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| Real Estate Investment SmartBrief |
| November 6, 2009 |
Central banks start to unwind emergency measures
Some of the largest central banks, including the European Central Bank and the Bank of Japan, are starting to exit stimulus measures implemented to tackle the financial crisis. ECB President Jean-Claude Trichet said the central bank will start to withdraw liquidity initiatives. "There are all kinds of risks," said Jim O'Neill, Goldman Sachs' London-based chief global economist. "We don't know how much of the improvement in markets is due to central banks' largesse, and neither do they. They're pretty nervous, but they've got to get out of it at some stage." Bloomberg (11/6)
Commercial property mortgages: The next big bank nightmare
Experts agree that 2010, because of maturing commercial property loans, will be another ugly year for U.S. banks, but they can't say how bad it will be. Nobody knows what the loans are worth because banks aren't required to write them down to market value, BusinessWeek said in a lengthy story addressing the problem. "In addition to losses caused by declining property cash flows and deteriorating conditions for construction loans, losses will be boosted by the depreciating collateral value underlying those maturing loans," said Jon D. Greenlee, a federal bank regulator. Bloomberg Businessweek/Unstructured Finance blog (11/5)
Commercial real estate lending off 54% in U.S.
In the third quarter, overall U.S. commercial mortgage lending plummeted 54%, the Mortgage Bankers Association said. The sharpest drop was in loans for shopping centers and malls, with a 62% decline. Lending for offices fell 46%. The dollar volume of loans for hotels was off 46%. 
Bloomberg (11/5)
Investment managers say they expect positive CRE returns
A survey by UBS Investment Research found more than 70% of global commercial real estate investment managers expected positive returns next year. Nearly 100 investors and managers, together in charge of about $265 billion worth of real estate assets, participated in the survey. REIT.com (11/5)
Analysts call Hyatt shares risky; price climbs after IPO anyway
In separate interviews, Todd Jordan, managing director at Research Edge, and David Menlow, president of IPOfinancial.com, described shares of Hyatt Hotels Corp. as a bit risky. Their words of caution didn't have much effect on the post-IPO trading. Hyatt shares advanced 3% in trading after completion of the hotel chain's $1.09 billion IPO, the second-biggest initial public offering in the U.S. this year. Hyatt's successful debut on the New York Stock Exchange came as a relief to banks after three earlier IPOs had to be pulled at the last minute because of a lack of interest from investors. ClipSyndicate/Bloomberg (11/5) ClipSyndicate/Bloomberg (11/5) Bloomberg (11/5)
REIT capital raising paid off for prior shareholders
When the publicly traded REITs went to the capital markets this year and raised $15 billion in new money, there were two ways of looking at the strategy. It could be viewed as a wise bet on a REIT rebound -- or evidence REIT executives didn't care about diluting the value of their existing shares. With the passage of time, industry experts are warming to the view the frenzy of capital raising was a good move that benefited everybody, including prior investors. Forbes (11/4)
David Green-Morgan: Great REIT opportunities around the globe
Great opportunities exist to buy REITs almost everywhere in the world, David Green-Morgan, Asia Pacific research director at DTZ, told CNBC's Martin Soong. There isn't anywhere where a careful investor can't find a well-managed, publicly traded REIT selling for less than current net asset value, he said. "The bigger ones will tend to get bigger and some of the smaller ones will be casualties," Green-Morgan said. REITs offer the greatest promise for investors with an investment horizon of five years or longer. CNBC (11/4)
Other News
BusinessWeek: Commercial property bust to be costlier
It might be comforting to look at the difficulties of U.S. commercial real estate as just another trip through the traditional boom-and-bust cycle, but that would be a mistake, BusinessWeek says in a lengthy story looking into the situation. This commercial real estate bust is a lot more complex than the ones that came before and will be costlier to fix, the publication said. Prices have dropped 47% from their 2007 high point. "We've never seen this extreme a correction as far back as the data go, which is the late 1960s," said Neal Elkin, president of Real Estate Analytics. Bloomberg Businessweek (11/5)
GE Capital executive sees up to 24 more months of CRE pain
GE Capital Real Estate CEO Ronald Pressman predicted U.S. commercial real estate prices will continue to fall for the next 18 to 24 months. "We're a long way from where we'd like to be," Pressman said at the Urban Land Institute's annual meeting in San Francisco. "The stakes are very big here." Bloomberg (11/6)
Sunstone Hotel Investors gets aggressive on mortgage
The hotel REIT Sunstone Hotel Investors said in its third-quarter earnings report it had not made the loan payment due Nov. 1 for a mortgage secured by 11 of its hotels. The REIT took the action in an effort to persuade the lender, Massachusetts Mutual Life Insurance, to extend the maturity of the debt or cut the principal balance. The REIT's executives said the properties are now worth less than the loan balance. The Wall Street Journal/Developments blog (11/5)
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Canada won't change tax status of REITs, for now
Oscar Belaiche, manager of the Dynamic Focus+ Real Estate Fund, does not expect the Canadian government to announce imminent plans to change REITs' tax status. "I can only assume that, given REITs have become the global de facto standard for securitized real estate, the Canadian government decided to leave them alone when they implemented the [specified flow-through entity] legislation," he said in reference to Canada's recent decision to tax other kinds of income trusts. The Wall Street Journal/Dow Jones Newswires (11/5)
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