Housing Market Tracker - Commercial Real Estate Review

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.

Quote of the Day

"The economy is in the crapper. Housing is going down the chute. Lowe's backed off, and then Kohl's said they wouldn't come without Lowe's, and the whole house of cards collapsed." - Richard Kopczick, mayor of Morris, Illinois, which had expected to gain more than $1 million in sales taxes from a planned shopping center that's now lost its key big-box stores. (Crain's Chicago Business, Dec. 23rd)

Commercial Real Estate and Real Estate Investment Trusts (REITs)

• Economic Uncertainty Surrounds Commercial Real Estate Market (San Diego Business Journal, Dec. 24th) San Diego: "The Urban Land Institute and Pricewaterhouse¬Coopers LLP report... anticipates a slowdown in commercial real estate nationally with a healthy correction that will likely bypass long-term investors but penalize speculators and over-leveraged buyers... Numerous commercial projects are expected to break ground in 2008, including the $16.3 million Allied Health Building at Mesa College... Consolidated Contracting Services Inc. anticipates the completion of the La Maestra Community Health Center... in City Heights, in fall 2008. Smith Consulting Architects anticipates the completion of... a 96,500-square-foot Class A office building in Scripps Ranch, in June. Sudberry Properties expects the completion of... a $115M Class-A office project in Kearny Mesa, in September."

• Suffering Increases For Some Fund Investors (USA Today, Dec. 24th): "The average real estate fund has tumbled 15.8% this year, compared with a 4.7% gain for the S&P 500-stock index. Yet many of those real estate funds are doling out large capital gains distributions this year, which means shareholders will... pay sizable taxes on a losing investment... The average real estate fund has paid $2.38/share in long- and short-term capital gains distributions this year... Long-term capital gains are taxed at a maximum 15%; short-term capital gains are taxed at your regular income tax rate, which is higher than the capital gains rate for most investors. A fund with a large capital gains payout can mean a weighty tax bill."

• Gazit-Globe US Unit Sells 11 Properties: Equity One Will Use Proceeds To Buy "Higher Quality Assets In Targeted Markets" (Trading Markets, Dec. 23rd): "Gazit-Globe Ltd. US REIT subsidiary Equity One Inc. (EQY) has sold 11 properties in the Southeast for $63.9 million and will report a Q4 capital gain of $18.2M. The properties, all shopping centers in Alabama, Florida, Georgia, North Carolina, and South Carolina, were sold in separate transactions. Equity One CEO Jeff Olsen said that the properties were sold at the company's "targeted pricing". He added that the properties were non-core assets in secondary markets, and that the company would use the proceeds to buy "higher quality assets in our targeted markets".

• Big Retailers Shelving Plans To Add Area Stores (Crain's Chicago Business, Dec. 23rd) Chicago, Illinois: "Target Corp., Home Depot Inc., Wal-Mart Stores Inc. and other big-box retailers — buffeted by sagging sales and the housing slump — are pulling the plug on new-store plans in and around Chicago. The pullback is another sign of the darkening outlook for 2008, as retailers turn cautious on expansion... The retailers' retrenchment hurts because retail and housing have been the primary sources of growth in exurbs like Morris, and city neighborhoods counted on new stores as an economic shot in the arm."

• Brandywine Closes $245M DRA Joint Venture (Globe St., Dec. 21st) Pennsylvania: "Brandywine Realty Trust has completed its previously announced sale of a 29-property suburban office portfolio to a joint venture with DRA Advisors LLC. The properties are located in Allentown and three Philadelphia suburbs and encompass an aggregate of 1.6 million sf. The portfolio is valued at $245.4 million and is 96.4% leased. The valuation represents a cap rate of approximately 7.3%, based on net operating income through Sept. 30, 2007, and 7.9% based on preliminary NOI projections for 2008."

• REIT JV Closes on 30 Asset Acquisition (Globe St., Dec. 21st): "Lexington Realty Trust revealed that its co-investment program with Inland American Real Estate Trust Inc. closed on the acquisition of 30 primarily single-tenant net leased assets from Lexington and its subsidiaries for an aggregate purchase price of $408.5 million, including the assumption of non-recourse first mortgage financing secured by certain of the assets. The 30 properties contain an aggregate of more than 3.5 million net rentable sf and are located in 23 states. The co-investment program is under contract to acquire up to an additional 23 properties from Lexington, a locally based REIT focused on single-tenant real estate investments, and its subsidiaries."

• Commercial Real Estate: Something New for Dulles (Washington Post, Dec. 21st) Washington D.C.: "Technology company GTSI has agreed to move its headquarters next year from Chantilly to a new building in Herndon, providing a shot in the arm to the Dulles commercial real estate market, which has seen a surge of speculative construction over the past few years. GTSI, which sells furbished computers, software and networking products to the U.S. government, signed a 10-year lease for 104,000 square feet in the building, which is still under construction. The company, which is the first major tenant for the project, expects to move into its address along Route 28 South in December 2008."

• Silverstein Makes It Official: Announces $1 B. Buy of 1177 Sixth (NY Observer, Dec. 21st) New York City: "Larry Silverstein's firm announced on Thursday that it had bought 1177 Avenue of the Americas for over $1 billion. Silverstein properties partnered with the California State Teachers’ Retirement System, and the joint venture bought the midtown tower from Paramount Group."

• Waterfront Revival Phase II May be Worth $2.3B (Globe St., Dec. 21st): "NY: A newly released master plan for the Alexander Street section of Yonkers' waterfront could generate more than 3,000 new housing units as well as new retail, office space and increased public access to the Hudson River... The Alexander Street area’s redevelopment will be the second phase of the city’s plan to revitalize the waterfront district. A proposal valued at approximately $1.3 billion by the partnership of Struever Brothers, Fidelco Realty and Cappelli Enterprises, is now in the approval process with the city and will likely break ground sometime in 2008."

• Buyer Ready To Transform Old Plant (News OK, Dec. 20th) Oklahoma: "A Kansas City company that specializes in retrofitting old factories is set to close today on its purchase of the former Dayton Tire plant, and is preparing to spend millions to turn it into an industrial park... Big Industrial LLC specializes in buying closed plants and converting them into industrial parks... Big Industrial, meanwhile, is finalizing plans for renovations that will include new roofing, facade changes, added docks, and a reconfiguration of the space to allow for tenants to use 25,000 to 2.5 million square feet of space... An analysis released earlier this year by Grubb-Ellis indicated the local market is ready for new industrial space, with vacancy down to 10%."

• SL Green, SITQ Complete $1.6B Acquisition (Bloomberg, Dec. 19th): "A venture between SL Green Realty Corp. (SLG) and SITQ has [acquired] two Downtown office buildings at 388 and 390 Greenwich St. for $1.6 billion, or $598/sf... The adjacent buildings... total more than 2.6 million-sf, are 100% occupied by Citigroup, which will remain in place under the terms of a 13-year triple-net lease that provides for annual rental increases. Under the joint venture, SL Green has a 50.6% interest and SITQ has a 49.4% interest. The two buildings, completed in the late 1980s, form a campus located on the Hudson River Waterfront that straddles the Tribeca and World Financial Center."

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