June real estate news roundup from KPMG

Calloway Real Estate Investment Trust (REIT) expects to receive $75 million from a recent five-year offering of 7.95% senior unsecured, BBB-rated debentures. The size of the issue was increased to $75-million from $50- million due to strong demand from retail investors.

Calloway Real Estate Investment Trust (REIT) expects to receive $75 million from a recent five-year offering of 7.95% senior unsecured, BBB-rated debentures. The size of the issue was increased to $75-million from $50- million due to strong demand from retail investors.

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CB Richard Ellis Ltd. reported that the office vacancy rate in Canada increased to 8.3% in the second quarter of 2009 from 7.5% in the first quarter of 2009 and 6.4% in the second quarter of 2008. The amount of unused office space in Canada increased by almost 75% to more than 7.7 million square feet from 4.4 million square feet in the second quarter of 2009 from the second quarter of 2008. The office vacancy rate increased to 7.8% from 5.6% in Vancouver, 10.2% from 4.6% in Calgary, 7.2% from 5.5% in Edmonton, 8.4% from 6.7% in Toronto, 5.1% from 4.9% in Ottawa, 9.7% from 8.5% in Montreal, and 9.7% from 8.8% in Halifax.

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According to CB Richard Ellis Ltd., office sublease space in downtown Calgary now accounts for 54.8% of the total available vacant space. The overall office vacancy rate in Calgary is expected to rise to nearly 20% later in 2009 from 10.2% in the second quarter of 2009. Twenty-seven office buildings are under construction in Calgary, with 33% of such space remaining available for lease.

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Colliers International reported that the vacancy rate for Class A office space in Saskatoon declined to 0.8% in the first three months of 2009. The overall vacancy rate for office space in Saskatoon was 4.6% and the sublease rate was zero during the same period. According to ICR Commercial Real Estate, the current vacancy rate is 3% to 4% for industrial space and 1% for retail space in Saskatoon. Any one 50,000 square foot office tower is currently under construction in Saskatoon.

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According to Colliers International, parking lot rates in Canada increased by nearly 10% to an average daily rate of $17.78 and a monthly rate of $222.75 in 2009 from 2008. Calgary had the highest parking rates in Canada, with a $22 daily rate and a $460 monthly rate.

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Colliers International Hotels reported that transaction activity in the Canadian hotel industry in 2008 declined by 77% from 2007. The average selling price per room decreased to $116,500 in 2008 from $154,200 in 2007.

According to the Hotel Association of Canada, hotel occupancies in Canada in the first four months of 2009 were 50.3%, a decline from 54% in the same period in 2008. Occupancy levels nationwide are expected to decline to 61% in 2009 from 63% in 2008. In April, 2009, the average daily room rate was $112.96, a decrease from $114.01 in April, 2008. Canadian hotel industry growth is expected to be 1.5% in 2009, a decrease from 2.4% in 2008.

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Red Roof Inn Inc., a budget hotel chain for business travellers, defaulted on US$367-million face amount of mortgage debt. Citigroup Inc. owns a 79% stake in Red Roof Inn and the remaining interest is held by hotel manager Westmont Hospitality Group and Westbridge Hospitality Fund II, a fund financed by Caisse de dépôt et placement du Québec, Regime de Rentes de Mouvement Desjardins and several Westmont Hospitality Group principals.

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Magna International Inc. plans to develop and build three new automotive parts plants in Russia in partnership with MI Developments Inc. Two of the “green field” automotive plants would be located in the St. Petersburg area and the third would be in Kaluga, which is two hours south of Moscow.

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The Teranet-National Bank House Price Index reported that the average price of an existing home in Canada decreased by 6.7% in April, 2009, from April, 2008. The average price of a home decreased by 10.9% in Vancouver, 9.8% in Calgary, and 7.6% in Toronto in April, 2009, from April, 2008, while the average price increased by 2.4% in Montreal, 0.6% in Ottawa and 0.2% in Halifax during the same period.

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Condominium prices have increased in downtown Toronto’s east end from an average of $449 a square foot for condos already sold to $531 a square foot for unsold inventory. Nine new east end condominium projects are currently under construction, seven are in the planning stage and 15,597 new units are in the approval stage.

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The owners of the Sears Tower in Chicago plan to build a 500-room hotel next to the 3.8-million-square foot 110 ten story Sears Tower and to also spend US$350-million to modernize and renovate the building. The Sears Tower will be renamed Willis Tower later in 2009 as part of a deal with Willis Group Holdings Ltd., the London-based insurance broker. Willis Group Holdings plans to lease more than 140,000 square feet of space in the building.

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Bank of America Corp. has provided half of a nearly US$1.3-billion loan to refinance the 55-storey Bank of America skyscraper in midtown Manhattan. The bank occupies 80% of the tower, which is slated to be completed in 2010. Original financing for the project included tax-exempt bonds totalling US$650- million.

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Office buildings, retail stores and other commercial properties in the United States valued in excess of US$100-million will be sold at an auction in July, 2009, according to Sperry Van Ness, which will conduct the auction with Guardian Real Estate Services LLC. The properties are located in California, Idaho and other western states and include an apartment complex and land on Wilshire Boulevard in Los Angeles with an estimated value of US$14.5-million. According to Real Capital Analytics Inc., commercial real estate transaction volumes in the United States decreased by 82% in the first five months of 2009 from the first five months of 2008.

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KB Home’s new home orders increased by 59 % in the second quarter of 2009 from the first quarter of 2009, but declined by 31% from the second quarter of 2008. The company had a net loss of US$78.4-million, or US$1.03 a share, in the second quarter of 2009 compared to a net loss of US$255.9-million, or US$3.30 a share, in the same period in 2008.

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The National Association of Realtors reported that sales of existing homes in the United States increased by 2.4% to an annual rate of 4.77 million units in May, 2009, from a downwardly revised annual rate of 4.66 million units in April, 2009. Sales of single-family homes increased by 1.9% to an annual rate of 4.25 million units and sales of multi-family homes rose by 6.1% to an annual rate of 520,000 units during the same period. Sales of existing homes in the United States decreased by 3.6% in May, 2009, from May, 2008. The median price of an existing home in the United States declined by 16.8% to US$173,000 during the same period. Housing inventory in the United States declined by 3.5% to 3.80-million existing homes in May, 2009, from April,

2009.

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According to the National Association of Realtors, new home sales in the United States declined by 0.6% in May, 2009 from April, 2009, and decreased by 32.8% from May, 2008.

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The Real Estate Group of New York reports that Manhattan apartment rents decreased by as much as 12.3% in June, 2009, from June, 2008. Rents for one-bedroom units in buildings with doormen declined to an average of US$3,786 a month. Rents for two-bedroom apartments in buildings without doormen decreased by 11.3% to US$4,069 a month.

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Taylor Wimpey PLC, the largest homebuilder in the United Kingdom, reported in June, 2009 that its order book increased by 73% from the end of 2008. Its current order backlog in the United Kingdom is $1.8-billion compared to $1.07-billion at the end of 2008.

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