Anthony Homer » Commercial Investment

Office Transaction Volume Heating Up

Anthony — Fri, 23 Jul 2010 19:07:59 +0000

PPR DAILY UPDATE – July 22, 2010

“Transaction Activity Heating Up“
Author: Aaron Jodka (aaron.jodka@pprglobal.com)

June was a big month for commercial real estate: It marked the first time since the Lehman implosion that sales topped $10 billion. For deals of at least $1 million, total sales hit $11.3 billion – $4.9 billion of which were office deals (see Exhibit 1). The flurry of core office deals in markets like New York and Washington, D.C., propelled the strong monthly volume. To be sure, sales have not returned to pre-crisis levels (around $20 billion monthly), but they are well off the lows ($4 billion) of early 2009.

Psychological price and volume barriers aren’t as talked about in commercial real estate as they are in the stock market. But nonetheless, crossing a volume threshold that has eluded the market for 21 straight months is certainly a good sign.

Deal Junkie reports GE Real Estate To Cut its CRE Portfolio in Half

Anthony — Tue, 08 Jun 2010 19:46:54 +0000

GE Capital holds an $80 billion portfolio of assets like office and apartment buildings, as well as loans secured by commercial property. Mike Neal, chief executive of GE Capital and a GE vice chairman, on Friday said the firm aims to cut that portfolio to $40 billion and to shift its composition more toward loans and away from ownership stakes.

While he didn’t give an exact time frame for the goal, the comments further clarified GE Capital’s plans for a troubled business. The market value of commercial buildings the company owns has fallen by nearly 40%, or $7 billion, since 2008 GE estimates. The company also has lost more than $1.6 billion since 2008 in its commercial real-estate debt portfolio, which includes loans to others to buy or develop properties.

Deal Junkie reports GE Real Estate To Cut its CRE Portfolio in Half.

REITs Have Plenty of Cash, Scarce Opportunity

Anthony — Thu, 04 Feb 2010 20:58:46 +0000

FROM THE WSJ – By ANTON TROIANOVSKI

For public real-estate companies, spending money has turned out to be harder than raising it—even as some signs point to a pickup in big property deals.

Real-estate investment trusts sold $24 billion in new stock last year, raising hopes the companies would be able to profit from commercial-property distress by picking up high-quality real estate at bargain prices.

But publicly traded REITs bought only $4.6 billion of property in 2009, a 67% decline from the previous year, according to research firm Real Capital Analytics.

With few deals happening and REIT shares now trading at twice their March lows, some executives regret last year’s money-raising binge.

“Today I’m sitting with $125 million in cash that I can’t find investment for,” Stephen Richter, chief financial officer of Weingarten Realty Investors, said in an interview. “If I would have known the markets are where they are today, I certainly wouldn’t have sold a third of the company.”

Weingarten, which owns shopping centers and warehouses in 23 states, sold about $380 million in stock last April, a time its shares were trading at less than half their value of a year before.

REITs are having difficulty doing deals partly because there is a dearth of product on the market. With commercial-property prices some 35% off their peak, most building owners are keeping their best assets off the market. Those properties that do go on the block are attracting a herd of buyers looking to snap up cheap real estate.

Many REIT executives and investors expected the volume of distressed buildings on the market to surge as owners defaulted and lenders foreclosed on property. But while the number of problem loans has been growing, so far this hasn’t translated into many fire sales. Banks have been willing to extend loans rather than foreclosing, and the firms that oversee commercial mortgages bundled into securities have also been slow to sell off distressed assets, market participants say.

“The volume of the properties that are truly distressed and will be sold in a distressed fashion will be significantly less than had initially been thought,” said Bob Steers, the co-chief executive of REIT investor Cohen & Steers Inc.

The scarcity of “for sale” signs has particularly roiled the market for “blind pool” REITs, which raise money from investors in order to build a new portfolio of real estate.

Last week, Terreno Realty Corp., which sought $200 million from investors to snap up warehouses on the cheap, postponed its initial public offering. Research firm Green Street Advisors recommended clients not participate in the offering because the ability “to acquire properties at discounts to underlying fair current-market value is likely to be limited” for industrial real estate. Through a spokeswoman, Terreno Chief Executive Blake Baird declined to comment.

Another prospective blind pool sputtered in December when shareholders in a blank-check company balked at turning their cash over to a management team that would use it to buy strip malls. “People, I think, fundamentally were concerned that we wouldn’t be able to generate the volume of acquisitions or investment opportunities to justify the investment in a blind pool,” said Bill Gerrity, who would have headed up the REIT. Instead, the $288 million blank-check company, Global Brands Acquisition Corp., said it would return its investors’ money.

The best opportunities for REITs may lie in sales of large portfolios by private investors who can’t access capital as readily as public companies. The bigger the portfolio and higher the price tag, the less the competition from other buyers.

In the biggest deal by a REIT since the downturn, mall landlord Simon Property Group Inc. in December said it would buy Prime Outlets, another shopping center owner, for $700 million. The sale gave Prime’s closely held parent, Lightstone Group LLC, cash to address the capital needs of its Extended Stay Hotels chain, which is now in bankruptcy protection.

In another big deal with a private owner, apartment giant Equity Residential on Monday announced a $475 million deal for three Manhattan buildings owned by debt-burdened New York City developer Harry Macklowe. One analyst said Equity Residential may have acquired the apartment buildings for half of what they would have gone for a few years ago.

“The advantage of access to capital will stay around for a while,” said Ross Smotrich, a REIT analyst at Barclays Capital.

But Equity Residential’s other recent deals show bargain-basement prices for high-quality real estate are rare even today, amid the worst commercial-property downturn in a generation. Chief Executive David Neithercut said the company would soon announce the acquisitions of two apartment buildings in the Washington, D.C., area and one in California. He declined to reveal the price paid but said the deals came in at less-eye-popping discounts than the Macklowe buildings.

The reason: Many others—from foreign buyers to private investors with cash to spend—also want to get in on the action.

In October, Equity Residential paid $100 million for a 326-unit apartment complex in Arlington, Va.. The property drew 160 interested parties and 40 offers, a level of interest that Alan Davis, a broker who represented the seller in the deal, said he couldn’t recall in several years of shopping multifamily properties in the Washington area.

Write to Anton Troianovski at anton.troianovski@wsj.com

Tough times for Sarasota and Manatee commercial real estate

Anthony — Mon, 04 Jan 2010 15:14:03 +0000

By KEVIN L. McQUAID

Published: Monday, January 4, 2010 at 1:00 a.m.

STAFF PHOTO / CHIP LITHERLAND

It’s more difficult to borrow money, vacancies are up, values and rent are down and the key to a solution – jobs – could be years away.

To borrow a biblical expression, it may be easier these days to pass a camel through the eye of a needle than it is to get a commercial real estate loan.

Despite federal bail-out money intended to stimulate lending, loans for investment in office buildings, shopping centers, industrial sites and raw land are increasingly rare, the result of falling values and other factors.

Commercial property owners and mortgage brokers say the lack of capital also stems, in part, from new federal regulations intended to staunch foreclosures and halt the aggressive lending practices of the early 2000s.

“It’s ironic that the federal government put all the stimulus money into banks, while another branch of the government is over-regulating capital reserve requirements on banks,” said Brett Hutchens, chief executive officer of Casto Lifestyle Properties, a Sarasota development firm that owns shopping and lifestyle centers nationwide.

“The same government is providing both the carrot and the stick to lenders,” Hutchens said. “It’s created gridlock and made lending and borrowing very, very difficult.”

“It’s a Catch-22 the government has imposed,” said N.J. Olivieri, president and owner of Sarasota-based Horizon Mortgage Corp. “They tell the banks to make loans but then tell the FDIC to tighten the restrictions on new lending.”

New regulations notwithstanding, lenders say the pullback in available credit is appropriate, given the shaky economy.

“Banks are simply not looking to take extended risk today,” said Charlie Murphy, chief executive of the Bank of Commerce, a Sarasota lender, and a board member of the Florida Bankers Association, a trade group.

“It’s not unusual for banks, in bad economic times, to tighten their lending standards,” Murphy said. “And regulators are not too happy these days about allocating new money to commercial real estate.”

Other forces

Banks have been hurt, as well, by other forces beyond their control.

Most notable has been the exit from the lending market by risk-averse insurers and pension funds, typically a key source for permanent mortgages.

That has crippled commercial real estate owners seeking to refinance or simply shift loans from banks, as is usually done.

That, in turn, has forced banks to keep mortgages on their books, which further limits their ability to cut new loans — especially in the construction and real estate sectors.

The precipitous drop in commercial real estate values — combined with falling rental rates on nearly every property segment — represents the largest factor in the dearth of lending, however.

Retail rental rates have fallen by as much as half, and many tenants remain unable to pay rent at all, part of the fallout from the longest economic recession since the Great Depression.

Vacancies, too, from super-regional malls to neighborhood-anchored strip centers, have risen dramatically.

“In many cases, shopping centers are full, but not all of the tenants are paying rent,” Olivieri said. “Landlords don’t want their space to go dark, so they’re letting them stay put.”

Office rents have also fallen, in Southwest Florida and nationwide — by 20 percent to 30 percent in some cases.

“In some submarkets, there is an even greater devaluation of rents,” said John Harshman, president of Harshman & Co., a Sarasota commercial real estate brokerage firm.

The lack of income, and decrease in values, has forced many property owners to come up with new equity on loans to satisfy lenders’ re-appraisals, investors say, even on performing mortgages.

Regulators, too, are calling on banks to beef up reserves and loan coverages by thinning loan-to-value ratios.

Restrictions

Meanwhile, the few commercial real estate loans that are available come with excessive restrictions, including onerous equity requirements and repayment schedules, which are also the result of new federal regulations.

In many cases, lenders that once required investors to put down 20 percent or 30 percent equity are demanding twice those percentages — and borrowers’ personal guarantees — before they will consider loaning money.

“We’ve gone from having an unsecured line of credit, on a performing loan, to getting a commitment for just one-year from the bank, and the terms are complex,” said Andy Dorr, a senior vice president with Githler Development Co., a Sarasota real estate investment and development firm.

As a result, Horizon and others have begun lining up equity partners for developers or investors, Olivieri said.

At the same time, Dorr said, the costs associated with commercial real estate borrowing — appraisals, origination fees, legal expenses and environmental analysis — have increased in many cases.

The hiked fees and the lack of new capital are both tied, investors and lenders say, to the fear that a commercial real estate meltdown is in the offing. Already, development giants such as mall owner General Growth Properties have defaulted on commercial real estate loans — a signal to some analysts that another wave of foreclosures is ahead. Next year alone, hundreds of billions of commercial real estate loans, many of which were cut during the real estate boom and required interest-only payments, will mature or come due nationwide. When that occurs, many predict, defaults will spike.

“Everyone keeps saying that commercial real estate is the next shoe to drop,” Hutchens said. “Well, I have to agree: It’s about to drop.”

The answer, industry experts say, can be summed up in a single word: Jobs.

“We have to stimulate the economy with more jobs and small business,” Murphy said. “When we have jobs, then businesses expand and the economy cycles upward. The opposite is also true, and it creates a vicious, self-fulfilling prophecy.”

“People have to go back to work,” Olivieri said. “Specifically, in construction.

“Construction has always led the way out of recession; it’s key. It starts the employment cycle, and then retailers hire and the cycle returns to supply and demand. But if you don’t have a job, if you don’t know where your next dollar is coming from, then you don’t spend,” Olivieri said.

Unfortunately, for Florida, that job growth may be a long time in coming.

Unemployment in Southwest Florida stands at 12.7 percent, slightly above the 11.5 percent statewide average, which is at the highest level since October 1975. Nationally, unemployment is just under 10 percent.

Even more dire are some economists’ predictions that Florida’s unemployment rate will not fall to 6 percent — within the range of a moderately healthy economy — until 2018.

If that proves true, experts believe commercial real estate will remain depressed well into the future.

“The 12 percent unemployment rate in Sarasota and Manatee counties, and the 10 percent rate nationally, will create more commercial real estate vacancies,” Harshman said. “And more vacancies will, in turn, further drive down commercial real estate values.”

This story appeared in print on page D6

Bloomberg Commercial Real Estate Videos

Anthony — Wed, 09 Dec 2009 15:12:31 +0000

Jaime Woodwell, vice president of commercial real estate research for the Mortgage Bankers Association, talks with Bloomberg’s Carol Massar and Matt Miller about the commercial real estate market. Delinquencies on commercial mortgage-backed securities rose to a record in the third quarter as unemployment rose and landlords struggled to retain tenants.

Bloomberg’s Greg Miles reports on the outlook for GE Capital’s exposure to the commercial real estate market. The best part of the video is at the end where there is an indication that GE believes that writing down loans and carrying them to maturity are mutually exclusive!

LAKEWOOD RANCH COMMERCIAL REALTY ADDS NEW AGENTS

Anthony — Mon, 30 Nov 2009 14:49:36 +0000

FOR IMMEDIATE RELEASE

November 30, 2009

For more information contact:

Candice McElyea

941-757-1546

LAKEWOOD RANCH COMMERCIAL REALTY ADDS NEW AGENTS

DIANE LAWSON & ANTHONY HOMER JOIN THE TEAM

Lakewood Ranch Commercial Realty is pleased to announce the addition of two top commercial agents to the team. Diane Lawson and Anthony Homer bring a wealth of experience and top notch customer service to Lakewood Ranch Commercial Realty. “With the addition of Diane and Anthony we are able to focus on our core Lakewood Ranch market while expanding general brokerage business in Sarasota and Manatee counties,” said Brian Kennelly, President of Lakewood Ranch Commercial Realty.”

Anthony Homer’s background includes the management of over half a million square feet of office and retail space in Lakewood Ranch and downtown Sarasota. Formerly with Hembree & Associates, he served as a tenant representative to several national and global companies and represented a broad range of clientele that included start-up retailers and Fortune 500 companies with multi-billion dollar portfolios.

He currently serves on the Board of Directors of the Sarasota Association of Realtors, is a member of SAR’s Commercial Investment Division, and is the Founder and Past-President of the Sarasota Young Realtors Association.

Diane Lawson has been in the commercial real estate industry for over 20 years specializing in sales and leasing of office and retail space. Formerly with Abbey Realty and Management for more than 10 years, she was recognized as one of Gulf Coast Business Review’s Top 40 under 40 for her expertise in this industry in Sarasota and Manatee counties in 2005. In 2007 Diane served as President of the Commercial Investment Division of the Sarasota Association of Realtors.

“I am thrilled with the opportunity to work with such a high level development team;” said Lawson, “a team which will provide a superior book of business enabling me to develop in Lakewood Ranch the same great reputation of success that I had in the downtown market.”

Lakewood Ranch Commercial Realty is an industry leader with a strong reputation in Florida commercial real estate, with expertise in every aspect of the project cycle, including development, leasing and the sale of office, retail, industrial, hotels, and medical space, as well as market analysis, interim financing, permanent financing, construction and property management.

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Lakewood Ranch Commercial Realty, a subsidiary of Schroeder-Manatee Ranch (SMR), is a full-service commercial real estate brokerage organization. The company specializes in the award-winning community of Lakewood Ranch, located in the desirable Sarasota/Bradenton region of Southwest Florida, an hour south of Tampa and Saint Petersburg. www.lwrcommercial.com

Development Land Use Attorney Joins Berlin Law Group

Anthony — Tue, 17 Nov 2009 16:11:06 +0000

Evan Berlin and Brenda Patten

One of Sarasota’s most prominent development attorneys has formed a new firm with a veteran real estate lawyer to create a “one-stop shop” for land-use services.

The Berlin Patten law firm, a venture between developer representative Brenda L. Patten and real estate lawyer Evan N. Berlin, formed last month.

The new firm, based in the Sarasota City Center office tower at 1819 Main St., has five attorneys and 14 total employees.

Steve Forbes on “How Capitalism Will Save Us”

Anthony — Mon, 16 Nov 2009 16:55:08 +0000

The worst recession in decades has shaken faith in our economic system – and even before the current downturn, our culture was curiously ambivalent about free markets and wealth creation. We need a full recognition of how we got here – and why capitalism truly is the best route to prosperity.

Steve Forbes continues to believe that capitalism is the world’s greatest economic success story, he said at this Milken Institute Forum. Forbes, whose latest book is How Capitalism Will Save Us, said free markets are not to blame for the economic downturn.

“Right now, capitalism is under a cloud. People are blaming it for the crisis that we are facing,” he said. “But the book discusses what capitalism truly is and why in a crisis usually it’s the government policies that bring about the crisis, but free markets get the blame for it.”

Check it out here.

More Sarasota Bank Closings

Anthony — Mon, 16 Nov 2009 12:09:32 +0000

Orion Bank Closed

In Florida, officials closed Orion Bank, Naples, Florida, and entered into a purchase and assumption agreement with IBERIABANK, Lafayette, Louisiana, to assume all of the deposits of Orion Bank. As of October 31, 2009, Orion Bank had total assets of $2.7 billion and total deposits of approximately $2.1 billion. The FDIC accepted a 1.5 percent discount from IBERIABANK on the deposits of the failed bank.

The FDIC and IBERIABANK entered into a loss-share transaction on approximately $1.9 billion of Orion Bank’s assets. IBERIABANK will share in the losses on the asset pools covered under the loss-share agreement.

IBERIABANK also agreed to purchase the assets of Century Bank, Federal Savings Bank, Sarasota, Florida, after it was closed Friday. As of October 31, 2009, Century Bank, FSB had total assets of $728 million and total deposits of approximately $631 million.

The FDIC accepted a 1.5 percent discount on the deposits of the failed bank from IBERIABANK. In addition to assuming all of the deposits of the failed bank, IBERIABANK agreed to purchase $706 million of the failed bank’s assets. The FDIC retained the remaining assets for later disposition.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for this week’s bank closing will be approximately $986 million.

Blumberg Looking at Commercial Real Estate Deleveraging

Anthony — Mon, 26 Oct 2009 13:49:58 +0000

What kind of buying opportunities are going to be available in the double dip in the commercial real estate market?

The Sarasota and Lakewood Ranch markets are going to continue to fight for tenancy even as the housing market continues to stabilize. Newer commercial office buildings with the ability get leased rather soon will do better than legacy buildings.