Commercial RE Slowdown Hits Vegas [Housing Tracker]

Commercial Real Estate and Real Estate Investment Trusts [REITs]

Debt-Laden Casinos Squeezed by Slowdown.  “The gambling slowdown… is taking a serious toll on Las Vegas, with banks, investors and private-equity funds growing as tightfisted as the consumers who are gambling less in the slumping economy. Once believed to be recession-proof, casinos are proving to be highly vulnerable to the economic downturn... Las Vegas is entering its lethargic summer season, and a boom-time frenzy of grand expansion plans and private-equity buyouts has left casinos laden with debt… Now, debt default or bankruptcy proceedings [are] looming as possibilities for some companies as cash flow shrinks.”  (Wall St. Journal, July 1^st)

Manhattan Office Vacancies Up Slightly.  “Brokerage Colliers ABR monthly report: Office vacancies continued to creep up for all building classes in Manhattan from the previous month... Asking rents began coming down in Midtown this month… to $80.65/sf, from $81.40/sf in May. The average asking rent was up $0.25 cents to $49.35/sf in Midtown South and up $0.14 to $51.24/sf in Downtown. Studley quarterly report: Q2 average asking rents [were] down in all markets. The average asking rent fell 2.2% to $77.10/sf in Midtown between March 31st-June. It also said that Downtown's average asking rent fell .2% to $50.81/sf over the same period.”  (The Real Deal, June 30^th)

Brandywine Selling Oakland Portfolio for $412M.  Oakland, California: “Brandywine Realty Trust has agreed to sell a 1.7 Million-sf, five-property office portfolio here to an affiliate of CIM Group for $412.5 million in cash and assumed debt... The deal also includes for the buyer Brandywine's condominium interest in a parking garage at 2353 Webster Street, an option for the CIM Group affiliate to acquire an additional asset. Bradywine in exchange will retain the right to manage and lease the property for at least one year.”  (Globe St., June 30^th)

Port Authority Finds WTC Cost Overruns, Delays.  “NY Port Authority admitted there were significant delays and cost overruns [at the World Trade Center site]. Although the P.A.'s assessment team did attempt to correlate each project at the site with a completion date and cost, the agency found at least 15 fundamental issues critical to the overall project had not yet been resolved. The P.A., which owns the 16-acre World Trade Center site, says in its report to Gov. Paterson that if it were to forecast completion dates and costs before those issues have been resolved, it would set more commitments and expectations that are unrealistic.”  (Globe St., June 30^th)

Prince Charles to Launch £1B Property Fund.  “Prince Charles is planning to launch a £1 billion property fund that will invest in sustainable building projects. A heavyweight team of property executives has been lined up to run the fund, called Tellesma, and Credit Suisse will raise money for the fund from Middle Eastern investors… A third of the fund will be owned by The Prince's Charities, which will benefit from the fund's profits. The brain-child of Prince Charles, Tellesma is seen as a way to capitalize on the expertise and experience gained by developing Poundbury, a 400-acre master-planned village established in Dorset, England in the late 1980s.”  (Commercial Property News, June 30^th)

Texas' Commercial Real Estate Market Holding Steady.  “Houston real estate valuation and consulting firm Lewis Realty Advisors: "Houston, Austin, Dallas/Fort Worth, and San Antonio are the top four gainers in job growth in the nation. Those four cities are also in the nation's top 10 for population growth… Texas real property is significantly outperforming other regions." Texas' economy has been bolstered by health care, education and technology. However, the energy sector is continuing to drive the state's economy, particularly in the Houston and Dallas/Fort Worth markets.  The domestic rig count, a measure of oil and gas drilling activity, is at its highest point since 1985.”  (Dallas Business Journal, June 30^th)

Report: Despite Faltering Economy, Industrial Sector Remains Stable.  “Marcus & Millichap Real Estate Investment Services report: The national industrial property market…“is in a stable equilibrium for supply and demand. The shorter term pains of increased supply on a speculative basis and a small increase in vacancy exist, but the market’s fundamentals continue to remain reasonably strong.” While certain markets, like California's Inland Empire, are expected to get ahead of themselves in terms of their supply and demand balance, the national market as a whole is expected to remain consistent.”  (CPN, June 30^th)

Avalon Bay Communities: Urban Rentals Hit the Spot.  “Avalon Bay Communities (AVB) builds and runs apartment communities. Accordingly, it is in the one part of the housing market that is healthy. As fewer can own, due to the tightened lending standards, more must rent. [Many] of AVB's communities are urban. This is a huge advantage as the nation will slowly de-suburbanize and re-urbanize in response to increasingly tight fuel supplies. Human habitation will gradually become more concentrated, benefiting purveyors of urban rentals. Also, AVB qualifies as an REIT, and has a yield of 3.57%... And if inflation rises, AVB may well be able to increase its rents and its dividends.”  (Timothy Siegel in Seeking Alpha, June 27^th)

Commercial Real Estate: Harder Times Ahead.   “New [commercial construction] activity dropped sharply in Q4, as financing became more difficult and employment growth slowed. The increase in building in 2007 was critical to gross domestic product growth. Residential construction subtracted 1.0 percentage point from growth last year, but nonresidential construction added back 0.4 percentage points… Extended declines followed the last two cyclical peaks, with activity dropping for seven years after 1985 and for three years after 2000. We think that this year will more closely resemble what happened in 2000, because there was much less overbuilding then than in the late 1980s.”  (BusinessWeek, June 27^th)

 

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Comments

[aquaculture]

Ok now we can understand why J.M. Keynes lived in a rental house and traded commodities.

[Tom Lindmark]

Here's what I learned last week at the IMN Distressed Real Estate Conference-blog.metro-real-estate...

[jjason]

Thank you for the link Tom. Excellent comments.

[Did U Think The Ponzi Scheme Would Last?]

Nice link to the Las Vegas CRE blog. Thanks!

[billddrummer]

Thanks, Tom, for the link and insights.