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Economic Update - V-Shaped Recovery in the Cards?
Aug 03, 2009
By: Dees Stribling, Contributing Editor
"Green shoots" is so second quarter. Will "V-shaped recovery" be the latest economic trope? Is there something to it? As usual, economists disagree with each other on the prospects.
The conventional wisdom, as expressed by a recent Bloomberg News survey of economists, is that the U.S. economy will grow 1 percent or so in the current quarter, as an annualized figure, and tepidly after that. In the second quarter of 2009, according to the U.S. Department of Commerce, the economy contracted by an annualized rate of 1 percent.
Over the weekend, former Federal Reserve Chairman Alan ("It's Not My Fault") Greenspan weighed in on the possibility of 2.5 percent annualized growth in 3Q09. "The reason is there has been such an extraordinarily high rate of inventory liquidation that the production levels are well under consumption,” he told the TV program This Week, sounding like the central banker he was for so long.
The economy still has a long way to come back, if indeed a V shape is in the cards. The Commerce Department released revised figures for the contraction of the economy over the for the first 12 months of the recession--4Q07 to 4Q08, when U.S. GDP shrank 3.9 percent. That indeed makes the period the worst slump since the Great Depression.
As reported last week by CPN, Microsoft is planning retail locations. Would that be to take advantage of the intense loyalty that consumers show to its operating systems, something like the stores already operated by a rival fruit-named computer company? In any case, more details leaked out over the weekend, namely that Microsoft's first two stores will be in upscale shopping centers in wealthy enclaves: Scottsdale Fashion Square in Arizona and The Shops at Mission Viejo in Orange County in Southern California.
Wall Street bounced around a good bit on Friday, but ended up roughly at square one. The Dow Jones Industrial Average ended up 17.15 points, or 0.19 percent, while the S&P 500 was up a scant 0.07 percent. The Nasdaq lost 0.29 percent.
Recent Investment Banking Headlines
Economic Update - Glimmers of Recovery on the Horizon
Aug 10, 2009
In news that caught most everyone's attention on Friday, the U.S.
Department of Labor said that the nation's unemployment rate actually
went down 10 basis points in July, to 9.4 percent. It's being called a
sign of stabilization because monthly changes in the unemployment rate
that small tend to be revised out of existence eventually, but at this
point, "stabilization" looks pretty good.
Economic Update - Roundtable Survey Finds CRE in Poor Mood
Aug 06, 2009
The latest quarterly survey by the Real Estate Roundtable, released
Wednesday, found the commercial real estate sector in a funk, squeezed
by poor financing prospects, decreasing valuations and lower demand for
commercial real estate of all varieties.
Economic Update - MIT/CRE Index Takes Hit in 2Q09
Aug 05, 2009
Commercial real estate took a drubbing in the second quarter, according
to Massachusetts Institute of Technology Center for Real Estate, whose
index tracking commercial properties sold by institutional investors
dropped 18.1 percent during 2Q09. The index is down 32 percent from the
end of 2Q08, and 39 percent from its mid-2007 (that is, bubble) peak.
Economic Update - Disney Weighs in on the Economy
Jul 31, 2009
Is Disney a major lagging indicator for the U.S. economy? Maybe. In any
case, Walt Disney Co. CEO Robert Iger sounded like a central banker on
Thursday during the company's second-quarter conference call: "We do
see signs of economic stabilization, but the pace and strength of
recovery remain uncertain, and we are managing accordingly," he said.
Economic Update - Could Be Worse, Says Fed
Jul 30, 2009
The latest Beige Book from the Federal Reserve is out, and the
message is that the economy is still fairly bad, but not quite as bad
as it was, or could be. Employers are still laying workers off, but not
as quickly as before. Lenders are still reluctant to lend and borrowers
are still reluctant to borrow. but there's a modicum of activity.
Regarding real estate, some member banks--Atlanta, Cleveland, San
Francisco--reported rising real estate loan delinquencies.
Economic Update - New Home Sales See Uptick
Jul 28, 2009
New single-family home sales recorded an uptick in June, increasing 11
percent compared with May, to an annualized rate of 384,000. It looks
like a little pent-up demand for new homes is being unleashed,
especially since prices are still falling. The Commerce Department also
reported that the median price for a new house stood at $206,200 in
June, down 12 percent from last June.
Economic Update - Four More Years for Bernanke?
Jul 27, 2009
Economist Nouriel Roubini, also known as Dr. Gloom (or is it Dr. Doom?)
for his voice-in-the-wilderness prediction of the soon-to-pop bubble
back during the bubble's expansion phase, opined in the New York Times
on Sunday that Federal Reserve chairman Ben Bernanke deserves another
term after his current one expires in January, crediting him with
"decisions [that] prevented the Great Recession of 2008-2009 from
turning into the Great Depression 2.0."
Economic Update - Housing Treads on the Bottom?
Jul 24, 2009
Could spring 2009 have been the housing bottom everyone has beenwaiting for since the pop of the bubble? Residential real estatespecialists hope so. According to the National Association of Realtors,U.S. existing home sales were up 3.6 percent in June to an annualizedrate of 4.89 million. That's more than economists were predicting, andthe most since October 2008.
Economic Update - Fed Paying Attention to CRE Time Bomb
Jul 23, 2009
Federal Reserve Chairman Ben Bernanke, wrapping up two days of
testimony to Congress on Wednesday, talked about a number of weighty
economic issues, including concerns about commercial real estate. The
ticking time bomb analogy didn't come up--pundits talk that way, not
central bankers--but the commercial real estate debt problem
nevertheless got a fair amount of attention.
Economic Update - Panning for Gold in CRE Debt
Jul 22, 2009
Federal Reserve Chairman Ben Bernanke, high oracle of the U.S. economy,
began two days of testimony before Congress on Tuesday, and said that
things will slowly get better, eventually. He also noted that he and
his banking brethren are watching developments in the commercial real
estate industry--that ticking time bomb--with all the attention that a
ticking time bomb deserves. Meanwhile, down in the trenches, there's a
gold rush of sorts going on to find profits in real estate debt.
Economic Update - Green Shoots a Little Greener, but CRE Not Overjoyed
Jul 21, 2009
It was a good way to start the week, economically speaking. According
to the Conference Board, the U.S. index of leading economic indicators
rose 0.7 percent in June, marking the third rise in the index in as
many months. In the first half of 2009, the index improved at an
annualized rate of some 4.1 percent , a clear contrast to the way it
shrank in the last half of 2008 at an annualized rate of 6.2 percent.
Economic Update - Homebuilding Unexpectedly Perks Up, For Now
Jul 20, 2009
The residential market made a surprising turn on Friday, with the U.S.
Department of Commerce reporting that housing starts were up 3.6
percent in June when compared with May: an annualized total of 582,000
units versus 562,000 units. Economists weren’t expecting that many.
Economic Update: Retailers Term CIT Too Big to Fail; TALF Attracts Interest
Jul 17, 2009
As if the retail industry didn't have enough trouble, the prospect of a
CIT Group bankruptcy is blowing through the industry like an unexpected
squall. On Thursday, those new worries were reflected in the S&P
Retail Index, which fell 0.8 percent. If CIT does go under, many
smaller and mid-sized apparel retailers might also have trouble staying
afloat later this year, especially during the critical holiday season.
Economic Update - CalPERS Takes Rating Agencies to Task
Jul 16, 2009
Another California trend? CalPERS, the nation's largest pension fund, has filed suit against the three largest credit-ratingsagencies, essentially asserting that the agencies gave away highratings like gold stars to kindergartners back in the days when realestate only went up. Or to use the language of the lawsuit, "wildlyinaccurate and unreasonably high" ratings on various structuredinvestment vehicles caused the pension fund to lose a cool billiondollars.
Economic Update: On Cars, Gas and Lipstick Sales
Jul 15, 2009
Closely watched retail figures from the National Retail Federation show
that June retail sales took a small dip of 0.2 percent when compared to
May, and were down 3.8 percent when compared to June 2008. These
figures differed somewhat from those of the U.S. Department of
Commerce, which released its own retail sales figures last week that
showed a slight improvement in sales in June when compared with
May--growth of 0.6 percent. The difference is that Commerce includes
cars, gasoline and restaurant sales, . In fact, the only category to
have grown since this time last year was health and personal care
stores, up 3.7 percent since 2008. Could it be due to the "lipstick
effect"?
Economic Update - CMBS Delinquencies Spike
Jul 14, 2009
U.S. Commercial mortgage-backed securities delinquencies grew in June
by a record $2.2 billion, according to Fitch Ratings. Last month there
was a 2.6 percent delinquency rate among U.S. CMBS, up 48 basis points
from the previous month. In June, at least, problems in retail
properties and the hospitality industry inspired much of the upward
bounce in delinquencies. But there's more to come, especially in the
beleaguered hotel sector.
Economic Update - Christmas in July to Boost Retail Sales?
Jul 10, 2009
As expected, June was a lousy month for retail sales--except at a few
retailers, probably including Wal-Mart Stores Inc., though the giant
retailer doesn't report monthly comparable-store sales. Target Corp.,
on the other hand, reported a 6.2 percent comp-store drop from June
2008, while Costco Wholesale Corp. dropped 6 percent. Major department
store chains took a comp-store drubbing as well: Nordstrom Inc., down
10 percent; Macy's, down 8.9 percent; J.C. Penney down 8.2 percent;
Dillard's Inc. down 14 percent.
Economic Update - Discount Retailers Still on Top
Jul 09, 2009
Even in a recession, there will be winners. Even in the retail world,
which has taken such a beating lately, there will also be winners--such
as Family Dollar Stores Inc., which reported its fiscal third-quarter
numbers on Wednesday. Its earnings spiked upward by 36 percent, which
the discount retailer attributed to strong sales of necessities.
Comparable-store sales, an important metric in the retail game, were up
6.2 percent.
Economic Update - Loan Delinquencies Edge Ever Upward
Jul 08, 2009
It's an age of loan delinquency. According to a report released Tuesday
by the American Bankers Association, delinquencies on consumer debt --
those debt holders more than 30 days late -- stood at a record 3.23
percent during 1Q09. That's only up a little from 4Q08, yet still the
highest rate since the organization began tracking such things in 1974.
Economic Update - Economy Ekes Out One More Green Shoot
Jul 07, 2009
Those economic green shoots, so eagerly awaited this spring, got a
blast of frost here in mid-summer when jobs numbers came in weaker than
expected for June late last week. Yet on Monday, the Institute for
Supply Management’s index of non-manufacturing businesses, which gauges
the pulse of about 90 percent of the economy, improved for the third
straight month.
Economic Update - Home Sellers, Appraisers Quarrel Over Valuations
Jul 06, 2009
Writing in the Wall Street Journal late last week, Stan
Liebowitz noted that "the evidence from a huge national database
containing millions of individual loans strongly suggests that the
single most important factor [in foreclosures] is whether the homeowner
has negative equity in a house..." Blaming subprime mortgage lending
for the current housing crisis, he asserted, misses the point.
Economic Update - Wal-Mart Takes Historic Healthcare Position, But Why?
Jul 02, 2009
It's a peculiar time in history when a retailer can influence the debate about national healthcare policy. Yet Wal-Mart is doing just that by coming out earlier this week in favor of the government forcing employers to provide health insurance to workers. It was seen as something of a surprise. The Wall Street Journal characterized the National Retail Federation as "flabbergasted" by Wal-Mart's decision. (Were NRF officials sitting around in conference rooms, being flabbergasted together?)
Economic Update - ProLogis Sells in Big Way to Deleverage
Jul 01, 2009
The difficult year 2009 is half over, and recent deals by one of the
world's largest landlords show two things about the current climate.
First, deleveraging is in. Second, there are buyers out there to help
sellers who want to raise some cash to do that deleveraging.
Economic Update - Worldwide CRE Still Feels Recession's Reverberations
Jun 30, 2009
Sometimes lost in the din of bad economic news in the United States isthe worldwide impact of the current recession on commercial realestate. Markets everywhere have been affected to some degree, someworse than others, and players in those markets are only now beginningto sort things out, as they are here at home.
Economic Update - Consumer Spending, Saving Up; Will Retailers Benefit?
Jun 29, 2009
This might count as good news: U.S. consumer spending and personal income both rose in May. Spending jumped by a small but noticeable 0.3 percent when compared with April, and personal income spiked upward by 1.4 percent, the strongest jump in more than a year, according to the U.S. Department of Commerce. The question now for retailers and their landlords is how much of that is going to go toward buying things.
Economic Update - CRE Still Faces Stress, Distress
Jun 26, 2009
Not-quite-so-bad news still passes for good news: the U.S. Department
of Commerce has revised its estimate of the annualized contraction of
the American economy in the first quarter of 2009 to 5.5 percent,
instead of the 5.7 percent previously estimated. Still, paired with the
4Q08 annualized contraction of 6.3 percent, the six months between last
October and this March represent the poorest economic performance for
the U.S. economy in over a half century.
Economic Update - No Green Shoots in New Home Sales
Jun 25, 2009
Earlier this week, there were glimmers of green shoots in existing home sales, which have been trending upward lately. No such shoots have been sprouting in new home sales, however, to the apparently surprise of economists forecasting an uptick. Compared with April, new home sales in May were actually down 0.6 percent, according to the U.S. Census Bureau on Wednesday.
Economic Update - Homebuyers Slowly Returning to Existing Home Market
Jun 24, 2009
Homebuyers seem to be returning to the existing-home market this summer, according to the latest report by the National Association of Realtors on existing U.S. housing sales. The sales of single-family homes, condos and coops rose 2.4 percent in May compared with April, coming on top of a gain for that month compared with March, thus marking the first back-to-back monthly increase in existing home sales since 2005.
Economic Update - Housing Reports See Short-Term Funk, Long-Term Hope
Jun 23, 2009
The residential refinancing boom that budded so promisingly in the spring has wilted, according to the latest predictions by the Mortgage Bankers Association. Back in March, the organization predicted refi activity to the tune of about $2.75 trillion nationwide by the end of 2009, spurred by historically low interest rates. Now that those low rates have evaporated, MBA says that total originations for the year will probably come in just above $2 trillion.
Economic Update - Tesco Completes Sale-Leaseback, CMBS Deals
Jun 22, 2009
British retailer Tesco Plc. inked a sale-leaseback of 14 properties. The sale-leaseback followed on the heels of the company's successful
completion of the sale of commercial mortgage-backed securities. The offering by Tesco may mark the glimmering beginnings of a new, simpler CMBS market.
Economic Update - Unemployment Numbers Mixed, But Outlook Promising
Jun 19, 2009
Despite jobless number climbing yet again, there appears to be some light at the end of the tunnel as the number of already unemployed workers filing claims dropped for the first time in more than six months. Couple that with the four-week average of job cuts at its lowest since mid-February and you’ve got a one-two punch of what passes these days as some very positive news.
Economic Update - Obama Unveils Financial Overhaul Plan
Jun 18, 2009
Responding to the economic crisis facing the United States, President Obama has proposed vast regulatory changes, including the creation of a new consumer agency aimed at guarding against the kinds of lending abuses which resulted in many Americans being saddled with far more mortgage debt than they could handle.
Economic Update - Recovery or Continued Slowdown?
Jun 17, 2009
Is the economy picking up or continuing to struggle? It seems to depend upon who you talk to and when you talk to them. While many reports gave a variety of accounts Tuesday, most supported bets that the pace of the recession is slowing.
Stocks, Retail Sales Rise, But So Does Unemployment
Jun 12, 2009
Stocks were higher Thursday closing at highs for recent
months with hopes that economic recovery is on its ways, while investors
concerned that the government’s spending spree and mounting debt will lead to
inflation caused treasuries to surge as an $11 billion sale of 30-year bonds
drew the highest yield in almost two years.
Economic Update - CRE Defaults Head for High Ground
Jun 10, 2009
A new report by Real Estate Econometrics, based on FDIC data, puts thecommercial real estate loan default rate at its highest level in morethan a decade and a half, at least those loans held by regulateddeposit-taking institutions—banks and thrifts, for the most part. Thedefault rate soared from 1.62 percent in the last quarter of 2008 to2.25 percent in the first quarter of 2009. That rate doesn’t includedefaults on loans associated with multi-family rental properties, whichReal Estate Econometrics put at 2.45 percent in the first quarter of2009, up 68 basis points from the previous quarter.
Economic Update - Fast-Track Chrysler Reorganization Stalls
Jun 09, 2009
The Chrysler reorganization and sale to Fiat, which
was to have been a model of a quick turn-around, has hit a snag in the
form of a court order by U.S. Supreme Court Associate Justice Ruth
Bader Ginsburg. Pension funds that hold some of Chrysler’s secured loan
are objecting to the goings-on, claiming it isn’t fair to them, and so
petitioned Justice Ginsburg for the measure. It isn’t clear how long
the temporary stay will delay the sale, or whether it will kill the
sale, or whether the full court will reverse the stay in a few days.
It’s unlikely, though, that the legal wrangling will affect the fate of
the Chrysler dealerships slated for closing, or change the amount of
real estate their closing will put on the market.
Economic Update - Starwood Eyes Distressed Sector with $500M Fund
Jun 08, 2009
Yet another deep-pocketed real estate entity has jumped into the grave-dancing game—only please, don’t call it that, but rather strategic investment in distressed properties. The player is a newly formed investment company called Starwood Property Trust Inc., a creation of Starwood mogul Barry Sternlicht, which filed with the Securities and Exchange Commission late last week for a public offering that aims to raise half a billion dollars to do the distressed-property boogie. It will invest in not only physical properties, but mortgages and mortgage-backed securities.
Economic Update - Retailers See May Malaise
Jun 05, 2009
May comparable-store sales numbers are filtering down from various retailers, and the results aren't inspiring confidence in the prospects for recovered consumer spending. Actually, most analysts expected average retail same-store sales to decline in May 2009 when compared with May 2008, but the trouble was they declined more than expected.
Economic Update - CRE Buyers Looking for Deals
Jun 04, 2009
Turns out that the recession is still on, at least if the latest
numbers from payroll firm ADP accurately reflect the state of hiring
and firing in the nation. According to ADP on Wednesday, U.S. companies
cut an estimated 532,000 employees from their payrolls last month, with
goods producers laying off 267,000 workers, and service providers
shedding 265,000 positions.
Signs of Life in 2Q as Sales Volume, Capitalization Jump
Jun 03, 2009
Despite overall sales figures down double digits from last year, transactions are still move forward, albeit in smaller amounts. Another good sign of real estate activity is the re-equitization of the REIT industry that continued in May as more companies deleveraged their balance sheets with equity capital raised in the public markets.
Economic Update - Seismic Shifts in Auto Industry Have CRE Implications
Jun 02, 2009
Monday was an historic day in Detroit, and arguably for the entire U.S.
manufacturing sector, even though GM's formal announcement of
bankruptcy, along with President Obama's promise for more than $30
billion for a company in which the U.S. Government will soon own a
controlling interest, weren’t surprises . A little more surprising
(only a little) was the quick approval by Chrysler's bankruptcy judge
of the sale of most of its assets to a group led by Fiat SpA, meaning
that the Detroit automaker will continue to exist in one form or
another, albeit with Italian bosses. But the fact that both events
happened the same day is an unusual coincidence indeed.
Economic Update - Mortgage Rate Worries Weigh on Housing Market
Jun 01, 2009
General Motors was in the news over the weekend before the largest
bankruptcy in U.S. history (that is, its own), but more worrying for
many policymakers, economists and ordinary borrowers is last week's
sudden spike in mortgage interest rates.
Economic Update - Foreclosures Spike Among Prime-Mortgage Holders
May 29, 2009
The tsunami of residential foreclosures may have started, back in the
days of easy mortgage money, with borrowers whose only qualification
was being able to fog a mirror. About half of those kinds of subprime
mortgages have resulted in a foreclosure outcome, and Alt-A-inspired
foreclosures are spiking too. But now, according to the Mortgage
Bankers Association, foreclosures on prime fixed-rate loans represent
the largest share of brand-new foreclosures.
Fitch: General Growth Chapter 11 Ruling a Mixed Blessing for Bondholders
May 26, 2009
The special-purpose entity structure that has helped to power real
estate finance in recent years remains intact after recent court
decisions tied to the General Growth Properties Inc. Chapter 11
bankruptcy filing. However, the rulings may turn out to be less than a
total victory for bondholders in the long run.
Economic Update - Legacy CMBS Now Under TALF
May 20, 2009
In a major expansion of the Term Asset Backed Securities Loan Facility (TALF), the Federal Reserve said on Tuesday that investors will be able to buy existing securities backed by commercial real estate loans--so-called "legacy" CMBS. The commercial real estate industry has been pushing for this for some time, and it will at last be possible starting in July.
Pocketing $387M, SL Green Becomes Latest REIT to Raise Equity Via Public Offering
May 19, 2009
SL Green Realty Corp. has jumped on the bandwagon of REITs that, facing credit markets that are frozen like a block of ice, have opted to raise funds through public offerings. The company, which is still New York City's largest office landlord, just walked away with net proceeds of approximately $387.4 million after selling 19.55 million shares of common stock.
Economic Update - Spooked by Economy, Consumers Consume Less
May 14, 2009
The U.S. Department of Commerce reported that retail sales dropped by 0.4 percent in April, compared with the previous month. The decline was a little more than expected, but less than the revised March drop of 1.3 percent. The recent two months of decline followed unexpected increases in consumer spending in January and February.
Economic Update - AIG Unloads Choice Tokyo Property for $1.2B
May 12, 2009
American International Group is finally in the news for something other than being a multibillion-dollar black hole for the U.S. Treasury; namely, a property sale. The beleaguered insurer has inked a deal to sell the AIG Otemachi Building and a one-acre site in Tokyo to Nippon Life Insurance Co.
Economic Update - Smaller Banks Face CRE Woes
May 07, 2009
On Wednesday, the eve of the stress test results, observers were
wondering just how much trouble sour commercial real estate loans are
going to cause those banks that hold them. Knee deep, waist deep, or up
to their eyeballs?
Economic Update - The Week Starts with Some Good News
May 05, 2009
Is that the glimmer of good economic news ahead, or just a mirage? Time
will tell, but for the moment it's good to know that the pending home
sales index rose 3.2 percent in March when compared with February, and
1.1 percent when compared with the same month a year ago, according to
the National Association of Realtors.
Economic Update - Corporate RE Plays New Role in Tough Times
Apr 28, 2009
It's a whole new world for corporate real estate owners, according to the 2009 State of the Industry Report by CoreNet Global, which was released Monday. The report distilled the views and opinions of more than 60 corporate real estate executives from around the world, along with information gleaned from various corporate real estate case studies.
Economic Update - Bear Stearns' Bum Real Estate, Revealed
Apr 24, 2009
Bear Stearns Cos. was in the news again Thursday, in case anyone
remembers back far enough to recall the last time it was big news--a
time when the disappearance of that company into JPMorgan Chase seemed
unfortunate, but not necessarily a harbinger of vast financial problems
ahead. Which, in fact, it turned out to be.
Economic Update - Credit Woes Put Kibosh on $2.5B Midway Deal
Apr 21, 2009
Citi Infrastructure Investors--a joint venture of Citigroup Inc., John Hancock Life Insurance Co. and Vancouver Airport Services-- will be unable to go through with a deal that would have seen the group buy Midway International Airport in Chicago for $2.5 billion. After previous extensions, the City of Chicago decided not to give the group any more time to close on the deal.
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