The Wall Street Journal-20080206-Plots - Ploys
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Plots & Ploys
Full Text (609 words)[What's Brewing in the Real Estate Market]
Wishful on Wall Street
So exactly when will the capital markets come back? That question dominated the discussions at the commercial-mortgage conference held by the Mortgage Bankers Association in Orlando, Fla., early this week. After all, the debt-market seize-up, which has left lenders unable to sell the loans they made, is the main culprit for the sharp drop in commercial-mortgage lending.
Some seemed "more hopeful than realistic," said Martin Kamm, a managing director at Jones Lang LaSalle. According to a poll taken by the Chicago-based brokerage firm at the event, 85% of those in charge of lending at 18 investment banks expect the credit market to snap back within six months, while the respondents from other types of lenders -- such as insurance companies and commercial banks -- generally agreed that it will take longer. (Altogether, lending executives from some 50 financial institutions filled out the survey.)
Sam Davis, a senior managing director at Allstate Investments LLC in Northbrook, Ill., was of the view that the market won't recover until the middle of next year. The key reason, he said during a panel discussion, is that banks haven't yet started selling off the huge amount of loans and securities that currently sit on their books. "It's not clear when that liquidation will happen," he said.
Buckhead Bust
The tony section of Atlanta called Buckhead could be heading for some pain. In addition to possible layoffs among the area's many financial tenants, the neighborhood has four new office towers coming online by 2009. That's nearly 2.2 million square feet of space in a market that absorbs an average of only about 266,000 square feet annually. Among the new buildings: Atlanta-based Cousins Properties' Terminus 200 and closely held Tishman Speyer's Two Alliance Center.
"Buckhead is in great supply-and-demand balance now, but the bloodbath is coming quick," said Kris Miller, president of Ackerman & Co., an Atlanta-based real-estate services firm, at the firm's annual investor conference last week. The firm predicts that the Buckhead vacancy rate will rise from its current 13.4% to 21.1% within 24 months. "Effective rental rates are going to fall dramatically," Mr. Miller said.
The office sector isn't the only area showing signs of stress. Related Group of Miami has pushed back construction of its One CityPlace luxury condo development. The company hasn't said when construction will begin on the 29-story tower, the first of nine high- rises planned for more than 3,800 units. Some experts predict that it could take two years for the Buckhead condo market to absorb the current housing supply.
More to Carve Up
Post Properties has iced its plans to sell any of its apartment buildings outside Atlanta, including two New York properties it had planned to sell this year, as a result of the company's potential sale.
The Atlanta-based company, which owns more than 20,000 apartments, is considering a $44- to $47-a share, all-cash buyout offer from John Williams, the company's founder, and Cadim, a real-estate arm of a Quebec pension fund. A Chicago-based hedge fund has nominated an alternative slate of directors to force the company to consider buyout offers.
Post's board is seeking other bids and, by holding onto its Manhattan properties, the company may entice bidders who might be interested in breaking up and selling off some of the company's assets. The New York apartment market remains robust. Post President and Chief Executive David Stockert said in a call with investors yesterday that it would follow through on plans to sell two of its Atlanta properties with a combined 750 units. The company hopes that the sale will generate nearly $100 million.
