Archive for August 6th, 2008

MIT’s Latest Data is Out

by David Bodamer August 6th, 2008

MIT has released its most recent data on commercial real estate transactions. Below is its transaction-based index.

Results for the 2nd quarter of 2008 show a 2.7% decline in the capital return for the properties sold in the NCREIF database. The demand-side index continued to fall, by 2.7 percent and the supply side of the market also decreased its reservation prices by 2.8 percent in the second quarter.

Please note that the TBI is a statistical methodology that produces estimates of price movements and total returns based on transactions of properties sold from the NCREIF Index database.

TBI

And here is its look at retail prices.

Retail

No Comments Related Topics: Investment, News, Research, Retail Real Estate |

Analysis of GGP’s Debt

by David Bodamer August 6th, 2008

The Wall Street Journal today has an interesting take on General Growth’s debt situation. The company has a high level of debt on its books. It has consistently been able to refinance all its expiring debt. But as the article illustrates, the terms are more harsh than the company had become accustomed to.

One example of the lenders’ upper hand can be seen in a $1.75 billion loan package Mr. Freibaum is piecing together. To get the deal done, General Growth had to grant lenders — led by Germany’s Eurohypo AG — 25% recourse, a humbling requirement that lenders rarely sought from big companies such as General Growth during the real-estate boom.
[Bernie Freibaum]

Recourse provisions give lenders more ammunition to go after borrowers if they default. In this case, if there is a default and the value of the property pledged as collateral falls short of the loan amount, the lenders can force General Growth to repay as much as 25% of the loan amount through other means, such as selling other properties. The loan also carries lofty upfront fees of 0.5% to 1.5% of the amount lent.

The company confirmed the terms of the transaction but wouldn’t elaborate. Mr. Freibaum declined to comment for this article.

“They’re no longer in the driver’s seat as far as determining the terms of their new debt,” said Christy McElroy, an analyst at Banc of America Securities, adding that General Growth nonetheless has several funding options. “The lenders now have the leverage.”

Link.

No Comments Related Topics: Commentary, Finance, News, REITs, Retail Real Estate |

Cabela’s To Make the Most of Less Space

by David Bodamer August 6th, 2008

A sign of the times? Cabela’s is trying to fit all of its merchandise into smaller spaces. There’s been lots of talk about retailers making more efficient of use of selling space. This is a good example of what many firms are thinking about or doing.

Cabela’s announced earlier that new stores would be smaller but more efficient in order to generate more sales dollars per square foot.

The spokesman, John Castillo, said Monday that a customer walking through the door would not notice any significant differences.

The changes involve things such as placing the mountain display, a fixture of Cabela’s stores, against a wall rather than having it in the middle of the space, and setting a deer display above the firearms counter rather than on the floor.

“While it is a smaller, 80,000-square-foot store, it still has all the features,” Castillo said.

No Comments Related Topics: Architecture & Design, News, Retail |

Planet Hollywood Buys Buca di Beppo

by David Bodamer August 6th, 2008

Reeling from a tough economy and financial mismanagement by former executives, Minneapolis restaurant chain Buca Inc. is being acquired by Planet Hollywood in a deal valued at $28.5 million, including debt.

The acquisition comes a month after the firm’s Buca di Beppo chain of Italian restaurants celebrated 15 years in business. It went public in 1999.

Link.

No Comments Related Topics: News, Retail |