Abu Dhabi’s Government Agreed to Buy Assets Valued at 16.8 Billion

Government Agreed to Buy Assets Valued at 16.8 Billion 

The government will purchase 760 three-bedroom to five- bedroom homes in the Al Raha Beach development and retire 5 billion dirhams of debt related to infrastructure on Yas Island,Aldar said in a statement today. It will also buy 5.7 billion dirhams of assets in Abu Dhabi’s city center, known as the Central Market, and finance the completion of the district’s redevelopment.
Developers in the United Arab Emirates are struggling to pay down debts after the credit crisis caused property values to plummet and drove speculators out of the market. The statement was released after the Abu Dhabi market closed. Aldar gained 3.7 percent to 84 fils today, the biggest gain in about two months. The shares have fallen 31 percent in the past six months, while the Bloomberg EMEA Real Estate Indexhas lost 19 percent.
“This will have a positive sentiment in the market, leading investors to buy the stock aggressively,” said Musa Haddad, head trader at National Bank of Abu Dhabi PJSC’s asset management group said.

Intense Interest Among Developers in Urban Markets

NNN Lease Market News

"Investors have shown a willingness to pay aggressive caps for urban properties"

"There are markets that we're operating in that are not seeing enough of a premium in terms of what people will pay for new development [or] to start speculative new construction," said Doug Linde, president of Boston Properties, the nation's largest office landlord. The company recently completed two apartment projects adjacent to their office buildings in Washington and Boston of 335 units and 86 units, respectively, above retail space. Monthly rents start at roughly $3,000.

The intense interest among developers in apartment buildings reflects rising rents and falling vacancies. In the third quarter, the national vacancy rate dropped to 5.6%, down from 7.1% a year earlier and the lowest rate since 2006, according to Reis Inc. Average monthly rental rates hit $1,004 nationwide, up 2.4% from a year earlier.

More Americans have been opting to rent in recent years as the allure of owning a home has diminished, due in part to tight lending restrictions, falling prices and rising foreclosures. These forces are driving up apartment building values—to levels unseen since 2007, in some cases.

The rush into apartment building development is raising the specter of a bubble, particularly in urban markets such as Washington and New York. While more than 173,000 units are expected to be started this year, 225,000 and 280,000 starts are expected nationwide in 2012 and 2013, respectively, according to Zelman & Associates. That still is less than 2005, when starts were at 352,000.

The recent spike in development is why some companies aren't joining the rush into multifamily projects. "I think there is a real possibility that anyone investing in multifamily right now is getting in toward the top of the market," said Doug Donatelli, CEO of First Potomac Realty Trust, which owns office, business parks and industrial properties.

Major real-estate companies generally stick to what they know best. Those who have strayed into unfamiliar businesses have had mixed results.

For example, analysts criticized Vornado Realty Trust in 1997 for leading a venture that purchased the nation's largest supplier of cold-storage space in a deal valued at close to $1 billion. Although Vornado eventually made a profit on the deal, if it would have purchased New York office buildings instead of cold storage "it would have done unbelievably better," said Michael Knott, an analyst at Green Street Advisors.

More recently, suburban shopping center landlord Kimco Realty Corp. is retreating from a $1.2 billion strategy to invest in mixed-use office and retail properties in urban markets. The company embarked on the strategy in 2007 to chase higher yields when prices for suburban shopping centers got too high, but realized that it didn't have the expertise in downtown development to make it a big success.

Apartments require a far different skill set than retail or offices. Turnover is high, so landlords constantly have to adjust prices to fill empty units. Tenants can easily be lured away by something newer, better located or offering more modern amenities. Landlords also have to worry about the economy worsening—plenty of apartment owners had to reduce rents after the financial crisis—and the for-sale market making a comeback. Investors have shown a willingness to pay aggressive caps for urban properties.  An increase in mixed use residential condominiums brought about by population movement toward the urban core  and  a pause in expansion by national retailers has contributed to the wide-ranging demand for NNN urban properties.  Coming on the heels of the recession and the ensuing across-the-board hike in cap rates, this move to dense, high traffic urban locations signals where investors want to be over the next decade.

Recently identified as a top niche investment trend by the Urban Land Institute (ULI), mixed-use urban projects have drawn retailers and investors to this asset type even in the current market cycle.  Driven by a desire to spend less time in traffic, live in a smaller footprint and work and play within an urban atmosphere, aging boomers and Gen XYZers alike are leaving the edge and making their way back to the city.  Developers have capitalized on this trend by coupling high-rise condominium living with easily accessible ground floor retail space.  The convenience of these on-hand amenities makes for an attractive lifestyle for local residents and nearby office workers.  

NNN Investment Market 8 Percent Returns

NNN Lease Market News

REITs yield 8 percent returns

Real estate investment trusts that invest outside of the four major categories of office, retail, residential and industrial property have been especially successful, according to the New York Times.

REITs have outperformed other investment areas in general, but those pouring money into cell phone towers, cold storage warehouses, or transportation and energy infrastructure have thrived. The Dow Jones U.S. Specialty REIT index has returned 7.94 percent compared to the 3.32 percent returns posted by the overall REIT index. 


Investors are buying commercial property as they search for higher yields than they may find on other assets, including some fixed-income securities. Buyers have flocked to high-quality real estate, such as office towers in major coastal cities, amid increasing tenant demand.

NNN Lease Midwest Market Report

NNN Lease Market News

The Midwest Market encompasses a varied set of states that mainly include: Missouri, Kansas, Minnesota, Illinois, Kentucky, Ohio, Indiana, Iowa and Wisconsin.  The major cities and metro areas that highlight this market are St Louis, Kansas City, Indianapolis, Minneapolis/St Paul, Madison, Kansas City, Des Moines, Cincinnati and Columbus.  Chicago although considered a cornerstone of the region acts more like one of the major metropolitan areas behind New York, Los Angeles, Miami, San Francisco and DC. It is the more representative of the primary market in trends and pricing even though it is a hub for retail commercial real estate and reporting, its’ behavior is an exception to the majority of Midwest’s  NNN lease market. 

As a whole, the Midwest sector is underserved and largely untapped in the NNN leased niche. There are virtually no firms specifically working on the NNN assets for this market.  The majority of the investment grade listings are picked up by out of state brokers who may not be cognizant of the intricacies of the Midwest investor mindset and region particulars.  

Read the full report here. 

www.calkain.com

What does it cost to do deals in South Korea Markets

NNN Lease Market News

What does it cost to do deals in South Korea? For Lone Star Funds, a Dallas-based buyout firm, almost $3 billion.

While Lone Star still stands to double its money from the eight-year investment in Korea Exchange Bank, its experience will undermine the government’s ability to dispose of a $3.8 billion stake in Woori Finance Holdings Co. (053000), CLSA Asia-Pacific Markets said. It also furthers the perception that South Korea, where companies sell at a discount to the rest of Asia because of concern over corporate governance and North Korean aggression, is hostile to foreigners, Market Force Co.’s James Rooney said.

“Investors would look at this case as a kind of horror show, where every kind of risk that is hated by professional investors seemed to show up and create a massive distortion of intelligent markets,” said Rooney, the consulting firm’s Seoul- based chief executive officer and a member of the investment committee at Macquarie Korea Opportunities Management. “This case has made the prospects much, much worse for Woori.”

In November 2006, as regulators investigated whether Korea Exchange Bank’s financial strength was deliberately understated to let Lone Star buy the stake, a sale to Kookmin Bank (105560), South Korea’s largest bank, collapsed. London-based HSBC, Europe’s biggest bank by market value, dropped its $6.3 billion proposal after regulators held the deal in limbo for more than a year.

With politicians using Lone Star’s windfall to criticize the buyout fund’s investment strategy in South Korea and sway public opinion, foreign investors may now stay out of the bidding forWoori Finance and undermine the government’s effort to sell the nation’s largest financial company by assets, according to Shaun Cochran, head of Korea research at CLSA Asia- Pacific Markets in Seoul.

Since South Korea first announced its plan to dispose of Woori Finance in July 2010, the bank has lost about a third of its market value, or about $2 billion, as of last week.

http://www.bloomberg.com/news

Good News For Real Estate Market In 2012

NNN Lease Market News

Good News For Real Estate Prices In 2012

A study released by Deloitte Real Estate Services says the U.S. commercial real estate market “appears to be on a gradual but uneven path to recovery with increased capital availability, transactions and improved fundamentals.” However, “a potential pause in recovery momentum” exists due to the European Debt Crisis, continued high unemployment rates in the U.S. and the high rate of maturing debt levels.

The Associated General Contractors of America released a study that says private construction spending increased for the first three quarters of 2011, but investments in the public sector continue to rapidly decline.

The National Association of Realtors reports pent up demand exists “from buyers who normally would have entered the market in recent years,” and that homeowner default rates now are lower than at any time in history.

For now, a 30-year fixed-rate mortgage remains at less than 4 percent, but a forecast by New York based investment banking firm Keefe, Bruyette and Woods, Inc. says the rate of 10-year treasury bonds should rise in 2012 because the Federal Reserve will not purchase enough mortgage backed securities “to keep mortgage rates from rising to 4.7 percent by the fourth quarter of 2012.”

What does all of this information mean? According to BusinessWeek, “…even the worst hit markets will begin to see improvement (in) 2012.”

Own a Piece of King Kong's Favorite Skyscraper Thought REIT

NNN Lease Market News

The public may get an opportunity to own a piece of King Kong's favorite skyscraper.

The Malkin family of New York, which currently controls the 102-story landmark, filed papers with the Securities and Exchange Commission Tuesday saying that it has "embarked on a course of action" that could result in the skyscraper being included in a newly formed real- estate investment trust.

Lately the Manhattan office market has been under a cloud due to economic uncertainty and cutbacks in the financial services industry. But the Empire State Building has outperformed comparable properties, thanks in part to a recently completed $550 million upgrade.

The building was valued in the summer at $1.65 billion, when the Malkin family refinanced the property. The building's net annual income is $63 million, according to Commercial Mortgage Alert.

Developed in the early 1930s by group of investors led by tycoon John Raskob, the Empire State Building hit the market during the Depression and sat mostly empty for years. Gradually, though, the building filled up with hundreds of tenants and became a Hollywood darling featured in movies such as "King Kong" and "Sleepless in Seattle." 

A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.

REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges.

http://online.wsj.com/article