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Commercial Real Estatehttp://www.wikinvest.com/concept/Commercial_Real_Estate1 of 63/13/2008 9:11 PM
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Bulls
Uptick in Commercial Foreclosures. For the lastcouple of years the Commercial Propertymarket has seen...read more1.A Return to Rational Prices. The current creditcrunch has positive effects. Those samespeculative buyers...read more2.Flexible Sellers. Sellers know the lenders areonly funding solid deals that are well priced. Weare seeing...read more3.
Bears
We are all living through the Residential RealEstate Meltdown1.The nastiest Credit Crunch in a very long time.2.The Bursting of the Retail Bubble3.
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Concept
Commercial Real Estate
This article describes aconceptwhich could impact a variety of companies and industries. The articlelists companies that could benefit or be harmed by the trend. To see what companies and articlesreference this concept page,click here.
Definition
: Commercial real estate is defined asproperty used solely for business purposes. Officebuildings, malls, industrial parks, hotels, conveniencestores, apartment complexes and gas stations are allexamples of commercial real estate.Commercial real estate is distinct fromresidential realestate, which has been under the microscope in 2007and 2008 due to thesubprime lendingcrisis. Issuesrelated to the failure of mortgage-backed securitieshave driven property values down and created problemsfor both home owners and institutional lenders, and thishas had a rippling effect on other parts of the economy.The commercial real estate market has suffered fromthe fall-out, but it has not bled as deeply as itsresidential cousin. Investors must ask: how far willcommercial real estate values continue to decline, or will they eventually plummet in the continuedaftershocks of the subprime debacle? Or will theyrebound more quickly than home properties and remainattractive investment opportunities?
Contents
1 Contractors that Build Commercial Properties2 REITs2.1 Office REITs2.2 Hotel/Motel REITs2.3 Industrial REITs2.4 Retail REITs3 Other Companies that Develop CommercialProperties4 How To Invest in Commercial Real Estate4.1 Direct Investment in Properties4.2 Indirect Investment through Real Estate
This article has nothing to dowith the Concept and is just asales pitch it should be deletedan...more
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Commercial Real Estatehttp://www.wikinvest.com/concept/Commercial_Real_Estate2 of 63/13/2008 9:11 PM
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Investment Trusts5 How the Subprime Lending Crisis has AffectedCommercial Real Estate5.1 Why Commercial Real Estate Will Escapethe Subprime Fallout5.2 Why Commercial Real Estate Won't AvoidSubprime Damages6 Recent Activity in the Office Market7 References
Contractors that Build Commercial Properties
These companies depend on the relative strength of the commercial real estate market to earn new contracts, as well as thecontinued financing of their current projects by existing developers.Fluor Corporationis the largest firm in this market, and offers engineering, procurement, construction management, andproject management services worldwide.McDermott Internationalis an engineering and construction company worldwide. The company operates in threesegments: Offshore Oil and Gas Construction, Government Operations, and Power Generation Systems.Foster Wheeler provides construction and engineering services to the oil and gas industry, as well as chemical,pharmaceutical, and power plant operation sectors.Perinioffers general contracting, construction management, and design-build services to private and public clients.Granite Constructionis a heavy civil contractor, building public works and producing construction materials for public andprivate sector clients in the United States.
REITs
Real estate investment trusts, or REITS, are corporations or trusts that pool the capital of many investors to purchase incomeproperty (equity REIT) and/or mortgage loans (mortgage REIT). An equity REIT owns and manages property, as opposed to amortgage REIT which purchases mortgages and may also borrow money from banks to lend again at higher interest rates.REITs that invest in commercial real estate can do so through commercial loans, or through the development and ownershipof property. Shares in a REIT are publicly traded on stock exchanges, and these companies are eligible for corporate incometax exemptions but in return are required to distribute 90% of their income to shareholders as dividends.REITs are exposed to the volatility of the commercial real estate market in that their revenues will decline if rents and propertyvalues are low, or if costs of development or borrowed capital are too high. However, most REITs have diverse portfolios withholdings in a variety of economic sectors and geographic regions, helping them to shield them from isolated fluctuations inthe market. Below is a list of commercial REITs, broken down by the sector on which they focus.
Office REITs
These REITs focus on the development and/or ownership of office buildings.
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Boston Properties (BXP)- market cap $10.8BLiberty Property Trust (LRY)- market cap $2.7BKilroy Realty (KRC)- market $1.5BCorporate Office Properties Trust (OFC)- market cap $1.5B
 
Commercial Real Estatehttp://www.wikinvest.com/concept/Commercial_Real_Estate3 of 63/13/2008 9:11 PM
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Hotel/Motel REITs
These REITs focus on the development and/or ownership of hotel properties.Host Hotels & Resorts (HST)- market cap $8.7BDiamondrock Hospitality Company (DRH)- market cap $1.2BLaSalle Hotel Properties (LHO)- market cap $1.2BStrategic Hotels & Resorts (BEE)- market cap $1.0B
Industrial REITs
These REITs focus on the development and/or ownership of industrial complexes.Public Storage (PSA)- market cap $14.3BProLogis (PLD)- market cap $13.9BAMB Property (AMB)- market cap $4.9BAlexandria Real Estate Equities (ARE)- market cap $2.9B
Retail REITs
These REITs focus on the development and/or ownership of properties that serve the retail sector.Simon Property Group (SPG)- market cap $19.3BVornado Realty Trust (VNO)- market cap $12.7BKimco Realty (KIM)- market cap $8.8BGeneral Growth Properties (GGP)- market cap $8.2B
Other Companies that Develop Commercial Properties
These companies develop commercial properties and sell them to investors. They depend on the health of the market tomaintain properties above development costs, so that their business is profitable. Most commercial real estate developmentis financed by large Real Estate Investment Trusts (REITs, see below How To Invest in Commercial Real Estate), so firms inthis category are smaller in scale.St. Joe Companyhas four segments: Residential Real Estate, Commercial Real Estate, Rural Land Sales, and Forestry,and it builds properties for retail, multi-family, office, and industrial uses.AMREP (AXR)sells developed and undeveloped lots to national, regional, and local homebuilders, and commercial andindustrial property developers in Rio Rancho, New Mexico.
How To Invest in Commercial Real Estate
There are two basic ways to invest in commercial real estate:
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Direct Investment in Properties
Direct investment in properties, either individually or through small partnerships,limited liability companys (LLC), LimitedPartnerships or tenancy in common (TIC)arrangements.Direct investment in Commercial Property offers a number of unique advantages to the investor.Annual write offs against income through depreciation.Sheltering of Capital Gains at the sale through the 1031 exchange.Pass through of much higher amounts of cash flow than REIT's pass through to their investors.
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