Daily Real Estate Update

- Jul 13, 2010

Investment managers from Pimco stated in an article called ‘Commercial outlook Shaky: report’ that the commercial market performance outlook isn’t pretty. Through a ground level survey, polling 100 industry experts Pimco deduced that many current commercial investments opportunities belie the markets shaky foundation. ‘Certain sectors have made many observers and participants optimistic," the firm said in a recent report, referring to underpriced investments and trophy properties, "but this has provided a false sense of clarity on the real level of property values.’ REITs have been able to drum up cash, driving the prices 96% higher between Q1 of 2009 and 2010, but investors have been focused on blue-chip trophy properties, and are avoiding the broader market. ‘Capital is clearly returning to commercial real estate, helping to stem the value decline in the sector," the firm reported. "[But] national price indices are misleading when transactions are limited and fail to reflect the significant uncertainty around property valuations.’

An article called ‘Mellon ponders 1 WTC move’ indicates the demand for space at 1 World Trade Center. Bank of New York Mellon is poised to snatch up 450,000 SF; while they wait for the port authority of NY an NJ to complete negotiations with newly formed partner the Durst Organization before it can formally peruse the location. Mellon will be relocating, and will be selling its current headquarters at 1 Wall Street and wants to move a portion of its workforce to a building it owns at 101 Barclay Street. Peter Riguardi, president of Jones Lang LaSalle and Mellon’s real estate broker declined to comment, but he noted the Durst’s selection ‘shows how much people think about this site’.
I am attempting to find the middle ground in understanding the real estate market conditions and outlook, but many of the articles I skimmed, especially this morning seem to be showing a negative trend.

An article labeled CMBS delinquencies still on the rise: Fitch’ states that delinquencies on Commercial Mortgage-Backed Securities are increasing, albeit at the slowest price seen in the last 11 months, according to a recent Fitch report. Fitch’s delinquency rate index rose to 8.14% from 7.97% in May with hotels realizing the highest delinquency rate (18.6%) which remained flat month-over-month. The report warns that delinquencies are poised to accelerate amid depressed commercial rents and occupancy rates, which could obliterate landlords’ ability to keep up with their mortgage obligations, according to national mortgage news.

Feedback and suggestions are always appreciated.


Domenick Petito
Intern
CPEX Real Estate
350 Livingston St, 1st Flr
Brooklyn, NY 11217
dpetito@cpexre.com

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