Archive for July 2010

Weekly Retail News Recap July 30, 2010

July 30, 2010

WEEKLY RETAIL RECAP

  • 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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  • 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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  • 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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  • 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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  • 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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  • 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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  • 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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Weekly Retail Recap July 23rd, 2010

July 23, 2010

WEEKLY RETAIL RECAP

  • 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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  • 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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  • 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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Companies Stockpiling Cash, Protecting Balance Sheets, But Hampering Economic Recovery

July 18, 2010

 

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.

  • Productivity soared in recent quarters, but businesses have stretched existing resources to their limit and will soon need to hire. During the year ending in the first quarter of 2010, output per hour climbed 6 percent, the most significant increase in eight years. Compensation declined modestly during the same 12-month period, contributing to stronger corporate profit margins. Pre-tax corporate profits in the first quarter climbed to 13.7 percent of gross domestic product (GDP), up from 9.6 percent of GDP one year earlier.
  • While several indicators point toward the resumption of moderate employment growth this year, lingering corporate caution poses a significant risk to the onset of a sustainable recovery. After cutting costs and slashing payrolls to survive the recession, many companies remain hesitant to shift out of conservation mode. Based on the results of a recent survey, most corporate finance executives plan to maintain or increase cash holdings over the next six months. If this occurs, the business sector could inadvertently set into motion another self-perpetuating downturn.
  • Impact on Commercial Real Estate

  • With the recovery expected to progress at a moderate pace through the second half of 2010, office vacancy should begin to stabilize by year end at approximately 18 percent. Even if companies ramp up hiring in the near term, however, it may be several quarters before vacancy rates recede. Many markets amassed significant amounts of shadow vacancy through the recession that will need to be filled before companies increase space needs.
  • The industrial property sector stands to benefit from strengthening international trade and modestly higher retail sales. Following the drastic correction cycle of 2008 to 2009, companies need to increase inventories to meet even modest demand levels, a trend that began to unfold in the first quarter. Furthermore, the corporate sector faces significant pent-up demand for equipment after several years of conservation. As capital spending gains traction this year and commercial development remains minimal, industrial vacancy will level off. During 2010, vacancy is forecast to rise just 40 basis points to 13 percent, following a 200 basis point increase last year.

Refinancing available for loans maturing in the next 12-18 months with yield maintenance or defeasance.

July 14, 2010

Atlanta Ga- Tim Kinney the senior director of Mark One Capital just shared this information with me and I could not wait to share it with our clients.

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

July 11, 2010

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.

§ 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.

Continued Economic Uncertainty Restrains Private-Sector Hiring;

July 3, 2010

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.