The bull-run by real-estate investment trusts ran out of steam during the second quarter as broader stock-market concerns, fueled by the European debt crisis, prompted investors to trim their holdings.

Overall, REITS declined 3% in the second quarter through Tuesday, as measured by the Dow Jones Equity All REIT index. That was better than the overall stock market, which declined 8.5%, based on the Dow Jones Industrial Average. But the latest REIT results pale in comparison to the previous two quarters; REITS posted gains of 10% in the first quarter, and 9.4% in the fourth quarter of last year.

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There are 960 fixed rate loans representing $9.6 billion scheduled to mature by the end of the year, according to a Fitch Ratings’ review of CMBS fixed rate commercial loans. Of these 960 loans, 103 loans representing $2.3 billion (23.3%) are in special servicing. Of those in special servicing, 27 loans (representing 48% by balance) are current.

The maturity breakdown by month through December is as follows:
* July: 148 loans, $1.7 billion
* August: 134 loans, $1.4 billion
* September: 154 loans, $1.1 billion
* October: 180 loans, $1.9 billion
* November: 161 loans, $1.6 billion
* December: 183 loans, $1.9 billion

Of the 148 loans maturing in July, 133, having an average balance of $8.5 million, are current and performing. Retail properties secure 40% of the loans (by dollar balance), followed by 34% office and 12% multifamily. By vintage, 57% of the maturing loans are from 2005 transactions, followed by 26% from 2000 and 8% from 2006 transactions. A majority of the loans have reported year-end 2009 results and have a weighted average debt service coverage ratio of 1.72 times.

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A new accounting standard is taking shape that could change the way tenants choose to lease space, with broad consequences for the commercial real estate market.

The Financial Accounting Standards Board, which sets American standards, has been working with the International Accounting Standards Board to merge its generally accepted accounting principles, or GAAP, with international standards. One major piece of the puzzle is the accounting for leases.

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Last week’s memorandum from President Obama directing federal agencies to eliminate excess space and reduce real estate-related spending while moving toward a clean energy economy has raised many questions over the impact the new initiative is expected to have on the commercial real estate market.

The government owns or leases 354 million square feet in more than 2,200 localities across the country, according to the General Services Administration (GSA). Under the new plan, which the president expects to generate $8 billion in savings by 2012, all federal departments and agencies are to evaluate their portfolios and strip away any excess properties, as well as make better use of the real estate assets that they have. Obama called for the federal government to take a more cost-effective, asset-management approach to managing its real estate, identifying and eliminating surplus assets; terminating or not renewing leases that are not cost effective; consolidating operations when possible; increasing occupancy in current facilities through better space management and alternative workplace arrangements; and identifying offsetting reductions in inventory when new space is acquired.

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How will FASB’s pending changes to GAAP surrounding accounting treatment for leases impact corporations?

The proposed changes to Generally Accepted Principles (”GAAP”), when accounting for real estate (and equipment) lease commitments, will significantly change recognition for leases that are now classified as operating leases.  Once codified by the Federal Accounting Standards Board (”FASB”), assets will then be classified predicated on a corporation’s “right-to-use” the leased property, whereas a lease liability will be classified based upon a corporation’s obligation to pay rent.

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The amount of losses on distressed CMBS loans resolved in the past year has jumped 33% to where noteholders are now recovering approximately 43 cents on the dollar. And, say analysts, the losses are expected to continue to mount this year.

The average loss severity rate or the ratio of realized loss to liquidation balance for U.S. commercial mortgaged-backed securities (CMBS) loans resolved with losses in 2009 was 57% compared to the 43% rate in 2008, according to new data from Fitch Ratings. Those losses outpace the cumulative historical average of 37.2%.

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Real-estate prices are enticingly low in many areas of the country, prompting business owners to pursue sweet deals on storefronts, manufacturing facilities and other commercial properties. But because banks remain wary of commercial real-estate loans, landing financing to make such a purchase can be time consuming and tedious.

Compared to peak prices in October 2007, commercial property values are down 42%, according to Moody’s Investors Service Inc. Price index reports compiled by Moody’s and Real Capital Analytics Inc. show that as of March 2010, the cost of industrial and office space fell 32% in the last two years. Retail space also plummeted 28%.

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