Housing Market Tracker - Commercial Real Estate Review

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Commercial Real Estate and Real Estate Investment Trusts (REITs)

• Citigroup Sells 2 NY Buildings For $1.6B (CNN Money, Dec. 4th): "Citigroup (C) has agreed to sell two downtown Manhattan office buildings to SL Green Realty Corp. (SLG) for about $1.58 billion, the companies said. Citigroup will lease back the adjacent buildings, which are home to Citigroup's investment bank, under a 13-year lease that calls for annual rental increases. The properties, located on Greenwich Street in Manhattan's Tribeca neighborhood, have about 2.6 million-sf of office space. The agreement... is the latest in a string of at least a half-dozen building sales by Citigroup. [The bank] has been struggling to rebuild its depleted capital base amid mounting mortgage-related losses and some costly acquisitions."

• AIG Calls Off J-Reit Offering (Financial Times, Dec. 4th): "US insurance group AIG (AIG), has cancelled the December IPO of its Japanese REIT, highlighting the weakness of Japan’s Reit market after the US subprime mortgage turmoil... AIG said Monday it had decided not to list its J-Reit, which has underlying assets of Y100 billion ($906bn), due to poor market conditions. Last month Tokyo-based APL Japan Trust postponed a $358m listing on the Singapore Stock Exchange... Another J-Reit, Saizen, fell 14% on its Singapore debut. The J-Reit market has suffered bouts of nervous selling, particularly by Japanese regional banks and global hedge funds covering their losses in derivative markets, analysts said.

• Foreign Real Estate Investment Increases (Ocala.com, Dec. 3rd): "Florida commercial real estate industry insiders say international investors are having an impact in Marion County... Foreign investment in Florida commercial RE has increased... from just less than $948 million in 2004 to $1.43 billion so far in 2007, an increase of just less than 51%... Of five sectors in the commercial market - apartment, hotel, industrial, office and retail - Real Capital Analytics data show the most staggering increase in the retail sector of the Florida commercial market, with foreign investment skyrocketing from about $194M in 2004 to almost $900M this year."

• Realtors Association Expects Leveling of U.S. Commercial Real Estate Market (Black Enterprise, Dec. 3rd): "National Association of Realtors. The Commercial Leading Indicator for Brokerage Activity slipped 0.1% to an index of 120.6 in Q3 from a record reading of 120.7 in Q2 but remains 0.7% higher than Q3'06 when it stood at 119.7. The dip follows nine consecutive quarterly increases. NAR chief economist Lawrence Yun: "The flattening index means net absorption of space in the industrial and office sectors is likely to contract modestly or hold even over the next six to nine months... There should be no measurable change in net absorption in the office and industrial sectors in Q1'08 and no measurable change in newly completed commercial construction activity."

• Prudential Subsidiary Buys Loudoun Buildings (Washington Business Journal, Dec. 3rd): "Prudential Real Estate Investors said Monday its German subsidiary acquired four office buildings in Loudoun County from Boston Properties (BXP). The terms of the deal were not disclosed. TMW Pramerica Weltfonds, based in Munich and managed by TMW Pramerica Property Investment GmbH, bought three buildings that make up Orbital Science Corp.'s 156-acre campus. Dulles-based Orbital (ORB) makes satellites and space systems. The fourth building in the purchase houses the U.S. Postal Service and VeriSign."

• Churches Turn To Market-Rate Projects (The Real Deal, Dec. 3rd): "Churches have long bought, developed and sometimes sold properties as part of their mission. Trinity Church, for example, now owns and rents out about 6 million square feet of office space, spread over 18 buildings in Downtown Manhattan, and also holds the sought-after asset of 2 million square feet of development rights. However, high land and construction costs are making it harder for churches to acquire more real estate to fulfill goals such as providing affordable housing. Several are getting creative, building mixed-income and sometimes mixed-use properties on church land. Some are even turning to developers to help."

• AMB Acquires 103,000-SF Warehouse (Globe St., Dec. 3rd) California: "AMB Property Corp. (AMB) has acquired a 103,248-sf warehouse and distribution building at 16350 Gothard Ave. from privately held Morgan Holdings LLC, according to Colliers International. The building was completed in 2006 and is 100% occupied by two tenants, Monro's Furniture and Melmarc Products Inc. Terms of the sale were not disclosed."

• Accredited Mortgage Loan REIT Trust Declares Q4 Dividend on Preferred Shares (PR Inside, Dec. 3rd): "Accredited Mortgage Loan REIT Trust announced that the Pricing Committee of the Board today declared a quarterly cash dividend on REIT's 9.75% Series A Perpetual Cumulative Preferred Shares at the rate of $0.609375 per share. The dividend will be paid on January 2, 2008 to preferred shareholders of record at the close of business on Dec. 14th."

• Industrial REITs On The Rise (Forbes, Dec. 3rd): "With soaring exports, a weak dollar, and a scarcity of warehouse and port space, industrial REITs have surged at a time when others in the real estate market have struggled. The big kids on the block are AMB Property (AMB), First Industrial Real Estate Trust (FRPRC), and ProLogis (PLD)... The Institute for Supply Management index for November shows that the manufacturing growth rate is declining, [so] how come industrial REITs are thriving? Louis Taylor, analyst at Deutsche Bank: The bulk of the[se REITs'] incremental growth is coming from outside the U.S. While U.S. manufacturing growth is slowing it is still fairly stable... The weak dollar has helped spur exports."

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