Beige Book Neither Glum Nor Glib

It's not a double dip, just less of a recovery.

September 9, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user jpmueller99

The Federal Reserve’s latest Beige Book, widely expected to reflect a more sluggish U.S. economy, did not disappoint on Wednesday, reporting exactly that. But not a double dip, just less of a recovery.

“Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods,” said the Summary of Commentary on Current Economic Conditions, by Federal Reserve District, to use the publication’s full name. The conventional wisdom is thus confirmed: still growing, but only meekly. Robustness is off the table.

For real estate and construction, things are still lousy, to use a word only between the lines in the report. “Activity in residential real estate markets declined further,” the Beige Book reported. “Most district reports highlighted evidence of very low or declining home sales, which many attributed to a sustained lull following the expiration of the homebuyer tax credit at the end of June… Residential construction activity declined in most areas in response to weak demand.”

Opportunity in Asset Management?

Weakness in real estate doesn’t mean the business is completely without opportunities, however. Just ask Chicago-based Aries Capital, which is taking this moment in time to create a new division of the firm, Aries Asset Management Services. Its function will be to offer distressed property–mostly condo developments–services to qualified lenders and borrowers.

“Institutions are re-valuing their assets lower and don’t have the expertise to work the assets to create value,” Neil Freeman, chairman and CEO of Aries Capital, told CPE on Wednesday. “As a result, this is the best time in several decades to be in asset management business.”

Aries Capital has generally specialized in mezzanine loans on commercial real estate, not distressed properties. But its recent experience with turning around a North Side condo development on behalf of a lender that had taken possession of the unfinished property persuaded the company that asset management has its rewards in the current market.

Owners of Pittsburgh’s Largest Hotel File for Chapter 11

As an industry, it’s safe to say that hotels aren’t out of the recessionary woods just yet. Case in point: on Wednesday, the owners of the former Hilton Pittsburgh, Shubh Hotels Pittsburgh L.L.C., filed for Chapter 11 bankruptcy restructuring. It’s a strategic maneuver that prevents, for the time being, lender BlackRock Financial Management Inc. from foreclosing on the 700-room property, which is Pittsburgh’s largest.

The move came shortly after Hilton Hotels & Resorts announced that Shubh had lost its franchise license; among other creditors, the owners owe Hilton $4.2 million. So the hotel can’t be called a Hilton any more (the “Shubh Pittsburgh” probably isn’t under consideration as a replacement name). The hotel is, however, open for business, and the owners say that won’t change.

Wall Street had another up day on Wednesday, though a fairly mild one. The Dow Jones Industrial Average gained 46.32 points, or 0.45 percent, while the S&P 500 was up 0.64 percent and the Nasdaq advanced 0.9 percent.