Commercial Real Estate and Real Estate Investment Trusts [REITs] 

Updated: Harrison Street Closes on $430M Equity Fund. “Harrison Street Real Capital has closed on a new private equity fund after raising about $430 million... Christopher Merrill, co-founder and managing principle of Harrison Street: the thrust of the fund's investment strategy is to focus on "recession resistant" categories of real estate, including student and seniors housing, medical office and other healthcare properties, and self-storage and boat storage. There are more than 40 investors in the fund, including both domestic and European pension funds, insurance companies, endowments and foundations… The Arizona Public Safety Pension Retirement System, has committed $80 million to the fund, including an additional $45 million for co-investments.” (Commercial Property News, July 24^th) 

Reits To Stabilise, Predicts S&P. “Alka Banerjee, VP at S&P, said barring a deep recession, commercial rents should hold up and the low value and high yields of REITs should pull investors back into the market: "If the income revenue is stable, the NAV will be less important.” Over Q2, REITs dipped slightly less than property shares as a whole, but still suffered significant losses… The UK… declined 21.1%. Emerging markets experienced a particularly significant discrepancy between REITs and property share performance, with the former going down 9.8% and the latter 21.4%. Europe experienced notably poor sentiment and was perhaps the regional market most due a rebound.”  (Financial Times Advisor, July 22^nd)

Las Vegas Review-Journal Real Estate Column. “Las Vegas: Valley Residential Properties closed escrow on the 670-unit Canyon Pointe apartments on Harmon Avenue, near Boulder Highway.  The company, led by former Related Cos. executive Marty Burger, has closed on 1,975 multifamily units in Las Vegas worth more than $200 million with equity partner Square Mile Capital. Canyon Pointe is their sixth acquisition since 2007. Burger was president of Related Las Vegas, which had proposed the Icon high-rise condo project on Convention Center Drive and once held a development agreement for the 61-acre Union Park.” (iStock Analyst, July 21^st)

Limits Could Leave Multifamily, Rental Housing Out In Cold. “Any rescue scenario that restricts Fannie Mae and Freddie Mac's lending abilities could have dire consequences for a little-noticed area in the current turmoil: multifamily and rental housing. Investors worry that nationalization or added government oversight of the two quasi-governmental agencies could cause them to stop lending to multifamily and rental housing projects because there would be political pressure for them to support single-family homes.” (Pensions & Investments, July 21^st) 

Expect Near-Record Office Vacancy Rates In 2009, Says Grubb & Ellis. “Cutbacks in key industries such as information technology, finance and professional services have led to more than a quarter-million layoffs during H1’08, which has emptied an estimated 38 million-sf of office space… Commercial real estate advisory firm Grubb & Ellis: The percentage of U.S. offices that are empty could hit 17% by the end of next year… In the prior two recessionary cycles; the vacancy rate hit 17.9% in Q1’04; during Q3’91, it topped 18.0%. As of June, the national office vacancy rate stood at 14%... Detroit has been hit hardest, with a whopping 22.6% office vacancy rate. Conversely, New York City had the lowest vacancy rate among major U.S. cities, at 5.6%.” (Financial Week, July 21^st)

Office Investment. “Orange County, CA: [I drove] down the street and [to see] how leasing was going at the new office park at Jeffrey and the 5. It doesn't look too good, I think maybe 6-7 of the buildings were partially or fully leased and the remaining 15 or so were empty as can be. ... What's sad is this complex has been open for leasing since late 2007… Office investment is one of the three key components of non-residential investment in structures that will probably decline in H2’08 (and into 2009). The three key areas are: office buildings, multimerchandise shopping, and lodging.” (Calculated Risk, July 21^st)

Commercial Mortgage Delinquencies Up. “Fitch Ratings:  June delinquencies rose to 0.41% among commercial-mortgage backed securities from 0.39% a month earlier. Both office and retail mortgage defaults are still below the commercial mortgage delinquency average, despite their increases in June. Retail delinquencies rose to 0.21% from 0.17% in May, Fitch said. The increase came as 15 additional loans went delinquent in June. About 0.19% of loans secured by offices were delinquent in June. Multifamily homes continue to account for the most delinquencies among commercial mortgages. The sector's delinquency index is 1.77%. Multifamily home mortgages accounted for 57% of all commercial mortgage delinquencies in June, though among they make up only 14.6% of all loans reviewed by Fitch.” (CNN Money, July 21^st)

Commercial Property Prices Fall In May -Moody's. “Moody’s Investors Service report: Commercial real estate prices fell 3.5% in May, the biggest drop since at least December 2000... Commercial real estate prices, as measured by Moody's/REAL Commercial Property Price Index, are down 5.7% from a year earlier and 8.8% from their peak in October 2007. May's decline marked three straight months of negative returns for the index. "The economy is softening and property prices are now beginning to reflect that," Moody's senior credit officer Andrea Daniels said.” (Reuters, July 21^st)

Liberty Property Trust Announces Second Quarter Results. “Liberty Property Trust (LRY) reported that net income per common share (diluted) was $0.34 per share for the quarter ended June 30, 2008, compared to $0.57 per share (diluted) for Q2’07. For H1’08, net income per common share (diluted) was $0.67, compared to $1.00/share for H1’07. Net income reported for Q2 and H1’07 included significant gains on sales of property whereas the gains were less significant for the same periods in 2008. Funds from operations available to common shareholders (diluted) [FFO] for Q2’08 was $0.80/share, compared to $0.79/share for Q2’07. FFO per share for H1’08 was $1.60, compared to $1.59 per share for H1’07.” (MarketWatch, July 21^st)

Mervyn's Fights to Keep Its Store Doors Open. “Mervyn's LLC, the long-struggling California department-store chain, is fighting for survival… A Mervyn's liquidation would deliver another blow to the nation's mall owners, which are suffering through a torrent of store closings… It would also be an embarrassment to Mervyn's owners. Private-equity firms Cerberus Capital Management and Sun Capital Partners, along with three other partners -- including real-estate investor Lubert-Adler -- acquired the chain from Target Corp. in 2004 for $1.2 billion. The group put up about $400 million in equity and financed the rest.”  (Wall St. Journal, July 21^st) 

Lake Las Vegas Owners Place Resort in Bankruptcy.  “The owners of Lake Las Vegas -- a resort community that boasts three golf courses, two luxury hotels and a 320-acre man-made lake in the desert outside Las Vegas -- placed the project in bankruptcy proceedings, the latest in a string of failures plaguing upscale developments in the West. The development is owned by a unit of Las Vegas-based Atalon Group, which specializes in turning around financially troubled companies… Lake Las Vegas [was] weighed down by… more than $800 million in debt… In addition to its immediate cash needs, the project, located about 20 miles from the Las Vegas Strip in Henderson, Nev., is facing potential lawsuits from homebuilders.” (WSJ, July 21^st)

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