The Leader - March/April 2009 - (Page 10) R EAL ESTATE I N T HE NEW S Global Economic Woes Weigh Heavily on Corporate Real Estate STILL, GOOD NEWS IS OUT THERE Cash-Hungry Companies Turn to Leaseback Deals Companies continue to take advantage of a healthy market for sale-leaseback transactions, enabling them to free up sorely needed capital, according to the New York Times. Large corporations have typically been hesitant to discuss the specifics of transforming themselves from owners to tenants. Often, the transactions are not even made public. In 2008, Real Capital Analytics reports that sale-leaseback deals of industrial, office and retail properties totaled $7.3 billion. In the fourth quarter, though, only $514 million in sale-leasebacks were recorded. The pool of buyers has diminished as some of the more active participants have been hit hard by financial difficulties. As economic conditions have deteriorated, an increasing number of corporations are looking to divest themselves of their real estate via sale-leasebacks. For troubled corporations, sale-leasebacks provide an alternative means of financing that can be used to pay down debt. properties are opting to remain on the sidelines until economic conditions improve. In the 18 months through December, all the gains made in the U.K.’s five- year boom to mid-2007 were completely wiped out, IPD researchers noted. Ireland was the first euro-region country to report an economic recession. PricewaterhouseCoopers LLP reports that Dublin offers the worst property-investment prospects among Europe’s major urban markets. U.K., Irish Commercial-Property Values Drop by Record Indexes compiled by Investment Property Databank Ltd. show that commercial properties in the United Kingdom and Ireland lost the most value on record in 2008, Retailers Still Expanding in China A number of the world’s largest retailers are continuing with aggressive expansion plans in China, according to the Wall Street Journal. Companies like U.K.-based supermarket operator Tesco PLC and big-box retailer Wal-Mart Stores Inc. continue to see the Chinese consumer as a good long-term wager. China’s official indicator of retail sales is holding up well, despite the fact that some economists have questioned the accuracy of the data. The data shows retail sales up 20.8 percent in December from the same month a year earlier versus a 2.7 percent decline for retail sales in the United States – the sixth consecutive monthly decrease. Tesco is expanding its chain of stores in China even as it scales back on capital expenditures and opens fewer stores in its home country of Britain. French hypermarket chain Carrefour plans to open as many as 28 stores in China in 2009, an increase from 22 last year. Meanwhile, Wal-Mart expects to continue opening new stores at a double-digit pace in China. The U.S. retail giant opened 30 stores there in 2008 and 17 a year earlier. As economic conditions have deteriorated, an increasing number of corporations are looking to divest themselves of their real estate via sale-leasebacks. Commercial Property Slump May Linger Jones Lang LaSalle reports that commercial property investments plummeted 70 percent in 2008, as the commercial mortgage-backed securities market fell a whopping 95 percent to $12.1 billion and an overwhelming majority of banks tightened lending standards for commercial real estate. Researchers note that potential buyers with approximately $300 billion to invest in U.S. commercial as would-be buyers struggled to borrow money during the worst slump in decades, Bloomberg reports. Values for warehouses, retail stores and office buildings in the U.K. plunged 26.4 percent, while the decline in Ireland was a whopping 37.2 percent. In the fourth quarter, U.K. commercial-property values fell 14.4 percent from the previous three-month period. In Ireland, the drop was even more pronounced – 17.7 percent. 2 0 0 9 THE LE ADE R 10 MARCH / APRIL
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