Housing Market Tracker - Commercial Real Estate Review

Includes: AMD, FCE.A, GSC, WRE
by: Judy Weil

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

“This is not Dubai signaling 'let’s get out of the U.S.'. It’s 'let’s be more judicious about what we buy here. And let’s make a killing while the killing can be made'.” - Peter Slatin, founder of the real estate newsletter The Slatin Report, about Dubai World's sale of 230 Park Ave. to Goldman Sachs' real estate arm for $1.15 billion. (Forbes, Dec. 26th)

Commercial Real Estate and Real Estate Investment Trusts (REITs)

  • 2007 Had Plenty Of Ups And Downs (Sun Herald, Dec. 31st) Florida: "Local buildings have been going up and coming down all over the place. In Punta Gorda, the long-awaited Event Center got "tilted up" in December... along the Peace River... The stately SunLoft building was topped off, even as a new hotel goes up along U.S. 41. Two other hotels went up in 2007: a Sleep Inn opened in November at Interstate 75 and a Microtel behind Bob Evans on U.S. 41 in Charlotte Harbor will be next. Baker Center and Neil Armstrong Elementary School students filled up their new schools in August and October."

  • New England Realty Associates: Baby Thrown Out With the Bath Water (Jonathan Blumberg in Seeking Alpha, Dec. 30th): "New England Realty Associates (NYSEMKT:NEN) is a company that owns apartment buildings and a small amount of commercial real estate in Boston and outlying cities... One strong argument to for this stock is that they have huge equity in their properties and are not nearly as leveraged as other apartment building operators. On top of the steep discount, to NAV the stock yields 4%. At these prices the company has to be careful that someone does not try and steal the company or start a bidding war. $66/share is a steal and in my opinion that price will be gone as soon as the tax selling season ends."

  • County's Building Boom Focuses Squarely On Malls (St. Petersburg Times, Dec. 29th) Florida: "If there's any upside to 2007 worth remembering on the development scene, it would be the... three supersized malls [coming to] central Pasco. In 2007, the malls hit the ground in quick succession, marching into Wesley Chapel with millions of square feet and business dollars. The 800,000-square-foot Grove at Wesley Chapel was first off the block, breaking ground in March and opening its first phase just in time to draw Thanksgiving shoppers... Cypress Creek Town Center [is] planned for just over 1-million-sf... among the biggest malls in the Tampa Bay area."

  • Credit Downturn Hits the Malls (Trader Mark in Seeking Alpha, Dec. 28th): "Harry Macklowe, the New York developer, is struggling to raise financing by February to replace $7.1 billion in short-term money he borrowed to finance his heavily leveraged acquisition of seven Manhattan office buildings this year... Macklowe's predicament... underscores the state of the... commercial real-estate market. For the past few months, the sector has been in a state of near-paralysis, as financing has nearly dried up. The number of major properties sold is down by half, and many worry that the market will continue to deteriorate as property sales remain slow, prices continue to drop and deals keep falling apart."

  • Commercial Real Estate 'Rules' Changed in 2007 (NY Sun, Dec. 27th): "For owners, operators, and developers of commercial real estate, 2007 will be remembered for the serious changes that have taken place in "the rules of the game." The turmoil in the credit markets resulted in a decrease in transactions in Q4 and gave further credence to the expression "cash is king" when purchasing an asset. In addition, the market started to reward "relationship banking," and investors who failed to maintain excellent relationships with their investment bankers and balance sheet lenders had few places to go to secure financing."

  • AMD Spends $270 Million On Its New Lone Star Business Campus (Statesman.com, Dec. 27th): "Chip maker Advanced Micro Devices Inc. (NYSE:AMD) is spending $270 million on its new Lone Star business campus that is being completed in Southwest Austin, and the company is betting on a lasting payoff. AMD, which typically concerns itself with getting the most out of every square millimeter of silicon that it designs and sells to computer makers and others, now wants to get the most out of the 870,000 square feet of space in five buildings on a 58-acre hillside complex at 7171 Southwest Parkway."

  • A World Full of Grand Plans (Wall St. Journal, Dec. 26th): "Some of the biggest cities in the world are proposing the most ambitious real-estate projects in a generation... But banks are sharply cutting back on commercial real-estate loans... Goldman Sachs on Dec. 14 downgraded the stock of one of the largest builders of urban projects nationwide, Forest City Enterprises. The downgrade said increased borrowing and construction costs are making its development projects less profitable. One of Forest City's subsidiaries, Forest City Ratner Cos... delayed the expected completion of an NYC basketball arena that is the centerpiece of its $10 billion Atlantic Yards project in Brooklyn."

  • Washington REIT's Ratings Cut To 'BBB+', Outlook Raised To Stable - S&P (Forbes, Dec. 26th): "Standard & Poor's Ratings Services said it cut its corporate credit and senior unsecured debt ratings on Washington REIT to 'BBB+' from 'A-' and raised the outlook to stable from negative. S&P: 'The downgrade was driven by a steady decline of Washington REIT's cash flow coverage measures resulting from debt-financed investment growth over the past three years and higher capitalised interest costs from an expanded development pipeline. This is offset by a relatively transparent financial presentation and the company's strengthened investment portfolio of diversified assets in relatively defensive property submarkets... S&P expects the company will be able to operate comfortably at the lower rating level."

  • Goldman Buys Building in New York for $1.15 Billion (Bloomberg, Dec. 26th) Goldman Sachs Group Inc.'s (NYSEARCA:GSC) Whitehall Fund and a partner bought 230 Park Avenue, the former Helmsley Tower adjacent to New York's Grand Central Station, for $1.15 billion from a property fund owned by Dubai's government. Istithmar World Real Estate sold the building, purchased in November 2005 for $705 million, to Goldman and Monday Properties, Dubai-based Istithmar said. Last month, Istithmar sold 280 Park Avenue for $1.35B... While Istithmar intended to hold the building for longer, "market conditions created an unusual opportunity,'' Sultan Ahmed Bin Sulayem, chairman of Dubai World, Istithmar's parent, said."

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