All GLG News Analyses Filed Under: REITs/Operating & Development

Slowing Fundamentals Hamper Hotel REIT Performance

October 22, 2008

Analysis by: GLG Expert Contributor

Analysis of:Slowing Fundamentals Hamper Hotel REIT Performance | www.commercialpropertynews.com

The article's points are well founded.  In addition watch the Office Market.  As office market vacancies decrease, the hotel occupancies will increase. The  Hoteliers are now and will become more competitive in their rate structures offering reduced prices and other amenities to compete for the commercial business and tourist traveler. Another inidcator to the health of the industry is the business in Las Vegas where many companies hold their conferences.  As this starts to turn around in the near term the rest of the country will start an upward swing.  This may not happen until mid 2009 depending on the U.S. ecxonomy in general. In the past two to three years the hoteliers have increased pricing whereas occupancies have remained relatively flat. Thus the boom in the hotel industry has been softening due to more supply and cutbacks.

Kenneth LeonardPrincipalLeonard Associates

ARE ALL REITs CREATED EQUAL?

October 21, 2008

Analysis of:Analyst decries REITs sell-off | www.investmentnews.com

REIT stocks have plummeted 30% so far in October, says Jan Morrissey of INVESTMENT NEWS and I have no reason to doubt her. However is this a newsworthy event or something that might be helpful in guiding the investment decisions of GLG clients? Without going into detailed analysis of each type of real estate investments, this broad generalization is virtually meaningless. 

Kenneth LeonardPrincipalLeonard Associates

Is This Any Way To Run A Retailer?

October 14, 2008

Analysis of:Sears names CFO-elect | www.chicagobusiness.com

Although this article deals with the management of SHLD, I have placed it under the REIT category because it is the single most important issue that will be influencing the success of Mall REITs for many years to come. Mr. Lampert is rebuilding his management team from the bottom up rather than from the top down and still expects to attract a top notch retail executive to "save" the company. The continued decline of Sears and the proposed closing of 200 to 300 "underperforming" Sears stores will have a profound effect on all Mall REITs. When it happens, (and notice that I did not say "if") the short term decline in FFO will be substantial but nowhere near the long term impact that will be felt for the next 5 years it will take to rebuild the anchor attractions of the vacant Sears stores. Talk about fiddling while Rome burns!

Kenneth LeonardPrincipalLeonard Associates

Just Like 2001 But Very Different

October 10, 2008

Analysis of:Analysts cautious commercial real estate outlook | www.forbes.com

The recent Goldman Sachs analysis of the prolonged downturn in commercial real estate is based upon a strict comparison with the 2001 downturn during that recession. Their numbers reveal that the 38 REITs they follow will suffer a total return of NEGATIVE 4.5% Are they for real? What do these young analysts know about what is really happening in the commercial real estate markets? I submit, not very much!

Kenneth LeonardPrincipalLeonard Associates

THE DOMINOS HAVE STARTED TO FALL

September 19, 2008

Analysis of:Steve & Barry's begins closing 103 stores | cbs4denver.com

Bay Harbour Management and York Capital Management, who acquired the 276 store Steve & Barry's operation presumably to take advantage of their "below market leases" and to show both Steve and Barry, the two young former owners, that they knew more about how to turn their company around than they did. They have now announced the closing of 103 unprofitable stores and the intent to operate the remaining stores. It is interesting to note that not one of the 103 stores were able to be subleased at "market rates" giving Bay Harbour and York a profit on the difference between market and below market rents. ----So much for the myth of intrinsic value in "below market leases". Even more important to GLG readers is the likely repercussions of wht these closings will do to the REIT industry.

Kenneth LeonardPrincipalLeonard Associates

An Indicator Of Things To Come

September 18, 2008

Analysis of:Discount retailer Steve & Barry's closing 5 Chicago-area stores | www.chicagotribune.com

Whenever a troubled shopping center loses an anchor store there are far more repercussions than most hedgefund analysts realize. Steve & Barry's which until recently has been the replacement anchor of choice for troubled malls, is now being seen as the first major anchor failure that could sound the death knell of many of the 100 troubled mall properties it has announced it will be vacating as the result of its' recent bankruptcy. Everyone of these shopping centers have had a serious shock when the original department store anchor vacated the premises. As we now know, these shopping center owners quickly chased down Steve & Barry's and shoved millions of dollars into their pockets to "bribe" them to open a replacement store in the vacant anchor position. Now the malls are again facing a major vacancy with NO REPLACEMENT ON THE HORIZON and very little incentive to "buy" another anchor.

This Should Be A Surprise To No One That Was Paying Attention

September 15, 2008

Analysis by: GLG Expert Contributor

Analysis of:MALL GLUT TO CLOG MARKET FOR YEARS | online.wsj.com

But then it appears that very few were paying attention to the markets, be them financial or real estate. In the last 8 years, developers have built one billion square feet of new retail space in just the 54 largest U.S. markets. That's billion with a "b", as in one thousand million. Or to put it another way, that is the equivalent of 667 new regional malls (12 per each of those 54 markets). That means that there is now the equivalent of about 38 square feet (or about the size of a small walk-in closet) of retail space for every man woman and child in those markets.  Can anyone say "over retailed"? 

Kenneth LeonardPrincipalLeonard Associates

WAKE UP AND SMELL THE OVERSATURATION

September 12, 2008

Analysis of:MALL GLUT TO CLOG MARKET FOR YEARS | online.wsj.com

In 1983 there was 29 square feet of retail space for every single person in the 54 largest U S markets. Today there is 38 square feet for every person in those same markets. One billion square feet have been added since 2000 driven in large measure by artificially cheap money and too much money chasing real estate deals. Now developers are facing one of the worst declines in shopping center occupancy rates since the 1990-1991 recession. However, because of the saturation levels it is generally agreed that this increase in vacancy rates will last long after the current recession has ended. 

Slow downward spiral for Retail REIT's.

September 12, 2008

Analysis by: GLG Expert Contributor

Analysis of:MALL GLUT TO CLOG MARKET FOR YEARS | online.wsj.com

First: It will be slow downward spiral for the REITS, as retailers and speciality users will continue to shed or renegotiate unprofitable "new market" and "old market" locations through the next 3-5 years... This coupled with capital/financing availability will create a "recalculation" of not only rental rates but long term values of commercial real altogether... Second: I believe the small National Retailers will look for efficiencies in co-branding weak locations as well as more Internet presence... Third: The perfect storm of economic woes, lack of cheap financing will cause more privately held commercial/retail properties to re-adjust their rental rates/values and will further depreciate and further aggravate the REIT's comparable properties...

Kenneth LeonardPrincipalLeonard Associates

WHAT ARE STRIP CENTER REITs REALLY WORTH?

August 29, 2008

Analysis of:Centro Takes Another Hit | retailtrafficmag.com

THIS ARTICLE PROVIDES ENOUGH INFORMATION TO ALLOW AN ASTUTE OBSERVER TO MAKE SOME PRETTY ACCURATE ASSUMPTIONS ABOUT THE CURRENT MARKET VALUES OF MOST OF THE STRIP CENTER REITs. 

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