The Commercial Real Estate Insider

Cleveland's $5 Billion Development Update

2011-07-11T11:41:00.000-04:00

We continue to be impressed and excited about the new development taking place throughout the city of Cleveland. In particular, the activity concentrated around downtown, along the Health Corridor and into University Circle highlights what appears to be a real shift in Cleveland's economic outlook.

For too long, the county, the city and the business community throughout Cleveland failed to effectively work together and get things done. It is nearly impossible to put blame on any particular person or group, as the failures of Cleveland have been a combination of failed government leaders and business leaders, fairly or not, seeking to move away or disengage from the corruption and challenges of our area.

This is all changing. The Plain Dealer has put together a great map (included below) of the current development projects either in process or being planned in their story from yesterday. Most impressive is what is actually under way. As we've learned time and time again, anything "planned" is not worth much until money is secured and we see a shovel in the ground. Of the 11 projects bigger than $100 million, only two are planned; the rest are either completed or under construction. In all, there are 84 projects listed, of which only 24 are planned. Better put, nearly $5 billion of the listed projects are either under construction or already completed. That is a huge number for a region that has seen decades of population loss and a move to the suburbs.

Yes, we note that a number of these projects, some of the largest included, are public works projects that do not necessarily add to real growth. Getting some of these projects done, however, we think buttresses the private or public/private projects. The best example is the inner belt reconstruction. The casino and med mart, along with a new office tower and growing health tech corridor, will hopefully bring increased downtown traffic. A major overhaul of our half-century old, antiquated freeway exchange doesn't sound like a bad idea.

Cleveland 2011 Development Map - Courtesy of The Plain Dealer

NEO CRE Play of the Week 7/4 - 7/8

2011-07-11T10:16:00.000-04:00

This weeks NEO CRE Play of the Week goes to Neil Viny at The Dalad Group for his acquisition of Essex Place on Rockside Road. Dalad Group, who is already a major player in the Rockside market, added the 80,000 SF Class A office property to their portfolio. Currently at 80% vacancy, Essex Place was one of the casualties of the economic downturn and battered Rockside sub-market. We at the CREInsider applaud Mr. Viny's foresight and timing (not to mention financing) of this acquisition as market fundamentals continue to improve not only Rockside but across Northeast Ohio. With a $2.9 million purchase price he should be poised to make some very competitive deals. More on his acquisition was reported in Crains Cleveland this week.

NEO CRE Play of the Week 6/27-7/1

2011-07-01T08:35:00.000-04:00

In a move that surpised just about everyone in the Northeast Ohio Commercial Real Estate community, Monte Ahuja announced yesterday that he purchased the $5.7 note on the up-scale Barrington Golf Club in Aurora, OH. Ahuja, a long time Cleveland philanthropist and former owner of Transtar Industries hopes to convert his debt position into an ownership position in the near future. In a time when many Northeast Ohio golf courses and private clubs continue to struggle, Monte stepped up and made a bold statement about his commitment and belief in this region and that is certainly deserving of the NEO CRE play of the week.

CRE Finance Council Recap - Optimism and Cash!

2011-06-23T20:38:00.001-04:00

A colleague of ours in CBRE's Debt & Equity Finance group, Jason Brown, does a great job at sharing information on the debt markets with those of us in investment sales. Most recently, he provided a summary from the CRE Finance Council meeting assembled from him and his colleagues in DEF.

Interesting of note for us at the Insider is that the mood seems to support lending in the rust belt states like Ohio on just stabilized deals. Well, we can definitely attest to that. Separately, retail seems to be leading the pack on property type, but we would expect to see a big swing towards office and industrial this year. This is probably particularly true in secondary markets where STNL and grocery-anchored retail have been the most sought after assets in the last couple years. But enough of our commentary - on to the experts.

Several of the Debt & Equity Finance team members attended the semi-annual CRE Finance Council conference. I thought I would pass along the feedback received on the state of the credit markets, especially the CMBS/conduit market which has been making a comeback.

General CREFC Feedback

Mood of the conference was pretty optimistic as there is A LOT of liquidity in the CRE space. Not enough product to go around to satisfy all the piggies at the trough.
Recent blow out of spreads put a damper on some of the mood as there is very little risk tolerance for losing money as some of these institutions get back into this business.
All the regulatory uncertainty is definitely having an impact on the industry. Nobody knows for sure what the rules of the road will be. Eg; risk retention, capital allocations in general, B Buyers not controlling the special servicer, ability to monetize the IO strip, requirement of B Buyers to hold their investments for 5 plus years, etc. Stay tuned.
Depending on how the regulatory framework evolves, we will have better clarity on whether the non-bank owned Conduits can thrive. Most think the big commercial and I-Banks will be the major players when the dust settles, but this is not a certainty.
2011 issuance levels will probably be in the $40 to 50 B range. Very few are predicting more will get done this year.
Not enough B Buyers in market now. Only 5 or so real buyers per some experts. Consensus is that buyers will emerge once the rules are set and yields are high enough.

Producer Feedback

Product/What kind of deals are Conduits winning?
Life Cos and GSEs winning the better product at reasonable leverage
Conduits winning the higher LTV loans
Go to Conduits for cash out refis
They will go to secondary and tertiary markets ( $85M office bldg loan in Tulsa). Leverage goes down and structure goes up as the markets get smaller.
Will lend in rust belt states of MI, IN and OH on stabilized deals
Issuance YTD in 2011 heavily weighted to retail – approx 40%
Conduits tough on acquisitions. Too much interest rate and execution certainty risk.
Winning proceeds driven refis

Comparing CMBS 2.0 Underwriting to version 1.0
Similar to 1.0 back in 2003. Nothing crazy. More thoughtful, visiting the real estate and understanding the market and the deal
Can only get basic structural constructs waived on very low LTV deals
No benefit for short amortization structures. In fact it may cut proceeds due to higher constant and lower cash flows
All underwriting to debt yields in 8 to 12% range depending on product, market, LTV, etc. Lowest for MF deals.
Can get 75% LTV on most product if cash flow is there
Some quoting 80%. Can get higher in capital stack by Conduit making a high leverage loan and securitizing the Sr Loan and stripping off a Mezz piece
All underwriting income in place. Very little creativity.

CMBS Process
Not much fun. Expensive and cumbersome. Don’t expect your client to pat you on the back at closing.
Slower, more thorough, and more reliable
Better at setting expectations at the outset
Real issues with spread volatility and holding spread and then proceeds
Some Conduits marketing an ERL execution, but latest language is full of outs for the Lender. ERL Agreement completely one-sided. Be very careful here.

CMBS Legal Structure/Loan Docs
Lock box required and can be an issue
Legal fees get high in a hurry. Min of $25,000
Independent Directors required: one on loans less than $20M and two on bigger deals
Tough but fair. More absolutes and fewer trade-offs
Carve-outs are a big issue. Some reaching for more backdoors to recourse. Need very close attention and negotiation, if possible.
Not much room for negotiation of loan docs.
Non-consolidation opinions required.

Northeast Ohio Market Snap Shot | Summer 2011

2011-06-15T13:43:00.001-04:00

What a difference a year makes. Total U.S. investment transaction volume was up by 120% in 2010, compared to the same period in 2009, and overall cap rates were down 30 basis points (bps) to 7.4% according to Real Capital Analytics (RCA). This trend not only continued in 2011, but also sped up. Commercial property sales reached $44.2 billion through April, a 75% increase over the same period in 2010, at an average cap rate of 7.35%.

Continued investor demand for core assets in primary markets has been a significant factor to increased sales, but activity is increasing in secondary markets such as Northeast Ohio as well. We have seen a large uptick in activity over the last two quarters in properties offered for sale. Consequently, the trend in the secondary markets appears to be the reverse of the primary markets – new offerings are preceding sales. Since secondary markets generally present more risk and less growth, this trend makes sense as investors ease away from the primary markets as supply tightens.

Investors interested in Northeast Ohio are seeking safety or stability, or both. As a result, properties which attract the most interest include single-tenant, net-lease with long-term credit; grocery anchored shopping centers; medical office buildings near or on hospital campuses; senior housing; and sale-leasebacks. The amount of capital chasing these assets continues to increase, and the lack of supply in certain markets has created a “scarcity premium,” driving pricing to levels we have not seen since 2007, even here in Cleveland. This is combined with historically low interest rates and a return to more reasonable credit underwriting to drive the pace of property dispositions.

Owners of these properties should evaluate whether a possible sale now makes sense to take advantage of the scarcity premium. Low interest rates are also helping to stabilize cap rates for properties that may not necessarily fit into one of the “hot” property buckets. Either way, as we look out on the horizon, we see continued loosening of the capital markets and good opportunities for investors and owners alike.

The Ice Cream Comeback

2011-06-14T12:28:00.001-04:00

Apparently the economy is not responding the way we all hoped a year ago. Business growth has slowed along with employment. It seems consumers are driving any recovery at all right now. This has limited new real estate projects to build-to-suits and renovations, especially in Northeast Ohio.

So when we saw the latest news headline that the ice cream business is booming and new facilities are being built, we thought what a great way to bring the economy back and hopefully commercial real estate with it. Considering it is like the tundra in northern Ohio 6 months out of the year, we may question this cool strategy, but hey, after the last few years, we're ready to try anything.

Local real estate investor offers unique perspective on investing in Cleveland

2011-06-10T08:29:00.002-04:00

More from Paul Gabrail can be found at http://www.thecapitalistmanifesto.com/

Ohio Nets Another Corporate Whale With Tax Incentives

2011-04-12T13:37:00.000-04:00

Ohio adopted some new tax incentive rules recently which helped retain American Greetings in Northeast Ohio. At the time, the legislature and Governor said there would be more benefits than just AG. Well, we now know the next one is Diebold, a long time corporate resident of Akron-Canton.

Diebold, which is known for its safes, is planning on spending $100 million on a new corporate campus. The Plain Dealer is reporting about $56 million of that will come as tax incentives. This is actually the third major corporate campus that will be built in Northeast Ohio including AG and the new Eaton Corp. campus on the east side of Cleveland.

Recovery in the Global Commercial Real Estate Markets

2011-04-01T13:27:00.000-04:00

Construction Trade Group Proposal Seems to Miss the Mark

2011-03-30T09:40:00.001-04:00

Co-Star recently reported on a proposal by the Associated General Contractors of America, an industry trade group, to help stimulate construction projects in the US. The full plan is included below.

What's striking about this proposal is that it explicitly recognizes what really drives new construction and investment, e.g., employment and consumer demand, but then goes on to list a couple dozen proposals that may have limited or no impact on either employment or consumer demand.

Not all the proposals are bad per se, but many are the types of things that lead to one-time bumps or special tax treatment. For example, the report suggests that faster cost recovery provisions related to leasehold improvements should be made permanent, e.g., speed up depreciation. While this may be a fine idea, it's not the sort of thing our CRE market needs for a wholesale comeback.

And speaking of taxes, that's where many of the proposals are focused - tax reform or tax provisions. All 12 of the proposals to "boost private sector demand" are tax-based. We question whether developers and companies will take on a new construction projects because of more lenient tax laws instead of actual demand. They might, but there seems to be a bigger problem anyway - getting the capital.

From our perspective, the bottleneck for new construction (useful, needed construction that leads to permanent, private-sector jobs, not the types of projects AGC suggests just to maintain artificially needed construction jobs, like "navigation and flood control needs") is two-fold: 1) money, and 2) money.

We see strong demand for new projects. New industrial, particularly in NEO, seems to be coming back. Large users don't want antiquated buildings - they want modern, efficient buildings. That has created opportunities. The medical and senior housing markets are also seeing strong demand for new builds or renovations. Retail, on the other hand, unless in the strongest of markets, is not going to resurge for awhile.

But the problem with all of this is money, capital, investment, call it what you will. A significant amount of our time is spent on, and clients continue to seek, capital for new projects. And while it is possible to find investment money, it's very difficult.

Unfortunately, AGC doesn't really address this. Just one proposal addresses private investment in real estate projects, though a few others indirectly address it, such as expanding private activity bonds or Build America Bonds - both of which can lead to the over leverage problems we've already had.

We understand AGC is a trade group and must endorse and push a certain legislative agenda that specifically supports its member base. We just wish the proposal was less about tax incentives and more about finding money for the people trying to get their projects moving.

AGC Blueprint

CoStar CEO Andrew Florance on CNBC discussing the commercial real estate comeback

2011-03-16T14:15:00.000-04:00

House Bill 58 WILL Retain American Greetings in Ohio - UPDATE

2011-03-04T11:27:00.005-05:00

Updated 3/8/11 - Turns out tax incentives do work. American Greetings is staying in Northeast Ohio, even if they don't know just where yet. The bill passed by Ohio's legislature and quickly signed by Governor Kasich was the difference. The Plain Dealer has good coverage here, which includes a video, time lines and several other good points of information. The original post is below.

Original Post -
American Greetings, the well-known card company, has much more incentive to stay put in Northeast Ohio. House Bill 58, set to be signed by Governor Kasich, was approved by the House on Wednesday, as the Plain Dealer reported. The bill creates a new refundable job retention tax credit.

AG has been toying with the idea of moving to Chicago, which would have been a hit to a Northeast Ohio economy that is slowing, but successfully, clawing back. (As a side, just because the Insider is a superhero movie nut - Cleveland is where the new Avengers movie will be filmed...). AG's commitment to the city of Cleveland is important on a number of fronts, not just financially. AG is a dynamic company that recruits and wants to retain young talent. That is something Cleveland needs and can support, but we need high-profile companies like AG to make sure they are here. AG staying will also help in discussions with various airlines' commitment to the city as two proposed mergers move forward - Delta and Continental (who has a primary hub here), and Southwest and Airtran, who compete as the low-cost carriers between the Cleveland Hopkins airport (Southwest) and the Akron-Canton airport (Airtran).

MBA Conference Highlights - Optimism with Lingering Anxiety

2011-02-14T12:19:00.002-05:00

Greg Greene is a Senior Vice President in CBRE's Debt & Equity Finance and has a long, successful career in the capital markets. Greg attended the recent MBA conference and was great enough to share his thoughts with us, which we are providing to our readers. We have put in bold several of Greg's points we found most interesting or telling about where we are today and italicized our thoughts.

Mortgage Bankers Association Conference Overview:

The spirit of the conference was one of optimism; however some anxiety remains as the difficulties of 2008 through early 2010 remain fresh on the minds of most lenders.

• There is a very substantial amount of capital committed to commercial mortgages in 2011.

• Most lenders are concerned that there will not be enough product to absorb the capital committed to these mortgages. This is a continuing problem throughout the commercial real estate market, not just on the financing side. We consistently find demand outpacing supply. This is changing, but we believe all of 2011 will be needed to re-balance the market.

• Life companies have a large appetite for commercial mortgage placement due in part to the fact that the yield on these mortgages is favorable to the yield on corporate bonds.

• Some money center banks are starting to quote non recourse deals for ten year terms, making them more competitive with life companies and CMBS at the longer term.

• Many lenders stated this is starting to feel somewhat like 2005.

• The CMBS platforms are very active and their underwriting is reflecting the competition in the marketplace. This does not imply that the CMBS lenders or others are engaged in loose underwriting, but the box is certainly expanding for the definition of a “financeable” deal. This is good to see. A year ago, we felt lenders were too confident, which borrowers did not appreciate.

• Numerous lenders expressed some doubt that all the current CMBS platforms would survive. The expectation is for mergers and for a few to drop out as volume is not sufficient to warrant the continued investment in the platform.

• Lenders are exploring ways to improve yield and get more money invested. There is a wide expectation that bridge loan opportunities will provide this outlet as debt is provided for assets that must be repositioned or assets that will be released from the commercial banks currently holding those assets.

• There is a desire (hope?) that the commercial banks will begin to more aggressively sell off the real estate assets they hold. The banks have seen a material recovery in the value of many of those assets and many of the banks are now in a better capital position to sell the assets and absorb a much reduced loss. However, like it or not, most people believe that “kick the can” has served the banks and the industry rather well over the last two plus years. We have already seen a pick up in requests from commercial banks to start moving, or at least to begin valuing, under performing assets. We hope the "pretend and extend" phenom is over.

• Many lenders stated that real estate values have recovered faster than anticipated in many markets.

• The CMBS platforms and a few life companies stated they will finance to a 75% LTV. This confirms what I am currently seeing in today’s market.

• Some lenders will provide forwards---but this number is relatively few and the number of months to go forward is limited.

• A substantial amount of capital is dedicated to mezz debt. Rates start at around 8% and increase from there with a rate of 8% to 10% prevalent for deals in the 70% to 80% LTV range. Terms range as long as ten years.

• Most lenders expect more dispositions from special servicers throughout 2011.

• Most lenders remain underweighted in industrial mortgages and would very much like to add industrial to their portfolios.

• Some life companies have become very competitive with Freddie and Fannie and are now winning business from the GSEs. Considering that Congress is upended the GSE's, this is probably a good thing for the real estate market; unless of course we're going to see pricing from the GSE's go up as the government guaranty subsides.

• Many lenders maintain a preference for the mezz debt structure instead of the preferred equity structure that gained some popularity in the preceding months.

• The current recovery remains a jobless recovery and there will be no real economic recovery until the U.S. can generate jobs. The recent positive jobs report for January is already being refuted by numerous sources that consider it more “accounting trickery” than fact.

• The “joke” coming out of last year’s MBA was that loan spreads fell 50 basis points in the three days of the conference as everyone realized how much money was re-entering the commercial mortgage market in 2010. The “joke” this year is that the previously held expectation of $50 billion in CMBS lending in 2011 has now become $70 billion. We shall see, but don’t be surprised. This remains very light compared to the $250 billion plus for CMBS issuance in 2006.

With all this said, expect the following as we get further into 2011:

• The competition for new loans will intensify. Lenders will increase LTV’s, finance more non-core assets, provide a longer interest only period, enter more tertiary markets, accept lower DSCR, etc. These are the logical actions for an industry that likely has more debt capital available than deals to absorb that capital.

• However, do not expect silly lending practices. The mortgage industry is filled with smart people who remain cognizant of the lessons of the recent past.

• CMBS will be very competitive and will provide much of the needed capital to finance lesser quality assets and quality assets in tertiary markets. Expect CMBS loan spreads to fall as the year progresses.

Senior Housing Presents Good Opportunties in 2011 and Beyond

2011-01-18T10:52:00.001-05:00

For investors who like commercial real estate, but have no experience in or exposure to senior housing, now may be the time to investigate. Mel Gamzon, an industry veteran and a board member of The American Seniors Housing Association, recently shared his thoughts in an article on Commercial Property Executive. It's not news to us, but his article is a well-written, succinct summary of the market.

He shares several key factors that support why senior housing is and should continue to be a good investment.

Occupancy levels push 90%+
There is a relatively low industry loan default rate
Historically controlled development
Strong trending demographics

We would also add there are typically strong operating margins, at least on the assisted living side, which can push 40% (before rent charges). As Mr. Gamzon points out at the end of his article, there were more than $6 billion worth of non-skilled nursing facility transactions either announced or closed in the second half of 2010.

This is important for two reasons. First, there is a significant amount of focus, and consequently capital, on senior housing. Second, independent and assisted living continue to be the investment of choice, not necessarily skilled nursing.

We have seen both of these trends. There are well capitalized investors with whom we deal, such as REITs, equity funds, foreign investors and high-net worth individuals, that have shown a strong desire for senior housing and are primarily interested in non-skilled nursing. The exception to skilled nursing is when there is a continuum of care model, either as a full CCRC (rental, not buy-in) or with just assisted and skilled. That's not to say there is no interest in skilled nursing, but being significantly more reliant on Medicaid/Medicare creates a different investment model that is not as inviting as assisted or independent living.

Because new development shut down with the rest of the real estate market, there is a deep need for new facilities to start being built. Construction financing remains very hard to obtain and the traditional GSE capital sources for senior housing (HUD, Fannie, Freddie) present so many challenges. This has created a need for alternate financing solutions and why all of our current senior housing engagements are to source construction and development capital.

According to The State of Seniors Housing 2008 report, nearly half of all independent and assisting living facilities were built before 1995. While we haven't seen the 2010 report, we can only believe that percentage has grown due to the limited development in the last couple years.

2011 is already looking like what most people thought 2010 was supposed to be - the year to rebuild. Though banks remain tight-fisted, capital is flowing from other sources. We believe that capital should and will be focused on senior housing. As everyone loves to talk about, the boomers are coming.

E&Y Tower Moving Forward

2010-12-22T09:04:00.002-05:00

Though we've known about the project and the financing structure for some time, the deal FINALLY closed yesterday for the construction of Cleveland's first CBD office tower in nearly 20 years. What will be known as Ernst & Young Tower, the first tenants include E&Y, Tucker Ellis, a large law firm based in Cleveland, and us, CBRE Cleveland. E&Y Tower is expected to open early 2013 and will include a hotel, conference center and several restaurants.

This is the beginning of what could be a boom for Cleveland. Waiting shortly behind the Tower is the construction of the new casino, which will be housed temporarily in the Higbee Building on Public Square, and the new convention center and medical mart. These developments, along with the strong activity in the Health Tech Corridor in Cleveland's Midtown, will hopefully push Cleveland in the right direction.

FORUM Architectural Services LLC, provided by www.cleveland.com

Midtown Cleveland Development Opportunity | Victory Innovation Center

2010-12-08T11:45:00.002-05:00

Very rarely do Steve and I use our blog to promote a listing but we think this one warrants some press given all the development activity in this sub-market and the opportunity this building presents for an investor/developer.

For more information please take a moment to visit the website at:

www.cbre.com/victorycenter

Cleveland's own Jeffrey Friedman explains why conditions are now optimal for apartment development and acquisition.

2010-11-19T14:59:00.003-05:00

Assisted Living is Up But Is New Construction Slowing?

2010-10-29T10:11:00.001-04:00

According to a story published this week by NREI on a new National Investment Center report, assisted living is seeing positive trends, which is helping stabilize some minor backward trends in independent living. AL facilities in the 31 largest MSAs saw absorption of about 40 basis points, while IL dropped about 40 basis points.

Most interesting is that the article says the pipeline for new construction is slowing and that a number of new facilities expected to open this year have been delayed. The primary culprit - financing. This is exactly what we've seen as well. There is significant pent up demand for new facilities, but finding money to get them off the ground is challenging. The typical senior care lenders, e.g., HUD, Fannie, etc., are not putting new construction high on their list, if at all. Even if they will look at them, it could take up to a year to get a deal approved. Traditional banks might do a deal, but need a well-capitalized borrower who will guaranty the debt with effectively full recourse.

As an alternative, we have had success assisting clients through alternate financing structures, primarily a sale-leaseback. There is significant capital ready to get these deals done, albeit at a higher cost of capital than traditional financing. But most clients are willing to swallow the higher cost to get these facilities on line. The upside is too big to wait for the debt markets to return.

As the senior market continues to stabilize and absorption trends up, our guess is that the construction pipeline is going to grow. Contrary to the article's premise, we don't think the construction pipeline is slowing - we think it's growing but with a bottleneck in the way hindering getting the deals actually done. Expect to see an explosion of new construction once the debt markets really do come back.

CPPI Increase - Read the Fine Print

2010-07-20T14:03:00.002-04:00

The Moody's/REAL Commercial Property Price Indices (CPPI) is showing a 3.6% increase for May, which follows a 1.7% increase for April. On the surface, this seems like good news. Unfortunately, the details and Moody's disclaimer limits the optimism the uptick in the CPPI may create. As Moody's managing director says, the increases are "tempered by low transaction volumes, forecasts for slowing macroeconomic growth and the rising risk of a double dip recession." Wow, that's not so rosy.

Low transaction volume is for sure. May's increase is based on just 107 sales nationwide, per Moody. We don't think that is a statistically relevant number of transactions to highlight price swings in the market nationally. Beyond that, as the previous post points out, commercial real estate is a local phenomenon right now. We don't have access to the underlying Moody data, but we'd be willing to bet most of those sales were on the coasts and southeast (except Florida).

The included chart, from MIT's Center for Real Estate, shows the real story, if there is one. Prices plummeted very quickly and if anything, have managed to stop the free-fall in the last six months. That has been our sense of the market as well, both nationally and in Northeast Ohio.

But we may yet see prices fall and rise depending on any number of factors. For example, STNL properties with 12+ year term and a quality tenant may continue to see price contraction. We have seen this in the last several months on Walgreen's. Alternatively, it is still challenging to find buyers for multi-tenant office space in the Midwest and thus very difficult to even price assets.

Confusion Persists, as TrafficCourt Astutely Points Out

2010-07-15T09:30:00.001-04:00

If you haven't read TrafficCourt, run by David Bodamer, you should put it on your to-read blog list. It's a great CRE blog that is part of Retail Traffic, the monthly news magazine. We here at Commercial Real Estate Insider haven't posted anything in about two weeks because, well, we just don't see much worth posting. News continues to be regurgitated but in different forms and with different messages - the recovery is on, the recovery is off; REITs are great, REITs are seeing their debt terms tightened; buyers are back, buyers are skeptical and underwrite conservatively. It is just maddening.

To this point, TrafficCourt has a great post on exactly this, addressing the mainstream media's inability to understand the market dynamics and its oversimplification of the situation for their readers. The bottom line, with which we agree, is that the market is fragmented between the good, bad, and really bad, and both opportunities and pitfalls exist in pockets scattered throughout the US - there is no singular "market." It's a bunch of little markets. From our perspective in Northeast Ohio, David is right-on, but probably understates the situation, with this:

We’re going to see continued pain in some places alongside recovery in others. It does very much appear, though, that a bottom in values has formed. But I don’t think anyone can say for certain what the contours or speed of recovery in values is going to look like. And it’s going to play out differently in different markets and in different property sectors.

We encourage you to read the whole post. If anything, someone who can successfully use the word "zeitgeist" in their post (which yes, we had to look up too) is worth reading to us.

Nontraded REITs Continue to Stockpile Cash

2010-06-30T09:42:00.001-04:00

A firm established last year to look at nontraded REITs, Blue Vault Partners, LLC, has published its 2010 first quarter review, which RetailTraffic overviewed. Not surprisingly, nontraded REITs are expected to raise 17% more in 2010 than in 2009, or about $7 billion. Due to the quick and reasonable liquid access to real estate ownership with professional management, REITs have done very well this year. So well, in fact, an investor with who we are negotiating on a deal actually brought up that he could get over a 10% yield with a nontraded REIT.

But therein lies the problem - that's not sustainable. The fees and overhead costs of running multi-billion dollar REITs can be significant and these REITs don't tend to use a lot of leverage. As the report points out, the median yield is only about 6.5%, which makes sense in our experience. For deals we've seen this year, at least with the health care REITs, the yields being sought range anywhere from 7.5% to 10% or 11%. Once salaries, overhead, fees, etc. are tacked on, how many hundreds of basis points are eaten? The other issue with investing in a REIT is limited use of leverage. The REITs that are still raising money have effective leverage of only 30%, according to the report. The REITs closed for the year at least have a leverage ratio of nearly 60%, but only about a third of REITs are closed. Though the market got leverage-drunk and is learning many lessons, 30% is way to low to generate a +10% yield on most investments.

Cleveland Redevelopment Train Keeps Rolling On.. with Hotels

2010-06-29T10:32:00.001-04:00

The face of E. 9th St. through the heart of Cleveland got another boast this week as the Schofield Building redevelopment project was awarded a $5m state historic tax credit. The redevelopment concept includes bringing a Kimpton Hotel to Cleveland, which would the first in Ohio, and adding a first floor restaurant and high-end apartments. The property has a very visible location at the corner of E. 9th and Euclid.

This is great news for the continuing makeover of the Euclid Corridor. We wonder, however, whether there are plans for too many hotels. As we blogged previously, Optima International may be looking at redeveloping the Huntington Building (which is on the other corner from the Schofield) as a hotel, at least in part, and the project on Cleveland's east bank in the Flats includes a hotel as well. Either way, one can't shake the good feel walking the streets of Euclid and 9th. There are good things happening - let's just hope it doesn't get "too good" like three years ago.

New National Hotel Coming to Akron

2010-06-23T17:15:00.005-04:00

Akron continues to show positive signs of growth and improvement. The latest is a new national hotel flag being added to downtown - Courtyard Marriott. Testa Companies, a well-known developer in northeast Ohio based near Akron, is developing in partnership with New Castle Hotels & Resorts, a hotel operator, the $16 million project, as Crain's Cleveland reported. Testa has done some very cool things, including developing the lofts that house The VegiTerranean, a trendy vegan restaurant owned by Chrissie Hynde, of the Pretenders, who also has a loft there.

Updated 6/24:

The Akron Beacon Journal has additional information (and the added renderings). The plan is a 10-story, 120 room hotel next to the lofts we mentioned above. The average room rate will be $120, which seems right for a Marriott in Akron. Besides getting a good flag into downtown Akron, the city will benefit from such cool looking development, as the renderings show.

Optima closes on The Huntington Building in Cleveland

2010-06-22T15:19:00.002-04:00

Optima International out of Miami Beach Florida recently closed on the The Huntington Building in Cleveland, a 22-story office building consisting of roughly 1.3 million square feet. The story broke in late March by the Plain Dealer that Optima was considering the acquisition. Word on the street is that they paid $18m, or $13.85/SF. This is going to be very interesting to watch considering that over 600,000 SF of tenants will be vacating the building over the next few years and Costar reports a current total vacancy of 335,000 SF. In addition, since purchasing One Cleveland Center two years ago, Optima has yet to make a new market office deal in that building. As probably an understatement, the Cleveland commercial real estate community is very interested to see what Optima has in store. There is apparently no redevelopment plan in place. Very interesting indeed.

Moody's Saying Prices Up, But Not By Much

2010-06-22T15:12:00.001-04:00

Moody's just issued an investor report saying commercial real estate prices are up for the first time since January this year. The increase of 1.7% isn't much, and we view it as statistically irrelevant. The more important factor is that prices are not falling anymore. We do not believe there will be any real increases in cap rates in the foreseeable future. If anything, pricing should continue to improve as the wave of capital continues to roll. That capital is picky, and if fund managers/REITs/investors want to make any money, they are going to have to put that capital to use and start buying out of their strict guidelines. It will be slow, but we are starting to see signs of this.

Cleveland's Health Corridor Gets a Boost

2010-06-07T10:20:00.001-04:00

Ohio is recognizing Cleveland's Health-Tech Corridor as a "hub" deserving of grant money and special preferred status, which should be a huge boost to the Euclid Corridor, the $250 million renovation between University Circle and downtown Cleveland. There are a number of well-capitalized developers who have an interest in seeing the corridor succeed. So strong is the faith in the corridor's success, one developer is building a +100,000 sf spec building, probably the first of its kind in a number of years in Cleveland.

According to the Plain Dealer, being a hub "brings with it a $250,000 matching grant and priority status for millions of dollars in grants and loans that the Ohio Department of Development and other state agencies dole out yearly." The corridor is already pretty successful, an obvious reason why the state would want to focus additional resources there. Per the Plain Dealer, the has more than 75 biomedical companies, 45 technology companies and seven business incubators.

"Nonresidential Construction Rebounding"

2010-05-27T09:54:00.002-04:00

A couple leading indicators that CoStar has picked up on is showing signs commercial construction is on an upswing, and not from public works, i.e., stimulus money projects. The Construction Backlog Index and the Architecture Billings Index both were up over the last few months. These indices help determine what construction is either in the pipeline or is in early stages of planning and design.

We've written on new development and construction before here for Northern Ohio. The project in Toledo Marina District project seems totally dead - we recently visited Toledo and the development signs previously up were nowhere to be found. Financing just isn't going to happen. Newport Pavilion in Cincinnati is probably in receivership by now with millions in defaulted loans. Midtown Cleveland development is going to be a marathon, so while there's no new news to report, that means there is no bad news either.

But that's not to say new construction is happening, though whether it's "public works" isn't in question - it clearly is. Cleveland State University's campus is under a huge transformation, with numerous projects under way now, including new extensive new student housing. CSU also just announced they finally selected a developer for their massive, mixed-use project in what is now surface parking. According to the Plain Dealer, construction could start next year.

With new construction having been at a virtual stand still for going on two years, something has to give. We're hearing about a number of new, non-government projects in the early planning stages, which is consistent with the leading indicator increases.

Highlights from HUD Lender Conference

2010-05-25T09:31:00.002-04:00

Jason Brown, our Debt & Equity expert out of Detroit , attended the Midwest HUD MAP Lender's Conference the week of May 17th in Columbus, Ohio. Below are his highlights from the conference, but here is a good big-picture:

Overall, HUD is open for business. They are making changes to protect the viability of their programs going forward. They are not increasing mortgage insurance premium, nor are they reducing LTV's and DSCR to limits below their competition. HUD remains the highest leverage financing for multi-family and senior housing investors with assets in the Midwest.

Highlights From FHA/HUD MAP Lender Conference

Mad Money Cramer Touts Health Care REIT as "Accidently High Yielder"

2010-05-20T13:59:00.000-04:00

Jim Cramer, the ever-opinionated TV host, was loving all over Health Care REIT (HCN) on last night's show. HCN is a diversified medical and senior care asset REIT in our backyard in Toledo. At the end of 2009, we sold them a long-term acute care hospital in Akron, Ohio and we think Cramer is right on point with his recommendation.

Same story, different asset class

2010-05-19T12:32:00.001-04:00

A story in Reuters today highlights the same buying problems and trends in multi-family that medical assets have experienced. The large players are going after the best-in-class assets, driving cap rates down while becoming unhappy with the properties coming to market. At some point, hopefully these trends translate into some interest for properties that aren't considered platinum. There are still very stable properties that are solid investments, whether in multi-family or medical.

Highlights from BOMA Medical Office Conference

2010-05-10T09:51:00.002-04:00

Steve and Scott attended the BOMA Medical Office Building and Healthcare Facilities Conference held in Chicago this past week.

If there is one phrase that summarizes our take-away from the conference, it would be “there is a lot of capital chasing too few deals.” Private REITs have clearly led the pack here, gobbling up whatever assets they can find with their hordes of newly raised cash. Beyond that, there are all kinds of players, most of whom are well-capitalized themselves, waiting for acquisitions, development, and joint ventures, including private equity, public and private REITs, hospitals, and developers.

The mood could not have been different from a year ago. This year’s conference was nearly all positive with significant market activity to discuss and the highest turnout in its history. Even new development is seeing a strong resurgence. Several national developers reported full pipelines of strong demand for new on and off-campus MOBs, surgery centers and other healthcare facilities. Clearly the access non-profit health systems have enjoyed to the bond market is helping move new projects forward, but one cannot overlook the surge of capital focused on this space right now as a significant contributing factor.

This is not to say there aren’t uncertainties. Obama-care, which in many ways is really just insurance reform, does not address long-term cost containment, among a number of other issues, and the debt market still seems to provide more support to the aspirin industry than would-be borrowers. But these issues tend to be ancillary to medical real estate investment and ownership. Fundamental questions may exist about whether primary care physicians or specialists will fare better in the next 5-10 years, but little concern seems to exist about whether either of those two groups (or any affiliated health system) will need additional real estate. The resounding consensus seems to be yes, they will.

So with another successful gathering of medical real estate junkies behind us, we look forward to seeing the predictions and shared expectations bare some fruit. We have highlighted the more pertinent predictions and expectations below.

Pricing/Cap Rates:
- Cap rates have compressed 50-75 bps since a year ago and range anywhere from 7.5% for on-campus, Class A MOB to 9.5%-10% for off-campus, Class B.
- Additional compression is possible, but will likely be on lower quality assets and be incrementally small. The best assets are probably priced as good as they’ll get for awhile.
- Bank underwriting, which is slowly beginning to matter again, will help provide a sanity-check on cap rates.

Buyer Profiles
- The REITs have had a buying spree, particularly Healthcare Trust of America. HTA has been raising $2-$4 million a day on average and has not been shy about putting it into acquisitions. In our opinion, HTA alone has caused cap rates for Class-A to compress by ±25 bps from a year ago.
- Big REITs have pursued nearly all deal sizes, but are starting to look larger. This will begin opening doors for other players, like private equity and non-REIT investors, to pursue deals.
- Leveraged players have generally been sidelined by all-cash REIT buyers whose yields just need to cover dividend payments and who generally don’t underwrite with exit plans.
- Foreign investors are showing “tremendous interest,” as one panel participant put it, in the medical real estate market due to the higher relative returns and lower volatility compared with many European markets. Healthcare reform has, however, kept some foreign capital at bay due to a perceived uncertainty of outcome in its application.

Acquisition targets/criteria
- This conference attracts larger players, who by necessity, go after assets that will generally align them with health systems. For that reason, many of the participants commented they have sought on-campus assets. One fund commented that with the right tenant mix and fee-simple ownership, they will go off-campus. We predict off-campus assets become more attractive as good on-campus assets become more difficult to find.
- Buyers are seeking assets with longevity and stable returns, which is generally determined by the strength of the nearby health systems (especially if they are a tenant), the property’s cash flow compared against rent to calculate a coverage ratio, the ownership structure, e.g., fee simple v. ground leased, and the overall tenant mix.
- Senior care is a target asset class for most of the same buyers of MOBs, though there are significant underwriting differences and the need for a well-tested operator.

FASB Changes to Lease Accounting
- The panel that addressed this topic did not have any serious concerns related to the proposed changes to lease accounting. The consensus was that analysts and ratings agencies are sophisticated enough to understand that any changes simply move things around and do not alter fundamental performance or economic position. As one panelist said, it will remain cumbersome for hospitals to own and manage real estate regardless of the accounting standards.

Development
- Developers have full pipelines of new development, most of which is from tabled projects over the last two years. Health systems have been raising money and will continue to have access to capital, which, combined with a trend to bring more physicians in-house, will lead to a need for new real estate.
- National developers are looking to partner with local developers
- Investor/buyers, such as REITs, will fund development but vary widely on what and how to fund it. Some will JV while others won’t, and those that do seem to recognize the value local developers provide and seek to partner with them.
- LEED-certified construction is becoming very popular
- Regionalization of health systems will lead to new freestanding emergency departments with some MOBs as a way to limit costs while expanding footprint size
- Market size and location may or may not matter; it just depends on the developer. In a tertiary market, the returns might have to be slightly higher, but if the facility is sized right for the market, the returns probably don’t need to be much better
- There is a growing trend to redevelop retail space to medical use because:
o Retail provides immediate access to an existing consumer base
o Providers can leverage stronger branding of their names
o There will be a higher need for primary care as the insurance rolls expand
o Occupancy costs are generally lower, especially in the current real estate market
o Retail vacancy can provide immediate occupancy
o End-cap users, like Blockbuster, are leaving and providing premium locations
o Hospitals and providers want to be near their customers
o Retailers can leverage increased daytime traffic, particularly as most medical consumers going to these locations tend to be women

Mall that spawned "The Club" to be sold; redeveloped

2010-05-03T09:29:00.002-04:00

Necessity is the mother of invention, or so it's said. Unfortunately for Randall Park Mall, once the largest shopping center in the US, that necessity was to protect your car from being stolen. According to Wikipedia, The Club was invented after a shopper's car was stolen from the mall's parking lot. And so goes the story of a mall fondly remembered for its vast shopping areas with endless stores and common areas that housed kids rides and Santa. It was finally closed in March 2009, but had long been a bastion of vacancy, with J.C. Penney starting the hiatus by switching from a full-service store to an outlet in 1998 and finally leaving all together in 2001.

But the world of real estate is one of missed opportunities or bad management to the enrichment of others. According to The Plain Dealer, Randall Park may be getting a well-needed makeover. Devland Holdings LLC (run by principals Neill Bernstein and Terry Brenner) is reportedly buying the mall for about $5 million and may push as much as $60 million into redeveloping it, albeit not as retail. The New York-based firm plans on some mixed-use that would include light manufacturing and research and development.

Whatever the use, it would be great to see some activity once again in North Randall that doesn't include gangs or cops. Though there has been a lot of pain throughout the real estate debacle, there are certainly going to be some bright spots. Let's hope this is one of them.

Principal Global Investors' CEO - Buy Commerical Real Estate!

2010-04-28T20:14:00.001-04:00

Even, as Chief Executive Jim McCaughan says, considering the "well-known refinancing issue" hiding around the corner, he feels the yields "are attractive" for brick and mortar investments and that "it's about time for commercial real estate." We couldn't agree more! Unfortunately, we're not seeing the deals at the opportunistic pricing everyone expected. Global Investors has even published a "why you should by CRE" paper meant for non-US investors. It has nice information, but fundamentally relies on under priced assets being available. While there are buying opportunities, we have yet to see the kind of value-added deals everyone assumed would be on the market by now. Sellers just haven't been playing ball unless someone takes their ball and gives it away. That just isn't happening to create real velocity. But we like Mr. MCaughan's enthusiasm and recommendation to start buying.

Large CRE Funds - Whose Got the Money?

2010-04-22T09:06:00.001-04:00

Within the large CRE investment funds, there are basically three types: public REITs, registered but untraded REITs - the so-called private REITs, and private equity funds. We have seen for some time the ability of private REITs to amass capital. For example, a large private REIT we know focused on medical acquisitions has consistently raised $2-$3 million a day and another focused on retail is raising $3-$4 million a day. Contrast this with private equity firms, who have had their relative struggles raising money in this environment.

Two years ago, there seemed to be a prediction on private REITs as well - this article from Global Real Estate Monitor in April 2008 predicted substantial growth in private REITs. Of course, there's always exceptions to the rule, as Inland's recent inability to raise substantial cash demonstrates (they raised just $67 million from August 2009 through March 2010).

But it seems the time may be ripe to tap the public markets. According to CoStar, "there have been more than 90 filings by REITs since March 1 announcing more than $10 billion in new fund raising activity and seeking to raise more than $50 billion." This filing activity was highlighted by the largest secondary offering ever, which was done by Macerich Co., raising $1.23 billion in a filing that closed in early April.

So who has the money? Everyone, it seems. Even at a relatively slow fundraising pace, the PE firms still raised nearly $10 billion last quarter. So capital will be, and is being, deployed into the CRE market. Now we just have to wait for the flood gates to open on bad CMBS loans.

Huntington Center - New Toledo Arena Renamed

2010-04-16T10:47:00.000-04:00

The Toledo Blade reported Huntington Bank will pay $2.1 for the naming rights for six years for what was the Lucas County Arena, a $105 million facility that has only been open for 6 months. It will now be called Huntington Center. As lending continues to thaw and banks continue to clean up their balance sheets, it's interesting to see larger advertising splashes like this being made.

Fed Beige Book - "Further Signs of Strengthening"

2010-04-15T09:44:00.003-04:00

The Fed published the Beige Book yesterday, which discussed signs of improvement nationally. Here are some highlights from the main summary regarding Cleveland/Fourth District:

- Consumer Spending - Cleveland reported recent sales strengthened and noted that retailers expect sales to improve during the upcoming months

- Manufacturing - Cleveland reported positive results in metals and fabrication, and increased auto or auto component production

- Banking - Most banks in Cleveland reported weak consumer loan demand, although a few contacts saw a slight increase due to seasonal factors. Not surprisingly, Cleveland saw flat business loan volume and tighter lending standards for commercial mortgages.

- Commercial real estate - Activity was slow across the nation, but Cleveland saw some development in the energy and industrial segments

- Employment - Cleveland reported strong demand for temporary workers. A pickup in employment was noted in the manufacturing sector, with little change in staffing for retail, energy, transportation and banking.

Apartment Acqusition Shows Distressed and Multi-Family Interest

2010-04-13T15:09:00.001-04:00

Equity Residential purchased a 559-unit complex in Washington, DC, reported on by Globsest.com, for $167 million. For a complex that's totally vacant, nearly $300,000 per unit seems a tad rich, but Equity Residential must feel they will stablize it fairly quickly. Good luck.

University Circle Development Secures Initial Financing

2010-04-08T13:58:00.003-04:00

The argument for spending $250 million on the Euclid Corridor project just got a boost. MRN Ltd. developers has secured $44 million for Phase I development in University Circle, which includes Little Italy, Case Western Reserve University, and is the arts hub of Cleveland (Art museum, history museum etc.). It is a cultural center that is now linked to downtown through the Euclid Corridor Health Line (in honor of the Clinic of course). The new development, as the Plain Dealer is reporting, includes 102 "higher-end" apartments and 56,000 square feet of stores and restaurants. Though apparently scaled down from its initial design, the project is a very welcome step in making Cleveland a more vibrant place.

Photo courtsey of The Plain Dealer from cleveland.com

Net Lease Market Continues Strong Come Back

2010-03-31T12:54:00.001-04:00

Single tenant net leased deals, an area that never truly ceased activity, has been leading the comeback among property classes. RetailTraffic's recent story is in-line with what we've been seeing in the market as well, with cap rate compression being lead by net leased opportunities. Though many owners who bought in 3 or more years ago at sub-7% cap rates are hesitant to lose on the sales side today, new development and even some of those hold-outs are recognizing interest is back and sub-8% is doable. As the article points out, cap rates for a Walgreens are probably around 7.75%, though we see that compressing over the next 6-9 months by up to 50 basis points.

Cincinnati Redevelopment to Add Residence Inn

2010-03-31T10:30:00.001-04:00

Another sign the real estate market is coming back, not least the economy, is new hotel development, this time in downtown Cincinnati. The Business Courier is saying construction has already begun on coverting an old office tower into 134-unit Residence Inn.

Proof - CMBS is Back

2010-03-26T13:28:00.001-04:00

Globest.com reported the closing of a $31.3 million CMBS loan through JP Morgan Chase to a Michigan REIT. Though exciting that CMBS is quickly coming back , keep in mind it will take some time to achieve the terms that were common 2+ years ago. This loan closed on just 60% LTV and a 10 year term. But for non-recourse debt right now, the LTV isn't getting too much better, with life companies at gnerally 65%. As our Debt & Equity team from Detroit has pointed out, it also takes very strong sponsorship, such as a large REIT, to get CMBS done right now.

Healthcare Bill Could Equal 60,000,000 new MOB SF

2010-03-25T08:16:00.002-04:00

The historic healthcare bill signed into law this week is going to have a significant impact on commercial real estate, whether specifically intended or not. There is going to be a lot of discussion on what that impact will be as the months and years roll by. Co-Star has an article on the bill's impact, and at one point quotes an industry player that the bill could ultimately lead to 60,000,000 more feet of MOB based on the number of new patients entering the rolls of the insured. On the flip side, the bill contains strong prohibitions on physician-owned hospitals, which will have a significant impact on current and future developments and currently existing hospitals.

Relocating Company Breaking Ground in Brecksville

2010-03-19T10:08:00.001-04:00

Some good news for Northeast Ohio was published by the Toledo Blade today - True North Energy will be building their new corporate headquarters in Brecksville. The site is set to be completed in May 2011. Many in Northeast Ohio will recognize the True North brand at Shell stations. True North is 50% owned by Shell. It's good to see companies moving into the region, though it's a little surprising True North is doing a build-to-suit. Office space right now is priced well below replacement cost. Roughly speaking, new office construction can be about $150 SF, while equivalent Class A office might be $100 SF. But like Eaton, True North must put some real value on having its own designed campus.

Eaton's Sprawling Beachwood Campus - A Giant Pond?

2010-03-18T00:08:00.003-04:00

Eaton Corp. and Richard E. Jacobs Group, the lead developer of the project, submitted some site renderings of the proposed project at a Council meeting this past Monday night, per Plain Dealer reporting. As most know, Eaton has bailed on downtown and is developing a new 53-acre campus in Chagrin Highlands. They are seeking a variance to eliminate nearly 1,300 parking spots required under current zoning. The two site renderings submitted by Eaton are posted here. With some 2 miles of trails, it looks like a pretty nice campus (though one commentator suggested the giant pond made the campus look like a big toilet, which I'm sure is not the concept the design team had in mind). It's just too bad our Central Business District pushes companies like Eaton away. The crazy thing is that Cleveland will still get 50% of the tax revenue. This is what a PD reporter had to say in the comment section of the article:

From reporter Michelle Jarboe:
.... under a preexisting joint economic development agreement, Cleveland will receive a 50 percent cut of the income tax revenues generated by Eaton from the Chagrin Highlands campus, even though the property is in Beachwood.

But in reality, how much is Cleveland really losing from employee income tax, meals tax, hotels and entertainment, etc., etc. Not too mention the fact yet another major corporate business is leaving the CBD. At least it's still in Northeast Ohio.

(Photos courtesy of The Plain Dealer/cleveland.com, as obtained from Eaton/Richard E. Jacob Group)

Senior Housing Update - Rents Up, Occupancy Slightly Down

2010-03-16T14:21:00.002-04:00

NIC recently released its latest data on the senior care market. NAREIT also published a story on the results. The data showed slowing activity in construction, slight declines in occupancy, but a small uptick in rents. These results seem to be in line with the regional activity we're seeing. The attached chart highlights changes from the 4th quarter in 2008 to 2009

Changes in Mark-to-Market? FASB proposes new standards.

2010-03-15T14:25:00.002-04:00

The Financial Accounting Standards Board is proposing that banks expand their use of mark-to-market accounting to include loans and other financial assets, as reported by the WSJ. Though marking assets to market values can make sense in a vaccum of financial analysis, the real world implications are huge. The problem is that markets, like historical costs, do not always represent the real value. Bigger than that though is the fact that financial statements can only provide limited, historical information. In a market moving and changing as fast as today's, trying to rely on information that can be up to several months old and that provides no predictive insight on where values will be, can create major issues, as we've seen. For example, making banks adjust their minimum capital based on asset values that may be outdated by the time their published doesn't seem like a good use of information.

Debt - Back in Action in the Midwest

2010-03-11T13:48:00.002-05:00

The below is the latest update from CBRE's Debt & Equity team that covers Michigan, Ohio, and Indiana. The important points seem to be 1) financing is available, and 2) though slightly higher rates than borrowers might like, its non-recourse.

Permanent Financing for Stabilized Assets
We continue to see signs of life in the credit markets. Banks largely remain on the sidelines, with the exception of community banks and credit unions. Life companies continue to cherry pick financing trophy assets in trophy markets with trophy sponsors. However, portfolio and balance sheet lenders are offering an alternative way to finance stabilized properties on a non-recourse basis.

I wanted to spotlight a loan program that will finance deals in the Midwest:

• $5 - $50 million
• 3-5 year term, may go longer in select cases
• Up to 75% LTV on “as is” value
• Acquisition or refinancing
• Stabilized multi-family, retail, office and industrial properties
• 7.0% - 8.5%
• Amortization up to 30 years
• Non-recourse
• 1.00% origination fee to lender
• Escrows for taxes, insurance, replacement reserves, tenant improvements/leasing commissions and immediate repairs

Challenges in Cleveland's Real Estate Market

2010-03-07T14:44:00.001-05:00

The Plain Dealer, Cleveland largest newspaper, published a mildly interesting article today. Anyone that has read this blog should know, probably more intimately than most, the general problems and issues with, and potenital fixes needed for, commercial real estate. And not just in Cleveland. But its good to know what the non-real estate news sources are writing about CRE anyway.

Ohio - Leading the Economic Development Charge - Again!

2010-03-03T21:24:00.004-05:00

Site Selection Magazine has awarded Ohio its Govenor's Cup for the fourth year in a row. As the cover story indicates, "Site Selection’s annual Governor’s Cup award recognizes the state with the most new or expanded private-sector capital projects as tracked by publisher Conway Data Inc.’s New Plant Database." We have included the story's "Selected Ohio Projects" chart to the right and a state-by-state look at three years of development activity below.

Site Selection Score Card

Three Ohio CRE Developments Highlight This Crazy Market

2010-02-24T10:05:00.004-05:00

Three commercial real estate developments in Ohio that made the news today are a great example of the market's uncertainty and opportunities. Looking back in two or three years from today, we believe the first half of 2010 will be seen as the turning point - for both winners and losers.

- The Newport Pavilion in Cincinnati seems like a home run, except the developer has no money. Already built with "shoppers flocking" to it, how can the market not respond positively and quickly to this opportunity (problem?)?

Lesson - the losers are starting to fall out to make way for new winners

- Developer Larry Dillon needs equity, bad, to finish the Toledo Marina District and Southwyke redevelopment, both cool projects that could really help Toledo. But Southwyke is a 3-5 year development project for retail. Is there really equity for that right now? We think so, but it's a very tough sell.

Lesson - There is interest in, and probably money for, new, grand development, but lessons learned are making people more realistic about new opportunities

- A concept is taking shape in Cleveland to revitalize Midtown. As ground-zero for development opportunities due to the near-by Cleveland Clinic campus, would a new, $35 million mixed-use development survive in Midtown along with other new technology development? Considering the other activity going on there, it sure looks like other people think so.

Lesson - Forget that last lesson - let's dive in head first!

An interesting year 2010 is shaping up to be indeed.

MBA Conference Highlights via CBRE Debt & Equity Team

2010-02-23T13:18:00.004-05:00

Here are some highlights/insights from CB's Debt & Equity team on the Mortgage Bankers Association Conference last week in Las Vegas:

The Debt Capital Markets are back, Las Vegas is not
Liquidity has returned with Life Cos increasing allocations and Securitized lenders back in market; material increase in effective capacity
Lenders have overcome their fear of commercial real estate, still careful but working to compete (greed overcomes fear once again)
Obama is a friend to the industry, annuity $ are flooding lenders liquidity accounts
60-65% Leverage is the new 50-55% LTV
Up to 75% LTV is possible on at least some assets in select markets; as well as recapitalization, mezzanine, equity, hope notes, basis plays, etc
6% Loan Coupon is the new 8%
Positive leverage is increasingly available, across the asset range
Competition for multi-family loans heats up as Life Co pricing narrows gap with agency terms
The valuation cycle is at or past bottom, at least for better quality assets; but there is a divide between high & low quality
The residential market bottomed last year and is now favorably priced based on relationship to median income
The cycle has moved past Fear, to Capital and then Fundamentals, should have a longer than typical run (10 years or more)
Banks are beginning to break the extension pattern, forcing borrowers to mark assets with sale or refinance on today's reality
This remains an orderly process, with abundant acquisition capital succeeding accommodating lenders as a limit on price weakness
The tone and optimism at this year's event could not possibly have improved more than it did compared to last year
Commercial real estate is a solid asset class and there is broad consensus that now is an optimum time to invest debt or equity capital

For more information, contact Jason Brown (248.351.2089) or Tony Roberts (248.936.6838) with CBRE's Debt & Equity team.

Investors' Investment in CRE - REITs?

2010-02-22T13:22:00.003-05:00

In two different articles on Friday from non-real estate publications, this one from the New York Times' Your Money section, and this one from Investors Business Daily, REITs took center stage. Both articles focus on investing in REITs, though the NYT article is broader, discussing the overall investment climate for commercial real estate.

Why have REITs done so well? We think because people ultimately find real estate intriguing and can't justify (or afford) buying some building directly. A good investment that provides investor liquidity and cash flow? Sure. But CRE is more intriguing than "safe," as we've all experienced over the last two years. Beyond the epic destruction of value since mid-to-late 2008 lies a pool of investors, itching and waiting for the proverbial shoe to drop. These articles simply highlight the continuing momentum we're seeing; the tidal wave of capital that we're expecting. Maybe not directly, but to be sure, they were written because people want to discuss commercial real estate.

Small Banks to Close the Spigot?

2010-02-11T20:04:00.003-05:00

UPDATED - 2/15/10

Here's a good summary from FT Alphaville on the oversight report.

The WSJ reported on a Congressional TARP oversight board report that has indicated small banks could be in big trouble from their CRE lending. Could be, as the article points out that all depends on the economy and the broader capital markets. Since we're seeing lending slowly creep back in from these smaller, regional banks, it seems limiting their ability to lend will only create bigger problems.

Mortgage Bankers Association - CRE Conference Highlights

2010-02-05T12:12:00.003-05:00

Co-star has posted some highlights from the MBA conference in Las Vegas that ended yesterday. Here are a few more interesting points from the article:

- commercial and multifamily mortgage debt maturing in 2010 and 2011 is 13% and 7%, respectively, of the $1.45 trillion balance of outstanding mortgages held by non-bank investors
- about 12% of loans held in CMBS will come due in 2010, including 7% of the $650 billion of loans in fixed-rate conduit CMBS and 72% of the $54 billion of loans in floating rate and large-borrower CMBS
- 4th quarter commercial mortgage loan origination increased by 12% over the same period last year and by 15% from the third quarter

Money Money Everywhere and Nothing to Buy

2010-02-03T09:54:00.004-05:00

REITs, on a stock selling binge last year, are now flush with cash but have had serious troubles placing it, so reports the WSJ today. It's no surprise either now that the new CRE landscape is taking shape. No floodgates have yet opened on distressed real estate; sellers are not motivated to sell with low prices; financing remains extremely challenging. It's the perfect storm to create apathy.... and lots of capital on the sidelines.

Distressed Assets Hit $170B

2010-01-27T11:29:00.001-05:00

Great article from Globe Street on distressed assets.

Akron's Bioinnovation Institute helping revitalize greater Akron

2010-01-26T09:35:00.002-05:00

Akron has been evolving over the last decade into a place to be. New development is taking place and capital is flooding in. This is due to a number of factors, but ultimately comes down to implementing collaboration that works. A great example of that is the Austin Bioinnovation Institute. The Akron Beacons's piece today discusses its background and interviews its CEO, Frank Douglas, a veteran at these enterprises. The Institute has already had $80 million in pledges over the next 5 years. (Here's their website).

We recently closed the sale of a LTACH, or long term acute care hospital, within Akron's Biomedical Corridor, and have seen first hand the movement happening in the city. The biomedical is going to lead the way, we believe, for revitlizing the city, which in turn will create great commerical property opporutnities. It seems healthcare, whether senior care or biomedical, will lead the CRE market for sometime.

East Ohio Gas Building - Closed Bid Auction

2010-01-22T08:29:00.004-05:00

Crains's Cleveland reported that the East Ohio Gas building may finally be sold under a closed-bid auction. We hope if it is purchased, a strong buyer steps up. It's a great location with a solid attached garage, but, as a number of downtown buildings, is in need of some serious "value-added attention." The retail corner space has been vacant for what seems like years and continues to be an eyesore. An auction sale will hopefully allow a new landlord to offer competitive rents and start attracting some more tenants back into the CBD. Maybe this will mark the beginning of a renewal for downtown office space... but wait, we still have to contend with McDonald Investments (maybe) and Huntington (probably). But here's hoping.

Photo credit: STAN BULLARD

Assisted Living - Changes in a Changing Environment

2010-01-19T06:51:00.002-05:00

"Policymakers and researchers will need to grapple with issues related to access to services, public financing, quality of care, and regulatory oversight." With each of these issues addressed, combined with excellent graphs and figures, the below article from the latest issue of Health Affairs lays out the assisted living landscape in the US today.

Health Affairs_Assisted Living 10-01

Grocery - Solid Anchors

2010-01-14T08:09:00.002-05:00

CoStar has an interesting piece on the value of grocery store anchors today and over the past 18 months. The timing is interesting, as we continue to hear from buyers with more frequency they are seeking grocery-anchored retail centers. The article has a very good breakdown of some of the national and larger regional chains as well. The article concludes with some forecasting from a CBRE investment expert on why these centers will remain sought after assets:

In a special report released in late December by CB Richard Ellis titled, "The Upside of the Downturn: Opportunities in Commercial Property Investments," Jim Costello, principal and director of investment strategy said that there is investor demand for high-quality cash-flowing assets in the current market. He added that stable neighborhood centers anchored by grocery and drug store tenants "will experience very little of the current pain in the market" during 2010. He added that such centers up for sale will be able to hold strong on pricing, in contrast to centers on the "high-end of the market."

January 2010 Capital Markets eNews - Rates, Deals and More

2010-01-12T15:37:00.001-05:00

CBRE Capital Markets eNews - January 2010

Morgan Stanley CRE 2010 Outlook Report

2010-01-08T09:29:00.000-05:00

Senior Housing - Stability in a Shaky Market

2010-01-06T13:18:00.002-05:00

In an article published by Sam Chandan, the chief economist at Real Estate Econometrics, the senior housing sector is broken down. Occupancy levels have been in a downward spiral for nearly two years. Finally, in 3Q09, occupancy levels increased. The bottom line, though, is senior housing has been relatively stable and with the demographic trends continuing, more space will be needed.

Dollar General adding stores, stores and more stores

2009-12-30T11:52:00.003-05:00

As Co-Star reported, Dollar General announced they project opening 600 new stores in 2010 and moving an additional 500. This can be a huge investment opportunity for strip centers and overall retail property. With retail vacancy up, filling in with stores like this that perform fairly well could mean the difference between having to hold onto a property and liquidating for a reasonable price.

Fight Inflation through Real Estate says Economist

2009-12-22T11:39:00.001-05:00

No new news - 2010 CRE Investment Outlook

2009-12-18T08:41:00.003-05:00

In NREI's 2010 investment outlook, there is good news and bad news - but really no new news.

The conclusion is basically what we continue to hear - there is capital, there is an interest in buying, but no activity because i) there's no leverage, ii) there's a pricing gap that keeps buyers away, and iii) there's a wait-and-see attitude for the onslaught of distressed properties.

As the report does point out, better properties are still getting solid cap rates. Our view, though, is that while cap rates will remain an important metric, it's utility has and will continue to fall. Unlike two years ago, investors are now taking the time to calculate realistic returns on realisitic NOI's. That is going to make cap rate comparison more difficult as a base-line metric within asset classes. This is especially true when distressed properties are added - cap rates simply cannot reflect an investor's outlook and expected return.

M&M2010Outlook

It's nice to read some good news about retail

2009-12-08T11:32:00.000-05:00

William Ackman thinks retail is a good bet. The founder of hedge fund Pershing Square Capital Management is even big on Sears.

The investor bases his views, he says, on a retail economy that’s doing better than most people think. "We think store-closure fears were over blown," he said at the International Council of Shopping Centers’ New York Conference.

Ackman: Retail Is a Good Bet

FDIC Consumer Deposit Reserve in Red and Falling Loan Balances

2009-11-30T15:08:00.002-05:00

DSNews.com reported the FDIC has announed the reserve it keeps for consumer deposits has gone negative to the tune of $8.2 billion. This is just the second time the reserve has dropped below zero. The article also highlights the latest FDIC report that shows the largest cut in bank lending since 1984 when the information began being tracked. That report is available here.

Lower Rents Drawing Retailers to Lease Space

2009-11-30T14:37:00.001-05:00

Values Face a Long, Slow Road Back

2009-11-24T15:45:00.000-05:00

Commercial property values have yet to reach the bottom and when they do, recovery will be slow and gradual following a "modest" rebound. In the interim, values could decline as much as 55% from their October 2007 peak. That’s the view of Moody’s Investors Service in a report issued Monday:

Values Face a Long, Slow Road Back

Stop lending? Small New Jersey banks stop CRE lending, per FDIC

2009-11-23T12:27:00.003-05:00

This report highlights the problems CRE is going to have over the next 12-18 months making a rebound. On its face, reducing a bank's exposure to CRE makes sense. However, underlying that assumption is 1) CRE is only getting worse, and 2) there are no "safe" investments. For #1, the best way to make CRE worse is to further tighten lending. So this is a self-fulfilling problem. As to #2, it could not be further from the truth. There is still plenty of quality real estate. Although fundamentals have certainly been hit, strong tenancy and underlying credit is still in the marketplace. The bottom line is that seeing headlines like this is not surprising, but is unfortunate. One of the best places to find leverage in today's market are smaller, regional banks that have strong underwriting standards and long relationships that provide them a better sense of risk. One wonders whether the FDIC appreciates those factors.

CNBC: Commercial Real Estate Optimism Boosts Regional Banks

2009-11-18T14:28:00.001-05:00

How will Healthcare reform impact MOB's

2009-11-17T08:10:00.001-05:00

Globest.com reported on the the second annual RealShare Medical Office Buildings conference, held on November 13 in Texas. Experts and speakers shared their expertise and predictions on what might happen to medical real estate.

Private Equity showing signs of the changing CRE market

2009-11-12T09:01:00.002-05:00

Two recent stories highlight the changing dynamics within CRE. The WSJ reported (subscription required) that Lone Star Funds is looking to raise $20 billion and that they were going to be cutting fees by up to 50%. Seperately, National Real Estate Investor's lead article in the current issue reports that PE may have up to $173 billion in purchasing power.

We continue to hear in the marketplace that there is signifcant capital yet to be deployed. The obvious play everyone talks about is distressed, but we hear medical and healthcare just as often. However, with debt still hard to find, it is no surprise that deal volume remains slow. Something has to happen soon though with the amount of dry powder PE firms are building (not to mention REITs, but that's a different post).

The fee cutting also is indicative of the changing market dynamics. Where PE funds perviously made money on management fees in the past, it appears funds will need to be a bit more patient to realize a nice return until exit events.

The Ugly Commercial Real Estate Picture

2009-11-11T16:03:00.000-05:00

The Ugly Commercial Real Estate Picture: "The commercial real estate market is a mess. I've mentioned this in the past, but a Bloomberg piece today presents some analysis worth highlighting. It includes a fascinating chart, but mostly focuses on a report by Randall Zisler, chief executive..."

Commercial Real Estate - "Best Place for Money"

2009-11-11T12:06:00.001-05:00

Time to REIT-urn to Real Estate? - Fund Observer (usnews.com)

2009-11-06T08:27:00.001-05:00

Time to REIT-urn to Real Estate? - Fund Observer (usnews.com)

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Commercial real estate pros say no recovery until 2011 - South Florida Business Journal:

2009-11-05T16:42:00.000-05:00

Loopnet, the largest online marketplace for commercial real estate properties, said a recent survey showed most of its members don’t expect a recovery in the market until 2011.

Glimcher To Dispose of Two Malls for $195M

2009-11-04T16:23:00.000-05:00

According to reports published earlier this week, Glimcher Realty Trust is working on two different mall sales that could add $195 million to the locally-based company’s books. The company is said to be selling the properties to Blackstone Group and will lose $126 million in the sale from what the company paid for the properties.

Glimcher To Dispose of Two Malls for $195M

Lease Modifications - Resistence Remains from Landlords

2009-10-30T14:58:00.003-04:00

There have been some interesting topics at the Cleveland Metro Bar's annual real estate law institute. While addressing commercial leasing in a distressed market, a panel participant from Developers Diversified Realty (DDR) stated they have had about 900 lease modification requests - they have so far agreed to 41.

Not a very good rate of success from a tenant perspective. Of those 41, most were national tenants and in all cases, DDR received something in return - payment, extension, rent bumps, etc. Though we've been hearing tenant's have been able to negotiate modifications by threatening going dark or vague claims of bankruptcy, it's clear that's not true across the board. A tenant's ability to modify depends on all kinds of factors, including geographical footprint, lease terms such as ability to go dark, state of the actual location such as multi or single tenant and current occupancy, bank or lender terms and requirements. The list is long.

The lesson is that modifications may be possible, but not a sure thing. Not even in this market in which one would expect the negotiating pendulum to have swung far to the tenants.

Is the Recession over?

2009-10-30T10:55:00.001-04:00

The so-called Great Recession, the longest and deepest since the Great Depression, is probably over. The Commerce Department’s advance estimate of third quarter gross domestic product came in at 3.5 percent, the strongest gain since the third quarter of 2007. We won’t know for sure which month the recession ended until the National Bureau of Economic Research, a non-profit group of economists, makes the call, and they usually wait for several months after the fact until the data are unequivocal. Besides GDP, the organization takes into account real income, employment, industrial production and wholesale-retail sales. Most economists think the recession ended in the summer or early autumn.

The strong performance is good news, but there are caveats. The “cash for clunkers” program added about one percentage point to the performance, and the $8,000 tax rebate for first-time homebuyers also played a role. It will be interesting to see if the economy can hold its momentum next year as the government support programs wind down.

For commercial real estate, this is certainly good news because it sets the stage for a return to job growth, although that may be several months away. Nevertheless, it is the clearest sign yet that the economy is headed in the right direction.

Robert Bach
SVP, Chief Economist
Grubb & Ellis

REITs and Commercial Real Estate's Victims

2009-10-28T14:05:00.000-04:00

Bob Bach, Grubb & Ellis Chief Economist, was quoted in the most recent issue of Time Magazine.

REITs and Commercial Real Estate's Victims

"Tremendous amount of capital" for acquisitions from Equity Residential

2009-10-21T11:10:00.002-04:00

Alan George, chief investment officer of Equity Residential, discusses dispositions of non-core assets and acquisition strategy over the short-term. On new acquisitions, Mr. George indicates yields are about 200 basis points higher than market peak and that their focus is on replacement cost and long-term expected return. As we continue to hear from other sources as well, Mr. George also indicates they have easy access to inexpensive capital. Question - is there a market bubble and will the equity markets continue to be as friendly? REITs' have certainly been a large beneficiary of the rising market. Once that spigot is tightened, will the debt markets really be back open?

U.S. Office Market First Look: 2009-Q3

2009-10-13T11:06:00.006-04:00

The latest U.S. office results for Q3 2009 and forecast from Bob Bach, Senior Economist at Grubb & Ellis

· The vacancy rate ended the third quarter at 17.1 percent, up 50 basis points from the second quarter. By comparison, vacancy in the first and second quarters increased by 80 and 100 basis points, respectively, which suggests some moderation in the pace of softening.
· Manhattan, despite its starring role in the credit crisis, retained the second-lowest major-market vacancy rate in the nation at 8.6 percent, bested only by the adjacent Outer Boroughs market at 8.4 percent. Tenant move-outs over the next six months are expected to add more empty space. Vacancy was highest in Phoenix at 26.3 percent followed by Detroit at 24.4 percent. Over the past four quarters, vacancy in Silicon Valley rose by 730 basis points to 19.1 percent, the fastest increase in the nation.
· Third-quarter net absorption totaled negative 11.3 million square feet, an improvement over the first and second quarters when tenants vacated a combined 37.6 million square feet. Absorption was positive in 20 of 67 markets led by Baltimore with 686,000 square feet. Pittsburgh, Austin and San Antonio also ranked near the top, suggesting some resilience in the Mid-Atlantic and central Texas regions. Seattle, Chicago and Boston saw occupied space shrink by 1 million square feet or more.
· Space under construction ended the quarter at 45.6 million square feet, its lowest level in more than four years. The pipeline will continue to empty for several more quarters as existing construction projects are finished and new starts are rare.
· In the second quarter, we noted that the inventory of available sublease space added a negligible 1.4 million square feet, a hopeful sign. Unfortunately it was a false alarm as the third quarter brought 10.5 million square feet of newly offered sublease space. The total now stands at 124 million square feet, not far from the all-time peak of 146 million square feet in 2002.
· Asking rental rates eased lower in the third quarter with Class A and B rates down by 1.9 and 1.3 percent respectively. Over the past four quarters, Class A and B rates are off by 4.3 and 3.7 percent. There is some evidence that the pace of decline is accelerating. Year-to-date effective rates, which include periods of free rent and above-standard tenant improvement allowances, are off by 15 percent compared with 2008.

Forecast

For a sustained office market recovery, employers must start adding jobs. Most economists think that hiring will be sluggish for several more months and possibly years. IHS Global Insight predicts the total number of jobs in the U.S. will not return to pre-recession levels until 2013, which implies that the office vacancy rate will not return to equilibrium until perhaps 2014. The slower pace of deterioration in the vacancy and absorption rates during the third quarter is a hopeful sign. One theory among economists is that panicked employers “over-fired” after the credit markets froze in September 2008. The faster pace of deterioration in the leasing market during the first and second quarters may have reflected this panic. Now that the recession appears to be winding down, tenants may feel less of a need to further slash their space requirements. Nevertheless, the office market is unlikely to embark on a sustained recovery before 2011.

To view more graphs depicting the nation's office market, click here to open an Excel file and then click through the worksheet tabs at the bottom of the page.

CMBS deals will get done, just a matter of when?

2009-10-13T09:06:00.002-04:00

VIDEO: The New Normal

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Positive Leasing Signs May Ease Fire-Sale of Distressed Assets

2009-10-07T20:09:00.003-04:00

Robert Bach (Grubb & Ellis - Chief Economist), in a piece re-printed below, provides an interesting analysis on whether distressed asset sales will be a flurry of quick activity or something more controlled.

A Ray of Sunshine?

Oct 07, 2009 By: Robert Bach, Grubb & Ellis Co.

The capital markets are on hold right now. The news is all about the lack of debt capital to refinance maturing loans and, on the flip side, the growing pool of equity capital waiting to invest in distressed assets, primarily debt. At the upcoming ULI Fall Meeting, the Research Forum roundtable topic of discussion will be, “Are pending debt events really equity events?” The standoff is because sellers don’t want to sell into the biggest buyers’ market since the early 1990s, and they are being enabled by banks (pretend and extend) and the IRS, which has relaxed the rules for amending the terms of CMBS loans. So the volume of sales remains very low--down 75 percent compared with the first eight months of 2008. Yet distressed assets continue to pile up – totaling $138 billion at the end of August, according to Real Capital Analytics. At some point these and many more assets will begin to change hands, but whether that process resembles a dam breaking or a steady flow is uncertain.

For a ray of sunshine, we must look to the leasing market. Preliminary third-quarter data from Grubb & Ellis show an abatement in the pace of deterioration compared with the past two quarters. The national office vacancy rate looks to be about 50 basis points higher than in the second quarter, which would take it to just above 17 percent. By comparison, vacancy in the first and second quarters increased by 80 and 100 basis points, respectively. Net absorption and sublease space also appear to be moderating.

With job losses accelerating last month, what could explain a slowdown in the rate of decline for the leasing market? One theory among economists is that panicked employers “over-fired” after the credit markets froze in September 2008. The faster pace of deterioration in the leasing market during the first and second quarters likely reflected this panic. Now that the recession appears to be ending, tenants may feel less of a need to further slash their space requirements.

The ultimate recovery of the investment market depends on a rebound in the leasing market. The leasing market is unlikely to embark on a recovery until a quarter or two after the labor market begins to create jobs again, which may not occur until the first half of 2010. But until that happens, a decline in the pace of deterioration is a hopeful sign--if not an actual ray of sunshine.

Select Retailers Gaining Strength

2009-10-07T16:11:00.001-04:00

Good article on the Top 10 Retailers Gaining Strength in this economy. Glad to see O'Reillys on the list

Real Estate Impact Huge Under Accounting Changes

2009-10-04T08:09:00.001-04:00

New accounting standards requiring property to be marked to market and proposed changes in lease accounting rules could have an immense impact on the balance sheets, income statements and overall financial outlook of US corporations, many of whom are unprepared for the changes.
Real Estate Impact Huge Under Accounting Changes

Next in line for Retail Bankruptcy?

2009-09-28T15:16:00.003-04:00

Who could be next? Macy's, Oskosh, Rite Aid, Sprint, and Goodyear? Click here to read more

Will investors buy REITs who plan to buy distressed-mortage assets?

2009-09-28T12:44:00.001-04:00

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090927/REG/309279961

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Zero-Cash Flow Property? Here's an idea.

2009-09-28T09:02:00.002-04:00

To be successful in today's turbulent market, brokers have to be creative. We have been offering a zero-cash flow property (Rite Aid) for sale with mixed-results, as many investors shy away from the unknown. Our efforts have focused on explaining the relatively significant debt pay down offered by zero-cash flow arrangements and the potential tax benefits of a 1031 exchange. Highlighting our point, a new article in Commercial Property Executive succinctly explains how investors with properties underwater can defer potential tax liabilities using these types of properties. Considering the state of CRE, we're betting there are plenty of investors who will find zero-cash flow properties much more attractive after reading the article.

Single-Tenant Sales Gain Market Share

2009-09-25T13:59:00.002-04:00

Single-Tenant Sales Gain Market Share

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This is good news...Retailers' Credit Outlook Improves

2009-09-21T14:19:00.001-04:00

Retailers' Credit Outlook Improves

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Daniel Tishman of Tishman Construction - State of CRE - $200 billion of refinancing needed this year

2009-09-21T09:37:00.002-04:00

Dan Tishman, CEO of Tishman Construction, comments on the CRE market on Squawk Box this morning.

Commercial Real Estate Crisis Threatens Recovery

2009-09-17T14:40:00.002-04:00

There is a staggering fact in this article...."Nearly half of all the commercial real estate mortgage loans in the U.S. are coming due within the next five years. Deutsche Bank believes that 65 percent or more of these loans will fail to qualify for refinancing."

A Healthy Buy in Real Estate

2009-09-16T10:08:00.001-04:00

A Healthy Buy in Real Estate

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Some signs of optimism emerge in CRE investing

2009-09-16T08:02:00.001-04:00

Some signs of optimism emerge in CRE investing

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IRS issues rules making it easier to refinance some commercial real estate mortgages | San Francisco Examiner

2009-09-15T21:11:00.001-04:00

IRS issues rules making it easier to refinance some commercial real estate mortgages | San Francisco Examiner

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Asset Managers Take Lead Role in Keeping Properties Performing

2009-09-09T08:54:00.001-04:00

Asset Managers Take Lead Role in Keeping Properties Performing

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The beginning of the end or just what was expected?

2009-09-01T12:02:00.002-04:00

REIT.com reported that commerical mortgage default rates moved up to 2.88% in Q2 2009, up from 2.25% a quarter earlier and up from 1.18% in Q2 2008, as tracked by Real Estate Econometrics (REE).

Everyone has known defaults were coming, but how soon and how big remains a guessing game . REE is projecting defaults to excced 5% in 2010.