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On 8-15 Robert W. Baird Initiated coverage of GLB at Outperform, Initiated coverage of KRC at Neutral, Initiated coverage of MPG at Neutral, and Initiated coverage of PKY at Neutral. On 7-12 UBS Starts Boston Properties At Neutral and UBS Starts Equity Office Properties Trust At Reduce. On 7-13 Morgan Stanley Downgraded AMB and PLD from Overweight to Equal-weight. On 7-18 Ferris Baker Watts Downgraded FPO from Buy to Neutral. on 7-20 Goldman Sachs raised its ratings on office owners SLG to "buy" from "neutral" and EOP to "neutral" from "sell," while at the same time is downgraded LRY from Neutral to Sell. On 6-16 Goldman Sachs Initiated MPG at Outperform. On 6-13 Merrill Lynch Starts Maguire Properties At Buy. On 6-13 Merrill Lynch Starts Liberty Property At Neutral. On 6-08 Wachovia Ups Parkway Properties To Outperfprm From Market Perform. On 6-01 DJ Newswires Stifel Nicolaus Ups Equity Office Properties to Hold. Commercial Real Estate Maintains Its Strength Jennifer Forsyth, WSJ 7-10 With America's housing market clearly cooling, will commercial real estate start to swoon? Hardly. The national office market, which cratered after the tech bust in 2000, has recovered and is the strongest it has been in five years. The commercial markets benefited from the former froth in the residential-property market because the boom in residential construction limited the amount of land that could be used for other purposes. In some markets, the conversion of apartments, hotels and, to a lesser extent, office buildings, into condominiums reduced the risk of oversupply - one of the biggest hazards in commercial real estate and one that contributed to the sector's crash in the late 1980s. In addition to condo conversions helping to reduce the supply of office space outright, residential construction has contributed to the high cost of land and materials in many U.S. markets. In many cases, because of high construction costs, it was cheaper to buy an office building - even at high prices - than to build a new one. Without much new speculative development, vacancy rates have dropped in almost every major market and landlords have been able to get more for rents. In Miami, for example, residential units in the central business district increased 55% since 2000, while the office increase was 9.5%, according to Jones Lang LaSalle. Even if developers contemplated a new office building, the construction companies were likely tied up with residential jobs until recently. All the while, the South Florida economy has been steadily improving. Those forces combined to boost the office market there. To be sure, the office recovery is uneven. Longtime struggling office markets such as Dallas, while improving, still have high vacancy rates from previous overbuilding, as do areas such as Cleveland and Detroit, where job growth has been limited. Real estate also remains a cyclical industry, and it is early in the office sector's recovery. Investors who paid sky-high prices for commercial buildings, especially those who financed using floating-rate debt or interest-only loans in the early years, are dependent on their optimistic growth projections to deliver. Yet, with generally improving fundamentals such as reduced vacancy and higher rents and few worries about overbuilding in most markets, the office sector should continue to improve in the near term, if job growth doesn't take a dive. "We're still in that race between increasing interest rates and increasing fundamentals," Stephen Blank, senior resident fellow of finance with the Urban Land Institute, says of the commercial market. "It appears to me that we are going to skate through this." Morgan Stanley Analyst Says REIT Performance Increasingly Tied to Bond Prices AP 7-13 Performance of real estate investment trust shares in recent years has become more tied to bond yields and interest rates and less correlated with small-capitalization stock performance, a Morgan Stanley analyst said Thursday. That finding prompted Morgan Stanley to modify the ratings on a slew of REITs, mostly based on their valuations relative to one another in light of their "In-Line" industry view. Morgan Stanley analyst Matthew Ostrower said REIT stocks historically have the highest correlation with small-cap stocks. REIT shares perform well in expanding economies, Ostrower said, so small-cap indexes tend to rise for the same reasons that would boost REIT shares. The relationship between REITs and interest rates has traditionally been less noteworthy. But in recent years REIT returns are becoming more similar to fixed-income investments, Ostrower said. Investors now see REITS, which pay high dividends, as having defensive qualities similar to bonds. "Relationships have been shifting: Rates are becoming more important, while small-cap factors are becoming less important," Ostrower said. REITs and bond prices move in tandem, Ostrower said. As bond prices fall and yields rise, investors prefer the safety of a fixed-payment from a bond. As bond prices rise and yields fall, investors are willing to assume the additional risk of an REIT stock in exchange for the higher return through dividends and share appreciation. This explains why rising interest rates would hurt REITs. Higher costs of borrowing mean new bonds would come to market with higher yields, offering a safer and more attractive fixed-payment investment than a REIT. Ostrower said his models indicate REITs are more likely to underperform than outperform in the current cycle. He rates the REIT sector "In-Line." NOTE: Although the tables above are checked and double-checked for accuracy, and may at times be 100% accurate - do NOT count on that. Please confirm through your own research any numbers on which you are to make a buy, sell or hold decision. Most sites giving this kind of data would say that it's information is for entertainment purposes only. I will not presume that you are that masochistic. And even accurately replicated and freshly retrieved FFO numbers are often stale. Home Page Previous REIT Update Top Sites |