Socal Multiunit Real Estate

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

http://www.newagedesign.com.au/library/scales.jpg

http://www.acumenlawgroup.com/wp-content/uploads/2009/11/commercial-loan.jpg

http://www.sandiegocommercialfunding.com/xSites/Mortgage/AxisRealEstateMortgageInc/Content/UploadedFiles/office_building_commercial_loan.jpg

http://www.sbasmallbusinessloans.com/moneywalk.jpg

GLOBAL EDGE TOP 10 BUSINESS DESTINATIONS

GLOBAL EDGE TOP 10 BUSINESS DESTINATIONS

edited by Jodi Summers

Global Property Guide has put together a list of the most attractive

property investment destinations across the world. Their research team

has ranked 77 of the world’s largest cities according to the average

gross rental yields.

The top 10 destinations are dominated by Asian cities, with Jakarta,

Kuala Lumpur and Manila all making the list.

http://www.globaledge.co.uk/news/top-10-best-investment-destinations-35909

10 GREEN BUILDING STUDIES OF INTEREST TO YOU

10 GREEN BUILDING STUDIES OF INTEREST TO YOU

by Jodi Summers

We are always bringing you statics and reports – now we thought we’d bring you a succinct collection. Recently The Green Economy Post highlighted 10 noteworthy green building studies. We’d like to share highlights with you as well as the appropriate links so you can dig deeper. Enjoy and be green…

Global Green Building Trends: Market Growth and Perspectives from Around the World.

http://construction.com/SmartMarket/globalgreen/default.asp

Research conducted by McGraw-Hill Construction Analytics regarding the global green building industry details the market trends and activities driving green building growth worldwide. The new research presented in the report indicates that green building has become a global phenomenon, with 53% of respondents expecting to be dedicated to green on over 60% of their projects in the next five years.

Reshaping Municipal and County Laws to Foster Green Building, Energy Efficiency, and Renewable Energy

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1107529

credited to Edna Sussman - Hoguet Newman Regal & Kenney LLP

The efficient use of energy in the built environment has been recognized by the Intergovernmental Panel on Climate Change (IPCC) and many other experts to offer a potential greater than any other sector to reduce CO2 emissions using mature cost effective technologies. Many governmental units and professional organizations have committed to a goal of carbon neutrality in buildings by 2030. The paper offers an outline of how local governments can have a critical positive impact on global warming and on meeting these goals by creating a receptive legal environment and enacting mandates that foster green buildings, energy efficiency, and renewable energy both in government operations and by the general population.

Using Mandates and Incentives to Promote Sustainable Construction and

Green Building

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1066982

Presented by the Social Science Research Network, this report emphasizes that timely, meaningful movement toward sustainability in the U.S. building industry requires state-level legislation that promotes, and sometimes even mandates, green building standards at the regional and local levels.

Corporate Responsibility and Sustainability Dollars & Cents of Green Retrofits

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_re_Dollars_Sense_Retrofits_190608_.pdf

This joint study by Deloitte and Charles Lockwood that shows there is substantial statistical evidence that green buildings are better for the environment than conventional buildings. Many forward-thinking companies are realizing that green buildings can be better for business, too. Green buildings offer their owners and tenants a number of bottom-line benefits, including reductions in water and energy use and costs; opportunities with respect to tax credits, permitting, and other regulatory incentives; and greater worker productivity and satisfaction, improved brand image, and better community relations.

Cascadia Value of Green Building Study

http://www.cascadiagbc.org/news/GBValueStudy.pdf

This report by the Cascadia Region Green Building Council, the Vancouver Valuation Accord and Cushman & Wakefield is a tool to help bridge the gap in understanding between the green building and financial communities. It is a study of office buildings in Seattle, Portland and Vancouver, BC and identifies how high-performance green features and systems can increase the value of commercial buildings. The report outlines how value was achieved and how sustainable attributes impact costs, savings, investment income, and capital value.

Energy Efficiency Retrofits for Commercial and Public Buildings

http://www.pikeresearch.com/archives/energy-efficiency-retrofits-for-commercial-and-public-building

Presented by Pike Research, this paper focuses on the energy efficiency retrofit market, which recently received a major boost from the American Recovery and Reinvestment Act of 2009 (ARRA). The paper observes that the largest potential for long term, sustained growth in commercial building retrofits lies in the private commercial space. Compared to conventional space, high-performance green building space is vacant less often and commands premium prices, leading commercial building owners to adopt green retrofits as a market differentiator.

The Green Building Revolution: Addressing and Managing Legal Risks and Liabilities

http://www.mgkflaw.com/Green%20Building%20Revolution.pdf

Harvard Law School Environmental Law and Policy Clinic - As green building expands from the exception to the rule, certain legal risks are inevitable. For building green to become a standard business practice, parties involved in project construction and management – owners, buyers, tenants, design professionals (architects, engineers, and consultants), contractors, and subcontractors – must become familiar with the legal risks and liabilities associated with green building, as well as strategies to minimize them. This white paper addresses the current movement toward green building, the increasing number of mandates requiring it, and the benefits and costs associated with building green; analyzes the legal risks and potential liabilities to those involved in green building; and concludes with practical recommendations for minimizing such risks and liabilities.

Green Building: Assessing the Risks–Feedback from the Construction

Industry

http://global.marsh.com/news/articles/greenbuildingsurvey/download.php

Marsh, the world’s leading insurance broker and risk advisor, reports lays out the concerns that building owners, contractors, and design firm executives are most concerned about with regards to green buildings. They include risks that may be associated with these projects, including potential financial exposures, uncertainty about evolving regulatory standards and legal issues, validating the qualifications of

consultants and subcontractors, and assessing the long-term performance of green building materials, among other potential issues in green design and construction.

The International Facility Management Association Green Practices Study

http://www.ifma.org/tools/research/surveys/GreenSurveyResults2008.pdf

This IFMA study involves the measurement of attitudes and behavior of facility managers in relation to implementing sustainability initiatives at their organizations.

Overcoming the Social and Psychological Barriers to Green Building

http://oae.sagepub.com/cgi/reprint/21/4/390

This University of Michigan article argues that environmental progress in the building design and construction industry will continue to stall if the significant social and psychological barriers that remain are not addressed. After surveying the three levels of barriers—individual, organizational, and institutional—the article concludes with seven strategies for overcoming them.

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http://greeneconomypost.com/green-building-studies-3879.htm

LOS ANGELES MULTIUNIT PROPERTY SNAPSHOT – MARCH 2010

By Jodi Summers

And the good news is – research is indicating that the Los Angeles employment market is expected to stabilize in the second half of 2010. Following a loss of 115,000 jobs in 2009, payrolls are forecast to expand by 0.3 percent this year, with the addition of 13,000 positions, observes the 2010 National Apartment Index Report by Marcus & Millichap. The lack of job growth is hurting demand in the multifamily market, confirms Reis Research. “It is only when labor markets stabilize and recover that we will see a ramp-up in household formation that represents the greatest driver for rental apartments,” observes Victor Calanog, Reis research director.

Investors obviously feel that the Los Angeles market is stabilizing. Comparing February 2008 to February 2010, the number of under contract multiunit properties in Los Angeles is up 148%, according to Clarus Market metrics.

In 2009, the national vacancy rate for apartment properties rose 1.3 percentage points to 8%, the highest level since t in 1980. Average asking rents in the sector dropped 2.9% to $1,026/unit last year. Rents fell or held flat in 69 of the 79 markets tracked by Reis.

For years, Los Angeles has had low, low, low vacancy rates, hovering between 2-3 percent – making it a very attractive market. Even with the recession making higher priced units on the West Side less desirable, vacancy rates are still hovering between 5-6%. The National Apartment Index Report notes that the lingering high unemployment will continue to pressure owners to lower rents. Asking rents are expected to fall to $1,335 per month in 2010, while effective rents will slip to $1,263 per month, respective declines of 2.8 percent and 3.6 percent annually.

Now that the economy is coming back, Los Angeles multiunts are still attractive. Between Feb-08 vs. Feb-10, the number of for sale properties is down 44% and the number of sold properties is up 53%.

According to Realpoint, 6.53% of securitized loans backed by multifamily properties are delinquent, which is the CMBS market’s second-highest delinquency rate behind the hotel sector’s 8.09% rate.

Investors realize the current value of the Los Angeles, and there is a trend of cash-rich buyers shifting money out of the stock market and buying multiunit property with the intent of holding it for future generations. This is why the average months supply of inventory is down -79.8%

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We would like your real estate business. If we can provide you with more detailed information, please contact the SoCal Investment Group through Jodi Summers, Jodi@jodisummers.com. We look forward to working with you in your next real estate transaction.

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http://www.loopnet.com/xnet/mainsite/news/news.aspx?DocID=12898

http://www.reuters.com/article/idUSTRE5950PA20091006

http://www.socalmultiunitrealestateblog.com/?p=689

http://www.tierraproperties.com/current_market_data/metro_la_apt_vacancy_table.htm

http://realpropertyalpha.com/2009/08/17/metric-to-watch-apartment-vacancy-rate/

http://www.marcusmillichap.com/aboutus/News/Current/020510_los_mm.asp

https://www.terradatum.com/