REIT Rebound?, Retail Landlord Reality Check; Men's Wearhouse Renegs, I/O Mortgages (Thursday's News & Notes)

Here are some news and notes on retail and retail real estate from around the Web today.

Here's a video that aired yesterday afternoon on CNBC--a mini debate on the outlook for REITs. Is it a shock that Brad Case--NAREIT's vp of research and industry--talks about how great a deal REITs are right now? What else is he going to say? REITs have stabilized and rebounded nicely from March lows, but I don't think they are out of the woods just yet. There also has to be some differentiation, right? REITs aren't necessarily going to all rise and fall in unison. Some REITs are better bets than others. Don't management, strategy and the health of balance sheets matter? Case also implies that the REITs were more conservative than private firms. It's don't think it shakes out that way. There are plenty of private real estate companies with little or no debt on their books and with plenty of cash stored way in funds they have ready to deploy. And there are plenty of REITs that got way too levered. Daniel Alpert of Westwood Capital does a good job raising these issues and others in debating Case.

One REIT that did get a nice endorsement is PREIT. Seeking Alpha called it a bargain in the retail sphere. It's the latest in a series of articles the blog has posted recently examining individual REITs.

Other news:

  • Marin Retail Buzz called RREEF's outlook on retail real estate "too dismal." Marin writes, "Overall, I disagree with RREEF's pessimistic view. The data shows that retail growth didn't accellerate [sic] during the housing boom, and there's no evidence that structural changes will have a negative impact on retail spending. I don't see any significant reasons why the retail sector won't bounce back strongly when the economy recovers."
  • Men's Wearhouse quickly dropped its bid for Filene's Basement. The auction for the bankrupt chain will be reopened tomorrow. Syms and Crown Acquisitions lost out on the initial bidding and could step back into the fray.
  • Retail sales rose in May, according to the Commerce Department. I posted a brief blog entry on the results here.
  • Wal-Mart is planning to build or remodel hundreds of "zero carbon" stores in China. Carrefour and Tesco are also looking to build green locations in the country.
  • Reuters posted a piece saying that retail landlords need a reality check. The story makes the argument from the tenants' perspective--quoting Nina Kampler, executive vice president at Hilco Real Estate--that more concessions are in order if retail real estate owners want to avoid more store closings. In another Reuters piece, it looks at how up-and-coming rating agencies like Realpoint are seeking to step in as alternates to S&P. Realpoint tracks CMBS.
  • CoStar posted a piece looking at the disconnect between buyers and sellers when it comes to distressed debt. The piece says that buyers who have been frustrated with sellers' unwillingness to drop prices on property are finding a similar situation in purchasing mortgages.
  • The Big Picture examines how interest only mortgages signed during the boom are beginning to hurt commercial real estate. Barry Ritholz writes, "But these 2 and 3 year commercial I/O lending packages at the tail end of a giant RE book are inherently problematic. Almost by definition, when a borrower users I/O financing, it suggests they cannot afford to make the actual purchase, and were unable to arrange other forms of financing." The post was a response to a Bloomberg story that looked at mounting losses from I/O loans. The story looks at how investors in bonds that packaged $62 billion of debt for U.S. offices, hotels and shopping malls are bracing for more loan defaults through 2010 as landlords' monthly payments jump by 20 percent or more.
  • Retailer Daily looks at how quick service restaurants like Chick-Fil-A are having success expanding during the current recession.
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