Socal Multiunit Real Estate

COMMERCIAL REAL ESTATE LENDING SNAPSHOT

edited by Jodi Summers

Allow us to present a really interesting synopsis of current commercial loan trends from a variety of banks, from an article on CoStar.com. The information is from first quarter, but it gives an idea of the ebb and flow of the commercial loan marketplace. Banks are presented in alphabetical order…

* Citigroup — In March, new commercial real estate loan commitments increased more than tenfold to $1.4 billion, compared with $132.4 million in the previous month. Loan renewals increased to $112.1 million, from $25.8 million in February. Average total CRE loan and lease balances rose to $23.8 billion, up from $23.3 billion in February.

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* Comerica Inc. — Commercial real estate renewals increased in March from February 2010. The increase was concentrated in the Western states and Texas markets, partially offset by a decrease in the Florida market. Commercial real estate new commitments decreased.

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* Fifth Third Bancorp — Average CRE balances decreased by approximately 0.7% in March 2010 compared to February 2010. New CRE commitments originated in March 2010 were $288 million, compared to $102 million in February 2010. Renewal levels for existing accounts increased in March 2010 to $964 million versus February 2010 at $392 million. Payments and dispositions of troubled CRE outpaced the volume of renewals and new originations in March causing the overall balances to continue to decline. As commercial vacancy rates continue to increase, Fifth Third continues to monitor the CRE portfolios and continues to suspend lending on new non-owner occupied properties and on new homebuilder and developer projects in order to manage existing portfolio positions.

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* KeyCorp — There was no change in loan demand trends in the CRE segment during March. The CRE market outlook continues to be weak. KeyCorp continued to extend and modify existing credits given the lack of liquidity and refinancing options available in the CRE market. Renewal volume doubled from the February level to $560 million and is comparable to levels experienced in April and May 2009. Three-fourths of the renewal volume, totaling $420 million, was related to performing development projects for which refinancing options remain constrained. For CRE development projects, KeyCorp created a fixed-rate 3-5 year loan program to modify and extend qualifying loans for existing customers.

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* Marshall & Ilsley Corp. — Construction and development concentrations continued to decline in-line with its goal of reducing credit exposure in this sector. Average CRE balances are expected to continue contracting due to portfolio amortization.

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* Regions Financial Corp. — The focus in commercial real estate lending continued to be on renewing and restructuring real estate loans with existing clients versus active pursuit of new real estate loans. Renewal activity includes loan restructuring, remargining and repricing, based on the current credit quality of the sponsor, the performance of the project and the current market.

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* SunTrust Banks Inc. — Average Commercial Real Estate loans decreased $192 million, or 0.9%, compared to the February average. Total CRE renewals and originations in March increased $252 million, or 77.5%, compared to seasonally low February activity. The majority of originations were associated with large commercial or corporate businesses.

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Thank you, http://www.costar.com/News/Article.aspx?id=359D8A406145159176A40807B924DC84

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State of the Commercial Loan Market

By Robert Schroell

The rough ride isn’t over the for the commercial loan market.

Community banks in particular will likely have a tough time in 2010. Hundreds of regional institutions have a significant chunk of their loan portfolios ― up to and exceeding a quarter in some places ― in commercial mortgages.

At the same time, commercial debt is coming due at a staggering rate. The market will need about $1 trillion to service more than $3 trillion in commercial mortgage debt, according to a recent forecast by Keefe, Bruyette & Woods, a well-known New York analyst.

That’s likely to make cash a disappearing commodity, primarily for the banking industry. In fact, experts at Keefe, Bruyette & Woods are urging banks to consider offering extensions to cash-strapped homeowners, many of whom have struggled to refinance their existing mortgages.

A significant slew of delinquencies in CMBS (commercial mortgage-backed securities) and bank loans is also expected to shape the course of 2010. It’s also almost difficult to imagine CMBS delinquencies getting any worse ― the rate skyrocketed an astounding 500 percent last year, jumping past 6 percent in December 2009 for the first time ever.

The governor of the Federal Reserve Board recently tried to rally optimism, noting that recovery should begin to take root as the year progresses. But those rosy projections didn’t include the commercial real estate market, which continues to flounder amid strained credit conditions and stagnant refinancing.

All in all, it’s a less than inspiring picture of what’s likely on the horizon.

“We estimate that the weighted average price decline for the commercial mortgage market is roughly 25%,” the experts at KBW state in their analysis. “This suggests that almost all the equity in the commercial sector has been wiped out.”

Fortunately… there’s pretty much no place else to go but up.

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http://www.mortgageloanplace.com/commercial-mortgage.html

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GUEST POST - VA LOAN OPPORTUNITIES

GUEST POST - VA LOAN OPPORTUNITIES

by Jay Buerck

Veterans and their families in Southern California can take advantage of one of the country’s most affordable and flexible home loan programs. The Veterans Administration’s home loan program was created specifically for the needs of those who have served our country.

VA loans offer veterans an almost unmatched degree of flexibility. The VA guarantees loans from commercial institutions. That security gives lenders the ability to offer competitive rates and favorable loan terms for qualified borrowers.

VA loans come with myriad financial benefits. Borrowers can purchase a home without spending a penny on a down payment or monthly private mortgage insurance. The VA has loan limits that vary from state to state. Some borrowers can qualify for 100 percent financing. Currently, VA loan limits for San Diego County is $593,750. In Orange County, the loan limit is $737,500. USe a VA Loan Calculator to determine the loan limit for your home purchase.

The VA has multiple loan options. Veterans must first obtain a Certificate of Eligibility (COE) before moving forward with the application process. The COE ensures that a prospective borrower meets the program’s initial requirements.

Any military member who has served 181 days on active duty during peace time or 90 days during war time may be eligible, along with those who have served at least six years in the Reserves or National Guard. Spouses of service members killed in the line of duty may also be eligible.

Not everyone who meets the basic criteria will qualify for a loan. But veterans with poor credit can still qualify for a VA loan. So can those who have filed for bankruptcy or faced foreclosure.

Southern California veterans who currently have a conventional home loan can also benefit from a VA loan. Qualified borrowers can now refinance up to 100 percent of their home’s appraised value through a VA loan.

URGENT! CONTACT YOUR CONGRESSMAN TO AVOID COMMERCIAL REAL ESTATE TAX HIKES

Action to Oppose More Than Doubling of Taxes on Real Estate Carried Interests

Edited by Jodi Summers

In early December, Congressman Charles Rangel Ways, chairman of the Ways and Means Committee of the House of Representatives, introduced the “Tax Extenders Act of 2009″ (H.R. 4213). Wrapped in this legislation package is a proposal that would more than double the taxes on carried interest received by general partners in real estate partnerships. Under this legislation, carried interest would no longer be taxed as capital gains at 15 percent, but as ordinary income at rates as high as almost 35 percent…making everyone’s investment real estate holdings a lot less sexy.

Kick us while we’re down. Those investing in commercial real estate are already feeling economic distress because of the decline of property values and the lack of loans available. The proposed legislation would more than double the taxes imposed on many real estate entrepreneurs.

If H.R. 4123 enacted into law, this proposal could be the largest modification to the taxation of real estate since the Tax Reform Act of 1986.

This bill was past stealthfully, proposed on December 7^th, it bypassed the customary legislative process, bypassing the House Ways and Means Committee, and going directly to the House floor for a vote on December 9, reducing meaningful opportunities to amend the bill.

Safeguard your real estate assets; communicate with your Congressional Representatives and Senators! Let them know that this tax increase on carried interest will further damage the commercial real estate industry and undermine efforts in their own communities to spur job growth and economic recovery.

http://www.capwiz.com/naiop/issues/alert/?alertid=14439831&type=CO has letters ready to go to your congressmen.

Save your assets and contact them.

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http://www.capwiz.com/naiop/issues/alert/?alertid=14439831&type=CO

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REAL ESTATE DEVELOPERS IMPACT BY BERNIE MADOFF’S “PONZI SCHEME”

REAL ESTATE DEVELOPERS IMPACT BY BERNIE MADOFF’S “PONZI SCHEME”

by Jodi Summers

Several major East Coast Real Estate Developers have been named as victims in Bernard Madoff’s complex Ponzi scheme, which is rumored to have stripped investors of $50 billion in assets.

According to GlobeSt.com this list includes:

· Larry Silverstein, the World Trade Center developer;

· The Wilpons and Rechlers families;

· Brokers at Newmark Knight Frank and CB Richard Ellis–including Stephen Siegel, chairman of worldwide operations there,

· New Jersey developer Fred Daibes is rumored to have lost a significant amount of money;

· Mort Zuckerman, the chief executive of Boston Properties;

· Fred Wilpon, who owns the Mets and is head of Sterling Equities;

· Steven Simkin, a partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison and chairman of the firm’s real estate department;

· A number of limited real estate partnerships in DC are also among the supposed victims.

· Other recognizable names on the list include John Malkovich, Sandy Koufax and Tim Teufel, - if these are the actor and baseball players, respectively, is unconfirmed, as is Larry King, the talk-show host, Frank Lautenberg, the Democratic senator from New Jersey, and Mark Green, a former public advocate of New York City.

Madoff was known to have focused on the rich and famous, sometimes requesting as much as a $20 million minimum.

A large number of the developers who invested with Madoff are reported to have pledged securities held by him for development projects. It has yet to be determined whether the actions of one person, will again impact bank lending criteria.

The complete client list of Madoff has been provided by the Wall Street Journal:

http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf

Info courtesy of:

http://www.globest.com/news/1341_1341/newyork/176748-1.html

https://ecf.nyeb.uscourts.gov/

http://designdepartment.wordpress.com/2006/09/07/

http://marketplace.publicradio.org/display/web/2006/10/27/down_in_debt/

http://www.observer.com/term/25509

http://gothamist.com/2007/09/07/revised_vision.php

http://blog.lib.umn.edu/mcgin017/blog/fall_2008/honors_intro_to_philosophy_fall_08/

BARKER PACIFIC GROUP IS READY TO BUY AS VALUES READJUST

BARKER PACIFIC GROUP IS READY TO BUY AS VALUES READJUST

by Jodi Summers

Barker Pacific Group has a new strategy. The LA-based investment and development firm has two new principals and plans to raise $300 million of new equity to acquire distressed and value-added commercial real estate notes and properties.

The company is targeting leverage ratios in the range of 50% and is looking for both performing and nonperforming properties and notes. It has already acquired a note that is performing but is going to be coming due, and it is considering another that is performing that it would acquire at a discount.

Although Barker expects that commercial real estate foreclosures will increase, he anticipates that most of the opportunities to acquire distressed assets will arise from the financing problems that borrowers will face when their loans mature. Borrowers who financed properties two or three years ago may find that those assets have declined in value, so they won’t be able to refinance them at the same loan-to-value ratios and may well face huge capital requirements, he points out.Barker says that other opportunities for value-add acquisitions may arise in a variety of situations, such as when a lease rolls over and a major tenant vacates a building. Value-add is a loosely defined term, he observes, but most people think of the phrase in terms of properties that require some work to be done, such as finding tenants for empty space or investing in capital improvements.

Get the whole story @

http://www.cityfeet.com/News/NewsArticle.aspx?Id=31664

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2009 INVESTMENT PROPERTY SALES WILL BE BETTER THAN 2008

2009 INVESTMENT PROPERTY SALES WILL BE BETTER THAN 2008

Just as you might expect, property-investment sales are way down. The numbers are in for all of 2008 and sales fell 68% from the previous year’s volume. The decline was particularly steep in Q4.

The $54.5 billion of commercial property-transactions that closed or went under contract last year were down from $170.4 billion in 2007, while the number of transactions dropped 54% to 846, according to the Commercial Real Estate Direct Property Sales Database, which tracks individual property sales of at least $10 million.

The $7.28 billion worth of deals in the fourth quarter was down 70% from the $29.42 billion of deals during the same period in 2007. This year’s fourth-quarter volume also was down 46% from the previous quarter, which was down just 16% from the $16.3 billion in the second quarter.

Full-year sales volumes were down from 2007 in every property type, with sector declines ranging from a high of 83% for hotels - $3.8 billion - to a low of 60% for multifamily - $8.38 billion - which was helped largely by the availability of debt financing from Fannie Mae and Freddie Mac.

Pundits predict that 2009 sales volume will increase 15% due largely to offerings from distressed sellers, particularly those who used floating-rate debt for acquisitions in early 2007 and 2006.

A continued stalled economy that is expected to cut tenant demand across all property types. Robert Bach, Grubb + Ellis’ chief economist, has predicted that the U.S. economy will lose another 2 million jobs in 2009, about the same amount lost in 2008, and will “dampen demand for all product types, resulting in negative absorption and increased vacancy.”

Info courtesy of

http://www.loopnet.com/xnet/mainsite/news/news.aspx?DocID=5720&sourcecode=1lntd009

THE HISTORY OF THE FINANCIAL BUBBLE

THE HISTORY OF THE FINANCIAL BUBBLE

by Jodi Summers

Allegedly, the first recorded speculative financial bubble occurred in the Netherlands in the 1630s when, according to Wikipedia, tulip contracts sold for 20 times the annual income of a skilled craftsman. When tulip prices came crashing down so did the economy, according to reports that have not been sufficiently documented for historians to conclude exactly what occurred.

sources:

http://www.flickr.com/photos/jimg944/2229214461/

http://www.inman.com/news/2008/10/23/dutch-toughen-downturn

INVESTING IN THE DOWNTOWN – THE TO-DO LIST

INVESTING IN THE DOWNTOWN – THE TO-DO LIST

The conclusions drawn from the recently released 2009 Emerging Trends in Real Estate report by the Urban Land Institute and PriceWaterhouseCoopers LLP are not pretty.

“Total expected returns on private equity real estate investments will likely drop into negative territory for the first time in nearly two decades as the market hits bottom next year,” the report suggests.

We slowly being to recover in 2010. The trough and recovery is predicted to be more U-shaped than V-shaped.

The report’s advice to investors and property owners to make it through the slow period:

· Go green. Cutting energy and other operating cost is likely to be a growing priority for both landlords and tenants.

· Buy or hold multifamily; hold office. Hold hotels, buy residential building lots, but be prepared to hold.

· Purchase distressed condos in urban areas near transit.

· Focus on neighborhood retail centers with strong grocery anchors and chain drugstores.

Info courtesy of:

http://www.costar.com/News/Article.aspx?id=41A9DE2D4E098EDEFBB56A05FBBB79A3