Commercial Real Estate: Financial Mergers Will Impact

Seeking Alpha's Housing Tracker reviews housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Overview

• GE's enormous commercial real estate portfolio could be a serious drag on future earnings reports, as it has been on Q1'08 and Q3'08 reports.
• BofA's Merrill buyout and Wells Fargo's Wachovia buyout could strongly impact Charlotte, N.C.'s CRE market. BofA and Wachovia are both Charlotte-based and are big regional employers.
• San Diego's convention center will expand.
• Las Vegas' retailer pain continues to hurt the CRE market there; California's CRE vacancy rates continue to rise.
• NY financials are expected to sell CRE to raise cash, but AIG's won't be at fire sale prices because they weren't highly leveraged.

Commercial Real Estate

GE's 'Honey Pot' Properties Turn Sour. “GE's (GE) difficulty selling its office buildings, shopping centers and other commercial property is dragging down its financial results. Lower property sales contributed to earnings shortfalls at the conglomerate in both the first and third quarters. GE, whose $88.7 billion real-estate portfolio is one of the world's largest, posted a 62% decline in its third-quarter profit on real estate, to $244 million from $640M a year earlier.” (WSJ, Oct. 15)

With Wachovia's Fall, BofA Stands Alone, And That May Hurt. N.C.: “Charlotte-based Bank of America Corp. (BAC), which employs 15,000 in the Charlotte metropolitan area, agreed to buy Merrill Lynch (MER)… The merger will likely increase its real-estate footprint in the region… Wells Fargo (WFC) agreed to purchase Charlotte-based Wachovia Corp. (WB), [which has] 20,000 employees in the area. WFC has said Charlotte would be the headquarters of the combined company's East Coast retail and commercial and corporate banking business… Brokers and analysts say that Charlotte office-building owners will need to brace for demand to soften and office rents to decline later next year.” (WSJ, Oct. 15)

Land Leased for 500,000-SF San Diego Convention Center Addition. California: “The  2.6 million-square-foot San Diego Convention Center management and operating entity, the San Diego Convention Center Corp., recently voted to plunk down $1 million to acquire a one-year lease option on 8.5 acres of land across from the existing center for an expansion project that could encompass as much as 500,000-sf of new exhibit space along the waterfront… According to the SDCCC, expanding the property is essential, as the city loses a year's worth of business annually due to space availability.” (Commercial Property News, Oct. 14)

Slumping Economy Hurts Las Vegas Commercial Real Estate Markets. Las Vegas, Nevada: “CB Richard Ellis: The retail market shows the strain of the economic downturn with steadily increasing vacancies and the first quarter of negative absorption, or the amount of new space taken by tenants, in a decade… The vacancy rate ran 6.32% in Q3 for nearly 59 million-sf of retail space in Las Vegas, up from 5.82% in Q2 and up 1.75 percentage points from a year ago. Asking lease rates have remained steady throughout the year.” (Las Vegas Review Journal, Oct. 14)

Real Estate Impact To Be 'Massive'.  “Although many are salivating over AIG's (AIG) $16.1 billion in real estate holdings, including a number of trophy properties such as its Manhattan headquarters, managers don't expect properties to be in distress, because of the relatively low level of leverage used by the insurer. Lehman Brothers Holdings Inc. of New York is expected to sell real estate securities and residential properties, including land, as part of its bankruptcy filing. The Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), both of New York, might have to sell off properties to raise cash and reduce the leverage on their balance sheets as they become bank holding companies.” (Investment News, Oct. 12) 

Hooters Closes At Station Square To Make Room For Sports Bar. “After nearly 16 years at Station Square, Hooters restaurant has closed its doors. The restaurant shut down Sunday after Station Square owner, Forest City Enterprises (FCE), exercised an option to terminate the lease. Forest City plans to replace Hooters with Field House, a sports bar.” (Pittsburgh Post Gazette, Oct. 10) 

First Into Recession, California Shows Possible Future for U.S. California: “Downtown Walnut Creek's commercial vacancy rate for Class A space has risen to 14.7% from 9.9% last year. Concord's commercial vacancy rate has jumped to 21% from 9.5% in 2007. Ed Del Beccaro, an office broker and senior managing partner at Colliers International in Walnut Creek, says his office's income is down about 20% this year.” (WSJ, Oct. 9)

                                   

Get Seeking Alpha's housing market coverage by email -- it's free and takes only seconds to sign up.