Real Estate

Seattle rock act Sunny Day Real Estate is planning to record its first album in 15 years with its original lineup. The news was Tweeted last night by Seattle radio DJ Marco Collins of KEXP and has been confirmed to Billboard.com as accurate, although no timeline for recording or release has been determined.
 
Group members Jeremy Enigk, Dan Hoerner, William Goldsmith and Nate Mendel have been fleshing out new material since last fall, coinciding with their first live shows as a unit since 1994. One untitled new song was played during that tour but it is unknown whether it will make the cut for the album.
 
Before disbanding, the original SDRE lineup made two hugely influential albums for Sub Pop, 1994’s “Diary” and an untitled 1995 album referred to as “LP2″ or “The Pink Album.” The band returned, minus Mendel, who still plays bass in Foo Fighters, for 1997’s “How It Feels To Be Something On” and 2000’s “The Rising Tide.” Mendel then rejoined Enigk and Goldsmith, but not Hoerner, to record a self-titled album as the Fire Theft in 2003.
 
SDRE has a handful of shows on tap this spring, including its first appearance at the Coachella festival in Indio, Calif., on April 18, a show in London four days later and an April 23 appearance at Belgium’s Groezrock Festival.
 
Meanwhile, Foo Fighters frontman Dave Grohl has told several interviewers in the past week that the band plans to regroup in the fall to make its next album with veteran producer Butch Vig.

Negotiating in the real estate market of 2007 and earlier was fairly easy.  There really wasn’t any.  Sellers named a price, buyers placed multiple bids, the highest offer won.  I remember getting a new construction contract from a seller’s counsel where the cover letter said “no negotiations will be considered on this contract, either sign it as is or return it unsigned and we will move on to the next deal.”

While that made my life easier, it was a bit frustrating.  “Can we ask for the sponsor to pay their own transfer taxes?”  “Sure,” I would reply to my buyer, “we can ask for anything.  But there are three other full price offers on the table, why would they give us that?” 

Today, however, all that has changed.  And success in this market requires us to dust off our negotiating techniques manuals and return to basics Everything, these days, is negotiable, and careful thinking about the transaction before signing avoids problems down the road.

But negotiating is not about winning, and forgetting that fundamental can derail an otherwise successful transaction.  Take an example from a recent deal.  I represented the seller in a difficult sale where the apartment had been on the market for many months without any real offers.  The seller was unhappy, financially strapped, and accepting a price that was well below what they hoped for.  That set the mood.  The seller started off resenting the buyer for the offer.  Instead of respecting the offer, albeit low, and appreciating that they finally had a real buyer, the seller viewed the buyer as the enemy, and a bottom feeder who was taking advantage of their misfortune.  The contract negotiations were difficult, but we finally reached an agreement, except on one item.  The seller wanted to remove 4 wall-mounted speakers that he had installed in the living room.  The buyer wanted them to remain, and signed the contract with those items written in to remain and delivered the contract with a down payment check to my office.

“Send it back,” ordered my annoyed seller.  He had had enough, and felt “nickeled and dimed” throughout the negotiation.  And he had been.  But that is what buyers in this market do.  I asked my seller how much it would cost to buy and install these four used wall mounted speakers.  “About 300 bucks, but that’s not the point.” Exactly, the cost was not the point, which is precisely why the seller should have immediately come to my office and signed the deal as presented.  He was fixated on the principle of the thing, he wanted to win, rather than do the deal.  When I focused my seller on the big picture, he started to see it differently.  “How many buyers are standing behind him?” I asked. 

The reality is in this market the buyers have the upper hand on negotiations.  And smart sellers need to figure out whether they are arguing on principle, or about important deal points that matter to them.  In the grand scheme of the transaction, and the financial wellbeing of my seller, these speakers amounted to nothing more than a footnote.  But they almost cost him the whole transaction.

Ski resort holding company Vail Resorts (MTN) saw earnings
fall 33% in the second quarter, as the company continued to take hits on its real estate holdings. 

Vail Resorts, which owns its namesake ski mountain along with Colorado ski areas Breckenridge and Beaver Creek, said it
earned $40.7 million, or $1.11 a share, compared with a profit of $60.5 million, or $1.65 a share, a year earlier. 

Revenue at Vail fell 23% to $300.5 million, primarily caused by a plunge in real-estate revenue. However, the results beat
the $1.13-a-share and revenue of $300 million that analysts had expected, according to data by Thomson Reuters.

Vail said its mountain segment saw a modest 1% increase in profits during the quarter to $261.0, helped by higher season
pass revenue. However, lower-than-average snowfall in Colorado caused visitations to decline 1.6% from a year ago. California
resort visits were up.

“I am pleased with how we have performed so far this season, particularly given the low early season snowfall levels at
our Colorado resorts and a still challenging economy,” said Rob Katz, CEO of Vail Resorts.

Vail’s lodging business saw profits fall to $38.7 million in the quarter on lower occupancies and average daily rates at
the company’s hotel rooms and managed condominiums. 

For the company’s real estate segment, profits plunged to $900,000 compared with $89.2 million in the previous quarter.
Vail said the plunge primarily caused by the timing of real estate closings.

Shares of Vail were up 4.6% to $39.04 on Wednesday. 

Apollo Management agreed to buy Citigroup’s real estate investment unit in a move that would more than triple the value of the private-equity firm’s property assets, a person with knowledge of the deal told Bloomberg News on Tuesday.

The purchase of Citi Property Investors will give Apollo, which is based in New York, 65 real estate investments in 26 countries with a net asset value of $3.5 billion, said the person, who asked not to be named because the negotiations were private.

Apollo’s global head of real estate, Joseph Azrack, helped assemble the portfolio when he led the Citigroup unit from 2004 to 2008, the news service said.

Go to Article from Bloomberg News »

A London-based professional association issued a weekly report Friday saying that fixed asset investment (FAI) in the Chinese housing sector will drop from last year’s record high because of excess liquidity and inflation concerns.

The Royal Institution of Chartered Surveyors (RICS) said in its report that monthly growth in FAI in real estate is now growing at three times the pace of 2004 and at close to double the pace of 2007.

According to calculations by the institution and economy. com, annual real estate investment spending has risen from around 1.5 trillion yuan ($219.7 billion) in 2004 to roughly 4.5 trillion yuan ($659.2 billion) last year.
“It would not be a surprise, however, to see this trend moderate somewhat in 2010 as attempts to rein in monetary stimulus gain traction,” the report said.

According to the data released by the National Bureau of Statistics, FAI growth on a year-to-date basis fell for the third consecutive month in December to 30.5 percent, after posting strong gains over the course of 2009.

Monetary authorities have taken measures to curb lending in recent months. The year-on-year growth of broad money supply (M2) in January declined to 25.98 percent from 29.64 percent in November, according to the People’s Bank of China (PBC), the central bank.

The RICS suggested that February’s inflation data, to be released this week, will be key. The January consumer price index (CPI) surprised by registering a 1.5 percent increase year-on-year, lower than the median forecast of 2 percent from a Reuters poll.

However, the RICS said, “Any sign of a monthly inflation surge could renew jitters that Chinese monetary policy tightening may start to accelerate.”

Patrick Chovanec, an associate professor at Tsinghua University, said that much of the central government’s efforts to dampen real estate investment boils down to the ability to control lending, which is not easy.

The annual lending target for last year was 5 trillion yuan ($732.5 billion), but the actual new loans made during the course of 2009 were above 9.4 trillion yuan ($1.4 trillion), according to the PBC.

Chovanec said the government is growth-biased at the moment, but inflation above 5 percent will trigger a reverse in the policy orientation.

Source: Global Times

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By John Spence, MarketWatch

BOSTON (MarketWatch) — Exchange-traded funds tracking real estate stocks have been among the market’s best performers since the March 2009 market low, but the potential for more upside is on shaky ground.

ETFs that focus on residential U.S. real estate have rebounded sharply. The iShares Dow Jones U.S. Home Construction Index Fund
/quotes/comstock/13*!itb/quotes/nls/itb
(ITB
13.52,
+0.31,
+2.35%)
and SPDR S&P Homebuilders ETF
/quotes/comstock/13*!xhb/quotes/nls/xhb
(XHB
16.57,
+0.31,
+1.91%)
are up 100.2% and 92.7%, respectively, for the 12 months through March 4. A broad yardstick for U.S. large-cap stocks, SPDR S&P 500 ETF
/quotes/comstock/13*!spy/quotes/nls/spy
(SPY
114.25,
+1.61,
+1.43%)
, gained 63.7%, according to FactSet Research.

Meanwhile, Vanguard REIT ETF
/quotes/comstock/13*!vnq/quotes/nls/vnq
(VNQ
46.42,
+1.23,
+2.72%)
has more than doubled from its March 2009 low. The portfolio is comprised of real estate investment trusts, which own and operate commercial properties such as offices and apartment buildings.

The snapback rally in real estate came after the sector avoided the financial ruin that investors had priced into these stocks during the credit crisis. Yet now there are worries the market has overshot and that projections of a strong recovery are too optimistic.

If a double-dip recession strikes, real estate stocks could be among the hardest-hit. Indeed, they fell further than the Standard & Poor’s 500-stock index
/quotes/comstock/21z!i1:in\x
(SPX
1,139,
+15.72,
+1.40%)
during the market’s crash. Therefore, investors need to keep a clear eye on the sector’s risks and its sensitivity to the economic recovery.
Read about investments for the bull market’s second year.

Commercial real estate

Before the credit meltdown, many investors were drawn to REITs’ solid performance over the previous decade, plus their dividends and diversification qualities. The stocks give investors a way to participate in commercial real estate and hedge against inflation.

However, the sector provided little shelter when the stock market plunged. Income-oriented investors were socked with a double whammy when many REITs scaled back dividends to conserve cash, or paid them out in stock. To qualify for federal tax breaks, REITs are required to pay out 90% of their taxable income to shareholders through dividends.

The total market capitalization of the U.S. REIT industry was about $272 billion at the end of February. The business owns about $500 billion worth of commercial real estate assets, or between 10% and 15% of institutionally owned commercial real estate, according to the National Association of Real Estate Investment Trusts. There are 14 REITs in the S&P 500.

The Vanguard REIT ETF is the largest ETF tracking the sector in terms of assets. Its top five stock holdings are Simon Property Group Inc.
/quotes/comstock/13*!spg/quotes/nls/spg
(SPG
79.43,
+1.82,
+2.35%)
, Public Storage Inc.
/quotes/comstock/13*!psa/quotes/nls/psa
(PSA
87.42,
+1.58,
+1.84%)
, Vornado Realty Trust
/quotes/comstock/13*!vno/quotes/nls/vno
(VNO
69.26,
+2.13,
+3.17%)
, Equity Residential Properties Trust
/quotes/comstock/13*!eqr/quotes/nls/eqr
(EQR
37.27,
+1.19,
+3.30%)
and Boston Properties Inc.
/quotes/comstock/13*!bxp/quotes/nls/bxp
(BXP
71.14,
+1.97,
+2.85%)
.

Other large commercial real estate ETFs include iShares Dow Jones U.S. Real Estate Index Fund
/quotes/comstock/13*!iyr/quotes/nls/iyr
(IYR
47.44,
+1.06,
+2.29%)
, iShares Cohen & Steers Realty Majors Index Fund
/quotes/comstock/13*!icf/quotes/nls/icf
(ICF
54.36,
+1.48,
+2.80%)
and SPDR Dow Jones REIT ETF
/quotes/comstock/13*!rwr/quotes/nls/rwr
(RWR
50.94,
+1.35,
+2.72%)
. Meanwhile, the SPDR Dow Jones International Real Estate ETF
/quotes/comstock/13*!rwx/quotes/nls/rwx
(RWX
35.27,
+0.71,
+2.05%)
, with more than $1 billion in assets, is a popular option for the global real estate market.

Despite the rally, REITs remain an unloved sector of the market and many economists are warning of a long, drawn-out crisis in commercial real estate.

REITs scrambled to deleverage their balance sheets when the credit crunch hit, and there are concerns about their ability to roll over debt in coming years. Fundamentally, the sector is facing declining rents, occupancies and property values. Add a weak economy, high unemployment and the specter of rising interest rates, and it’s no wonder the outlook is so bleak.

Still, there are some positive signs for the sector. Many REITs were able to tap the capital markets in 2009 by raising equity and debt. Meanwhile, the strongest companies may be among the deep-pocketed investors able to scoop up depressed properties and profit when the economy recovers.

M&A activity could also provide a lift to the stocks. For example, Simon Property and Brookfield Asset Management Inc.
/quotes/comstock/13*!bam/quotes/nls/bam
(BAM
24.43,
+0.32,
+1.33%)
have locked horns over bankrupt mall giant General Growth Properties Inc. Vornado is reportedly interested in General Growth as well.

The levy won’t be subject to haggling between future buyers and sellers, either. That’s because it’s a covenanted mandate — a novel type of lien on the underlying real estate — called a private transfer fee. It’s not a government transfer tax. Nor is it a homeowner association or environmental protection covenant. It’s purely a private requirement that runs with the land. If a seller refuses to pay it to a third-party trustee at closing, the sale won’t proceed.

Sounds like a great deal — provided that you’re on the collecting end of a near-perpetual revenue stream. Apparently, the idea has been attractive enough that substantial numbers of developers and builders are signing up with a New York-based company that has devised what it calls a “patent pending” system to tap into real estate transactions into the next century.

Manhattan-based Freehold Capital Partners declines to identify any clients or participants in its private-transfer-fee program, but it claims on its Web site that as of late 2009, “the owners of an estimated $488 billion in real estate projects nationwide, including some of the country’s largest, most well-respected companies, have partnered with Freehold.”

The company says it is negotiating with institutional investors to “securitize” pools of transfer fees — essentially creating bonds based on future cash flows that can be sold to deep-pocket money managers.

Freehold’s activities have stoked legislative controversies in several states, and real estate trade groups that oppose the private-fee concept plan to fight it across the country in the coming months.

The National Association of Realtors and the American Land Title Association, for example, are asking their members to persuade legislators to prohibit or limit the use of investor-oriented private-transfer-fee programs. Even the National Association of Home Builders, some of whose members reportedly have signed up to participate in the transfer fee program, isn’t convinced that the idea is sound.

“It’s a very creative concept,” said David Ledford, the builder association’s senior vice president for housing finance, “but it’s largely untested and controversial politically.”

For its part, Freehold maintains that its transfer-fee covenants are good for consumers and good for cash-strapped builders. Curtis Campbell, a spokesman for the firm, said in an e-mail that “private transfer fees represent an adaptation in how to pay for development costs” incurred by builders “at a time when funding is not available” to them on “reasonable terms.”

Freehold’s system allows developers and builders to recoup some of their infrastructure costs — project amenities, environmental protection and land-use requirements imposed by local governments — without lumping them onto the price paid by the first buyer of a house.

By creating future revenue streams — which builders can monetize upfront by selling to investors — the plan allows developers to sell houses for lower prices than they otherwise could, Campbell said.

Critics charge that the program will taint houses encumbered with transfer fees for decades, lowering their values and making them harder to sell. Real estate attorney Robert A. Franco, of Mansfield, Ohio, said the concept is also “certain to lead to litigation” years from now, “since many buyers may not be aware” of the fees. Future buyers may also challenge their legal validity in court, balk at settlements and jeopardize property sales, Franco said.

According to a white paper prepared by the American Land Title Association, six states have limited or restricted private transfer fees: California, which requires upfront disclosures; Texas, which prohibits the fees in certain circumstances; and Kansas, Oregon, Florida and Missouri, which ban them.

A Utah developer who signed up with the program but has since withdrawn said the underlying purpose is worthwhile. Nate Shipp, managing partner of Development Associates Inc., said in an interview that many builders and developers would like to be able to receive compensation for some of the heavy upfront costs they bear in creating a new community.

But DAI “pulled off” the covenants attached to recent home sales, he said, in part because they bothered some purchasers and because DAI “never received anything” in exchange. One of DAI’s home buyers, Camber Keiser of Eagle Mountain, Utah, said the fee “was not disclosed” at the time of purchase, “so yes, we were surprised to learn of it” and pleased that DAI removed it.

Most states still have no restrictions on the fees, and most home buyers are likely to be unaware of them. So look for them before signing any contract.