Midtown Manhattan office rents fell 33 percent in 2009 as New York’s financial industry cut staff and relinquished space, commercial property broker FirstService Williams said in a report.
Rents in the nation’s most expensive office district dropped to $59.31 a square foot in the fourth quarter and are down almost 50 percent when concessions including temporary free rent are included, the New York-based broker said today.
Financial companies occupy more New York office space than any other non-governmental employer. They cut 25,200 local jobs in the 12 months through November, helping push the city’s unemployment rate to 10 percent, according to the New York State Department of Labor.
“Employment is not going to trend up with any alacrity,” FirstService Williams Executive Chairman Robert Freedman said in an interview. “We’re going to see a very, very modest uptick in demand” for offices.
The percentage of available space in Midtown climbed to 14.9 percent from 11.9 percent a year ago, FirstService Williams said. The rate applies to office space between 34th Street and Central Park in Manhattan.
The decline in neighborhood rents showed signs of leveling off as more than 1 million square feet along Park Avenue, Fifth Avenue and Avenue of the Americas were leased in the fourth quarter, FirstService said. Landlords stopped increasing incentives to lure tenants, the broker said.
Wall Street Area
Downtown rents declined 22 percent in 2009 to $38.60 a square foot and availability jumped to 13 percent from 10.5 percent at the end of 2008. Most of the available space downtown was added in the fourth quarter.
Between 8 percent and 10 percent of downtown leases signed in 2009 were for financial tenants, according to FirstService’s preliminary numbers. About 30 percent of the New York City office market is already occupied by the industry.
“With the financial sector still a major driving force in the downtown market, recovery in lower Manhattan may be slower than expected,” Freedman said.
In Manhattan’s Midtown South area, roughly located between 34th and Canal streets, office availability climb to 11.7 percent from 8.5 percent at the end of last year. Asking rents averaged $39.73 a square foot, down 28 percent from a year ago.
Thirteen of Arizona’s 21 billion-dollar public companies saw their stock prices move up during the fourth quarter.
Seven of the companies posted double-digit gains, with Clear Channel Outdoor leading the pack at 58 percent, according to the Phoenix Business Journal’s analysis of prices from Sept. 30 through 30 through Dec. 18.
Penny stock Mesa Air Group mirrored that performance with a 58 percent decline to lead the group of eight companies with a drop in price per share over the quarter.
Over the same period the Dow Jones Industrial Average gained 6.4 percent and the Nasdaq Composite moved up 4.2 percent.
The Arizona group did better when price changed is measured over all of 2009, but all but four of the stocks still lag from the end of 2007. Click here for the 2009 wrapup and here for a two-year look at local stocks.
Estate planner Richard Behrendt helped his client make $5 million loans to each of his children this year, avoiding gift taxes of 45 percent and saving the kids as much as $837,000 apiece in interest.
Rates for so-called intra-family loans have declined as much as 53 percent since 2008. “The timing of it was clearly tied to the rock bottom of these rates,” said Behrendt, who works for Robert W. Baird & Co., based in Milwaukee, Wisconsin.
The loans may be the perfect holiday gift to help relatives this year, according to Carol Kroch, head of wealth and financial planning at Wilmington, Delaware-based Wilmington Trust. For wealthy taxpayers, they can be used for estate planning purposes, since gains earned will be free of estate and gift taxes.
That’s because low interest rates and depressed asset values mean there’s a greater possibility that investments purchased with an intra-family loan, such as stock, will appreciate more than the loan’s cost, Kroch said.
The rate for an intra-family loan made in January 2010 for less than three years is 0.57 percent. The rate is 2.45 percent for a loan of three years to nine years and 4.11 percent for a loan of nine years or more, according to the Internal Revenue Service, which sets the rates monthly. That compares with an average rate of 10.55 percent for a personal bank loan in the New York metro area and 12.51 percent for a credit-union loan, based on data from Bankrate.com.
“The chances are they are going to go up, the only question is how fast or how soon,” said Bill Fleming, managing director of New York-based PricewaterhouseCoopers’s Private Company Services Group, referring to rates for intra-family loans.
Tax Savings
Behrendt’s client, who has a net worth of $100 million, loaned each of his three children $5 million for nine years. The children invested the money in a balanced portfolio seeking at least a 5 percent return, said Behrendt, a former estate tax attorney for the IRS.
Any amount above the 1.65 interest rate, which was the February rate, should pass to the client’s children free of estate and gift taxes, he said. The Standard & Poor’s 500 Index has increased 36 percent since February as of yesterday.
The borrowers also saved on interest costs because of the low rates. Each will owe $82,500 in interest annually, compared with $175,500 if the loan had been made in February 2008 when the rate was 3.51 percent.
Current federal law taxes estates exceeding $3.5 million for an individual or $7 million for a married couple at as much as 45 percent. Any gift to an individual of more than $13,000 annually may also be taxed as much as 45 percent with a $1 million lifetime exclusion per donor, according to the IRS.
Estate Tax
The estate tax is scheduled to expire for a year on Jan. 1 under the provisions of a tax-cut bill enacted in 2001. It comes back in 2011, taxing estates valued at more than $1 million as much as 55 percent. Senate Finance Committee Chairman Max Baucus, Democrat of Montana, has vowed to extend the estate tax in 2010 retroactively.
Lenders who are subject to the estate tax can use the loans to reduce the value of their estates because the appreciation of any investment made with the loan above the IRS rate accrues outside of the lender’s estate, said Larry Richman, chair of private wealth services at Neal, Gerber & Eisenberg LLP in Chicago.
Taxpayers with family businesses may also want to consider intra-family loans to help with the sale of the business to family members, according to David Kron, a partner in the Fort Lauderdale office of law firm Ruden McClosky.
Parents can loan their children money to buy the business and the children can repay using profits from the firm. The future appreciation and any income of the business beyond the loan amount are then considered part of the children’s, not the parents’, estate, Kron said.
‘Low-Tech’ Tool
Intra-family loans are a “low-tech” way to give money to family members because they’re easy to set up and are appropriate for anyone regardless of net worth, said Deborah L. Jacobs, author of “Estate Planning Smarts: A Practical, User- Friendly, Action-Oriented Guide,” which was published this month.
Family members should be aware the loans must be repaid in full with interest at the rate specified by the IRS. If the borrower doesn’t repay, it may be considered a gift subject to the gift tax, said Jacobs, who is based in New York.
Lenders should also consider the income tax they’ll owe on the interest received with repayment of the loan, said Kron.
‘Thanksgiving Firecracker’
Loaning money to family members may create relationship issues, said Dan Deighan of Melbourne, Florida-based Deighan Financial Advisors Inc.
“It’s like throwing a firecracker on the Thanksgiving dinner table when you bring money issues into the family dynamic,” Deighan said.
Borrowers can get “sloppy with repayments,” which is why setting up an automatic bank transfer for payments is recommended, said Fleming of PricewaterhouseCoopers.
Don Albritton, a 61-year-old executive in Longwood, Florida, gave his son $260,000 to buy a house through a 30-year intra-family loan four years ago. Albritton ended up taking the house back after his son was unable to sell it without taking a loss. Home prices have declined 17 percent since January 2005, according to the S&P/Case-Shiller index for 20 metropolitan areas.
“I’m not discouraged,” Albritton said. “I’m getting ready to make him another loan now.”
U.K. consumer confidence fell for a second month in December, complicating Prime Minister Gordon Brown’s efforts to revive his popularity before next year’s election, market researcher GfK NOP said.
An index of consumer sentiment dropped to minus 19 from minus 17 the previous month, GfK NOP said in an e-mailed statement today in London. A gauge of expectations for the economy over the next year fell nine points to minus six.
“This must be concerning for the government,” Nick Moon, an analyst at GfK, said in the statement. “What will be particularly worrying for Gordon Brown is that the index for the state of the economy, which had crept into positive territory, has fallen by a substantial nine points.”
Brown, who must call an election by June, is struggling to claw back the support lost to the opposition Conservatives during the financial crisis. Bank of England policy maker Kate Barker said Dec. 15 an economic recovery will be “bumpy,” and data released yesterday showed British retail sales unexpectedly fell in November for the first time in six months.
Retail sales growth will “fizzle out” next month, and trading conditions across the industry are likely to “remain challenging” in 2010, the Confederation of British Industry said yesterday instant personal loans guaranteed.
A gauge of the economy’s performance over the past year slipped two points to minus 61. A measure of consumers’ willingness to buy big items such as refrigerators and furniture rose three points to minus 16, GfK said.
Housing Recovery?
British consumers are still adapting to a recession that sparked the country’s worst housing slump since the early 1990s and has led to 600,000 job losses, pushing the unemployment rate to 7.8 percent. Barker said she would be “surprised” if the recent pick up in property prices were sustained next year as unemployment threatens household finances.
The market researcher surveyed 2,004 people between Dec. 4 and Dec. 12 on behalf of the European Commission. The margin of error is estimated at two percentage points, the report said.
The Raleigh-Cary metro area was one of the few regions in the country to show job growth in the third quarter, signaling the area may be among the better performers pulling out of recession, according to a report released Tuesday by the Brookings Institution.
Unemployment in Raleigh-Cary was 8.6 percent in the third quarter, a 0.1 percent improvement compared to the second quarter. The modest growth is better than most of the top 100 metros evaluated by the Washington, D.C., think tank. Just 13 of the top 100 metros experienced job growth in the third quarter. The U.S. average for the top 100 metros was 9.6 percent unemployment, a 0.5 percent increase in unemployment in the third quarter compared to the second quarter.
Raleigh-Cary was also one of just 10 metro areas to show faster growth in jobs and gross metropolitan product in the third quarter compared to the second quarter, according to Brookings. Raleigh-Cary GMP increased by 1.1 percent in the third quarter compared to the second quarter instant payday loan.
Nationally, gross domestic product increased at a 2.8 percent annual rate in the third quarter. That was the first increase after four consecutive quarters of contraction. Brookings said the growth, along with other indicators such as increasing housing prices, are a sign that recovery is under way.
But Brookings cautioned that the recovery “seems fragile.”
“The output increase may have resulted largely from the replenishment of manufacturing inventories and from temporary federal policies: the ‘cash-for-clunkers’ program, the first-time home buyer tax credit, and the American Recovery and Reinvestment Act’s economic stimulus,” the report states. “As the effects of these policies recede, the recovery could slow or give way to yet another recession or a prolonged period of economic stagnation.”
Lee Enterprises Inc., owner of the St. Louis Post-Dispatch, said Friday it had stronger advertising sales in November and expects declines in revenue to ease for the company’s fiscal first quarter ending Dec. 27.
"Based on trends through early December, we’re hopeful that the turnaround has begun," Mary Junck, chairman and CEO, said in a news release. "Although it’s premature to guess when year-over-year revenue comparisons will turn positive, we expect our aggressive cost reductions will enable meaningful earnings growth when they do."
Among the cost reductions were increases in premium cost-sharing for some participants in retiree medical plans and elimination of retiree health care coverage for other participants. Lee said these changes will reduce annual retiree medical costs beginning in 2010 and will cut benefit obligation liability by up to $30 million.
Lee said it expects operating revenue for the quarter ending Dec paydayloans. 27 to fall 14 percent to 15 percent compared to the same period in 2008. Revenue declined an average of 20 percent in the last three quarters of fiscal 2009.
The company also said that debt refinancing, adequate liquidity and improving business conditions allowed its accounting firm, KPMG LLP, to drop from this year’s annual report an explanatory paragraph in 2008’s annual report that raised doubt about Lee’s ability to continue as a going concern. Lee filed the 2009 report Friday with the Securities and Exchange Commission.
Lee, based in Davenport, Iowa, owns 49 newspapers and has a joint interest in four others. It also has online sites and nearly 300 specialty publications in 23 states.
Tampa-St. Petersburg hotel occupancy rates and revenue per available room were up for the week ending Nov. 5, while the U.S. hotel industry posted declines, according to national lodging research firm Smith Travel Research.
Tampa-St. Petersburg’s occupancy rate increased 11.8 percent to 52.2 percent, ranking the region among the top three out of 25 markets measured, a release from STR said.
The occupancy rate in Oahu Island, Hawaii, climbed 15.3 percent to 74.7 percent, and the rate in New Orleans, La. rose 13.1 percent to 67.6 percent, the release said.
The industry’s occupancy fell 4.9 percent to end the week at 47.6 percent in year-over-year measurements, the release said no faxing payday loan.
Along with Oahu Island and New Orleans, Tampa-St. Petersburg was one of only three markets to report an increase in revenue per available room for the week. The increase in Tampa-St. Petersburg was 1.8 percent increase to $44.70.
New Orleans posted a 42.4 percent increase to $101.72, and Oahu Island posted a 7.1 percent increase to $105.87.
The industry’s revenue per available room decreased 11.9 percent to $45.86, and the average daily rate dropped 7.3 percent to $96.25, the release said.
There’s something different about the Masters’ Select Funds. Though it’s not unusual for a team of professionals to manage mutual funds, these offerings put a fresh spin on it.
Rather than bulk up with an in-house team of analysts and portfolio managers to establish the Masters’ Select Funds, Litman/Gregory Fund Advisors chose to play overseer. It hired highly regarded money managers as subadvisers — each responsible for a portion of one of its funds.
"Each manager has a very concentrated mandate to own only eight to 15 of their best ideas," says Chief Investment Officer Jeremy DeGroot. The funds are diversified from the different styles in investment philosophies of each manager, so there’s a broader mix of industries and stocks.
The largest fund is top-rated Master’s Select International Fund, with $1.4 billion in assets and a return of just more than 39 percent this year. Its five-year annualized return of 7.6 percent still places it among the top in Morningstar’s foreign large blend fund category.
DeGroot recently offered insight on his market perspective:
What’s your take on the market rally we’ve seen this year, and what do you expect lies ahead?
I want to be clear that Litman/Gregory’s view doesn’t impact how the Masters Funds are invested since those funds are built stock by stock by the managers. The reason I’m saying that is because Litman/Gregory is not that optimistic about stock returns looking out three to five years from now.
We think the consumers’ need to increase savings and rebuild their balance sheets is going to lead to slower growth in consumption.
That among other factors will lead to reduced earnings growth for companies. So in terms of outlook, we’re kind of in the subpar economic recovery group. We’re not in the V-shaped economic recovery group.
What’s guiding that outlook?
The market is expecting a stronger earnings recovery than we think is likely.
We think the baseline case scenario is for subpar recovery coming out of this recession. That’s because of the overhang of debt in our economy — because of all the government spending, the huge deficit that’s likely to lead to higher interest rates down the road, probably higher taxes on individuals. Those are not going to be positive for economic growth.
After taking a hit, don’t consumers usually return to being fat and happy — shaking off what ails them?
This time is different from most typical economic cycles in that this recession is more of a balance sheet recession. It wasn’t caused by the Federal Reserve worrying about inflation and an overheating economy and raising rates — leading to a contraction in consumer credit and a reduction in spending and business inventories getting cut. That did happen, but that’s not really what triggered the recession. We’re building debt upon debt, and we’re overspending our income for a number of decades.
Historically there have been some studies that have looked at the after-effects of balance sheet recessions, and they take much longer for economies to rebound. Unemployment usually stays significantly higher than it does in a normal recession. You know the Fed can’t lower rates any more. They’re doing other things to increase liquidity. We’re always hesitant, as everyone in the investment business is, to say it’s different this time. But it’s different from the typical cycle in our view.
Are there any factors that would trigger you to adopt the more positive scenario?
We think there has to be a significant reduction in household debt levels. We think it’s going to happen, hopefully fairly gradually, but when that happens, that is a headwind to growth. But we also think there are some worst-case scenarios for subpar growth where there could be a significant decline in the dollar. We expect a modest sustained gradual decline because it’s in no one’s interest to have the dollar crash.
With all the turmoil in the market over the last few years, has your firm’s team approach been tested?
We talk to managers about their mistakes a lot. And we think you really learn about the person, the team and their mind-set. If they’re willing to admit their mistakes and learn from them or if their ego is too big to really even acknowledge it.
The bottom line is that we removed one manager in the fall of last year, not based on short-term performance. It had been a process of reassessing over a couple of years, but with the other mangers we reconfirmed our confidence in their ability to perform well.
Bank of America said late Wednesday it planned to return the entire $45 billion in bailout money it received from the government over the past year.
The move would allow Bank of America, the nation’s largest lender, to wriggle free from a variety of government restrictions it has had to abide by, including pay caps for its top executives.
It could also smooth what has been a difficult search for a new chief executive.
Outgoing CEO Ken Lewis is scheduled to depart by year end. Bank of America’s board of directors originally hoped to select a successor by Thanksgiving.
"We believe that this is good news, not only for the U.S. taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover," Lewis said in a statement.
The payback would be made largely through the sale of $18.8 billion of securities that would convert into common stock, according to the company. The stock sale will be put to a shareholder vote in coming months.
In addition, the bank said it would supplement the $18.8 billion with $26.2 billion in cash.
Last fall, as the government tried to stabilize the financial markets, Bank of America received $25 billion in aid under the Troubled Asset Relief Program, or TARP.
That number grew to $45 billion in the following months as the bank sought to cover losses it absorbed through its purchase of Merrill Lynch at the height of the crisis in September 2008 payday loan online.
There had been speculation earlier this fall that the company was exploring options to pay back part of the money it had received from the government.
But many believed that it would be at least several more months before the Charlotte, N.C.-based lender could get completely out from under the government’s thumb.
The move, of course, will save Bank of America from having to make any further dividend payments on aid it received from the government. So far this year, the company has paid out $2.54 billion to the Treasury Department.
But exiting TARP won’t come without a cost. The company said it would reduce its fourth-quarter results by $4.1 billion as a result. The company is expected to report a loss of $524 million in the current quarter.
Bank of America noted however, it did not plan to exercise its right to repurchase warrants, or rights to purchase company shares, owned by the government.
Bank of America (BAC, Fortune 500) shares finished more than 1% lower in regular trading Wednesday, but jumped more than 3% on the news after the bell.
European Central Bank President Jean- Claude Trichet is withdrawing stimulus measures faster than economists anticipated, clearing obstacles to higher interest rates next year.
The ECB’s decision yesterday to end long-term emergency loans and tighten the terms of its final 12-month tender will give greater traction to any rate increases in 2010 should policy makers deem them necessary.
“The ECB chose a quicker exit path,” said Laurent Bilke, a former ECB economist now at Nomura International Plc in London. “It’s very difficult not to think it’s the beginning of a tightening process.”
The move to tie the rate on the 12-month loans to the ECB’s key rate rather than setting a fixed rate of 1 percent means any increase in the benchmark will also affect banks’ funding costs. While Trichet said the move doesn’t signal the ECB intends to raise rates, some officials are concerned that leaving borrowing costs at a record low for too long will fuel asset bubbles and faster inflation.
Trichet spoke as Federal Reserve Chairman Ben S. Bernanke promised a “smooth” withdrawal of stimulus in the U.S. as the world’s two biggest economies pull out of recession.
Yesterday’s announcements “put the ECB in a position where it can choose to raise rates if it wants to further down the line,” said David Page, an economist at Investec Securities in London. “We’re penciling in a rate rise in the second half of next year.”
Economic Recovery
The risk for the ECB is that any indication it could raise rates sooner than the Fed may fuel further gains in the euro and undermine the region’s economic recovery.
Economists had expected the ECB to leave the rate on its 12-month tender fixed at 1 percent, according to a Bloomberg News survey. That would have made any increase in the benchmark rate next year less effective because banks would have had money at 1 percent through the end of 2010.
By setting the rate on the loans to the average of the benchmark rate over the year, “the ECB has made sure that future movements in interest rates will be reflected in banks’ funding costs,” said Colin Ellis, an economist at Daiwa Securities SMBC Ltd. in London.
Some members of the ECB’s Governing Council were against indexing the rate, fearing it would fuel market expectations of policy tightening, people familiar with the discussions told Bloomberg last week. Trichet said today the decision was not unanimous, rather reached “by consensus.”
‘Strong’ Dollar
The euro traded at $1.5081 at 7:30 p.m. in Frankfurt last night, down from $1.5123 before Trichet spoke. It fell to $1.5061 after Trichet said it’s “very important” for Europe that the U.S. has a “strong” dollar.
The euro has gained 20 percent against the greenback since mid-February, threatening to slow the region’s recovery by hurting exports same day payday loans. Daimler AG, the world’s second-largest maker of luxury cars, said yesterday it will shift some production to Alabama from Germany as it seeks to benefit from the cheaper dollar.
While the ECB raised its economic outlook, forecasting growth of 0.8 percent next year and 1.2 percent in 2011, it said price pressures remain “subdued.” Inflation is expected to average 1.3 percent next year and 1.4 percent in 2011, below the bank’s medium-term goal of just less than 2 percent.
‘No Compelling Argument’
“The new staff growth and inflation forecasts confirm that there is still no compelling argument for hiking rates,” said Marco Annunziata, an economist at UniCredit Group in London. “Trichet was emphatic in noting that the decisions on liquidity simply reflect improving market conditions and in no way signal a prospective hardening of the monetary policy stance.”
Still, the ECB is withdrawing its non-standard operations “at a somewhat quicker pace than we had expected,” said Julian Callow, an economist at Barclays Capital in London. “In our view, today’s decisions are on the hawkish side.”
ECB council member Axel Weber said yesterday it’s a “balancing act” for central banks to withdraw stimulus measures without threatening their economic recoveries.
“We’ve made it clear that we’ll gradually withdraw unconventional measures in the future,” Weber, who is also head of Germany’s Bundesbank, told ARD television. “But that doesn’t mean that we won’t use the necessary caution. There’s no need to send a signal on interest rates at the moment.”
Normal Refinancing
The changes announced by the ECB nevertheless pave the way for a return to normal refinancing operations, in which the interest rate on its loans is determined by market demand. After the collapse of Lehman Brothers Holdings Inc. in September last year made banks reluctant to lend to each other, the ECB said it would lend them as much cash as they wanted at its benchmark rate.
Money-market rates have dropped, suggesting banks have become less wary of lending to each other. The Eonia overnight rate, the rate European banks charge each other for overnight loans, has declined to 0.34 percent from 2.2 percent at the start of the year.
“Once liquidity conditions normalize in the third quarter of next year, the Eonia rate is likely to move back to the refinancing rate,” said Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam.
“This would pave the way for conventional monetary tightening from the autumn of next year, and we expect 50 basis points of rate hikes by the end of 2010.”
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