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
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