April 16, 2014

New York REIT Starts Fast

Nicholas Schorsch has been snapping up properties, including 367-369 Bleecker St. in New York.
Keith Bedford for The Wall Street Journal

For the past year,

Nicholas Schorsch,

one of the country’s most active real-estate investors, has been snapping up marquee New York commercial properties in the hope that Wall Street would bestow on them a rich valuation.

The early results are in, and investors seem to like what they see.

Shares of Mr. Schorsch’s latest real-estate investment trust, American Realty Capital New York REIT, listed Tuesday on the New York Stock Exchange and closed trading at $10.75 a share, rising close to 3.8% in the last hour of trading. Before Tuesday, the shares were valued at $10 each.

To be sure, New York REIT’s prelisting marketing materials say the 23 retail and office properties owned by the company are actually worth $12.47 a share. But it isn’t unusual for REITs to trade below their net asset values, especially new companies.

Mr. Schorsch previously said that it would be a “victory” if share prices traded at $10.75 the first day of listing.

In an interview after markets closed Tuesday, Mr. Schorsch said New York REIT was the “most successful listing” of any company he has taken public. “I had hoped that we would exceed the opening price of $10.70, and it did. That’s the definition of a good opening day for a stock.”

Nicholas Schorsch
Keith Bedford for The Wall Street Journal

The pricing of New York REIT has been closely watched in the real-estate industry. Mr. Schorsch has built a large property-buying operation based on his ability to raise billions of dollars mostly from small mom-and-pop investors through companies known as nontraded real-estate investment trusts.

The nontraded REIT industry has attracted some critics as well as regulatory scrutiny over issues such as disclosure and high broker fees.

Mr. Schorsch has countered critics by pointing to the good returns that he has produced for many of his investors.

Nontraded REITs technically are public companies, but their shares aren’t listed on any stock exchanges; instead, they are sold directly to retail investors through a network of broker-dealers, typically by promising high dividends.

Over 100 nontraded REITs have raised over $100 billion since the industry got going in the early 1990s. But fundraising has intensified in the past few years as investors have looked for yield in a low-interest-rate environment.

Mr. Schorsch, who has developed 18 nontraded REITs in total, has been by far the biggest player in the industry. Last year, companies under his sponsorship raised $8.1 billion, about 41% of all the funds raised by nontraded REITs in 2013, according to Robert A. Stanger Co., a New Jersey investment bank.

But for the investments to work, at some point the nontraded REITs have to liquidate. They do this either by selling their properties, merging with another company, going public in an initial public offering or changing their nonlisted shares to listed shares, which is what Mr. Schorsch did Tuesday with New York REIT.

The goal of the companies is to value the shares in these so-called liquidity events at a high-enough price to produce a good return for the original investors in the nontraded REITs.

As a nontraded REIT, New York REIT raised funds between 2010 and 2013 from investors who paid $10 a share and have received 6% annual dividends. Its biggest transaction was its purchase of a 49% stake in Worldwide Plaza, a 50-story office tower in Midtown Manhattan. The deal valued the building at $1.3 billion.

Some analysts have questioned Mr. Schorsch’s valuation of the company’s assets, pointing out that 80% of the company’s assets were acquired in 2013.

Green Street Advisors, a real-estate stock research firm, estimates that Manhattan office property values have risen about 8% since then. “To accept American Realty Capital’s suggested net asset value, investors would have to believe that the assets New York Recovery REIT acquired in 2013 have since appreciated meaningfully in value,” says John Bejjani, an analyst with Green Street.

In conjunction with Tuesday’s listing, existing investors in the New York REIT also were offered a tender offer of $10.75 a share, up to $250 million, on a limited basis.

Bruce Cassidy, a retired pulmonologist who lives in Atlanta, started buying shares of the New York REIT at $10 around the end of last summer. He and his wife now own about 19,000 shares, and he said he doesn’t plan to sell them right away because he thinks the company’s value will rise in the coming months.

“I’m not a stock guru, but I think there’s room for the price to go up,” he said. “Sure, I’d love it to be at [$11.50], but looking at everything, I’ve already got a gain, and I do have some confidence that it’ll go a little higher. I’m certainly willing to wait 30 to 60 days.”

Write to Robbie Whelan at robbie.whelan@wsj.com

Article source: http://online.wsj.com/article/SB10001424052702303887804579503893888330838.html?mod=residential_real_estate

Building a School That Replaces Its Used Energy

On a remote plot of scrubland in the southwestern corner of Staten Island, the city is building a school unlike any other in New York.

When P.S. 62 has its opening scheduled for the fall of 2015, it will be billed as a “net zero” school. This jargon means that, according to the architect’s projections, the new public elementary school for 444 pre-K through fifth-grade pupils will produce at least as much energy as it…

Article source: http://online.wsj.com/article/SB10001424052702303532704579481710893597826.html?mod=residential_real_estate

No Big Spring Bounce for Housing Starts

Two of the three measures of residential
construction activity used by the Census Bureau fell slightly in March.  Fewer permits were issued and fewer homes
reached completion than in February while housing starts rose slightly.

The Bureau and the U.S. Department of
Housing and Urban Development report that residential building permits were issued
in March at a seasonally adjusted annual rate of 990,000 units.  This is 2.4 percent below the revised
February rate of 1,014,000 units and 11.2 percent higher than the rate of
890,000 units issued in March 2013.

Permits for single family houses were
issued at a rate of 592,000, 0.5 percent above the February estimate of
589,000.  Permits for construction of
units in buildings with five or more units were at the rate of 370,000 units
compared to 402,000 in February.

On a non-seasonally adjusted basis an
estimated there were 83,000 permits issued compared to 70,500 in February.  Single-family permits accounted for 50,800 of
the total compared to 41,200 the previous month.

Housing starts were up 2.8 percent to a
seasonally adjusted annual rate of 946,000 units from a revised February estimate
of 920,000 units.   This number is 5.9
percent below
starts a year earlier which were at a rate of 1,005,000
units.  Single-family starts were at a
rate of 635,000, up 6.0 percent month over month and starts in multifamily
units were at a rate of 292,000 compared to 311,000 in February.

On an unadjusted basis there were 79,100
housing starts of which 54,000 were single family.  In February the corresponding numbers were
63,300 and 41,200.

Housing completions were at a rate of 872,000,
0.2 percent below February’s rate of 874,000 and 7.7 percent higher than a year
earlier when completions were running at 810,000 units.  Single family units were completed at a
602,000 pace, down 3.8 percent and multifamily completions rose 7.9 percent to
a rate of 258,000.

Completions were estimated to number
67,500 on an unadjusted basis compared to 60,400 the previous month.  Single-family units accounted for 46,900 and
44,000 of those totals respectively.

Permitting rose 33.3 percent in the
Northeast
compared to February and 36.0 percent from March 2013 Housing starts
also jumped, up 30.7 percent for the month and 22.3 percent for the year.  Unit completions were unchanged from February
and down 33.3 percent on an annual basis.

In the Midwest permits were up 26.0
percent month-over-month and 18.7 percent year-over-year.  Housing starts rose 65.5 percent from
February and were 2.9 percent above the same period in 2013.  There were 14.1 percent fewer completions
than in the previous month but 15.5 percent more than a year earlier.

There was a 17.1 percent decrease in the
rate of permits issued in the South in March and permits were down 1.1 percent
from a year earlier.  Housing starts fell
9.1 percent and 13.9 percent for the two respective periods.  Completions increased 1.3 percent from
February and were up 26.7 percent from a year earlier.

The rate of permitting in the West was
unchanged from a month earlier but was 21.4 percent higher than in March 2013.
Starts were down 4.3 percent and 3.2 percent and completions rose 7.4 percent
from February but were down 10.2 percent year-over-year.

At the end of the reporting period there
were 108,000 permits outstanding for which construction had not yet started
compared to 105,500 in February.  There were
709,300 units under construction.

Article source: http://www.mortgagenewsdaily.com/04162014_permits_and_starts.asp

Mortgage Rates Slightly Higher, but Remain Near Recent Lows

Mortgage rates were slightly higher today as investors continued to pull back from yesterday’s geopolitically motivated buying spree.  Tensions in Ukraine had created a short term spike in demand for fixed income securities like Treasuries and the mortgage-backed-securities (MBS) that most directly influence mortgage rates.  Higher demand means lower rates.

As we saw yesterday, that spike in demand led to moderate improvements in rates, but had already started fading by the end of the day.  This morning simply continued in that same vein, resulting in higher mortgage rates.  That said, the weakness has been merely moderate.  Weaker housing data helped to prevent further bond market weakness (bonds tend to improve when economic data is weaker than expected).

The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains centered on 4.375%. Some lenders are close to 4.25% and fewer still are at 4.5%.  When adjusted for day-to-day changes in closing costs, today’s rates are 0.02% higher.  Despite the modest weakness, rates are still much closer to their recent lows than they are to the highs seen in early April.


Loan Originator Perspectives

“My position is one of extreme caution. Our rates/points combinations
have been improving, despite often positive economic news. Is there a
herd mentality moving markets… yes. Do you want to be on the wrong
side of the herd, chasing you down…no. Lock if you like your rate,
don’t chase the best rate possible.. you likely won’t get it.” -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group

“Increasingly, it looks like something big will need to
happen overseas or in the domestic economy in order for rates to move below their recent range.  I don’t think it’s prudent to bet on a big event to
get us there.  Considering we’re still closer to the lower end of that range, locking is the best call. ” -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans

“LOCK–We remain very close to the lowest points in the last 3 months,
until we see a significant move, confirming a break lower, I still
believe locking is the best decision. Risk vs reward, and currently the
greater risk is to higher rates.” -Brent Borcherding, www.brentborcherding.com

 

Today’s Best-Execution Rates

  • 30YR FIXED -4.375%
  • FHA/VA – 4.00%
  • 15 YEAR FIXED -  3.375%
  • 5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of “coming to terms with tapering” in 2013.  
  • Rates fell significantly in January, leveled-off in February and took choppy steps higher in March
  • Some mitigating factors had kept rates from moving too far out of a narrow range, including the uncertain impact of weather on recent economic data as well as geopolitical risk surrounding Ukraine
  • As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January’s highs.
  • Barring surprises, even within the very narrow trend from January through March, we’ve seen a slight bias toward higher rates.  It will take economic or geopolitical surprises to push back against that momentum.
  • (As always, please keep in mind that our Best-Execution rate always
    pertains to a completely ideal scenario.  There are many reasons a
    quoted rate may differ from our average rates, and in those cases,
    assuming you’re following along on a day to day basis, simply use the
    Best-Ex levels we quote as a baseline to track potential movement in
    your quoted rate).

Article source: http://www.mortgagenewsdaily.com/consumer_rates/356474.aspx

MBS RECAP: Sharply Sideways Day for Bond Markets

As of the 3pm Treasury pit close (the unofficial end of the day for bond markets), little, if anything has changed from this morning. Despite having a wide variety of potential market movers in play, bond markets instead saw a session that would be hard pressed to be more uneventful.

Treasuries were slightly weaker in the overnight session with yields pushed higher by a generally improving risk tone. This may have had something to do with stronger Chinese GDP, but even without it, there was still some ‘unwinding’ to do from yesterday’s Ukraine- inspired flight-to-safety. When we see such flights, bond markets are preemptively moving into stronger territory on the chance that geopolitical tensions continue escalating rapidly. If geopolitical tensions to anything else, bonds lose some of those gains.

That general theme made for weaker opening levels in MBS, though just as they underperform Treasuries into the risk rally, they outperform into the unwinding of that rally. In other words, MBS weren’t as weak as Treasuries at the open, when compared to yesterday’s latest levels.

Weaker Housing Starts data helped bond markets hold their ground against further losses and from there on out, bonds held on to the weakest levels as a supportive barrier. For what it’s worth, those supportive levels were starkly in line with yesterday’s weakest levels.

When bond markets continue to trade INSIDE yesterday’s range (aka an “inside day”), it tacitly confirms one of two things. Either there’s a tremendously well-balanced battle between bulls and bears, or the day is simply uneventful. Given the lack of concerted effort to push in either direction combined with the tepid economic data and tomorrow’s early closure before an extended holiday weekend, we’ll go with the latter (i.e. “simply uneventful”).

Article source: http://www.mortgagenewsdaily.com/mortgage_rates/blog/356528.aspx

Little House, Long History

  • Price: $1,295,000
  • Location: Palisades, NV

This Federal-style home in the Palisades, built around 1820, is listed on the National Register of Historic Places and played host to prominent artists such as folk singer Woody Guthrie and writer Carl Sandburg. — Jackie Bischof

Article source: http://online.wsj.com/article/SB10001424052702303456104579489972496864850.html?mod=residential_real_estate

Housing Trouble Grows in China

CHANGZHOU, China—Wu Xuesong, a professor in this city on the Yangtze, says he doubled his money on an apartment he bought as an investment some years back and is ahead on a second.

Buy a third? Forget it.

Mr. Wu slides open a dining-room window and points to the dark shadow of a new apartment complex, where only a handful of lights are…

Article source: http://online.wsj.com/article/SB10001424052702303456104579487790125203828.html?mod=residential_real_estate

Former Tobacco Hub Clears the Air

Wake Forest Biotech Place is one of three former tobacco factories Wexford renovated in Winston-Salem.
Wexford Science Technology

Activists in the world of historic preservation have long staked a claim to rescuing architecturally important train stations, government buildings and private estates. Many now are shifting their focus to saving vestiges of America’s industrial past, mainly old mills and factories.

Some examples of their work can be found in North Carolina. Under a state tax-credit program pushed by preservationists, real-estate developers are rehabilitating aging textile mills and tobacco factories and transforming them into modern offices and research labs.

The old plants are worth preserving because they represent North Carolina’s “industrialization at the turn of the 20th century,” said Myrick Howard, president of Preservation North Carolina. “The textile and tobacco industries provided the capital for the rise of our modern banking and energy industries.”

A big user of the tax-credit program is Wexford Science Technology, a unit of San Diego-based


BioMed Realty Trust Inc.,



BMR +0.99%



BioMed Realty Trust Inc.


U.S.: NYSE


$20.33


+0.20
+0.99%



April 15, 2014 4:03 pm

Volume (Delayed 15m)
:
1.06M



AFTER HOURS



$20.33


0.00
0.00%


April 15, 2014 4:19 pm

Volume (Delayed 15m):
8,425




P/E Ratio
101.65

Market Cap
$3.88 Billion


Dividend Yield
4.92%

Rev. per Employee
$2,853,890









04/15/14 Preservationists Tackle Tobacc…
More quote details and news »




BMR in







Your Value
Your Change









Short position




which has renovated three former R.J. Reynolds tobacco factories in Winston-Salem. The old tobacco factories are part of the Wake Forest Innovation Quarter biomedical-science and information-technology hub, where researchers are working on treatments for smoking-related ailments.

“It’s really kind of ironic that they’re able to convert [former tobacco factories] into research and knowledge-oriented businesses” that could make Americans healthier, said Daniel Cramer, senior vice president of development for Wexford.

Wexford, which builds and manages university research parks and health-care facilities, began rehabilitation work last week on a former Chesterfield cigarette factory in Durham that will become a multitenant research center. The seven-story, 300,000-square-foot brick building was once part of the Liggett Myers Tobacco Co. complex. Wexford purchased the building for $7.5 million late last year. The company declined to say how much the rehabilitation would cost, noting that will largely depend on what tenants it signs. The Chesterfield brand—whose past spokesmen include former President Ronald Reagan—still exists but was sold to Philip Morris, now part of Altria Group, in 1999.

North Carolina mills and factories began emptying out two decades ago due to rising imports and worker-displacing technology. Hoping to retain pieces of the state’s manufacturing history while also sparking an economic revival, the state passed a “mill rehabilitation tax credit” in 2006. It can be used by developers that rehabilitate former manufacturing space in certified historic structures that had been at least 80% vacant for two or more years.

Companies that qualify for the tax credit can reduce the costs of rehabilitation by up to 60% when they combine the state mills-rehabilitation tax credit with a federal historic-preservation tax credit.

Other mill renovations under way in North Carolina include that of the former Loray textile mill in Gastonia, for $64 million. It will become a mixed-use center with commercial and office space, topped by apartments. A $44 million first phase of renovation is expected to be completed this summer. The development is being done by Historic Preservation Partners LLC.

North Carolina’s tax credit has driven $559.6 million of completed renovations of 26 old manufacturing facilities since 2006, according to the North Carolina State Historic Preservation Office. Currently, there are 28 proposed or ongoing renovations as companies rush to apply for the program before it expires Jan. 1, 2015. Mr. Howard expects the credit will be extended in some form.

Absent the credit, most companies would prefer to build new, especially in states like North Carolina where land is plentiful, said Wexford’s Mr. Cramer. “We could have built new buildings,” he said. “But the economic benefits to these tax credits are strong enough that you wouldn’t really choose to do new construction unless you had to.”

Write to Donna Kardos Yesalavich at donna.yesalavich@wsj.com

Article source: http://online.wsj.com/article/SB10001424052702303887804579501910876691616.html?mod=residential_real_estate

Consumer Expectations Rise Slightly Along with Inflation Fears

Another survey has found a slight
overall improvement in consumer attitudes toward the economy.   The New York Federal Reserve Bank said that
its monthly Survey of Consumer Expectations (SEC) for March showed increasingly
positive attitudes toward income growth, employment, and access to credit.  At the same time consumers appear more wary
about the possibility of inflation and have moderated their outlook toward the
growth of home prices.

Consumers’ expectations about median
earnings growth over the next six months had remained flat from the survey’s
inception in June 2013 but began to climb at the beginning of this year and rose
to 2.4 percent in March, the survey’s highest point, from 2.26 percent in
February.   The Fed said the expectation of higher wages
increased among consumers everywhere but in the Midwest. 

 

 

Another improvement was noted in
consumer attitudes about keeping or if necessary finding a job.  Respondents were asked a series of questions
about losing or voluntarily leaving their jobs and the percent chance of
finding an acceptable new position within three months.  As might be expected there was wide variation
across demographic groups
, but the mean perceived chance of being laid off
declined slightly to about 16 percent (it peaked at over 17 percent last fall),
driven by a drop in perceived layoff risk among college graduates.  The overall expectation of finding another
job rose to 49 percent from 46.1 percent in February.  The likelihood that one might quit voluntarily
fell slightly as well, falling under 20 percent for the first time since
September.

 

 

Expectations about
home price increases have moderated since the beginning of the year.  The January survey elicited a peak price
increase projection of 4.64 percent.  This
dropped to 4.0 percent in February and to 3.81 percent in the most recent
survey, matching the low point in October
2013.
  This pattern did not hold in the West
where respondents expected a higher rate of increase.

 

 

Perceptions of credit availability
improved
slightly, with fewer people finding it harder to obtain credit today
compared to a year ago. Debt delinquency expectations also declined slightly.

Concern about inflation rose,
especially among groups with lower education. 
Consumers had a median expectation of a 3.20 percent rise in inflation over
a one-year horizon and a 3.38 percent increase over three years.  This is an increase from the 3.09 percent and
3.18 percent respectively reported in February.

A question about the likelihood of a
respondent changing residence over the next year garnered a 20 percent positive
response, virtually unchanged over the life of the survey.  There is significant variation on a regional
basis, however, with participants in the Northeast far less likely to
anticipate a move (13.96 percent) than those in the West (22.31 percent.)  This regional pattern has also been
consistent; a third of westerners indicated they could relocate in one early
survey edition.  

 

The SEC is designed to provide
information about how consumers expect overall inflation and its component
prices to behave and to gather data about American attitudes toward job
prospects, earnings growth, and other concerns. 
It also provides measures of uncertainty about the main economic outcomes.  The survey is conducted on-line among a
rotating panel of about 1,200 heads of household each of whom participates in
the panel for up to twelve months, allowing survey managers to observe changes
in expectations and behaviors over time.

Article source: http://www.mortgagenewsdaily.com/04152014_consumer_attitiudes.asp

New Home Applications Up in March

The Mortgage Bankers Association (MBA)
estimated today that there was a 15 percent increase in applications for new
home purchases in March compared to February even as the annual pace of new
home sales eased. MBA’s Builder Application Survey (BAS) which tracks mortgage
application volume from mortgage subsidiaries of home builders, indicated that
sales of new single-family homes were running at a seasonally adjusted annual rate
of 479,000 units in March, a decrease of 10.1 percent from the February
estimate of 533,000 units.

On a non-seasonally adjusted basis MBA
estimates sales for the month at 46,000 units. 
This is an increase of 7.0 percent from the estimated 43,000 sales
reported in February.

Conventional loans made up 68.3 percent
of new home purchase applications and FHA-backed mortgages accounted for 17.2
percent.  VA loans comprised 12.9 percent
and 1.6 percent were Rural Housing Services/USDA loans.  The average size of a new home loan increased
from $295,008 in February to $296,428 in March.

MBA derives its sales figures from mortgage application information gathered
through the BAS and assumptions about market coverage and other factors.   Official new home sales estimates are conducted by the
Census Bureau on a monthly basis.  In that data, new home sales are
recorded at contract signing, which is typically coincident with the mortgage
application.  The MBA estimates the coverage for the BAS is almost 30 percent
of the new home sales market.

Article source: http://www.mortgagenewsdaily.com/04152014_mba_new_home_sales.asp