Economic Update - Investors Still on Lookout for Deals

Economic Update - Investors Still on Lookout for Deals
March 18, 2009
By: Dees Stribling, Contributing Editor, Commercial Property News

A deal like this was garden-variety stuff only about two years ago, but these days it has a ring of news to it: Men's Wearhouse is leasing about 232,400 square feet at a warehouse in Bakersfield, Calif., owned by Northbrook, Ill.-based New Trier Partners as part of its Fund I investment portfolio. The men's wear retailer will use the space as its West Coast Tuxedo Service Center.

"It was a juggling act to get everything done in this environment, including dealing with the existing tenant, the new tenant, and the lender--which was a conduit loan, and those are especially difficult right now," Robert Goldstein, managing partner of New Trier, told CPN.

Since it started its first fund a few years ago, New Trier has been a specialist in acquiring value-add commercial properties, focusing on "single-tenant office buildings and industrial buildings in a handful of markets," said Goldstein. "It's a tough time now to be in the market for acquisitions, because we aren't seeing a lot of banks selling properties yet. But at the same time, there are are decent buildings available with some years' life in them, and the potential for value-add. That's what we're looking for."

Gregory Skirving, a principal with New Trier, told CPN that "we've seeing a lot of cap-rate movement upward. The opportunity is still there to buy buildings that are close to being stabilized, but with some vacancy or rollover risk. If you manage those properties appropriately, you can create some relatively attractive yields."

It might be part grandstanding, but Capitol Hill seems to be emitting some genuine indignation over the bonuses paid, or slated to be paid, to employees of black-hole insurer A.I.G. The bonuses attracted even more ire on Tuesday after the company revealed--at the instance of New York Attorney General Andrew Cuomo--that much of the pay went to the Financial Products division, now known to world know as purveyors of mind-boggling amounts of credit default swaps.

The top recipient at A.I.G. got $6.4 million; the top 10 bonuses combined totaled $42 million; and 73 people--11 no longer with the firm--got $1 million or more. In the Wall Street of 2007, such figures would have merited no attention. Now they are lightning rods.

The residential real estate market isn't the only thing contracting in Las Vegas. So too is gaming revenue, and it's putting the squeeze on the likes of MGM Mirage, which owns 10 hotels on the Strip and is majority owned by billionaire Kirk Kerkorian. The company in the thick of trying to renegotiate debt and auditors have raised "substantial doubt" about the company's future as a "going concern." MGM Mirage also recently reported a $1.15 billion 4Q08 loss it attributed to declining gambling revenue. Somewhere in Vegas, bookmakers are making odds on the prospect of bankruptcy for the casino giant.

The rest of Wall Street continued to enjoy an upward ride on Tuesday, with the Dow Jones Industrial Average up 178.73 points, or 2.48 percent. The S&P 500 was up 3.21 percent and the Nasdaq gained 4.14 percent.