Welcome to Finance World

U.S. commercial property prices rose 4.3 percent in September from the previous month, the biggest gain in a decade of records, Moody’s Investors Service said.

The Moody’s/REAL Commercial Property Price Index climbed 0.3 percent from a year earlier as a small number of high-priced deals drove up values, Moody’s said in a statement today. The measure had fallen to an eight-year low in August.

“Each of the summer months this year recorded declines in the 3 percent to 4 percent range, followed by this month’s sizeable uptick,” Nick Levidy, a Moody’s managing director in New York, said in the statement. “The relatively large swings seen in the index recently are due in part to the uncertain macroeconomic environment and the effects of a thin market with low transaction volumes.”

Demand is rising for the best office buildings in major markets such as New York and Washington as investors seek returns higher than fixed income. Interest in well-leased commercial properties in smaller markets may also be starting to increase, according to Robert Bach, chief economist for Grubb & Ellis Co cash until payday loans., a Santa Ana, California-based commercial broker.

“The demand is still focused at the core end of the spectrum,” Bach said before the report. “Investors may be broadening their parameters just a little bit.”

43% Below Peak

The Moody’s/REAL index is still 43 percent below its October 2007 peak. The gauge measures overall commercial property values on a monthly basis and breaks the numbers down by property type once each quarter. The changes are based on repeat sales transactions.

While the number of repeat sales had only a “slight uptick” in September, the dollar volume of those transactions doubled from August to $3.7 billion, according to Moody’s. That was the largest volume since January 2008, the company said.

The biggest single-property sale to close in September was a $208 million deal for Union Bank Plaza, a 627,000 square-foot (58,250 square-meter) office building on South Figueroa Street in Los Angeles, according to Real Capital Analytics Inc., a New York-based firm that tracks commercial real estate sales.

Apartment buildings have led prices higher, rising almost 16 percent in the third quarter from a year earlier, Moody’s reported. An index of retail properties fell about 12 percent in that time, while industrial buildings dropped 1.2 percent. Office property values increased 4.4 percent.

Top 10 Areas

Office prices in the top 10 metropolitan areas jumped 22 percent in the third quarter from a year earlier, the most of any property type in major cities. Prices gained 9.4 percent from the previous three months.

Moody’s defines the top 10 metropolitan areas as the ones with the most transactions by dollar volume. New York, Los Angeles, Washington, San Francisco, Atlanta and Chicago are included in the rankings for all four property types.

Two competing indexes show national commercial property prices rising at a faster rate. Green Street Advisors, a real estate research company in Newport Beach, California, reported Nov payday loans in California. 2 that values are up 24 percent in the 12 months through October. Its property index is 21 percent below its 2007 peak.

CoStar Group Inc., a real estate data service based in Bethesda, Maryland, found that prices for investment-grade properties in the U.S. rose 5.5 percent in September. Values are down 4.9 percent from a year earlier and 29 percent from two years ago, according to the company.

CoStar, unlike Moody’s, tracks transactions below $2.5 million. CoStar also limits its index to Class A and B offices, the highest-quality buildings; retail and industrial properties built since 1990; and multifamily buildings of 30 units or more.

Green Street’s index includes deals that are in negotiation or under contract, while Moody’s tracks only closed sales.

Source

China ordered its banks Friday to hold back more money as reserves in a new move to curb lending and rising inflation that communist leaders worry might stir unrest.

It was China’s second reserve increase in two weeks and came as Beijing tries to restore normal financial conditions following its recovery from the global crisis and cool inflation that surged to a 25-month high in October.

Analysts also expect China to announce a second interest rate hike after its surprise Oct. 19 increase but there was no word Friday of any changes in rates.

The state-owned banking industry was ordered to set aside an additional 0.5 percent of deposits as reserves, effective Nov. 29. Reserves vary by institution but could be as high as 19 percent for the biggest commercial lenders.

Economists say money flooding through the economy from China’s stimulus spending and heavy bank lending helped to push inflation to 4.4 percent in October, well above the government’s 3 percent target. Politically sensitive food costs jumped more than 10 percent.

Poor families in China spend up to half their incomes on food and communist leaders see inflation as a possible trigger of unrest.

Regulators worry that excessive lending is fueling overspending on real estate and other assets and might leave banks burdened with unpaid loans if ill-considered projects default.

Friday’s order came after China’s stock markets closed. Stocks fell this week on investor fears the government might respond to October’s inflation by tightening economic controls and further slowing China’s growth faxless payday loans.

China’s post-crisis expansion peaked at 11.9 percent in the first quarter of this year and cooled to 9.6 percent in the three months ending in September. The World Bank says next year’s economic growth should slow to 8.7 percent.

Raising reserve requirements allows Beijing to slow lending growth without increasing costs for borrowers through a rate hike. The government has used such targeted tools to try to restrain housing costs and make other changes while avoiding large rate increases.

A rate hike is politically fraught because it increases costs for state companies and heavily indebted finance agencies set up by local governments to use bank loans to invest in infrastructure and real estate projects.

Analysts say the modest quarter percentage point rate hike on Oct. 19 was meant as a warning to banks to cut back runaway lending.

Chinese leaders also worry that higher interest rates will attract inflows of foreign speculative “hot money” into stocks and real estate. Unauthorized inflows of money meant to profit from China’s rebound and a rise in its currency, the yuan, have surged in recent months despite Beijing’s moves to tighten capital controls.

Source

Traders are increasing payments to limit ruble losses faster than any other European emerging- market currency as the Irish debt crisis and China’s vows to cut inflation cause a slump in oil, Russia’s biggest export earner.

Options traders are paying more than double the rate at the end of October for the right to sell the ruble rather than buy it, with the one-week risk-reversal rate against the dollar — the premium of put options over calls — climbing to 1.25 percent yesterday from 0.5 percent on Oct. 29. The increase is the biggest among Europe’s emerging-market currencies and topped the 0.3 percentage point rise in the rate for Brazil’s real and a decline of 0.2 percentage point for China’s yuan.

Russia, which depends on oil and gas for 25 percent of economic output, is losing investor support as fuel prices slump to a four-week low on speculation higher Chinese borrowing costs will erode demand and as Ireland’s fiscal woes drive a selloff in riskier assets. VTB Group, the second-largest Russian bank, cut its economic growth forecast yesterday, citing lower oil prices. The ruble slid to its weakest level in five months against the dollar, the worst performer among the 25 developing- nation currencies tracked by Bloomberg.

“Depreciation pressures on the ruble have intensified,” Alexander Morozov, chief Russia economist at HSBC Holdings Plc, said in a phone interview in Moscow yesterday. “With lower oil prices and higher global volatility, the ruble will naturally weaken.”

Russia’s currency slid as much as 1.2 percent yesterday, its biggest drop in more than a month, and ended the day 0.9 percent lower at 31.37 per dollar, the weakest closing price since June 11. Non-deliverable forwards, or NDFs, which provide a guide to currency movements and allow companies to hedge, yesterday showed the ruble at 31.5963 per dollar, slipping for a fourth trading day to the weakest since June 11.

Dollar Demand

Investors are fleeing to the safety of the dollar as Ireland moves toward a possible European Union bailout that Barclays Capital has estimated may cost about 80 billion euros ($108 billion). The Irish government agreed yesterday to a review of the finances of its debt-laden banks.

The average yield on dollar-denominated Russian corporate bonds jumped 8 basis points yesterday to 5.72 percent, the highest since Sept. 27, as investors shunned emerging market assets.

Market volatility is “characteristic” of the post-credit crisis world, Deputy Finance Minister Dmitry Pankin said in a phone interview in Moscow yesterday.

Fleeing Risk

“There are periods when it seems there is a mass of money that’s just looking for a home and then a moment comes, whether it’s Portugal, Dubai, now Ireland, that spurs outbursts and nervousness on the market,” Pankin said. “Positions are being closed, investors are fleeing to risk-free assets and are no longer able to soberly measure the risk level of any given country.”

Crude lost as much as 2.4 percent in New York trading yesterday after Chinese Premier Wen Jiabao said the government of the world’s fastest growing economy is drafting measures to counter inflation, which at 4.4 percent last month is the fastest in two years. Energy accounts for about 75 percent of Russian exports to the Baltics and countries outside the former Soviet Union, government data show. Urals crude, Russia’s chief export blend, declined 0.2 percent to $84.73 a barrel.

The ruble would have weakened further had the central bank not intervened in the market to stem the drop, HSBC’s Morozov said. Bank Rossii, which has managed the ruble against a basket of dollars and euros since February 2005, is selling about $300 million of foreign currency a day to limit the ruble’s decline, Morozov said. The Moscow-based regulator doesn’t comment on its day-to-day actions in the currency markets.

Currency Basket

Russia’s currency fell for a fourth day against the basket, sliding 0.4 percent to 36.2998 by the close of trading at 5 p.m. in Moscow yesterday. The basket is made up of about 55 percent dollars and 45 percent euros and is used to limit swings in the currency that disadvantage Russian exporters. The ruble was little changed against the euro at 42.3250 yesterday, after hitting its weakest intraday level in a week.

Russia’s federal ruble bonds, or OFZs, have declined, with the yield on notes due 2016 jumping 20 basis points in November to 7.37 percent yesterday. Government dollar bonds due 2020 have also dropped this month, sending the yield 16 basis points higher to 4.67 percent since Oct. 29.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps rose 1 basis point to 145 yesterday, down 72 from this year’s peak of 217, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a debtor fail to adhere to its agreements.

Depreciation Pressure

Credit-default swaps for Russia, rated Baa1 by Moody’s Investors Service, its third-lowest investment grade, cost 13 basis points more than contracts for Turkey, which is ranked four levels lower at Ba2. Russia swaps cost as much as 40 basis points less on April 20. Brazil stood at 109 yesterday and China at 62.

The extra yield investors demand to hold Russian debt rather than U.S. Treasuries fell 3 basis points to 212 points, according to JPMorgan’s EMBI+ indexes. The difference compares with 146 for debt of similarly rated Mexico and 175 for Brazil, which is rated two steps lower at Baa3 by Moody’s.

Concern Russia’s economic recovery after the global financial crisis may falter is spurring foreign investors and local companies to switch from rubles and invest their money outside the country, stoking depreciation pressures, said Aurelija Augulyte, a Russia economist at Nordea Bank AB, the Nordic region’s biggest lender.

OAO Sberbank, Russia’s largest bank, said Nov. 16 it will seek a $2 billion loan to help meet client demand for U.S. currency.

Slowing Growth

Russia’s economy expanded at its slowest pace this year in the third quarter at 2.7 percent as the worst drought in 50 years cut agricultural output and reduced consumer demand, according to government data published Nov. 12. China grew three times faster at 9.6 percent in the three months to Sept. 30.

Russia, the world’s largest energy exporter, is also being outpaced by the other so-called BRIC economies, with Brazilian and Indian GDP growing 8.8 percent in the second quarter, compared with 5.2 percent for Russia.

“Russia’s clearly not the strongest link in the emerging- market basket right now,” Nordea’s Augulyte said by phone from Copenhagen yesterday. “The overall picture of Russia in investors’ eyes is just not that attractive.”

Capital Outflows

Net capital outflows from Russia will reach $22 billion this year, the central bank said in monetary policy guidelines published Nov. 16, more than doubling its previous forecast of $8.7 billion. Russian bond funds took in $166 million so far this month, half the $326 million invested in Brazilian debt funds, according to Cameron Brandt, an analyst at EPFR Global, a Boston-based research firm.

Russian companies and the government have a total $17.1 million of foreign-currency denominated debt coming due in December, the most since at least July, according to central bank data. Repayments and the resulting demand for dollars will further depress the ruble until the end of the year, said HSBC’s Morozov, who forecasts the currency will weaken 6 percent to 33.40 per dollar by the end of 2011.

VTB Capital, the investment banking arm of VTB Group, cut its forecast for economic growth to 4 percent from an earlier estimate of 4.3 percent, according to its note e-mailed yesterday. It also lowered its ruble forecast to around 30 per dollar by year-end from a previous estimate of 29.30 per dollar, as oil trades at an average $85 a barrel, from previous forecasts of $92, the note said.

“All this noise about the euro area debt crisis and risk coming off is not going to just die away,” Ivan Tchakarov, chief economist for Russia and the former Soviet Union at BofA Merrill Lynch Global Research in Moscow said by phone from London yesterday. “December is going to be a challenging month for the ruble.”

Source

Canadian Tire Corp. says it’s boosting dividend payments after third-quarter profits rose 21 per cent, despite a previously announced restructuring charge.

The big hardware and home goods retailer said its quarterly dividend payments would increase to 27.5 cents next year.

The move comes after the company reported quarterly profits of $103.2 million, or $1.46 per share, when factoring in a restructuring charge of $14.7 million.

That’s an increase from $85.4 million, or $1.11 per share, in the same three-month period a year earlier.

Operating revenue improved slightly, rising 1.6 per cent to $2.2 billion.

Meanwhile retail sales at its Canadian Tire (TSX: CTC) stores rose 2.6 per cent to $2.51 billion. The company’s financial services division posted a 175 per cent rise in earnings before income taxes to $51.3 million.

Source

The austerity measures adopted to combat the euro region’s sovereign debt crisis are choking growth in countries such as Greece and Spain, 18 months after Germany emerged from recession, reports this week will show.

Gross domestic product figures from Germany, Greece and Portugal may highlight Europe’s two-speed economy, driving up borrowing costs for so-called peripheral nations. The extra yield investors demand to hold Irish debt rather than German bunds surged to a record today, while Portugal’s spread is near a euro-era high.

The divergence poses a challenge for European Central Bank policy makers, whose desire to remove stimulus measures is complicated by the Federal Reserve’s decision to expand its bond-buying program to underpin the economy. Peripheral euro countries risk stricter central bank policies boosting the single currency’s value, undermining recoveries that are already sapped by deficit-cutting efforts.

“There are tough times ahead and monetary policy could have helped cushion that, but it’s not in a place to do so because it has to be right for the whole area,” said Nick Kounis, head of macro research at ABN Amro Bank in Amsterdam. “The periphery would be happy to have the Fed as their central bank at the moment.”

ECB President Jean-Claude Trichet signaled on Nov. 4 the bank intends to stick to its exit strategy even after the Fed’s decision to buy another $600 billion of Treasuries to bolster the U.S. economy. Trichet’s comments sent the euro to a 10-month high, further complicating growth in the peripheral countries that are counting on exports to drive growth.

German Manufacturing

Spain’s central bank estimated on Nov. 5 the economy stagnated from July to September after emerging from recession in the first quarter, nine months after Germany. Purchasing managers’ surveys last week showed German manufacturing gained the most in two months in October, while the same gauge in Greece showed a deeper contraction than the previous month.

German GDP may have expanded 0.8 percent in the third quarter, according to a Bloomberg News survey of economists. Greek GDP probably contracted and Portuguese growth may have slowed in the quarter, according to Giada Giani, an economist at Citigroup Global Markets Ltd in London. Greece, Germany and Portugal all release their GDP reports on Nov. 12.

Bond Losses

Greek bonds, the worst performers in Europe, have lost 18 percent this year, followed by a 9.9 percent decline in Irish debt and 7.9 percent for Portuguese bonds, according to the European Federation of Financial Analysts Societies. Spanish bonds gained 0.4 percent, as the euro region’s fourth-largest economy moved more quickly to slash its deficit than Ireland, Portugal or Greece. German bonds have increased 8.6 percent.

Ireland announced on Nov. 4 an additional 6 billion euros in budget cuts, equal to 3.6 percent of GDP, to try to win back investor confidence. Portugal’s 2011 budget plan includes a 5 percent cut to the public-wage bill and an increase in value- added tax creditreport. The Bank of Spain cited austerity measures as one reason why growth in Spain, where the government also cut wages and raised VAT, stagnated in the third quarter. Greece’s government revenue rose just 3.6 percent in the first nine months of the year, compared with a target of 8.7 percent in the country’s deficit-reduction plan.

“It’s a worrying trend; smaller countries in the euro region are enduring the very tough fiscal retrenchment, and the weakening of their economies is not going to help because they will need revenues to meet the fiscal targets,” said Vincent Chaigneau, head of rate strategy at Societe Generale in London.

Swelling Deficits

The peripherals are trying to convince investors they are serious about bringing down record deficits that would help rein in borrowings costs. Ireland’s shortfall was 14.4 percent of GDP last year, Spain had a gap of 11.1 percent, while Portugal’s deficit reached 9.3 percent. The EU will release a revision of Greece’s 13.6 percent deficit on Nov. 15.

Borrowing costs of the peripheral countries also surged last week as German politicians stepped up calls for investors to contribute to the cost of any future debt restructurings. Germany is pushing for the burden sharing as a condition to support EU plans to make permanent a bailout mechanism set up in June as a financial backstop for EU members after the fallout from Greece’s near default in May roiled European bond markets.

The spread on Irish debt rose to a record 534 basis points today, while the extra yield on Portuguese bonds surged to 417 basis points, 10 basis points shy of its euro-era closing record. Spanish debt also approached its record of 221 basis points set in June at the height of the sovereign debt crisis.

Bond Sale

That will make it more expensive for Portugal to sell on Nov. 10 some 1.3 billion euros of bonds due 2016 and 2020. The 2016 securities were last sold Aug. 25 at an average yield of 4.371 percent. They now yield 5.855 percent in the secondary market.

As Germany booms, unions are starting to ask for raises for their workers, increasing the risk that the ECB will tighten policy before the peripheral countries’ economies are ready. Germany’s IG Metall won a 3.6 percent immediate wage increase for 85,000 steel workers, the union said on Sept. 30. The DBB union will demand a pay increase of at least 7 percent in the 2011 round of wage talks for public servants, Neue Osnabruecker Zeitung reported on Oct. 26.

“Wage rounds are coming up,” said Nick Firoozye, head of interest rate strategy at Nomura International Plc in London. “There are going to be wage pressures in Germany and the ECB always gets hawkish around German wage rounds.”

Source

A piece of the puzzle needed to bring a battery-making plant and 1,000 jobs to Columbus is locked in place.

Columbus City Council at its Monday meeting approved a three-part incentive package valued at up to $32.6 million for Lio Energy Systems, a joint venture between Santa Monica, Calif.-based Coda Automotive Inc. and Lishen Power Battery of China. Coda in May announced plans to build a plant in Columbus that would make lithium ion batteries for plug-in electric cars. The $657 million investment at the shuttered Alcatel-Lucent plant at East Broad Street could employ up to 1,000.

Council’s Coda incentive includes a 10-year, 75 percent property tax break on improvements; a 12-year, 65 percent Jobs Creation Tax Credit; and an eight-year, 35 percent Jobs Growth Incentive.

While the local credits chip away at the overall cost, Coda has said it needs to secure a $400 million to $500 million loan from the U.S. Department of Energy and incentives from the state. Council spokesman John Ivanic said the city wanted to act sooner rather than later.

“We wanted to make sure we step up to the plate and fulfill all of our commitments to make sure they know how eager we are to have them in Columbus,” he said.

Should Coda secure the loan and proceed with the project, it’s told the city it could begin working on the former Lucent property as early as next spring.

Source

Dollar Tree Stores is expanding its presence in South Florida, signing 10 leases. Combined, the deals soak up about 99,000 square feet of retail space across the region, according to the Rotella Group. The Fort Lauderdale-based brokerage’s Steven M. Miller represented the retailer in its space hunt.

The new stores are slated for Nassau Square in Palm Beach County; The Fountains, Midway Plaza, Shenandoah Square and Southland Shopping Center in Broward County; and Intracoastal Mall, Kendale Lakes Plaza, Kendall Plaza, Plaza Del Paraiso and Sawgrass Promenade in Miami-Dade County.

The stores range from 5,400 square feet to 14,278 square feet.

Source

Wright-Patterson Air Force Base provided a more than a $5.1 billion annual boost to the region last year, up $700 million from the previous year, according to a new report prepared by base officials.

The document shows a total of 27,406 military, civilian and contract employees work for the base, up about 1,700 compared to 2008. The addition of 2,400 civilian workers offset a slight drop in military and contract personnel. Annual payroll in 2009 topped $2 billion.

The base also is responsible for more than 33,000 indirect jobs with an annual value of $1.38 billion, which is up from 3,000 jobs and $200 million compared to 2008, according to the report.

Last year, Wright-Patt spent nearly $1.75 billion for construction, services and supplies.

Local companies snagged some of that construction work. Last summer, for example, Wilcon Construction of Dayton, won a $13 million expansion and renovation project at the 88th Security Forces Squadron Operations facility at the base.

In April, 2009, Beavercreek-based Butt Construction Co. captured the final Base Realignment and Closure contract at Wright-Patt, a $36 million design/build project to add and renovate space in the Air Force Research Laboratory sensors complex. Butt Construction snagged at least seven military construction contracts at Wright-Patt during a two year period ending in 2009, totaling more than $300 million in work.

The economic impact of the base was expected to grow over the next several years as new missions complete moves as part of the Base Realignment and Closure Process, or BRAC. However, that is now in doubt because of a directive by U.S. Defense Secretary Robert Gates to cut contractor funding 10 percent for each of the next three years (link to Friday’s article?)

The 2009 Economic Impact Analysis from Wright-Patt used data through September, 2009, and included Clark, Greene, Miami, Montgomery and Preble counties.

Source

Kansas Speedway has gotten NASCAR’s approval to host a second NASCAR Sprint Cup Series weekend, starting in 2011.

The Kansas City, Kan., speedway and its parent, International Speedway Corp. (Nasdaq: ISCA), said Tuesday that the first NASCAR Sprint Cup Series event would be June 4-5; the second will be the fourth race in the Chase for the NASCAR Sprint Cup, which will be Oct. 8-9.

Requesting another Sprint Cup Series race at Kansas Speedway was one of the sweeteners that casino developer Kansas Entertainment LLC offered when pitching its proposal to local and state officials. The first phase of the Hollywood Casino project, which broke ground in April, is expected to cost $386 million and open during the first quarter of 2012. It will overlook the second turn of the speedway track.

“Our fan support for the past 10 years has been tremendous and as a result of that support and the new Hollywood Casino at Kansas Speedway, we are fortunate enough to gain an additional NASCAR Sprint Cup Series race starting in 2011,” Kansas Speedway President Pat Warren said in a release.

Tickets for the 2011 races will go on sale after the speedway’s 2010 NASCAR Sprint Cup Series event in October. The full 2011 Sprint Cup Series schedule will be released later this year.

ISC CEO Lesa France Kennedy said the casino project “will make Kansas Speedway two of the most anticipated stops on the NASCAR Sprint Cup schedule Payday advance.”

The casino, planned to be a $700 million project when all phases are complete, is being developed by a joint venture of ISC and Penn National Gaming Inc. (Nasdaq: PENN). The first phase is to include a 100,000-square-foot casino floor with enough room for 2,300 slot machines and 86 table games, a lounge and several dining and entertainment concepts.

Later phases are planned to include a hotel, more gambling space, a spa, a convention center and an entertainment retail district. International Speedway also has committed to building a road course at Kansas Speedway and using two free track-side billboards to promote Kansas tourism.

Hollywood Casino at Kansas Speedway is expected to bring more than 1,700 construction jobs, more than 1,000 full-time jobs and other economic benefits for the Kansas City region.

In 2007, Kansas approved a law that allowed four destination casinos in specific areas of the state, including one in Wyandotte County. Developers competed to be chosen to build and manage the project.

Source

A federal court has dealt YRC Worldwide Inc. a setback in its attempt to avoid making more than $21 million in debt payments next month.

In April, the Overland Park-based trucking company (Nasdaq: YRCW) asked for summary judgment against Deutsche Bank Trust Co.

Deutsche Bank is acting as trustee for bondholders that did not participate in last year’s debt-for-equity exchange, announced Dec. 31, which eliminated about a third of YRC’s total debt and gave bondholders a majority share of the company. YRC had said a bankruptcy filing was possible if the debt-for-equity swap didn’t succeed.

The bank claims that obligations for those bonds still are coming due Aug. 9, but YRC says the swap relieved it of those requirements.

In a securities filing Tuesday, YRC said the U.S. District Court for Kansas sided with the bank, saying the company could not eliminate its obligations without approval from those bondholders. The company said about $21 paydayloans.6 million in notes are outstanding.

YRC said it was considering its options, including appealing the decision. If it doesn’t, the company said it could make the debt payments with money raised through a $70 million private debt placement it agreed to in February.

The company said that it still is waiting for the debt placement to go through and that if it doesn’t receive the financing, it would have to use existing cash or seek additional third-party financing, which would require approval from its lenders.

“The company cannot assure you that it will have sufficient cash or that its senior lenders will grant their consent or whether the terms of any other financing will be favorable to the company or its stakeholders or that such financing can be obtained prior to Aug. 9,” YRC said in the filing.

Source