WSJ(5/7) What's Brewing In The Real-Estate Market 07/05/2008 9:58AM (From THE WALL STREET JOURNAL) [What's Brewing in the Real-Estate Market]
Centro See-Saw
Shopping-center owner Centro Properties Group, which needed to secure its fourth repayment extension on $4.9 billion in debt by Wednesday, had to grant one of its lenders a mulligan to do so.
Centro, which owns roughly 680 shopping centers in the U.S. and 130 in Australia, was on the verge of getting a 7 1/2-month extension when one lender balked two days before the April 30 repayment deadline, people familiar with the matter say. German bank WestLB, which holds less than $200 million of Centro's debt, had just received a $7.8 billion bailout from the European Union and wanted more time to consider the deal.
The banks then granted a seven-day interim extension to resolve the matter. In a deal expected to be announced Wednesday, the banks have agreed to extend the deadline to Dec. 15, according to people familiar with the talks.
The catch: WestLB gets to revisit its decision late this month or early next, once again examining data that Centro will provide it about its operations, these people say. If WestLB elects to bolt from the extension, it could mean that Centro or the other banks will have to pay its claims or that Centro will end up in the Australian equivalent of bankruptcy court. Both Centro and WestLB declined to comment.
Super Bowl Hangover
Hotels in the Phoenix area should have printed money in the first quarter. After all, the area hosted the Super Bowl in February, baseball spring training in March, and an early Easter vacation season.
But the overall economic decline in the once-booming desert city had a bigger impact than these one-time or seasonal events. Data from Smith Travel Research show Phoenix posted an 8.6% decline in occupancy through March compared with the year before. Revenue per available room, or revpar, a commonly used hotel measure, is down 1.6%, not including inflationary effects.
Even the one data bright spot might be an illusion. The average daily rate hoteliers charged was up 7.6% through March. But much of that bump was thanks to the Super Bowl month, February, when rates jumped 17.8% from the year before. Rates fell back in March, up just 1.3% from March 2007.
Asia Gets Pinched
A bit of caution for property investors wishing to park their money overseas: Even Asia, a region that so far has withstood the global credit-market crunch with robust real-estate demand and rising prices, is expected to feel the pinch from the slowdown in the U.S. and Europe, real-estate adviser Newmark Knight Frank says in a report.
That is because weakening Western economies are likely to further curb the exports from countries like China and India, which in turn would damp demands for things like office space in those countries. World-wide, the report concludes that softening property sales that started with such major markets as London and New York in the second half of 2007 will extend into more regions as downward pressure continues into this year.
Because of the likely drop in exports, demand for real estate in the majority of Asian countries is expected to grow at a slower rate over the near term, says Peter Kozel, executive managing director at Newmark Knight Frank. For instance, Mr. Kozel says, office rents in places like Hong Kong, which have grown at a rate of more than 30% during the past two years, will flatten out in the next couple of years.
-- Kris Hudson, Alex Frangos and Lingling Wei
(END) Dow Jones Newswires
May 06, 2008 19:58 ET (23:58 GMT)
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