Archive for November 24th, 2008
by David Bodamer November 24th, 2008
REIT Wrecks brings us a nice rundown of the carnage in commercial mortgages that’s unfolded after Henry Paulson’s sudden about face on how he was going to use the TARP money. The article talks about how what’s going on with the CMBX indices seems like an overreaction.
The default rate on commercial mortgages remains near its historical low, although it is increasing. Overall, the number of commercial mortgages packaged into securities that are 30 days or more past due rose to 0.64% in October from 0.39% at the end of last year. That is the highest delinquency rate in two years but still far from the kind of carnage that occurred during the commercial real-estate collapse of the early 1990s. Back then the cumulative default rate on loans made in 1986 reached 36%.
The trading levels of CMBS bonds imply a cumulative loss rate of as much as 40% on top-rated bonds, which means that at least 70% of the underlying loan pool would have to go into default, [emphasis added] said Richard Parkus, head of CMBS research at Deutsche Bank Securities Inc. But he, like other market observers, views that as an unlikely scenario. …
The spreads between the CMBX, a credit market index that tracks the values of commercial real-estate bonds, widened to another record level Thursday. And CMBS bonds with triple-A ratings now yield more than 14 percentage points above yields on 10-year U.S. Treasury notes, according to Trepp, a New York company that tracks the commercial real-estate-finance market. That compares with a 1.5 percentage point spread one year ago and an 8.3 percentage point spread just one week ago.
Related Topics: Finance, News, Trends |
by David Bodamer November 24th, 2008
Target Corp. said it decided not to pursue various real-estate structure ideas proposed by activist investor Pershing Square Capital Management, calling the potential value of the deal “highly speculative.”
Last month, the hedge fund led by William Ackman set forth a plan for Target to spin off the land it owns into a separate, publicly traded real-estate investment trust in order to unlock its value. Earlier this week he revised the plan to satisfy Target’s various misgivings. Unlike retailers that lease most or all of their outlets, Target owns 85% of the real estate for its stores, giving it control over store designs and remodeling.
On Friday, the box-box retailer also expressed concern about the costs, strategic and operating risks and loss of financial flexibility in executing such a deal amid the current economic environment. In addition, Target again noted the proposed structure could have had an adverse impact on its debt ratings.
“Target does not share Pershing Square’s perspective that execution of this proposed transaction will generate measurable shareholder value over time and believes the risks, particularly in light of the serious challenges facing our retail and credit-card segments in 2008 and 2009, are significant,” Chief Executive Gregg Steinhafel said.
Link.
Related Topics: Investment, News, REITs, Retail, Retail Real Estate |
by David Bodamer November 24th, 2008
Restaurant chains with a bulk of their locations in malls and retail centers are bracing for a holiday shopping season that is expected to bring fewer potential customers past their doors.
Many restaurant chains have some units in malls, whether in the food court, elsewhere in the mall or as freestanding locations in the parking lot. However, some have a greater percentage of their stores in malls than others, and thus are more susceptible to traffic declines, especially during the all-important holiday shopping season.
Among those are California Pizza Kitchen Inc., which has about 89% of its 251 restaurants in or near retail centers and malls, and Cheesecake Factory Inc., with two-thirds of its stores in or near shopping centers. Most Red Robin Gourmet Burgers Inc. restaurants are also tied to retail centers, while Kona Grill Inc.’s 20 restaurants are also primarily within shopping centers. P.F. Chang’s China Bistro Inc. and Ruby Tuesday Inc. are also exposed to downturns in retail traffic, analysts say.
“These aren’t necessarily brands you make a reservation to,” Oppenheimer & Co. restaurant analyst Matthew DiFrisco said. “They live off the flow of traffic going to lifestyle centers and malls, and are trying to intercept you while you’re out shopping.”
Link.
Related Topics: News, Retail |
