Finance Investment Banking
Economic Update – CRE Defaults Head for High Ground
June 10, 2009
A new report by Real Estate Econometrics, based on FDIC data, puts the commercial real estate loan default rate at its highest level in more than a decade and a half, at least those loans held by regulated deposit-taking institutions—banks and thrifts, for the most part. The default rate soared from 1.62 percent in the last quarter of 2008 to 2.25 percent in the first quarter of 2009. That rate doesn’t include defaults on loans associated with multi-family rental properties, which Real Estate Econometrics put at 2.45 percent in the first quarter of 2009, up 68 basis points from the previous quarter.
Economic Update – Fast-Track Chrysler Reorganization Stalls
June 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
June 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
June 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.
Signs of Life in 2Q as Sales Volume, Capitalization Jump
June 04, 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 - CRE Buyers Looking for Deals
June 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.
Economic Update - Pending Home Sales Reach for Unexpected Highs
June 03, 2009
The National Association of Realtors said Tuesday that its index of signed sales contracts, which is regarded as a harbinger of home sales in the very near future, spiked upward 6.7 percent nationally in April to 90.3. That much of a rise hadn't been expected by analysts, and represented the quickest upward movement of the index since late 2001.
Economic Update - Seismic Shifts in Auto Industry Have CRE Implications
June 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
June 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.
Economic Update - Consumer Confidence Wows Wall Street
May 27, 2009
Happy days are here again? Or maybe the American consumer isn't quite that optimistic, but instead is simply glad things don't seem to be getting a lot worse. In any case, the Conference Board reported on Tuesday that its index of consumer confidence shot up in May to 54.9 from a revised 40.8 in April, marking the largest one-month jump in the index since April 2003.
Economic Update - Leading Economic Indicators Inch Up
May 22, 2009
A bright spot to kick off the Memorial Day holiday weekend, or economic fool's gold? Time will tell, but in any case the Conference Board reported on Thursday that leading indicators of the U.S. economy posted their first rise since the summer of last year.
Economic Update - CRE Sees First-Quarter Downtick in Brokerage Activity
May 21, 2009
Commercial real estate has had that sinking feeling all year so far, and on Wednesday the National Association of Realtors quantified things: brokerage activity in the commercial sector dropped 4.8 percent in 1Q09 compared with 4Q08. Compared with the first quarter of 2008, brokerage activity is down 12.9 percent.
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 - The Economy's Latest Buzz-Phrase: 'Better Than Expected'
May 19, 2009
"Better than expected" is the latest turn of phrase commonly used to describe lousy performance by companies that isn't quite as lousy as analysts predicted, and as such the phrase might have a longer shelf-life than "green shoots." Since lousy is the new normal, then "better than expected" is what Wall Street now rewards.
April Brings Surprise Revival of Global RE Stocks
May 18, 2009
For commercial real state concerns around the world, it appears that the light at the end of the tunnel is getting brighter, at least as far as equities are concerned. Buoyed by successes in raising capital and improving balance sheets, property companies saw their stocks rally significantly, experiencing a total return of more than 20 percent in April, according to a new report by ING Clarion Real Estate Securities L.P.
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 - Commercial, Residential Prices Deflate Like Stuck Balloon
May 13, 2009
Commercial property prices sank by 5.8 percent in 1Q09, according to the MIT Center for Real Estate's Transactions-Based Index, which saw its fourth quarterly drop in a row during the quarter. The index is now 21 percent lower than in 1Q08, and fully 26 percent below its peak in mid-2007. According to MIT, that drop is similar to the index's 27 percent drop during the commercial property slump of the early 1990s.
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. AIG will receive about $1.2 billion in cash for the property--a drop in the vast AIG bucket, perhaps, but still a tidy sum.
Economic Update - Looking for Green Shoots Among the Economic Indicators
May 11, 2009
Friday's unemployment numbers from the U.S. Department of Labor, while hard to characterize as good, aren't quite as bad as they have been in previous months. Unemployment is still going up, but not quite as quickly as before. That kind of thing is beginning to be called "green shoots," to use an up-and-coming economic buzzword.
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