CoStar: REITs Will Be Big Sellers in 2016

CoStar Group has reviewed over 80 year-end and fourth quarter earnings reports, along with 2016 outlines, for publicly traded REITs and is projecting a majority of the nation’s publicly traded REITs and real estate companies expect to be big sellers of properties this year, according to a new article. With three times as many REITs projected to be net sellers compared to net buyers, the reviewed companies have disclosed an expectation to sell more than $20.7 billion in properties this year, while only anticipating $9.8 billion in acquisitions.

"Even though the year started with choppy financial markets, we continue to benefit from a very strong real estate market and we expect 2016 to be another very good year," said Bill Hankowsky, chairman, president and CEO of Liberty Property Trust, citing "strong demand from the investment buyer universe."

"Our overall disposition efforts have resulted in a significant reduction of our non-core holdings in Pennsylvania, New Jersey, Delaware, Richmond and Northern Virginia," stated Gerard Sweeney, Brandywine Realty Trust's president and CEO. "In addition, these transactions significantly increase our financial capacity, reduce debt and provide ample liquidity for our development pipeline."

"We expect to complete, including the pending investments announced today, between $750 million to $1 billion of total real estate investments in 2016, subject to favorable capital market conditions," said John Thomas, president and CEO of Physicians Realty.

For more news and information visit Blumberg Partners.

CCRSI Price Indices Reflect Strong Year in the CRE Market

CoStar Group has released its year-end Commercial Repeat-Sale Indices (CCRSI), which showed double-digit price growth at the end of 2015 in all regional and property types across the U.S. commercial real estate markets. The CCRSI provides the market's first look at December 2015 commercial real estate pricing, noting that "improving CRE fundamentals, surging investor demand and liquid capital markets propelled the CCRSI composite indices upward in 2015. Demand for core property assets was especially strong." An excerpt from the summary follows:

December transaction activity remained true to its seasonal pattern observed over the last several years, spiking in the final month of the year as investors raced to close transactions prior to year-end. The December composite pair volume of nearly $18 billion was the highest monthly total on record, helping lift total 2015 volume to $128.3 billion, a 26.2% increase from the previous peak reached in 2014.

While pricing in core U.S. markets set records in 2015, investors moving out on the risk spectrum in search of higher yields resulted in equally strong sales activity in non-core markets and property types, as reflected in the equal-weighted U.S. Composite index. Heavily influenced by lower-value properties typical of those in secondary and tertiary markets, the equal-weighted U.S. Composite Index rose 12.6% in 2015 and is now within 3.4% of its previous high water mark.

To review the CCRSI and accompanying graphs, click here. For more news and information visit Blumberg Partners.

CMBS Research Shows Rebound to Pre-Recession Levels

A new report from the CoStar Group examines the trends and latest information yielded from the April CMBS bondholder remittance reports to evaluate the state of CMBS loans, which now see to be rebounding to pre-recession levels. Data shows that net operating incomes on almost all yearly vintanges of CMBS loans are now near or above underwritten financial levels. An excerpt follows:

Based on the loans that have reported year-end 2012 financials, NOI growth was strong in 2012 rising 4.5% on average. For the 2010 and 2011 vintages about 30% of the loans reporting year-end 2012 financials are showing lower NOI than was underwritten. The 2012 vintage is showing a higher percentage, with around 40% of the loans having lower NOI compared to the underwritten amount.

While they plan to revisit the topic again in a few months once the majority of the loans have reported, based on the early look at NOI (net operating income) trends among loans that have reported year-end 2012 financials, Jan de Beur said NOI growth was strong in 2012, rising 4.5% on average.

"While preliminary, the 2012 NOI growth rate is noticeably higher than the 3% increase in NOI experienced in 2011 on average," said Marielle Jan de Beur, managing director and head of Structured Products Research CMBS and Real Estate Research for Wells Fargo Securities.

For more news and information visit Blumberg Capital Partners.

Major CRE Firms Report 3Q Deal Slowdown

A new report from CoStar Group examines the slowed activity in commercial real estate during the third quarter this year, and the causes. With third quarter earnings calls being hosted this week, the largest publicly traded CRE firms have indicated that the lull in leasing and sales activity in the United States reflects cautious businesses waiting for results from the Presidential election, national tax and debt issues, and concerns regarding the ongoing debt crisis in Europe coupled with the slowdown in Asian economic growth.

Comments from industry leaders quoted in the CoStar article include:

"The market environment turned more cautious in the third quarter," noted Brett White, CEO of Los Angeles-based CBRE Group Inc. "Many investors and occupiers deferred making decisions and commitments. The current recovery, unlike previous ones, remains frustratingly slow and inconsistent. Nevertheless, we continue to believe that the recovery is ongoing and as we've been saying for some time, remain subject to quick swings in market sentiment."

"We believe we see that business is coming our way because of general uncertainty and hesitancy, and that traditionally favors the strong brands in any markets, and ours is no exception," said JLL CEO Colin Dyer, participating in the company's conference call Tuesday morning via mobile phone due to dislocation by the hurricane. "For next year, we anticipate markets that are not going to get worse, but at the same time, not improving as quickly as businesses might hope," he said. "There are encouraging signs. The U.K. emerging from recession and China perhaps, turning around its declining growth rates. But there are also global-scale issues that concern business confidence, the post-election fiscal cliff in the U.S. and the ongoing issues with sovereign debt in Europe being the two principal examples."

For more news and information visit Blumberg Capital Partners.