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Everyone Is in the Boat Together

December 22, 2008

Analysis of:PREIT, Cafaro Lend Boscov's a Helping Hand | www.printthis.clickability.com

Just as we see banks working with overlevered borrowers to extend or alter terms of loans in this environment, landlords are helping struggling tenants. The incentives are even stronger in retail versus other property types as dark storefronts quickly can impact a center's appeal. Taken further out, co-tenancy clauses can kick in, which can lead to a death-spiral as tenants invoke their right to either not pay rent or potentially exercise an early termination clause. Unfortunately for investors, the lease and co-tenancy terms are generally not made public and vary from property to property and landlord to landlord. What does this mean for GLG clients? It means that increasingly we are seeing how lenders/borrowers and landlords/tenants are in the ship together and each is bailing as fast as they can. This situation is not good for asset values, of course, and thus until we see this trend slow, one would expect property values to remain under pressure.

The Ripple Effect of New York's Economic Fallout on Apartments

December 19, 2008

Analysis of:NYC Apartment Rents Fell in November, Vacancies Rose | www.bloomberg.com

The effects of the economic crisis are now becoming evident in the New York apartment rental market. Whereas landlords benefitted from the positive mark-to-market of rents, that is no longer the case. Renewing tenants balk at increases and prospective tenants demand concessions or reduced rents. The pain is likely more acute among class A properties, as the college-educated appear to be feeling more of the layoff brunt than the non-college educated (http://www.nytimes.com/2008/12/12/nyregion/12jobs.html?ref=nyregion). Given that one Wall Street job generates two other jobs in New York City, the accelerating pace of layoffs provides little comfort to landlords. Restauranteurs, retailers, and other service providers along with professionals like accountants and attorneys are impacted with Madison Avenue now joining in the layoff news as advertising budgets are cut.

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