ASIA
In China:
- The move further strains the economic relationship between both countries. In addition, the outlook of the Biden administration quickly reestablishing the status quo before the Trump administration took over, was dealt a blow this week when the New York Times reported that Biden would not remove the 25% tariffs on goods immediately. US President Elect Biden stated that he first wants to conduct a full review of the existing agreement with China and consult with America’s Asian allies in developing a coherent strategy
In Japan:
- The news was welcomed as the nation continues to see increased infection rates and cities proposed new lockdown measures.
REIT Focus:
CapitaLand announced that it had divested three retail malls in Japan and an office building in Korea for a total of S$448.7M. The company also announced that it had entered into a joint venture with Mitsui & Co Real Estate to develop and operate a logistics project in Japan.
Europe
In Europe:
- Reports highlighted the fisheries issue with France as the main reason talks failed on Thursday. Negotiations are expected to continue over the weekend.
- The downturn in services sector activity continues to way on the Eurozone’s recovery.
REIT Focus:
The London office market, like many others around the world, has experienced a decline in leasing and investment sales activity due to the disruptions associated with the COVID-19 pandemic. This week London office specialist Derwent London announced it had agreed to sell a 190,720 sf office referred to as the Johnson Building for a headline price of £170 mn before rental top-ups of £2.4 mn for incentives and vacant space. Derwent originally purchased the building back in 2000 for £29 mn and in 2006 completed a significant refurbishment that increased the leasable area by 53%. Approximately 40% of the passing rent in the building expires in 2021. The sales price represents a net initial yield of 4.1% on the current passing rent, which falls to 2.5% allowing for the 2021 lease expirations. The disposal price, net of incentives, is 4% below the reported June 30, 2020 book value and crystallizes an IRR of 10% pa to Derwent since the acquisition. Derwent plans to reinvest the proceeds into a new development at 19-35 Baker Street that is scheduled to start in 2021. Separately, Derwent announced that Transfer Wise has executed an early extension and expansion of its lease at the iconic Tea Building, one of Derwent’s signature refurbishments that transformed a block of early twentieth century warehouses once occupied by the Lipton Tea factory into offices. The lease increased TransferWise’s premises by 54% to 48,950 sf with the new rent in line with the current passing rent. TransferWise committed to a new 5-year lease that was previously due to expire in December 2023, but had a tenant break in May 2021. While not large transactions, both provide some indication of how quality owners such as Derwent are seeing opportunities in an otherwise challenging market.
North America
In the U.S.:
- Hospitality and retail jobs declined while transportation and warehousing gained. The unemployment rate fell to 6.7% versus October’s 6.9% reading.
- While Senate Majority Leader McConnell said things are moving in the right direction and compromise is within reach, he has not formally expressed support for the bipartisan deal.
REIT Focus
Apartment Investment and Management Company (AIV) received a conditional non-binding indication of interest to purchase from Westdale (Bloomberg). Aimco announced that its board unanimously determined the proposal was grossly inadequate and not in the best interest of Aimco and its shareholders.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.