Friday, February 11, 2011
By: Michael Pento
The U.S. trade deficit increased by 5.9% to $40.6 billion during the month of December, which was up $38.3 billion from the prior month. For the year 2010, the trade gap surged 43%, which was the biggest jump in a decade, as our government’s efforts to reignite consumer borrowing and spending led to a record number of imported consumer goods. For all of 2010, the trade gap climbed to $497.8 billion, up from $374.9 billion in 2009. The Commerce Department reported that consumer spending rose at an annual rate of 4.4% in the fourth quarter of 2009. That increase—which was the biggest in four years—was led by a surge in imports and helped send the trade gap back onto its unsustainable trajectory.
Despite the fact that the U.S. dollar has fallen 8% since June of last year, the trade deficit has continued to widen. That’s because the inflation caused by a falling dollar has made it more expensive for foreigners to importer U.S. made goods—thus offsetting the increased purchasing power of their currencies. And, of course, the cost of U.S. imports has increased because there is no immediate domestically produced alternative to foreign made goods. Therefore, the U.S. trade imbalance continues to climb higher.
That economic truth ushers in the fear over how much wider the trade gap will grow once the dollar actually crashes, as it inevitable must. Why must it crash you ask? Simply because the U.S. is incapable of paying its debts without a massive dilution to the currency. Once the greenback loses its place as the world’s reserve currency, prices will skyrocket for our imported goods, thus sending many more dollars into foreign control. And send the red ink associated with our trade imbalance beyond the limits of what most economists could ever conceive to be possible. And before anybody tells you that a trade deficit isn't something to be concerned about, ask them if they don't mind selling a great proportion of the assets and the sovereignty of the nation to another country. Add'l Michael Pento Posts
Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.
Showing posts with label Commerce Department. Show all posts
Showing posts with label Commerce Department. Show all posts
Saturday, February 12, 2011
Wednesday, February 2, 2011
CMBS Delinquency Rate Sets New All Time Record of 9.34%
Trepp Reports Another Record High
CMBS Delinquency Rate of 9.34%
for January Despite New
Issuance and Falling Spreads
2/2/2011
NEW YORK--(BUSINESS WIRE)--Trepp, LLC, the leading provider of CMBS and commercial mortgage information, analytics and technology to the global securities and investment management industry, released today its January 2011 Delinquency Report (full report available at http://www.trepp.com).
The U.S. CMBS delinquency rate rose again in January with the percentage of loans 30 or more days delinquent, in foreclosure or REO climbing 14 basis points to 9.34%, the highest in history for U.S. commercial real estate loans in CMBS. The value of delinquent loans now exceeds $61.4 billion.
The Glass 1/2 Full Perspective
“While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months,” said Manus Clancy, Managing Director of Trepp, LLC. “Pessimists can counter that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans.” Additional CMBS Delinquency Data from
Barclays Capital via Housing Wire
The multifamily sector was up 120 bps to a 15.8% delinquency rate, according to Barclays Capital. Industrial delinquencies increased the most month-over-month yet still remained below multifamily, up to 8.9% from 6.3%. In the lodging sector, 17% of CMBS are delinquent, Barclays said.Sunday, November 28, 2010
Black Friday sales little changed even though CNBC did their very best to hype retail activity
CNBC did their very best to hype retail activity on Black Friday. Live interviews with shoppers, video clips of mall-ites carrying bags albeit CNBC personalities were not granted a peek into bags.
CNBC even displayed satellite images of a mall parking lot comparing car counts for a three year period. Of course there is no way to definitively determine if the count resulting from the painstaking process of placing red dots on cars reflected actual shoppers or an increase in "park-and-ride" vehicles.
In true WWE Smackdown fashion, CNBC attempts to whip viewers into a state of frenzy anticipating the best Black Friday in years. As with Smackdown, the promotional fanfare does not live up to the results.
By Dan Hart and Ian Thomson
Nov. 27 (Bloomberg) -- Black Friday sales were little changed, rising 0.3 percent, from last year, as U.S. retailers’ efforts to lure customers by opening early failed, ShopperTrak said.
The early holiday sales and promotions boosted sales and traffic for the first two weeks of this month through Nov. 13 by 6.1 percent and 6.2 percent, respectively, ShopperTrak said in a statement on its Website.
Shoppers nationwide spent $10.69 billion yesterday, Bill Martin, founder of Chicago-based research firm ShopperTrak, said in the statement. Black Friday is the day after Thanksgiving Day in the U.S. and the traditional beginning of holiday season buying.
Hundreds of people lined up at individual stores across the U.S. to take advantage of special deals as they face down a slow economic recovery. Sears Holdings Corp. and Toys “R” Us Inc. started their Black Friday “doorbuster” sales on Thanksgiving Day to attract consumers after two years of dampened shopping enthusiasm since the recession.
Sears, the largest U.S. department-store chain, opened at 7 a.m. with bargains that included a 58-inch Panasonic Corp. high- definition plasma television for $1,044, 55 percent off its list price of $2,299.
Open on Thanksgiving
Toys “R” Us, the world’s biggest toy retailer, opened earlier this year to accommodate customers who said they wanted to shop after Thanksgiving dinner, said Chief Executive Officer Jerry Storch. Employees at the chain’s Times Square store in New York handed out Santa hats to about 1,500 shoppers queued outside before the opening, spokeswoman Jennifer Albano said.
In 2009, Black Friday spending rose 0.5 percent to $10.66 billion, compared with a year earlier, according to ShopperTrak.
Analysts’ estimates for the holiday season’s aggregate sales vary from little changed to increases of as much as 4.5 percent. The Washington-based National Retail Federation forecasts a gain of 2.3 percent to $447.1 billion after an uptick of 0.4 percent last year and a 3.9 percent drop in 2008.
The projections coincide with a rebound in U.S. consumer spending this year as the economy began adding jobs. Consumer spending, which accounts for about 70 percent of the nation’s economy, increased at a 2.8 percent annual rate in the third quarter, according to the Commerce Department. That was the fastest since the final three months of 2006.
CNBC even displayed satellite images of a mall parking lot comparing car counts for a three year period. Of course there is no way to definitively determine if the count resulting from the painstaking process of placing red dots on cars reflected actual shoppers or an increase in "park-and-ride" vehicles.
In true WWE Smackdown fashion, CNBC attempts to whip viewers into a state of frenzy anticipating the best Black Friday in years. As with Smackdown, the promotional fanfare does not live up to the results.
By Dan Hart and Ian Thomson
Nov. 27 (Bloomberg) -- Black Friday sales were little changed, rising 0.3 percent, from last year, as U.S. retailers’ efforts to lure customers by opening early failed, ShopperTrak said.
The early holiday sales and promotions boosted sales and traffic for the first two weeks of this month through Nov. 13 by 6.1 percent and 6.2 percent, respectively, ShopperTrak said in a statement on its Website.
Shoppers nationwide spent $10.69 billion yesterday, Bill Martin, founder of Chicago-based research firm ShopperTrak, said in the statement. Black Friday is the day after Thanksgiving Day in the U.S. and the traditional beginning of holiday season buying.
Hundreds of people lined up at individual stores across the U.S. to take advantage of special deals as they face down a slow economic recovery. Sears Holdings Corp. and Toys “R” Us Inc. started their Black Friday “doorbuster” sales on Thanksgiving Day to attract consumers after two years of dampened shopping enthusiasm since the recession.
Sears, the largest U.S. department-store chain, opened at 7 a.m. with bargains that included a 58-inch Panasonic Corp. high- definition plasma television for $1,044, 55 percent off its list price of $2,299.
Open on Thanksgiving
Toys “R” Us, the world’s biggest toy retailer, opened earlier this year to accommodate customers who said they wanted to shop after Thanksgiving dinner, said Chief Executive Officer Jerry Storch. Employees at the chain’s Times Square store in New York handed out Santa hats to about 1,500 shoppers queued outside before the opening, spokeswoman Jennifer Albano said.
In 2009, Black Friday spending rose 0.5 percent to $10.66 billion, compared with a year earlier, according to ShopperTrak.
Analysts’ estimates for the holiday season’s aggregate sales vary from little changed to increases of as much as 4.5 percent. The Washington-based National Retail Federation forecasts a gain of 2.3 percent to $447.1 billion after an uptick of 0.4 percent last year and a 3.9 percent drop in 2008.
The projections coincide with a rebound in U.S. consumer spending this year as the economy began adding jobs. Consumer spending, which accounts for about 70 percent of the nation’s economy, increased at a 2.8 percent annual rate in the third quarter, according to the Commerce Department. That was the fastest since the final three months of 2006.
Assciated Press notes:
Comparatively, sales on Black Friday 2009 increased 0.5 percent
versus Black Friday 2008, with 10.66 billion dollars spent.
Tuesday, November 23, 2010
Thanks for applying however we do not need you, Corporate Profits Were the Highest on Record Last Quarter
By Catherine Rampell
The New York Times
11/23/10
The nation’s workers may be struggling, but American companies just had their best quarter ever.
American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or non-inflation-adjusted terms.
The government does not adjust the numbers for inflation, in part because these corporate profits can be affected by pricing changes from all over the world. The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.
Corporate profits have been going gangbusters for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as the fact that some of the profits of American companies come from abroad. Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly.
Tuesday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter. Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent. The economy grew at 1.7 percent annual rate in the second quarter.
Still, most economists say the current growth rate is far too slow to recover the considerable ground lost during the recession.
“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,” Paul Dales, a United States economist for Capital Economics, wrote in a note to clients. “This is unlikely to change in 2011 or 2012.”
The increase in output in the third quarter was driven primarily by stronger consumer spending. Wages and salaries also rose in the third quarter, which might help bolster holiday spending in the final months of 2010.
Private inventory investment, nonresidential fixed investment, exports and federal government also contributed to higher output. These sources of growth were partially offset by a rise in imports, which are subtracted from the total output numbers the government calculates, and a decline in housing and other residential fixed investments.
The New York Times
11/23/10
The nation’s workers may be struggling, but American companies just had their best quarter ever.
American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or non-inflation-adjusted terms.
The government does not adjust the numbers for inflation, in part because these corporate profits can be affected by pricing changes from all over the world. The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.
Corporate profits have been going gangbusters for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as the fact that some of the profits of American companies come from abroad. Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly.
Tuesday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter. Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent. The economy grew at 1.7 percent annual rate in the second quarter.
Still, most economists say the current growth rate is far too slow to recover the considerable ground lost during the recession.
“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,” Paul Dales, a United States economist for Capital Economics, wrote in a note to clients. “This is unlikely to change in 2011 or 2012.”
The increase in output in the third quarter was driven primarily by stronger consumer spending. Wages and salaries also rose in the third quarter, which might help bolster holiday spending in the final months of 2010.
Private inventory investment, nonresidential fixed investment, exports and federal government also contributed to higher output. These sources of growth were partially offset by a rise in imports, which are subtracted from the total output numbers the government calculates, and a decline in housing and other residential fixed investments.
Monday, November 15, 2010
Valuing an underperforming mall, What's In Your Reit?"
Analysis by Kenneth Leonard
Gerson Lehman Group
Ken Leonard Bio
11/14/10
The article goes into some detail about three of the largest and most recent repositioning (de-malling) projects; Villa Italia in Lakewood, Colorado, Bay Shore in Glendale, Wisconsin and Padre Staples in Corpus Christi, Texas. Although the article was a little vague on some of the specific financials, there was enough information to draw the following conclusions:
First and foremost, all three projects at the start of construction, were valued or acquired at only slightly more than the value of the underlying land. While there did not seem to be any major deductions for the cost of demolition, it is very clear that the real value of underperforming malls is NOT in the buildings or leases, it is in the land and zoning that allows for the development of what is essentially a new mall from the ground up. Additionally, when the contribution of the local governments, without which the project could not be built, are factored into the equation, (for such things as infrastructure improvements, garages, roads, etc.), the actual value of the pre-demolished mall is very close to zero. I wonder how many Mall REITs have given their de-malling candidates a zero value on their books?
Next and of almost equal importance, is the time, effort and money it takes to do the "pre-development" work. All three talk about the "several years" of working with the public sector to gain support and public funds for the development, before the first building can be demolished. None of these malls talked about how this very real pre-development cost was accounted for.
Finally, I thought the fact that all three redevelopment projects were shown upon completion, to be slightly less productive on a sales per-square-foot basis, than the original mall. the only thing that seems to save the projects from bankruptcy is the sizable amount of land that was redeveloped for office and residential purposes.
So the next time you see an article in the media that talks about the "hidden value" of underperforming retail assets, you should refer back to the Shopping Centers Today article of October, 2010, titled "Not For The Meek-Hearted.
Gerson Lehman Group
Ken Leonard Bio
11/14/10
Summary
A recent article in an industry trade journal features a reasonably candid picture of the costs and difficulties of repositioning an underperforming regional mall. I will summarize the article for any of the GLG readers who follow the Mall REIT industry and who may be lulled into a false sense of security about the values of those Mall REITs who are recognized as having a substantial number of underperforming malls in their portfolios.Analysis
This article states that "there are several hundred malls in the U.S. that are candidates for de-malling". In my opinion this is a very conservative number if one includes those malls that need to be demolished and have the land underneath put to other uses. However, "several hundred" is as good a number as any to work with and assume they are equally distributed among the Mall REITs.The article goes into some detail about three of the largest and most recent repositioning (de-malling) projects; Villa Italia in Lakewood, Colorado, Bay Shore in Glendale, Wisconsin and Padre Staples in Corpus Christi, Texas. Although the article was a little vague on some of the specific financials, there was enough information to draw the following conclusions:
First and foremost, all three projects at the start of construction, were valued or acquired at only slightly more than the value of the underlying land. While there did not seem to be any major deductions for the cost of demolition, it is very clear that the real value of underperforming malls is NOT in the buildings or leases, it is in the land and zoning that allows for the development of what is essentially a new mall from the ground up. Additionally, when the contribution of the local governments, without which the project could not be built, are factored into the equation, (for such things as infrastructure improvements, garages, roads, etc.), the actual value of the pre-demolished mall is very close to zero. I wonder how many Mall REITs have given their de-malling candidates a zero value on their books?
Next and of almost equal importance, is the time, effort and money it takes to do the "pre-development" work. All three talk about the "several years" of working with the public sector to gain support and public funds for the development, before the first building can be demolished. None of these malls talked about how this very real pre-development cost was accounted for.
Finally, I thought the fact that all three redevelopment projects were shown upon completion, to be slightly less productive on a sales per-square-foot basis, than the original mall. the only thing that seems to save the projects from bankruptcy is the sizable amount of land that was redeveloped for office and residential purposes.
So the next time you see an article in the media that talks about the "hidden value" of underperforming retail assets, you should refer back to the Shopping Centers Today article of October, 2010, titled "Not For The Meek-Hearted.
Monday, November 8, 2010
NAR sipping the Kool-Aid Again...Steady Improvement Predicted for Commercial Market
NAR Defines Steady Improvement:
"could see signs,"
"indicating a slight improvement,"
"lending practices must improve,”
"net absorption slowly improving,"
"GDP Expansion 2-2.5% next two years"
New Orleans, November 06, 2010
National Association of RealtorsWhile still experiencing challenges, the commercial real estate market could see signs of steady improvement in the near future, specifically concerning lending. This is according to two economists at the Economic Issues and Commercial Real Estate Business Trends Forum at the 2010 REALTORS® Conference & Expo in New Orleans today.
National Association of REALTORS® Chief Economist Lawrence Yun and Hugh Kelly, clinical professor of real estate at New York University Schack Institute of Real Estate, shared their predictions surrounding the commercial market, indicating a slight improvement in commercial lending.
“Banks’ profits have returned to healthy levels. As a result, it is inevitable they will return to the business they were created for, which is lending,” said Yun. “Commercial real estate has experienced a sharp price correction, but there is still a shortage of buyers because of lack of adequate capital resources.” Mr. Yun, are you familiar with "mark-to-model?"
Kelly pointed out that most commercial mortgages have been random and idiosyncratic, stressing that the lending environment should not remain that way. “The banks are in the driver’s seat, meaning they can cherry-pick deals and there is no stigma to turning away business,” said Kelly. “The capital flow in the commercial real estate market has been very selective. To achieve full recovery, lending practices must improve.”
In addition to capital flow, the commercial market depends largely on job creation. Yun stated that since the beginning of 2010, 1 million jobs have been created, yet this number is not high enough. “We have turned a corner and while some job creation is good, we are still at close to 10 percent unemployment,” said Yun. According to Yun, the country needs to create much more than 100,000 jobs per month to have a meaningful impact on vacancy rates.
Another challenge affecting the commercial market is corporate profits versus business spending. Yun said in an ideal market, corporate profits and business spending correlate; however, business spending currently is stagnant. Corporate profits have returned to normal, yet companies are not spending their cash. Yun described several reasons for why businesses are not spending, but he said it comes down to consumers and companies being unsure of the future economic climate.
A majority of the commercial real estate sectors are still experiencing hardships with office and retail vacancies continuing to rise. However, Yun said with imports and exports in the U.S. rising, the demand for industrial space will improve. The only sector continuing to perform well is multifamily. Vacancy rates for multifamily properties are falling and rents are expected to rise. Yun said this was mostly due to home ownership rates falling and people postponing home purchases. Mr. Yun, multifamily vacancy rates are falling because people are booted out of their foreclosed property...this is deemed a healthy and long term trend?
Yun’s 2011 commercial forecast shows steady improvement in the market with rents stabilizing and net absorption slowly improving. Yun also predicts a moderate GDP expansion of 2 percent to 2.5 percent in the next two years and an unemployment rate of eight percent in 2012 and six percent in 2015. Mr. Yun, we can't pay down our debt at 2 to 2.5% GDP.
Friday, November 5, 2010
REITS: "Fair-Value" Accounting Impact??
The trade group is not advocating fair value
but is giving FASB its input
(Why is "fair value" a negotiable item?)
Montreal Gazette
By Dena Aubin (Reuters)
11/4/10
NEW YORK - U.S. rule-makers are mulling an expansion of fair-value accounting to land and buildings held for investment, a change that could reshape the balance sheets of hundreds of real estate companies.
Fair value, which measures assets by their market worth rather than historical cost, is at the center of a big debate in the banking sector, where the Financial Accounting Standards Board is broadening its use.
The board has tentatively decided to also require fair value for investment property, potentially changing the way that hundreds of billions of dollars of commercial real estate are accounted for.
Companies likely to be most affected include real estate investment trusts, which own about $500 billion of commercial property, according to the National Association of Real Estate Investment Trusts (NAREIT), a trade association.
Under current generally accepted accounting principles, REITs value their buildings based on historic costs, depreciated each year. That method has long been criticized as giving an unrealistic value for real estate, which usually appreciates over time, despite its recent severe slump.
"I have heard people say if we report fair value, the information is more timely and transparent," said George Yungmann of NAREIT. The trade group is not advocating fair value but is giving FASB its input, he said.
Publicly traded REITs such as Simon Property Group (SPG.N), Boston Properties (BXP.N) and Vornado Realty Trust (VNO.N), along with REIT mutual funds, have become a growing asset class and are one of the only ways ordinary investors have to invest in large commercial properties.
PROPOSAL EXPECTED EARLY 2011
A draft fair-value rule for investment properties is expected early next year, according to FASB. No implementation date has been set.
The impact on companies' balance sheets would depend on the age of their properties, industry experts said. Some REITs have property that has been depreciated since the 1980s, and the value of those assets would be significantly stepped up, said Tom Wilkin, a real estate partner at PwC.
"Other assets that were bought at the peak of the market, maybe in 2006 or 2007, might have significant declines in value that haven't been recorded because they are not considered impaired," he said.
The proposed change is part of FASB's efforts to align U.S. accounting with International Financial Reporting Standards, set by the London-based International Accounting Standards Board. FASB's rule is expected to be similar to International Accounting Standard 40, which allows a fair-value option.
If FASB follows that standard, changes in real estate value would be recognized in net income.
While FASB has not yet defined which companies its rule would apply to, REITs, real estate operating companies and other companies that hold property for capital appreciation or rent could be affected, according to PwC.
FASB's proposed approach would differ from the international standard, which gives companies the option of using fair-value or cost accounting. FASB has tentatively decided that fair value would be required.
One impact could be a more timely picture of commercial real estate values. In the United Kingdom, where market values for real estate have been reported for years, prices of commercial property corrected during the recent downturn much sooner than they did in the United States.
Analysts said it is too soon to tell how fair value would affect REITs' share prices or some of the complicated measures used to value REITs.
Net asset value, a common benchmark for valuing REIT shares, already incorporates a rough estimate of the market value of REIT assets and may not change much, analysts said. NAV is essentially the current value of a REIT's assets, minus its liabilities.
Companies' reaction to fair value is guarded, PwC's Wilkin said.
"I think they're comfortable to a large degree with where they are," Wilkin said. "There are certain aspects of accounting today that they don't like. This would fix it, but 'is it worth the change?' is I guess the concern."
Montreal Gazette
By Dena Aubin (Reuters)
11/4/10
NEW YORK - U.S. rule-makers are mulling an expansion of fair-value accounting to land and buildings held for investment, a change that could reshape the balance sheets of hundreds of real estate companies.
Fair value, which measures assets by their market worth rather than historical cost, is at the center of a big debate in the banking sector, where the Financial Accounting Standards Board is broadening its use.
The board has tentatively decided to also require fair value for investment property, potentially changing the way that hundreds of billions of dollars of commercial real estate are accounted for.
Companies likely to be most affected include real estate investment trusts, which own about $500 billion of commercial property, according to the National Association of Real Estate Investment Trusts (NAREIT), a trade association.
Under current generally accepted accounting principles, REITs value their buildings based on historic costs, depreciated each year. That method has long been criticized as giving an unrealistic value for real estate, which usually appreciates over time, despite its recent severe slump.
"I have heard people say if we report fair value, the information is more timely and transparent," said George Yungmann of NAREIT. The trade group is not advocating fair value but is giving FASB its input, he said.
Publicly traded REITs such as Simon Property Group (SPG.N), Boston Properties (BXP.N) and Vornado Realty Trust (VNO.N), along with REIT mutual funds, have become a growing asset class and are one of the only ways ordinary investors have to invest in large commercial properties.
PROPOSAL EXPECTED EARLY 2011
A draft fair-value rule for investment properties is expected early next year, according to FASB. No implementation date has been set.
The impact on companies' balance sheets would depend on the age of their properties, industry experts said. Some REITs have property that has been depreciated since the 1980s, and the value of those assets would be significantly stepped up, said Tom Wilkin, a real estate partner at PwC.
"Other assets that were bought at the peak of the market, maybe in 2006 or 2007, might have significant declines in value that haven't been recorded because they are not considered impaired," he said.
The proposed change is part of FASB's efforts to align U.S. accounting with International Financial Reporting Standards, set by the London-based International Accounting Standards Board. FASB's rule is expected to be similar to International Accounting Standard 40, which allows a fair-value option.
If FASB follows that standard, changes in real estate value would be recognized in net income.
While FASB has not yet defined which companies its rule would apply to, REITs, real estate operating companies and other companies that hold property for capital appreciation or rent could be affected, according to PwC.
FASB's proposed approach would differ from the international standard, which gives companies the option of using fair-value or cost accounting. FASB has tentatively decided that fair value would be required.
One impact could be a more timely picture of commercial real estate values. In the United Kingdom, where market values for real estate have been reported for years, prices of commercial property corrected during the recent downturn much sooner than they did in the United States.
Analysts said it is too soon to tell how fair value would affect REITs' share prices or some of the complicated measures used to value REITs.
Net asset value, a common benchmark for valuing REIT shares, already incorporates a rough estimate of the market value of REIT assets and may not change much, analysts said. NAV is essentially the current value of a REIT's assets, minus its liabilities.
Companies' reaction to fair value is guarded, PwC's Wilkin said.
"I think they're comfortable to a large degree with where they are," Wilkin said. "There are certain aspects of accounting today that they don't like. This would fix it, but 'is it worth the change?' is I guess the concern."
Tuesday, November 2, 2010
Commercial Real Estate: “There’s almost a false optimism out there right now." Shhh...don't tell the REITS
Q4 Sentiment Index Remains Flat Amid
Weak Job Growth, Ongoing Refinancing Difficulties, Uncertainty Over Government Policy
(Shhh...don't tell the REITS)
WASHINGTON, Nov. 1, 2010 /PRNewswire-USNewswire/ -- Commercial real estate markets are in for a long, slow recovery amid persistently high unemployment, ongoing concern over government policy, uneven availability of capital for refinancing, and other factors dampening market activity, according to The Real Estate Roundtable's Q4 survey of over 110 senior commercial real estate executives.
The latest survey suggests continued incremental improvement in market activity, pricing and transaction volume as well as access to capital, although this is largely limited to well-leased, well-located "class A" properties — often in so-called "gateway" cities — prompting anecdotal references by survey respondents to a "bifurcated market." Aside from the most high-profile projects, said one respondent, "serious shortages exist for the majority of the industry in tapping both debt and equity."
The overall Sentiment Index dropped by one point this past quarter, to 73, but has been on a relatively flat trajectory since the beginning of the year and appears likely to stay that way for some time. Asked how real estate market conditions will be one year from now, fewer respondents in the Q4 survey said they expect conditions to be "much better," while more respondents projected only "somewhat better" conditions.
- “In the next 12 months, we’re going to be moving in the right direction, but slowly, very slowly.”
- “It’s ‘steady as she goes’ right now. The market has been healing as the broader economy has healed, but risk is still there.”
- “There’s almost a false optimism out there right now. Everyone wants things to improve, and there’s anecdotal evidence of improvement, but the empirical evidence suggests it’s getting worse.”
- “I’m not expecting a double dip or a rapid recovery. It will be a slowly sloped upward trend. The black swans are still out there, though. People aren’t discounting them the way they used to.”
Monday, November 1, 2010
Construction Spending Near Decade Low, Well Yippee...the stock market doesn't care
Daniel Indiviglio
The Atlantic
11/1/10
More money was spent on construction in September, revealed a report from the Census Bureau on Monday. But the report was actually a pretty negative one for the sector -- it revised downward the past two months' construction spending significantly. As a result, it has been virtually flat over the past three months, hovering around $800 billion, which is the weakest spending on construction in about a decade.
Here's a chart showing how construction spending has changed since 2000:
You can see how flat it has been over the past couple of months. In September it increased 0.5% to $801.7 billion. Over the past three months, construction spending hasn't risen above its July 2001 level.
September's increase might sound like an improvement, but it's only better than July and August because Monday's report revised downward both those months' tallies. They changed to $798.8 billion and $797.5 billion from $808.6 billion and $811.8 billion, respectively. As you can see, those are pretty big revisions. If spending for August hadn't been revised, then September's result would have meant a 1.2% decline, instead of a 0.5% rise.
Most of September's increase was due to a rise in public construction. Spending on structures by the government rose 1.3% from August. In the private sector, month-over-month spending was flat. This was mostly due to commercial construction remaining virtually unchanged, though residential construction rose slightly, by 1.8%.
Compared to a year earlier, private construction spending was much lower, down 16.8%. Public construction, however, has risen. It's up 1.3%. At this point, any growth in construction spending is clearly being driven by government spending, not firms creating more structures for growth.
See Grandpa's comments: Government reports revised, then revised and revised yet again
The Atlantic
11/1/10
More money was spent on construction in September, revealed a report from the Census Bureau on Monday. But the report was actually a pretty negative one for the sector -- it revised downward the past two months' construction spending significantly. As a result, it has been virtually flat over the past three months, hovering around $800 billion, which is the weakest spending on construction in about a decade.
Here's a chart showing how construction spending has changed since 2000:
You can see how flat it has been over the past couple of months. In September it increased 0.5% to $801.7 billion. Over the past three months, construction spending hasn't risen above its July 2001 level.
September's increase might sound like an improvement, but it's only better than July and August because Monday's report revised downward both those months' tallies. They changed to $798.8 billion and $797.5 billion from $808.6 billion and $811.8 billion, respectively. As you can see, those are pretty big revisions. If spending for August hadn't been revised, then September's result would have meant a 1.2% decline, instead of a 0.5% rise.
Most of September's increase was due to a rise in public construction. Spending on structures by the government rose 1.3% from August. In the private sector, month-over-month spending was flat. This was mostly due to commercial construction remaining virtually unchanged, though residential construction rose slightly, by 1.8%.
Compared to a year earlier, private construction spending was much lower, down 16.8%. Public construction, however, has risen. It's up 1.3%. At this point, any growth in construction spending is clearly being driven by government spending, not firms creating more structures for growth.
See Grandpa's comments: Government reports revised, then revised and revised yet again
Construction Spending: Census Bureau and Commerce Department continue their struggle with adding and subtracting
Welcome to the U.S. Census Bureau/
Department of Commerce.
REVISE...REVISE...REVISE...
Common headline of the day: Construction Spending in U.S. Unexpectedly Rose in September. Of course the number unexpectedly rose given the continual downward revisions of the U.S. Census Bureau/Department of Commerce.
August 2010 construction spending was initially reported at $811.826 billion then revised to $797.457 billion in today's report. Due to the usual overstatement in the initial report, September construction spending beat August.
Do you really think August was an abnormality with respect to measurable downward revisions?
Current Revised/Initial Report/Month
- $797.457 billion/$811.826 billion/ for August
- $798.752 billion/$805.159 Billion/ for July
- $820.198 billion/$$836.012 billion/ for June
- $819.702 billion/$$841.888 billion/ for May
- $869.088 billion/$834.148 billion/ for April
- $824.023 billion/$847.300 billion/ for March
- $815.797 billion/$846.200 billion/ for February
- $841.040 billion/$884.100 billion/ for January
Total September Construction is down 10.4% year over year. Total Residential construction is down 5.3% year over year and total Non-Residential construction is down 12.4% year over year. Total PRIVATE CONSTRUCTION is down 16.8% year over year.
Total construction spending for September 2010 remains lower than January through June 2010. Thank God for the government as total Public Construction is up 1.4% year over year.
Welcome to how the U.S. Government assists with launching the market; throw out a figure beating expectations, crank up Queen's "We Are the Champions" as the stock market launches and quietly revise the figure below initial expectations during the next 60 to 90 days. Census Bureau Remedial Math Reports
I've paid my dues -
Time after time -
I've done my sentence
But committed no crime -
And bad mistakes
I've made a few
I've had my share of sand kicked in my face -
But I've come through
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