The Problem with The American Housing Market

NNN Lease Market News

What’s holding back these “sidelined sellers?” Some can’t sell because they owe more than their homes are worth, of course. But many more are simply paralyzed by the fear of selling and buying again in a falling market. Often at root here is what psychologists and behavioral economists call “loss aversion.” We avoid accepting a grim loss on a current investment, and recent research suggests that we over-estimate the pain associated with a future loss (say, with buying a home that then loses value).

So it’s understandable to want to wait for better days to sell, but—at least when it comes to your house—you’re probably making a mistake.
First, let’s dispense with the idea that better days are coming soon. The consensus among the 100 economists surveyed by Cambridge-based data firm MacroMarkets is that housing prices will slip 1.3% in 2011. That’s far, far too optimistic. At Zillow, we believe prices will tumble as much as 7% in 2011. After reaching the bottom, we expect real estate appreciation will remain in the doldrums for three to five years—something we’ve been forecasting for more than three years.
So we’re all going to have to make a little peace with falling prices.  But here’s the good news: If you run some numbers, you find that selling in a falling market is not always a bad idea. Especially if you’re thinking of trading in your current home for a smaller home or one in a less expensive neighborhood.

http://blogs.forbes.com/

Commercial Real Estate Markets Improvement in the Fourth Quarter

NNN Lease Market News

U.S. commercial real estate markets continued to exhibit stability or mild improvement in the fourth quarter, Moody's Investors Service said Wednesday.
The overall composite score rose a point to 65 compared with the prior quarter, based on a range of 1 at the weakest end and 100 at the strongest. That puts it within two points of the highest scoring bloc, which Moody's calls "green."
Across all sectors, measures of market strength either improved slightly or stayed the same, the agency reported. The multifamily composite sector remains the only one with a green score, which held steady at 88. Retail also held steady at 64 during the fourth quarter.
The biggest improvement was for offices in central business districts, which gained four points to 66, which is the highest score before entering green territory. Suburban offices, the industrial sector and hotels also improved to a lesser degree in the last quarter of 2010.
According to Moody's, the five best metropolitan markets in the U.S. are: Honolulu, which lost a few points; New York, which held steady; Los Angeles 76, which gained one point; Orange County, Calif., which gained a point; and Washington D.C., which lost two.


http://online.wsj.com/

NNN Dollar General is a Great Example For Investors

NNN Lease Market News

Dollar General is a great example. Dollar General has recently moved to a much larger type facility. The leases they wrote were 10 years with 3 five year options. In many markets they decided not to exercise options, and have built much larger stores in close proximity to the original store. So the landlord is now left with an empty store, no competitor wants to lease because Dollar General is in area with a better facility, and the ballon mortgage payment is do. Further, these were set up at such low cap rates that the investor actually had negative cash flow, but theoretical equity buildup. with real estate values down and these properties hard to lease, the equity buildup is gone and so to may be the capital invested.

The point to realize is that even if everything turns out great with a NNN property, the competition is such that the investor gets a rate of return similar to a long term bond issued by the same company. The payoff would come from after the lease is up, IF the value of the property has risen with demand.

For a larger profit both cash flow and capital appreciation, the investor must lease to non credit tenants who have little market power and will pay a return reflecting a much higher cap rate. These properties can yeild double what a credit tenant NNN lease can yield. Of course the risk of default is increased also.

The Strength of Washington, D.C.'s Office Market

NNN Lease Market News

The strength of Washington, D.C.'s office market, which has lifted the values of some properties to boom-era levels, also has helped busted developments in the nation's capital.

"Where does the development derive its value? It's generally from its lease," says Joseph Fuszard, head of commercial real-estate workouts for Bank of America.

Workout experts say that in strong commercial markets such as Washington, as well as New York, Miami and San Francisco, banks increasingly are making the decision to commit to seeing commercial projects through to the end, even if that means increasing funding.
"I'd imagine we're going to see more sponsors making decisions where they might put capital into the asset in order to continue to improve it, to enhance value because they see the market coming back," says Peter Nicoletti, head of special asset services for global real-estate brokerage Jones Lang LaSalle Inc.
In addition to having a guaranteed end user and solid prospects for strong future cash flows, the NOAA project got a push from the fact that it was the pet project of U.S. Sen. Barbara Mikulski, a Democrat from Maryland, who has long championed NOAA's weather research and earmarked federal funds for the agency.
The Washington office market is one of the country's healthiest, in part due to demand from government agencies and contractors. According to researcher Reis Inc., demand is slowing, but tenants are expected to occupy one million square feet more of office space this year.

http://online.wsj.com/article

KFC and Pizza Hut Sees Profits Rise

NNN Lease Market News

Yum Brands, the owner of fast food chains Pizza Hut, KFC and Taco Bell, has reported better-than-expected profits for the first quarter.

Net income for the first three months of the year stood at $264m (£161m), a 10% increase from the same period last year, the firm said.
The company said total sales at its Chinese operations increased by 28% during the period.
Yum Brands operates more than 3,700 outlets in China.

'Highest-margin market'

Income levels in China have been rising steadily as the country's citizens reap the benefits of its economic growth.
That has resulted in an increase in the spending power of consumers, which in turn has been driving growth for companies operating in the country.
"Our China business continues to fire on all cylinders," said David Novak, chief executive of Yum Brands.
Sales at existing restaurants of Yum Brands in China rose by 13% during the period. It also added 92 new outlets to its tally.
Analysts also say that growth in China is likely to be the driver of growth going forward.
"It's their fastest-growing, highest-margin market," said Stacey Brodbar of WP Stewart.
"If that can continue to grow at accelerated rates, that's the story here," she added.

http://www.bbc.co.uk/

Trophy Office Building For Sale In Northern Virginia

NNN Lease Market News

Another trophy office building goes on the market in Northern Virginia

A 356,370-square-foot, Class A office building in the Rosslyn-Ballston Corridor is on the market. Cushman & Wakefield said Tuesday today that it has been selected by MetLife to market the property at 1320 North Courthouse in Arlington for sale or joint venture investment.
“Given the current market conditions and the building’s premier location, we believe this property will be well received by investors and developers looking to acquire high quality real estate in the D.C. area,” Senior Managing Director Susan Carras said in a statement. She and Senior Managing Director Brian Dawson are leading the assignment. 

http://www.virginiabusiness.com/

The Largest Net Leased Retail Transaction In The Washington, DC Area In The Last Several Years

NNN Lease Market News

Walgreens & PNC Bank leases Made this Net Leased Retail Transaction More Unique in Today’s Market

Reston, VA, – Calkain Companies, a national real estate investment brokerage firm, represented both seller and buyer on a cobranded Walgreens (NYSE:WAG) and PNC Bank (NYSE:PNC) ground lease in Fairfax, VA. The transaction sold for $13,800,000 which equated to the largest net leased retail transaction in the Washington, DC area in the last several years.  The sale price represented a 5.90% capitalization rate which is indicative of the reach that Calkain Companies has to match investors with sound real estate investments.
Jeff Bogart, Tax Strategy Specialist of Calkain Companies, represented both the buyer and seller.  “Ground leases are not as prevalent as fee simple properties and as such, demand is high for Walgreens (Standard and Poors: A+) and PNC Bank (Standard and Poors: A+) quality of credit coupled with the added security of ground lease ownership. Both leases had rental increases every 5 years, which, in comparison to typical Walgreens’ leases, made this property more unique in today’s market. The intrinsic value of the real estate also helped drive the cap rate to 2007 levels as it is located in Fairfax County, Virginia - which has a top 10 national ranking for median household income, at well over $110,000. The buyer, an undisclosed, due to confidentiality agreements, local investor considered himself fortunate to secure such a quality asset.”

D.C.'s Office Market Has Lifted The Values

NNN Lease Market

The strength of Washington, D.C.'s office market, which has lifted the values of some properties to boom-era levels, also has helped busted developments in the nation's capital.
Take the case of two Washington projects by Opus East LLC, a large mid-Atlantic merchant builder that filed for bankruptcy liquidation, along with two other sister companies, in July 2009. Those filings jammed the brakes on about 150 projects valued at more than $1.5 billion across the country. So far, only about a third of those projects have been restarted, sold or completed, according to Dennis Ryan, an attorney for Opus Corp., the parent company.
Among the survivors: the new headquarters of the National Oceanic and Atmospheric Administration and a 400,000-square-foot speculative office building near the new Washington Nationals baseball park. In recent weeks, construction giant Skanska AB restarted work on the NOAA building and began putting the final touches on the office building.

http://online.wsj.com/article

CVS $25 Billion Benefit Looms With Caremark Breakup

NNN Lease Market News

CVS Caremark Corp. (CVS), created in a takeover four years ago that has left investors with underperforming stock, could be worth $25 billion more if the company split itself up.
Shareholders SunAmerica Asset Management Corp. and Cambiar Investors LLC say Chief Executive Officer Larry Merlo, 55, may have to separate CVS Caremark’s drugstore and pharmacy-benefits units if the largest U.S. provider of prescription drugs doesn’t lift profit growth. Merlo last month replaced Thomas Ryan, 58, who orchestrated the purchase of Caremark RX Inc. in March 2007. Since then, the stock gained just 3.4 percent through yesterday, trailing a 14 percent advance for companies in the Standard & Poor’s 500 Index that sell consumer staples.

http://www.bloomberg.com/news

March Sales at Victoria's Secret, Costco Beat Analyst Estimates

NNN Lease Market News

Victoria’s Secret, Costco Wholesale Corp. (COST) and other retailers posted a surprise gain in sales last month as improving U.S. employment encouraged some consumers to shop.
Same-store sales at Victoria’s Secret, owned by Limited Brands Inc., rose 19 percent, more than 10 times the rate predicted by estimates compiled by Retail Metrics Inc. Industrywide, retailers posted an increase of 2.2 percent, compared with the average projection for a 0.5 percent drop.

Columbus, Ohio-based Limited rose 19 cents to $35.42 at 9:56 a.m. in New York Stock Exchange composite trading. Costco of Issaquah, Washington, advanced $3.21 to $78.20 on the Nasdaq Stock Market. The Standard & Poor’s 500 Retailing Index climbed as much as 0.8 percent.

http://www.bloomberg.com/

Qatar Enters U.S. Market with Deal to Help Fund $700 Million D.C.

NNN Lease Market News

Qatar has been active in the prime London property market, where a consortium of Qatari-backed entities is funding the development of the Shard, the largest skyscraper to be built in the UK, as well as developments at the former Chelsea Barracks and Park House in the West End.

Al Saad told the Financial Times his group would continue to look for investments in the U.S. real estate market.

"We were very interested in the DC market," he said. "The risk profile in the city is more controlled. The economics work well. It was the right place to start" for the Qatar group.

Al Saad also noted the US real estate market had "attractive fundamentals".

Qatar, one of the world's smallest and richest countries, has rushed to the rescue of a planned, two-phased $700 million mixed-use project that has been languishing for the past 10 years in the heart of Washington, DC.

Washington, D.C. mayor Vincent C. Gray said City Center had been almost a decade in the making. He called the project "the "last missing piece of our downtown," the Financial Times reported.

According to Wikipedia, Qatar has the world's largest per capita production and proven reserves of both oil and natural gas.

In 2010, Qatar had the world's highest GDP per capita, while the economy grew by 19.40%, the fastest in the world. Qatar has the highest human development in the Arab world after the United Arab Emirates.

Qatar's 1.7 million population lives in a total land area of only 4,416 square miles.

http://www.worldpropertychannel.com/

Getty Realty Corp. Acquires 66 Shell Branded Properties in the Greater Boston Region

 Nouria Energy Corp. and Nouria Energy Ventures I LLC have completed the acquisition of a portfolio comprised of 80 Shell-branded retail gas stations located in Massachusetts and New Hampshire from Motiva Enterprises LLC. As part of a simultaneous transaction, Getty Realty Corp. has financed a sale/leaseback transaction with Nouria Energy covering 66 stations; the remaining locations will be supplied directly by Nouria.
The 66 properties were acquired in a simultaneous transaction among Motiva Enterprises LLC (“Shell”), Nouria and Getty Realty Corp. whereby Nouria acquired 66 gasoline station and convenience stores from Shell and simultaneously completed a sale/leaseback with Getty of the 66 properties under a long-term triple-net unitary lease having an initial term of 20 years plus renewal options. The Company expects to receive approximately $5.8 million of revenue from the investment during calendar year 2011.

http://www.cspnet.com/