GLG News by Mr. Jack Kern, Managing Director
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
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Multifamily Becomes Multiple Choice in the North Hollywood, LA Submarket
October 1, 2009
Apartment Know-How in NoHo? | online.wsj.com
The Wall Street Journal report, by Maura Webber Sadovi, published on September 30, 2009 highlights what has become an increasingly common occurrence, the decline in property values over the past several years. The example used, a 438 unit deal in North Hollywood was almost sold for more than $140 million. Most recently, the same deal was sold for $96 million, a precipitous decline in value to say the least, and the carnage probably isn't over.
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Brookfield's $4.9 billion Investment Unlikely to Perform
August 14, 2009
Brookfield's $4.9-billion bet on the bottom | www.theglobeandmail.com
Brookfield Properties is making a major bet on the status of the U.S. housing market and rushing headlong into buying what they characterize as distressed assets in a number of major American and worldwide markets. It's interesting that they've raised about $5 billion to invest, and this may signal the willingness on the part of investors to take chances. In this instance, I think Brookfield didn't really get the right research behind the decision and are going to fall flat.Â
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Landmark Mall Not A Landmark Opportunity
July 10, 2009
As Owner Struggles, Landmark Mall Languishes | www.washingtonpost.com
Landmark Mall in suburban Virginia has been in decline for almost 20 years, as cash strapped GGP milked the center for any operating income they could get. In what was supposed to be a grand vision of future retailing and commercial space, GGP simply waited too long to redevelop the center and now sits on a white elephant, replete with local uses and property tax blight. The site isn't as valuable as the City of Alexandria believes and the area is changing, and not for the benefit of GGP.
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REITs Slow Dance for the Street
June 30, 2009
Multifamily REITs see Underweighting by BOA-Merrill | www.globest.com
The apartment industry is subject to a great deal of coverage, and some of it, justified or not is decidedly negative. As an industry that is subject to great challenges, it also meets property management issues with concessions and no increases at renewal. In many places, the levels of site traffic are down, but submarkets prevail in this business and the downgrading of REIT stocks in multifamily overplays the reality of future rent growth in some markets. Property prices are declining based on in-place rents and so future IRR considerations are vastly more complicated than ever before. With the downgrade of REIT securities, the vast number of shares shorted will be rewarded, but long term, apartments are stable.
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Restoring CMBS Key to Future CRE
June 26, 2009
Worries over systemic risk in CMBS | www.ft.com
The Federal Reserve Bank of New York, through president Richard Dudley has made restoring CMBS a key priority. This is really good policy while it seems to contradict some of the earlier actions of the Fed, especially in light of the decisions about the eligibility of certain loan terms for loan participation. The ability of owners to refinance their obligations is what is really at stake here and with the advent of $3,400bn in loans coming due, failure to secure a working CMBS facility and market could be a disaster. The Fed's TALF program, with approximately $1,000bn in capital, starting in July is going to be a determining factor in how well the program works.
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NAR Promotes Higher Home Sales As Sign of Recovery
May 1, 2009
Is Now the Time for Some Home Buyers to Make a Deal? | www.cnbc.com
This article, written with references to the National Association of Realtors and mostly quoting realtors provides an industry line specific recommendation about the real estate cycle and buying homes. The NAR has been under increasing criticism, both inside the home building and real estate industry and even from its former chief economist, now in private practice. The central issue is the almost paranoid need to present good news for realtors at any cost, with honestly being the first casualty it seems.
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Miami Condo Sales Showing Longer Term Outlook
April 30, 2009
Miami housing: The power of cheap | money.cnn.com
Miami is one of America's great cities. With award winning architecture, an internationally recognized skyline and an attractive quality of life, it is perhaps unsurprising that the city is rebounding. In the money.cnn.com article, the highlight is the number of people who have bought homes out of distressed situations. According to quoted First American Core Logic, South Florida housing prices declined 36%, while the foreclosure rate in February hovered around 9%, up from approximately 4% a year ago. The upshot: Media attention on the demise of South Florida was overplayed.
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April 29, 2009
New shopping centers across Europe delayed or cancelled as economic downturn bites | www.europe-re.com
The quality of life for many Europeans has unquestionably improved as such popular habits in the West as visiting shopping centers and spending money have become a favored practice. Now, with the recession becoming a more international phenomena, not surprisingly many new projects are being put on hold or cancelled entirely, just like, well - here in the U.S. It just goes to show you that recessions do not observe boundaries and regional economies are sometimes not so regional. Even the typically American problem of getting financing has been exported to the EU and surrounding areas.
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California Home Sales Tank Filling but the Trend Still Leaks
April 13, 2009
Signs of life in California real estate | money.cnn.com
Oh those clowns at CNNMoney.com are at it again... California has become the poster child for housing excess, with foreclosures leading the nation and entire neighborhoods comprised of empty tract homes. Recently the California Association of Realtors announced that the median home price has fallen to $247,590, a 41% decline from a year ago. Not surprisingly the vulture investors are picking over the carcass' of the far flung suburbs looking for deals, and beyond surprise home sales jumped by over 600,000 homes. CNNMoney promptly jumped to the assertion that the CA housing bust may be over. I do believe one of these days they'll get it right, but not this time.
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Housing Short Sales Spell the Beginning of a New Problem
April 7, 2009
$500K homes now selling for $200,000 | www.cnn.com
Across the nation, in lush neighborhoods, previously known for their exclusive addresses and opulent surroundings, the aura of for sale signs and new home purchases is becoming a familiar theme. In previous housing cycles, these home buyers would never have found the bank owned real estate anything close to affordable, but with dwindling prices and weak kneed sellers, anything is possible. What appears, however to be a boon to buyers is a warning shot across the bow of neighborhoods across the U.S. Simply put, the second wave of panic selling is coming.
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Foreclosure Shocks Surprise No One but CNN
March 23, 2009
Rise in foreclosures 'a shock' | money.cnn.com
It is starting to turn out that money.cnn.com (c) is part of comedy central (c), at least unintentionally. The headline, Rise in foreclosures 'a shock,' simply misses the point that foreclosed homes are on the rise across the country. The real increase in reported cases in February shouldn't have shocked anyone because local and regional initiatives have run their course in many places and homes that were effectively protected from court action finally hit the list. This constant sweepstakes in the media to drum up issue selling headlines has hit a new low, the false claim that somehow nobody saw this coming. Money ought to be ashamed.
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March 16, 2009
Are REITs worth it? | money.cnn.com
REITs, particularly the ones noted in the Money.cnn.com (c) article have had a pretty good run, but there is the same potential risk and variability in buying these indices and shares as in other sectors. Real estate, and all of their types are sometimes in favor and sometimes not. Like anything else, buying the funds the magazine recommends is not always the best approach. Anyone buying stocks based on a magazine's recommendation might want to look at a bridge I have for sale in Brooklyn.
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Declining Home Sales Index Doesn't Tell the Story, NAR Strikes Again!
March 6, 2009
Pending home sales hit record low | money.cnn.com
Recently, the National Association of Realtors reported that their proprietary pending home sales index declined 7.7% in January, 2009 from December, 2008. This article appeared in Money (CNNMoney.com) and quoted Lawrence Yun, chief economist for the realtors group as suggesting that "Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales." Really now? According to Yun, "History suggests that home sales can rise even in times of job losses when housing affordability rises." Yun then mentioned he expects home sales to turn around by the summer. Makes you laugh doesn't it?
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The "Fix" Is In and Many Will Not Qualify
February 27, 2009
Who won't be helped by housing fix | money.cnn.com
According the the CNNMoney.com (c) article, most current homeowners and borrowers with under water mortgages will not qualify under rules set for foreclosure assistance. The premise is, even if things are bleak, if you can afford your current mortgage and still have a job, you won't qualify and if you're in trouble, have an upside down mortgage and lost your job, well, you might not qualify either. These arcane rules, designed to help about 9 million families under the $75 billion program have very specific requirements.
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Foreclosures Tap Fannie/Freddie Funds for $20+ Billion
February 26, 2009
Fannie, Freddie to fund part of plan | money.cnn.com
The Administration, in an effort to conserve part of the TARP appropriation approved by Congress has decided to pull approximately $20 billion out of Fannie/Freddie. Both Fannie/Freddie are currently unstable with losses mounting in the billions already. Their credit lines have been effectively doubled to $200 billion each with the Treasury. Other federal agencies are also contributing to the effort.
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When Rent Loss is News - Multifamily Residential in Manhattan Declines
February 16, 2009
A Month Free? Rents Are Falling Fast | www.nytimes.com
The report in the NY Times illustrates the current weakness in residential rents in Manhattan. For a wide variety of reasons, chief among them the job loss caused by the decline in the investment banking industry, New York residential real estate is under stress and it has become a resident's market, instead of an owners.
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Vacant Office Space Creates Vacant Stares from Lenders
January 7, 2009
As Vacant Office Space Grows, So Does Lenders’ Crisis | www.nytimes.com
It is, without a doubt, well known that all of the real estate sectors are suffering some decline. Office occupancy is, not surprisingly continuing to deteriorate and the impacts will largely be felt in core cities and central business districts. Lenders and financial partners are rightfully concerned, but the future may not be as bleak as it seems.
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Sovereign Wealth Funds are Major Investors in Commercial Properties
December 17, 2008
Sovereign wealth funds poised to snap up global real estate | www.propertywire.com
CB Richard Ellis is reporting that Sovereign wealth funds will own up to 20% of global real estate worth with an estimated value of $725 billion by 2015. There has been a rise in these funds as more countries look to the safety and security of the Western nations. Apparently international bankers believe that a lot of the funds are on the sidelines waiting for market conditions to stabilize before committing to a particular property sector. "This means that they will have bought between 15 and 20% of total international property by 2015 while increasing competition for trophy assets in the US and UK where property prices are low," according to the article.
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Commercial Concerns Rise Faster Than Delinquencies
December 3, 2008
Commercial Mortgage Delinquencies on Rise | www.financialweek.com
Commercial properties are seeing some real stress in many markets and as the economy has continued to falter, there are reasons to feel concerned about the status of their mortgages and prospects for remaining current. In many respects, commercial properties are more insulated from failure because of the structure of ownership and the strong economic incentive not to walk away from a loan. The reality is that the scale of failures so far, however small pales in comparison to the press coverage the impending problem receives.
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National Association of Realtors Site Proves Renting Will Continue
November 27, 2008
Consumer Search Trends Show Increased Interest in Real Estate by Potential Home Buyers | www.marketwatch.com
There has been continued concern in the professional real estate community that the NAR has consistently mis-understood housing statistics. It may be charitable to call it that. This powerful industry group has fallen prey to the same line of reasoning that ultimately doomed many members of the mortgage bankers association, that it's always a good idea to buy a house. Let me share with you why their reasoning is faulty.
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