by Calculated Risk on 6/25/2009 08:05:00 PM

This is an interesting transaction for several reasons:

The seller was J.P. Morgan. Need cash?

The cap rate is rumored to be in the 8.5% to 9% range.

It was an all cash deal (no financing) by a CRE REIT that stayed on the sidelines during the insanity.

The purchase price is said to be below replacement cost.

From the Denver Post: 17th Street Plaza sale is biggest in Denver this year

A Massachusetts-based real-estate investment trust has paid $135 million in cash for 17th Street Plaza in the largest real-estate deal done in Denver this year.

HRPT Properties Trust bought the 32-story building at 1225 17th St. from J.P. Morgan, which was represented by brokers Mary Sullivan and Tim Swan of CB Richard Ellis.

Sullivan declined to reveal the sale price, but people in the real-estate community pegged the deal at $135 million.
...
"It's substantially below the replacement cost to build that building," [Todd Roebken, managing director of Jones Lang LaSalle] said.

A few months ago, CoStar noted that Class A office space average actual cap rates had risen from 6.1% in Q4 2007 to 7.9% in Q4 2008. And this sale suggests cap rates have risen further ... as CRE prices fall.

by Calculated Risk on 6/25/2009 06:22:00 PM

The Committee on Oversight and Government Reform released a couple of interesting documents this afternoon.

The first document contains some Federal Reserve emails and documents.

See page 2 you will find an overview of Merrill's legacy portfolio.

How about this message from a Senior Fed Vice President on 12/20/2008 (page 8):

Some very preliminary thoughts on getting a pound of flesh out of Ken Lewis. Should we do this as part of the agreement to bail them out or just let them know we will be contacting them with a board resolution/mou in January. Your thoughts

And many other memos.

And another document of interest. There is an interesting discussion on PDF pages 11 through 16 on the financial system that was apparently prepared by the Federal Reserve staff.

There will be quiz later ...

by Calculated Risk on 6/25/2009 04:11:00 PM

A few stories too ... a major auto supplier is near bankruptcy ...

From Dow Jones: Lear Corp. Working On Prepackaged Bankruptcy - Sources

Lear Corp. (LEA), a maker of automotive seats and interior electronics, is working on a pre-packaged bankruptcy five days before it must make a $38 million interest payment on two of its bonds ... If the prepackaged bankruptcy deal falls apart, Lear could file for a traditonal-style bankruptcy next week ... The company has also lined up debtor-in-possession financing with its lenders ...

From MarketWatch: Fitch downgrades California to A-minus

Fitch Ratings downgraded the California's general obligation credit rating on Thursday to A-minus from A, based on the magnitude of the state's financial challenges and persistent weakening economy.

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

And Jillayne Schlicke (of CEForward.com) brings us a few sample questions provided by the National Mortgage Licensing System for the new national loan originator exam: Will the New National Loan Originator Exam be Too Easy?. Here are the first two of six questions she posted:

If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?
(A) $2,163.20
(B) $2,343.47
(C) $2,379.52
(D) $2,487.68

The requirement for private mortgage insurance is generally discounted when the loan-to-value ratio falls below:
(A) 20%
(B) 50%
(C) 80%
(D) 90%

Take the test.

by Calculated Risk on 6/25/2009 03:04:00 PM

From CNBC interview (video here, comments start at 6:40) (ht Brian)

Q: You've said in some cases what appears to be a green shoot might actually end up being moss - moss growing on a rock ...

Kanas: Actually what I said is I hope it's not mold growing on a stagnant economy. But frankly I understand that there are - I hate the term green shoots, and we all talk about it every day - but I don't see it that much. I'm on main street every day, and I'm in a lot of different markets - I'm in New York half the week, and Florida half the week, and were dealing with thousands of people and hundreds of businesses every day and there are very limited green shoots from my perspective.

There is a discussion on the saving rate too and the impact on consumption. The personal income and outlays (and saving rate) for May will be released tomorrow.

by Calculated Risk on 6/25/2009 02:07:00 PM

From HotelNewsNow.com: STR posts US results for 14-20 June 2009

In year-over-year measurements, the industry’s occupancy fell 11.5 percent to end the week at 63.0 percent. Average daily rate dropped 10.1 percent to finish the week at US$96.78. Revenue per available room [RevPAR] for the week decreased 20.5 percent to finish at US$61.01.

The report also includes some hightlights on the performance for the top 25 markets. As an example, occupancy is off almost 20% in Dallas and Phoenix, and the Average daily rate (ADR) is off 30% and RevPAR off 35% in New York. Ouch.

No wonder more and more hotels are defaulting ...

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 12.1% from the same period in 2008.

The average daily rate is down 10.1%, so RevPAR is off 20.5% from the same week last year.

Note: some readers might notice the occupancy rate has risen to 63% - but that is just seasonal. The hotel occupancy rate is usually the highest during the peak vacation months of June, July and August.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com