Recently I had the chance to tour the Hearst Castle up in Cambria, CA. If you’ve never been there, I advise you to run…not walk! It’s a great tour, and we have no idea how long it will be there.
Standing on one of the terraces overlooking the incredible Neptune swimming pool, the high, ornately decorated towers, priceless statues and tapestries, and gold leaf coated gates, it occurred to me that William Randolph Hearst would have loved the news earlier this month. According to the MIT Center for Real Estate, commercial property values owned by institutional investors rose 4.4 percent in the third quarter, the first increase in more than a year.
Hearst Castle, of course, is owned by the State of California these days (and funded partly by my tour ticket at $24 a crack!), so Hearst himself wouldn’t have had a personal stake in the news, even if he hadn’t died in 1951. But I can’t help but believing the old guy would have enjoyed hearing that his pride and joy was finally up a notch or two in value.
The importance of the MIT index report may be more that it’s one of the few recent positive signs out there, more than anything else.
Based on the value of property transactions in the NCREIF index, it relies on info for roughly 6000 properties. Even though the index is still 36% off its peak in 2007, it does reflect some of the first positive market sentiments in over 2 years. That’s good to know when you, as an investor, look over your current or prospective holdings.
Other good indicators from the index: a narrowing in the gap between what sellers are asking and what prospective buyers are offering for properties. Offers in the third quarter rose 12 percent, after declining for eight consecutive quarters, while accepted prices dropped 2.5 percent, and were 30 percent below the peak reached in mid-2007.
Naturally, a single quarter does not make a trend. But it beats another downward quarter for now.
