Commercial Real Estate Finance

Archive for March, 2012

Commercial real estate professionals seem to be in agreement: there’s no market like Washington, D.C. From the government offices to the non-profit, private sector, and educational institutions that call D.C. home, there is a lot of demand for real estate. So, while CRE markets in the rest of the country were battered by the Recession and its aftershocks, D.C.’s real estate has kept on going, with firms building and investing there like there is no recession to speak of.

Unlike multifamily and certain niche property types (self-storage and healthcare come to mind), office buildings have been slow to recover as an investment property. With the news that developers in D.C. are racing to bring even more office space online–an absurd proposition in most other markets–some might respond with a simple, Well, that’s D.C. for you…

Read the rest of this entry »

Week in Review for March 24 – 30:

- BGC Partners, Inc. (BGCP)’s acquisition of the troubled Grubb & Ellis (GREBQ) is approved in bankruptcy court. The buyers believe the resources gained in this deal will complement those of their previous acquisition, Newmark Knight Frank.

- Rubenstain Partners acquires the Northbrook Corporate Center in Trevose, PA for $13 million. The 107,742 square foot, Class A property was sold by Wells Fargo Advisors, represented by Jones Lang LaSalle (JLL).

- Moody’s (MCO) CEO Ray McDaniel says governments should start their own credit-rating agencies in order to bring greater balance, accountability, and transparency to the credit-rating industry.

- Fellow ratings agency Standard & Poor’s warns that the growth of e-commerce could negatively impact CMBS due to high retail vacancies. This report arrives with the news that Best Buy is closing 50 locations and cutting 400 jobs.

- According to the Urban Land Institute, economists predict a strong commercial real estate market through 2014. They expect CMBS and other transaction volumes to increase as the economy recovers. Read the rest of this entry »

http://drawthelinemidwest.org/ohio/transparency-report/

I saw an interesting headline on Bloomberg: “Geithner Says Fannie, Freddie Should Cut Some Principal.”  Geithner is basically suggesting Fannie and Freddie (together, the “GSEs”), in an effort to “… help maximize return of the taxpayer…”, use “principal reduction” in some circumstances.  According to the article Edward DeMarco, the acting director of FHFA has indicated the GSE’s haven’t yet employed that strategy as it would cost the GSE’s almost $100 billion.  The article also points out that 12.1% of mortgages were delinquent or in foreclosure.

$100 billion sounds like real money to me, so I decided to investigate a bit.  As you may remember, the GSE’s are publicly traded companies whose debts are backed by the full faith and credit of the US government.  Imagine what you could do with that sort of financing!  Here’s a chart showing what Fannie did (ticker FNMA.OB): Read the rest of this entry »

Following up on last Wednesday‘s Top 10 List, here is a ranking of the Top 10 Built-to-Suit Data Center Transactions of Last Year:

10. Umpqua Bank (55,000 square ft.)

9. NetApp, Hillsboro, OR (55,000 sf)

8. Equinix, Ashburn, VA (77,000 sf)

7. Adobe, Hillsboro, OR (100,00 sf)

6. Disney, Kings Mountain, NC (100,000 sf)

5. Amazon, Boardman, OR (120,000 sf)

4. Boeing, Quincy, WA (133,000 sf) Read the rest of this entry »

In the event of an economic crisis–or any crisis for that matter–the inevitable first reaction tends to be finger-pointing. In the case of the ’08 credit crisis, the sovereign debt crisis in Europe, and the related problems we’ve seen in the last few years, a great deal of finger-pointing has been reserved for the credit-rating agencies: Moody’s, Fitch, Standard & Poor’s. Voices from both the public and private sectors have accused these organizations of unfair practices and sometimes grossly inaccurate ratings, ratings that lead to widespread defaults.

The criticism is nothing new. Take a look at this article in The Guardian from 2003, describing the SEC’s concerns about the three credit-rating agencies, which the SEC presented to Congress :

The SEC said it would [...] look at potential conflicts of interest among agencies being paid by the companies whose debt securities they are rating. The issue is similar to that which has plagued research in the investment banking industry.

It’s not a new problem, then, and the SEC’s report clearly didn’t curb the sorts of problematic ratings we would see down the road. But now, a call for greater government involvement in the ratings business is coming from an unlikely source: Ray McDaniel, the CEO of Moody’s. Read the rest of this entry »

Standard & Poor’s recently announced that they were adding shopping mall investor Simon Property Group (SPG) to their elite S&P 100. With ownership or an interest in 264,000,000 square feet of gross leasable space on three continents, SPG is by far the biggest U.S. REIT. In fact, NAREIT reports, Simon Properties is about twice the size of its next-largest American competitor, American Tower Corp. (AMT). With its profound influence on the worldwide real estate market, not to mention its staggering number of assets and revenue, SPG has become, in many ways, a poster child for the era of the REIT.

But it seems that many investors are still cautious about REITs as an investment choice, according to a REIT.com interview with Don Wood of Federal Realty Investment Trust (FRT). As he explains,

Read the rest of this entry »

Some office real estate markets see improvement thanks to increased employment in parts of the country:

Read the rest of this entry »

Top 10 Best U.S. Cities for New Businesses:

10. New York, NY

9. Washington, D.C.

8. Denver, CO

7. Raleigh, NC

6. Tulsa, OK

5. Seattle, WA Read the rest of this entry »

Week in Review for March 17 – 23:

- Host Hotels and Resorts (HST) expects to raise $344 million in a private placement. It plans to use some of these funds to pay off the mortgage on its JW Marriott in Washington, D.C.

- Kenedix, Inc. plans a $480 million IPO in Japan. The properties to be included in this offering are mainly residential assets in Tokyo. This is the first IPO of a Japanese REIT since 2007.

- Commercial real estate analyst says the industry is better prepared for a recession than it was a few years ago: “Having gone through the Great Recession I think everyone is much more cognizant of the signs,” he says.

- Southern multifamily REIT Ginkgo Residential plans to raise roughly $250 million in an IPO. The REIT currently owns 24 complexes (5,678 units) in South Carolina and Virginia.  Read the rest of this entry »

One sign of increasing optimism in today’s economy is commentators’ tendency to refer to the so-called “Great Recession” in the past tense. No longer in but recovering from this economic low point, the world of investment and finance is now talking about the return of hard-hit economic sectors. For real estate, some assets are proving more resilient than others: office and retail properties still face challenges in many markets, and residential is an ongoing saga. But new figures are showing significant improvements in America’s industrial sector, with increases in production, employment, and workers’ hours. This bodes well for the economy as a whole.

Commercial real estate investors have taken note. Whether this is a temporary boost or a long-term trend, demand for industrial properties such as warehouses is steadily growing. According to the most recent PwC Real Estate Investor Survey, investors are attracted by projections of increased rents and overall demand for industrial space.

Read the rest of this entry »