Jefferies Research - Germany: A Budding Real Estate Boom

Germany: A Budding Real Estate Boom [Sean Darby, Kenneth Chan, Irene Zhou]
A combination of firm wage growth, negative bund yields, dormant inflation and a booming current account surplus is allowing the German real estate market to reflate. In comparison to Western markets, the German property market starts from a much lower base and also relatively favorable price comparison. We are bullish on the real estate sector as well as the DAX.

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China's Love Affair with U.S. Real Estate Fades

U.S. real-estate sales to Chinese buyers fell for the first time since 2011. U.S. realtors say China's capital controls and currency depreciation are having an impact on potential buyers pulling the trigger. Bloomberg's Shery Ahn met with a young Chinese professional in New York to find out how the conditions are affecting her purchasing power. (Source: Bloomberg)

Consultatio's Costantini bullish on Argentine real estate

Things are looking up for Argentina's high-end real estate sector after it struggled for years under former President Cristina Fernandez's unorthodox economic policies, industry leaders told Reuters this week. Eduardo Costantini has made a name for himself in recent decades with luxurious residential mega-projects, such as the massive Nordelta community north of Buenos Aires.

In an interview on Tuesday as part of a Reuters Summit on Argentina, Costantini…. VIEW ARTICLE

Argentine real estate and banking tycoon Eduardo Costantini poses in front of his museum in Buenos Aires, Argentina, August 9, 2016. Picture taken August 9, 2016. REUTERS/AGUSTIN MARCARIAN

Argentine real estate and banking tycoon Eduardo Costantini poses in front of his museum in Buenos Aires, Argentina, August 9, 2016. Picture taken August 9, 2016. REUTERS/AGUSTIN MARCARIAN

Standard & Poor's New Real Estate Sector Is A Catalyst For REITs

On September 17, Standard and Poor’s will start a new Real Estate sector which will include all of the real estate investment trusts (REIT) that are currently classified in the Financial sector. Many institutional investors, mutual funds, and exchange traded funds are going to be required to move capital into this new sector when it becomes official. Sam Miklosko tells us what to expect and how we can take advantage of this situation..... FULL ARTICLE

There Are All Kinds of Signs of a High-End Real Estate Slowdown

According to real-estate website StreetEasy, 12 of the condos in Manhattan currently listed at over $20 million have had their prices cut by 5 percent or more in recent months, while only 2 of them have seen any increase in their listing price. Among the cuts is a condo at 1 Central Park South. It's been on the market for more than 250 days, and is now on sale at $45.5 million, $6.45 million less than its price a few weeks ago.

That's just one of the indications that the market may be slowing down. Here are some others: 

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Aerial view of Lower Manhattan on Friday, June 19, 2015. Photographer: Craig Warga/Bloomberg

WUNDERLICH Update - Rexford Industrial Realty, Inc. (REXR: $22.34)

Equity REITs

Model Update Post 2Q16 Results & Preferred Offering

Estimate Changes Rating: Hold

Price Target: $20.00

Market Cap: $1,475.1

We are maintaining our Hold rating and $20 target on Rexford Industrial Realty (REXR) as we update our model for 2Q16 results and a subsequent preferred equity offering. REXR is a pure play on infill industrial real estate in Southern California, where we believe management has targeted a niche wherein consistent shareholder value can be created due to a deep understanding of the market and significant research capacities, giving REXR the ability to persistently source accretive off-market deals. While embedded occupancy upside represents accretion to NAV and earnings, in our view the shares already reflect this. Our $20 target is 111% of our $18.10 NAV estimate (5.25% cap rate) and represents an in-line 2017E FFO multiple with industrial peers trading at 20.6x.

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CITI - Financials & REITS

Ares Commercial Real Estate Corp (ACRE, Buy, $14 PT) — Donald Fandetti reiterates his buy rating on ACRE, while increasing PT from $12 to $14. ACRE reported Q2’16 GAAP EPS of $0.31, above our estimate of $0.29 and consensus estimates of $0.27. The $0.31 EPS was comprised of $0.22 earnings from continuing operations and $0.09 from discontinued operations of selling its mortgage banking business. On June 28th, ACRE announced its agreement to sell its mortgage banking business to Cornerstone Real EstateAdvisors for $93M in cash. Mgt noted during the call that the deal was expected to close in Q3 or Q4 of this year and capital would be fully deployed by Q1’17. ACRE declared a Q3’16 dividend of $0.26, unchanged q/q, which equates to 8.1% yield on the current share price. Book value was up slightly to $14.28 from $14.24 q/q. Shares are currently trading at 0.9x P/B.

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*SOME CHINESE BANKS SHORTEN TENOR OF LOANS TO DEVELOPERS: XINHUA

Banks including ICBC and Industrial Bank have shortened tenor of loans to real estate developers as a measure to cool down the property market, Xinhua reports, without citing anyone.

CITI - Financials & REITs Updates

Financials & REITs

Starwood Property Trust, Inc. (STWD, Buy, $24PT) – Donald Fandetti increases target price to $24 from $20 and reiterates Buy for STWD. Q2 Results — STWD reported core EPS of $0.50, in-line with our and consensus estimates of $0.50. GAAP earnings were $0.47. BV was down slightly to $16.96 from $16.98 q/q. The quarterly dividend is $0.48. Implications — STWD had a solid quarter in spite of market volatility. We believe STWD is well positioned in the CRE lending markets with ample room for growth. And their CRE servicing business offers a nice hedge as they will earn more fees as the industry moves towards more special serviced loans. With the US economy holding up, the 10- year US treasury yield at 1.57%, STWD offers an attractive 8.6% dividend yield. We are raising our target to $24 on updated comp valuations and a more stable credit market. No change to our forward earnings estimates. BXMT and STWD remain our favored names in the mortgage REIT sector.

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Traditional Asset Managers (AB, APAM, IVZ) –Bill Katz maintains that an absence of active growth continues. Another Challenging Flow Month, For Some — With APAM and AB showing Active ‘core’ net outflows, though IVZ had solid organic growth, even after adjusting for one-time low-fee mandate wins. While industry flows remain tough to come by, these collective prints reinforce a growing bifurcation between 5 strategic ‘winners’ (BLK, AMG, IVZ) and laggards (BEN, APAM, WDR), with 10%+ organic loss rates no longer abnormal at the latter – see also 8/8, BEN: July AUM: Print Points To Continued, Widespread Attrition. Prints also set a quite low bar for LM (July AUM on 8/10 pre-market), we expect.

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Howard Hughes Corp (HHC, Buy, $166PT )—Will Randow maintains his Buy rating for HHC. Yesterday (8/8), HHC released 2CQ16 results, which included unadjusted EPS of $0.16 on net income of $7M. Excluding market-to-market adjustments for management’s warrants and non-operating items (e.g. D&A, given HHC’s is a real estate company), adjusted net income amounted to $67M in the quarter versus $24M in 2Q15. HHC reported strong equity JV income due to $48M of land sales at The Summit (that resulted in $9M in JV earnings), a luxury golf course development within Summerlin. In addition, the company noted Two Merriweather, a 130K square feet office building (incl. 30K in retail) in Columbia, MD is 58% pre-leased, with construction commencing during 3Q16. The $41M project is projected to reach stabilized NOI of $3.6M. In Hawaii, Waiea has 91% of units under contract, Anaha has 92%, and Ae’o has 52% under contract. The three towers are scheduled to be completed in 4Q16, summer 2017, and late 2018, respectively. The target price has been increased to $166 from $165.

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