Sunday Morning Oil & Gas Articles

There are two oil and gas articles worth reading this morning.  The first is a Washington Post opinion article about how the United States' oil policy is becoming more Western-centric and less dependent upon the Middle East.  The new ability to exploit oil fields in Canada, North Dakota and Texas, and new finds off the coast of Brazil are why the reliance on Middle East oil is declining, and the decline is expected to continue. The article was written by Daniel Yergin.

The second article is from the New York Times and reports how hydraulic fracking has impacted Cooperstown, NY.  Neighbors are battling each other over the fracking issue.  This is not a cheery article, especially when you read this paragraph:

As it turns out, despite the furor here, the Marcellus Shale, a vast rock formation under New York, Pennsylvania and other states, is so shallow near Cooperstown it is not clear how much gas would be available and what kind of drilling would take place here. And no one expects that fracking will ever come to Cooperstown itself.

People are creating personal and familial chasms that will last generations, all over a contentious issue that may not ever happen.  

Jumpy

It is interesting how one 200 share trade is able to move American Capital Realty Property (ARCP) stock up 6.3%.  Here is a screen shot from Google finance this morning showing the move:



Yesterday, ARCP stock closed at $10.80 per share.  According to an S-11/A filed yesterday, ARCP principals and affiliates own 36% of its stock.  (I had figured the principal and affiliate ownership at 34%, based on ARCP's Form 4 filing last week, which show 1,900,419 shares owned by principals and affiliates, out of 5,580,00 shares issued in ARCP's early September IPO.)

Update:  As as a follow-up, ARCP closed at $10.53, on volume of 2,008 shares.  No, I am not going to post on this stock everyday, it was just that a 6.3% move on 200 shares caught my attention.

Real Estate Prices

I have not posted this data in several months.  The Moody's / REAL Commercial Property Price Index rose 2.4% in July, and is now up 7% from a year ago and 15% from its post-peak low in April of this year.  The share of distressed deals was the lowest portion (21.7%) of the index since January 2010.   The Bloomberg article linked to above provides data on other commercial real estate indexes for comparison:

Other property price indexes have showed a slowdown. CoStar Group Inc.’s National All Property Type Composite Index slipped 0.5 percent in August from the previous month, the Washington- based real estate data provider said Oct. 12. The index was down 3.6 percent from a year earlier and is 34 percent below a peak reached in 2007.

Green Street Advisors Inc., a real estate research company in Newport Beach, California, reported commercial property values were unchanged in September from the previous month and advanced 15 percent from a year earlier. Prices are down 9 percent from their August 2007 peak, the company said Oct. 6.

Green Street’s index is weighted by asset value and includes deals that are in negotiation or under contract.

This was a positive report.

Blackstone and GE Deal

Last week, a Blackstone fund purchased 82 suburban office properties from Duke Realty for $1.08 billion.  This supports recent reports that the demand for commercial real estate is spreading from major, downtown metropolitan locations to suburban and smaller metropolitan areas.  The Duke Realty properties were located in the South and Midwest.  GE Capital is providing finance on the transaction to the tune or $800 million, or 80%.  An 80% loan-to-value is the highest I have seen since the Credit Crisis, without the use of a bridge loan or other forms of junior debt.  This signifies lenders' acknowledgement of a widening real estate recovery.  According to the Bloomberg article linked to above, GE will initially keep the loan on its balance sheet, but may syndicate it in the future.

CMBS News

I have been busy the last few weeks, which is why blogging has been light.  I saw this article yesterday on CMBS delinquencies that I thought interesting.  Here is most of the article:

Analysts said the rate of delinquent loans increased to 9.36% from 9.01% in August. The rate has stayed higher than 9% for all of 2011.

The delinquency rates for all five property types rose in September from the prior month and are higher than the year earlier: retail to 7.11% from 7.08% in August; office to 8.16% from 7.36%; industrial 11.39% from 11.2%; hotel 14.81% from 14.56%; and multifamily 15.33% from 15.21%.

One new CMBS deal worth $1 billion priced last month and was more than offset by the $5.9 billion of legacy CMBS that exited the space during September, lowering outstanding CMBS to $594.6 billion, according to Moody's.

I am always surprised that retail has the lowest delinquency rate and multifamily the highest.  I'd intuitively think retail would have high defaults because so many retail properites were built in response to the new housing that was developed in the 2000s.   I don't know what the author of the article means with the statement that "$5.9 billion of legacy CMBS that exited the space during September."  These loans obviously refinanced with new CMBS loans.