Inveslogic.com Daily Blog Report: Home sales drop 12.8%, retail sales disappoint, Indian real estate firm lists on Euronext

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Home sales drop 12.8% this year

According to a post from Zacks Investment Research blog, the National Association of Realtors has reported another disappointing set of results. The NAR stated that sales of existing homes “fell to a seasonally adjusted annual rate of 5.500 million in August from 5.750 million (-4.3%) in July… a year ago, existing home sales were running at a rate of 6.310 million, so the year-over-year decline is 12.8%.” The post noted that this decline, though sharp, was predicted by many industry analysts.

With sales dropping, inventories have risen significantly. The August numbers stated that 4.581 million houses are now on the market, up 2.9% from July. The post reports that this represents a jump of “19.2% from a year ago.” The excess of supply has put a dent in the median home price, as well. According to the post, “the price of a median home dropped to $224,000 in August from $228,700.” This represents a decline of 2.1% within one month.

The post was adamant that conditions are going to get worse before they get better as fall-out from the sub-prime fiasco will see foreclosures activity continue to increase. “The wave of mortgage resets is still building, and this will cause more foreclosures, dumping more supply on the market… the market is oversupplied with houses, both new and used.” Zacks advised investors to stay away from any stock associated with homebuilding until “the second major homebuilder files for Chapter 11… I don’t know for sure which ones will bite the dust, but some will, and you do not want to be in the group until a substantial amount of capacity has been removed from the market.”

Recent Retail Numbers are Dismal

Expert financial blog In the Money written by Jordan Khan, a managing partner of Beverly Investment Advisors, commented on the recent string of lacklustre retail results. According to the post, “Retailers are not reporting very strong results currently, just ask Lowe's... the company lowered guidance materially, and said that too many uncertainties exist to call the bottom.” Retailing stalwart Target has also lowered its September same-store sales forecasts.

The post noted that one of the key motivations behind the drop-off in retail sales was the massive hit that the housing sector has taken recently. Noting that existing home sales fell 4.4% last month, he was insistent that more retailers would start feeling the same pain that homebuilders are feeling. 

Khan reported that homebuilder Lennar “also posted dismal results, posting a net loss vs. the consensus for a gain.” This reportedly comes on the heels of the company cutting its work force by 35%. Further job losses are anticipated in the near future for the beleaguered homebuilder. The NYSE homebuilder index was down 2.1% on the day.

$100 million Canadian Cleantech fund launched

An increasing number of American venture capitalists have been turning their attention north of the border when looking to invest in green technology. This has led to an Ottawa-based VC firm announcing the launch of Canada’s first investment fund dedicated exclusively to cleantech. According to a post from Clean Break, an expert blog focused on the business of Cleantech, “Ottawa-area venture capital firm Venture Coaches is preparing to launch a $100 million cleantech fund committed to investment in Canadian companies.” 

Venture Coaches was founded in 2001 with its first fund focused exclusively on information and telecommunications companies.

The post reported that the firm intends to focus on companies engaged in research, design, development and manufacture of energy efficient materials. Additionally, components, sub-systems and energy management solutions will also be targeted. Clean Break reports that “Money for the fund is in the process of being raised and a spokesman for Venture Coaches said the company is confident it will meet its $100 million goal.”

Clean Break was positive that the fund, dubbed Canadian Cleantech Fund, will be well-received in Canada. According to the post, “Canadian Cleantech Fund, will be welcome in a country that tends to take a conservative approach to early-stage investing, particularly in the Canadian cleantech sector, where U.S. venture capitalists are beginning to realize there are quality deals to be had.”

Indian real estate fund lists on Euronext

VC Circle, an expert blog focused on Indian venture capital, is reporting that Yatra Capital will raise $212 million through a private equity offering in the Netherlands and private placements. Yatra, an India-based real-estate fund, is already listed on the Euronext exchange in Amsterdam and is already reported to have “made five investments in India which amount to $125 million.” Yatra was the first Indian real estate company to list itself on the Euronext stock exchange.

According to the post, the planned real estate investments are focused on “tier II and tier III cities of India.” Yatra has claimed it will use the new proceeds to invest in several projects identified by its Mauritius-based subsidiary K2 Property Ltd. VC Circle revealed that some of the investments include “$9.18 million in a 50-50 joint venture with Modi Build-Well Ltd in Gujarat, $23.5 million in Market City, Pune, $5 million in the Mumbai-based Phoenix Mills Ltd, $30.5 million in Pune’s Kolte Patil Developers, among others.”

The fund was founded by ex-HSBC executive Ajoy Veer Kapoor and Rohin Shah, and backed by investors like Morley Fund Management, Fortis Investments and Standard Life. It appears as though Yatra has much loftier ambitions as Ajoy Veer Kapoor was quoted saying that, over the long term, “the fund was planning to raise $600 million to invest in India.”



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