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.

*

* 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.

*

* 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.

*

* 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.

*

* 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.

*

* 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.

**

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

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NEW MULTIFAMILY REAL ESTATE LOANS TO EXCITE YOU

By Jodi Summers

Investors know, multifamily properties have been one of the most desirable real estate 

purchases throughout the downtown. GRMs are down, and properties now have an 

impressive amount of upside potential because of recent rent concessions. Problem

has been that the loan market being what it’s been has not made getting a loan easy.

Thankfully, that’s all starting to change.

A variety of multifamily small loan packages are coming to market. Globest.com 

suggests Chicago-based Aries Capital, through subsidiary Aries Multifamily; Alliant 

Capital in Anaheim, CA; and New York City-based Centerline Capital, through its 

agency lending group. All of these companies have opened small lending programs

during the past year. It is reported that the debt typically is up to $5 million, and is 

sometimes obtained through the agencies' small lending products. 

 Prudential Mortgage Capital Co. has a unique program that addresses debt for 

unstabilized properties. Known as the Agency Gateway program, it caters to 

apartment owners looking to refinance or buy assets that currently don't 

qualify for Fannie Mae or Freddie Mac financing. Apartment properties that 

would qualify include well-located, completed or renovated properties that have 

not yet reached stabilized occupancy levels. 

"The improving economy and upward growth in employment are positives for

Multifamily properties," observes Ted Hopkins, a PMCC principal and portfolio 

manager of Agency Gateway. "We feel it's time to get in there and help multifamily 

properties get stabilized." 

Ranging in size from $5 million to $25 million, the Agency Gateway loans run for 

terms of six to 24 months, until the property is stabilized. 

The deals are considered on a case-by-case basis and Hopkins not that the 

pricing is "very competitive. That is one factor that we rely on, plus the fact that

 we know multifamily product very well. Each loan is tailored to the individual property." 

**

http://www.globest.com/news/1659_1659/insider/184943-1.html

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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.

**

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

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MALIBU GOES GREEN UNDER PRESSURE

MALIBU GOES GREEN UNDER PRESSURE

By Jodi Summers

Malibu should be ashamed of itself, acting like conservation is not for the wealthy. Santa Monica has been heavily into the green movement for years – aiming to become a net zero city, Our mother city, Los Angeles, is very motivated to become one of the greenest cities. Meantime the gilded village of Malibu is only turning green because of upcoming deadlines for compliance with state-mandated sustainable development standards.

Under pressure by state mandates, Malibu is finally getting around to developing a sustainable development program. This comes more than a year after the City of L.A.’s green building ordinance to reduce the City’s carbon emissions by more than 80,000 tons by 2012. Motivated only by state regulation, Malibu is planning to require larger projects to be LEED certified. Money is green; Malibu will get the hang of it.

Grudgingly, in late summer, Malibu began to comply with mandated standards addressing water use for landscape irrigation. Additionally the fabled city on PCH will comply with other statewide requirements, such as weather-proofing, formaldehyde content in wood products, air conditioning refrigerants, and outside air ventilation, not to mention finally getting collection areas for recyclables. (Hello! If that’s an issue for you guys, just bring in some homeless, and they’ll recycle for you.)

As Malibu has been so late to get on board the green bandwagon, the city is panicking about meeting residential construction standards effective Jan. 1, 2011, benchmarks that are already in place in neighboring Santa Monica, Beverly Hills, West Hollywood and Los Angeles.

The January 2011 requirements call for sediment and runoff protection from construction sites; diversion of at least 50% of construction waste; low or no use of volatile organic compounds such as indoor adhesives, paints and coatings; low formaldehyde indoor finish materials.

Looking further forward, as of July 1, 2011, residential construction projects will be required to be more water efficient – insisting on a 20 percent reduction in indoor water use.

Not to be berated for being totally arrogant and antiquated, Malibu does already have mandates in place for water conservation landscaping – though some city residents are insisting that is not enforced.

“I think our biggest problem is water in Malibu,” planning Commissioner Regan Schaar noted, more than a year after Governor Arnold Schwarzenegger declared a statewide drought. “The issue of people submitting plans [development applications] without any landscaping plans is a way for them to get around the issue. We need to put landscaping plans in place and make sure they’re low water usage.”

Malibu has been an ostrich, hiding its proverbial head in the sand while other local cities have been proactive on conservation measures. Lifestyles of the rich and infamous.

**

http://www.malibutimes.com/articles/2009/06/10/news/news3.txt

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LOS ANGELES MULTIUNIT PROPERTY SNAPSHOT – JANUARY 2010

LOS ANGELES MULTIUNIT PROPERTY SNAPSHOT – JANUARY 2010

By Jodi Summers

The residential real estate market bottomed out in 2009, and the pundits at the Urban Land Institute feel that 2010 is the year “commercial real estate is going to hit to bottom as well,” notes ULI researcher Charles DiRocco.

It has been reported that commercial real estate value declines will average more than 40 percent below previous highs of mid-2007. Savvy investors are realizing that the apartment building market has hit bottom. Locally, in Los Angeles county, from December 2007 – December 2009 the median price of for multiunit properties for sale properties is down 13% and the median price of sold properties is down 70%. On the upside, the number of sold properties is up 78%, which should keep multiunits away from the wave of property falling back into their possession.

**

http://saratogavoice.com/wordpress/2009/10/20/california-real-estate-forecast-for-2010/

http://nyrej.com/37067

http://www.realtor.org/research/economists_outlook/commentaries/forecast1209

http://pittsburgh.bizjournals.com/pittsburgh/stories/2009/12/07/daily30.html

U2 CAN BUY COMMERCIAL PROPERTIES @ AUCTION

U2 CAN BUY COMMERCIAL PROPERTIES @ AUCTION

By Jodi Summers

Going, going, gone…with the commercial loan market in such a pathetic state, auctions are the fastest way for banks to unload undesired commercial property assets.

“Sellers are coming to the realization that the price point they had in mind is not a reality. That’s where auctions are so useful in determining value — bringing people together through competitive bidding,“ observed National Auctioneer Association spokesman Chris Longly. “Our membership is seeing more energy and movement this year on the commercial real estate side.“

The National Association of Auctioneers estimates that $58.6 billion in real estate was sold in private live-auction bidding in the U.S. in 2008, up 38.5% from five years ago. Auctions in residential real estate have risen 47.7%, raw land (including agriculture) 36.8%. Commercial real estate is up 31.3%, to $15.5 billion in gross auction sales for 2008. Last year, banks were dealing with residential real estate issues, now, banks are confronting commercial property asset issues.

While the foreclosure moratorium was on in residential, banks were able to reassess their commercial assets. You’ll note that auction activity growing in the 2^nd half of 2009, with major online commercial auction events. In the second half of July, NAI Global offered 75 investment properties in 21 states valued at more than $250 million. The timed online auction will include 58 properties — including the historic State Theatre in South Bend, IN, which still bears bullet holes from the nearby shootout following John Dillinger’s final bank robbery on June 30, 1934 — and 14 other properties. In late July, Sperry Van Ness/Guardian held an auction at the Hyatt Regency in Los Angeles includes more than $100 million in real-estate owned (REO), bank-ordered and developer close-out assets in six Western states.

Among the high profile properties going up for sale is the historic Watergate Hotel made infamous during President Nixon’s wiretapping antics. (http://www.socalofficerealestateblog.com/?p=669). Other noteworthy pieces of real estate hitting the auction market include development sites in the metro Washington, DC area, retail sites in Highland Park, IL, and Spokane, WA, the historic theater redevelopment in South Bend, IN, and an infill site in Flint, MI; an upscale hotel/golf resort in Beecher, WI, and a fully entitled multifamily development tract in Navarre Beach, FL, plus lots of excess and partially developed inventory.

Even the government is getting into it. As you know, the state has been selling off their legacy assets - http://www.santamonicapropertyblog.com/?p=1188, and take a cursory glance @ what the U.S. government might be auctioning off in California, and we find industrial properties in Laguna Nigel, Morro Bay and Red Bluff.

“We’re probably seeing a 30 to 40% increase this year” in office, retail, industrial, multifamily and land auction inquiries, remarked Paul Rogers, senior vice president @ Inland Real Estate Auctions, Inc. “With bank activity in particular, we’re going to be busy for the rest of this year — and probably well into next year.”

This trend echoes the real estate slump of the 1990s and early 2000s, with commercial properties following residential foreclosure auctions after they have been mainstays in the downturn. Companies auctioning properties note that it is an opportunity to sell assets quickly, reduce holding costs, and secure true market value under unpredictable market conditions.

**

Sources:

http://www.costar.com/News/Article.aspx?id=F9243DEB83153259F95525F184C9EEE8&ref=100&iid=140&cid=383F14EEE265B182474DA2442BACBBBF

http://fasrp.sc.egov.usda.gov/fasrp/mainAction.do;jsessionid=804CCE54F02BBCC115D4B0BA22A910FF?pageAction=GetCounties&state=CA&stateName=California

http://www.philly.com/inquirer/world_us/20090720_Watergate_auction_drawing_interest.html

http://www.socalofficerealestateblog.com/?p=669

http://media.commercialappeal.com/mca/content/img/photos/2009/04/16/b17auction.jpeg

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LIQUIDATING CORPORATE ASSETS – COMPANIES ARE LOOKING FOR SALE-LEASEBACK TRANSACTION

LIQUIDATING CORPORATE ASSETS – COMPANIES ARE LOOKING FOR SALE-LEASEBACK TRANSACTION

by Jodi Summers

Sale-leaseback transactions are back in vogue. With the tenuous economy, businesses of all types are interested in sale-leasebacks as an avenue to monetize their assets.

In the wake of the lending crisis, banks have sold off their retail branches and office buildings in response to declining capital positions. Locally, Countrywide Home Loans sold the office building at 5220 Las Virgenes Road in Calabasas, CA, to digital technology developer DTS, Inc. for $15.64 million or $182 per square foot. The sale is a partial sale-leaseback; with Countrywide continuing to occupy 59,457 square feet of the 85,948-square-foot building.

CoStar reports that sale-leasebacks were about 2.2% of all closed transactions by dollar volume in third-quarter 2007, totaling about $2.1 billion. During the same quarter last year, those transactions had doubled as a percentage of total sales volume to 4.4%. Notably, third-quarter 2008 was the strongest of the year for sale-leasebacks and among the strongest on record.

“Sale leasebacks are still a bright spot in the real estate market right now,” noted Bruce Westwood-Booth, managing director for Jones Lang LaSalle’s Corporate Capital Markets Group. “Volume was very strong last year and we had another record year in that area. Whether we’re just picking up market share or whether our clients are more interested, it’s hard to say….but pricing has been impacted, so we’re also seeing a rise in cap rates.”

Private investors acquired the industrial buildings at 2255-2267 Agate Court in Simi Valley, CA, from Turbonetics for $5.35 million, or $153 per square foot. The seller, a turbo systems manufacturer, will continue to fully occupy both buildings. The industrial facilities total 34,875 square feet and were constructed in 1985 in the Moorpark/Simi Valley Industrial submarket.

Jay Koster, managing director of Jones Lang LaSalle’s Corporate Capital Markets practice, predicts a significant sharpening of the corporate appetite for sale-leasebacks in 2009. He notes that inquiries from the firm’s corporate clients are up by 300% versus 18 months ago.

“Corporations are looking for capital capacity to operate their businesses and position themselves to take advantage of opportunities that will arise through this market cycle,” Koster noted. We expect that appetite will be matched by heightened demand from investors that recognize inherent value in real estate leased to strong-credit corporations.”

JLL predicted an increase in corporate sale-leasebacks last year — “and that trend will absolutely continue [in 2009] as corporations remain challenged in securing new sources of capital,” added Kenneth Rudy, Jones Lang LaSalle’s president /COO. “Investors are more willing to commit capital to acquire companies’ owned assets tied to long-term, credit leases. We also expect to see more corporate dispositions to come from downsizing in 2009 as corporations mark-to-market the value of surplus real estate inherited in acquisitions at market clearing prices.”

All the dirt @

http://www.costar.com/News/Article.aspx?id=8BF2590E41B392530B05DF90ACC7A547&ref=100&iid=116&cid=383F14EEE265B182474DA2442BACBBBF

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COMMERCIAL REAL ESTATE FINANCE TAKES A HIT

COMMERCIAL REAL ESTATE FINANCE TAKES A HIT

by Jodi Summers

Those involved in commercial real estate are feeling confident that the marketplace won’t take anywhere near as hard a hit the residential real estate market…but the fallout has certainly begun. Some companies, such as Anthracite Capital, may not survive to benefit from the Federal Reserve’s effort to resurrect the U.S. financial markets with cash.

Forbes.com, the rock for reliable statics and information, reports that BlackRock-managed Anthracite Capital invests in high-yield (read: junk) bonds and loans that finance commercial real estate. Recently, the company announced a mammoth fourth-quarter loss - financial problems ranging from busted loan covenants to unpaid margin calls - and a warning by its auditors that its demise may be imminent.

The experts perceive that when times are tough and market conditions are deteriorating, banks behave differently. As markets deteriorate, bank loan portfolios erode in value putting pressure on bank capitalization ratios.

“Undercapitalized banks shift their attention to short-run capital preservation rather than long-run profit maximization, and this change in goals has several undesirable effects,” observed Eric S. Rosengren, president and CEO of the Federal Reserve Bank in Boston. “Perhaps the most undesirable is that undercapitalized banks, finding it difficult to raise additional capital, are forced to improve their capital ratios by shrinking assets.”

“Since loans are usually the bank’s most significant asset, lending becomes more restrictive,” he said. “And, because undercapitalized banks seek to shrink without incurring additional losses, the specific form the asset shrinkage took could be perverse. For instance, some banks would support troubled borrowers in an effort to avoid loss recognition, while reducing credit to more creditworthy borrowers with whom the bank could curtail credit without incurring a loss.”

Anthracite’s Problem goes back to the company’s business model, which call for a steady stream of outside funding. Issue is, the company has been shut out of the financial markets by the subprime-spawned disaster, and this issue subsequently affected the company’s commercial sector. Anthracite Capital reported a loss of $3.49 per share, miles below the 25 cents per share gain Wall Street had expected. Sales meanwhile were only $26.3 million, 69.6% below the $86.5 million consensus forecast. During the 2007 fourth quarter the company earned 24 cents per share.

In response, It lost half its value on March 18th, closing at 40 cents. The shares began to falter in the middle of 2007, when the subprime crisis started to freeze up credit markets; the stock traded above $12.50 at the time and spun off an annual dividend of about $1.20.

Forbes.com concludes: “Anthracite is a perfect example of what can go wrong with real estate-related businesses. As financing for the sector evaporated, it caused prices to drop, leading to reduced demand for the securities and loans in which Anthracite dealt.”

Original content @

http://www.forbes.com/2009/03/18/anthracite-capital-blackrock-markets-equity-commercial_print.html

http://www.costar.com/News/Article.aspx?id=A8CD2AA8205D4246D8EF8B4AAA852644&ref=100&iid=123&cid=383F14EEE265B182474DA2442BACBBBF

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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/

NEW MARKET TERMS

NEW MARKET TERMS

 by Jodi Summers

We get lots of interesting email…this one, from Sanddra ay Costalife Services rollover@costalifeservices.com  gives us a chuckle…

BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET — A 6 to 18 month period when the kids get no allowance and the wife gets no jewelry.

VALUE INVESTING — The art of buying low and selling lower.

BROKER — What my broker has made me.

STANDARD & POOR — Your life in a nutshell.

STOCK ANALYST — Idiot who just downgraded your stock.

INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.

PROFIT — An archaic word no longer in use.