SOURCE: The New York Times

The new Pacific Rim real estate fund which will be worth from $2.5 - $3 billion is being started by Merrill Lynch. It will invest in a number of different types of property across the Pacific Rim and will include India, Australia, Japan, and the rest of Asia.

The launch of the funds comes at a time when many investors are looking to Asia as a safe haven in the wake of the credit crunch set off by U.S. subprime woes. Both the European and U.S. property markets are showing signs of waning due to the global credit crunch. But, Asia is still showing strength with a 26% jump in direct property investment in 2007

Other global investment banks including UBS, Morgan Stanley, and the Blackstone Group are planning on launching Asian property funds. As well, CLSA Asia-Pacific Markets have already started raising funds for their pan-Asia property fund which will have roughly $1 billion focused on China, Japan, Taiwan, Hong Kong and Singapore.

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SOURCE: Wall Street Journal Online

Government-sponsored Fannie Mae and Freddie Mac are fueling the fire for multifamily deals. Not only are they making credit available, their mandate is to provide market liquidity and funding for affordable housing which is allowing them to expand their portion of the multifamily market to fill the gap left by private lenders.

The multifamily sector "is the beneficiary of the housing mess, and it feels like it has room to run," says Mike Kirby, chairman of Green Street Advisors Inc., a Newport Beach , Calif. , REIT research group. He also said that "Fannie and Freddie are dominating the market. Normally they're just players."

Mike May, who is the senior vice president for multifamily at Freddie Mac feels that the apartment market helps his firm meet their goals for lending to affordable housing. Fannie Mae spokesman Jon Searles says that the multifamily market is attractive due to a number of perspectives which include the low delinquency rates that in January were just one-tenth of 1%.

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SOURCE: Wall Street Journal Online

Real-estate investment trusts rallied in the first quarter. These were driven by strong gains in two of the industries that are benefiting from the housing bust. Eight of the top 10 performers last quarter by way of total returns -- a combination of stock-price appreciation and dividends -- were apartment or self-storage REITs.

Because people are moving from homes they can't afford into apartments and their belongings into self-storage units, both these industries are doing well. "The simple logic there is that as people downsize their housing, they need some place to store their stuff," said Mike Kirby, director of research for investment-research firm Green Street Advisors.

Another positive note of mention is that apartment REITs can borrow from the government-backed lenders Fannie Mae and Freddie Mac. This is a stable source of capital which is unavailable to other REIT classes.

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SOURCE:

Wall Street Journal Online

Demand for office space dropped for

the first time since the economy emerged from its downturn earlier in the

decade, according to first-quarter data from Reis Inc., a
New York research firm. Reis's data is compiled using the 79 largest office markets.

Vacant office space nationwide has increased to 12.8% from 12.6% in the previous quarter. This is still considerably below the 16.9% rate it hit in 2003 after the technology bust. The feeling is that it isn't expected to get near that rate this time as developers haven't been building nearly as much new space.

There are some bright spots out there though. "The energy markets are booming," says Ric Clark, chief executive of office company Brookfield Properties. Houston topped the list of 79 markets that Reis surveys in terms of rent growth, up 3.5% last quarter. Denver, Tulsa and Oklahoma City also fared well.

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SOURCE: Forbes

According to the latest loan delinquency index from Fitch Ratings, CMBS delinquencies rose to 0.30% which is only slightly higher than the historic low of 0.27%. Part of the increase was due to an increase in delinquencies for multifamily loans which reached $1 billion at the end of last month, up by 14.5% compared to $894 million at the end of January 2008. But, office delinquencies decreased by 1.1% in February.

The Fitch report shows that the slight rise in the delinquency index was due to the $130 million newly delinquent multifamily loans. Of all the delinquent CMBS loans, 60% are multifamily. The only loans that are accounted for in the Fitch ratings are those that have been delinquent for 60 days or greater. The full details of how Fitch determines their numbers can be found within the report.

The average loan delinquency index for the previous 12 months is equal to 30 basis points (bps). Managing Director Susan Merrick states that "Multifamily delinquencies continue to be overrepresented in the index". Even though 60% of all delinquent CMBS loans are multifamily they only represent 14.6% of the Fitch-rated universe.

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SOURCE: Trading Markets

Not all sectors of commercial real estate are seeing difficulties in gaining financing for prospective buyers. For example, apartment deals are readily financed as demand for rental properties continues to climb. This is due in a large part because homeownership has become more difficult for many borrowers which makes it hard for current renters to move on to their own property.

Some sellers are sitting tight and waiting to see what happens while others are dropping prices to make sure their property moves. Some commercial property owners, especially those in multifamily rental sector are not feeling the lending pinch as badly as other areas. It is felt that the lending crunch will keep tenants renting longer now that there is more difficulty in obtaining financing. The other key aspect is that current homeowners who are facing foreclosure will still need a roof over their heads and will re-enter the rental market.

Some property owners still feel that they have time to wait. "There's still this idea in the mind of sellers that their properties are worth more than it really is," said Bryan Kane, vice president of debt and equity finance at CB Richard Ellis in Raleigh.

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