CPN - December 2008 - (Page 6)

BUZZWORTHY down period.While General Growth had been in trouble for some time, the other REITs saw share prices In the beginning of the current ties Inc.’s John Bucksbaum and slide only in early October. On the other hand, the drop financial crisis, REITs remained Robert Michaels; BRE Properties relatively healthy. Typically large Inc. executive vice president & has been sharp; share prices for and lower leveraged than other CFO Henry Hirvela and Gramercy each of the above REITs have types of firms, they outperformed Capital Corp. president & CEO plummeted significantly. General Growth and ProLogis were the rest of the stock maramong the hardest hit, ket, as many investors each falling from the top viewed them as a safe—or 15 largest equity players at least safer—haven. during the past quarter. Recently, though, REITs General Growth suffered have shown that they are not the additional ignominy of immune to the problems being ousted from the S&P plaguing the economy, taking 500 index in November. a dive in the past few John Bucksbaum, Jeffrey Schwartz and Michael REITs are now commonths. A notable side effect Brennan have fallen from their CEO thrones of pelled to act in the face of has been turnover at the high- commercial real estate’s former darling REITs. financial pressure, and a est levels of management. Since September, the list of Marc Holliday. Bucksbaum will change in leadership is often the top managers stepping down remain chairman of General quickest and most efficient method has grown to include Jeffrey Growth and Michaels will retain of reorientation. But only time will Schwartz of ProLogis; First Indus- his COO title, while Holliday con- tell how successful the recent spate trial Realty Trust Inc.’s Michael tinues to head Gramercy affiliate of executive turnovers will be. —Reach news writer & Brennan; General Growth Proper- SL Green Realty Corp. economic editor Adam Perrotta Many of these C-suite shake-ups Visit www.cpnonline.com for the latest news affecting commercial real estate. at adam.perrotta@nielsen.com. have come after a remarkably short NEWS TREND Top Executives Take Fall for REITs Deal Trends New Jersey: The Northern/Central New Jersey office market continues to attract companies, and it experienced strong lease renewal activity during the third quarter as tenants opted to stay in place in the face of the turbulent economy. ProLogis, for example, signed seven new lease agreements representing 490,600 square feet in the area during the third quarter, including: 82,000 square feet to Packaging & Distribution Resources L.L.C. in Sayreville; 80,000 square feet to Spectrum Plastics Group in Edison; 234,400 square feet total to Staples Inc. and Intelect Corp. in Central New Jersey. United States: REITs are not the only entities to be hit lately. DBSI Inc., a private firm that serves investors in tenant-in-common transactions and 1031 exchanges, filed for Chapter 11 under the U.S. Bankruptcy Code. DBSI is the parent company of DDRS L.L.C., DBSI Development L.L.C., Spectrus Real Estate Group and DBSI Securities Corp. —Reach staff writer Elena Gontar at elena.gontar@nielsen.com. ECONOMIST’S OUTLOOK Worldwide Deleveraging The economic outlook worsened considerably in October. A free fall in consumer confidence following the financial market crisis became exacerbated during that time.We were in a moderate recession from the beginning of 2008, but it is now our view that we likely entered a deep recession in September and October. During the next 18 months, we expect the loss of 2 million to 4 million jobs to be added to the 800,000 jobs that had been lost year-to-date as of September; we expect the unemployment rate to climb to more than 8 percent. Because the consumer comprises more than 70 percent of the economy, a substantial pullback in spending guarantees an ugly economic outlook. On the positive side, the massive intervention of the Federal Reserve and Treasury appears to have prevented a collapse of the financial system. A key measure is the LIBOR spread over the federal funds 6 ON The world is deleveraging, and the global nature makes the solution much more complicated. It will be very difficult to escape without massive pain.We expect a deep and long recession with a very slow recovery. The real estate outlook has worsened as the economy has weakened. The MSCI US REIT Index sank 31.8 percent in October, the sharpest one-month decline ever. It represented a marketwide liquidation of stocks by mutual funds and hedge funds, as well as massive margin calls for many company executives in the sector. The hardest-hit stocks had higher-than-average debt levels, short-term debt rollover needs and substantial development pipelines that may no longer be profitable. Companies focused on New York City markets were hit especially hard, reflecting the view that the city’s economy will fall sharply, given its large dependence on Wall Street. It is likely that private real estate will show these same negative trends during the next year. —Kenneth Rosen is chairman of Rosen Real Estate Securities L.L.C. THE RADAR rate. In the last two weeks of October, this spread moved down substantially. This is a very good sign, though the credit markets by Kenneth Rosen, Ph.D. are still fragile, and it is the first sign that the financial tsunami may be abating. The reduction of interest rates is also an important positive for the world’s economies. However, we cannot be at all sanguine about the fact that many of the economies of the developed and developing world are in crisis. While these countries did not make subprime mortgages as did the United States, they did equivalent things. England, Ireland, Spain, Australia and Eastern Europe had bigger housing bubbles than the United States did, and they were also supported by easy credit. Those countries are also experiencing the free fall in housing markets and in their economies. Hotel Pipeline Could Run Dry After 2010 The hospitality sector’s current development boom could slow to a relative crawl as the financial crisis catches up with the construction pipeline and bogs down the industry. Around the globe, developers are currently building more than 4,600 projects totaling over 836,000 guest rooms, according to Lodging Econometrics. Another 3,800 projects are set to break ground by the middle of 2009, and 5,800 new hotels will open their doors in the next two years. Most of these projects were conceived before the credit crunch took hold, and many will run into financial roadblocks, given changes in financing availability and demand from travelers. And as the contagion of the economic meltdown has reached a global scale, hotel markets worldwide will feel the pinch. —Adam Perrotta COMMERCIAL PROPERTY NEWS • December 2008 • www.cpnonline.com http://www.cpnonline.com http://www.cpnonline.com

Table of Contents for the Digital Edition of CPN - December 2008

CPN - December 2008
Contents
Starting Line
Buzzworthy
Retail
Data/Analysis
Conferences
Boston Market Profile
Finance
International
Property Management
Marketplace

CPN - December 2008