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…
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
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.
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
October 22, 2009
Court rules Stuyvesant complex inappropriately charged market rents on thousands of units
NY supreme court has ruled today that the owners of the Stuyvesant apartment complex inappropriately began charging market rents on thousands of units and according to NYT may owe as much as $200 million in overcharges back to tenants. My previous post regarding the struggling deal done at the height of the market is here . The ruling may also affect many other owners throughout the city.
New York Observer headlines it as “Apocalypse Now at Stuytown” .
October 21, 2009
How are architects faring in the Great Recession?
WSJ reports that US Architectural firms are increasingly picking up work in Asia where several large towers are moving forward with construction or design work despite the challenging economic environment. Revenue from Asia now accounts for about 7% of AIA member firm revenues, but overall revenues will still be down by 20-25% this year. WSJ article
The American Association of Architects reports increasing inquiries from clients but few new projects being signed up. Payroll levels are down by 15% from their peak. AIA’s Architectural Billings Index shows some recent improvement but business conditions remain very weak for member firms:
AIA Chief Economist Video Update
October 19, 2009
What will become of Old Course icon?
Hamilton Hall, the iconic building in St. Andrews, Scotland overlooking the 18th green of the Old Course, was auctioned off recently. The winning bidder has not been disclosed, but Herb Kohler is rumored to be the likely winner. Jones Lang LaSalle brokered the sale on behalf of Bank of Scotland, which had taken over the property when its loan to David Wasserman went bad. John Paul Newport’s article from WSJ.
Moody’s CPPI reflects slowing price declines for CRE
Moody’s CPPI indices were released this morning:
- Pace of price declines shows continued slowing, more of that “less bad” phenomenon we’re all getting used to: most recent data shows a 3% decline in August after falls as steep as 8% in April and May
- Aggregate index now stands 40.6% below peak of October 2007 and 32.8% below one year ago
- Transaction volume picked up with repeat sales of $950 million (for August, 2009, latest data included in the index)
The report includes an interesting chart plotting the CPPI index vs CPI. Had CPPI tracked CPI, then prices would be slightly higher today than they actually are. In other words, have we overshot on the way down? If nothing else, the chart seems to support the notion that we must be somewhere near the bottom.
