Archive for January, 2011

Commercial Real Estate Recovery Has Legs

Monday, January 31st, 2011

A recent poll of investors, lenders, executives and other commercial real estate stakeholders found a generally optimistic attitude towards the industry in 2011. More than 70% of the responders in the poll, which was conducted by PricewaterhouseCoopers, believe the recovery in commercial real estate is realistic enough to keep up its momentum. Over half of the respondents were confident enough to say that they plan to address their out-of-balance loans by extending their maturities and waiting out the market, which also suggests a positive outlook for the sector in the near future.

According to REIT.com, investors see small but promising signs that the U.S. will avoid a double-dip recession, and that the hard-hit commercial real estate industry has bottomed out. The highest percent of responders in the poll that said they are looking to invest again came from the Apartment, Office and Hotel sectors. Though the future looks a little brighter, riskier plays in investing won’t take place again until a healthier U.S. employment picture develops.

To read the full article from REIT.com, click here.

Posted in Apartments, Hospitality, Hotels, Multi Family, Office, Real Property | No Comments »

ProLogis Near Merger with Industrial Giant AMB

Friday, January 28th, 2011

In what would be the biggest deal since the recession involving publicly traded real estate companies, AMB Property, the second largest public warehouse owner in the U.S., is near a merger with its larger rival, ProLogis. The Wall Street Journal has reported talks amongst the two companies which claim they would combine in an all-stock, at-market transaction. The combined capitalization rate of the two companies is just under $14 billion.

Mergers and acquisitions have picked up in real estate, partly because of broad investor demand for income-producing property like office buildings, shopping malls, apartments and warehouse, and partly because publicly traded REITs, have benefited from access to the public markets. ProLogis has a market value of $8.4 billion and owns or manages more than 475 million square feet of industrial space across the world while AMB sits at a $5.5 billion market value and 156 million square feet.

Posted in Industrial, Real Property, Warehouse | No Comments »

Banks Recovering Slowly After Historic Failures

Thursday, January 27th, 2011

2010 saw bank closures increase 12% from the 140 that occurred in 2009. The main occurrence that does failed banks in is loans that go bad and spark excessive losses that delete capital. Quite a bit of the losses come from commercial real estate. According to the National Real Estate Investor, the rate of collapse is expected to moderate this year, but predicting the failure rate of lenders is an inexact science as no one can predict truly how things are going to shape up.

More than 66% of failed banks in 2010 were small community banks with assets under $1 billion. The common theme among most of these failures was significant losses in commercial real estate loan portfolios as well as significant losses in acquisition, development and construction portfolios. Despite the losses, all the major players have been able to hold up through the downturn, and have even been highly profitable. Today, banks are once again beginning to increase their lending pointing towards signs that the worst may be over.

To read the full article from the National Real Estate Investor, click here.

Posted in Banks, Financial Services | No Comments »

Blackstone Bets Big On Industrial Property Rebound

Wednesday, January 26th, 2011

Blackstone Group LP is making a $2 billion investment in industrial commercial real estate, one of the hardest hit corners of the property market. According to Reuters, Blackstone’s real estate division, Blackstone Real Estate Advisors, has amassed a portfolio of 275 industrial properties spanning about 45 million square feet. Tenants of these sometimes extremely large warehouses and distribution centers include shippers, manufacturers and retailers.

Analysts say at the moment that industrial real estate in the private market is much cheaper than other property types. Industrial real estate last year had not recovered at nearly the same rate as apartments, hotels, retail or office, so prices look very attractive on a relative basis. The new size and rapid growth of Blackstone’s industrial arm have some wondering if it will become the first public offering of the company.

To read the full article from Reuters, click here.

Posted in Distribution Centers, Industrial, Real Property, Warehouse | No Comments »

CMBS Loans: December 2010 Payoffs Best in Two Years, $22B Coming Due in 2011

Tuesday, January 25th, 2011

More than half of the commercial real estate loans reaching maturity in December 2010 were paid off by borrowers, marking the highest monthly payoff rate in two years. The inclination here is that replacement financing is growing more accessible to borrowers. According to the National Real Estate Investor, of the $856.2 million in CMBS loans that matured in December, borrowers were able to make balloon payments on time to retire $441 million. The 51.5% payoff rate marks the first time since December 2008 that the payoff rate cracked 50%.

Looking toward the future of CMBS loans, GlobeSt.com reports that across the U.S., 2011 will see about 2,000 come due, representing a balance of about $22.5 billion. Over 50% of the loans coming due were originated during the pre-recession years of 2005-2007, causing implications for refinancing. Fitch Ratings, who came out with the loan total estimates, states that borrowers of maturing five-year interest only loans will need to contribute additional equity to reduce debt levels. The five-year loans thus face greater difficulty in refinancing, especially office loans with predicted lease rollover.

Posted in Financial Services, Real Property | No Comments »

Commercial Mortgage Market Will Hit Bottom in 2011

Monday, January 24th, 2011

The commercial mortgage market is expected to continue shrinking for another year and bottom out towards the end of 2011 at around $2.9 trillion. According to Business Wire, a Prudential Real Estate Investors report claims that the market should begin to rise in 2012 with volume reaching $3.3 trillion by 2015. The main factor used to determine the numbers was the availability of debt and how it helps gauge the health of the market. As commercial mortgage volume nears the bottom of the current cycle, activity will begin to pick up.

Based on Prudential’s current model, the commercial mortgage market will shrink down through Q4 of 2011 about a half trillion dollars from its $3.4 trillion peak in the first quarter on 2009. A similar pattern occurred during the banking crises of the 1990s when the ratio of commercial mortgages as a share of GDP fell for three years after the absolute size of the market was growing.

To read the full article from the Business Wire, click here.

Posted in Financial Services, Real Property | No Comments »

Commercial Real Estate Firms Optimistic, Hiring in 2011

Friday, January 21st, 2011

In anticipation of a commercial real estate recovery, several Jacksonville, FL agencies are adding to their staffs. According to the Jacksonville Business Journal, many firms had a positive 2010, including Coldwell Banker Commercial benchmark in Jacksonville who was up 29% in transactions in 2010 compared to 2009 and up 20% in gross revenue. Other agencies are banking on that glimmer of hope and following suit by adding more employees.

The general consensus is that 2011 will be better than 2010. Recovery is being seen in various areas, and bank owned work with lenders is continuing across the entire state of Florida. Increases in transactions are expected across the board with distressed, non-distressed and challenged assets. The office, industrial and retail sectors in Jacksonville all showed positive signs in the fourth quarter of 2010 and are looking to keep that pace up in 2011.

Posted in Eastern, Industrial, Office, Real Property, Retail | No Comments »

Occupancy Gains Anticipated in Senior Housing Market

Thursday, January 20th, 2011

While the dire state of the housing market has caused occupancy rates at senior housing facilities to fall over the past year, 75% of senior housing managers or owners who responded to a National Real Estate Investor online survey claim that they expect the level of occupancy at their properties should increase over the next six months. Even better news is that one-third of the respondents indicate that transaction activity has already begun to increase, while 44% expect transaction levels to rise by the end of 2011.

Another highlight of the survey from the National Real Estate Investor is that rental discounts and incentives have had a negative effect on occupancy at senior housing facilities over the past year, according to 36% of respondents. However, 26% indicate that the discounts and incentives have had a positive impact on occupancy, while 34% say they’ve had no effect. Overall, the survey shows that the biggest current demand is coming from the independent living/assisted living segment of the industry.

To read the full article from the National Real Estate Investor, click here.

Posted in Multi Family, Real Property, Senior Living | No Comments »

Climate Improves for Potential Retail REIT IPO’s

Wednesday, January 19th, 2011

After a rough start in 2010, this year is shaping out to be a better one for REIT initial public offerings (IPO’s). The thought process behind this is that there is recognition that commercial real estate this year will be fine, if not great, as compared to the heavy doubt casted over conditions in 2010. According to Retail Traffic Magazines, many examples of the turnaround are already popping up with American Assets Trust in San Diego selling 27.5 million initial shares at a price of $20.50 apiece, raising approximately $563.8 million. The selling price for these shares was at the higher end of their range of $19 and $21, and was also the largest REIT IPO in over a year.

The new trend is a drastic change from a year ago when some firms were forced to cancel offerings. Overall, only nine REIT IPOs in 2010 raised about $2 billion, while 2011 already has 12 on file or waiting to launch on top of American Assets Trust $563.8 million transaction.

To read the full article from Retail Traffic Magazine, click here.

Posted in Real Property, Retail | No Comments »

95% Tax Savings on ‘Improvements of Possessory Rights’ Properties

Tuesday, January 18th, 2011

In Arizona, there are several classes of property (1 -9). Each class of property has its own ratio (the percentage applied to the Full Cash Value to arrive at the Assessed Value). For example: Class 1 (commercial property), 20%; Class 2 (vacant land), 16%; Class 4 (rental residential property), 10%; Class 9, 1%.

A recent hospitality client of Paradigm Tax Group presented itself as a very unique property. It is a large convention hotel built on State Land. This type of property is called an IPR (Improvements on (of) Possessory Rights). Since the improvements are not secured to the land (land not owned by the same entity as the owner of improvements), IPR’s are considered Personal Property.

In reviewing the statutes, Paradigm Tax Group successfully determined that this property should qualify as Class 9 (1%), thereby lowering the ratio from Class 1 (20%) and effectively saving our client 95% on its property taxes. To become Class 9, the following criteria had to be met:

The improvements had to be owned by our client.
The land must be owned by a government entity.
The improvements must be used primarily for Convention or recreational use.
At the end of the lease, the improvements must be turned over to the government entity who owns the land.

(more…)

Posted in Country Clubs, Golf Courses, Hospitality, Hotels, Personal Property, Real Property, Resorts, Western | No Comments »

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