Four month extension granted to General Growth…WSJ article.
March 4, 2010
February 18, 2010
Real Estate Roundtable’s Sentiment Index Shows Improvement
Things are still not “good” but are looking up according to the Real Estate Roundtable’s sentiment index…
Pew report puts States’ unfunded pension liabilities in stark relief
The Pew report below on States’ unfunded pension liabilities puts the issue in stark relief, more clearly than I have seen it laid out before. Social Security is only part of the problem. Here is the other…$1 trillion of state and municipal unfunded pension liabilities.
Congressional Oversight Panel recognizes risks to economy from CRE loans
A little light bed-time reading for everyone…the Congressional Oversight Panel has issued a 190 page report detailing the risks posed by CRE loans. Full document is below and the COP web site is here.
February 17, 2010
SPG + GGP = 1/3 of malls in US?
NPR reported last night on the potential merger of Simon and General Growth and stated that the combination would result in one company controlling 1/3 of the (regional) malls in the US. Didn’t quite sound believable to me, so after doing some digging, I have found that:
- Simon owns 387 malls
- General Growth owns 200 malls
- ICSC reports that there are 765 regional and 614 super regional malls in the US for a total of 1,379 malls
So, well, I was wrong, SPG + GGP would own more than 1/3, 43% of the malls in the US in fact. So, yes, this sounds like a potential anti-trust issue. Certainly on a regional basis there would be questions about a virtual monopoly of the mall business (which already exists in some ares, though). Granted, regionals and super regionals represent less than 17% of US retail GLA, but they are a very specific niche in the retail space which historically competes indirectly with other formats such as big box, neighborhood centers, etc. Retail brokers and tenants are concerned that the merger will tilt negotiating power much more in Simon’s favor. It’s early stage yet, but could have huge implications for the retail landscape.
2/18/10: Good update on SPG/GGP from CoStar is here.
Aquarium coming to office building in Times Square?
OK, this one is just too weird not to pass along. WSJ reports on a potential aquarium occupying the lower floors of an office building in Times Square. 11 Times Square was built speculatively (without leasing) during the boom days–a local developer teamed with a Prudential fund to build it. According to CoStar the building is approximately 1.1 million SF and reportedly is completely vacant. Well, why not, they’ve got the space, right?
Harvard Endowment seeks to reduce real estate expsoure through secondary market sales
WSJ reports today that Harvard’s Endowment is putting up for sale a significant chunk of its real estate funds and other iliquid assets in order to improve its cash position and reduce future commitments / capital calls. It’s hard to see why this effort will fare better than previous attempts by the Endowment to sell private equity holdings in the secondary market, though, which resulted in offers to buy the stakes only at very steep discounts.
February 10, 2010
State of NJ threatening to take back Xanadu site
WSJ reports today that New Jersey Governor Chris Christie is threatening to take back the Xanadu site. The project stands nearly complete but remains under-capitalized and without enough tenants at this point to avoid a flood of “kick out” clauses in tenant leases coming into play. Even in the best of times a mall with an indoor ski slope sounded a bit crazy, eh?
WSJ article here.
My previous post here.
Cap rates for core properties are falling?
With cap rates having risen 100-300 bps on average, depending on the property in question, some recent deals have a lot of people shaking their heads a bit. It was apparent several months ago that quality core multifamily assets were commanding premium pricing with cap rates in the 6-7% range, with a few deals even trading at sub-6% cap rates. The Class A multifamily market has continued to attract great interest, and now core office deals with strong credit and limited near term rollover are getting priced around 6% caps again as well. What is going on? Are cap rates coming back down? Well, not across the board. The core deals trading at these levels are attracting a lot of interest because there is not much on the market and while everyone waits for the return of the early ’90’s bargain hunting, core deals are attracting interest as the closest to a sure thing as is available today. There is a lot of capital ready to be invested, resulting in upwards of 25-30 credible bids for solid core deals. I have to wonder whether this will hold, though, and whether it might just be a brief mini-bubble that has redeveloped for core assets. It seems like a simple case of supply and demand–not much quality product on the market and a lot of capital chasing the few deals available.
February 4, 2010
Google spreadsheet – not ready for real estate?
I recently moved my personal e-mail to gmail. Wow, what an elctronic ecosystem google has created. Gmail is clearly the best e-mail interface and google voice the best voicemail system available. Google docs seems to hold a lot of promise, too. But the transition from client/PC based apps to cloud-based apps cannot be completely accomplished for many financial and real estate people just yet. There are too many issues with lost formatting and other breakdowns when converting MS documents to google apps. For example, google spreadsheets do not appear to allow for iteration. This is a major deal killer for many financial and most real estate people. Particularly in development pro formas, iteration is a necessary fact of life. Yes, there are ways around it, but who wants to redesign all of their spreadsheets to work with google apps? Iteration is used mainly in solving intentional circular references such as a total which points to cells which calculate using the total–e.g., a development fee which a developer charges at say 3% of total costs is often calcuated on total cost, which in turn includes the fee itself. Or an estimate for loan interest charges which points to the total cost or to all of the individual line items which make up the total. The best I can tell, google spreadsheet does not allow iteration. The issue seems to be that Excel spreadsheets are “live”, iterating documents whereas the google spreadsheets are static. (A competing cloud app service called Zoho also seems to have the same problem.)
For simple spreadsheets google spreadsheet seems to work fine, but beyond that it is just not sophisticated enough yet. Possibly the rumored google app store will encourage someone to solve this problem and take their spreadsheets to the next level? If you’ve found a way to solve this problem without reprogramming your spreadsheet to avoid circular references, I’m all ears. With years of real estate spreadsheet template development having provided me with templates for just about any type of analysis, there is no way I am going to redesign them all to work without needing iteration. I’m sure there are other industries for which this would be a problem as well and until it is fixed this will hold back the power users from making the leap to the cloud.
January 3, 2010
Best apps/tools of 2009
Here is a short list of my favorite apps/tools of 2009. These are things that I now use every day and find absolutely indispensable:
- Evernote: this app is amazing and is everything that I always hoped for in a to do list and more. Prior to finding this app I had all but given up on ever finding an electronic to do list/app that I liked. Well, here it is, and a lot more. You can access it on the web, in a Windows app, a Mac app, on an iPhone/Touch, or Blackberry. It synchronizes across all of these apps so you can access your to dos and other documents from anywhere, anytime. You can clip web pages to your “notebooks”, save hyperlinks, .pdf’s, you name it, it can probably do what you want or soon will. And, oh by the way, it indexes everything to make it searchable with keywords. You can even take pictures and any words that show up will be recognized. This thing is very slick; I’ve finally found the to do app I was looking for and a lot more. And I’ve dispensed with my paper to do cards! http://www.evernote.com/
- Readability: this is a “bookmarklet” app that takes any web page and strips it instantly down to a simple readable format with no ads, simple black and white, no frames, nothing to distract from just plain reading. Simple and great. http://lab.arc90.com/experiments/readability/
- Google Voice: You no longer have to switch to a new number to use Google Voice. Most of the features are available to use with your existing cell phone #. The voice mail app for Blackberry is great, and although the speech to text feature is far from perfect, it is good enough so that you get the gist of most messages. https://www.google.com/voice
- Mint/Quicken Online: Both of these were probably around before ‘09, but hey, I just found them this year. Microsoft recently discontinued its support for MS Money and is phasing it out, so I have now moved to the cloud. Both Mint and Quicken Online are free and provide a way to access all of your financial accounts conveniently in one place and track your spening. Mint is great but does not yet provide the ability to manually enter future/upcoming transactions. Quicken does allow for manual transaction entry, so I’m working in it more often. Since Quicken has now purchase Mint and Mint’s staff is basically now running the Quicken Online site, it looks like the two will merge and the best of both apps will result. There are improvements that I see as obvious, but nothing that is a fatal flaw. The convenience of accessing all accounts in one place is fantastic and makes up for the shortcomings. Mint: http://www.mint.com/ Quicken Online: http://quicken.intuit.com/
December 9, 2009
FDIC Projection of Losses from Bank Failures to Date
FDIC estimates that about $51 billion in losses will occur as a result of the 177 bank failures to date. Below is a spreadsheet providing details of projected losses by bank. The data is courtesy of Subsidyscope, which conveniently supplies all of its data in open formats. I have prettied it up (just a little), sorted by estimated loss, and provided a total. About 1/5 of the total is for IndyMac Bank.
Geithner talks about expanding TALF to benefit CRE
I received an e-mail from Treasury this morning which contains a letter which Secretary Geithner has or is sending to Hill leadership on the administrations’s exit strategy for TARP. Most importantly for the CRE world, it holds out some hope that TALF (Term Asset Backed Securities Loan Facility) “may” be increased:
…”we may increase our commitment to the Term Asset-Backed Securities Loan Facility (TALF), which is improving securitization markets that facilitate consumer and small business loans, as well as commercial mortgage loans. We expect that increasing our commitment to TALF would not result in additional cost to taxpayers.”
We’ll see what they actually do, but this is definitely welcome news for those facing loan maturities in the next year or two and it might even help to stop or slow the free fall in commercial real estate pricing.
Letter below…
November 13, 2009
Know your landlord! Feds trying to seize 650 Fifth Ave
The US is seeking to seize 650 Fifth Ave, also known as the Piaget Building, which is allegedly owned indirectly by the Iranian government in violation of US law.
http://therealdeal.com/newyork/articles/feds-seek-forfeiture-at-650-fifth-ave
The 36 story building is comprised of approximately 336,000 square feet of office space plus ground floor retail, including tenant Juicy Couture. The property was built in 1979 and is currently about 80% leased according to CoStar. Jones Lang LaSalle is the building rep. and office tenants include a number of financial institutions and law firms.
National Public Radio reported this morning that the government says the building will remain open and operate as normally while the case is ongoing. The case actually goes back to December of 2008, but it appears the US likely knew of Iran’s involvement for many years since Bank Melli of Iran provided financing for the project in 1978 and it was built on behalf of the Pahlavi Foundation, which was controlled by the Shah of Iran. Amusingly, Wikipedia reports that Ivan Boesky had an office in the building in the 80’s.
ULI Emerging Trends 2010
ULI’s 2010 emerging trends, available here, is a survey of about 900 key industry participants. This year’s survey seems to validate the consensus view which has been forming about the future of CRE. Among its observations:
- Property fundamentals will continue to deteriorate over the next year + as the economy remains weak
- Debt markets will remain compromised
- Recovery will be slow due to weak job growth
- Investors are retreating to top markets like NY, Boston, Washington, D.C., and San Francisco–high barrier to entry markets with strong demand drivers as nodes of international commerce
- Apartments and hotels will turnaround first (due to the absence of long term leases which delay recovery in other property types)
- Home sales/pricing stabilizes further in 2010, leading economic recovery
- Development hits all time lows in 2010–one participant said the term does not even make sense in this environment!
- Hundreds more bank failures likely
