the Editors of Commercial Property Executive
For Hotel Developers, 2009 Proving to Be No ‘Shangri La’
A lending environment that is particularly hostile, and a deep recession that is severely depressing hotel operating fundamentals, are putting many high-profile lodging development projects on ice. The latest victim is the Shangri La Chicago, a 222-room hotel that was to open in the Waterview Tower at West Whacker Drive and Clark Street, along the Chicago River, construction on which is currently at a standstill.“Under the current economic environment, regrettably, the implementation of the hotel project has been suspended with no indication of when activities will resume,” the Hong-Kong-based luxury hotel company said in a statement.This marks the second time…
Colonial Properties Bucks Trend, Snagging $350M Credit Facility from Beleaguered Fannie Mae
Sizeable loans are eluding most real estate concerns these days, but Colonial Properties Trust has proven to be one of the exceptions. The Birmingham, Ala.-based REIT just closed a $350 million credit facility originated by PNC ARCS L.L.C. for repurchase by troubled mortgage lender Fannie Mae, which, despite a 2008 loss of $58.7 billion, is apparently not shying away from big deals. Colonial’s new credit facility, secured by 19 multi-family assets encompassing an aggregate 6,565 residential units, comes with a 10-year term and a 6.04 percent weighted average fixed interest rate. The REIT will use the proceeds to pay down…
Economic Update — AIG Black Hole Eats Billions More
“Too big to fail” has new meaning these days in the context of the never-ending black hole known as American International Group. The “too big” in this case is the insurance giant’s giant losses, which totaled $61.7 billion in 4Q08, a record. Just to give a little context, that much money is roughly equal to or greater than the gross state products of 12 states of the union–Hawaii, for instance, had a gross state product of $61.5 billion in 2007, according to the U.S. Bureau of Economic Analysis.“Public ownership of financial institutions is not a policy goal and, to the…
Survival of the Fittest
Social Darwinism aside, reports of nose-diving profits for nearly every store in the nation continue to pour in. The Home Depot, Office Depot, Target, Lowe’s, Macy’s, Sears, RadioShack and Domino’s Pizza are just a few of the retailers posting losses for the quarter. How many quarters such reports will continue depends on how long these stores and others competing for the limited consumer dollars can hold on. They will do all they can to survive, from reducing new store openings or closing stores altogether to freezing salaries and cutting staff, to reducing contributions to employees’ retirement funds. Nothing is off…
Kohl’s, Forever 21 Eye Growth
Apparel retailers and department stores are two of the retail categories hit hardest by the pullback in consumer spending. Perhaps less obvious is that some retailers also view the economic downturn as a time for growth, even as familiar brands like Circuit City, Mervyns and Linens ’n Things shut their doors for good.The closing of Mervyns, a department store mainstay in the West, is opening doors for the bold expansion plans of other retailers. Kohl’s Corp. and Forever 21 Inc. are each preparing to open 11 new stores this year in former Mervyns sites. The department store and the apparel…
Private Equity, Government Expect Increased Lending
Of nationwide lenders to the commercial real estate sector, 53 percent expect loan production to increase from 2008 to 2009, according to Jones Lang LaSalle Inc.’s annual Loan Production Outlook survey, conducted at the Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo last month. Private equity lenders and government agencies expected increased lending, noting an average expected rise of as much as 20 percent. Banks and life companies, however, expected volume to decrease anywhere from 30 to 80 percent.This year, 80 percent of respondents predicted that as much as 40 percent of each their companies’ loan allocations…
Stable Banks Boost Canadian Hotel Development
Canada’s highly regulated banking system has fared better than the United States’, as they largely avoided subprime mortgages. Thus lending for hotels in Canada is less constricted than in its neighbor to the south. However, Canada’s economy has slowed, affecting new hotel development to a degree, according to a Lodging Econometrics report. “There is a softening economy, but they don’t have the down-and-out-lending industry that the U.S. has,” said the firm’s president, Patrick Ford. Thus, the Canadian hotel development pipeline is evenly divided between hotels under construction, construction starts scheduled for the next 12 months and hotels in the early…
New Achilles Heel
Office markets across the country have weakened considerably as the economy has slowed and layoffs mount, but what is becoming increasingly clear is that markets that have a higher percentage of financial services jobs are getting hit harder than those that don’t. Manhattan is the poster child for cities that have a high concentration of banking-related jobs, and recent data shows that New York City is also one of the weakest office markets in the country.Back in the 2001-02 period, markets that were home to high-tech nodes were the most affected. San Jose, San Francisco, Boston, Austin and Seattle were…
Duke Energy Commits to Charlotte
Charlotte, N.C., office landlords house a large roster of banking and financial services clients and have likely spent some restless nights lately wondering how hard the city will be hit by the U.S. financial meltdown and how Wells Fargo’s purchase of Wachovia Corp. and Bank of America Corp.’s buy of Merrill Lynch & Co. will affect office tenancy.Bank of America employs 15,000 in Charlotte and has announced plans to slash its payroll by 35,000 jobs across the corporation. Wachovia has 20,000 employees in the area. But the city did receive some good news in late February, as Duke Energy Corp….
Will the Stimulus Package Increase Demand?
The signing of President Barack Obama’s plan to pull the United States out of the current economic crisis puts into action the most expensive fiscal firepower since President Franklin Roosevelt’s New Deal. While most economists would agree the stimulus package is a provocative step, it is necessary to soften the negative impact of the downturn and accelerate recovery. It is certainly preferred to the inaction that preceded it.In tracking the success of Obama’s historic stimulus package, which represents 5.5 percent of the nation’s 2008 nominal gross domestic product, we expect it to have a sizable impact on the economy, begin…