Thursday, November 11, 2010
The Brickyard Apartments, Evansville, IN
Chris Stuard and Steve Martin at Sperry Van Ness/Martin Commerical Group have recently been retained to faciliate the disposition of The Brickyard Apartmetns in Evansville, IN. This Class A community is 178 units located on the west side, which is the strongest sub-market in Evansville. The offering can be viewed via the web at http://sale.svn.com/thebrickyard . For more information, please contact Chris Stuard at 812.471.2500 or via email at chris.stuard@svn.com .
Just Leased - Former Blimpie's Space
Sperry Van Ness/Martin Commercial has just leased the former Blimpie's space in the VPS Building located at 6th and Main in Evansville, IN. The space is directly across from the main gate of the new downtown arena, which will be completed in 2011. The new tenant plans to operate a upscale sushi bar.
Friday, October 1, 2010
FOR SALE: Royal Oaks Golf Club, Grafton (Cleveland), OH
Royal Oaks Golf Club is an 18-hole parkland style track. The site totals 96.97 acres and is a triangular tract. The course was designed by the father and son team of Max Jalowiec, Sr. and Jr. There are three sets of tees and the course plays from 4,439 to 5,729 yards. The fairways are tree-lined with greens that vary in size and contour. Eight holes have water hazards in the form of several lakes. There is a putting green, and cart and club rental is available. There is a 1,600 square foot club house built in 1998.
The club house offers a bar and food for patrons. There is also a 768 square foot pavilion with picnic tables. See marketing package for complete details and financials are available upon request.
Royal Oaks is located in Grafton’s west side just east of Grafton Road on Parsons Road. Parsons Road connects to Main Street, which directly accesses State Route 57, then the Ohio Turnpike, Route 2 or Route 10 (I-480) to the east.
PRICE: $1,200,000
Marketing Webiste
Contact:
Christopher M. Stuard
Sperry Van Ness/ Martin Commercial Group
4004 E. Morgan Avenue
Evansville, IN 47715
(812) 471-2500
chris.stuard@svn.com
Victor S. Voinovich, Sr.
Sperry Van Ness / First Place Commercial Realty, LLC
12150 Lyndway Drive, Suite 100
Cleveland, OH 44125
(888) 236-1435
voinovichv@svn.com
The club house offers a bar and food for patrons. There is also a 768 square foot pavilion with picnic tables. See marketing package for complete details and financials are available upon request.
Royal Oaks is located in Grafton’s west side just east of Grafton Road on Parsons Road. Parsons Road connects to Main Street, which directly accesses State Route 57, then the Ohio Turnpike, Route 2 or Route 10 (I-480) to the east.
PRICE: $1,200,000
Marketing Webiste
Contact:
Christopher M. Stuard
Sperry Van Ness/ Martin Commercial Group
4004 E. Morgan Avenue
Evansville, IN 47715
(812) 471-2500
chris.stuard@svn.com
Victor S. Voinovich, Sr.
Sperry Van Ness / First Place Commercial Realty, LLC
12150 Lyndway Drive, Suite 100
Cleveland, OH 44125
(888) 236-1435
voinovichv@svn.com
Operators Cheered By Latest Seniors Housing Data
Although the U.S. economy is still sputtering and the capital markets remain skittish, the worst is probably over for the seniors housing industry, according to several new reportsAlthough the U.S. economy is still sputtering and the capital markets remain skittish, the worst is probably over for the seniors housing industry, according to several new reportsAlthough the U.S. economy is still sputtering and the capital markets remain skittish, the worst is probably over for the seniors housing industry, according to several new reports.
“For seniors housing operators, there’s a sense that they’ve come through some very tough economic conditions,” noted Robert Kramer, president of the National Investment Center for the Seniors Housing & Care Industry (NIC), speaking at the group’s 20th annual conference held in Chicago last week. “Operators are cautiously optimistic.”
Several industry reports released at the conference point to some positive trends, including new data showing the seniors housing industry weathers downturns better than other types of commercial real estate.
As of the fourth quarter of 2009, the seniors housing sector generated a cumulative return of 2.7 times its mid-2003 value, according to the National Council of Real Estate Investment Fiduciaries (NCREIF).
By comparison the entire NCREIF Property Index, which includes all types of commercial properties, posted a cumulative gain of 1.5 times its mid-2003 value.
Separately, new construction of seniors housing properties has declined dramatically, according to the “Construction Trends Report for 2010,” prepared by the American Seniors Housing Association (ASHA) and NIC.
The report tallies only 129 new seniors housing project starts in the last year, along with expansions of 58 existing projects. “This is a very modest level of construction,” notes David Schless, president of ASHA. Today’s construction level is 32% less than the previous year, and down 57% from two years ago.
The Dallas area has the most construction activity, with 2,332 units under way. New York has 2,018 units under construction. San Francisco and Chicago have the next highest levels of construction, with 1,186 units and 1,692 units respectively.
The construction of continuing care retirement communities (CCRCs) also has slowed, mostly due to the difficulty of financing these projects which feature several different types of housing and care on one campus.
CCRCs are often financed with tax-exempt bonds, which have been less available since the downturn. A year ago, CCRCs represented 22% of all new seniors housing units under way. Now CCRCs comprise 13% of the total number of units under construction.
Consumer demand jumps
Occupancies at seniors housing facilities —including assisted and independent living — have stabilized. Among the top 31 markets tracked by NIC, the occupancy rate peaked in early 2007 at 92%. But by the first quarter of 2010, the occupancy rate had dipped to 87.6%, a decline of 440 basis points.
In the second quarter of 2010, the occupancy rate in those top 31 markets ticked up slightly to 87.7%. “We’re bumping along the bottom,” says Michael Hargrave, vice president at NIC.
Demand for units rebounded quickly last year. Defined as the change in the number of occupied units, demand had been growing at an annual rate of 1.6% prior to the recession. Demand was flat during the downturn, but it is currently growing again at an annual rate of 1.7%. “A demand-led recovery is what the sector needs,” says Hargrave.
Despite the V-shaped recovery in demand, the outlook for occupancies remains clouded because new units are being added to the market. In the second half of the year, 4,360 units are slated to open, well above the 2,287 units absorbed in the first half of the year.
Absorption did outpace new supply in the second quarter, however. For the sector to hit its all-time occupancy peak of 92% by the end of 2011, absorption would have to average about 5,000 units a quarter. The highest quarterly absorption was 3,759 units in the last quarter of 2005.
Other headwinds include the continued weak housing market and high levels of unemployment. “The recovery of occupancy will be slow and gradual,” notes Hargrave.
Asking rents have remained positive, however, according to NIC. Rents were growing at a rate of about 4% annually in 2007. The decline in occupancies has slowed rent growth to its current level of 0.7% annually.
NIC’s Hargrave is quick to point out that asking rents in seniors housing are still positive in contrast to other commercial real estate sectors, which have experienced a drop in rents during the downturn.
New resource
At the conference, NIC also introduced the executive summary of the “NIC Investment Guide 2010: Investing in Seniors Housing & Care Properties.” The report, which will be available in its entirety in late October, pulls together the latest research from various sources and evaluates the risks and opportunities for investors in the sector.
NIC’s Investment Guide includes a seniors housing index developed in conjunction with NCREIF, which compares performance among the various property sectors. “This is a benchmark moment for the seniors housing industry,” notes Kramer, who emphasizes how far the industry has come in a short time. “We have the data and it speaks for itself.”
Seniors housing has outperformed other commercial real estate sectors during the downturn because those who move into a seniors facility usually require some services. In other words, they can’t always put off a move, according to NIC’s Kramer. “Seniors housing has been resilient.”
Sep 30, 2010 10:56 AM, By Jane Adler, NREI Contributing Writer
Apartment: Core/Value-Add Debt & Equity Capital Flows
Equity Capital
While public apartment REITs heavily favor core properties, they have also been buyers of value-add assets, including development sites, particularly in markets they deem strategic. The public apartment REITs are more defined by geography, and the largest companies have been targeting major markets and exiting secondary and tertiary markets. This focus is not likely to change in the current market environment. However, private REITs and institutional investors targeting yield are more likely to migrate beyond the major markets into secondary and possibly tertiary markets.
In the value-add space for apartment investment, private entrepreneurial owners and operators account for the largest share of acquisitions. Institutional investors and opportunistic equity funds are also more active buyers of value-add apartments. Interestingly, cross-border investors are also responsible for a larger share of value-add than of core activity, but the origin of this capital is quite different. Instead of the major foreign institutions and sovereign wealth funds that are investing in core properties, it is largely foreign-based private investors, particularly from Canada and Israel, that have been active buyers of value-add apartment properties.
Debt Capital
Debt capital for apartments is much more segmented along the core/value-add divide. Most notably, the government agencies remain the largest multi-family lender for core properties, but provide relatively little financing for value-add transactions. The agencies provided debt for 56% of the core apartment acquisitions that have received financing so far this year. However, Fannie and Freddie’s share of the core lending market is down from a year ago, as insurance companies and regional and community banks have started to offer competitive terms.
Data subject to future revision; based on properties & portfolios $5 mil and greater.
©2010 Real Capital Analytics Inc. All rights reserved.
While public apartment REITs heavily favor core properties, they have also been buyers of value-add assets, including development sites, particularly in markets they deem strategic. The public apartment REITs are more defined by geography, and the largest companies have been targeting major markets and exiting secondary and tertiary markets. This focus is not likely to change in the current market environment. However, private REITs and institutional investors targeting yield are more likely to migrate beyond the major markets into secondary and possibly tertiary markets.
In the value-add space for apartment investment, private entrepreneurial owners and operators account for the largest share of acquisitions. Institutional investors and opportunistic equity funds are also more active buyers of value-add apartments. Interestingly, cross-border investors are also responsible for a larger share of value-add than of core activity, but the origin of this capital is quite different. Instead of the major foreign institutions and sovereign wealth funds that are investing in core properties, it is largely foreign-based private investors, particularly from Canada and Israel, that have been active buyers of value-add apartment properties.
Debt Capital
Debt capital for apartments is much more segmented along the core/value-add divide. Most notably, the government agencies remain the largest multi-family lender for core properties, but provide relatively little financing for value-add transactions. The agencies provided debt for 56% of the core apartment acquisitions that have received financing so far this year. However, Fannie and Freddie’s share of the core lending market is down from a year ago, as insurance companies and regional and community banks have started to offer competitive terms.
Data subject to future revision; based on properties & portfolios $5 mil and greater.
©2010 Real Capital Analytics Inc. All rights reserved.
Monday, September 27, 2010
Wherefore Art Thou, Distress?
By now, most commercial real estate pros are thinking the same thing – whatever happened to that 100-foot high wall of water (aka tsunami) that was to wash through the industry and cleanse the bad properties from the system? For pennies on the dollar?
Now “keep on waiting/lurking” seems to be the prevailing view. According to New York-based researcher Real Capital Analytics, the default rate for commercial real estate mortgages held by the nation’s FDIC-insured depository institutions did increase by 9 basis points to 4.28% in the second quarter, up from 4.19% in the first quarter.
For those of you keeping score on a historical scorecard, at its cyclical low in the first half of 2006, the commercial mortgage default rate was 0.58%. A mere pittance.
Year-over-year, the tale is more striking, with the commercial default rate up by 139 basis points.
However, rather than gaining speed, the negative trendline appears to be slowing. Year-over-year increases had been accelerating for thirteen consecutive quarters through the end of 2009, but have moderated more recently.
Consistent with the slower increase in the default rate, the dollar volume of commercial mortgages in default measured its smallest increase since the second quarter of 2007, three years ago. Now some $46.2 billion of bank-held commercial mortgages are in default, up by just $547 million from the first quarter of 2010.
Apartments March Ahead
The nation’s apartment sector appears to be recovering faster than other segments, in a sort of “first in, first out” play on the recession.
In the second quarter, the multifamily mortgage default rate declined by 47 basis points, from 4.63% to 4.16%, falling below the commercial default rate for the first time in two years.
The default rate for multifamily mortgages surpassed the rate on commercial mortgages in the second quarter of 2008, and remained marginally higher during the following nine quarters.
“The second quarter drop was the first meaningful decline in the multifamily default rate this cycle,” notes the RCA analysis. The volume of multifamily mortgages in default fell by $1.0 billion from the first quarter, to $8.9 billion.
Reflecting differences in loan quality across lender groups, the default rate for bank-held multifamily mortgages is still significantly higher than for multifamily mortgages at Fannie Mae and Freddie Mac. In spite of the challenges in their single-family lending portfolios, the GSEs’ multifamily portfolios continue to perform. The serious delinquency rate for Fannie Mae’s multifamily loans is 0.8% as of June 30, up from 0.5% one year earlier, but much lower than for the market as a whole.
Banking on Defaults
The largest class of banks – those with $10 billion or more in assets – accounted for 48.6% of all bank-held commercial mortgages and had the highest default rate, at 4.98%, according to RCA’s analysis. But the combined multifamily and commercial real estate concentration at these institutions (CRE loans as a percent of all loans) was the lowest of all the bank peer groups, at 12.1%.
To read more, please click this link.
Sep 15, 2010 10:22 AM, By Ben Johnson, NREI Contributor
Now “keep on waiting/lurking” seems to be the prevailing view. According to New York-based researcher Real Capital Analytics, the default rate for commercial real estate mortgages held by the nation’s FDIC-insured depository institutions did increase by 9 basis points to 4.28% in the second quarter, up from 4.19% in the first quarter.
For those of you keeping score on a historical scorecard, at its cyclical low in the first half of 2006, the commercial mortgage default rate was 0.58%. A mere pittance.
Year-over-year, the tale is more striking, with the commercial default rate up by 139 basis points.
However, rather than gaining speed, the negative trendline appears to be slowing. Year-over-year increases had been accelerating for thirteen consecutive quarters through the end of 2009, but have moderated more recently.
Consistent with the slower increase in the default rate, the dollar volume of commercial mortgages in default measured its smallest increase since the second quarter of 2007, three years ago. Now some $46.2 billion of bank-held commercial mortgages are in default, up by just $547 million from the first quarter of 2010.
Apartments March Ahead
The nation’s apartment sector appears to be recovering faster than other segments, in a sort of “first in, first out” play on the recession.
In the second quarter, the multifamily mortgage default rate declined by 47 basis points, from 4.63% to 4.16%, falling below the commercial default rate for the first time in two years.
The default rate for multifamily mortgages surpassed the rate on commercial mortgages in the second quarter of 2008, and remained marginally higher during the following nine quarters.
“The second quarter drop was the first meaningful decline in the multifamily default rate this cycle,” notes the RCA analysis. The volume of multifamily mortgages in default fell by $1.0 billion from the first quarter, to $8.9 billion.
Reflecting differences in loan quality across lender groups, the default rate for bank-held multifamily mortgages is still significantly higher than for multifamily mortgages at Fannie Mae and Freddie Mac. In spite of the challenges in their single-family lending portfolios, the GSEs’ multifamily portfolios continue to perform. The serious delinquency rate for Fannie Mae’s multifamily loans is 0.8% as of June 30, up from 0.5% one year earlier, but much lower than for the market as a whole.
Banking on Defaults
The largest class of banks – those with $10 billion or more in assets – accounted for 48.6% of all bank-held commercial mortgages and had the highest default rate, at 4.98%, according to RCA’s analysis. But the combined multifamily and commercial real estate concentration at these institutions (CRE loans as a percent of all loans) was the lowest of all the bank peer groups, at 12.1%.
To read more, please click this link.
Sep 15, 2010 10:22 AM, By Ben Johnson, NREI Contributor
What Happens If and When the Bush Taxs Cuts Expire
If the Bush tax cuts are allowed to expire this year (and current indications are they should), the capital gains tax rate will go from the current 15 percent to 20 percent next year.
Who is happy about paying a third more taxes next year on the sale of their investment real estate?
Answer: Nobody.
But what can you do about it?
Answer: Make a plan based on your situation.
2010 sales
If you were planning to sell in the next year, you can keep more of your sale proceeds (after tax) if you can close before Jan. 1, 2011.
2011 sales
If you can't or won't sell before the end of this year, then you have two choices with dramatically different tax consequences on investment real estate sales that close in 2011. You can either:
A. Brace yourself to pay a higher capital gains tax to receive the cash equity from your sale proceeds, or
B. Pay little to no capital gains tax by using a 1031 Exchange when you sell. But this means you can't touch your cash equity at the closing (or if you do ... only a small portion). It also means keeping your equity invested in the deal and staying within your current ownership entity ... invested in another piece of real estate. Some long-standing partners in ownership entities today may prefer to go their own way with their respective equity shares upon a sale. But you can't do that with a 1031 Exchange if you want to legally avoid paying the capital gains tax on the sale. You need to stay together in the same entity to take advantage of these tax benefits available to you per U.S. Tax Code 1031. Since the capital gains tax rate is going up, we can expect to see more 1031 exchange transactions being utilized to minimize tax liabilities in 2011.
To read more & and true life example of how to untilize this - Click Here
Who is happy about paying a third more taxes next year on the sale of their investment real estate?
Answer: Nobody.
But what can you do about it?
Answer: Make a plan based on your situation.
2010 sales
If you were planning to sell in the next year, you can keep more of your sale proceeds (after tax) if you can close before Jan. 1, 2011.
2011 sales
If you can't or won't sell before the end of this year, then you have two choices with dramatically different tax consequences on investment real estate sales that close in 2011. You can either:
A. Brace yourself to pay a higher capital gains tax to receive the cash equity from your sale proceeds, or
B. Pay little to no capital gains tax by using a 1031 Exchange when you sell. But this means you can't touch your cash equity at the closing (or if you do ... only a small portion). It also means keeping your equity invested in the deal and staying within your current ownership entity ... invested in another piece of real estate. Some long-standing partners in ownership entities today may prefer to go their own way with their respective equity shares upon a sale. But you can't do that with a 1031 Exchange if you want to legally avoid paying the capital gains tax on the sale. You need to stay together in the same entity to take advantage of these tax benefits available to you per U.S. Tax Code 1031. Since the capital gains tax rate is going up, we can expect to see more 1031 exchange transactions being utilized to minimize tax liabilities in 2011.
To read more & and true life example of how to untilize this - Click Here
Wednesday, September 15, 2010
Apartments and Offices Score in Second Quarter
Real Estate Research Corporation’s (RERC’s) investment conditions ratings for the institutional apartment and central business district (CBD) office sectors each jumped a full point during second quarter 2010, making them the two highest-rated property types that RERC surveys.
The findings are included in the RERC’s new summer report, Riding the Edge of Success.
The investment conditions ratings are based on a scale of 1 to 10, with 10 being higher and most favorable.
For the apartment sector the rating increased to 7.1 during second quarter 2010 from 6.1 during the first quarter. The investment conditions rating for the CBD office sector increased to 6.0 during the second quarter, up from 5.0 for the first quarter.
“These high ratings reflect the increased investment prospects we are seeing for commercial real estate in general,” said Ken Riggs, RERC president and CEO. “Institutional investors skittish about the slowing economy and the volatility and risk exhibited in the stock market are finding the diversification, stability, and higher absolute returns of the commercial real estate asset class increasingly attractive.”
Although the apartment sector, long-recognized as the commercial property type that generally possesses better risk-versus-return characteristics, has often presented an investment conditions rating higher than those for other property types RERC rates, it has not had a rating this high since second quarter 2001, when the rating was 7.4 on the same scale.
Basically, that means that apartment investments are proving to be safer bets during slowed economic times and are meeting the strategic initiatives of most investors.
“I wouldn’t say the apartment sector is ‘recession-proof,’ but it is the sector that is regarded as ‘most safe’ and also seems to garner the most demand when times are tough, whether it is in this recession or the last one,” said Riggs.
To read more, please click this link.
Aug 23, 2010 10:26 AM, By Ben Johnson, NREI Contributor
The findings are included in the RERC’s new summer report, Riding the Edge of Success.
The investment conditions ratings are based on a scale of 1 to 10, with 10 being higher and most favorable.
For the apartment sector the rating increased to 7.1 during second quarter 2010 from 6.1 during the first quarter. The investment conditions rating for the CBD office sector increased to 6.0 during the second quarter, up from 5.0 for the first quarter.
“These high ratings reflect the increased investment prospects we are seeing for commercial real estate in general,” said Ken Riggs, RERC president and CEO. “Institutional investors skittish about the slowing economy and the volatility and risk exhibited in the stock market are finding the diversification, stability, and higher absolute returns of the commercial real estate asset class increasingly attractive.”
Although the apartment sector, long-recognized as the commercial property type that generally possesses better risk-versus-return characteristics, has often presented an investment conditions rating higher than those for other property types RERC rates, it has not had a rating this high since second quarter 2001, when the rating was 7.4 on the same scale.
Basically, that means that apartment investments are proving to be safer bets during slowed economic times and are meeting the strategic initiatives of most investors.
“I wouldn’t say the apartment sector is ‘recession-proof,’ but it is the sector that is regarded as ‘most safe’ and also seems to garner the most demand when times are tough, whether it is in this recession or the last one,” said Riggs.
To read more, please click this link.
Aug 23, 2010 10:26 AM, By Ben Johnson, NREI Contributor
Second-Quarter Loan Originations Flat Year Over Year
Commercial and multifamily mortgage loan originations in the second quarter were 1% higher than the same period a year ago and 35% higher than the first quarter, according to the Mortgage Bankers Association's (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
“Borrowing remains light as few commercial property owners are selling or refinancing their properties unless they have to,” says Jamie Woodwell, MBA's vice president of commercial real estate research.
"Life insurers, CMBS conduits and others are back in the market and lending, and rates are at extremely attractive levels. However, low volumes of property sales, depressed property values, stressed cash flows and modest loan maturities are all keeping borrowing to a minimum."
The report shows that originations for life insurance companies and CMBS conduits increased dramatically on a percentage basis. Meanwhile, originations for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac fell by more than half from 2009 levels.
The 1% overall increase in commercial/multifamily lending activity during the second quarter was driven by increases in originations for office and industrial properties. When compared with the second quarter of 2009, the increase included a 183% increase in loans for industrial properties; a 180% increase in loans for office properties; an 18% increase in loans for hotel properties; a 76% decrease in loans for health care properties; a 25% decrease in multifamily property loans, and a 9% decrease in retail property loans.
Among investor types, loans for conduits for CMBS saw an increase of 173% compared with last year's second quarter. There was also a 148% increase in loans for life insurance companies, and a 12% decrease in loans for commercial bank portfolios. The dollar volume of loans for Fannie Mae and Freddie Mac saw a decrease of 55%.
Among investor types, loans for conduits for CMBS saw an increase in loan volume of 106% compared with the first quarter; loans for life insurance companies saw an increase in loan volume of 57% compared with the first quarter; originations for GSEs increased 21% from the first quarter to the second quarter of 2010; and loans for commercial bank portfolios decreased by 2% during the same time span.
Compared with the first quarter, second-quarter originations for hotel properties saw a 405% increase. There was a 114% increase for industrial properties; a 107% increase for health care properties; a 56% increase for office properties; a 38% increase for multifamily properties; and an 11% decrease for retail properties.
Jul 29, 2010 10:46 AM, By NREI staff
“Borrowing remains light as few commercial property owners are selling or refinancing their properties unless they have to,” says Jamie Woodwell, MBA's vice president of commercial real estate research.
"Life insurers, CMBS conduits and others are back in the market and lending, and rates are at extremely attractive levels. However, low volumes of property sales, depressed property values, stressed cash flows and modest loan maturities are all keeping borrowing to a minimum."
The report shows that originations for life insurance companies and CMBS conduits increased dramatically on a percentage basis. Meanwhile, originations for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac fell by more than half from 2009 levels.
The 1% overall increase in commercial/multifamily lending activity during the second quarter was driven by increases in originations for office and industrial properties. When compared with the second quarter of 2009, the increase included a 183% increase in loans for industrial properties; a 180% increase in loans for office properties; an 18% increase in loans for hotel properties; a 76% decrease in loans for health care properties; a 25% decrease in multifamily property loans, and a 9% decrease in retail property loans.
Among investor types, loans for conduits for CMBS saw an increase of 173% compared with last year's second quarter. There was also a 148% increase in loans for life insurance companies, and a 12% decrease in loans for commercial bank portfolios. The dollar volume of loans for Fannie Mae and Freddie Mac saw a decrease of 55%.
Among investor types, loans for conduits for CMBS saw an increase in loan volume of 106% compared with the first quarter; loans for life insurance companies saw an increase in loan volume of 57% compared with the first quarter; originations for GSEs increased 21% from the first quarter to the second quarter of 2010; and loans for commercial bank portfolios decreased by 2% during the same time span.
Compared with the first quarter, second-quarter originations for hotel properties saw a 405% increase. There was a 114% increase for industrial properties; a 107% increase for health care properties; a 56% increase for office properties; a 38% increase for multifamily properties; and an 11% decrease for retail properties.
Jul 29, 2010 10:46 AM, By NREI staff
Wednesday, September 1, 2010
Sperry Van Ness Announces $7.85MM Sale of Texas Skilled Nursing Facility
The sale was handled by Grant Edwards, National Director of Sperry Van Ness’s Healthcare Real Estate Team. Transactional support was provided by Jake Corrigan, Advisor with Sperry Van Ness Healthcare Real Estate Team and Steve Fithian, Managing Director of Sperry Van Ness / Visions Commercial in Fort Worth, Texas.
Commenting on the sale, Grant Edwards said, “As always, the Sperry Van Ness Healthcare Team utilized it considerable resources to fish for Buyers with a wide net, while at the same time preserving confidentiality throughout the process. And yet, this transaction showcased more specifically our ability to help structure complex transactions for the benefit of all parties. That’s another important advantage of our team’s adherence to a set of core covenants, which ensures a client-first approach to senior care brokerage.”
Tuesday, August 10, 2010
New Concepts are Back on the Agenda for Some Retailers
Landlords on the prowl for new tenants have reason for optimism.
Although vacancy rates in all retail property types continue to creep higher, retailers that were knocked down by the recession are pulling themselves off the floor and restarting the expansion pipeline. Moreover, there is a growing cadre of up-and-coming retailers that operate handfuls of stores today, but are looking to make the leap to becoming larger chains.
As a result, the attitude has changed a bit in leasing circles. Recently, most emerging and expanding retailers sold necessity products or were value oriented, says Doug Healey, senior vice president of leasing for the East Coast with the Macerich Co., a Santa Monica, Calif.-based regional mall REIT. But the tenants coming onto the scene now increasingly sell discretionary goods, Healey says.
For example, some retailers have succeeded by going after parents’ wallets with concepts aimed at preschoolers and tweens. Among these is the new Crazy 8 chain from the Gymboree Corp. and P.S. from Aeropostale from Aeropostale Inc.
Then there are concepts that might sell stuff for kids, but also offer relief for stressed-out parents. For instance, WONDER!, a new-to-market emporium that will sell everything anyone needs for a child under seven years of age, was originally conceived as a stress-free place where parents could do all of their shopping and grab a bite while their children run around an in-store playground.
Meanwhile, a much smaller, but relative in spirit concept, has emerged in the form of Little Monkey Bizness, a new chain of playgrounds that also sell gourmet coffee and snacks. Little Monkey Bizness recently signed leases for its seventh and eighth stores in Wheaton, Ill. and Tampa Bay, Fla.
Among the fastest growing categories in the next year or two will be fast-food operators that take spaces under 5,000 square feet, according to the June edition of a monthly retailer demand report put together by Rich Moore, an analyst with RBC Capital Markets, that includes data from Retail Lease Trac.
One such retailer is Freshii, a newcomer to the quick service sector that concentrates on fresh, healthy, custom-built menus. Freshii’s founder, Matthew Corrin, hopes to eventually have a North American fleet of at least 1,000 stores. The chain opened its first location in Toronto in 2005, but it’s already considering expanding worldwide. It currently operates stores in the U.S., Canada, Austria and Dubai. “If Subway has 30,000 [stores], I believe we can achieve 10 percent of that number,” Corrin says.
To continue reading, please clck the link.
Although vacancy rates in all retail property types continue to creep higher, retailers that were knocked down by the recession are pulling themselves off the floor and restarting the expansion pipeline. Moreover, there is a growing cadre of up-and-coming retailers that operate handfuls of stores today, but are looking to make the leap to becoming larger chains.
As a result, the attitude has changed a bit in leasing circles. Recently, most emerging and expanding retailers sold necessity products or were value oriented, says Doug Healey, senior vice president of leasing for the East Coast with the Macerich Co., a Santa Monica, Calif.-based regional mall REIT. But the tenants coming onto the scene now increasingly sell discretionary goods, Healey says.
For example, some retailers have succeeded by going after parents’ wallets with concepts aimed at preschoolers and tweens. Among these is the new Crazy 8 chain from the Gymboree Corp. and P.S. from Aeropostale from Aeropostale Inc.
Then there are concepts that might sell stuff for kids, but also offer relief for stressed-out parents. For instance, WONDER!, a new-to-market emporium that will sell everything anyone needs for a child under seven years of age, was originally conceived as a stress-free place where parents could do all of their shopping and grab a bite while their children run around an in-store playground.
Meanwhile, a much smaller, but relative in spirit concept, has emerged in the form of Little Monkey Bizness, a new chain of playgrounds that also sell gourmet coffee and snacks. Little Monkey Bizness recently signed leases for its seventh and eighth stores in Wheaton, Ill. and Tampa Bay, Fla.
Among the fastest growing categories in the next year or two will be fast-food operators that take spaces under 5,000 square feet, according to the June edition of a monthly retailer demand report put together by Rich Moore, an analyst with RBC Capital Markets, that includes data from Retail Lease Trac.
One such retailer is Freshii, a newcomer to the quick service sector that concentrates on fresh, healthy, custom-built menus. Freshii’s founder, Matthew Corrin, hopes to eventually have a North American fleet of at least 1,000 stores. The chain opened its first location in Toronto in 2005, but it’s already considering expanding worldwide. It currently operates stores in the U.S., Canada, Austria and Dubai. “If Subway has 30,000 [stores], I believe we can achieve 10 percent of that number,” Corrin says.
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Apartments Stage a Comeback as Renters Return in Surprising Numbers
After two years of rising vacancies and slumping rents, apartment owners have reason to be cheerier these days.
According to the latest survey of 169 markets across the U.S. by researcher Reis, the national apartment vacancy rate peaked at a record 8% in the fourth quarter of 2009 and remained unchanged in the first quarter of 2010. Asking rents increased by a scant 0.1% in the first quarter, but that was the first gain since the third quarter of 2008.
Some 20,000 apartment units were absorbed in the first quarter of 2010, which is the strongest first-quarter showing in the past 10 years, according to Victor Calanog, director of research at Reis. “The multifamily market appears to be on the cusp of recovery. If so, pricing and transaction activity will rise and the window of opportunity for landing good deals may close soon,” says Calanog.
Rental demand drove the occupancy rate for downtown Chicago apartments higher in the first quarter, to 93.6% from 91.4% in the fourth quarter of 2009, according to consulting firm Appraisal Research Counselors.
The latest results surprised long-time industry watchers, including Robert Bach, senior vice president and chief economist at Grubb & Ellis. However, Bach is concerned about the abundant supply of empty condos and single-family homes that are entering the rental market in hard-hit areas like South Florida and Phoenix. He believes they are casting a shadow over traditional apartment communities, and siphoning off potential renters.
“I’m surprised the apartment fundamentals have bottomed out this quickly, but as long as there are these shadow units out there, then it’s going to be interesting to see if the apartment market can recover independent of that,” says Bach.
The rest of 2010 will be a telling barometer, notes Calanog. “The next two quarters will offer critical perspective as to whether positive rent growth is sustainable.” Calanog does expect the vacancy rate to improve over the next five years, dropping to 6.6% in 2014.
Unemployment stings young Americans
Certainly one of the most closely watched keys to the short-term apartment market turnaround is the jobs picture. According to the U.S. Bureau of Labor Statistics, the U.S. economy added 290,000 jobs in April, the largest gain since March 2006. That followed a revised 230,000 increase in March. Still, the overall unemployment rate rose from 9.7% in March to 9.9% in April, a sign that more Americans are starting to look for jobs.
According to some observers, danger lurks at the deep end of the renter pool. The primary renter market base, people aged 20-30, comprises 70% of the total U.S. apartment market, and that segment is recovering more slowly than others.
As an example, the unemployment rate among Americans aged 20-24 was 15.8% in March, but jumped to 17.2% in April. “The unemployment rate for young people has climbed faster than it has for the labor market in general,” says Sam Chandan, global chief economist and executive vice present at researcher Real Capital Analytics.
According to Chandan, the rental pool is not being supported by new entrants of young people graduating with jobs. “We need job growth among the younger age groups to drive apartment demand. There’s got to be some replacement there.”
Compounding the situation, one of the biggest challenges to recovery in this market is older, more skilled workers who are willing to take lower paying jobs just to find work. Typically this segment is more inclined to own rather than rent. “This is an issue that’s going to weigh on the performance of the apartment market,” says Chandan.
Jun 23, 2010 7:56 AM, By Ben Johnson, NREI Contributing Writer
According to the latest survey of 169 markets across the U.S. by researcher Reis, the national apartment vacancy rate peaked at a record 8% in the fourth quarter of 2009 and remained unchanged in the first quarter of 2010. Asking rents increased by a scant 0.1% in the first quarter, but that was the first gain since the third quarter of 2008.
Some 20,000 apartment units were absorbed in the first quarter of 2010, which is the strongest first-quarter showing in the past 10 years, according to Victor Calanog, director of research at Reis. “The multifamily market appears to be on the cusp of recovery. If so, pricing and transaction activity will rise and the window of opportunity for landing good deals may close soon,” says Calanog.
Rental demand drove the occupancy rate for downtown Chicago apartments higher in the first quarter, to 93.6% from 91.4% in the fourth quarter of 2009, according to consulting firm Appraisal Research Counselors.
The latest results surprised long-time industry watchers, including Robert Bach, senior vice president and chief economist at Grubb & Ellis. However, Bach is concerned about the abundant supply of empty condos and single-family homes that are entering the rental market in hard-hit areas like South Florida and Phoenix. He believes they are casting a shadow over traditional apartment communities, and siphoning off potential renters.
“I’m surprised the apartment fundamentals have bottomed out this quickly, but as long as there are these shadow units out there, then it’s going to be interesting to see if the apartment market can recover independent of that,” says Bach.
The rest of 2010 will be a telling barometer, notes Calanog. “The next two quarters will offer critical perspective as to whether positive rent growth is sustainable.” Calanog does expect the vacancy rate to improve over the next five years, dropping to 6.6% in 2014.
Unemployment stings young Americans
Certainly one of the most closely watched keys to the short-term apartment market turnaround is the jobs picture. According to the U.S. Bureau of Labor Statistics, the U.S. economy added 290,000 jobs in April, the largest gain since March 2006. That followed a revised 230,000 increase in March. Still, the overall unemployment rate rose from 9.7% in March to 9.9% in April, a sign that more Americans are starting to look for jobs.
According to some observers, danger lurks at the deep end of the renter pool. The primary renter market base, people aged 20-30, comprises 70% of the total U.S. apartment market, and that segment is recovering more slowly than others.
As an example, the unemployment rate among Americans aged 20-24 was 15.8% in March, but jumped to 17.2% in April. “The unemployment rate for young people has climbed faster than it has for the labor market in general,” says Sam Chandan, global chief economist and executive vice present at researcher Real Capital Analytics.
According to Chandan, the rental pool is not being supported by new entrants of young people graduating with jobs. “We need job growth among the younger age groups to drive apartment demand. There’s got to be some replacement there.”
Compounding the situation, one of the biggest challenges to recovery in this market is older, more skilled workers who are willing to take lower paying jobs just to find work. Typically this segment is more inclined to own rather than rent. “This is an issue that’s going to weigh on the performance of the apartment market,” says Chandan.
Jun 23, 2010 7:56 AM, By Ben Johnson, NREI Contributing Writer
2010 National Multi Housing Council's Top 50
National Real Estate Investor is pleased to present the 21st annual NMHC 50, the National Multi Housing Council’s authoritative ranking of the nation’s 50 largest apartment owners and 50 largest apartment managers. For more than two decades, the NMHC 50 has been a key resource for industry observers. The top owner and manager lists, and the analysis that accompanies them, have provided the only historical benchmark against which to measure industry trends and concentration.
Download the Full 2010 National Multi Housing Councel's Top 50
Apr 12, 2010 5:33 PM - National Real Estate Investor
Download the Full 2010 National Multi Housing Councel's Top 50
Apr 12, 2010 5:33 PM - National Real Estate Investor
Wednesday, June 9, 2010
Indiana Dollar General Portfolio Exclusively Offered By The Martin Team
Chris Stuard & Steve Martin at Sperry Van Ness/Martin Commercial Group have been exclusively retained in the disposition of a Indiana Dollar General portfolio. This portfolio consists of 7 locations throughout Indiana, which are on 15 year initial terms. For more details please visit http://sale.svn.com/indg.
Dollar General Corporation (NYSE: DG) is a Fortune 500 credit tenant with 8,700+ stores and 2009 sales of $10.5 billion.
Dollar General Corporation (NYSE: DG) is a Fortune 500 credit tenant with 8,700+ stores and 2009 sales of $10.5 billion.
Sperry Van Ness/Martin Commercial Group Moves Difficult Industrial Asset
Chris Stuard at Sperry Van Ness/Martin Commercial Group has sold the former ISM building located at I-164 and I-64 just north of Evansville, Indiana.
The 80,000 SF facility was acquired by the New York based compnay Pramco back in 2005 and has been on the market for over 5 years. Sperry Van Ness was retained approximately 1 year ago and sold the property within $10,000 of the projected price. The buyer is a manufacturer from Dubois County, which is approximately 50 miles east of Evansville. They will be relocating their operation allowing them to expand.
The 80,000 SF facility was acquired by the New York based compnay Pramco back in 2005 and has been on the market for over 5 years. Sperry Van Ness was retained approximately 1 year ago and sold the property within $10,000 of the projected price. The buyer is a manufacturer from Dubois County, which is approximately 50 miles east of Evansville. They will be relocating their operation allowing them to expand.
New Supply Mutes Recovery In Short Term, NIC Cautions
May 24, 2010 8:30 AM, By Jane Adler, NREI Contributor
The downturn in seniors housing isn’t over just yet, according to a new report by the National Investment Center for the Seniors Housing & Care Industry (NIC). Several more quarters of flat or falling occupancies are expected as new buildings continue to open, though industry fundamentals could improve significantly in the next 12 months if the economic recovery continues.
“We’re bumping along the bottom,” says Michael Hargrave, vice president at NIC based in Annapolis, Md. “There are a lot of economic pressures out there.”
In the first quarter of 2010, occupancies at independent living buildings fell 1.4% year-over-year to 87.9%, NIC reports. Occupancies also declined by 0.3% from the previous quarter. At assisted living facilities occupancies fell 0.1% year-over-year to 88.1% and were down 0.3% from the previous quarter.
The big, publicly traded seniors housing companies reported similar occupancy levels in the first quarter. Brookdale Senior Living (NYSE:BKD) had an average occupancy of 86.6%, a drop of 10 basis points from the fourth quarter of 2009, and flat compared with the year prior.
At assisted living company Emeritus Corp. (NYSE:ESC), occupancy across the portfolio in the first quarter averaged 87.2%, an increase of 110 basis points year over year, and up 0.1% from the previous quarter.
Supply/Demand Imbalance
Building owners report a recent uptick in leasing activity, though occupancies are being held in check by new building openings. Construction on facilities that began in 2007 and 2008 when financing was readily available are just opening.
“The industry is dealing with building deliveries now,” notes Hargrave. Last year, the seniors housing inventory for independent and assisted living properties grew by about 9,500 units. During the same period about 2,600 units were absorbed.
Property owners can expect more of the same in the months ahead. About 8,800 seniors housing units are under way and most will open this year. Construction has slowed because of the downturn, but new inventory will grow by 1,000 to 2,000 units quarterly until the end of 2010. Absorption has been somewhat erratic, but has recently averaged about 750 units a quarter.
If demand picks up with about 1,000 units absorbed a quarter, Hargrave predicts that occupancies will stabilize. If absorption hits 2,000 units a quarter, he believes that “things will start to get healthy pretty quickly.”
That will hinge on whether there is a drop in the unemployment rate and a big improvement in the residential housing market. Also, pent-up demand could boost absorption since many seniors have delayed a move because of the soft residential housing market, sources say.
Read Full Article
The downturn in seniors housing isn’t over just yet, according to a new report by the National Investment Center for the Seniors Housing & Care Industry (NIC). Several more quarters of flat or falling occupancies are expected as new buildings continue to open, though industry fundamentals could improve significantly in the next 12 months if the economic recovery continues.
“We’re bumping along the bottom,” says Michael Hargrave, vice president at NIC based in Annapolis, Md. “There are a lot of economic pressures out there.”
In the first quarter of 2010, occupancies at independent living buildings fell 1.4% year-over-year to 87.9%, NIC reports. Occupancies also declined by 0.3% from the previous quarter. At assisted living facilities occupancies fell 0.1% year-over-year to 88.1% and were down 0.3% from the previous quarter.
The big, publicly traded seniors housing companies reported similar occupancy levels in the first quarter. Brookdale Senior Living (NYSE:BKD) had an average occupancy of 86.6%, a drop of 10 basis points from the fourth quarter of 2009, and flat compared with the year prior.
At assisted living company Emeritus Corp. (NYSE:ESC), occupancy across the portfolio in the first quarter averaged 87.2%, an increase of 110 basis points year over year, and up 0.1% from the previous quarter.
Supply/Demand Imbalance
Building owners report a recent uptick in leasing activity, though occupancies are being held in check by new building openings. Construction on facilities that began in 2007 and 2008 when financing was readily available are just opening.
“The industry is dealing with building deliveries now,” notes Hargrave. Last year, the seniors housing inventory for independent and assisted living properties grew by about 9,500 units. During the same period about 2,600 units were absorbed.
Property owners can expect more of the same in the months ahead. About 8,800 seniors housing units are under way and most will open this year. Construction has slowed because of the downturn, but new inventory will grow by 1,000 to 2,000 units quarterly until the end of 2010. Absorption has been somewhat erratic, but has recently averaged about 750 units a quarter.
If demand picks up with about 1,000 units absorbed a quarter, Hargrave predicts that occupancies will stabilize. If absorption hits 2,000 units a quarter, he believes that “things will start to get healthy pretty quickly.”
That will hinge on whether there is a drop in the unemployment rate and a big improvement in the residential housing market. Also, pent-up demand could boost absorption since many seniors have delayed a move because of the soft residential housing market, sources say.
Read Full Article
Tuesday, June 8, 2010
Time Is Ripe for Life Care Services to Bulk Up On Acquisitions
May 24, 2010 8:30 AM, By Jane Adler, NREI contributor
As some companies shed operations to survive a punishing economic downturn, Life Care Services (LCS) is expanding with two new acquisitions. The Des Moines-based company recently purchased property manager CRSA Holdings, establishing LCS as one of the nation’s top property managers of continuing care retirement communities. LCS declined to reveal the price.
In another recent transaction, LCS paid $41 million for the Wyndemere Senior Living Community, a retirement campus in Wheaton, Ill.
LCS manages about 100 continuing care communities and owns 12 of the properties. Memphis-based CRSA manages 29 properties, mostly continuing care retirement communities owned by non-profit groups.
“We see great compatibility between the companies,” says Rich Seibert, vice president and director of corporate marketing at LCS. “This enhances our ability to build a national integrated network.”
Both CRSA and LCS are privately held. The terms of the sale were not disclosed, though Seibert says CRSA was not in financial trouble and is not a turnaround situation.
CRSA has about 400 employees and its Memphis office will remain open. The company will retain its own name and identity, too. “We did not buy CRSA just to get the management contracts,” says Seibert of LCS.
The companies will be able to enjoy savings by combining some operations, such as purchasing, he says. The home health care and insurance programs offered by LCS will be available at CRSA properties.
The development arm of CRSA, which provides services for non-profit community operators, will remain open. LCS has its own development group for company-owned projects that will continue to operate.
LCS opened its newest owned property, Sagewood, in Phoenix, last December. The 85-acre community features 294 independent living units. The assisted living and nursing care building is currently under construction and should be complete by the end of the year.
CRSA has a new project, Longhorn Village, in Austin, Texas. The 56-acre property, which opened last August, features 173 apartments and 41 villas. The healthcare building with assisted living, nursing and memory care units is in the process of opening. The project is affiliated with the Ex-Students’ Association of the University of Texas.
M&A Activity Heating up
More industry consolidation could be on the horizon, sources say. The seniors housing business is still quite fragmented and some operators now find themselves in challenging positions because of the weak economy. Big operators with cash have the chance to capture market share while property prices are low.
Brookdale Senior Living purchased 21 properties for $204 million last winter from Sunrise Senior Living. The $1.3 billion purchase of 134 Sunwest buildings by a group of investors led by the Blackstone Real Estate Advisors was just approved by the bankruptcy court. The deal is expected to close in the third quarter.
Meanwhile, Formation Capital and Smith/Packett Med-Com purchased 18 assisted living buildings in North Carolina last December for about $100 million. The seller was Wakefield Capital, a healthcare real estate investment firm in Chevy Chase, Md.
“We are always looking at acquisitions,” says Arnold Whitman, chairman and CEO at Formation Capital based in Alpharetta, Ga. Like a lot of investors, Whitman says that economies of scale are key to generate healthy investment returns in seniors housing.
“Companies have to deliver services at the lowest price point and large companies can be more efficient than small ones at delivering services,” says Whitman. He estimates that a large company can save 1% on overhead costs after integrating the operations of a smaller acquisition.
Capital Concerns Persist
Big acquisitions, those over $50 million, are still hampered today by the lack of debt financing. “That’s a real obstacle,” says Kevin McMeen, president of real estate lending at MidCap Financial based in Chicago.
Debt financing may be more readily available in the latter part of 2011, adds McMeen, assuming the economy continues to recover. “Companies will have the capital to back their appetite for growth.”
LCS financed the Wyndemere community purchase with a bank loan, though Seibert would not provide details. Wyndemere was sold by DuPage Central Hospital, which developed the 14-acre campus and opened it in 1993.
The hospital operated Wyndemere as a non-profit entity, but now, under LCS, the property will be a for-profit venture.
LCS plans to spend at least $2 million to upgrade the property. Currently, the average entrance fee is about $280,000. The average monthly fee is about $3,000. A pricing change is not anticipated at this point.
The campus has about 400 residents and features 212 apartments and 26 cottages for independent seniors. There are 65 assisted living and 131 nursing care units. The property’s occupancy rate is about 85%.
“Wyndemere has a good reputation,” says Seibert. “We plan to continue the same philosophy of operations.”
Read Full Article
As some companies shed operations to survive a punishing economic downturn, Life Care Services (LCS) is expanding with two new acquisitions. The Des Moines-based company recently purchased property manager CRSA Holdings, establishing LCS as one of the nation’s top property managers of continuing care retirement communities. LCS declined to reveal the price.
In another recent transaction, LCS paid $41 million for the Wyndemere Senior Living Community, a retirement campus in Wheaton, Ill.
LCS manages about 100 continuing care communities and owns 12 of the properties. Memphis-based CRSA manages 29 properties, mostly continuing care retirement communities owned by non-profit groups.
“We see great compatibility between the companies,” says Rich Seibert, vice president and director of corporate marketing at LCS. “This enhances our ability to build a national integrated network.”
Both CRSA and LCS are privately held. The terms of the sale were not disclosed, though Seibert says CRSA was not in financial trouble and is not a turnaround situation.
CRSA has about 400 employees and its Memphis office will remain open. The company will retain its own name and identity, too. “We did not buy CRSA just to get the management contracts,” says Seibert of LCS.
The companies will be able to enjoy savings by combining some operations, such as purchasing, he says. The home health care and insurance programs offered by LCS will be available at CRSA properties.
The development arm of CRSA, which provides services for non-profit community operators, will remain open. LCS has its own development group for company-owned projects that will continue to operate.
LCS opened its newest owned property, Sagewood, in Phoenix, last December. The 85-acre community features 294 independent living units. The assisted living and nursing care building is currently under construction and should be complete by the end of the year.
CRSA has a new project, Longhorn Village, in Austin, Texas. The 56-acre property, which opened last August, features 173 apartments and 41 villas. The healthcare building with assisted living, nursing and memory care units is in the process of opening. The project is affiliated with the Ex-Students’ Association of the University of Texas.
M&A Activity Heating up
More industry consolidation could be on the horizon, sources say. The seniors housing business is still quite fragmented and some operators now find themselves in challenging positions because of the weak economy. Big operators with cash have the chance to capture market share while property prices are low.
Brookdale Senior Living purchased 21 properties for $204 million last winter from Sunrise Senior Living. The $1.3 billion purchase of 134 Sunwest buildings by a group of investors led by the Blackstone Real Estate Advisors was just approved by the bankruptcy court. The deal is expected to close in the third quarter.
Meanwhile, Formation Capital and Smith/Packett Med-Com purchased 18 assisted living buildings in North Carolina last December for about $100 million. The seller was Wakefield Capital, a healthcare real estate investment firm in Chevy Chase, Md.
“We are always looking at acquisitions,” says Arnold Whitman, chairman and CEO at Formation Capital based in Alpharetta, Ga. Like a lot of investors, Whitman says that economies of scale are key to generate healthy investment returns in seniors housing.
“Companies have to deliver services at the lowest price point and large companies can be more efficient than small ones at delivering services,” says Whitman. He estimates that a large company can save 1% on overhead costs after integrating the operations of a smaller acquisition.
Capital Concerns Persist
Big acquisitions, those over $50 million, are still hampered today by the lack of debt financing. “That’s a real obstacle,” says Kevin McMeen, president of real estate lending at MidCap Financial based in Chicago.
Debt financing may be more readily available in the latter part of 2011, adds McMeen, assuming the economy continues to recover. “Companies will have the capital to back their appetite for growth.”
LCS financed the Wyndemere community purchase with a bank loan, though Seibert would not provide details. Wyndemere was sold by DuPage Central Hospital, which developed the 14-acre campus and opened it in 1993.
The hospital operated Wyndemere as a non-profit entity, but now, under LCS, the property will be a for-profit venture.
LCS plans to spend at least $2 million to upgrade the property. Currently, the average entrance fee is about $280,000. The average monthly fee is about $3,000. A pricing change is not anticipated at this point.
The campus has about 400 residents and features 212 apartments and 26 cottages for independent seniors. There are 65 assisted living and 131 nursing care units. The property’s occupancy rate is about 85%.
“Wyndemere has a good reputation,” says Seibert. “We plan to continue the same philosophy of operations.”
Read Full Article
Thursday, April 22, 2010
Bankers Prepare for Increase in Retail REOs
Apr 20, 2010 11:32 AM
Commercial real estate lenders have prolonged dealing with distressed loans for close to two years. But they may no longer be able to remain passive.
Speakers at the Bankers Forum on Distressed Properties and Real Estate Loan Workouts, which took place in New York City on Apr. 19 and 20, said they are seeing the amount of distressed retail property continue to grow. In spite of a recent spike in retail sales, the leasing market remains challenging and retail property NOIs continue to fall. Up to now, banks have spent much of their time dealing with troubled construction and residential loans. But in 2010, they are turning more attention to resolving office and retail loans.
As of February, there were $2.3 billion in retail properties counted as real estate owned (REO) on bank balance sheets, up from a level of $450 million 12 months ago, according to Real Capital Analytics (RCA), a New York City-based research firm. A further $24.3 billion in properties were identified as distressed, up from $7 billion 12 months ago.
“Currently, the retail sector [probably] causes the most concern, just because of the economy,” said Derrick D. Cephas, president and CEO of Amalgamated Bank, a New York City-based institution that holds approximately $1 billion in diversified commercial real estate debt. “It’s not because of poor structure or poor concept.”
Cephas, along with Pat Goldstein, vice chairman of Emigrant Realty Finance Inc., the commercial real estate arm of Emigrant Bank, said that lenders try to work out troubled loans with borrowers when they are looking at properties that continue to generate cash flow, but the process is not always easy. The terms of traditional loans in the $10 million to $20 million range can often be changed if borrowers have additional real estate that can be pledged as collateral, Cephas said. To make this an attractive proposition, lenders try to offer terms that are favorable enough for borrowers to recoup most, if not all, of their investments in the assets.
Approximately $16.5 billion of loans on retail properties have been restructured in the past 12 months, according to RCA data. A big chunk of that total is due to General Growth Properties’ ongoing restructuring.
But one of the biggest challenges in today’s market, according to Goldstein, comes from large syndicated loans that require a consortium of lenders to agree before an extension is granted. Some banks don’t like the “pretend and extend” approach. Others face directions from the FDIC that require them to write down cash-flowing properties that face technical defaults. Still others—hedge funds, for example—might stand to profit when assets enter foreclosure because of short positions, so there is pressure to not seek any remedies. As a result, Goldstein estimates that Emigrant officials spend about half their time talking with other lenders rather than working with borrowers.
Meanwhile, banks are beginning to take back properties where rental incomes have deteriorated enough to affect cash flows. Once those properties enter REO, banks might try to retain the assets and invest additional funds in class-A and class-B centers in primary markets. However, banks are trying to move less attractive assets as soon as possible, said Michael Morris, managing director of real estate capital markets with Zions Bank, a Salt Lake City-based lending institution. “We don’t want to hold assets for longer than 90 days in the REO bucket. That’s our philosophy,” Morris notes.
Note sales continue to be the preferred strategy for disposing of troubled loans in the current environment as buyers’ interest in buying notes is more robust than interest in purchasing underlying properties. The problem is few buyers want notes on largely empty retail centers, according to Lorne Polger, senior managing director with Pathfinder Partners LLC, a San Diego, Calif.-based opportunistic investor that purchases both senior debt and underlying real estate assets. Pathfinder, like many other opportunistic investors in the market today, looks to achieve double-digit returns on the deals it makes. That requires investment in stabilized assets.
There are, however, strategies the banks can adapt to make their notes more attractive to potential buyers, says Polger. He recommends offering at least some kind of leverage for deals and marketing the assets through as many channels as possible. He also cautions banks not to wait too long to move distressed debt off their balance sheets.
“We’ve seen innumerable times when banks call us nine or 10 days before the end of the quarter to ask us to take something off their books,” he says. “That’s good for us, but you are not going to get the highest price” by asking investors to close the deal in a week’s time.
—Elaine Misonzhnik
Commercial real estate lenders have prolonged dealing with distressed loans for close to two years. But they may no longer be able to remain passive.
Speakers at the Bankers Forum on Distressed Properties and Real Estate Loan Workouts, which took place in New York City on Apr. 19 and 20, said they are seeing the amount of distressed retail property continue to grow. In spite of a recent spike in retail sales, the leasing market remains challenging and retail property NOIs continue to fall. Up to now, banks have spent much of their time dealing with troubled construction and residential loans. But in 2010, they are turning more attention to resolving office and retail loans.
As of February, there were $2.3 billion in retail properties counted as real estate owned (REO) on bank balance sheets, up from a level of $450 million 12 months ago, according to Real Capital Analytics (RCA), a New York City-based research firm. A further $24.3 billion in properties were identified as distressed, up from $7 billion 12 months ago.
“Currently, the retail sector [probably] causes the most concern, just because of the economy,” said Derrick D. Cephas, president and CEO of Amalgamated Bank, a New York City-based institution that holds approximately $1 billion in diversified commercial real estate debt. “It’s not because of poor structure or poor concept.”
Cephas, along with Pat Goldstein, vice chairman of Emigrant Realty Finance Inc., the commercial real estate arm of Emigrant Bank, said that lenders try to work out troubled loans with borrowers when they are looking at properties that continue to generate cash flow, but the process is not always easy. The terms of traditional loans in the $10 million to $20 million range can often be changed if borrowers have additional real estate that can be pledged as collateral, Cephas said. To make this an attractive proposition, lenders try to offer terms that are favorable enough for borrowers to recoup most, if not all, of their investments in the assets.
Approximately $16.5 billion of loans on retail properties have been restructured in the past 12 months, according to RCA data. A big chunk of that total is due to General Growth Properties’ ongoing restructuring.
But one of the biggest challenges in today’s market, according to Goldstein, comes from large syndicated loans that require a consortium of lenders to agree before an extension is granted. Some banks don’t like the “pretend and extend” approach. Others face directions from the FDIC that require them to write down cash-flowing properties that face technical defaults. Still others—hedge funds, for example—might stand to profit when assets enter foreclosure because of short positions, so there is pressure to not seek any remedies. As a result, Goldstein estimates that Emigrant officials spend about half their time talking with other lenders rather than working with borrowers.
Meanwhile, banks are beginning to take back properties where rental incomes have deteriorated enough to affect cash flows. Once those properties enter REO, banks might try to retain the assets and invest additional funds in class-A and class-B centers in primary markets. However, banks are trying to move less attractive assets as soon as possible, said Michael Morris, managing director of real estate capital markets with Zions Bank, a Salt Lake City-based lending institution. “We don’t want to hold assets for longer than 90 days in the REO bucket. That’s our philosophy,” Morris notes.
Note sales continue to be the preferred strategy for disposing of troubled loans in the current environment as buyers’ interest in buying notes is more robust than interest in purchasing underlying properties. The problem is few buyers want notes on largely empty retail centers, according to Lorne Polger, senior managing director with Pathfinder Partners LLC, a San Diego, Calif.-based opportunistic investor that purchases both senior debt and underlying real estate assets. Pathfinder, like many other opportunistic investors in the market today, looks to achieve double-digit returns on the deals it makes. That requires investment in stabilized assets.
There are, however, strategies the banks can adapt to make their notes more attractive to potential buyers, says Polger. He recommends offering at least some kind of leverage for deals and marketing the assets through as many channels as possible. He also cautions banks not to wait too long to move distressed debt off their balance sheets.
“We’ve seen innumerable times when banks call us nine or 10 days before the end of the quarter to ask us to take something off their books,” he says. “That’s good for us, but you are not going to get the highest price” by asking investors to close the deal in a week’s time.
—Elaine Misonzhnik
Thursday, March 25, 2010
Commercial Real Estate Financing Today
Being Capital Markets Savvy in a Down Economy
It is rare when we have a conversation these days where the topic of financing doesn’t arise as a serious concern for our clients. When the economy is robust, and the capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However, during today’s recessionary times, the commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. There are hundreds of millions of dollars in maturing loans from insurance companies, banks, CMBS, and other lenders, which means that many borrowers will be forced to secure financing in a market that presently offers little liquidity.
Given the financial markets described above, only the seasoned sponsors with solid projects will be receiving attention from lenders and investors. In the text that follows, I’ll provide you with an overview of the information you need to possess in order to speak fluent finance and to increase the odds of getting your project financed.
Always keep in mind that financing serves multiple purposes beyond rate and term considerations. Developing the proper financing strategy can allow you to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage, and lower the overall cost of capital. Good sponsors focus on developing an integrated capital formation strategy surrounding acquisition, development, construction, refinancing and recapitalization initiatives. The following items are just a few of the things commercial borrowers need to address when seeking capital:
• The selection of the appropriate capital provider;
• Level(s) of the capital structure to be addressed;
• Operating considerations;
• Control provisions;
• Rate, term, pricing and structure;
• Closing time frame;
• Third party requirements;
• Certainty of execution;
• Recourse provisions;
• Exit and pre-payment options;
• Inter-creditor or other multi-party agreements;
• Post closing servicing issues;
• The effect of the capital acquired on tax, balance sheet, future projects or portfolio considerations, and;
• A whole host of other value-added considerations.
Possessing knowledge and understanding of the commercial capital markets is a critical factor in not only determining the eventual success of a single transaction, but also an entire portfolio or operating business. The first thing that borrowers must understand is that all capital providers are not created equal. There is a definite hierarchy within the world of capital providers, and understanding the value-ads offered by different capital providers is important in choosing a relationship. Understanding how to use different types of capital providers for different types of solutions/needs will be important to structuring the proper outcome. Approaching a lender for high leverage loan in today’s market without having your ducks in a row will prove to be next to impossible.
With debt service coverage ratios (DCR) nearing or even eclipsing 1.3 for many asset classes, advance rates on senior debt have certainly constricted requiring more mezz and equity investments for most sponsors to put a deal together. Making matters even more complicated is that there is no longer a clear division between debt and equity in the commercial capital markets. Given the ever increasing complexity of financially engineered structured finance solutions, it is essential for borrowers to develop a detailed understanding of the capital markets, and the structured finance options available to them. With the conservative advance noted above, it is critically important that you understand how to fill the increasing equity gap with the most affordable and effective capital markets solutions available.
The optimized use of structured finance solutions is one of the few arenas that allow commercial real estate owners to dramatically impact leverage, efficiencies and economies of scale across all business lines including acquisitions, financing ventures and operating activities. Structured finance is best defined as financially engineering the proper blend of debt, equity, synthetic, derivative, and hybrid capital in order to resolve particular transactional needs that cannot readily be met by conventional senior financing alone.
Structured financing allows for an engineered design and pricing of situation - specific financing instruments. Representative examples of typical situations that call for structured finance solutions include the following:
• Working around balance sheet or capital constraints;
• Shifting a higher percentage of the capital structure up or down in the leverage curve based upon
current needs or market conditions;
• Attaining greater amounts of leverage at a lower blended cost of capital;
• Adding value and increased leverage to buyouts, yield-plays, recapitalizations, repositionings,
and stress-induced financial restructuring;
• Shifting risk and better managing control at both the project and entity levels;
• Releasing trapped equity in single assets or portfolios;
• Conversion of illiquid assets into tradable securities;
While many would choose to define structured finance in narrow terms, it is rather the limitless ability to engineer hybrid, synthetic or derivative instruments. This level of flexibility makes the engineered solution provided by structured finance so valuable. While current capital markets conditions have restricted the use and/or availability of some products, typical structured finance instruments include the following:
• Senior and Junior Mezzanine Debt;
• Straight, Convertible and Participating Second Mortgages;
• Preferred Equity Structures;
• Bond Placements, Tax Credits and other Municipal Finance Alternatives;
• Index or Currency Linked Strips;
• Swaps, Options, Caps, Collars, Swaptions, Captions, etc;
• Credit Enhancement, Financial Guaranties, Standby Commitments; Forward Commitments;
Understanding how to maximize all levels of the capital structure through the use of structured finance techniques when developing the capital formation plan on your next transaction will help you create a much more effective and efficient execution. The following items are just a few of the benefits of understanding how to engineer the right capital structure:
1. Use all levels of the capital structure to move up the leverage curve: By using the proper combination of senior debt, subordinated debt and third party equity, even in this market it is still possible to aggressively climb the leverage curve and still maintain control of the project.
2. Use different levels of the capital structure to prevent project ownership dilution: By using subordinated debt (seller financing or mezzanine financing) to fill as much of the equity gap as possible, you will lower your overall cost of capital while not being forced to give up as much ownership in the project as you would by closing the entire equity gap with a joint venture equity partner.
3. Work with your Lenders: In today’s market, lenders will often work with borrowers where there is a benefit for doing so. It is quite possible to get a lender to restructure the current financing on a property or portfolio to keep from taking back non-performing assets.
4. Negotiating the proper type of equity joint venture can be critical to the financial success of a project: If you move up the leverage curve with the proper combination of senior and subordinate debt the amount of equity needed from outside investors is minimized. Using the right preferred equity investment structure can leverage the sponsor co-invest to a smaller percentage of the project equity requirement while still leaving the sponsor with the majority of project ownership.
5. Individual Investors vs. Institutional Investors: Decide early where you choose to seek your capital partners and investors and be willing to live with your decision. With rare exception, if a sponsor can meet institutional suitability tests, they will be better served by accessing commercial capital markets rather than dealing with individual investors. Institutional investors have more knowledge and flexibility when structuring transactions giving owners more operating flexibility. Institutional investors have deep pockets and can provide the appropriate level of financing to allow sponsors to engage on multiple projects at one time thereby creating the ability to grow their business with greater velocity when contrasted to the leverage provided by individual investors. Additionally, most institutional investors prefer passive investments and will only exercise dilution or control provisions in the rarest of circumstances. Lastly, institutional investors often times can provide tremendous non-financial value adds in the form of knowledge base, intellectual capital, market contacts and the like.
6. Resist the temptation to do “one-off” project level financings: Disparate financings at the project level can at a minimum restrict a borrowers future ability to cost effectively monetize on value creation by subjecting the property to pre-payment issues in the case of refinancing or disposition prior to the expiration of lock-out periods. Worse than trapping equity at the project level may be the fact that one-off financings restrict the ability to pool the asset with the balance of the portfolio creating a lack of optimized leverage and timely access to credit which in turn can create capital constraints by slowing acquisitions activities or operating initiatives. Lastly, large portfolios or even smaller sub-portfolios created by a multitude of one-off financings can create a management nightmare. This is due to constantly maturing debt rollover which will subject individual assets to credit, interest rate and market risk. This type of risk is not present when financing at the portfolio level due to the ability to trade in and out of collateralized pools where pricing, sizing and structural aspects are known constants.
The year ahead will definitely be challenging with regard to capital markets issues. Understanding how to access and maneuver within the commercial capital markets, and effectively leveraging the many benefits of understanding how to work the capital stack to your advantage may be the defining difference in optimizing the scalability and efficiency of your commercial real estate venture.
Please take a moment to review my bio and feel free to reach my team and I at any of the contact points listed below if we can offer any assistance to you. Thank you for your consideration.
by J. Steven Martin, CCIM, CPM, Managing Director
Sperry Van Ness – Evansville, IN
It is rare when we have a conversation these days where the topic of financing doesn’t arise as a serious concern for our clients. When the economy is robust, and the capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However, during today’s recessionary times, the commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. There are hundreds of millions of dollars in maturing loans from insurance companies, banks, CMBS, and other lenders, which means that many borrowers will be forced to secure financing in a market that presently offers little liquidity.
Given the financial markets described above, only the seasoned sponsors with solid projects will be receiving attention from lenders and investors. In the text that follows, I’ll provide you with an overview of the information you need to possess in order to speak fluent finance and to increase the odds of getting your project financed.
Always keep in mind that financing serves multiple purposes beyond rate and term considerations. Developing the proper financing strategy can allow you to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage, and lower the overall cost of capital. Good sponsors focus on developing an integrated capital formation strategy surrounding acquisition, development, construction, refinancing and recapitalization initiatives. The following items are just a few of the things commercial borrowers need to address when seeking capital:
• The selection of the appropriate capital provider;
• Level(s) of the capital structure to be addressed;
• Operating considerations;
• Control provisions;
• Rate, term, pricing and structure;
• Closing time frame;
• Third party requirements;
• Certainty of execution;
• Recourse provisions;
• Exit and pre-payment options;
• Inter-creditor or other multi-party agreements;
• Post closing servicing issues;
• The effect of the capital acquired on tax, balance sheet, future projects or portfolio considerations, and;
• A whole host of other value-added considerations.
Possessing knowledge and understanding of the commercial capital markets is a critical factor in not only determining the eventual success of a single transaction, but also an entire portfolio or operating business. The first thing that borrowers must understand is that all capital providers are not created equal. There is a definite hierarchy within the world of capital providers, and understanding the value-ads offered by different capital providers is important in choosing a relationship. Understanding how to use different types of capital providers for different types of solutions/needs will be important to structuring the proper outcome. Approaching a lender for high leverage loan in today’s market without having your ducks in a row will prove to be next to impossible.
With debt service coverage ratios (DCR) nearing or even eclipsing 1.3 for many asset classes, advance rates on senior debt have certainly constricted requiring more mezz and equity investments for most sponsors to put a deal together. Making matters even more complicated is that there is no longer a clear division between debt and equity in the commercial capital markets. Given the ever increasing complexity of financially engineered structured finance solutions, it is essential for borrowers to develop a detailed understanding of the capital markets, and the structured finance options available to them. With the conservative advance noted above, it is critically important that you understand how to fill the increasing equity gap with the most affordable and effective capital markets solutions available.
The optimized use of structured finance solutions is one of the few arenas that allow commercial real estate owners to dramatically impact leverage, efficiencies and economies of scale across all business lines including acquisitions, financing ventures and operating activities. Structured finance is best defined as financially engineering the proper blend of debt, equity, synthetic, derivative, and hybrid capital in order to resolve particular transactional needs that cannot readily be met by conventional senior financing alone.
Structured financing allows for an engineered design and pricing of situation - specific financing instruments. Representative examples of typical situations that call for structured finance solutions include the following:
• Working around balance sheet or capital constraints;
• Shifting a higher percentage of the capital structure up or down in the leverage curve based upon
current needs or market conditions;
• Attaining greater amounts of leverage at a lower blended cost of capital;
• Adding value and increased leverage to buyouts, yield-plays, recapitalizations, repositionings,
and stress-induced financial restructuring;
• Shifting risk and better managing control at both the project and entity levels;
• Releasing trapped equity in single assets or portfolios;
• Conversion of illiquid assets into tradable securities;
While many would choose to define structured finance in narrow terms, it is rather the limitless ability to engineer hybrid, synthetic or derivative instruments. This level of flexibility makes the engineered solution provided by structured finance so valuable. While current capital markets conditions have restricted the use and/or availability of some products, typical structured finance instruments include the following:
• Senior and Junior Mezzanine Debt;
• Straight, Convertible and Participating Second Mortgages;
• Preferred Equity Structures;
• Bond Placements, Tax Credits and other Municipal Finance Alternatives;
• Index or Currency Linked Strips;
• Swaps, Options, Caps, Collars, Swaptions, Captions, etc;
• Credit Enhancement, Financial Guaranties, Standby Commitments; Forward Commitments;
Understanding how to maximize all levels of the capital structure through the use of structured finance techniques when developing the capital formation plan on your next transaction will help you create a much more effective and efficient execution. The following items are just a few of the benefits of understanding how to engineer the right capital structure:
1. Use all levels of the capital structure to move up the leverage curve: By using the proper combination of senior debt, subordinated debt and third party equity, even in this market it is still possible to aggressively climb the leverage curve and still maintain control of the project.
2. Use different levels of the capital structure to prevent project ownership dilution: By using subordinated debt (seller financing or mezzanine financing) to fill as much of the equity gap as possible, you will lower your overall cost of capital while not being forced to give up as much ownership in the project as you would by closing the entire equity gap with a joint venture equity partner.
3. Work with your Lenders: In today’s market, lenders will often work with borrowers where there is a benefit for doing so. It is quite possible to get a lender to restructure the current financing on a property or portfolio to keep from taking back non-performing assets.
4. Negotiating the proper type of equity joint venture can be critical to the financial success of a project: If you move up the leverage curve with the proper combination of senior and subordinate debt the amount of equity needed from outside investors is minimized. Using the right preferred equity investment structure can leverage the sponsor co-invest to a smaller percentage of the project equity requirement while still leaving the sponsor with the majority of project ownership.
5. Individual Investors vs. Institutional Investors: Decide early where you choose to seek your capital partners and investors and be willing to live with your decision. With rare exception, if a sponsor can meet institutional suitability tests, they will be better served by accessing commercial capital markets rather than dealing with individual investors. Institutional investors have more knowledge and flexibility when structuring transactions giving owners more operating flexibility. Institutional investors have deep pockets and can provide the appropriate level of financing to allow sponsors to engage on multiple projects at one time thereby creating the ability to grow their business with greater velocity when contrasted to the leverage provided by individual investors. Additionally, most institutional investors prefer passive investments and will only exercise dilution or control provisions in the rarest of circumstances. Lastly, institutional investors often times can provide tremendous non-financial value adds in the form of knowledge base, intellectual capital, market contacts and the like.
6. Resist the temptation to do “one-off” project level financings: Disparate financings at the project level can at a minimum restrict a borrowers future ability to cost effectively monetize on value creation by subjecting the property to pre-payment issues in the case of refinancing or disposition prior to the expiration of lock-out periods. Worse than trapping equity at the project level may be the fact that one-off financings restrict the ability to pool the asset with the balance of the portfolio creating a lack of optimized leverage and timely access to credit which in turn can create capital constraints by slowing acquisitions activities or operating initiatives. Lastly, large portfolios or even smaller sub-portfolios created by a multitude of one-off financings can create a management nightmare. This is due to constantly maturing debt rollover which will subject individual assets to credit, interest rate and market risk. This type of risk is not present when financing at the portfolio level due to the ability to trade in and out of collateralized pools where pricing, sizing and structural aspects are known constants.
The year ahead will definitely be challenging with regard to capital markets issues. Understanding how to access and maneuver within the commercial capital markets, and effectively leveraging the many benefits of understanding how to work the capital stack to your advantage may be the defining difference in optimizing the scalability and efficiency of your commercial real estate venture.
Please take a moment to review my bio and feel free to reach my team and I at any of the contact points listed below if we can offer any assistance to you. Thank you for your consideration.
by J. Steven Martin, CCIM, CPM, Managing Director
Sperry Van Ness – Evansville, IN
Tuesday, March 23, 2010
Medical Office Sector Ramps Up
Mar 22, 2010 3:54 PM, By Sibley Fleming, NREI managing editor
Investors aren't waiting for the outcome of the healthcare debate before they inject their capital into the medical real estate sector. After a year of inactivity, hospitals are expanding again and investors are realizing that demand for medical office space, by most measures, is inexhaustible.
Last year, transaction volume for medical office properties valued at $1 million or more was down by more than half from 2008 totals, both by the number of deals and by dollar amount. In 2008, there were 891 transactions with a total value of $4.3 billion. In 2009, just 420 medical office deals, valued at $1.9 billion, closed.
“In 2009, you were very challenged to put together transactions in excess of $10 million,” says Alan Pontius, managing director of the healthcare real estate group at Marcus & Millichap Real Estate Investment Services, in the firm's San Francisco office.
Now deals are beginning to accelerate. In December, Marcus & Millichap brokered the $16.7 million sale of Hampden Place Medical Center, a 66,339 sq. ft. Class-A medical office building in Englewood, Colo.
In mid-2009, the asset couldn't trade even at a generous capitalization rate of 8.5%, Pontius says. But in December, the property “comfortably” sold at an 8.25% cap rate. “That is an example of how the overall market has come back around,” says Pontius.
Hampden Place isn't on a medical campus, but it is within a few blocks of the Swedish Medical Center and Porter Adventist Hospital campuses. The property also is an outpatient facility that houses a broad array of services, including an ambulatory surgery center, medical imaging, physiotherapy and medical offices for orthopedic, hematology-oncology and other physicians.
In short, Hampden Place is a great example of the type of asset lenders and investors are targeting these days. “Investment-grade medical office has not been necessarily recession-proof, but it has been recession-resistant,” says Jeffrey Cooper, executive managing director of Savills US, who works in the London-based company's New York office.
Cooper defines institutional-grade properties as on-campus buildings or properties associated with healthcare systems. Read Full Article
Investors aren't waiting for the outcome of the healthcare debate before they inject their capital into the medical real estate sector. After a year of inactivity, hospitals are expanding again and investors are realizing that demand for medical office space, by most measures, is inexhaustible.
Last year, transaction volume for medical office properties valued at $1 million or more was down by more than half from 2008 totals, both by the number of deals and by dollar amount. In 2008, there were 891 transactions with a total value of $4.3 billion. In 2009, just 420 medical office deals, valued at $1.9 billion, closed.
“In 2009, you were very challenged to put together transactions in excess of $10 million,” says Alan Pontius, managing director of the healthcare real estate group at Marcus & Millichap Real Estate Investment Services, in the firm's San Francisco office.
Now deals are beginning to accelerate. In December, Marcus & Millichap brokered the $16.7 million sale of Hampden Place Medical Center, a 66,339 sq. ft. Class-A medical office building in Englewood, Colo.
In mid-2009, the asset couldn't trade even at a generous capitalization rate of 8.5%, Pontius says. But in December, the property “comfortably” sold at an 8.25% cap rate. “That is an example of how the overall market has come back around,” says Pontius.
Hampden Place isn't on a medical campus, but it is within a few blocks of the Swedish Medical Center and Porter Adventist Hospital campuses. The property also is an outpatient facility that houses a broad array of services, including an ambulatory surgery center, medical imaging, physiotherapy and medical offices for orthopedic, hematology-oncology and other physicians.
In short, Hampden Place is a great example of the type of asset lenders and investors are targeting these days. “Investment-grade medical office has not been necessarily recession-proof, but it has been recession-resistant,” says Jeffrey Cooper, executive managing director of Savills US, who works in the London-based company's New York office.
Cooper defines institutional-grade properties as on-campus buildings or properties associated with healthcare systems. Read Full Article
Monday, March 22, 2010
Trepp: CMBS Loan Losses to Deepen in 2010
Mar 9, 2010 3:04 PM, By Sibley Fleming, NREI managing editor
Properties backed by CMBS loans that have had an appraisal reduction may be a financial fortune cookie for investors. Ordering an updated appraisal is just one of the steps required after a loan has been transferred to special servicing. Read Full Article
Properties backed by CMBS loans that have had an appraisal reduction may be a financial fortune cookie for investors. Ordering an updated appraisal is just one of the steps required after a loan has been transferred to special servicing. Read Full Article
Friday, March 19, 2010
2010 Borrower Trends: All Is Quiet on The Lending Front
Jan 1, 2010 12:00 PM, By Matt Valley
Borrowers and lenders see no immediate end in sight to credit crunch.
Borrowers are less optimistic now than they were a year ago on the issue of whether the credit crunch in commercial real estate will ease over the next 12 months. The percentage of borrowers who expect the credit markets to improve over the next year dropped from 53% in 2008 to 34% in 2009, according to an exclusive survey conducted by National Real Estate Investor and Penton Research. Read Full Article Here
Borrowers and lenders see no immediate end in sight to credit crunch.
Borrowers are less optimistic now than they were a year ago on the issue of whether the credit crunch in commercial real estate will ease over the next 12 months. The percentage of borrowers who expect the credit markets to improve over the next year dropped from 53% in 2008 to 34% in 2009, according to an exclusive survey conducted by National Real Estate Investor and Penton Research. Read Full Article Here
Thursday, March 18, 2010
PricewaterhouseCoopers: Apartment Sector to Lead Rising Property Sales in 2010
Mar 16, 2010 12:39 PM, By Denise Kalette, NREI senior associate editor
As cap rates begin to stabilize, investors are showing more confidence in the commercial real estate market than at any point in the last two years, a new report from New York-based PricewaterhouseCoopers shows.
Although transactions are expected to be lower in 2010 than at the peak of the market, the report released today projects marked improvement over 2009, with the apartment sector leading the recovery effort.
Cap rates, which gauge expectations of property income and value, not only show signs of leveling off, they have even declined slightly in some markets for quality assets, according to the PricewaterhouseCoopers' Korpacz Real Estate Investor Survey.
As cap rates become more attractive to investors, that trend is expected to help stabilize commercial property values. Survey participants project that over the next six months, overall cap rates will hold steady in 19 of the 30 markets surveyed. Last quarter, the survey projected stabilization in only two markets.
“The worst seems to be over, according to survey participants, as investors suggest that the bottom is near, if not here, particularly for better-positioned markets and assets,” said Susan Smith, director of real estate advisory practice at PricewaterhouseCoopers, and editor-in-chief of the survey.
Commercial real estate fundamentals also are expected to moderate in the remainder of this year. Across property types, occupancy and rental rates have deteriorated significantly in the past 24 months, but the declines are not expected to be as severe in 2010 as they were last year, according to the survey.
“Following the onset of the recession and the credit crisis, underlying fundamentals were deteriorating and overall cap rates were expanding simultaneously and quickly, causing values to plummet,” said Smith.
Marketing pace quickens
In the apartment market, the low end of the range for overall cap rates decreased 75 basis points this quarter to 5%, as investors showed up to bid for quality assets in healthier markets. In another good sign, the average time it took to market the assets declined in two survey markets, indicating restored confidence among many investors, according to the report.
Investors forecast that the apartment sector will be the first to recover, noting that some multifamily assets already are showing slight value increases. The office and retail sectors, meanwhile, are more deeply mired in the economic doldrums, and affected by nationwide job losses.
Survey participants said that owners and lenders finally are coming to agreement on the value of properties, overcoming at least in part, the bid-ask stalemate over prices that has impeded many transactions for more than a year. Read Full Article
As cap rates begin to stabilize, investors are showing more confidence in the commercial real estate market than at any point in the last two years, a new report from New York-based PricewaterhouseCoopers shows.
Although transactions are expected to be lower in 2010 than at the peak of the market, the report released today projects marked improvement over 2009, with the apartment sector leading the recovery effort.
Cap rates, which gauge expectations of property income and value, not only show signs of leveling off, they have even declined slightly in some markets for quality assets, according to the PricewaterhouseCoopers' Korpacz Real Estate Investor Survey.
As cap rates become more attractive to investors, that trend is expected to help stabilize commercial property values. Survey participants project that over the next six months, overall cap rates will hold steady in 19 of the 30 markets surveyed. Last quarter, the survey projected stabilization in only two markets.
“The worst seems to be over, according to survey participants, as investors suggest that the bottom is near, if not here, particularly for better-positioned markets and assets,” said Susan Smith, director of real estate advisory practice at PricewaterhouseCoopers, and editor-in-chief of the survey.
Commercial real estate fundamentals also are expected to moderate in the remainder of this year. Across property types, occupancy and rental rates have deteriorated significantly in the past 24 months, but the declines are not expected to be as severe in 2010 as they were last year, according to the survey.
“Following the onset of the recession and the credit crisis, underlying fundamentals were deteriorating and overall cap rates were expanding simultaneously and quickly, causing values to plummet,” said Smith.
Marketing pace quickens
In the apartment market, the low end of the range for overall cap rates decreased 75 basis points this quarter to 5%, as investors showed up to bid for quality assets in healthier markets. In another good sign, the average time it took to market the assets declined in two survey markets, indicating restored confidence among many investors, according to the report.
Investors forecast that the apartment sector will be the first to recover, noting that some multifamily assets already are showing slight value increases. The office and retail sectors, meanwhile, are more deeply mired in the economic doldrums, and affected by nationwide job losses.
Survey participants said that owners and lenders finally are coming to agreement on the value of properties, overcoming at least in part, the bid-ask stalemate over prices that has impeded many transactions for more than a year. Read Full Article
Sperry Van Ness Announces 2009 Earnings Performance
Irvine, CA (PRWEB) March 16, 2010 -- Sperry Van Ness International (“SVNI”), one of the leading commercial real estate advisory & brokerage brands, covering more than 150 markets and 38 states, announced today that it reported profitable earnings for the year ending 2009. “We believe SVNI is one of the few national commercial real estate brands to achieve positive EBITDA in 2009. In addition to our strong financial performance in 2009, we are one of the few national firms that is debt free, has operating cash reserves, and maintains an untapped line of credit.” said Kevin Maggiacomo, President and CEO of Sperry Van Ness. He further added, “It is a testament to our business model and the quality of our franchisees and their advisors to have generated such a high level of production, despite the challenging market.” Read Full Article
Friday, March 12, 2010
Kevin Maggiacomo was recently interviewed by NAR for their “Technology & Intelligence Briefing Podcast”.
Interview with Kevin Maggiacomo, President & CEO, Sperry Van Ness, one of the nation's largest commercial brokerages, on social media. Refreshing and impactful conversation from a top REALTOR® who's doing it right. Kevin discusses why he and Sperry Van Ness are leading proponents for Social Media. Listen To It Here.
Thursday, March 11, 2010
Goldman Sachs Resumes Coverage on Kraft Foods (KFT) with a Neutral
March 11, 2010 7:03 AM EST
Goldman Sachs removed the not-rated designation on Kraft Foods (NYSE: KFT) and now rate it Neutral with a $33 12-month price target. The firm said Kraft is still a "show me story."
The firm's EPS estimates are $2.04 for 2010, $2.32 for 2011, and $2.63 for 2012.
StreetInsider.com
Goldman Sachs removed the not-rated designation on Kraft Foods (NYSE: KFT) and now rate it Neutral with a $33 12-month price target. The firm said Kraft is still a "show me story."
The firm's EPS estimates are $2.04 for 2010, $2.32 for 2011, and $2.63 for 2012.
StreetInsider.com
REIT Stocks Jump as Investors Bet on Recovery
Mar 10, 2010 12:20 PM, By Denise Kalette, NREI senior associate editor
Despite poor commercial real estate fundamentals, retail and apartment real estate investment trusts (REITs) are enjoying a powerful resurgence. For the 12-month period ending February 28, a key equity REIT index soared 95.19%, outdoing both the Nasdaq and Standard & Poor’s 500 index of stocks, according to a new report.
For the month of February, U.S. REITs gained more than 5%, according to the report by the National Association of Real Estate Investment Trusts (NAREIT), a trade group based in Washington, D.C. The gains were driven by investment in the retail and apartment sectors, according to the report.
“This has been a period of tremendous growth for REIT shares,” says Ron Kuykendall, vice president at NAREIT. “What it means, I believe, is that investors are betting on a recovery.”
The performance represents a remarkable contrast to the period from the market peak in early 2007 to the trough in March 2009, the lowest point for REITs. Share prices fell a devastating 75% during that period, says Kuykendall.
If investors indeed are betting on recovery, that could provide a shot in the arm to the commercial real estate industry across the U.S. Although REITs comprise just 10% to 15% of the total U.S. commercial real estate marketplace, they represent many of the largest companies and property owners across all property types — retail, multifamily, office, industrial and hotel.
Dealmakers get busy
A developing trend that factors into the recent investment in shares is that acquisitions are once again beginning to take place after the nation’s deep recession and credit shortage, particularly in the... Read More Here
Despite poor commercial real estate fundamentals, retail and apartment real estate investment trusts (REITs) are enjoying a powerful resurgence. For the 12-month period ending February 28, a key equity REIT index soared 95.19%, outdoing both the Nasdaq and Standard & Poor’s 500 index of stocks, according to a new report.
For the month of February, U.S. REITs gained more than 5%, according to the report by the National Association of Real Estate Investment Trusts (NAREIT), a trade group based in Washington, D.C. The gains were driven by investment in the retail and apartment sectors, according to the report.
“This has been a period of tremendous growth for REIT shares,” says Ron Kuykendall, vice president at NAREIT. “What it means, I believe, is that investors are betting on a recovery.”
The performance represents a remarkable contrast to the period from the market peak in early 2007 to the trough in March 2009, the lowest point for REITs. Share prices fell a devastating 75% during that period, says Kuykendall.
If investors indeed are betting on recovery, that could provide a shot in the arm to the commercial real estate industry across the U.S. Although REITs comprise just 10% to 15% of the total U.S. commercial real estate marketplace, they represent many of the largest companies and property owners across all property types — retail, multifamily, office, industrial and hotel.
Dealmakers get busy
A developing trend that factors into the recent investment in shares is that acquisitions are once again beginning to take place after the nation’s deep recession and credit shortage, particularly in the... Read More Here
Friday, March 5, 2010
Integra Bank and First Security Bank Announce Agreement for Purchase of Branches and Loans from Integra
EVANSVILLE, Ind. and OWENSBORO, Ky., March 3, 2010 (GLOBE NEWSWIRE) -- Integra Bank Corporation (Nasdaq:IBNK) and First Security Inc. announced today that First Security Bank of Owensboro, Inc. ("First Security"), the wholly-owned subsidiary of First Security Inc., has agreed to purchase eight banking offices of Integra's wholly-owned bank subsidiary, Integra Bank N.A. ("Integra Bank"). The banking offices include five located in Bowling Green and Franklin, Kentucky and single offices located in Paoli, Mitchell and Bedford, Indiana. In addition, First Security has agreed to acquire a pool of indirect consumer, commercial, and commercial real estate loans from Integra. Read Article Here
General Growth to split into two companies
By Alan Rappeport in Washington
Published: February 24 2010 23:26 | Last updated: February 24 2010 23:26
General Growth Properties, the second largest US mall operator, said on Wednesday that it had agreed to take $2.6bn of capital from Brookfield Asset Management and to split itself into two companies in a move that would allow it to emerge from bankruptcy.
The deal would give Brookfield, a Canadian property manager, a 30 per cent stake in General Growth and offers its stockholders $15 a share. If approved, it could also thwart the $10bn bid made last week by Simon Property, General Growth’s bigger rival which was offering $9 a share. Read Full Article
Published: February 24 2010 23:26 | Last updated: February 24 2010 23:26
General Growth Properties, the second largest US mall operator, said on Wednesday that it had agreed to take $2.6bn of capital from Brookfield Asset Management and to split itself into two companies in a move that would allow it to emerge from bankruptcy.
The deal would give Brookfield, a Canadian property manager, a 30 per cent stake in General Growth and offers its stockholders $15 a share. If approved, it could also thwart the $10bn bid made last week by Simon Property, General Growth’s bigger rival which was offering $9 a share. Read Full Article
Thursday, March 4, 2010
Better Times Ahead for Apartments
Jan 1, 2010 12:00 PM, By Doug Bibby
Fannie Mae, Freddie Mac play a critical role as capital sources.
Though the apartment market is seeing signs of financial stabilization, and the longer-term outlook for apartments remains good, in the short run the statistics are rather bleak.
Transaction volume in 2008 was down by more than 60% compared with the 2007 peak, and volume for the first half of 2009 dropped by 77% compared with the same period a year earlier. Read More Here
Fannie Mae, Freddie Mac play a critical role as capital sources.
Though the apartment market is seeing signs of financial stabilization, and the longer-term outlook for apartments remains good, in the short run the statistics are rather bleak.
Transaction volume in 2008 was down by more than 60% compared with the 2007 peak, and volume for the first half of 2009 dropped by 77% compared with the same period a year earlier. Read More Here
Making Sears Both Bigger and Smaller
By Mike Duff | Mar 1, 2010
Inside Eddie Lampert's Brain: His Plan to Make Sears Both Bigger and Smaller
Eddie Lampert says less is more when it comes to Sears.
The Sears chairman rarely discusses what he thinks of the country’s fourth-largest retailer, so the shareholder letter he writes in the annual report is always keenly awaited. In this year’s version, Lampert makes the case that the retailer can generate new revenues without big investments as it pays down debt. Read More Here
Inside Eddie Lampert's Brain: His Plan to Make Sears Both Bigger and Smaller
Eddie Lampert says less is more when it comes to Sears.
The Sears chairman rarely discusses what he thinks of the country’s fourth-largest retailer, so the shareholder letter he writes in the annual report is always keenly awaited. In this year’s version, Lampert makes the case that the retailer can generate new revenues without big investments as it pays down debt. Read More Here
Wednesday, March 3, 2010
Shopping Center REITs Report Signs of Improvement, but Expect More Store Closings
Shopping center REITs turned in a respectable performance for the fourth quarter of 2009, giving credence to the notion that the worst of the downturn may be over. Yet REIT analysts continue to be cautious about the sector’s prospects for 2010, as the year may bring more closings among smaller shopping center tenants and make re-leasing vacant space difficult. Read More Here
By - Elaine Misonzhnik
By - Elaine Misonzhnik
Tuesday, March 2, 2010
COMMERCIAL MARKET IMPROVEMENT - WILL COME SLOWLY
NAR Chief Economist, Dr Lawrence Yun, predicts high vacancy rates and ubiquitous commercial rent concessions. Slight employment improvements will help absorption rates for office/warehouse space, and SIOR's (Society of Industrial and Office Realtors) recent survey confirms the forecast of easing in this sector. More than half the members of SIOR® expect an improvement in Q2 2010. Rents are down for Office, Industrial, Retail and Multifamily, but not by as much as in Q4 -2009, and the trends are improving slightly. To read the February Commercial Forecast and table on specifics of four commercial sectors, click here.
Monday, March 1, 2010
SVN has been named the 11th most recognized brand
Sperry Van Ness has been named the 11th most recognized brand in commercial real estate in Lipsey Survey. This is ahead of well known brands such as Marcus & Millichap, Costar, LoopNet, Duke Realty and Simon Properties to name a few. Read Survey Here
Buy it Right!
By: J. Steven Martin, Managing Director, Sperry Van Ness/Martin Commercial Group
Peeling back the layers on the subtleties of the buy-side.
The acquisition phase is one of the most important parts of the commercial real estate lifecycle. Most reasonable people would admit that the best way to have a successful outcome to any real estate venture is to get off on the right foot. While it’s certainly possible to “rescue” a troubled project, the best way to safeguard against a troubled scenario is to minimize future risk through the implementation of a sound acquisition plan. In the text that follows, I’ll offer some thoughts about some of the most common acquisition mistakes and how to avoid them.
Put simply, bad acquisitions are not healthy for financial sustainability. I’ve had the displeasure of watching lenders, investors, tenants and owners all suffer through the devastation and turmoil created by a bad acquisition. Whether it was due to lack of planning, leasing the wrong space, lending or investing in the wrong asset class or in the wrong market, getting whipsawed by buying into changing market conditions, paying too much for a property, or missing a critical window of opportunity, a bad acquisition usually spells trouble down the road. The sad part about what I’ve just described is that in most cases, these bad acquisitions could have been easily avoided by filtering them through a well conceived acquisition model.
Before I go any further, I want to dispel the myth that bad acquisitions only happen to inexperienced buyers... this is simply not true. Experience, while certainly a good hedge against a bad acquisition, won’t save you in all instances. Over the years, I’ve observed some very bright industry veterans end up on the wrong side of a bad deal. Don’t believe me? Go ask the smartest real estate investor you know to tell you about the worst acquisition they ever made - I’ll guarantee that if they’re being honest, they’ll have a painfully entertaining story to tell you. Read More Here
Peeling back the layers on the subtleties of the buy-side.
The acquisition phase is one of the most important parts of the commercial real estate lifecycle. Most reasonable people would admit that the best way to have a successful outcome to any real estate venture is to get off on the right foot. While it’s certainly possible to “rescue” a troubled project, the best way to safeguard against a troubled scenario is to minimize future risk through the implementation of a sound acquisition plan. In the text that follows, I’ll offer some thoughts about some of the most common acquisition mistakes and how to avoid them.
Put simply, bad acquisitions are not healthy for financial sustainability. I’ve had the displeasure of watching lenders, investors, tenants and owners all suffer through the devastation and turmoil created by a bad acquisition. Whether it was due to lack of planning, leasing the wrong space, lending or investing in the wrong asset class or in the wrong market, getting whipsawed by buying into changing market conditions, paying too much for a property, or missing a critical window of opportunity, a bad acquisition usually spells trouble down the road. The sad part about what I’ve just described is that in most cases, these bad acquisitions could have been easily avoided by filtering them through a well conceived acquisition model.
Before I go any further, I want to dispel the myth that bad acquisitions only happen to inexperienced buyers... this is simply not true. Experience, while certainly a good hedge against a bad acquisition, won’t save you in all instances. Over the years, I’ve observed some very bright industry veterans end up on the wrong side of a bad deal. Don’t believe me? Go ask the smartest real estate investor you know to tell you about the worst acquisition they ever made - I’ll guarantee that if they’re being honest, they’ll have a painfully entertaining story to tell you. Read More Here
Friday, February 26, 2010
Multifamily Lenders Share Their Biggest Concerns For The Road Ahead
Feb 3, 2010 10:23 AM, By Matt Valley
LAS VEGAS — What’s the biggest worry among multifamily lenders in 2010 and 2011? The usual suspects, jobs and interest rates, rank high on the list. But for Kenneth Bacon, executive vice president of Fannie Mae, the sharp drop in real estate valuations from peak levels just a few short years ago is most troubling.
Although determining value remains a difficult task because there have been relatively few transactions, the Moodys/REAL Commercial Property Price Index numbers show a 40% drop for multifamily properties from the market peak to the third quarter of 2009. Read More Here
LAS VEGAS — What’s the biggest worry among multifamily lenders in 2010 and 2011? The usual suspects, jobs and interest rates, rank high on the list. But for Kenneth Bacon, executive vice president of Fannie Mae, the sharp drop in real estate valuations from peak levels just a few short years ago is most troubling.
Although determining value remains a difficult task because there have been relatively few transactions, the Moodys/REAL Commercial Property Price Index numbers show a 40% drop for multifamily properties from the market peak to the third quarter of 2009. Read More Here
Thursday, February 25, 2010
Economist: Washington’s Fixes Have Become the Problem
Feb 24, 2010 3:00 PM, By Matt Hudgins, contributing writer
Uncertainties over taxes and access to credit are driving U.S. businesses to hoard cash rather than lead the economy into recovery by spending and hiring, according to a prominent real estate researcher.
The private sector has squirreled away trillions of dollars that could revitalize the economy, but businesses are reluctant to part with cash they may need for operating capital in the absence of credit, and to pay higher tax bills at all levels of government, according to Dr. Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University.
“We are used to thinking of the federal government as the solution to these problems for economic growth and they have rapidly become the source of the problem because of the uncertainty that they have created for business people,” says Dotzour, who was one of several presenters at a symposium hosted by the CCIM Central Texas chapter on Feb. 23 in Austin. Read More Here
Uncertainties over taxes and access to credit are driving U.S. businesses to hoard cash rather than lead the economy into recovery by spending and hiring, according to a prominent real estate researcher.
The private sector has squirreled away trillions of dollars that could revitalize the economy, but businesses are reluctant to part with cash they may need for operating capital in the absence of credit, and to pay higher tax bills at all levels of government, according to Dr. Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University.
“We are used to thinking of the federal government as the solution to these problems for economic growth and they have rapidly become the source of the problem because of the uncertainty that they have created for business people,” says Dotzour, who was one of several presenters at a symposium hosted by the CCIM Central Texas chapter on Feb. 23 in Austin. Read More Here
Wednesday, February 24, 2010
Global Commercial Property Sales Surge 85% In Fourth Quarter, Says RCA
Feb 23, 2010 2:12 PM, By Denise Kalette, NREI senior associate editor
A new report on global commercial property sales $10 million and above shows that quarterly transaction volume has surged for the first time in two years, a clear indication that the market is recovering from a deep recession.
In the fourth quarter of 2009, volume rose to $147 billion, up 85% from the same period of 2008, according to New York-based research firm Real Capital Analytics (RCA). It was the first quarterly increase on a year-over-year basis in seven quarters, according to the report.
From apartments and offices to retail deals, all property types except hotels showed an increase. Office, retail and industrial transactions together registered a 29% gain in the fourth quarter from the same period a year earlier.
Asia led the fourth-quarter surge, with China, Hong Kong and Taiwan providing most of the momentum, while the U.S. and Canada experienced a decline in sales.
“The U.S. is lagging counterpart regions in Europe and Asia. But we fell into the down cycle arguably later as well,” says Dan Fasulo, managing director of RCA. “We like to think that the U.S. will start to recover rapidly over the next six months, basically following in the same path of the recovery we’ve seen in Western Europe and in Asia.”
In the Asia Pacific region, volume rose 240% year-over-year in the fourth quarter, with China showing the strongest gains. And for all of 2009, only China registered a significant increase in sales, with volume rising 139% to $156 billion.
Although European and U.S. governments initiated stimulus programs, they were outdone by China, says Fasulo. “When Beijing told the banks to lend, they went out and lent the money. A lot of that excess debt capital went toward the acquisition of real estate, mainly large development sites.” A number of mixed-use projects were initiated at those sites and projects are under way.
Values begin to rise
The strengthening sales show that the market has bottomed out and begun its recovery, says Fasulo. “I think it’s very easy to say that as far as transaction activity goes, we’re well off the bottom, which as we look back, probably occurred in the first half of 2009.”
Anecdotal and some statistical evidence show that values have also begun to rise, says Fasulo. “In early 2009, you could barely get a quote to buy an office building in Manhattan. And if you did get a quote from a lender, you would be at extraordinarily low loan-to-values and a high interest rate. Now there’s more than a dozen lenders that would give you an honest quote today, at pricing that’s much more attractive.”
In one example signaling an improved market, the iconic, 160-unit Helmsley Carlton House hotel on Madison Avenue in Manhattan drew a flurry of offers after it was put up for auction in January. “There were over 35 bidders — over 100 interested parties and 35 firm bids,” says Fasulo. “Those are greater numbers than we saw at the height of the market.”
Bidding war in Boston
Another sign of an improving commercial property market is the bidding war that erupted over One Brigham Circle, a 200,000 sq. ft. office complex in Boston. Less than a week ago, AEW Real Estate Investment Management, based in Boston, won the competition with a bid reported at nearly $99 million.
Although the fourth quarter saw a dramatic increase in sales activity, transactions for the entire year of 2009 reflected the severe losses of the economic downturn. The global volume of commercial property sales dropped 30% to $381 billion, while the number of transactions fell 40%, RCA reports.
“We got pushed to the brink in late ‘08 and early ‘09, and saw almost the disappearance of the debt capital markets for commercial property,” explains Fasulo. But little by little, the marketplace has improved and property values are in the initial phases of climbing back from the abyss.
Still, not all properties are rising in value and desirability at the same pace. Class-A properties in highly desirable markets will recover their values more quickly, says Fasulo, particularly those with long-term leases in place and strong tenants.
“It’s almost a two-tiered market that’s developing. One is the prime assets that have more bond-like qualities, and the other part is assets that have near-term exposure to the economy — retail centers that have lost major tenants, broken development projects, raw land, a secondary market hotel. Those are the types of assets that are not going to see values recover anytime soon.”
A Class-A office building that stands mostly empty also is unlikely to share in the rebounding market, says Fasulo. But a building net-leased to a major institution such as a pension fund is a different story. “You’d better believe we’re going to see values increase for that type of product this year.”
As for the timing of recovery, Fasulo says he may be more bullish than many analysts. “I would argue that it’s already happening now.”
A new report on global commercial property sales $10 million and above shows that quarterly transaction volume has surged for the first time in two years, a clear indication that the market is recovering from a deep recession.
In the fourth quarter of 2009, volume rose to $147 billion, up 85% from the same period of 2008, according to New York-based research firm Real Capital Analytics (RCA). It was the first quarterly increase on a year-over-year basis in seven quarters, according to the report.
From apartments and offices to retail deals, all property types except hotels showed an increase. Office, retail and industrial transactions together registered a 29% gain in the fourth quarter from the same period a year earlier.
Asia led the fourth-quarter surge, with China, Hong Kong and Taiwan providing most of the momentum, while the U.S. and Canada experienced a decline in sales.
“The U.S. is lagging counterpart regions in Europe and Asia. But we fell into the down cycle arguably later as well,” says Dan Fasulo, managing director of RCA. “We like to think that the U.S. will start to recover rapidly over the next six months, basically following in the same path of the recovery we’ve seen in Western Europe and in Asia.”
In the Asia Pacific region, volume rose 240% year-over-year in the fourth quarter, with China showing the strongest gains. And for all of 2009, only China registered a significant increase in sales, with volume rising 139% to $156 billion.
Although European and U.S. governments initiated stimulus programs, they were outdone by China, says Fasulo. “When Beijing told the banks to lend, they went out and lent the money. A lot of that excess debt capital went toward the acquisition of real estate, mainly large development sites.” A number of mixed-use projects were initiated at those sites and projects are under way.
Values begin to rise
The strengthening sales show that the market has bottomed out and begun its recovery, says Fasulo. “I think it’s very easy to say that as far as transaction activity goes, we’re well off the bottom, which as we look back, probably occurred in the first half of 2009.”
Anecdotal and some statistical evidence show that values have also begun to rise, says Fasulo. “In early 2009, you could barely get a quote to buy an office building in Manhattan. And if you did get a quote from a lender, you would be at extraordinarily low loan-to-values and a high interest rate. Now there’s more than a dozen lenders that would give you an honest quote today, at pricing that’s much more attractive.”
In one example signaling an improved market, the iconic, 160-unit Helmsley Carlton House hotel on Madison Avenue in Manhattan drew a flurry of offers after it was put up for auction in January. “There were over 35 bidders — over 100 interested parties and 35 firm bids,” says Fasulo. “Those are greater numbers than we saw at the height of the market.”
Bidding war in Boston
Another sign of an improving commercial property market is the bidding war that erupted over One Brigham Circle, a 200,000 sq. ft. office complex in Boston. Less than a week ago, AEW Real Estate Investment Management, based in Boston, won the competition with a bid reported at nearly $99 million.
Although the fourth quarter saw a dramatic increase in sales activity, transactions for the entire year of 2009 reflected the severe losses of the economic downturn. The global volume of commercial property sales dropped 30% to $381 billion, while the number of transactions fell 40%, RCA reports.
“We got pushed to the brink in late ‘08 and early ‘09, and saw almost the disappearance of the debt capital markets for commercial property,” explains Fasulo. But little by little, the marketplace has improved and property values are in the initial phases of climbing back from the abyss.
Still, not all properties are rising in value and desirability at the same pace. Class-A properties in highly desirable markets will recover their values more quickly, says Fasulo, particularly those with long-term leases in place and strong tenants.
“It’s almost a two-tiered market that’s developing. One is the prime assets that have more bond-like qualities, and the other part is assets that have near-term exposure to the economy — retail centers that have lost major tenants, broken development projects, raw land, a secondary market hotel. Those are the types of assets that are not going to see values recover anytime soon.”
A Class-A office building that stands mostly empty also is unlikely to share in the rebounding market, says Fasulo. But a building net-leased to a major institution such as a pension fund is a different story. “You’d better believe we’re going to see values increase for that type of product this year.”
As for the timing of recovery, Fasulo says he may be more bullish than many analysts. “I would argue that it’s already happening now.”
Tuesday, February 23, 2010
FAILING TO SUCCEED
At first blush, this week’s essay seems to focus on what to do when you fail to succeed. But let’s turn that on its head. Instead, I am suggesting that you need to fail in order to succeed… success achieved through failure. Indeed, history shows that truly great success is usually achieved only after either great failure or a great deal of failure, or both.
We mistakenly think that anyone who succeeds has had nothing but good luck all their life and that he or she had it easy. By the time we hear about someone making it, the focus is on the success, not on the long hard struggle to get there. The truth is, everyone has failed. Not only that, everyone has failed miserably.
Pioneers, innovators and phenoms alike have usually experienced immense disappointments throughout their existence. Consider the evidence. Michael Jordan, arguably one of the greatest athletes to grace sports, once said, “I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeeded.” Thomas Alva Edison, who held the world record of 1093 patents for inventions, once said, “I have not failed. I’ve just found 10,000 ways that won’t work.”
Another case in point. J.K. Rowling, author of the Harry Potter books - over 400 million sold and now the second richest woman in the UK - said that at her lowest point she was suicidal, not knowing how she was going to provide for her kids. Failing is a part of life. It’s hard to imagine that someone like Rowling on the brink of suicide. Yet failure – and the feelings of despair that can accompany it - are all too common. We all fail, and guess what? We will continue to fail because we absolutely need it to succeed.
Failing is trying. Without trying, we never have a shot at succeeding. The faster we deal with failure, the sooner we are ready for success. Each failure is a building block to success. Some people cannot deal with failure, so they never try anything. The result: nothing. Nothing can happen without action. Life is about action, and action means taking risks.
In sales, those who succeed are typically the ones not afraid of rejection. In fact, anyone who has ever done sales knows that sales is all about rejection. For some people, the risk of being rejected is so paralyzing they cannot approach a potential client. But those who are successful at sales know that no risk equals no sales. No sales equals no success. Renowned sales coach Tom Hopkins said that rejections or failures are the rungs to the ladder of success. Here was his theory. Say for example that each sale you made was worth $100, and you complete a sale about once every 10 tries. That means each failure is worth $10! It’s a clever way to look at failure. More importantly, he recognized there is value in failure.
Failure also provides lessons. Each failure brings experience and knowledge that can help you succeed. Thus, you should never fear failure. In the game of life, nobody plays a perfect game. If you think that some people lead perfect flawless lives, the mistake is in your perception. So, how do you achieve success through failure?
Step 1 - Accept that failure is part of life.
Step 2 - Accept past failures. For some, past failures haunt and torment them. Get over it! Know that this is not an isolated incident or something that only happened to you. Everyone has faced failure. You are no different. At least you tried!
Step 3 - Accept that you will fail again in the future. Some things will work, and some won’t. Prepare yourself mentally for this. It’s realistic and logical.
However, accepting failure is not expecting failure! You should never expect to fail. Those who expect to fail realize their wishes very easily. You can be logical and accept that the possibility of failure exists, but you should also be confident in your chances to avoid failure and succeed. This is crucial! The goal is to know that even if you fail, you will get over it and it won’t destroy you. This is so empowering that simply having that frame of mind increases your chances of success even more.
The next time you are thinking of doing something, a new project or endeavor, just give it a try. The biggest hurdle that keeps people from succeeding is the fear of failure. It causes a sudden halt in progress, and no movement means no opportunity for success. So don’t be afraid to fail. Accept it. Be ready for it. But expect to succeed, and in the end, you will.
"Success is not final, failure is not fatal: it is the courage to continue that counts." Winston Churchill
By: Madison Title Agency, LLC
We mistakenly think that anyone who succeeds has had nothing but good luck all their life and that he or she had it easy. By the time we hear about someone making it, the focus is on the success, not on the long hard struggle to get there. The truth is, everyone has failed. Not only that, everyone has failed miserably.
Pioneers, innovators and phenoms alike have usually experienced immense disappointments throughout their existence. Consider the evidence. Michael Jordan, arguably one of the greatest athletes to grace sports, once said, “I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeeded.” Thomas Alva Edison, who held the world record of 1093 patents for inventions, once said, “I have not failed. I’ve just found 10,000 ways that won’t work.”
Another case in point. J.K. Rowling, author of the Harry Potter books - over 400 million sold and now the second richest woman in the UK - said that at her lowest point she was suicidal, not knowing how she was going to provide for her kids. Failing is a part of life. It’s hard to imagine that someone like Rowling on the brink of suicide. Yet failure – and the feelings of despair that can accompany it - are all too common. We all fail, and guess what? We will continue to fail because we absolutely need it to succeed.
Failing is trying. Without trying, we never have a shot at succeeding. The faster we deal with failure, the sooner we are ready for success. Each failure is a building block to success. Some people cannot deal with failure, so they never try anything. The result: nothing. Nothing can happen without action. Life is about action, and action means taking risks.
In sales, those who succeed are typically the ones not afraid of rejection. In fact, anyone who has ever done sales knows that sales is all about rejection. For some people, the risk of being rejected is so paralyzing they cannot approach a potential client. But those who are successful at sales know that no risk equals no sales. No sales equals no success. Renowned sales coach Tom Hopkins said that rejections or failures are the rungs to the ladder of success. Here was his theory. Say for example that each sale you made was worth $100, and you complete a sale about once every 10 tries. That means each failure is worth $10! It’s a clever way to look at failure. More importantly, he recognized there is value in failure.
Failure also provides lessons. Each failure brings experience and knowledge that can help you succeed. Thus, you should never fear failure. In the game of life, nobody plays a perfect game. If you think that some people lead perfect flawless lives, the mistake is in your perception. So, how do you achieve success through failure?
Step 1 - Accept that failure is part of life.
Step 2 - Accept past failures. For some, past failures haunt and torment them. Get over it! Know that this is not an isolated incident or something that only happened to you. Everyone has faced failure. You are no different. At least you tried!
Step 3 - Accept that you will fail again in the future. Some things will work, and some won’t. Prepare yourself mentally for this. It’s realistic and logical.
However, accepting failure is not expecting failure! You should never expect to fail. Those who expect to fail realize their wishes very easily. You can be logical and accept that the possibility of failure exists, but you should also be confident in your chances to avoid failure and succeed. This is crucial! The goal is to know that even if you fail, you will get over it and it won’t destroy you. This is so empowering that simply having that frame of mind increases your chances of success even more.
The next time you are thinking of doing something, a new project or endeavor, just give it a try. The biggest hurdle that keeps people from succeeding is the fear of failure. It causes a sudden halt in progress, and no movement means no opportunity for success. So don’t be afraid to fail. Accept it. Be ready for it. But expect to succeed, and in the end, you will.
"Success is not final, failure is not fatal: it is the courage to continue that counts." Winston Churchill
By: Madison Title Agency, LLC
SW Indiana Medical Buildings Sold
An Arizona-based real estate investment trust has acquired a five building medical office portfolio in Evansville. Healthcare Trust of America, Inc. is purchasing 260,000 square feet of space currently leased to Deaconess Clinic ad 110 primary care and specialty physicians. The buildings are also located near the Deaconess Hospital campus. Read Full Article
Source: Inside INdiana Business
Source: Inside INdiana Business
Monday, February 22, 2010
Expect Tight Credit Conditions To Persist As Commercial Mortgage Defaults Rise
Feb 18, 2010 10:45 AM, By Matt Valley, NREI editor-in-chief
With the default rate on commercial mortgages held by U.S. depository institutions projected to reach 5% this year and not peak until 2011, the extremely tight credit conditions imposed by banks on borrowers are not likely to loosen anytime soon. So says Sam Chandan, global chief economist and executive vice president with Real Capital Analytics (RCA). Read Full Article
With the default rate on commercial mortgages held by U.S. depository institutions projected to reach 5% this year and not peak until 2011, the extremely tight credit conditions imposed by banks on borrowers are not likely to loosen anytime soon. So says Sam Chandan, global chief economist and executive vice president with Real Capital Analytics (RCA). Read Full Article
Friday, February 19, 2010
Jones Apparel to Cut Costs by Closing Stores
News.Medill.Northwestern.edu - 2/18/2010
“During the quarter, we continue to execute on our retail improvement plan and anticipate closing a total of 265 stores by the end of 2010. By the end of 2010, outlets will represent about 70 percent of our store base.” (full story)
“During the quarter, we continue to execute on our retail improvement plan and anticipate closing a total of 265 stores by the end of 2010. By the end of 2010, outlets will represent about 70 percent of our store base.” (full story)
Thursday, February 18, 2010
Retail Distress Highest Among Unanchored Strips, Bubble Markets
Jan 26, 2010 12:47 PM, By David Bodamer
Distress is rampant in the retail sector, which leads all property sectors with $32 billion in distressed assets, according to New York-based Real Capital Analytics. But not all retail is created equal. A look inside the numbers reveals that unanchored strip centers, retail in regions plagued by high unemployment and deep housing busts, as well as loans originated in 2006 and 2007, are disproportionately more susceptible to distress. Read Full Article
Distress is rampant in the retail sector, which leads all property sectors with $32 billion in distressed assets, according to New York-based Real Capital Analytics. But not all retail is created equal. A look inside the numbers reveals that unanchored strip centers, retail in regions plagued by high unemployment and deep housing busts, as well as loans originated in 2006 and 2007, are disproportionately more susceptible to distress. Read Full Article
Wednesday, February 17, 2010
Tenants Appeal to Lease Auditors for Rent Relief
Feb 16, 2010 3:14 PM, By Denise Kalette, NREI senior associate editor
Cash-strapped commercial real estate tenants are increasingly turning to the services of lease auditors to pare expenses and free up capital for other uses. The auditors are using Web technology to pinpoint potential areas for cost reduction, while keeping in touch with clients via secure Internet sites. Read Full Article
Cash-strapped commercial real estate tenants are increasingly turning to the services of lease auditors to pare expenses and free up capital for other uses. The auditors are using Web technology to pinpoint potential areas for cost reduction, while keeping in touch with clients via secure Internet sites. Read Full Article
Tuesday, February 16, 2010
Home Depot looks to add businesses to its parking lots.
Home Depot, the big-box hardware store, is taking a hard look at those acres of blacktop surrounding their stores – and seeing dollar signs. Read Full Article
Monday, February 15, 2010
Among Buyers, Who Will Step Up?
Feb 15, 2010 10:37 AM, By Ben Johnson, special to NREI from OKCREiew
No single buyer group is leading the charge for commercial property in 2010, but REITs look the best poised to make a significant impact, according to a new report from New York-based researcher Real Capital Analytics (RCA).
The dearth of transaction activity that began in 2008 and carried through much of 2009 finally began to ease in the third quarter and looks to continue into 2010. However, buyers are minus a lead dog to guide the way. The biggest bellwether appears to be the public REITs, which have already committed to acquire as much property so far in 2010 as they did for all of 2009. They’ve also raised an enormous amount of dry powder for the job, an estimated $30 billion.
Across the buying landscape, there does seem to be at least one consistent theme – a frustration at the lack of product. This is most evident when quality assets hit the market. They are quickly bid up by the pool of salivating buyers.
Among buying groups, foreign investors have yet to create a surge in buying activity. Equity funds targeting distressed assets also have raised enough capital to have a serious impact on the market, but their high return expectations are dampening real activity.
According to RCA, prospective investors are increasingly divided between two camps: core and opportunistic, and although they all are looking for bargains, few are finding them.
Core buyers complain that there are few suitable, quality assets on the market and competition for those that are available is steep, pushing pricing to surprisingly strong levels. Opportunistic buyers have been denied the expected tsunami of distressed sales and are now realizing RTC-like returns will be unlikely. Some may have to alter their initial investment strategies or lower their return expectations.
Just 10.8% of all sales in 2009 were associated with distress, but the composition of those buyers differs from non-distressed sales in some meaningful ways, especially within each property type. Overall, players from all sectors, except the public and private REITs, are active in the distressed space. Surprisingly, institutional investors are buying a significantly greater share of distressed sales than of non-distressed, and foreign buyers have been equally active in both arenas. Equity funds have been buying a slightly greater share of distressed than non-distressed properties.
Without decisive moves from REITs, foreign buyers or equity funds, the buyers in the market have largely been private and mostly local. Users, including corporations and governmental and educational entities, have also stepped up to become the second most active buyers of commercial property. As the market recovers, a shift away from private local buyers and users to national and international investors is expected.
No single buyer group is leading the charge for commercial property in 2010, but REITs look the best poised to make a significant impact, according to a new report from New York-based researcher Real Capital Analytics (RCA).
The dearth of transaction activity that began in 2008 and carried through much of 2009 finally began to ease in the third quarter and looks to continue into 2010. However, buyers are minus a lead dog to guide the way. The biggest bellwether appears to be the public REITs, which have already committed to acquire as much property so far in 2010 as they did for all of 2009. They’ve also raised an enormous amount of dry powder for the job, an estimated $30 billion.
Across the buying landscape, there does seem to be at least one consistent theme – a frustration at the lack of product. This is most evident when quality assets hit the market. They are quickly bid up by the pool of salivating buyers.
Among buying groups, foreign investors have yet to create a surge in buying activity. Equity funds targeting distressed assets also have raised enough capital to have a serious impact on the market, but their high return expectations are dampening real activity.
According to RCA, prospective investors are increasingly divided between two camps: core and opportunistic, and although they all are looking for bargains, few are finding them.
Core buyers complain that there are few suitable, quality assets on the market and competition for those that are available is steep, pushing pricing to surprisingly strong levels. Opportunistic buyers have been denied the expected tsunami of distressed sales and are now realizing RTC-like returns will be unlikely. Some may have to alter their initial investment strategies or lower their return expectations.
Just 10.8% of all sales in 2009 were associated with distress, but the composition of those buyers differs from non-distressed sales in some meaningful ways, especially within each property type. Overall, players from all sectors, except the public and private REITs, are active in the distressed space. Surprisingly, institutional investors are buying a significantly greater share of distressed sales than of non-distressed, and foreign buyers have been equally active in both arenas. Equity funds have been buying a slightly greater share of distressed than non-distressed properties.
Without decisive moves from REITs, foreign buyers or equity funds, the buyers in the market have largely been private and mostly local. Users, including corporations and governmental and educational entities, have also stepped up to become the second most active buyers of commercial property. As the market recovers, a shift away from private local buyers and users to national and international investors is expected.
Friday, February 12, 2010
Thursday, February 11, 2010
Wednesday, February 10, 2010
Multi-Family News - Carlton to Sell $257M of Non Performing, First Mortgage Loans Secured by Small Balance, Multifamily and Retail Commercial Properties
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Tuesday, February 9, 2010
Monday, February 8, 2010
Friday, February 5, 2010
Arbor Apartments - For Sale
Arbors @ Red Bank, Evansville, IN
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Arbors @ Evansville, Evansville, IN
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Arbors @ Red Bank, Evansville, IN
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Arbors @ Evansville, Evansville, IN
http://ping.fm/y1VLK
New REO industrial facility
4916-4920 O’Hara, Evansville, IN.
Marketing Website: http://sale.svn.com/79289
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