Commercial Brokerage

Commercial Loans Jeopardize Banks

The Congressional Oversight Panel reported Wednesday that commercial real estate loan failures could jeopardize bank stability.

The panel said most of the bad loans were made at the height of the real estate bubble and are concentrated at smaller banks, which make 40 percent of all small business loans.

“We haven’t seen the worst of the problems yet in terms of loan defaults. This is a large issue for a major portion of the banks out there,” said Matthew Anderson, a partner at research firm Foresight Analytics, which provided data for the report.

Source: MarketWatch, Josh Lipton (02/17/2010)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

Banks Teeter as Commercial RE Struggles

Commercial real estate prices rose 1 percent in November. That’s the first increase in more than a year, according to Moody’s/ReAL Commercial Property Price Indices.

But it’s too soon to say the sector is stabilizing. Moody’s analyst Connie Petruzziello predicts that occupancy and rental rates will fall in the first half of 2010, pushing prices downward as well. She expects prices to decline as much as 45 percent to 55 percent from their peak in 2007 before they begin to recover later this year.

The woes of the commercial real estate market are likely to cause more banks to fail in 2010, Federal Deposit Insurance Corp. Chair Sheila Bair said in a speech to the Commercial Mortgage Securities Association.

Bair said regulators predict higher delinquencies and charge offs for commercial real estate properties in the first three months of this year. “Commercial real estate credit problems are affecting large and small banks alike,” Bair said.

Source: Reuters News, Ilaina Jonas (01/20/2010) and The Wall Street Journal, Michael R. Crittenden (01/20/2010)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

MIT Index Says Commercial Prices On the Rise

Prices of commercial real estate in which there are large numbers of major investors rose 4.4 percent in the third quarter, according to the MIT Center for Real Estate’s transaction-based index.

This is the first increase in more than a year and the largest since the market slowed in mid-2007. Observers see this as a harbinger of better times in the troubled commercial space.

“One quarter does not a trend make and we are still well below normal trading volume,” David Geltner, director of research at MIT/CRE, said in a statement. “Nevertheless, this is the strongest sign of a bottom that we’ve had in two years.”

Source: Reuters News, Ilaina Jonas (10/3/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
(404) 431-2117
Web: www.elliottyouragent.com
Blog – www.elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

Credit Crunch Constrains International Buyers

Interest in U.S. real estate by international buyers declined due to the worldwide recession and severe credit crunch, according to the 2009 National Association of Realtors Profile of International Home Buying Activity.

The share of REALTOR® clientele who are foreign buyers is smaller than in previous years, but among those purchasing nearly half paid all cash – bypassing the mortgage process. Twenty-three percent of survey respondents served at least one international client in the 12-month period between the end of May 2008 and the end of May 2009, down from 26 percent in the 2008 study. During this period an estimated 154,000 homes were sold to foreign nationals, which is down from approximately 170,000 international transactions during the previous 12 months.

Pricing

The median price for a home paid by foreign buyers for the year ending in May 2009 was $247,100, higher than the overall national price of $198,100 in 2008. A significant number, 45.8 percent of foreign buyers, paid cash for their property, in part because obtaining a mortgage was more difficult than in prior years. The total dollar volume was $38.7 billion.

Lawrence Yun, NAR chief economist, said recent improvements in the credit market will help reverse the slide in foreign buyers. “Stock market gains and improving bank balance sheets will permit a greater amount of lending for second-home purchases,” he said. “In addition, expanding foreign economies for international buyers and favorable exchange rates give them more purchasing power, particularly in a period of record high affordability conditions in the United States. Property investment here generally builds wealth over the long term.”

Origin of Buyers

U.S. laws do not restrict or scrutinize most property purchases by foreign nationals. There are few barriers to owning property here, unlike transactions in many other countries, although immigration laws prohibit foreigners from remaining in the U.S. continuously for more than six months without a special visa. In addition, international investors are afforded the same property rights as those enjoyed by U.S. citizens.

The top five countries of origin for foreign buyers were:

1. Canada, 17.6 percent of buyers
2. United Kingdom, 10.5 percent
3. Mexico, 9.8 percent
4. India, 8.5 percent
5. China, 5.4 percent

The percentage of buyers from Canada, the U.K., and China declined from the previous study, while purchasers from Mexico and India increased. Although most buyers were from North America, Europe and Asia, buyers from Latin America, Africa, and Oceania also purchased U.S. real estate.

Most Popular States

Foreign buyers were active in every state and the District of Columbia, with the most popular states being Florida, which accounted for 23.0 percent of all foreign purchases; California, 13.0 percent; Texas, 10.7 percent; and Arizona, 7.1 percent. These states are major gateways into the U.S. from other countries and also offer relatively mild climates.

California saw a notable rise in foreign interest as affordability conditions improved markedly in the state last year. “Florida is the most popular state for European and Latin American buyers, while Asian buyers are drawn to California,” Yun said.

Property Types

The study shows 69 percent of international purchases were single-family homes, while condos accounted for 18 percent. Townhomes made up 8 percent of transactions, with commercial property at 4 percent. Nearly 46 percent of properties were in suburban areas and 25 percent in urban environments. The rest were evenly split between resorts and small towns or rural areas.

The prime purpose for purchasing a property in the U.S. is to use it for a vacation home, cited by 33.9 percent of respondents; for both investment and vacations, 23.5 percent; as a residential rental property for investment, 18.3 percent; and commercial property for investment, 3.5 percent. The 2009 NAR Profile of International Home Buying Activityis based on responses from 3,785 REALTORS® and describes international home buying activity in the U.S. over the 12-month period from the end of May 2008 to May 2009.

Source: NAR

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

10 Markets Where Building Is Booming

The building business—both commercial and residential—is a seeing a recovery in some markets, especially those where military, government, and energy jobs are driving demand.

Lake Charles, La., which leads the nation, is an anomaly—it’s recovering from hurricanes—but the other markets are largely driving by economic growth. For instance, building permits for apartments in Huntsville, Ala., near the expanding U.S. Space & Rocket Center, have jumped 400 percent so far in 2009.

Many of the contracts are going to smaller local builders, but some of the giants are getting back in the game as well. KB Home resumed construction in the Mid-Atlantic, including Washington D.C., after pulling back earlier this year.

The top 10 growth markets, based on building permits, are:

1. Lake Charles, La., 122.5 percent
2. Beaumont-Port Arthur, Texas, 65.8 percent
3. Salt Lake City, 36.6 percent
4. Huntsville, Ala., 30 percent
5. Jacksonville, N.C., 28.6 percent
6. Augusta-Richmond County, Ga.-S.C., 21.6 percent
7. Fayetteville, N.C., 12.2 percent
8. Las Cruces, N.M., 11.6 percent
9. Auburn-Opelika, Ala., 11.3 percent
10. Little Rock-North Little Rock, Ark., 7.7 percent

Source: BusinessWeek, Prashant Gopal (09/18/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

Investors Wait for Commercial Opportunity

Investors looking to buy commercial properties on the cheap as the economy slams the commercial real estate industry have been disappointed so far.

Property values have declined on paper, but would-be buyers haven’t been able to walk off with offices, shopping centers, hotels, and warehouses at fire-sale prices, and very few properties are changing hands.

“Investors seem surprised at the lack of quality buying opportunities given the problems in the financial markets and the continued weakening of the industry’s fundamentals,” says Susan Smith, director of the real estate advisory practice at PricewaterhouseCoopers.

Investors are expected to keep waiting because many properties purchased during 2006 and 2007 are over-leveraged and lenders will eventually be forced to foreclose and sell them at a discount.

Source: Los Angeles Times, Roger Vincent (09/15/09)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

IRS Changes Rules to Ease Commercial Refis

The U.S. Internal Revenue Service announced changes to tax rules Tuesday that make it easier for commercial property owners to refinance.

The new guidelines allow commercial loans that are part of investment pools known as Real Estate Mortgage Investment Conduits, or REMICs, to be refinanced without penalties for investors.

The new regulations allow investors to keep tax savings that they would have lost under the old rules. The IRS is considering expanding the changes to other investment vehicles like real estate investment trusts (REITs).

“A stalemate now exists on commercial mortgage backed security (CMBS) loans that are not currently in default but need modification,” said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for property owners and investors. “Today’s announcement should help break the stalemate.”

Sources: The Associated Press, Stephen Ohlemacher (09/15/2009) and The Wall Street Journal, Lingling Wei (09/16/2009)

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Elliott Robinson, JD – Associate Broker
Keller Williams Realty Metro Atlanta
315 West Ponce de Leon Ave., Ste. 100
Decatur, GA 30030
o- (404) 564-5560
Blog – http://elliottonrealestate.com
Twitter – http://twitter.com/elliottrob

Commercial Brokerage

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

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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

Commercial Brokerage

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 Brokerage

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

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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

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