Commercial

Vacancies Still Strain Commercial Properties

Commercial real estate is feeling the pain as retailers cut back on rental space in light of unemployment and a weak economy.

Just this week, Maguire Properties Inc., which owns office buildings in Southern California, walked away from seven of its properties because it couldn’t pay the mortgages and may abandon others, according to rating agency Realpoint.

“The bottom line: defaults are exploding,” said Richard Parkus, an analyst with Deutsche Bank. “It’s terrible. It’s going to be worse than in the early ’90s.”

Source: The Associated Press, Alex Veiga

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

U.S. Will Extend Lending Program

The Federal Reserve and the Treasury Department have agreed to extend the Term Asset-Backed Loan Facility (TALF), which frees up loans to build apartment communities, office complexes, and other income-generating properties.

The move comes even though the program has yet to make significant progress in resuscitating the ailing commercial property market–due to its relatively small size.

White House officials have no plans to pad the program with more federal resources, even as rising vacancies and declining rents leave building owners vulnerable to default. Some observers fret that a new wave of defaults is on the horizon, with $814 billion in commercial real estate loans on pace to mature between now and 2011.

Source: Washington Post, Annys Shin and David Cho

Commercial Market Shows Signs of Rebound

Analysts point out that competition in commercial lending is increasing on the West Coast, which they call a sign that the drought in the commercial loan business is ending.

Citigroup Inc. analyst Darrell Wheeler said there was “aggressive” competition among insurance companies and foreign banks to fund office properties. Other new lending programs include securities sales through the Federal Reserve and opportunity funds that are looking to buy debt-free assets.

“These disposition options would not have existed just two months back, so market conditions are changing very quickly,” Wheeler wrote.

He concluded that with increasing financing “valuations for these assets should quickly recover if the economy is recovering, and we now expect the number of voluntary defaults will start to drop off.”

Source: Reuters News, Al Yoon

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Hotels in Default on the Rise

An increasing number of owners of hotels are walking away from their properties and turning the keys over to the bank.

More than 1,000 non-casino hotel properties and 31 casino hotels are in default with a total loan value of more than $25 billion, according to research firm Real Capital Analytics.

Unlike other commercial real estate with long-term leases, guests can abandon a hotel overnight, leaving the management with little or no cash flow.

Many of the hotels in default are publicly traded. “Pricing for hotels really got out of control in 2005 to 2008 and the public companies were aggressive in buying assets, so they piled on a lot of mortgage debt,” says David Loeb, a lodging analyst with Robert W. Baird & Co.

Source: The Wall Street Journal, Kris Hudson

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222 ext. 26
Blog: elliottonrealestate.com
Twitter: elliottrob@twitter.com

Banks Plan to Keep Lending Tight

Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.

About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.

Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.

Source: Bloomberg, Craig Torres

Office Market in Bad Shape

Nearly 16 percent of offices in the U.S. were vacant in the second quarter, the highest rate in four years. Rents fell by the largest amount in seven years, according to research firm Reis Inc.

“It’s bad,” Reis’ Director of Research Victor Calanog says. “It’s decaying and getting worse. Given the depth and magnitude of the recession, you can argue that we are facing a storm of epic proportions and we’re only at the beginning.”

Reis confirmed its previous prediction that the U.S. office vacancy rate will top out at 18.2 percent in 2010 and for rents to continue to fall through 2011. It expects the default rate to peak at 5.2 percent in 2011.

Source: Reuters News, Ilaina Jonas (07/07/2009)

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Billionaire Looking for Wind Farm Sites

Billionaire clean-energy supporter T. Boone Pickens is scaling back his plan to build the world’s largest wind farm in Texas and searching for several smaller sites elsewhere.

His company Mesa Power bought $2 billion worth of turbines from General Electric Co., a year ago, and now he’s looking for a better variety of places to put them since his plan to erect transmission lines in Texas fell through.

He’s reportedly searching for windy sites in Wisconsin, Oklahoma, Kansas and Texas.

“It doesn’t mean that wind is dead,” said Pickens, who runs the Dallas-based energy investment fund BP Capital. “It just means we got a little bit too quick off the blocks.”

Source: The Associated Press, Kate Galbraith (07/07/2009)

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Distressed Commercial Real Estate Tops $97B

The total value of distressed commercial real estate reached $97.8 billion in June, doubling every three months since December 2008, according to a new report from Delta Associates.

Foreclosures of commercial mortgages reached a 3.2 percent delinquency rate in the first quarter of 2009, up from 1.8 percent in the first quarter of 2008.

Retail properties represented the largest segment of distressed mortgages at $29.7 million.

Source: Washington Business Journal (06/26/2009)

——————–
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Onyx – Purchasing a New Location Case Study

Challenge
Find a Secure, In-Town, Stand-Alone location, with parking

Onyx Consulting hired Elliott Robinson, JD to represent them in the purchase of a new location. Onyx is an Apple certified computer consulting and repair business. Their flagship location, 3296 Northcrest Road, affords easy access for their clients in the Perimeter Business District as well as Gwinnett and North DeKalb counties. However, a large portion of their business clients in the Downtown and Midtown Atlanta areas were more challenged in getting to this location.

After several consultation sessions with the client, we determined the primary factors in selecting a location.

• Location – 15 minute drive to Downtown/Midtown Atlanta
• Security – A building with high security features to protect the computing equipment
• Parking – Drive-up parking for a short walk into the building
• Accessibility – Visible without drawing unwanted attention

Initially, Onyx preferred the East Atlanta Village market due to its close proximity to Downtown and Midtown Atlanta and heavy artist community (typically Apple users).

Solution
Elliott applied a series of analytical tools and techniques to help determine the best fit for Onyx’s newest location.

• Market Analysis – Determine best areas of growth
• Geographic Needs – Proximity to client base, Traffic Counts, Controlled Visibility
• Demographic Analysis – Income, Disposable Income, Education

It was determined that the City of Decatur was the most viable market.

Results
Onyx purchased a stand-alone building located at 122 Williams Street in Downtown Decatur.  The property, the former Eastern Treats building, met all of Onyx’s needs and has exceeded their expectations.

• 10 minute drive to both Downtown/Midtown Atlanta and their East Atlanta art community clients
• Plenty of drive-up and on-street parking spaces
• Highly secure brick building with limited windows
• Building sits at the intersection of 3 of Downtown Decatur’s busiest streets, while remaining tucked away
• Expanded their reach with the student demographic (Emory University is only 5 minutes away, while Agnes Scott College, the Art Institute of Decatur, DeVry University and most of the City of Decatur schools are all within walking distance.)

—
Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

Small Business Lending Gets Much Needed Help

The American Recovery and Reinvestment Act was passed to give small business owners much needed access to capital.  Within this Act, the Small Business Administration (SBA) has been given $730 million, leniency in their fees and increased guarantees to encourage financial institutions to begin lending.

Increased Loan Guarantees

To assist the lending community, the SBA has increase the amount of their loan guarantee from 75% to 90% of the loan amount.  This is significant because it lowers the bank’s exposure in the instance of a default while making the loans attractive for sale on the secondary market.

Eliminated SBA Fees

The new act also allows the SBA to waive their standard fees.  Under the 7(a) program, the fee can range anywhere from 2% – 3.75% of the loan amount guaranteed by the SBA.  The fee percentage varies based on the amount of the loan guarantee.

An example of the impact on potential borrowers: A $300,000 loan with a 75% guaranty would have a guarantee fee of 3%. With the temporary elimination of SBA fees, you would save $6,750.00 ($300,000 x 75% x 3%). Under the new 90% guaranty your savings would be $8,100 ($300,000 x 90% x 3%).

The application fee for the 504 program is being waived.  That fee is 1.5% of the loan guarantee amount.

The program is slated to last until December 31, 2009 or until the funds are exhausted.

7(a) Program

Typical 7(a) borrowers are entrepreneurs looking to start, expand or acquire a small business. In many cases, the applicant may have a strong business idea, management ability, and sound financial projections, but may have a shortfall in collateral to secure a loan or equity to put into the business.  The maximum loan amount for a 7(a) loan is $2 million.

In order to qualify for a SBA 7(a) loan, borrowers must be unable to secure conventional commercial financing on reasonable terms and be a “small business” as defined by SBA size standards. In 2008, of the $18 billion in SBA backed loans, 35% went to start-up businesses, nearly 32% ($5.7 billion) went to minority owned businesses, and nearly 23% went to women owned businesses. The most frequently financed industries in 2008 were services, retail trade, accommodation/food service, construction firms, and manufacturing.

504 Program

Aimed at Certified Development Companies, these loans offer growing small businesses long-term, fixed-rate financing for major fixed assets, such as land, buildings and machinery and equipment. These loans are aimed at fostering community development, creating jobs and encouraging modernization.

Other provisions of the Act

Microloan Expansion: Provides extra funding for loans and technical assistance to SBA backed microlenders

ARC Stabilization Loans: Offers 100% guaranteed deferred payment of loans up to $35,000 to help viable small businesses facing immediate economic hardship make payments on existing qualifying loans

Expanded 504 Refinancing Project: Allows borrows to refinance an existing eligible loan as part of a new 504 small business expansion project.

Surety Bond Program Expansion: Allows more small businesses to compete for contracts by raising the maximum amount for contracts that qualify for SBA surety bonds to $5 million and up to $10 million for certain contracts.

SBIC Program Expansion: Increases the maximum levels of funding that SBA can provide to SBICs.

Secondary Market Guarantee for 504 First Mortgages: Provides liquidity to lenders by allowing SBA to guarantee 504 first mortgage pools sold into the secondary market.

7(a) Secondary Market Lending Authority: Increases liquidity in the secondary market for SBA loans by directly lending money to brokers to purchase SBA 7(a) loans.

—

Elliott Robinson, JD – Associate Broker
Adams Realtors
458 Cherokee Ave. SE
Atlanta, GA 30312
(o) 404-688-1222

« Previous Page