Time to Buy Commercial Real Estate

U.S. commercial real estate yields are near the highest level relative to Treasury bonds on record, a signal to some investors it’s time to buy property.

Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, based on an index calculated by the National Council of Real Estate Investment Fiduciaries. That was 429 basis points, or 4.29 percentage points, higher than the yield on 10-year government bonds as of June 30, according to data compiled by Bloomberg. It’s about 475 basis points higher than Treasury yields as of yesterday.

That spread is near the record 539 basis points in the first quarter of 2009, when the U.S. was mired in the worst of the financial crisis and property prices sank. Risk-averse investors are seeking the highest-quality office towers, hotels and apartments as the gap widens, according to Nori Gerardo Lietz, partner and chief strategist for private real estate at Partners Group AG in San Francisco.

“The data indicate that real estate is poised for a rebound,” said Gerardo Lietz, who advises pension funds on property investments.

Some buyers already are acquiring buildings at lower cap rates, which move inversely to price. In June, a group of South Korean pension fund investors bought the 33-story Wells Fargo Building in San Francisco for $333 million from Principal Financial Group Inc. in one of the largest transactions in the second quarter, according to Real Capital Analytics Inc., a property research firm. The office tower sold at a cap rate of about 7 percent, said Goodwin Gaw, the developer who helped broker on the deal.

New York Rates

In Manhattan, RXR Realty LLC bought a stake in 340 Madison Ave., a 22-story office building, at a cap rate of 6 percent, according to New York-based Real Capital. Cap rates are calculated by dividing net operating income by purchase price, so the lower the rate, the higher the value of the property, and vice versa.

The NCREIF index measures 6,066 U.S. properties with a market value of $234.5 billion. The spread over Treasury yields was calculated using transaction cap rates, which are based on actual sales — 48 in the second quarter — and are usually more reliable than appraised values, according to Chicago-based NCREIF. The organization’s measure, which it began publishing in 1982, represents current yield before any price appreciation.

Comparing Yields

Investors compare property yields with Treasuries to determine how much potential profit real estate offers relative to an investment that’s considered low-risk. The spread shrank to less than 80 basis points, the narrowest in 16 years, when commercial real estate prices peaked in 2007. Property values have dropped more than 40 percent since the October 2007 top of the market, according to Moody’s Investors Service.

The gap’s widening follows a plunge in bond yields after the global financial crisis spurred a flight to safety and the Federal Reserve slashed interest rates to a record low. Treasury bonds yesterday completed the biggest monthly rally since the end of 2008 amid signs economic growth is faltering, with the benchmark 10-year note yielding 2.47 percent.

“Property is attractively priced versus the fixed-income market,” said Ritson Ferguson, chief investment officer of ING Clarion Real Estate Securities in Radnor, Pennsylvania, which manages about $12 billion.

The wide spread carries a warning signal to some investors because the economy remains weak, hurting commercial rents and occupancy.

Being ‘Picky’

“It’s questionable how much growth you’re going to get,” said James S. Corl, managing director for distressed real estate investments at Siguler Guff & Co., a New York-based private- equity firm. “Yes, there is value in real estate but you’ve got to be very picky. If you pay up for existing leases, it’s very hard to manage your way out of that situation.”

For much of the past two decades, institutional real estate was valued at about a 9 percent cap rate, according to Jeffrey D. Fisher, a consultant to NCREIF and a real estate professor at Indiana University in Bloomington, Indiana. Cap rates on some commercial deals fell to less than 4 percent during the peak.

The rate declined in the second quarter as transactions began to increase, he said.

“What I’m seeing is a two-tiered market right now,” Fisher said. “For properties that have high occupancy, that’s where you really have seen the price appreciation and cap rates falling.” For buildings with low occupancy rates, “there is very little interest,” he said.

Sales Rebound

U.S. sales of office, retail, industrial, apartment and hotel properties totaled $20.7 billion in the second quarter, according to Real Capital. That was up 86 percent from $11.1 billion a year earlier.

The deals were still 85 percent below the peak of $135.7 billion in the second quarter of 2007, Real Capital data show.

Corporate bond yields are a better comparison than Treasuries and also indicate that properties are undervalued, said Michael Knott, managing director at Green Street Advisors Inc., a Newport Beach, California-based company that specializes in analyzing real estate investment trusts. Bonds rated Baa by Moody’s are perceived as investments with moderate risk, similar to commercial real estate, said Knott.

The spread between NCREIF real estate cap rates and Baa- rated corporate bonds is more than 200 basis points, Knott said. The average during the past 25 years is about 140 basis points.

“Underlying real estate looks cheap to us relative to where moderate-risk corporate bond yields are priced,” Knott said in a telephone interview. The exception is publicly traded REITs, which trade at a premium to asset values, he said.

“Smart managers today are being very selective because they realize a lot more property has to clear the market,” said Corl of Siguler Guff. “The volume of deals is definitely going to go up.”

Source: Bloomberg

Commercial Real Estate Yields Spur Investors

Yields on U.S. commercial real estate are nearing a record high compared to Treasury bonds. Many investors take that as a signal to buy property.

Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, as calculated by the National Council of Real Estate Investment Fiduciaries. That was 4.29 percentage points higher than the yield on 10-year government bonds as of June 30 and 4.75 percentage points higher than Treasury yields as of Aug. 31.

These returns are near the record 5.39 percentage points in the first quarter of 2009, when the U.S. was dealing with the worst economic downturn since the Great Depression. The spread shrank to less than 80 basis points when commercial real estate prices peaked in 2007.

“The data indicate that real estate is poised for a rebound,” says Gerardo Lietz, who advises pension funds on property investments.

Source: The Republican Journal

Commercial Real Estate Finance Council lobbys Washington

The Commercial Real Estate Finance Council, which represents buyers and sellers of investments backed by commercial property loans, spent $140,000 in the second quarter lobbying the federal government.

The trade group lobbied on accounting, bankruptcy and tax issues, credit rating agencies, regulation of the financial system, mortgage securities, taxes, terrorism and flood insurance, according to a July 20 filing with the House clerk’s office.

The trade group was formerly known as the Commercial Mortgage Securities Association. It changed its name earlier this year.

Besides lawmakers, the group lobbied the Treasury Department, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Office of the Comptroller of the Currency.

The group’s second-quarter spending on lobbying was up from $100,000 in the same quarter a year ago and down from $160,000 in the fourth quarter of last year.

Source: Business Week

Retailers Post Surprisingly Strong August Sales

Retailers are turning in surprisingly strong monthly sales reports in August, as sales-tax-free holidays and discounting coaxed shoppers to open their wallets and stock up on back-to-school items.

Overall, the Thomson Reuters Same-Store Sales Index is expected to rise 2.5 percent in August, the research firm said.

The majority of the retailers reporting monthly sales results have topped analysts’ estimates, according to Thomson Reuters.

One of the best performances came from Limited

// [LTD  24.27  ---  UNCH  (0)   ] // , which posted a 10 percent increase in same-store sales, far better than the 7.3 percent increase analysts had projected.

Teen retailers were expected to struggle, and that was reflected in the results from Hot Topic // [HOTT  5.27  ---  UNCH  (0)   ] // and The Buckle // [BKE  24.37  ---  UNCH  (0)   ] // . Hot Topic missed estimates with same-store sales falling 3.7 percent, while The Buckle’s sales fell 3.5 percent. The companies were forecast to post sales declines of 6.2 percent and 6.5 percent, respectively.

Consumers remain cautious about spending as unemployment remains high and questions about the economy persist. The real test for retailers will come in September. That is when investors will see if consumers are truly picking up their spending or if back-to-school sales merely shifted to August from September.

On Wednesday, MasterCard’s SpendingPulse report showed an uptick in total retail spending in August, but shoppers stuck to the basics and spent on essentials such as children’s clothing. Sales in other categories, including women’s and men’s apparel and luxury goods, fell, the report said.

More than one-third of the states held sales tax holidays in August, including three large states that did not have this kind of event last year.

Retailers are likely hoping that the fall brings more clarity about the economy and an improved employment picture. Meanwhile, investors will be looking at August sales for the lessons they may teach about the upcoming Christmas holiday season.

One thing that isn’t up for debate: the bar will be raised in the months ahead as retailers will be facing much tougher comparisons with their year-ago performance beginning in September.

August 2010 Same-Store Sales

Retailers	August 2010 Estimates	August 2010 Actuals
Costco Wholesale (excluding gas)	3.6%	5%
BJ Wholesale (excluding gas)	2.4%	1.9%
Target	2.0%	1.8%
JC Penney	1.6%	2.3%
Kohl’s Department Store	2.6%	4.5%
Dillards Department Store	(0.5%)	Breakeven
JW Nordstrom	5.9%	6.3%
Saks Department Store	4.3%	1%
Stage Stores	1.3%	0.5%
Macy’s	4.0%	4.3%
Gap	(0.2%)	Breakeven
TJX	2.4%	2%
Limited	7.3%	10%
Ross Stores	2.9%	5%
Stein Mart	Breakeven	8.5%
Abercrombie	5.9%	6%
American Eagle	1.1%	1%
Aeropostale	1.2%	(1%)
Hot Topic	(6.2%)	(3.7%)
Wet Seal	(3.5%)	1.1%
The Buckle	(6.5%)	(3.5%)
Zumiez	7.7%	9.1%
Walgreen	2.4%
Rite Aid	(1.0%)	(1.0%)

Source: CNBC

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Rankin Commercial Properties says Commercial Real Estate Market Back to Black

Rankin Commercial Properties released a press release with their latest market insight.

Raleigh, NC (RCPNEWS) 1, September 2010 – Rankin Commercial Properties announced their latest view on Commercial Real Estate Market Conditions today saying that the industry is “Back to Black.”   

Rankin Commercial Properties a full service commercial real estate firm in Raleigh, North Carolina, has been a market leader in maintaining property portfolios for clients in the South Eastern United States.  Rankin Commercial Properties occasionally releases market updates on conditions surrounding the commercial real estate market.  

“For the first time in a long time, we are seeing significant activity in the Commercial Real Estate markets that suggest a fall out is no longer expected” said Charles Rankin, President of Rankin Commercial Properties.  “Institutional buyers are stepping into investments helping the Dow Jones REIT index significantly outperform the broader market.” FTSE NAREIT’s All-REIT index, comprised of 148 publicly traded REITs, was up 11.7 percent year-to-date as of Aug. 26 while the Standard & Poor’s 500-stock index was down 4.9 percent. Publicly traded REITs represent 15 percent of the total U.S. commercial real estate market.

However, Rankin Commercial Properties forecasted a foreclosure rush earlier in the year which would have offset the scarcity of property acquisition opportunities, which has limited many REITs’ ability to grow as the economy recovers.  “We thought a fall out would have been a good thing, a great thing for our business, but it never happened, now we are focusing on leasing properties and maintaining properties” said Charles.

Rankin Commercial Properties believes Apartments and Retail properties will outperform the market as Office properties and Industrial Properties begin moving off the bottom.  But the fact that the commercial real estate market hasn’t crashed is overall positive. 

According to Rankin, CMBS loans in 2010 while a fraction of the peak in 2007 have already far exceeded the total for 2009. Commercial Real Estate Sales spiked to $9.7 Billion in June, while commercial property values continued to increase at a premium above current rental rates.  The aggregate value of Commercial Real Estate (CRE) loans priced by DebtX that collateralize CMBS increased to 79.4% as of July 30, 2010, up from 77.4% as of June 30, 2010. Loan values were 71.1% as of July 31, 2009. In July, DebtX priced 57,801 Commercial Real Estate loans with a $679.5 billion aggregate principal balance. “The fact is, sum 90% of CMBS loans are performing” said Charles.

July’s numbers followed June’s where there was a spike in national multifamily and commercial real estate sales, rising to $9.7 billion in the month. This was the highest volume of significant commercial property sales since September 2008. The increase in activity-over the year, from the first to the second quarter and over the second quarter itself-suggests that investors remain largely undeterred by downward revisions to the economic outlook. The current tally of commercial properties in contract suggests that prevailing levels of activity will be sustained into the third quarter.

“Cap rates are beginning to rise significantly” says Charles “from 9 to 10% last year to 7 to 7.5% today, there still could be a backlash and slight double dip, but still we are talking about capitalization rates at all significant highs yielding great commercial property investment opportunities.”

“Apartments will outperform the entire real estate industry as renters move back into the community but aren’t ready for purchasing a home, a common trend following a recession” said Charles.  REITs that primarily own apartment buildings are in a stronger position than those that concentrate on office, retail, and industrial properties. With home prices continuing to fall, and access to credit diminished, renting is the only option for many people who can’t get mortgage loans or aren’t willing to buy a house now. Occupancy rates for apartment buildings are currently running at 92 percent to 94 percent, compared with about 88 percent for warehouses and other industrial properties and 84 percent for office buildings.

But Rankin Commercial Properties believes the Retail Property market is leaning towards a pop.  “US consumers are deleveraging faster than expected, they are cash heavy, and it’s only a matter of time before they start spending.”  Today consumer spending rose slightly as some consumers began fretting off fears of unemployment.  “The worst for the retail industry is over, has been over, and as those retailers begin looking for ways to increase revenue and reallocate funds, property leasing activity is going to rise, and higher spending will increase percentage rents.” 

“In August we saw a pop in Retail sales driven by back to school shoppers and sales tax holidays” said Charles, “that was actually an unexpected improvement.” Better consumer confidence numbers, spending numbers, and August sales numbers are all good signs for Retail Properties.    

Although Rankin Commercial Properties is bearish on the suburban office space and industrial space, they still had a few positives.  “Our entire economy has changed, we simply won’t return to the same conditions we had pre 2007, however, one thing is certain and that is recessions are restored with innovation.  Innovation requires office space and industrial space, the question is where will that innovation come from, Tech, Medical, Research and Development, who really knows at this point, it’s too early to tell” said Charles.

“On a local market level, Raleigh Commercial Real Estate  and Cary Commercial Real Estate have several strengths that will help push a recovery in Office and Apartments as Fort Brag expands and DOD contractors search for offices in the Raleigh-Fayetteville areas” said Charles.   “Other office space users seem to be temporarily medical and counselor driven, however RTP has seen some significant activity recently from Research and Development type corporations.”

“Overall Commercial Properties are ‘Back to Black’ meaning the cash flows are increasing enough to sustain properties and keep bankers from foreclosing.  But significant growth remains weak primarily because the segment is recovering without a washout.  We’ve seen a lot of loans rolled and very few foreclosures in recent months accompanied with stronger leasing activity.”

About Rankin Commercial Properties LLC:

Rankin Commercial Properties (RCP) is a Full Service Commercial Real Company.  Encompassing all aspects of commercial properties, RCP offers Property Management, Brokerage Services, Tenant Representation, Landlord Representation, Facilities Services, Property Maintenance, Construction, Landscaping, and Cleaning & Janitorial Services. The company currently employs over 13 full time and part time personnel.

Rankin Commercial Properties is North Carolina’s Premier Source for Commercial Real Estate Expertise. Our team specializes in Office, Retail, Industrial, Land, and Investment Properties. Unlike most Commercial Real Estate Companies, Rankin Commercial Properties (RCP) is a Full Service Commercial Real Estate Company offering Landscaping, Cleaning & Janitorial, Property Management, Brokerage, Marketing, Maintenance, and Financial Services. Our “all around, hands on” approach not only gives us the knowledge to negotiate fair deals, but the ability to lower operating costs for most investment properties. The Rankin Team has an uncanny ability to creatively and analytically determine proper solutions to every commercial real estate need. Rankin Commercial Properties is devoted to building long term relationships with its clients and community.

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Asia REIT market cap up by a quarter in H1 2010 -CBRE

Asia’s total market capitalisation for real estate investment trusts (REITs) rose by
a quarter in the first six months to $69 billion, global property
services firm CB Richard Ellis said on Wednesday.

 However, the weighted average dividend yield for Asian REITs
contracted to 6.86 percent in the first half of 2010 from 8.06
percent during the same period last year, U.S.-based CBRE (CBG.N)
said in a statement.
 "The fortunes of Asian REITs still remained mixed. During the
first half of the year, some markets have seen strong growth in
IPO and acquisition activity and others have witnessed delisting
applications, mergers and consolidations," said Andrew Ness,
executive director at CBRE Research Asia.
 "REITs in Japan, Taiwan, Korea and Hong Kong outperformed
their respective stock markets, all of which suffered downward
adjustments in the second quarter amid concerns over the pace of
the global economic recovery," Ness said.
 Acquisitions in the market totalled $5.7 billion during the
first half of 2010, surpassing the $4.2 billion recorded for the
whole of 2009, with Japan being the most active market for asset
purchases, CBRE said.
 Singaporean and Malaysian REITs were active buyers of office,
retail, industrial and healthcare assets while REITs in Hong
Kong, Taiwan, South Korea and Thailand remained inactive, it
said.
 While a few REITs were delisted, South Korea, Singapore and
Thailand saw new listings, such as Cache Logistics CAL.SI.
 REITs invest in mainly commercial property and pay rent
collected from their properties to shareholders as a dividend and
also usually offer returns that are higher than yields of
government bonds.

Source: Reuters

REIT’s feed Yeild-Hungry Investors

REITs Attract Yield-Hungry Investors

The U.S. commercial real estate market has so far averted the catastrophe that many strategists were predicting last year. Even after sales of existing homes plummeted 27 percent to record lows in July, threatening further home-price declines, analysts see commercial real estate values stabilizing. Vacancies for apartment buildings, office complexes, retail mall, and self-storage facilities are no longer rising meaningfully, rents are no longer falling, and many Real Estate Investment Trusts, the main vehicle for individual investors to participate in the sector, continue to reduce their debt loads.

Equity investors are taking notice: FTSE NAREIT’s All-REIT index, comprised of 148 publicly traded REITs, was up 11.7 percent year-to-date as of Aug. 26 while the Standard & Poor’s 500-stock index was down 4.9 percent. Publicly traded REITs represent 15 percent of the total U.S. commercial real estate market. Equally striking is how much more confidence investors have put in U.S. mutual funds and exchange-traded funds that focus on real estate assets than they have in equity funds in general. Year-to-date through July, $1.42 billion flowed into U.S. real estate mutual funds, while $27.1 billion flowed out of U.S. equity funds, according to an Aug. 20 research note by Deutsche Bank Securities (DB).

This doesn’t mean that there aren’t plenty of commercial real estate loans in default. Fitch Ratings, in an Aug. 20 report, said that 43 percent of the 126 commercial mortgage-backed securities set to mature in September — representing $962 million in face value — are either delinquent or in foreclosure. [Commercial mortgage-backed securities are pools of loans that were bundled and sold to investors in tranches rated for their level of risk of default.)

Given that the value of many properties has fallen dramatically since commercial mortgages were taken out five years ago — the typical loan duration — and that most of these loans are interest-only, for which principal hasn’t been paid down, most borrowers will be hard pressed to provide the additional equity required by banks in order to refinance them at considerably lower loan-to-value rates, says Jeremy Anagnos, co-portfolio manager of the American Beacon Global Real Estate Fund (ABEAX).

The REITs trading at the highest multiples are those with better-quality properties and stronger balance sheets. Investors must decide whether it’s worth paying up for those stocks on a bet that they’ll use their liquidity for growth, says Paul Adornato, an analyst at BMO Capital Markets. They may prefer to buy a cheaper REIT facing a high cost of capital on the belief that the value of their portfolios will appreciate as the broader economy recovers. If you’re not expecting a quick recovery, you may prefer the higher-valued REITs, Adornato says.

Nearly all of the 15 REITs on Credit Sights’ coverage list reported funds from operations [FFO) in the second quarter that exceeded analysts’ consensus estimates. Roughly two-thirds of the companies increased their full-year FFO forecasts, according to an Aug. 16 report by the ratings provider. Credit Sights continues to recommend an overweight position in REITs’ credit such as unsecured bonds “based on relative value compared to other investment grade sectors and in the context of stabilizing, if not improving, fundamentals and capital markets that remain accommodative to debt refinancing and other capital raising.”

Anagnos, who says American Beacon has questioned the strength of the economic recovery from the start, suggests that investors stick to higher quality REITs with lower costs of capital. The lower the interest payments a REIT is making on outstanding debt, the more money it’s likely to have to make acquisitions and expand its portfolio of assets, he says.

Developers Diversified Realty (DDR) agreed to pay an initial yield-to-maturity of 8.0 percent on $300 million of 10-year unsecured debt it sold during the week ended Aug. 13, while Simon Property Group’s (SPG) $900 million offering of 11-year unsecured notes was not only $150 million bigger than targeted but priced at just 4.42 percent. The same week, the largest tranche of Vornado’s $600 million offering of commercial mortgage-backed securities priced at 4.03 percent due to strong demand.

Dave Rodgers, an analyst at RBC Capital Markets, sees liquidity as a more important factor because it determines how much capital a company can afford to spend on acquisitions. Some companies have attractive balance sheets but not necessarily strong liquidity.

“AMB Property (AMB) — an industrial REIT — has good leverage, but its liquidity is not great because they have a lot of near-term maturities,” Rodgers says. ProLogis’ (PLD) leverage is “too high,” he says, noting that it has “good” liquidity because most of its debt doesn’t mature for a further 24 to 48 months.

Then there’s Boston Properties (BXP), which is sitting on more than $1 billion in cash. Including untapped credit lines, the company currently has a total investment capacity of $2.5 billion to $2.8 billion, Rodgers adds.

REITs have a permanent place in the investment portfolios that Scarsdale [N.Y.)-based Palisades Hudson Asset Management manages for its clients because of the higher yields they offer vs. government bonds. On Aug. 26, the yield on the FTSE NAREIT All-REIT index was 4.74 percent, compared with 2.50 percent for the 10-year Treasury bond. “You can’t fake dividends,” says Jonathan Bergman, chief investment officer at Palisades Hudson.

Having shored up their balance sheets by paying down debt and raising cash through equity offerings in recent quarters, the larger equity REITs “will be pouncing on opportunities over the next three to four years” as more distressed properties come to market from private owners that don’t have access to the capital markets and will be forced into foreclosure, he says.

Palisades Hudson prefers to invest in REITs via international mutual funds with a focus on developed economies such as North America, Western Europe, and Japan. Among those the firm uses are the Morgan Stanley Institutional U.S. Real Estate Fund (MSUSX) and the Morgan Stanley International Real Estate Fund (MSUAX).

REITs that primarily own apartment buildings are in a stronger position than those that concentrate on office, retail, and industrial properties. With home prices continuing to fall, and access to credit diminished, renting is the only option for many people who can’t get mortgage loans or aren’t willing to buy a house now. Occupancy rates for apartment buildings are currently running at 92 percent to 94 percent, compared with about 88 percent for warehouses and other industrial properties and 84 percent for office buildings, says Rodgers.

Retail properties may be the second-most-attractive asset class. Investors need to be cautious because data show lower retail sales and certain retailers are closing some stores, says Stan Ross, chairman of the board at the University of Southern California’s Lusk Center for Real Estate. Office buildings would be his last choice, due to high vacancy rates and a weak job recovery forecast. “The only good news there is that no construction is going on,” he says.

Credit Sights said it finds the biggest challenges in industrial properties because tenants are reluctant to commit to space and prefer to use just-in-time leasing strategies and unconventional inventory management — which is expensive and likely unsustainable.

The fact that the commercial real estate market hasn’t crashed as expected is positive, but it also explains the scarcity of acquisition opportunities, which has limited REITs’ ability to grow as the economy recovers, says Adornato. Banks and special servicers of commercial mortgage-backed securities have been too willing to extend maturities and pretend that property values haven’t fallen because they’re reluctant to liquidate properties at distressed prices and they don’t want the market to discover the true value of their loans portfolios, he says.

Another reason acquisitions have been slow is that REITs are being outbid for properties in the top markets by private equity real estate funds, which have to invest their clients’ money and are often willing to overpay for assets, says Brad Case, an economist at NAREIT.

Source: MSNBC

Apollo Commercial Upgraded

A FBR Capital Markets analyst on Monday upgraded his rating on Apollo Commercial Real Estate Finance Inc. to “Outperform” from “Market Perform,” citing the company’s recent success getting attractive returns on its loan portfolio.

Apollo Commercial is a real estate investment trust that invests in commercial mortgage-backed securities, first mortgages, and mezzanine loans.

Analyst Gabe Poggi said the 10-percent discount on the company’s stock compared to book value of $18.45 per share, is “unwarranted” given a substantial increase in its quarterly dividend, its performance in the second quarter and the $60 million of available funding it still has on its credit facility. The analyst expects the company will use the remaining funding to write loans.

Earlier this month, Apollo Commercial reported second-quarter operating earnings of 43 cents a share, topping Wall Street’s expectations of 33 cents a share. And on the heels of the financial results, the company declared a 40-cent per-share dividend, an increase of 14 percent over the its previous payout.

“The increase can be attributed to higher marks on Apollo Commercial’s CMBS (commercial mortgage-backed securities) portfolio,” Poggi wrote.

Source: Business Week

Commercial Real Estate Loans Rise Cost Wise

Commercial Real Estate Loan Prices Rise in July

Prices Increase For Fourth Straight Month

The aggregate value of Commercial Real Estate (CRE) loans priced by DebtX that collateralize CMBS increased to 79.4% as of July 30, 2010, up from 77.4% as of June 30, 2010. Loan values were 71.1% as of July 31, 2009.

“Despite weak CRE fundamentals and increasing levels of delinquencies and defaults, 90% of CMBS loans are still performing,” said DebtX CEO Kingsley Greenland. “The outlook for Commercial Real Estate loans that collateralize CMBS continues to improve due to increased activity in the CMBS new issue market and strong demand for distressed Commercial Real Estate loans in the secondary market. Investors have become more comfortable that loan valuations have stabilized and are looking to achieve better risk-adjusted yields.”

In July, DebtX priced 57,801 Commercial Real Estate loans with a $679.5 billion aggregate principal balance. These loans, which collateralize 623 US CMBS trusts, each received a DXMark®, a price based on loan sales executed at DebtX, the largest marketplace for loans. Access to individual DXMark prices is available through the BLOOMBERG PROFESSIONAL® Service. Type DXMK <go> for more information.

DebtX’s CMBS loan pricing analysis is part of DXMarket Data(sm), a subscription service that provides loan buyers insight about transactions executed at www.debtx.com. DXMarket Data(sm) is available to registered DebtX buyers and includes seven components: Non-Performing Loan Sale Prices, Bank Watch, Secondary Loan Market Commentary, CMBS Loan Collateral Prices, Asset Valuation Spotlight, Secondary Loan Market Liquidity and Commercial Real Estate Capital Markets Observations.

Source: PRNewsWire

Retailers get August Boost

Retailers Get Back-to-School Boost: SpendingPulse

State sales-tax holidays and back-to-school buying helped give retailers a modest boost in August, with most retail sectors showing gains, according to a report released on Wednesday.

But consumers clearly remain cautious, and the retail sales trend is more likely to show a tendency to remain stable and flat rather than towards growth, according to SpendingPulse, an information service by MasterCard Advisors that estimates sales for all forms of payment, including cash, checks and credit cards.

“Categories such as apparel and electronics appear to have been helped by the back-to-school season, which tends to peak in August,” said Michael McNamara, vice president, research and analysis for SpendingPulse.

Sales of apparel headed back into positive territory in August, rising 2.6 percent from last year. The category, on a year-over-year basis, has logged increases in five of the past 8 months, and was down 1.1 percent in July.

Within the apparel category, sales of clothing for children were the most robust, rising 8.4 percent from last year. But parents appear to have held off on spending for themselves to buy for their growing kids. Sales of both men’s and women’s apparel continued to slip in the latest month.

After a sharp decline in July, sales of men’s apparel fell 1.9 percent in August from last year, while women’s apparel sales fell 2.7 percent from the year-ago period. In July, women’s apparel sales were down 1.9 percent.

Sales of footwear, continued to show weakness as they have over the past four months. In August, sales in the category inched up 0.9 percent.

Electronics sales have become a bigger piece of the back-to-school budget, as students buy laptops and other gadgets to help them with their classes. Both consumer electronics and appliances logged increases in the latest month, with consumer electronics sales up 2.3 percent, and appliances up 9.4 percent.

Online revenue continued to grow in August, but the 7.2 percent gain in the latest month was the smallest year-over-year increase in 2010.

McNamara said he suspects consumers may have headed to brick-and-mortar stores to take advantage of tax holidays rather than purchase goods online.

More than a third of all U.S. states offered residents tax holidays in August, including three states that had not offered a similar event last year. Those states—Florida, Illinois and Massachusetts—are large and likely had a significant impact on sales last month.

The Massachusetts tax break, which waived sales tax on all retail items that cost less than $2,500, was particularly generous.

It will be interesting to see if these tax holidays encouraged more consumers to shop in August. In general, consumers have been holding off on buying items until they absolutely need them. With hot temperatures continuing to dominate much of the country, the weather offered little incentive to shop for fall sweaters and jackets.

The hot and dry conditions, however, helped the overall restaurant sector, while the continued volatile financial markets performance hurt sales of luxury goods, McNamara said.

McNamara also noted that retailers will be facing more difficult comparisons with the year-ago period beginning in September.

“In most categories, consumers are still reluctant to buy,” McNamara said. He said the employment picture and consumer confidence will need to improve before consumers can begin making larger purchases on a sustained basis.

Earlier in the week, the Commerce Department reported that Americans spent money at the fastest pace in four months. Still, consumer spending rose only a lackluster 0.4 percent in July, outpacing the increase in personal incomes, which grew only 0.2 percent.

On a more positive note, McNamara said he didn’t see signs of excessive discounting. Industry-watchers have been concerned that discounts could accelerate if fall merchandise doesn’t move off the shelves.

Discounts have been an important way to lure consumers into stores as consumers focus on value.

“The bias has been to the lower end of the price spectrum,” McNamara said. “They are pointing their wallets at wherever they can find a deal.”

Source: CNBC