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
“In hindsight, everybody should have been more cautious. We all knew this wasn’t going to last, but we hoped it would end with a whimper, not a bang.”- Robert Bach, the chief economist at Grubb & Ellis, the national real estate brokerage firm, about the commercial real estate market. (NY Times, Jan. 6th)
Commercial Real Estate and Real Estate Investment Trusts (REITs)
- Office Vacancy Rate Rises For First Time in 4 Years (Wall St. Journal, Jan. 7th): "Reis Inc., a real-estate research firm: Nationally, the office vacancy rate -- measured by 79 metropolitan markets -- rose to 12.6% [in] Q4'07 from 12.5% [in] Q3'07... Net absorption -- the change in the amount of occupied space -- dropped slightly below 4.4 million-sf in Q4. By contrast, 16.2 million-sf was absorbed in Q3. In 2000... the figure topped 36 million-sf in a single quarter... In Q4, developers added more... than 19 million-sf of new office space... the most since Q4'00... the last boom. This year, about 75 million-sf of new office space is scheduled to come online in the 79 markets... up from about 53 million-sf finished in 2007."
- Monmouth: A High-Yield Commercial REIT to Consider (Thomas Smicklas in Seeking Alpha, Jan. 7th): "Monmouth Real Estate Investment Corporation (MNRTA) invests in net-leased (primarily triple-net leased) industrial properties with long-term leases to investment grade tenants... The high quality of this $191 million dollar portfolio gives investors the unique opportunity of investing in institutional quality real estate while at the same time receiving high yields... Monmouth has acquired over $100 million dollars in net-leased industrial properties since late 2004. MNRTA [is] regionally diversified... [and] has traditionally maintained a conservative balance sheet, although Q4'07 gained significantly over Q4'06... Rental revenue [increased] by 27%. The stock is trading... at approximately $7.90/share and yields 8.61%."
- Company Slimming Down Headquarters (Crain's NY Business, Jan. 6th): "iQor, a company that operates call centers, is subleasing 16,400-sf at 335 Madison Ave. [in Midtown.] The building's... asking rent is in the $85-a-square-foot range, according to Greg Kraut, a broker at CB Richard Ellis... iQor is subleasing the space from BEA Systems Inc... The lease is only for three years, which is atypical, but Mr. Kraut says the company wanted flexibility. iQor is currently located in about 22,000-sf at 100 Park Ave."
- U.S. Real Estate Bargains - Barron's Interview (Eli Hoffmann in Seeking Alpha, Jan. 6th): "Barron's interviews JP Morgan portfolio manager Scott Blasdell, a U.S. and global real estate guru. Blasdell foresees a possible total 15-20% correction in property prices, which means a 30% drop in REIT prices, of which we've already seen 20%. However, he says, the timing is good to look at select property companies - the cheapest stocks in the sector. Simon Property Group (SPG), Public Storage (PSA), Boston Properties (BXP), Kimco Realty (KIM) and ProLogis (PLD). Two other stocks he likes: 1) Colonial Properties Trust (CLP) and 2) Alexandria Real Estate Equities (ARE)."
- Don't Throw Out ProLogis With REIT Bathwater - Barron's (Seeking Alpha, Jan. 6th): "ProLogis REIT (PLD) has grown double-digits annually from three sources of income: It owns/manages/leases industrial properties; its investment fund fees provide cash for development and acquisitions and enable ProLogis to avoid expensive borrowing; PLD also services and develops corporate distribution facilities, generating rental fees. Funds from operations [FFO] were strong at $4.40-$4.50/share in 2007, and derived mostly from non-U.S. assets. That's up from $3.69 in 2006, and projections for 2008 are $4.65-$4.85. FFO is the preferred measure of a REITs health, and ProLogis expects 12%-14% FFO growth annually. Q3 earnings topped analyst estimates, and management aims to more than double assets under management, to $60B, by 2010."
- Harry Macklowe’s $6.4 Billion Bill (NY Times, Jan. 6th): "NY developer Harry Macklowe has a $6.4 billion debt payment coming due next month. [Macklowe] purchased seven Midtown Manhattan office buildings a year ago... from Equity Office Properties... [He] used $50 million of his own money, borrowing $7 billion to finance the rest... Mr. Macklowe's empire of 15 prime office towers and two [NY] development sites... is awash in expensive, short-term debt [when] financial backing for megadeals has all but shut down. One of his loans is backed by a $1 billion personal guarantee, and he is already in default on $510M in development loans for a Park Avenue project."
- Commercial Real Estate Caught In Slowdown (Naples News, Jan. 5th): "Florida commercial RE broker David Stevens [IPC]: "[This year:] Continued good activity in retail, office, industrial and income properties, but not at frenzied levels until after the 2008 presidential election..." REITs probably will slow purchasing in H1'08 because their financing options are more limited after the subprime crisis, Stevens said. That will open up more opportunities for individual investors because it will reduce competition... A slowing commercial market in Southwest Florida looks a lot like a booming market in many other areas of the country."
- DDR Agrees to $100M-Plus Retail Buy (Globe St., Jan. 4th): "Developers Diversified Realty (DDR) is acquiring a portfolio of eight grocery anchored shopping centers in three New England states. The assemblage of 660,000-sf is expected to fetch more than $100 million for the sellers, a partnership of Heitman and the California State Teacher’s Retirement System... The bulk of the portfolio is in Massachusetts, but there are also assets in North Windham and Waterville, ME, and in Warwick, RI. The Massachusetts holdings are in Cohasset, Easton, Hanover, Plymouth and Waltham. All except the latter property are anchored by a Shaw’s Supermarket, a dominant retailer in New England."
- Two Buildings Trade for $13M (Globe St., Jan. 4th): "Two South Jersey office buildings have been sold for just less than $13 million in separate deals brokered by Colliers Lanard & Axilbund’s New Jersey Office Division. The combined space involved is approximately 93,000 sf. In a sale-leaseback deal, the 52,648-sf 111 Woodcrest has been acquired by Behringer Harvard Woodcrest IV LLC of Addison, TX for just less than $6.3 million, or approximately $119/sf. The seller was the Udren Family LP, an affiliated entity of the building’s occupant, the Law Offices of Mark Udren. Terms of the lease were not disclosed."
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