Economic Update – AIG Unloads Choice Tokyo Property for $1.2B
- May 12, 2009
American International Group is finally in the news for something other than being a multibillion-dollar black hole for the U.S. Treasury; namely, a property sale. The beleaguered insurer has inked a deal to sell the AIG Otemachi Building and a one-acre site in Tokyo to Nippon Life Insurance Co. AIG will receive about $1.2 billion in cash for the property–a drop in the vast AIG bucket, perhaps, but still a tidy sum. It is a choice bit of real estate. Not only is it in the traditionally expensive Tokyo market, the building overlooks the Imperial Palace, one of the few places in the city sporting large tracts of greenery. AIG has been busy lately selling assets, especially business lines, and the Otemachi Building is only the latest. More assets, both business lines and real estate, are certain to be sold as the company attempts to dig itself out of its financial hole. Last week, the insurer said that it only lost $4.35 billion in 1Q09, which counted as good news in the topsy-turvy economy, since AIG’s 4Q08 loss was an eye-popping $62 billion, or just a shade more than the gross state product of Hawaii in 2007, to give it some context. Much of AIG’s fourth-quarter loss functioned as a kind of backdoor bailout for European banks. The company’s image was helped (slightly) in that its 1Q09 loss was announced the same day as GM’s $6 billion quarterly loss. The latest report by credit-rating agency Realpoint puts the amount of CMBS delinquency in March at $13.89 billion, compared with $11.99 billion in February. For much of 2008, the average monthly CMBS delinquencies hovered around $4 billion, but have increased steadily since September 2008. The increase in the number of CMBS more than 90 days delinquent has been especially sharp in recent months, averaging around $1.5 billion monthly in most of 2008, but mushrooming to well over $5 billion in March 2009. Expressed as a percentage, the amount of CMBS delinquency has gone from historic lows in mid-2008–less than 0.5 percent–to 1.664 percent in March 2009, which was up from 1.431 percent in February. Expect more escalation of that percentage in the coming months. Apparently investors were eager for profit-taking after the run-up on Wall Street last week, taking the Dow Jones Industrial Average down 155.88 points, or 1.82 percent, on Monday, the largest drop in about three weeks. The S&P 500 was likewise down a fair amount, 2.15 percent, but the Nasdaq lost a smaller amount, 0.45 percent.