WEEKLY RETAIL RECAP

• Story of the Week: Barnes & Noble unable to reach settlement with Burkle
  Barnes & Noble said Thursday it has not reached a settlement with billionaire investor Ron Burkle’s Yucaipa Cos.
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• Report: July total U.S. retail sales mixed
  A report released Thursday by MasterCard Advisors found that July total retail sales edged up, but not as much as in June.
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• Gap to expand e-commerce reach on global basis
  Gap said Thursday that it has upped international shipping offerings on its e-commerce site to 55 countries, including Australia, Brazil and Mexico, and by year-end will make online shopping available in up to 65 countries.
  Read More

• rue21 opens 600th store
  Rue21 said Thursday it has opened its 600th store, located in North Attleboro, Mass. Read More

• Kohl’s records 14% rise in Q2 profit
  Kohl’s Corp. reported Thursday that profit for the second quarter ended July 31 rose to $260 million, from $229 million in the prior year.
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• Casey’s continues to fight takeover, sends letter to shareholders
  In its continuing fight against takeover, Casey’s General Stores president and CEO Robert J. Myers has sent a letter to shareholders urging them to reject moves being made by Canadian c-store operator Alimentation Couche-Tard to acquire the company.
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• Cache profit edges up in Q2
  Specialty women’s apparel retailer Cache reported Thursday that profit for the quarter ended July 3 edged up to $897,000, compared with $845,000 in the year-ago period.
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• Report: Card spending up in July
  A report released Wednesday by First Data Corp. found that after three consecutive months of decelerating growth, July 2010 card spending growth increased.
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• Arden Group’s net income slips in Q2
  Arden Group, parent of Southern California supermarket chain Gelson’s Markets, reported Wednesday that it earned $4 million in the second quarter ended July 3, compared with earnings of $4.7 million in the year-ago period.
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• J.C. Penney headquarters is LEED Gold
  J.C. Penney Co.’s corporate headquarters in Plano, Texas, has been awarded LEED (Leadership in Energy and Environmental Design) Gold certification by the U.S. Green Building Council.
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• American Apparel will miss filing deadline
  American Apparel has informed the Securities and Exchange Commission that it will miss its filing deadline.
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• Pop-Tarts opens Times Square pop-up
  The Pop-Tarts brand has opened its first retail store, a temporary location just off Manhattan’s Times Square.
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• Macy’s Q2 profit soars, ups outlook
  Macy’s net income surged in the second quarter as the chain saw a payoff from its focus on exclusive moderately priced fashions and tailoring its assortments to local markets.
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• Report: E-commerce spending up 9%
  A report released Tuesday by digital marketing firm comScore found that U.S. retail e-commerce sales estimates are up 9% for second quarter 2010.
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• Blockbuster adds video games to by-mail subscription program
  Blockbuster said Tuesday it is adding video games to its DVD-by-mail and Total Access mail subscription programs in an attempt to be more competitive.
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• Edwin Watts acquires Double Eagle Golf
  Edwin Watts Golf Shops said Monday it has acquired Double Eagle Golf in Cordova, Tenn.
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• Piperlime launches pop-up in NYC
  The Gap-owned online accessories retailer Piperlime said Tuesday it will open its first pop-up store in the SoHo neighborhood of New York City.
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• Lenders take control of stalled Xanadu project
  The controversial and long-delayed Xanadu entertainment and retail complex in the Meadowlands Sports Complex in East Rutherford, N.J., may have yet another chance at revival.
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• GNC Q2 profit leaps 42.5%
  General Nutrition Centers reported Tuesday that net income for the second quarter ended June 30 was $25.6 million, compared with net income of $18 million for the year-ago period.
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• Fossil Q2 profit more than triples
  Fossil said Tuesday its second-quarter profit more than tripled, smashing analysts’ expectations, as the watch and fashion-accessories retailer posted record results on big sales gains.
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• Casey’s General Stores completes private placement worth $569 million
  As part of its ongoing battle to fend off acquisition by Canadian convenience-store operator Alimentation Couche-Tard, Casey’s General Stores said Tuesday it has completed a private placement for $569 million of 5.22% senior unsecured notes due 2020.
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• HomeGoods to open its first Manhattan store
  Winick Realty Group announced that HomeGoods has signed on for its first Manhattan location.
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• Santa Monica Place opens
  Macerich, one of the nation’s leading owners, operators and developers of regional shopping centers, on Friday opened the new Santa Monica Place, 524,000-sq.-ft., three-level, open-air retail and dining destination that is located just two blocks from the beach.
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• Men’s Wearhouse expands into U.K. with acquisition
  The Men’s Wearhouse has acquired Dimensions Clothing Ltd. and certain assets of Alexandra plc, two leading providers of corporate clothing uniforms and workwear in the United Kingdom.
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• Big 5 Sporting Goods Q2 earnings flat
  Big 5 Sporting Goods Corp. reported second-quarter sales and earnings growth roughly flat with the year-ago period, as a sluggish economy and unseasonably cool weather in many of the its markets curbed shoppers’ spending.
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• Dress Barn Q4 sales leap 78% with Justice addition
  Dress Barn reported late Thursday that revenue for the quarter ended July 24 surged 78% with the inclusion of retailer Justice, which Dress Barn acquired in November as part of its purchase of Tween Brands.
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• NRF: 2010 retail container traffic expected to be up 15%
  A report released late Thursday by the National Retail Federation and Hackett Associates said that import cargo volume at the nation’s major retail container ports is expected to total 14.5 million containers for 2010.
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• Story of the Week: ShopperTrak: Week-over-week sales up 1.3%
  ShopperTrak’s National Retail Sales Estimate Wednesday reported that year-over-year GAFO retail sales increased 3.9% for the week ending July 24 while sales rose 1.3% versus the previous week ending July 17.
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• Panera Bread Q2 profit up 33%, plans to hire 25,000 workers
  Panera Bread Co. plans to hire 25,000 workers in the coming year, company chairman Ron Shaich said in an interview Wednesday with CNBC.
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• Tractor Supply approves stock split
  Tractor Supply Co. said Thursday its board has approved a two-for-one stock split of its shares.
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• Build-A-Bear loss widens in Q2
  Build-A-Bear Workshop said Thursday that its second quarter loss was $8.5 million, compared with a loss of $6 million a year ago.
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• Cabela’s Q2 profit surges 98% on financial services revenues
  Cabela’s reported Thursday that net income for the second quarter soared 98% to $18 million, compared with $9.1 million in the second quarter of 2009.
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• West Marine records 11.5% profit rise in Q2
  West Marine reported Thursday that its profit rose 11.5% in the second quarter ended July 3 to $36 million, from $32.3 million in the year-ago period.
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• Golfsmith profit dips in Q2
  Golfsmith International Holdings said Thursday that net income for the quarter ended July 3 dropped to $6.2 million, from $6.8 million a year earlier.
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• Sally Beauty posts 30% profit increased in Q3
  Sally Beauty Holdings said Thursday it recorded net income of $41.1 million in the third quarter, up 30.6% from the year-ago period.
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• Best Buy forms partnership to offer broadband service
  Best Buy Co. announced Thursday that its subsidiary Best Buy Connect and wireless service provider Clearwire Corp., based in Kirkland, Wash., have forged a wholesale relationship that will allow Best Buy to use Clearwire’s 4G network to offer mobile Internet service to customers under the Best Buy Connect service.
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• Winn-Dixie to cut 120 jobs, close 30 stores
  Winn-Dixie Stores said Thursday it will close 30 of its underperforming stores and cut more than 120 corporate and field support jobs to cope with weak sales.
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• RadioShack’s profit up, will open kiosks in Target
  RadioShack Corp. reported Thursday that it recorded a second-quarter net profit of $53 million, an 8.6% increase over its $48.8 million profit a year ago.
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• Peltz’s Trian Fund Management takes 6.6% stake in Family Dollar
  Trian Fund Management, through which activist investor and billionaire financer Nelson Peltz has invested in companies ranging from Wendy’s/Arby’s Group to H. J. Heinz Co., on Wednesday reported ownership of a stake of nearly 6.6% in Family Dollar Stores.
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• Casey’s rejects updated takeover bid from Couche-Tard
  Casey’s General Stores has rejected the latest takeover bid from competitor Alimentation Couche-Tard and announced a recapitalization plan to increase shareholders’ value.
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• Guess to open Manhattan flagship
  Guess will open its largest U.S. store to date, a two-level, 13,000-sq.-ft. flagship on Fifth Avenue in Manhattan, in December, according to Women’s Wear Daily.
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• Destination Maternity earnings up in Q3
  Destination Maternity said Wednesday it earned $8.5 million in its fiscal third quarter, exceeding projections.
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• Jones Apparel Group Q2 profit more than doubles
  Jones Apparel Group said Wednesday that its second-quarter profit almost doubled to $24.5 million from $12.6 million a year earlier.
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• CVS Q2 profit falls, wins 12-year contract with Aetna
  CVS Caremark’s net income fell 7% in the second quarter, slipping to $821 million from $886 million, because of contracts lost by its Caremark pharmacy services division.
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• Target CEO defends Minnesota political donations
  Target Corp. CEO Gregg Steinhafel said Tuesday he stands in defense of the retailer’s political donations to a Minnesota group helping the state’s Republican candidate for governor.
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• Rite Aid agrees to pay $1 million to settle privacy disclosure allegations
  Rite Aid Corp. on Tuesday agreed to pay $1 million to settle potential privacy disclosure violations.
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• Study: Many shoppers research online, shop offline
  Research released Tuesday by Searchandise Commerce revealed that two-thirds of consumers launch their shopping online, and half convert offline.
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• Report: Retailers paying more for cargo space on ships
  More retailers are being negatively impacted by supply-chain challenges, as they find it harder and more expensive to get product delivered from overseas this year, according to a report by the New York Times.
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• Brookstone loss widens in Q2
  Brookstone reported Tuesday that it recorded a loss of $12.5 million in the quarter ended July 3, compared to a loss of $10.5 million in the year earlier period.
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• Consumer confidence in retreat on job concerns
  Consumer confidence fell in July on concerns about jobs and business conditions, following a sharp decline in June, the Conference Board reported Tuesday.
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• Survey: Back-to-school spending looking up
  Survey results released Tuesday by Deloitte found that 28% of shoppers say they plan to spend more this year on back-to-school items compared with last year.
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• Supervalu profits plummet 40% in Q1
  Supervalu, operator of Albertsons, Jewel-Osco, Shaw’s, Save-A-Lot and Cub Foods, reported Tuesday that its first-quarter net income dropped 40%, earning $67 million in the quarter ended June 19, compared with $113 million in the year-ago period.
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• GameStop to acquire social gaming company
  GameStop Corp. said Tuesday it will acquire Kongregate, a social gaming destination and community for core gamers representing the fast-growing free-to-play gaming market.
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• Office Depot reports smaller-than-expected loss amid cost cuts
  Office Depot on Tuesday reported a smaller-than-expected quarterly loss on lower distribution costs and other expense controls.
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• Profit up 30% at Luxottica
  Luxury eyewear company Luxottica Group SpA on Monday reported that its net income rose 30% in the second quarter as sales improved.
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• California court upholds rights of retailers to restrict union picketing
  In a huge win for retailers with stores in the Golden State, the California Court of Appeal has upheld the authority of Ralphs Grocery Co. to regulate and control union picketing in storefront areas considered private property.
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• First Data: Gift card sales grow in first half of 2010
  First Data Corp. on Monday announced that U.S. merchant-branded gift card sales gained traction in the first half of 2010.
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• Target takes Manhattan
  Target officially opened its first-ever store in Manhattan, a 174,000-sq.-ft. outlet at East River Plaza in East Harlem.
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• Wal-Mart to use smart tags on men’s clothing
  In a move to gain even closer control of its inventory, Wal-Mart Stores will deploy electronic identification tags on men’s clothing starting Aug. 1, the Associated Press reported.
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• Amazon.com Q2 profit up 45%
  Amazon.com reported that net income increased 45% to $207 million in the second quarter, compared with net income of $142 million in the year-ago period.
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• Chicago mayor seeks approval for third Walmart
  Mayor Richard Daley asked aldermen to support a third Walmart store in Chicago, part of Wal-Mart Stores’ much-publicized plan to open stores across the city and further penetrate urban markets.
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• OfficeMax COO lands at A&P; grocer’s losses widen in Q1
  After OfficeMax announced that its COO Sam Martin had departed the company, Great Atlantic & Pacific Tea Co. said Friday that it has nabbed Martin as its new president and CEO.
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WEEKLY RETAIL RECAP

• Story of the Week: TJX Cos. to expand Marshalls into Canada with up to 100 units long-term
  TJX Cos. said Tuesday that it will expand its Marshalls store chain into Canada, with plans to open six locations there initially and up to 100 stores ultimately.
  Read More

• Vitamin Shoppe reports soaring profit in Q2
  Vitamin Shoppe reported Thursday that its net income for the quarter ended June 26 surged 74% to $7.3 million, from $4.2 million a year ago.
  Read More

• Tractor Supply sees Q2 profit, sales jump
  Tractor Supply Co. said Wednesday that net income for the second quarter was $76.5 million, compared with $54.8 million in the year-ago period.
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• Safeway profit drops in Q2
  Safeway reported Thursday that net income for the second quarter was $141.3 million, compared with $238.6 million a year earlier.
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• Wal-Mart could open 100s of stores if India rules ease
  Wal-Mart Stores could potentially open hundreds of stores in India if the country opens up the sector to foreign direct investment, the chief of its Indian joint venture told Reuters on Thursday.
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• Target opens first Manhattan store in East Harlem
  Target Corp.’s first store in Manhattan officially opens on Sunday, representing a key step in the retailer’s push to open in urban markets.
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• Duane Reade opens Union Square flagship store
  Drug store retailer Duane Reade announced the opening of its new flagship store located at the southern end of Union Square Park in Manhattan on a site once occupied by Virgin Superstore.
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• Alimentation Couche-Tard boosts offer for Casey’s takeover
  Canadian c-store chain Alimentation Couche-Tard said Thursday it has raised its offer to acquire Casey’s General Stores, hoping to persuade shareholders to back the takeover.
  Read More

• Menard wins Wisconsin Supreme Court appeal
  The Wisconsin State Supreme Court has sided with home-improvement retailer John Menard, who sought to overturn an arbitration decision in a wrongful termination case against his former general counsel.
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• RILA: Celebrating President Obama’s signing of swipe-fee reform legislation
  The Retail Industry Leaders Association (RILA) issued the following statement from RILA president Sandy Kennedy following the bill-signing ceremony on Wednesday at the White House.
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• Macy’s to open in Tracy, Calif.
  Macy’s said Wednesday it will open a new store in Tracy, Calif., at the General Growth-owned West Valley Mall this fall.
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• Save-A-Lot aligns with Hispanic operator to open Houston, South Texas stores
  Grocery operator Save-A-Lot said Wednesday it has joined with Hispanic grocery operator Rafael Ortega to form a new company, Adventure Supermarkets LLC.
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• RadioShack suitors reportedly drop out
  TPG Capital plans to drop out of bidding for RadioShack Corp., according to a Tuesday report in the Dallas Morning News.
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• Study: Consumers resetting, not recovering
  A study released Wednesday by market research firm NPD Group found that consumers are focused not as much on recovering from the economy as they are “resetting.”
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• Report: Consumers prefer e-mail over social media
  A report released Wednesday by cross-channel solutions provider CrossView found that e-mail is a more effective promotional channel than social channels.
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• NPD: More digital games purchased in stores than online
  According to the PC Games Digital Downloads: Analyst Report, from The NPD Group, in 2009, 21.3 million PC Game full-game digital downloads were purchased online in the United States compared with 23.5 million physical units purchased at retail during the same period.
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• Borders completes sale of Paperchase unit
  Borders Group said late Tuesday it has completed the sale of its Paperchase Products Ltd. stationery unit for $31 million.
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• Roundy’s to expand in Chicago
  Grocery retailer Roundy’s said it has plans to open between 12 and 18 stores in the Chicago area over the next five years under the Mariano’s Fresh Market banner, according to a report by Supermarket News.
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• Sprouts offers high-efficiency HVAC, refrigeration solutions
  A new Sprouts Farmers Market that opened late June in Culver City, Calif., is projected to use 50% less refrigerant than the industry average, thanks to high-performance heating, ventilation, air conditioning and refrigeration solutions that meet the company’s sustainability objectives.
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• Liz Claiborne to close outlet stores
  Liz Claiborne announced Wednesday that it will close its 87 outlet stores as part of a plan to end losses at the stores.
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• ShopperTrak: 1.4% traffic decline, 3.5% sales rise predicted for back-to-school
  A report released Tuesday by ShopperTrak said that it expects total U.S. foot traffic for back-to-school 2010 to dip 1.4% while retail sales are expected to increase 3.5% for the same period as compared with last year.
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• Target.com to offer first-ever Black Friday sale in July
  Target Corp. said it will offer its first-ever “Back in Black Friday” online sale on July 23 as an effort to jump-start holiday shopping.
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• Poll: Consumers still gloomy about economy
  A poll released Monday by management consulting firm Alix Partners found that consumers feel worse about their own economic conditions than they did a year ago.
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• Houston Kroger store expanded, remodeled
  Centro Properties Group said Monday that the Kroger store in its Merchants Park Shopping Center in Houston has completed a comprehensive expansion and remodeling project.
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• Target opens new store in Chicago’s Wilson Yard
  Target Corp. said Tuesday it has opened a new store in the Wilson Yard community of Chicago.
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• Kroger: Will expand FoodsCo in Oakland
  Kroger Co. said Monday it will open two new stores under its FoodsCo banner in two East Oakland, Calif., neighborhoods by 2012, according to a report by Supermarket News.
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• Luxottica to roll out new concept store
  Eyewear retailer Luxottica Group S.p.A. announced Tuesday that it has successfully opened its new concept store in Australia and is preparing to roll it out globally.
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• Wal-Mart de Mexico Q2 profit soars 24%
  Wal-Mart de Mexico SA reported late Monday that its second-quarter profits surged 24%.
  Read More

• Report: Electronics, apparel back-to-school spending expected to rise
  A new report from PriceGrabber found that, this year, 15% of elementary school students will start school with a new laptop, 13% will have computer accessories, and 10% will receive a new cell phone or smartphone.
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• Netflix to expand into Canada
  Netflix said Monday it will launch a Canadian service for streaming movies and TV episodes later this year.
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• Red Lobster location awarded LEED Silver certification
  Darden Restaurants, owner of Red Lobster and Olive Garden banners among others, said Monday that its Red Lobster restaurant in Centerview, San Antonio, is one of the company’s first to receive sustainability recognition.
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• Jennifer Convertibles files for Chapter 11 bankruptcy
  Home furnishings retailer Jennifer Convertibles said Monday that it has filed for reorganization bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York.
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• Lego opens in Manhattan
  Danish toymaker Lego has opened its first location in Manhattan.
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• Steamy, hot weather to drive seasonal-goods sales
  Retailers in the Eastern part of the United States can expect above-normal temperatures to continue to drive sales of seasonal goods, according to Planalytics, which provides business weather intelligence.
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• ShopperTrak: Retail foot traffic up 7.7% in June
  Total U.S. retail foot traffic was up 7.7% in June compared with last year, with the largest weekly gain the week before Father’s Day, according to the ShopperTrak Retail Traffic Index (SRTI).
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• Tommy Hilfiger to debut new brand and store format
  Tommy Hilfiger Group will debut a new line, Tommy, targeted at young men and women in their twenties, Women’s Wear Daily reported.
  Read More

• Deloitte Consumer Spending Index declines in June
  The Deloitte Consumer Spending Index declined in June for the second consecutive month, once again due to weakness in real wages and the housing market.
  Read More

Nonfinancial corporations grew holdings of liquid assets 25 percent over the past two years to $1.84 trillion, the highest level on record. This trend reflects efforts by companies to protect balance sheets and reduce their reliance on credit markets for future growth. Some corporations have begun to use built-up cash for stock buybacks, but until more sidelined capital is invested in the broader economy, the recovery will remain choppy, and risks of a double dip will persist. The consumer sector, which accounts for 70 percent of GDP and typically drives expansion during the early stages of recovery cycles, will remain strapped by high unemployment, minimal income growth and tight credit markets for several quarters to come.

Commercial Loans – Rates in The Low 5% Range

Rates are in the low 5% range for good quality commercial real estate with strong sponsorship.

• Lender can forward rate lock up to 12 months in advance. No spread premium for the first 4 months. Average 7 basis points per month thereafter. This is a great option for loans maturing in the next 12-18 months with yield maintenance or defeasance.
• Apartments – Loan-to-Value 70% – 75%, 30-year amortization, 10-year term, 5.25% rate
• Prefer grocery anchored retail with strong sales. Loan-to-Value 70% – 75%, 30-year amortization, 10-year term, 5.25% rate. Other retail types also acceptable upon review.
• Prefer Medical Office Buildings with a stable history. Loan-to-Value 70% – 75%, 30-year amortization, 10-year term, 5.25% rate.
• Prefer Industrial Properties with strong tenants and a stable history. Loan-to-Value 70% – 75%%, 30-year amortization, 10-year term, 5.25% rate.
• Prefer Owner-Occupied Properties with strong financials

Lower rates apply for lower leverage. This lender just rate locked their loan on an industrial property. 48% LTV with a 10 year term and 10 year amortization. The rate was below 4%!

If you have properties that fit the above criteria please contact me so that I can get Tim our in-house mortgage guru do a no obligation quote for you.

I am very happy to share this information with you.

Capital Markets Beginning to Loosen; CMBS, Life Insurance Companies Step Up Lending

§ Constraints on commercial real estate lending eased during the first half of 2010, a trend that should continue as more lenders re-enter the securitization market and life insurance companies pursue a broader range of deals. Unlike a year ago, financing has become available for properties over $10 million, and some lenders have re-engaged higher-quality, lower-risk transactions in noncore markets. In addition to greater availability of financing across property types, price ranges and markets, lenders also have increased loan-to-values (LTVs) on new loans by an average of 5 percent from last year. Despite these positive developments, potential borrowers continue to face tight underwriting standards and stringent lender requirements compared to historical standards.

§ While commercial mortgage originations during the first quarter remained depressed relative to figures reported from 2005 to 2007, conduits and life insurance companies drove up activity 12 percent from last year. During the first half of 2010, U.S. CMBS issuance reached $2.4 billion, approaching the 2009 total of $3 billion but still just a fraction of the $197 billion annual average reported from 2005 to 2007. Even when viewed against a less frothy period, such as 2000 to 2003, activity in the first half still pales by comparison. Recent CMBS issuance included multiple-borrower deals with subordinate tranches, a far cry from the ultra-safe, single-borrower transactions completed late last year, generating optimism the sector will soon offer increased liquidity.

§ New CMBS loans price in the 6.0 percent to 6.5 percent range for five-year mortgages, with lenders targeting deals of $10 million or more. While these interest rates may be at the higher end of the spectrum, CMBS borrowers can often negotiate 30-year repayment schedules versus an average of 25 years for life insurance companies, offsetting the impact of interest rates on monthly payments. In addition, LTVs for CMBS loans can push into the low- to mid-70 percent range, versus 65 percent to 70 percent for life insurance companies, assuming the debt-service coverage ratio (DSCR) still falls between 1.25x and 1.35x.

§ Next to the CMBS sector, life insurance companies made some of the most impressive headway over the past 12 months. This sector increased commercial mortgage originations by 131 percent during the year ending in the first quarter and recently began to compete more intensely for high-quality deals. While maintaining strict underwriting standards, life insurance companies have begun to actively pursue new business in major markets, increasing their scope to include nearly all price ranges and property types. This demonstrates a strategic shift from last year, when most life insurance companies focused on rewriting maturing loans already in their portfolios. As 2010 progresses, life insurance companies will increase lending as their commercial/multifamily portfolios outperform the broader marketplace; as of first quarter, this segment boasted a delinquency rate of just 0.31 percent.

§ Despite the recent delisting of Fannie Mae and Freddie Mac from the NYSE and expectations for government-mandated changes in the quarters ahead, their multifamily lending arms should remain operational, benefiting apartment investors. New loan originations by the GSEs slipped in early 2010 and may continue at depressed levels this year, however, due to a paucity of deals within their target criteria.

§ While commercial lending will increase this year, risks to this outlook remain. High and rising delinquency rates, particularly among commercial banks and within the CMBS sector, will drag on confidence. Maturities also pose significant challenges, as declining property values have turned many owners upside down on their mortgages, making it impossible to refinance without additional equity contributions. Approximately $535 billion of commercial mortgage debt will come due between 2010 and 2011, including $110 billion of CMBS. Of the CMBS loans slated for maturity during this period, more than 14.5 percent have DSCRs of 1.0x or less.

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made. Sources: Marcus & Millichap Research Services, Marcus & Millichap Capital Corporation, Commercial Mortgage Alert, Moody’s Economy.com, Mortgage Bankers Association, Trepp. Additional contributions to this report were made by William E. Hughes, Managing Director, Marcus & Millichap Capital Corporation.

Private Sector job Growth Following recessionary periods

Continued Economic Uncertainty Restrains Private-Sector Hiring;
Risk of Stalled Growth Rising in Second Half

• Heightened uncertainty among businesses over the sustainability of the recovery hampered employment momentum in June, as census cuts outpaced weak hiring in the private sector. While a double-dip recession remains unlikely, persistent weakness in the labor market continues to drive down consumer confidence and weigh on personal balance sheets, restricting spending and dampening the recovery. In the second half, private businesses will continue to add workers at a modest pace, bringing the 2010 total to 1.3 million. These limited payroll gains, as well as lingering doubts about credit availability and concerns the recovery may not become self-sustaining, will drag on the economy in the coming quarters.
• Employers shed a net of 125,000 jobs in June, the first monthly decline in 2010, intensifying concerns over the strength of the recovery. Despite these losses, a few bright spots persisted, as several sectors expanded during the month, led by the addition of 37,000 leisure and hospitality positions. Growth in most segments was minimal, however, highlighting the cautious stance prevailing at most companies. Also, employers continue to rely heavily on temporary workers, who account for nearly one-third of all private jobs added this year. Contraction in June was most pronounced in the government sector, as 225,000 temporary census positions expired.
• Private-sector employment growth in June outpaced the previous month but lagged the gains recorded earlier this year, as firms remain hesitant to commit resources until the recovery demonstrates clear signs of sustainability. Private employers added 83,000 workers in June, the sixth consecutive month of gains. Year to date, employers have added 593,000 non-government positions for a 0.6 percent increase, the slowest private-payroll growth following a recession since 1992 and the second slowest pace of recovery since World War II. Without more substantial hiring by the private sector, unemployment will remain elevated, and the economic recovery will be slow to gain momentum.
• The unemployment rate dipped 20 basis points to 9.5 percent in June; however, the decline was attributable to individuals leaving the labor force, rather than improving employment conditions. While elevated unemployment will restrain household formation in the near term, apartment vacancy will inch down 50 basis points in 2010 to 7.5 percent as the expiration of the homebuyer tax credit and continued weakness in the housing market sustain the renter pool.
• Weakness in the financial activities sector has weighed on tenant demand for office space. Employers continue to eliminate financial positions, shedding 73,000 workers thus far in 2010. Despite minimal completions, office vacancy will increase 100 basis points this year to 18 percent on negative net absorption of nearly 25 million square feet. Metro areas with high concentrations of financial firms, such as New York City, Dallas/Fort Worth and San Francisco, will likely see a rise in competition from sublease space.

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.
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Fannie Mae, Freddie Mac Continue to Lead Multifamily Lending;

Fannie Mae and Freddie Mac have provided much-needed liquidity to the apartment investment market through the credit crunch and recession, helping to offset the void left by the stagnant CMBS sector. Since the federal government took control of Fannie Mae and Freddie Mac in the third quarter of 2008, the amount of multifamily mortgage debt outstanding in the GSEs’ portfolios and federally related mortgage pools has increased by more than 10 percent, or approximately $33.5 billion. During the same period, other major sectors, including commercial banks, CMBS and life insurance companies, registered decreases in multifamily debt outstanding, curbing their exposure to real estate debt.

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Posted via email from PhotoBlog RAM Investments Group of Marcus & Millichap