Commercial Real Estate Finance

Posts Tagged ‘Fed’

Week in Review for March 30 – April 1:

- Improving home prices and a strengthening labor market suggest the U.S. economic recovery is gaining momentum. Some suggest it is time for the Fed to wind down its economic stimulus program through which it has purchased billions of dollars in securities to hold down interest rates. Others argue the Fed’s bond-buying should continue until the unemployment rate has fallen below 6.5%.

- Philadelphia-based multifamily operator Morgan Properties closes on $1.2 billion in refinancing for a portfolio of 73 properties. The refinancing, the largest in Morgan Properties’ history, was originated by Berkadia Commercial Mortgage, reports CoStar Group.  

- With the rejuvenation of many CRE markets and growing CMBS activity, buyers of higher-risk, B-rated bonds are showing increased appetite.

- The Libor scandal of the last couple years, which has triggered numerous lawsuits, investigations, and government inquiries, prompts some regulators to call for a new, more transparent benchmark for interest rates. Others, including the European Commission, hope to improve the current system, reports the New York Times.

- Philadelphia’s Equus Capital Partners announces the sale of a 330-unit student housing property in Chicago’s South Loop. The high-rise, sold for $58 million, serves Columbia College, Roosevelt University, and other Chicago schools. Equus Capital was previously known as BPG Properties, Ltd. Read the rest of this entry »

Week in Review for February 16 – 22:

 - According to the first three paragraphs of a Wall Street Journal article (you have to have a “Pro” account to read the rest), many investors are missing opportunities for high yields among smaller-cap REITs.

- Private commercial real estate service Cushman & Wakefield expands its presence in Central Pennsylvania, opening a local office in Harrisburg. John Derham, Cushman & Wakefield’s local director, tells CoStar Group the expansion is a response to the Harrisburg market’s growth, the fastest in the state.

- High-profile Federal Reserve officials voice opposition to the organization’s ongoing bond-buying practices, which are intended to stimulate the economy and hold down interest rates, says Reuters. The Fed had previously indicated it would maintain its stimulus program until the U.S. unemployment rate drops substantially. The Fed’s bond-buying is considered significant to many parts of the commercial real estate sector, including the REIT market.

-  In Manhattan, Comcast Corp (NASDAQ: CMCSA) acquires the iconic 30 Rockefeller Plaza. This purchase coincides with Comcast’s $16.7 billion purchase of General Electric (NYSE: GE)’s 49% stake in NBCUniversal, the building’s tenant.   Read the rest of this entry »

There’s a strong connection between the economy and an individual business, but I wouldn’t say the two are directly correlated. That view overlooks the complexity of the economy, not to mention the creativity of many a capitalist.

While an economic downturn may leave a lot of businesses belly up, it may also be the opportunity for a new business to profit and grow. This happened during the Great Depression, when entrepreneurs looked for ways to do business with America’s ever-growing underclass, resulting in such innovations as Ocean Spray cranberries, the Yellow Pages, and a number of retail chains. In other words, for the creative, pragmatic, and (ideally) unburdened-by-conscience, there are ways to profit from someone else’s loss.

Cynical? Maybe, but I won’t go on a tirade against capitalists. That’s my audience. I’ll let Michael Moore do the anti-capitalist ranting.

I’m always fascinated when an economic upswing or downturn creates an opposite reaction in certain companies. I’m thinking in particular of mortgage REIT Annaly Capital Management (NYSE: NLY). A few notes on Annaly Capital:

• Midway through the year, Annaly’s assets totaled around $128 billion, which makes the firm larger than some national banks.
• Since the financial downturn, low interest rates and other conditions have helped Annaly and other mortgage investors gain prominence, aided by the winding-down of government lending.
• Annaly’s two top executives each received about $35 million in compensation last year.
• Moreover, the company’s returns to investors essentially doubled over the past five years (Bloomberg). Read the rest of this entry »

The results are in from our latest poll. QE3 has been well received…

This past week, we asked you how you responded to the Fed’s underwhelming economic predictions for the next couple years. Here’s what you thought…

See our previous polls here.

Just when you thought it was safe to go back into risk assets, Bernanke says he might not go for an even bigger punch bowl.  A mixed metaphor, perhaps, but I think it  captures how markets reacted to the Fed’s indication that QE3 might not be necessary.  In all fairness, the reemergence of the hydra-headed European debt crisis added fuel to the fire this week with a poor bond auction in Spain.  The importance of Fed policy, however, remains undiminished and worthy of a closer look.

Why would the Fed change it’s rhetoric at this particular point in time?  Things just started looking up with both employment data and asset markets pointing to a more stable recovery.  Things are hardly booming, however, so many figured Bernanke would keep the pedal to the metal.  In fact, the Fed has worked very hard to convince markets they could keep rates low.  Ironically, this expectation is so well entrenched, the Fed now has to back-track a bit.

The following chart shows 5 year interest rate swaps (IRS – black line), the 2 year – 10 year treasury spread (inverted – red line), the 5 year TIP spread (green line), and the S&P 500 (blue line).  It’s a mouthful, but it shows something interesting.

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Kate Rogers of FoxBusiness discusses a new study by NFIB exploring the connection between real estate and small businesses’ success:

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http://www.noradarealestate.com/blog/government-handcuffs-real-estate-investors/

The good news, according to this article, is that multifamily assets are getting picked up on the offer side.  As you may remember, in 2009 and 2010 we talked about the intractable bid-offer spread in CRE: a situation where sellers weren’t being forced to sell (the offer side) and buyers were expecting large discounts (the bid side) yielding very low deal volume.  So, now we’re seeing  sellers who could hang in and actually get paid full price for their assets. Seems like pretty good news.

Like everything, however, there’s a cost.  According to the article, Read the rest of this entry »

It’s easy to lose sight of actual news stories in the middle of primary season.  While being bombarded with endless reports of only the most ridiculous, out-of-context comments from candidates and their attack dogs, its hard to keep your eye on the ball.  After Linsanity (no, I’m not embarrassed to jump on a bandwagon), the most important actual news story is the real, albeit sluggish, improvement in the economy.

Things have definitely improved a bit since the most recent European debt panic in the fall of 2011.  Employment numbers have improved and the president’s approval rating has gone up. Read the rest of this entry »

Three quick thoughts for you:

1)  The rise of New Gingrich in the republican primary race requires us to figure out how his policies will impact commercial real estate.  Beyond the typical conservative low tax/low regulation rhetoric, the former Speaker of the House has now picked up “sound money” as a sound bite.  Presumably, Newt’s trying to pull some Ron Paul/libertarianism into his updraft.  If anti-fed/sound money policies become a platform in the mainstream Republican platform, asset prices will be squarely in the cross-hairs.

2)  Speaking of hard money, it would appear oft-repeated inflation fears have been overdone so far.  As you can see from the following graph, inflation expectations remain “well anchored.”

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