Picture of The Day

This is incredible. A newly built apartment building in Shanghai just toppled over as a result of shoddy construction. Apparently lax construction practices are pretty rampant in China. One would hope the Chinese have learned their lesson after last year's massive earthquake in Southern China, during which a disproportionately high number of schools fell down onto their students and teachers, due to shoddy construction.

Weekend Roundup

Global Property Slide May Be Long ("Reuters")

Experts at Odds on World Commercial Property Recovery ("Reuters")

Don't Be Fooled ("Trend Czar")

Global Property Lending Landscape Altered Forever ("Reuters")

Burned U.S. banks may stay shy on real estate ("Reuters")

Distressed Real Estate Hits $97B ("GlobeSt.com")

Where Are All of the Distressed Assets ("StreetWise")

For Those with Money: "You Won't Find a Better Time to Be a Buyer" ("CoStar")

Behind The Extended Stay Bankruptcy Brouhaha ("WSJ")

Public Companies 'Seriously' Considered Non-Traded REITs ("CRENews.com")

Liquidity remains tenuous for US equity Reits, says Fitch ("PFW")

Biggest REITs Managed to Whittle Down Debt Maturities; Still Face Challenges ("CRENews.com")

Office Tenants Now in the Driver's Seat ("CPN")

Shortfall of Apartments Supply When Recession Ends in 2011 ("CPN")

Landlords Finding New Uses for Big Box ("GlobeSt.com")

Net Lease Market Sluggish, But Not Comatose ("CPN")

Developers of Mixed-Use Projects Remain Committed to Hotels ("Retail Traffic")

Medical Office Update: Healthcare Coming Down With Symptoms of Ailing Economy ("CoStar")

Interest in Assisted Living Undeterred by Trouble Economy ("CPN")

Is The Gap Between Buyers and Sellers Narrowing?

It appears so, according to Allen Smith, CEO of Prudential Real Estate Investors:

"Just recently -- and by recently I would measure this in weeks not months -- we've seen the transaction market begin to show some strengthening," Allen Smith, chief executive officer, said at the Reuters Global Real Estate Summit in New York. "Credible players are appearing and bidding on assets.

"We'd seen that earlier, but the people who were showing up to bid frankly weren't terribly credible and often were really not prepared to close," Smith said. "We are now seeing people show up who fall into the institutional category and are clearly ready to close. We're more prepared to act on that as a seller than we might have been in the past."

AIG Headquarters in Manhattan Attracted 400 Bids

According to CB Richard Ellis broker Darcy Stacom, the Queen of the Skyscraper:

When the AIG tower in lower Manhattan came onto the market, it attracted more than 400 bids, including some from current tenants, she said. It was eventually was sold to a consortium of Youngwoo & Associates, a New York investment firm, and South Korea's Kumho Investment Bank.

Apparently the towers were sold for $100 million at $100 PSF, and “One of the reasons the Koreans prevailed is that they were willing to buy both properties,”.

Commercial Real Estate "another real stomach blow" to Banks

Philip Blumberg, CEO of Blumberg Capital Partners speaking at the Reuters 2009 Global Real Estate Summit in New York:

Bloomberg: Signs of Strain in Commercial Real Estate

Here is a Bloomberg interview with Susan Smith of PricewaterhouseCoopers. According to PricewaterhouseCoopers' latest Korpacz Real Estate Investor Survey, commercial real estate recovery is not expected to materialize until 2011. The 2011 recovery projection seems to be significantly more optimistic than the 2017 recovery predicted by Richard Parkus, Deutsche Bank head of Commercial Mortgage-backed Securities and Asset-Backed Securities Synthetics Research. Now, are you going to listen to owners and investors in the business, or a CMBS analyst?

Worldwide Plaza Deal Falls Apart, Again

Private Equity Heading to Arizona

According to a Arizona-based fund manager, US private equity companies of all sizes are heading to Arizona for real estate investment opportunities. Let's just say, I'm not convinced:

E. Patrick La Voie, fund manager for the Arizona-based Westward Fund, says the recession has produced a surplus of high-quality real estate assets that are now available at substantially below-normal prices, particularly in Arizona.

Weekend Roundup

Treasury’s Got Bill Gross on Speed Dial ("NYT")

Bank, CMBS Defaults Continue Record Setting Increases ("CoStar")

Opportunistic CRE Investment Heats Up ("CPN")

Overseas Buyers Will Be Back in the USA ("GlobeSt.com")

Trying to Gauge the REIT Rebound ("NYT")

Why REITs Are Ahead of the Recovery Curve ("NREI")

Lenders Still Cool to Lodging Properties ("GlobeSt.com")

The Green Mandate for Commercial Real Estate ("CPN")

Let's Move In Together

Nation's Girlfriends Unveil New Economic Plan: 'Let's Move In Together'

David Lichtenstein on CNBC

Since the Lightstone Group is in the news, I dug up an old CNBC interview which featured David Lichtenstein, principal of The Lightstone Group. The interview took place in February, 2008. What a difference a year makes.

Morgan Stanley Hurting From Commercial Real Estate

Over the years, Morgan Stanley has become one of the largest investors in commercial real estate through its various investment funds. Unfortunately, the current market condition is causing a lot of pain for the firm:

•Morgan Stanley is writing down 80% of the properties in Fund V U.S. and 60% in Fund VI International.

•Two investors — the $60.5 billion New Jersey State Investment Council and the $3.86 billion Contra Costa County Employees Retirement Association — backed out of their commitments to its latest closed-end fund, the approximately $5 billion Morgan Stanley Real Estate Fund VII. Contra Costa had committed $75 million; New Jersey, $150 million. (Fund VII is closed to further commitments but is technically open to tie up loose ends, according to sources close to Morgan Stanley.)

•Its $5 billion open-end core real estate fund, the Morgan Stanley Prime Property Fund, has a line of investors asking for a total of more than $500 million in redemptions as of year-end 2008. The fund returned -19.8% for the 12 months ended March 31, underperforming the NCREIF Property index but outperforming the NCREIF Open-End Diversified Core Equity index, according to fund information provided to investors.

You can read more here.....

CNBC: Commercial Real Estate: Ticking Bomb?

Extended Stay Files for Bankruptcy

The commercial real estate slump has claimed another victim. The Extended Stay bankruptcy is the latest example of a highly-leveraged transaction completed at the top of the market turning sour. From Bloomberg:

Extended Stay Hotels, the operator of mid-priced hotels acquired at the peak of the commercial real estate market for $8 billion, filed for bankruptcy protection as the recession cut corporate and leisure travel.

The Spartanburg, South Carolina-based chain, with more than 680 properties in 44 states, collapsed two years after Lightstone Group LLC purchased the company with $7.4 billion in financing. The company said it had $7.1 billion in assets and $7.6 billion in debts at the end of last year, according to papers filed today in U.S. Bankruptcy Court in New York.

According to WSJ, the principal David Lichtenstein of Lightstone Group has only $200 million equity in the deal:

David Lichtenstein, whose Lightstone Group LLC led the buyout group, appears to be surviving Extended Stay's meltdown relatively unscathed. Lightstone contributed only $200 million of equity and borrowed a chunk of that for the deal, according to people familiar with the matter.

Under the hotel chain's proposed restructuring plan, the 48-year-old Mr. Lichtenstein would avoid personal guarantees in the original loan agreement. He would also be kept on as manager of the 680-property hotel chain.

The New York Times Magazine

This week's Architecture Issue covers from state-of-the-art data centers to a prison in a small Austrian town, that has glass walls, balconies, communal cooking spaces and private bathrooms. Go read it!

Weekend Roundup

Industry Better Off Than Nine Months Ago ("GlobeSt.com")

Global Commercial Real Estate Debt: Deleveraging into Distress ("IREI")

Stressed but Not Distressed: CRE Pricing Disconnect Spreads to Mortgage Investments ("CoStar")

Relief for Commercial Real-Estate Debt? It Seems Possible ("WSJ")

Industry Contemplates a Toxic Debt Roadmap ("GlobeSt.com")

Bondholders Face Losses From Commercial Mortgages ("Bloomberg")

Lenders Now Hinge Decisions on Proof of Developers' Wealth ("TRD")

Will Green Shoots Sprout for Institutional Investors? ("NREI")

New Rail Lines Spur Urban Revival ("NYT")

REITWeek 2009: Low-Leverage REITs May Lead ’90s-Style Real Estate Revival ("CoStar")

Canadian REITs stronger than U.S. peers ("GlobeandMail")

Las Vegas Construction Industry Faces Deeper Hit ("WSJ")

Retail Property Sellers Opt to Offering Financing to Get Deals Done ("Retail Traffic")

Done Shopping – Structural Shifts in the US Retail Sector and Their Implications for Real Estate Investment ("IREI")

Retail Indicators Looking Up; But Execs Warn, "Curb Your Enthusiasm" ("CoStar")

The American Dream or The American Delusion? The Private and External Benefits of Homeownership ("Wharton")

Beige Book: Commercial Real Estate Markets Continued to Weaken

From the Beige Book:

Although the residential real estate market remains weak, agents in the New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas, and San Francisco Districts reported an uptick in home sales. The reasons cited include seasonal factors, low interest rates, declining house prices, and tax credits for first-time buyers. Much of the sales increase was found in the lower-priced end of the market. New home construction appeared to have stabilized at very low levels in Philadelphia, Cleveland, Atlanta, Chicago, Minneapolis, Dallas, and San Francisco, although Kansas City reported an uptick in construction. Home inventories were trending down in Philadelphia, Richmond, Atlanta, Kansas City, and Dallas. However, Chicago reported that inventories remain elevated.

Commercial real estate markets continued to weaken across all Districts. Vacancy rates for commercial properties were rising in many regions of the Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and San Francisco Districts putting downward pressure on rents. Atlanta, Chicago, and St. Louis reported new construction projects being postponed or cancelled, and new construction in the New York, Philadelphia, and Minneapolis Districts dropped substantially. Eight Districts cited difficulty in obtaining financing as one of the primary reasons for delaying or stopping construction of new developments and for limiting sales of existing properties.

Starwood CEO Barry Sternlicht on Bloomberg

Here is Bloomberg's full interview with Starwood Capital's CEO Barry Sternlicht.

Weekend Roundup

Commercial Mortgage Market Wants Changes To Fed TALF Program ("WSJ")

Capital Markets' Distress Mingles with Hints of Improvement ("CPN")

Troubled CRE Assets on Banks' Books Double to $34 Billion ("CoStar")

Lack of Leverage Lends Strength, REIT Week Panel Maintains ("CPN")

REIT Players Crossing Fingers The Worst Is Over ("WSJ")

REITs Have the Upper Hand in Recovery ("GlobeSt.com")

Recharged REITs ("Forbes")

Shopping Centers Anchored by Groceries Hold Drawing Power ("WSJ")

Retail REITs Pursue Stock Offerings in a Darwinian Battle of the Balance Sheets ("Retail Traffic")

Lodging Leaders: Recovery a While Away ("GlobeSt.com")

What GM Bankruptcy Means fir Mort Zuckerman's Boston Properties ("The New York Observer")

Sales of Apple Store at GM Building: $44,000 PSF

Check my math:

Before the GM Building was sold to a Boston Properties partnership last year, a prospectus shown to possible purchasers revealed the Apple store under the famous glass cube was doing an incredible $440 million a year. By comparison, sources said, Apple's outpost at Prince and Greene streets does $100 million. (The uptown Apple is larger, but not by much -- it has an estimated 10,000 square feet of selling space compared with 8,500 feet in SoHo.)

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Who Was The First Blogger?

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Quote of The Day

"Our ratings are driven only by our best analytical judgment of the creditworthiness of the issuers and securities we rate and are formed independent of other concerns," Ed Sweeney, S&P.

Former REIT Analyst Discussing Investments in REITs

More Cars and Real Estate

Cars and Real Estate

From Developments:

The twin bankruptcies of GM and Chrysler also dampen prospects for Detroit’s commercial real estate industry. An effort to revive the city’s St. Regis Hotel stumbled earlier this year when the developer defaulted on a construction loan. And leaner companies could mean rising office vacancies, spurring debate over what Detroit should do now. A column in Crain’s Detroit Business argues that Quicken Loans could be one possible suitor for office space in the Renaissance Center.

The real estate impact of GM’s bankruptcy will also be felt beyond Motor City, as some 2,300 dealership closings by GM and Chrysler weigh on the already sagging retail real-estate market. The retail sector has been hit particularly hard rising vacancies during the recession; mall landlord General Growth Properties filed for bankruptcy earlier this year.

”This is single purpose real estate that has to change use now. So there will be a lot of that coming at one time,” AutoNation CEO Mike Jackson told Reuters last month. “And that’s going to take quite some time to work its way through the system.”