Sarasota Real Estate

The CoStar Commercial Repeat-Sale Indices (CCRSI), produced by CoStar Group, found that investment-grade property continued to decline in value for the second straight month in July. 

Properties of sufficient quality and size for inclusion in large institutional portfolios saw their value decline by 5.05% during the month following a similar dip in June. The cumulative drop of nearly 10% over the two-month period nearly offsets the strong 11.78% increase in May that gave analysts hope that the recovery might be accelerating. As a result, the three-month change in the investment grade index ending July 31 posted a slight 1% increase. The CCRSI August report is based on data through the end of July. 

The investment grade index fell 14.34% over the last 12 months — seemingly a large decline, but a major improvement over the 20% to 33% annual drops observed from April 2009 through April 2010. 

However, while institutional real estate is softening, general commercial real estate continued to show improvement. The CoStar composite index for all commercial real estate rose 6.41% for general commercial property and 5.67% for the composite in July, suggesting that with investors finally able to source financing, interest is picking up in second-tier and tertiary markets and smaller properties. The general composite index remains down by nearly 6% from a year ago, but far better than numbers observed during the previous 12 months. 

---

For more information about the CoStar Commercial Repeat-Sale Indices, please visitwww.costar.com/ccrsi/.

---

Still, given the weakness in the important institutional-grade market segment, “It’s a shaky bottom” for commercial real estate, said Norm Miller, vice president of analytics for CoStar Group, Inc., commenting on the July indices. 

“This recovery is not going to be V-shaped where we hit bottom and bounce right up,” Miller said. “We’re actually seeing investment-grade and general real estate go two different directions, which is pretty interesting.” 

“It appears transaction volume is picking up slightly in general real estate and [investors] are finally able to close some of those deals. I wouldn’t say underwriting standards have loosened, but it’s increasingly possible to get financing for investors with enough equity to put down.” 

Miller said the market will continue to be tainted for a while yet by distress due to the uneven national economic recovery. “A fair amount of distressed sales is mixing into our numbers, so we’re seeing more distress for investment grade than for general real estate. By average transaction size, the distress sales are much bigger than general sales, and that means there’s more distress mixed in with that larger investment-grade market.” 

Sales transaction dollar volume picked up for all property types during the second quarter of 2010, with significant increases in the office and multifamily sectors. Industrial and retail volumes remain low but also showed some increase in activity.Overall investment activity appears to be trending slightly higher so far in the third quarter over the second quarter, Miller said. 

While transaction volume increases generally point to positive movement in pricing, the level of distressed sales is adding volatility and noise to the indices, “and all we can say now is we’re observing a shaky bottom,” Miller said. 

CoStar launched the CCRSI last month in response to the void within the $11 trillion U.S. commercial real estate industry for an effective, non-biased indices to measure commercial real estate price movement by property type and geography. The index fills a gap for consistent and timely information on fundamental economic issues facing the CRE industry, including the important question of whether prices and values are climbing or falling on a month-to-month basis. 

CoStar has identified more than 85,000 repeat sale pairs in its U.S. database, which it believes is the largest and most comprehensive comparable sales database in the U.S. commercial real estate industry. 

Pair volume has been trending upward since 2009, with February 2009 appearing to have been the low point in the downturn, when just 374 sale pair transactions were recorded. Since then, pair volume has increased overall and beginning in November 2009, year-over-year changes in pair volume have been positive every month. 

Other significant observations of the latest indices include the following: 

• Public and private real estate investment trusts (REITs) have been the most active buyers, followed by developer-owners and individuals and investment managers, including hedge funds.





• Distress is a factor in the mix of properties being traded. Since 2007, the ratio of distressed sales to overall sales has gone from around 1% to above 23% currently. While overall distressed sales are still increasing, they appear to be peaking as a percentage of sales, although overall volumes are also picking up, according to the CoStar National Composite Monthly Indices.





• Hospitality, at 35%, showed the highest level of distressed sales as a percentage of transactions in the second quarter, followed by multifamily at 28%, office, 21%; retail, 18% and industrial, about 17%.

CoStar saw an increase in the proportion of repeat investment-grade properties trading hands in June. Investment-grade sales amounted to 31% of the total number of sales in June, the highest level it has been going back to January 2008. 

That indicates an increase in larger properties changing hands, which had been at low ebb since the beginning of the recession. Prior to June, 24% of sales pairs in 2010 were considered investment grade. This compares to an average of 33% of sales pairs being investment grade in 2006 and 2007, before the start of the downturn.

via Tervis Tumbler buys 3.5 acres in Nokomis business park | Real Estate | HeraldTribune.com.

Real-estate funds saddled with tens of billions of dollars of boom-time properties are beginning to get some relief from Wall Street firms and other investors hoping to capitalize on their need for cash.

Opportunistic investors are buying stakes in troubled funds at steep discounts or lending the funds money in deals that give them a steady return and potentially a share in the profit if real-estate markets rebound. At the same time, some funds are succeeding in persuading existing investors to cough up more capital, although this typically is an uphill struggle.

Real-estate funds are a particularly needy bunch. By some estimates, about 80%—or $335 billion—of the $420 billion amassed in the U.S. by real-estate funds since 1999 was raised from 2005 to 2008, the height of the market. And the money was spent quickly.

Now, amid depressed property values and maturing loans, a total of 40 private-equity real-estate funds have gone back to their investors for additional capital since last year, according to Townsend Group, which invests on behalf of institutional clients. But only a handful, including funds run by Deutsche Bank AG and Stockbridge Real Estate Funds—have been successful, as existing fund investors like pension funds and college endowments worry about throwing good money after bad.

It took more than a year for the $1.6 billion fund run by Deutsche Bank’s real-estate-investment unit, named RREEF, to line up $100 million of additional capital from its investors, according to people familiar with the matter.

A disclosure made by Pennsylvania’s Public School Employees’ Retirement System provides a window into the desperate needs for cash by some fund managers and the kind of hefty rates that usually come with the extra funds.

According to a presentation made to the board of the retirement system on Aug. 11, a $1 billion fund operated by Stockbridge Real Estate Funds “is facing significant loan maturity and fund-level liquidity issues” and likely “would be forced to abandon or liquidate many of its assets” absent the injection of new capital.

The staff of the retirement system, which had an original commitment of $162.5 million to the fund, recommended it contribute another $20.3 million as part of a $125 million credit line to the fund. The annual interest rate on the new money: 25%.

But most real-estate funds haven’t been able to raise additional capital from investors, nor do they have any remaining promises that investors made to provide additional money in the future, or “uncalled commitments.” That gives Wall Street firms leverage to be opportunistic.

Without the ability to tap existing investors, “they are stuck,” says Jeffrey Giller, managing partner and chief investment officer at Clairvue Capital Partners.

Some investors are simply buying stakes in funds from institutions that have resigned themselves to cashing out at a discounted price.

Others are making deals with the funds directly. In the J.P. Morgan recapitalization of the CB Richard Ellis portfolio, the bank injected $55 million in capital and, in exchange, got preferred equity in six buildings in the portfolio.

“A lot of capital is lining up to take advantage of the opportunity” to recapitalize property funds, says Anthony Frammartino, a principal of Townsend, of Cleveland.

The Clairvue fund backed by Goldman was set up in April to provide capital to help restructure real-estate funds. The loan to Normandy is its first deal.

The Normandy fund, which has holdings that include the Indigo Hotel and two Summer Street office buildings in Boston, purchased most of its properties near the peak of the market and will use the money primarily to buy back its existing debt at discounts.

Jeff Cronning, managing principal of Normandy, predicted in a statement that the increase in the fund’s return from the new capital will be greater than the cost of the capital.

Make up your own mind, but know the facts: check out florida2010.org for more information.

Commercial real estate lender Walker & Dunlop reports it originated the largest Department of Housing and Urban Development (HUD) portfolio of commercial-backed securities since 2005. The loans, a total of $162.m, are financing a 16-property, 2,088-bed portfolio of skilled nursing facilities in Florida.

“This opportunity was a complicated portfolio transaction,” said senior vice president and group head of Federal Housing Administration Finance, Steve Ervin. “Not only did we need to balance the needs of the owners, but also the operator, our lender and HUD.”

Each loan in the portfolio was structured at a rate of 4.95%, with a 35-year term and a 35-year amortization. Loans were underwritten to an average of 81% loan-to-cost.

The news is a rarity in the region. Keefe, Bruyette & Woods reported today that metropolitan statistical areas (MSAs) in Florida rank near the bottom of all commercial real estate indexes for the second quarter of 2010, including the retail sector and industrial sector.

Walker & Dunlop was recently ranked the 19th largestcommercial/multifamily servicer for the first half of 2010by the Mortgage Bankers Association.

Walker & Dunlop Closes Biggest CRE HUD Deal Since 2005 « HousingWire.

19,000 Square-Foot Multi-Tenant Space in Parrish, Fla. Sells for More Than $2.8M

Despite continued concern about and very little movement within the Florida commercial real estate market, Manatee County’s largest retail real estate sale of the year was recently completed.

The final July 22 sales transaction for Allris Plaza, located at 8320 U.S. 301 North in Parrish, Fla. totaled $2.85 Million. The 20,000 square-foot, multi-tenant shopping center was at 91 percent occupancy at closing, with a pool store, fitness club, residential realty, medical office, Italian restaurant and home decorating store as major tenants. Just a single vacancy remained for lease.

“Allris Plaza is a very well-constructed, quality property,” said Larry Richards, CCIM, lead listing broker in the transaction. “Its immaculate condition, prime location and nearly full occupancy rate were all key factors in Manatee County’s biggest commercial real estate sale this year.”

In contrast, the only other two retail real estate transactions for 2010 in Manatee County’s Community Shopping Center Land Use category were for single-tenant retail properties. In early March 2010, a 25,000+ square-foot property sold for $2.256 Million. In early July 2010, a just over 9,000 square-foot property sold for $1.085 Million.

“As we all know, the commercial real estate transaction numbers were staggering in 2009 with national sales at 90 percent less than the peak of the market. Virtually nothing was being traded,” Richards said. “But while Florida commercial and retail real estate transactions are still very low, sales like this – when priced right – are encouraging signs of life.”

Manatee County’s Largest 2010 Retail Real Estate Transaction Finalized.

Florida real estate agents on Monday were awarded one of the first major settlements with the $20 billion Gulf Coast Claims Fund, which just transferred from BP to federal appointee Kenneth Feinberg.

Florida Realtors — the former Florida Association of Realtors — negotiated $16 million from the fund to compensate agents for lost sales and broken contracts stemming from the Gulf oil spill.

John Sebree, lobbyist for the Realtors, said that the money will be distributed to agents through a claims adjusting firm which also is handling the work for four other states.

“It may not go terribly far,” Sebree said. “But it’s a step in the right direction.”

No one has put a figure on the amount of damage the spill did to real estate sales in Southwest Florida, but there has been anecdotal evidence that it scuttled dozens of sales of existing homes and even some contracts for some new homes.

But Manatee, Sarasota and Charlotte counties seemed to dodge the worst of the spill. Bolstered by federal tax incentives, sales rose 33 percent during the second quarter in the Sarasota-Bradenton market and 12 percent in Charlotte County-North Port.

Earlier, real estate claims related to lost sales and lost income were not included in Feinberg’s protocol for handling the $20 billion BP account.

But representatives of Florida, Alabama, Mississippi, Louisiana and Texas have been negotiating for weeks with Feinberg, who formally took over the fund Monday.

In each state, Realtors’ organizations will receive a payout based on the estimated loss to individuals and brokerages from canceled sales and depressed market conditions.

Florida real estate agents to share $16 million of BP payout | HeraldTribune.com.

Amendment 4’s Impact on Our Economy

Study: “Amendment 4’s passage will have potentially devastating consequences…”

A comprehensive economic report on Amendment 4 indicates that this measure will mean fewer jobs and higher costs for all of Florida’s working families. “An estimated 267,247 high-wage jobs for Florida residents are at risk directly or indirectly from the potential adverse impacts associated with the passage of Amendment 4…” writes Professor Tony Villamil, Dean of the School of Business at St. Thomas University and lead economist for The Washington Economics Group (WEG), which conducted the study.

Amendment 4 will impact “the whole economy of Florida,” says WEG.  The study goes on to indicate that, under Amendment 4, “Florida’s economic dynamism is lost. [Amendment 4] would permanently impact the economic growth potential for Florida, causing a steady decline in the standard of living of all Florida residents. Further, permanently impacting employment and growth within major industries and job-generating activities.

Ultimately, Amendment 4 would “force local and state governments to either raise taxes or cut services. Public schools, public safety and local health care services would suffer from both the direct impact of Amendment 4 (delay construction until the next election) and the indirect impact of fewer tax revenues from which to fund needed operations and capital investments.”

The study goes on to conclude that “Amendment 4’s passage will have potentially devastating consequences to Florida’s economy at a time when the economic situation at both the state and national levels is uncertain and at a time when attracting new businesses to Florida is essential for the future recovery and prosperity of the state and its residents.”

Read the Economic Study for more details.

LAKEWOOD RANCH — Donors cheered the results of their monetary gifts Wednesday as they toured a new $11.2 million facility at the Lakewood Ranch campus of State College of Florida.

It was a sneak preview and benefactor recognition ceremony at the college’s new Medical Technology and Simulation Center, SCF’s first certified “green,” environmentally-friendly building.

The 42,000-square-foot facility will function as a clinical setting for students in a simulated hospital environment, officials said. Its classrooms and laboratories will house those studying nursing, other health professions, education and energy technology management, they said.

SARA KENNEDY/skennedy@bradenton.com Donor Al Goldstein, left, and Susan Valentin, middle, look at a dummy “patient” named Standard Granny as SCF Assistant Professor Debra Marr, right, explains the newest technology at SCF’s new Medical Technology and Simulation Center.

Asked why he had donated money to the project, David Band, a Sarasota attorney, replied, “Because education is the heart and soul of the economy. It’s the best thing anybody can support.”

Another donor addressed a standing-room-only crowd of more than 100 that had gathered in one wing to celebrate the building’s completion.

“I can’t think of an institution that gives the local populace and the local economy the lift that this one does,” said Rex Jensen, president and chief executive officer for Schroeder-Manatee Ranch, developer of Lakewood Ranch and donor of the land upon which the glistening new building rests.

Representing State College of Florida Foundation Inc., which hosted the event, was Peg Lowery, who called the facility a “wonderful community jewel.”

Site work on the building began in 2008, its ground breaking ceremony took place in February 2009, and SCF’s grand opening is slated for Friday, officials said.

Fall classes are slated to begin Monday.

“It’s spectacular,” was the assessment of Al Goldstein as he stood in a room with his name written above it. “It’s always good to give money away, hopefully it does some good.”

Sara Kennedy, Herald reporter, can be reached at (941) 745-7031.

via Donors cheer new building at SCF’s Lakewood Ranch campus – Local – BradentonHerald.com.

The Florida retail real estate market is showing signs of stability for the first time in years, according to a report by Crossman and Company for the International Council of Shopping Centers.

“In nearly every market of the state we have seen the freefall of rents and occupancy leveling off, indicating we may have found the bottom of the market, though significant challenges still remain for owners and retailers alike,” Justin Greider, primary author of the report, said in a company statement.

The report notes that rental rates for the entire state average $16.60 per square foot for mid-year 2010, down nearly 15 percent from the peak in the first quarter of 2008. Occupancy has leveled off at just over 89 percent, a decrease of about 6 percent from its peak in 2006.

The Tampa Bay market’s average rental rate is $14.51 per square foot, down 2.8 percent since the end of 2009, and 12.5 percent from their peak in early 2008. Average occupancy is 88.8 percent, remaining flat from six months ago.

“The Tampa market is very fragmented right now,” Greider said. “The infill market locations in Pinellas and Hillsborough County have been feeling strong signs of recovery all year, while the outlying markets may still have another six to 12 months before they see real turn-around in the fundamentals.”

The outlook for the next year is cautiously optimistic.

“People throughout the state are very positive, but the recovery is going to be long and slow, and there is still a lot of over-valued product that has to work its way through the system,” Greider said.

The report will be presented Aug. 23 at 1 p.m. during ICSC’s Florida Conference at the Gaylord Palms Resort & Convention Center in Kissimmee.

Crossman & Company, one of the largest third-party retail leasing and management firms in the Southeast, has produced the report for ICSC for the past 15 years.

via Crossman report: Florida retail market settles down – Tampa Bay Business Journal.