9.8% total return for Commercial Real Estate in 2011

Commercial Property has delivered a return of 9.8% globally in 2011, Please read article below for the full story...

Global commercial property delivered a 9.8% total return in 2011; Irish returns in Q1 2012 were at 0.6%

Home Sales in U.S. Probably Climbed in January to Highest Level Since 2010

Home sales in the U.S. probably climbed in January to the highest level since May 2010, adding to evidence the housing market is regaining its footing, economists said reports this week will show.

Combined purchases of new and existing houses rose to a 4.97 million annual rate from 4.92 million in December, according to the median forecast in a Bloomberg News survey. Claims for jobless benefits held near the lowest level since 2008, bolstering consumer confidence, other reports may show.

A strengthening job market, combined with record affordability driven by the drop in home prices and mortgage rates, will probably keep underpinning demand. Nonetheless, the Federal Reserve and Obama administration are striving to find ways to lend the industry additional assistance amid concern that mounting foreclosures will continue to hinder the recovery.

“Home sales have bottomed, and from here on, we should see a moderate pickup,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “Hiring is improving slowly, so that’s helping.” More policy efforts are needed as “we still can’t rely on housing to recover on its own,” she said.

The National Association of Realtors will release data on existing house sales on Feb. 22. Purchases increased 0.9 percent to a 4.65 million annual rate, following a 4.61 million pace in December, according to the Bloomberg survey median.

Sales of new homes climbed to a 315,000 annual rate from 307,000 the prior month, the survey median showed. The report is due from the Commerce Department on Feb. 24. Last year marked a record low for the industry in data going back to 1963, as builders sold 302,000 homes, down 6.2 percent from 2010.

More Homebuilding

Reports last week indicated housing is on the mend. Builders broke ground on more homes than forecast in January, helped by warmer weather, and construction permits also advanced. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in February to the highest level since May 2007.

Beazer Homes USA Inc. (BZH) reported that orders jumped 36 percent in the final three months of 2011 from a year earlier, and closings on new houses surged more than 60 percent. The Atlanta-based builder said it expects to sell more properties this year than last.

“While our visibility into the economic conditions for the remainder of the year is limited, I believe that we will benefit from a gradually improving housing market,” Allan Merrill, chief executive officer, said on an earnings call on Feb. 2.

Build Shares

Investors also are upbeat about prospects. The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME) has advanced 21 percent since the end of last year, outpacing an 8.2 percent gain in the broader S&P 500.

Policy makers are working to help distressed homeowners. The top five mortgage lenders this month reached a $25 billion settlement with 49 states and the U.S. government over the use of faulty paperwork in foreclosures.

Fed Chairman Ben S. Bernanke said the central bank’s efforts to spur growth are being blunted by impediments to mortgage lending, and called for more steps to heal the housing industry.

“The economic recovery has been disappointing in part because U.S. housing markets remain out of balance,” Bernanke told homebuilders on Feb. 10 in Orlando, Florida. “We need to continue to develop and implement policies that will help the housing sector get back on its feet.”

One asset has been the improvement in employment. The jobless rate fell in January to a three-year low of 8.3 percent, and payrolls rose by 243,000 workers.

Fewer Firings

Firings are also waning, Labor Department figures may show on Feb. 23. Initial jobless claims rose last week to 355,000 after reaching a four-year low the prior week, according to the median forecast in the Bloomberg survey.

Greater affordability is also supporting home demand. The National Association of Realtors’ measure of whether households earning the median income can afford a median-priced house at current interest rates reached a record in the last three months of 2011.

Among other reports this week, the Thomson Reuters/University of Michigan final index of consumer sentiment rose to 72.8 in February from a preliminary reading of 72.5, economists in the Bloomberg survey predicted. The data will be released Feb. 24.

JLL Commercial Real Estate Report: “It’s a Great Time to Be a Borrower” | Area Development Online

JLL Commercial Real Estate Report: “It’s a Great Time to Be a Borrower”

Jones Lang LaSalle (2/8/2012)

Jones Lang LaSalle's Tom Fish dissects the market financing requirements borrowers have in today's lending environment. A new proprietary survey defines the likely universe of capital available for commercial real estate lending in 2012. Conducted by Jones Lang LaSalle (JLL) and Penton Media Research, it compiled direct feedback from 186 borrowers and 136 lenders who together comprise a median $73.3 million in commercial real estate asset value. Specifically, the "2012 Borrower Sentiment" report details the borrowers' sentiments for 2012 funding aims. In the last 12 months, these respondents borrowed a median $21.1 million for commercial real estate ventures. While borrowers used to bemoan the slow loan closing speed and the post-closing service process, "both areas have improved as of late," shared Tom Melody, co-head and executive managing director of JLL's real estate investment banking business. "We anticipate that improvement will continue throughout the year. It is a great time to be a borrower." Enlarge This Image The increasing level of available credit is music to borrowers’ ears as 44 percent of borrowers and 56 percent of lenders expect credit to increase in 2012. LINK: JLL: Commercial Real Estate Borrowers Set to Increase Debt Levels in 2012 It "makes sense" that a majority of borrowers still need more capital lending in 2012, added Tom Fish, co-head and executive managing director of JLL's real estate investment banking business, noting there is $415 billion of mortgage maturities on the horizon in 2012 alone "and opportunistic plays in the market." Even with the existing global economic concerns, he predicts debt financing "will remain very strong in the core space from life companies and domestic banks, and we expect the CMBS market to continue to regain footing in 2012." Here are some report highlights: The health of the United States economy has the greatest impact on borrowers' ability to obtain financing. Borrowers further noted that debt-service coverage ratios and loan-to-value ratios also impacted their ability to refinance. Borrowers need more debt in 2012, as 40 percent expect their total portfolio debt to increase this year--up six percent over last year's increase expectations. Commercial banks are the most active lenders, borrowers find, as 77 percent of respondents borrowed from banks in 2011. One in three borrowed from life companies and one in four borrowed from private-equity investors in 2011. The report said this flags a trend expected to increase in 2012 as more borrowers seek funds from alternative sources. In 2012, 44 percent of borrowers and 56 percent of lenders expect credit to increase. Most borrowers (74 percent) are sourcing primary loans or short-term construction loans (41 percent) followed by 30 percent sourcing a line of credit. The debt process is improving since commercial real estate borrowers report feeling satisfied with the certainty of execution from lenders, which they say is the most important factor when seeking a loan origination provider. Expectations for an increase in long-term mortgage rates have subsided. Only 57 percent of borrowers predict an uptick in interest rates in 2012, while 78 percent thought rates would rise in 2011. Regarding financing requirements, the survey found that in 2012, "debt in all forms, deleveraging, bank stability and currency movements will dominate the global financial picture." Domestic borrowers indicated the majority of their 2011 financing needs (51 percent) were used for refinancing, followed by 42 percent for financing acquisitions where opportunistic buys existed. "Contrary to typical wisdom, a large portion of borrowers' funding in the last year went to new development (24 percent)," said the report . The market is expecting rates to remain low during 2012 with generally favorable commercial loan pricing, said Melody. “We're at an absolute 25-year low for fixed rate loans on the best, low leveraged, quality assets. Borrowers with core, well-located properties will have a lot of competition and bidding wars from lenders willing to be aggressive on their pricing even though absolute rates are low given the spreads to those benchmark interest rates are still extremely attractive." LINK: JLL: Commercial Real Estate Borrowers Set to Increase Debt Levels in 2012

Jones Lang LaSalle: Global Sustainability Perspective – March 2011

One Hyde Park: £60m apartment sold and luxury retail on the market

One Hyde Park: £60m apartment sold and luxury retail on the market

6 February 2012 | By David Doyle.

One Hyde Park's last five bedroom apartment has been sold, bringing the
total volume of sales in the London luxury residential scheme to more than
£1.5bn.


The five bedroom apartment, the largest size beneath penthouse, sold to an
unnamed buyer at the end of last week. Another £40m of apartments are also
said to be under offer.


It is the last of eleven five-bedroom apartments, which are almost 9,000 sq
ft in size, to be sold in the scheme.

At the same time Project Grande, the joint venture between the Prime
Minister of Qatar's Waterknight's and Christian Candy's CPC, has bought the
last retail unit in the development to the market.

The unit, which is the first UK premises for Abu Dhabi Islamic Bank, is
being marketed by Savills for in excess of £21m, a net initial yield of
3.6%.

Project Grande said the yield is predicted to rise to 4.35% and 4.99% with
indexed rent reviews. The property is let for 14 years off an annual rent of
£800,000.

One Hyde Park's other retail units, let to Rolex and McLaren, were sold for
more than £13m and £11.5m respectively, reflecting yields of 2.91% and 3.3%.

Rising Investment In French Commercial Property

During the final three months of 2011, France recorded its highest commercial property transaction volume since the third quarter of 2007.

Figures released by CB Richard Ellis (CBRE) revealed that investment in French commercial real estate climbed by 65 per cent between the third and fourth quarters of last year.

In total, €6.5 billion (£5.4 billion) was transacted between October and December 2011, making it the second most popular market in Europe after the UK.

The CBRE report stated: "Investment activity in France was heavily biased towards the Paris office sector and included large portfolio and single-asset deals."

According to the Savills European Office Markets bulletin released in autumn last year, yields for Parisian offices stood at just over five per cent in the third quarter of 2011.

The organisation noted that both demand and rents were on an upward trend at this time, while the supply of such real estate assets in the French capital was falling.

Head of Europe, the Middle East and Africa capital markets at CBRE Jonathan Hull stated that data from the final quarter indicates France, along with the UK, Germany and the Nordic nations, "are key to core strategies" among investors.

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Foreigners Snap Up Swiss Property - WSJ.com

By GORAN MIJUK

ZURICH—With average house prices nearing 800,000 francs, the Swiss residential real-estate market continues to boom. Market participants say there is no end in sight as cash-rich Europeans and Russians keen to protect their assets fuel demand.

"I'm getting calls from Greek investors almost every day who want to buy a house here," says Robert Ferfecki, managing director for Sotheby's International Realty Inc. in Zurich, who is selling luxury homes in the German-speaking areas of Switzerland, including Zurich and Lucerne.

"Had Switzerland no restrictive property laws that limit what foreigners can buy, I would probably be able to sell my portfolio within a week," Mr. Ferfecki says, noting that Germans and Britons are the top buyers.

Unlike property markets in the U.S. and many European countries, which are still smarting from the 2008 housing collapse, prices for all categories of Swiss real estate have risen steadily over the past three years, according to consultancy Wuest & Partner AG.

Prices for family homes, for example, have risen some 20% since 2008 to an average of 780,000 francs, or $830,000, the consultancy says. Also boosting the market are record-low mortgage interest rates, which hover at 2.7%, after the Swiss National Bank cut its key interest rates close to zero last summer.

Fanning the boom is a steady influx of foreigners attracted by the strong economy, Wuest & Partner says. Over the past four years, Switzerland has seen a net influx of about 330,000 foreigners, according to the national homeowners' association, HEV Schweiz.

Most are highly skilled workers from Germany, the U.K. and France, who are drawn by Switzerland's strong job market. Unemployment was 3.3% in December.

Mr. Ferfecki of Sotheby's says the financial crisis has also triggered interest from cash-rich Europeans and Russians, who want to park some of their assets in Switzerland to shield themselves from a potential breakup of the euro zone and benefit from the country's stability, as well as its low taxes, which can be less than 10% of a person's income.

In recent years, billionaires from the former Soviet Union, including Coalco Metals Ltd. owner Vasily Anisimov and Viktor Vekselberg, chairman of commodities company Renova Group, have moved to Switzerland. Dinara Kulibayeva, the daughter of Kazakh President Nursultan Nasarbeyev, reportedly paid 74.4 million francs for a villa at Lake Geneva in 2009.

"What really makes these people come to Switzerland isn't just the low taxes, but the quality of life and the stable rule of law," Mr. Ferfecki says. "They don't need huge security and can go shopping without being recognized."

But because Switzerland's property laws are restrictive for non-resident foreigners—only about 2,000 homes can be sold to non-residents every year—foreign investors who are unwilling to live in Switzerland but want to benefit from the market's strength have started to build up investments in Swiss real-estate funds and property companies.

Shares in Swiss funds such as PSP Swiss Property AG, Swiss Prime Site AG and Mobimo Holding AG, which own residential and commercial real estate in Switzerland, have sharply outperformed the Swiss stock market. Stocks overall have lost more than 7% over the past 12 months, while property stocks have gained between 1% and 4%.

"What our international investors like about us is the fact that we are a pure Swiss play," says Luciano Gabriel, chief executive officer of PSP Swiss Property. "Since we have no operations outside Switzerland, our business depends on the Swiss economy and investors have an almost pure Swiss franc investment that isn't linked to other risks." Because of the international interest, Mr. Gabriel says, PSP holds annual investor events in the Netherlands, the U.S. and the U.K.

This investor demand, coupled with Switzerland's still sound economic outlook—the government expects the economy to grow by 1.9% in 2013 after moderate growth this year—prompted Mobimo to seek 200 million francs in fresh capital last month to finance new projects. UBS AG and fund manager Swisscanto Holding AG both recently raised money for their respective Swiss real-estate-fund businesses, financing new projects in the country and spurring a building boom.

According to the Swiss government, real-estate projects worth 63.7 billion francs were launched last year, the bulk financed by private investors. This is up 3% from 2010, when 61.92 billion francs' worth of projects were planned.

"We are certainly in a boom phase," says Thomas Vonaesch, head of real-estate fund management at Credit Suisse Group, which controls around 14.4 billion francs of real-estate assets. "And demand is expected to remain sound as the financial environment with low interest rates is expected to drive demand."

UBS's Swiss Real Estate Bubble Index, which tries to measure signs of the market overheating, rose in the third quarter but showed no sign of a bubble, according to the bank. Bank Vontobel real-estate analyst Stefan Schuermann says prices will continue to rise "as investors have nowhere else to go."

He argues that Switzerland's housing market won't go the way of that of the U.S., as mortgages are usually backed by a 30% deposit. "This makes this market safe and price development stable," he says.

Write to Goran Mijuk at goran.mijuk@dowjones.com

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