This aired Monday afternoon.

The U.S. retail sector might have a ways to go before it could be considered anything close to healthy, but it seems recovery is beginning to take hold, with some chains finally looking at expansion. The commercial real estate sector, however, is still in very troubled waters, according to reports from the past few days.

• Based on declining fundamentals, Moody’s suspects the commercial real estate market has not yet reached bottom, according to Research Recap.


• The slow road to recovery is frustrating both landlords and lenders. Chicago Real Estate Daily reports that a tiff over some “tenant-friendly” lease modifications has stirred up trouble between the developer of Chicago’s Block 37 project and the project’s lender, Bank of America.


• On the positive side, it seems the lending market is finally beginning to show signs of life. The Wall Street Journal reports Colony Capital CEO is looking to lend money to commercial real estate owners.


• Meanwhile, REITs might benefit from the shortage of available financing by buying assets on the cheap, according to Seeking Alpha.


• In other REIT news, Retailer Daily reports that bankruptcy court approved General Growth Properties’ two-year incentive plan. The plan will result in bonuses for General Growth employees if the REIT emerges from bankruptcy protection by next October.


• Over in the tenant’s universe, Toys “R” Us will open FAO Schwarz boutiques at 585 of its stores before the start of the holiday season, according to the Los Angeles Times. Toys “R” Us bought its upscale rival earlier this year.


• Calculated Risk reports that there are signs retail tenants are starting to recover from the recession, prompting landlords to deny rent concession requests. Of course, the report is referring to retail tenants in Great Britain.


• But U.S. retailers seem poised to follow suit, according to Forbes.


• However, retailers’ desire to increase sales in a difficult market is changing the previously easy-going feel of the mall, according to The Washington Post.

It’s been a popular year for joint ventures. Macerich has been the most aggressive about forming joint ventures to shore up its balance sheet. The moves put it in a better position for a common offering, which it recently announced.

In the past couple of days, two other retail REITs have released details of joint ventures. In one deal, shopping center REIT Weingarten Realty Investors is teaming up with German real estate fund manager Jamestown. In the other, Canadian REIT RioCan REIT inked a $181 million pact with Cedar Shopping Centers.

CoStar reported on the Weingarten deal. Let’s look at the details. more

The most significant news for the sector was Capmark’s bankruptcy filing. It was talked about over the weekend and became official this morning. Here is the Wall Street Journal’s report.

Here are some other news and notes from around the web.

• CoStar took a look at how the FDIC is preparing to bailout small banks as a result of the deteriorating commercial real estate loan portfolios on their balance sheets. Overall, 106 banks have failed in 2009 and commercial real estate is increasingly a culprit. This is something we touched on in our newsletter last week.


• Microsoft’s much ballyhooed new store opened last week. Here are a few different reports on the opening.


• NetLeaseNation had some thoughts on the whole is the “commercial real estate shoe” dropping meme. The message that is out there is a bit scattered. For example, this report from CNN is very much in the “commercial real estate is going to collapse” vein. There’s no disagreement that commercial real estate faces major problems. The questions–can the system take the shock? Banks will fail, but can the FDIC handle it? Or are we looking at another September 2008-style collapse? And can the investment banks handle any losses in their securitized mortgage pools? I’m thinking the crisis will fall short of what we saw in 2008 and I think we’re deep into it already. It’s not a looming threat, but something that we’re dealing with everyday already. And by and large the industry is getting through this. Not every company will emerge unscathed, but we’re not looking at a wholesale collapse


• Lastly, on the lighter side, the Wall Street Journal has a feature looking at how there’s an annual pilgrimage to the Monroeville Mall in Pittsburgh where people dress as zombies. The mall is where George Romero’s horror class Dawn of the Dead was filmed more than 30 years ago.

As the commercial real estate industry continues to worry about all those debt maturities coming up in 2010 and 2011, the Federal Deposit Insurance Corp. (FDIC) is one step closer to issuing guidelines for banks dealing with troubled loans. It seems we are finally seeing some progress in other areas, as well–there’s been an increase in architectural billings last month, Jones Lang LaSalle believes the worst of the downturn might be over and a high profile retail project in New York City just got the okay from one of the city’s planning agencies.

• Bloomberg reports that investors are showing an increased appetite for commercial mortgage-backed securities, even as commercial real estate loan defaults rise.


• Worried that the defaults might be getting out of control, the FDIC is finalizing guidelines meant to encourage banks to workout troubled commercial loans, according to the CoStar Group.


• In the meantime, CoStar provides industry professionals with a breakdown of the best and worst areas of the country based on retail real estate fundamentals.


• According to new research from Jones Lang LaSalle, however, the worst of the downturn is over for the global commercial real estate market, reports Reuters.


• Calculated Risk also has some encouraging news. The American Institute of Architects (AIA) registered an increase in its Architectural Billings Index in September. The Index is now at 43.1, which is still below the January 2008 level.


• Among projects getting the go-ahead is the Kingsbridge Armory in the Bronx. The New York Times reports that New York’s City Planning Commission just approved a redevelopment plan that will turn the armory into a $310 million mall.


• Finally, Microsoft opened its first store today, in Scottsdale, Ariz., according to Channel Web.

RREEF recently made the decision to stop managing its portfolio of properties directly. A few weeks back it announced the firms taking over management of its industrial and office portfolios. Today the retail piece was announced. Jones Lang LaSalle was the big winner, scoring management duties on 29 centers, but four other firms were also tapped. (You can see how these firms rank in our annual Top Managers listing here.)

Here’s the full list of the assignments:

Jones Lang LaSalle has been assigned 29 retail centers totalling approximately 5.7 million square feet. The properties are primarily concentrated on the West and East coasts in addition to Ohio and Western Pennsylvania.

United Commercial Realty (UCR) has been assigned eight centers totalling approximately 1.7 million square feet concentrated in Texas.

Mid-America Asset Management Inc. has been assigned 12 centers totalling approximately 1.6 million square feet concentrated in the Midwest.

Crosland has been assigned four centers totalling approximately 1.5 million square feet concentrated in the Carolinas and Tennessee.

KeyPoint Partners has been assigned five centers totalling approximately 533,000 square feet concentrated in New England.

The terms “commercial real estate” and “next shoe” generate more than 29,000 hits on a Google search.

For the past few months, there’s been a drumbeat that it’s just a matter of time before commercial real estate collapses and wreaks havoc on the economy. The thought is that the mountain of commercial real estate debt coming due in the next few years will trigger a second wave of the credit crunch as an avalanche of losses rumbles through bank balance sheets. This, in turn, will derail the momentum the economy has had in recent months as it begins to recover from the deepest and longest recession since the Great Depression.

The main evidence for this view includes data points such as the fact that commercial real estate values are off by 40 percent from market peaks and that there is approximately $3.4 trillion in commercial mortgage debt outstanding. Of that, about $1.4 trillion will come due by the end of 2012.

In our newsletter today, more

Real Property Alpha has up a fascinating interview with Sperry Van Ness President & CEO Kevin Maggiacomo about commercial real estate and social networking. Maggiacomo has a blog and a Twitter feed. More interestingly, according to this post, he has “a mandate to have 100% adoption of social media within the Sperry Van Ness brand.”

Sperry Van Ness has close to 1,000 advisers in its network. Maggiacomo also says there were 125,000 commercial real estate brokers circa 2006. I had no idea there were that many brokers out there. That’s a lot of people to try and connect.

Personally, I’ve been spending a lot of time the last few months more

Most of the major predictions are now in for the holiday shopping season. Here we’ve put together a roundup of what various trade associations and research outlets are predicting. Projections range a bit this year. Some groups are calling for a slight decline, other say sales will be flat and some say sales will show a slight uptick.

In part, the differences stem from the different way the groups look at the numbers. ICSC and Retail Forward, for example, look at same-store sales while the National Retail Federation looks at total sales. For its part, Deloitte is working off Commerce Department data. NPD bases its projection on surveys it completes. And ShopperTrak’s metrics are based off its proprietary foot traffic counts. Collectively, the data gives a fairly well-rounded picture of what the experts are expecting to see for the critical season.

The bottom line is that all the groups expect the season to be stronger than 2008’s disastrous holiday shopping season, but the recovery will be modest. more

Here are some of the big news and notes from blogs and news outlets from the past couple of days. There remains a lot of contradicting information on commercial real estate. Should we be worried? Should we not? There are posts here arguing both outlooks.

• A Bloomberg story from this morning features an admission from the FDIC that it failed to enforce its own guidelines to rein in excessive commercial real estate lending by at least 20 banks that later collapsed.
  
  

  The FDIC’s Office of Inspector General analyzed 23 lenders taken over by regulators from August 2008 to March and found that for 20, the agency’s examiners didn’t identify the issue early enough or should have taken stronger supervisory action after recognizing the banks had dangerously high levels of the loans before they failed. The findings are in separate reports posted this year on the inspector general’s Web site.

  
  

  “It’s often we’ll see in our reports that the FDIC detected problems in the bank in a timely fashion, but in some cases forceful corrective action wasn’t required by the FDIC to be taken quickly enough,” Jon Rymer, the FDIC’s inspector general, said in a telephone interview.

  
  

  The failure to follow up on the 2006 recommendation, that banks avoid letting commercial real-estate holdings exceed 300 percent of capital, has emerged as FDIC Chairman Sheila Bair steps up her effort to expand the agency’s role in regulating the financial-services industry.

  
  

  That’s not so promising.



• CRE Beat writes about a recent Capital Economics release that argues that commercial real estate loans won’t crater the financial system. The main data point the blog highlights is the fact that only 18 percent of large institutions’ loans are on commercial real estate. Another post from the blog examines Moody’s CPPI index and the declines in prices for commercial real estate.


• There have been some initial reviews skeptical of Microsoft’s retail strategy. A WSJ blog post looks at these criticisms, but also points out that many people thought Apple would fail as a retailer as well. And look how well that’s turned out?


• Wall Street is planning on potentially record bonuses this year, so why shouldn’t GGP pay out bonuses as well? A Daily Herald report looks at the REIT’s plans. It is seeking a bankruptcy judge’s permission to spend as much as $47.5 million a year for two years on bonus payments, $11.6 million of which would go to the top 12 executives.


• Taubman was ranked as one of the best places to work in a new Detroit Free Press report.