Monthly Archives: July 2009

Retail returning to big cities: JLL Poland

According to JLL’s latest report, retail developers in Poland are set to turn their eyes once again to the big cities. After dozens of projects that have already changed the character of retail on secondary and tertiary markets, the difficult market conditions — problems with financing and the decreasing dynamics of consumer spending in Poland — will cause retail developers to return to Poland’s larger cities.

Warsaw, Kraków and Wrocław have more diversified economies and will therefore be less vulnerable to the crisis. On top of that, Poland’s best retail market, Warsaw, still has areas where retail development is light years behind residential. So, has the race now begun for the next Złote Tarasy?

Scary US real estate numbers

The level of distress in US commercial real estate is finally becoming clear, with increasingly large swaths of loans made from 2005 to 2007 proving problematic. Realpoint offers an in-depth look at the damage.

In June 2009, the delinquent unpaid balance for CMBS increased by a substantial $9.87 billion, up to a trailing 12-month high of $28.65 billion. Overall, the delinquent unpaid balance grew for the 10th straight month, up an astounding 585% from one-year ago (when only $4.18 billion of delinquent balance was reported for June 2008), and is now almost 13 times the low point of $2.21 billion in March 2007.

Armonia shopping center in Braila to close

Red Management’s €45m Armonia shopping center in Braila, Romania, will shut down for at least six months of repositioning. The center was attracting as few as 2,000 visitors on some days, and sales were far below what had been expected. Managing director Andrew Stear was quite open with Ziarul Financiar about what went wrong.

“We have certainly not sufficiently researched the Braila market. The project is not drawing enough people, and the level of retailers’ prices is above the city inhabitants’ purchasing power. We’ll close Armonia centre in August to reposition it as a regional discount shopping centre and we hope we can reopen it in six to nine months”

Real estate valuations in US at root of crisis

In a link that comes via Naked Capitalism,  Elena Panaritis,  an expert in property rights.

We cannot achieve secure derivative trading if the information on the underpinning asset is not standardized but oblique and difficult to find – because markets run on information. In the same way we understand the need to standardize derivatives, we must understand the need to do the same for the underlying real estate assets. While we have national and international trading in asset-based securities, the information on the assets themselves is localized, and the way it is collected and reported varies from county to county and state to state.

Warning on German banks

Naked Capitalism carries a warning for everyone who thinks German banks are doing well.

Germany never participated in the upswing of the housing bubble. This fact has led German politicians of all stripes to mistakenly believe their banking system was somehow immune to the problems infecting bubble markets like the US or Spain.  Unfortunately, it has not worked out that way because the globalization of finance has shifted risk far and wide within the global financial system.

The article points directly at the Landesbanks and says that the topping up of Commerzbank has given market observers with a false sense of security. Deeper discussion of the issue comes from a link provided by a reader in the comments section.

Prague’s Congress Center drowning in debt

Looking for a distressed asset? Look no further than Congress Center Prague, the building reconstructed back in 2000 in time for the World Bank meeting. Financing for the massive construction project put the asset CZK 1.4bn in the hole, a liability that will sink it by next year, according to current estimates.

That leaves the city with little option but to sell the center, though Prague will try to retain some sort of shareholding.

“KCP’s operations will be weighed down in the long-term by debt servicing that is stressing the company so much that under current conditions it will be unable to meet all of its obligations,” said city councilor Milan Richter.

Bazaar beatings in Warsaw

In scenese marked by violence, police in Warsaw moved in yesterday to close down what we can only describe as the unsightly KDT bazaar on Plac Defilad whose retailers saw their lease run out at the end of last year. They’d been given until yesterday to clear out, but they obviously had no intention of doing so. Sensing trouble, a huge police force numbering in the hundreds moved in to throw them out. Traders in KDT demanded they be allowed to stay until a replacement building is completed in 2011, but the city intends to prepare the way for an modern art museum that is to take its place. Dozens of people were injured in the riot.