While commercial real estate values have not rebounded in the first six months of the year, the fear that 2010 was a disaster waiting to happen has subsided as liquidity has started flowing back into the market, according to new reports out this past week from PIMCO and PricewaterhouseCoopers.

The pair of reports suggest that, for institutional quality property at least, property values have found a bottom and cap rates have peaked and could even start to subside. Neither of the reports is projecting a worry-free environment, however, in fact both are projecting a long, long road to full recovery.

“While most investors sense that the worst is over in terms of market deterioration, supply greatly outweighs demand across all property sectors keeping overall vacancy rates high and rental rates on a downward trend,” said Susan Smith, director, real estate advisory practice, PricewaterhouseCoopers. “Top-tier locations are showing the most signs of life with respect to tenant interest and recovery potential. However, inspiring leasing trends have yet to fully materialize, further contributing to this sense of market flux.”

Commercial real estate investors seem frustrated and disappointed at the lack of quality buying opportunities that many expected would have materialized by now, according to the second quarter 2010 findings of PricewaterhouseCoopers’ (PwC) Korpacz Real Estate Investor Survey. The report notes that the unknown speed and strength of the economic recovery has many investors anxious, with the uncertainty surrounding the large debt volume coming due in 2011 and 2012 amplifying their angst.

In the quarterly survey, the average overall capitalization rate, a key measure of investors’ expectations of property income and value, declined in 17 of the survey’s 30 markets over the past three months, an indication that investors perceive less risk in the industry now, particularly for prime properties and better markets, according to the PwC survey.

The ‘bottoming’ of the industry continues to be recognized by investors’ expectations that overall cap rates will either decline or hold steady in most markets over the next six months. Specifically, survey participants forecast overall cap rates to hold steady in 18 of the survey’s 30 markets. Furthermore, the survey data revealed that 13 markets could see overall cap rates decline by as much as 100 basis points in this time period.

Surveyed investors cited potential declines in near-term overall cap rates in the Manhattan office market, the national warehouse market and the national apartment market (all three segments down as much as 100 basis points).

For individual office markets included in the survey, average overall cap rates remain lower for central business district (CBD) submarkets than for suburban counterparts, suggesting that investors continue to see less risk and better investment potential in the major CBDs.

“There is a tremendous amount of capital targeting institutional-grade, quality assets,” Smith said. “In fact, survey participants cited that strong competition among well-capitalized buyers is helping to elevate sale prices and lower overall cap rates for many prime properties. Furthermore, the low percentage of distressed trades as of late reflects investors’ preferences as most buyers are steering clear of ‘junk’ and focusing only on core assets according to survey participants.”

John Murray, commercial real estate portfolio manager and head the PIMCO’s CRE/CMBS team, also reported that capital is clearly returning to commercial real estate, helping to stem the value declines in the sector. But, his report stressed that optimism should be tempered because national price indices are misleading when transactions are limited and fail to reflect the significant uncertainty around property valuations.

“Capital has returned to CRE and high levels of bidding activity in certain sectors have made many observers and participants optimistic,” Murray wrote in his report. “Transactions have generally been limited and capital flows have been concentrated in trophy properties and in properties where below-market agency financing is available. This has provided a false sense of clarity on the real level of property values. A significant volume of weaker and distressed assets has yet to be liquidated and this foreshadows further pressure on values. Against this backdrop, we caution against the presumptions that a rapid broad-based recovery is underway.”

Murray is not as optimistic on the direction of cap rates as PwC survey participants.

“We expect that the spread between cap rates and 10-year Treasuries will remain above its average of 265 basis points seen since 1995, as the litigious deleveraging process leads to a sustained period of risk aversion in the sector,” Murray wrote. “If cap rate spreads remain above their average, the market can expect long-term cap rates near or above 8%. In this case, even if properties with floating rate debt can successfully avoid defaults in the short term, rising longer term rates will create a floor for cap rates and limit recoveries.”

As the deleveraging cycle unfolds, attractive opportunities are likely to be available to investors with capital, Murray wrote. Although, he warned that capital flows alone should not be a gauge of where attractive investment opportunities lie.

“Many owners in primary markets are perplexed by the extent of non-US capital flowing into their markets. With this in mind, new investors should not expect a continued rapid appreciation in pricing for trophy assets in these markets,” Murray wrote. “Conversely, owners of grocery-anchored retail assets in smaller markets express frustration in securing financing today, despite strong tenant profiles and positive demographics. As capital returns to CRE, we expect this yield spread (as reflected by cap rates) between trophy assets and less liquid, quality assets in smaller markets to eventually tighten.”

CRE Markets Have Moved Away from the Edge, but Not Out of Trouble – CoStar Group.

U.S. commercial property prices rose 1.7 percent in April but were down 41.1 percent from their October 2007 peak, according to the Moody’s/REAL All Property Type Aggregate Index released on Monday.

The increase comes on the heels of two consecutive months of price declines, according to the index, which measures the change in actual transaction prices for U.S. commercial real estate assets based on the repeat sales of the same assets.

But price changes have been choppy, the report said, and the rise does not necessarily indicate a turnaround for the battered industry.

Since reaching a low of 107.98 in October 2009, the index is at 113.10, 16.4 percent lower than last year.

It is difficult to determine if prices have stabilized because the number of sales remains low, Moody’s said. Despite deteriorating prices, there has not been a flood of distressed commercial real estate hitting the market because lenders have been extending maturing loans over the past few years.

Moody’s warned that if lenders and special servicers, who handle troubled loans that have been securitized, suddenly unload their distressed properties, a flood could pull prices down again.

Additionally, even if the market has found a bottom, it could bump along for several quarters as vacancy rates remain high or climb, and rents stay weak.

The price changes depended upon type and market. New York performed the worst of three major office markets, with prices over the year falling 23.9 percent.

Also on Monday, real estate services company Jones Lang LaSalle said the vacancy rate for the best and priciest buildings in Manhattan fell to 13.4 percent in May from 13.9 in April. The vacancy rate for those quality Manhattan office buildings peaked at 15 percent in May 2009.

**Note that the vacancy in Sarasota CBD is also 13.9%

Since the start of the year, sales of Manhattan office buildings have totaled $3.9 billion, surpassing the $3.5 billion for all of last year. Still, at an annualized rate, sales in 2010 are running 80.1 percent below the peak in 2007, Jones Lang LaSalle said.

Elsewhere in the country, according to Moody’s, prices in Washington, D.C., where government spending has helped support the market, fell 16.9 percent over the past year.

Prices in the San Francisco office market have fallen 10.7 percent over the year, Moody’s said.

Overall, in the eastern United States, prices for three of the four property types — office, warehouse and distribution centers, and apartments — have fallen over the past 12 months, Moody’s said. Retail was the only sector to have an increase.

In the south, only warehouse and distributions centers underperformed the national index for industrial property over the past year, according to Moody’s.

Prices for warehouse and distribution centers, which reflect demand for imports and exports, dropped 27.3 percent in southern California, a chief U.S. shipping market.

The other types of commercial real estate in southern California fared better, with prices falling 2 percent for apartment buildings and 19.2 percent for retail properties. Office prices fell 13.3 percent.

The Florida apartment market registered its largest one-year decline in value since the index began, dropping 29.9 percent over the last four quarters and leaving the index value down more than 50 percent percent from the peak four years ago.

(Reporting by Ilaina Jonas; Editing by Gary Hill)

From: US commercial property prices up in April–Moody’s | Reuters.

Commercial real estate investors reveal both frustration and disappointment at the lack of quality buying opportunities that many expected would have materialized by now, according to the second quarter 2010 findings of PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey®, released today. The report notes that the unknown speed and strength of the economic recovery has many investors anxious, with the uncertainty surrounding the large debt volume coming due in 2011 and 2012 amplifying the angst.

Average Overall Cap Rates Decreasing in Certain Markets

In the quarterly survey, the average overall capitalization (cap) rate, a key measure of investors’ expectations of property income and value, declined in 17 of the survey’s 30 markets over the past three months, an indication that investors perceive less risk in the industry now, particularly for prime properties and better markets.

The ‘bottoming’ of the industry continues to be recognized by investors’ expectations that overall cap rates will either decline or hold steady in most markets over the next six months.

Specifically, survey participants forecast overall cap rates to hold steady in 18 of the survey’s 30 markets. Furthermore, the survey data reveals that 13 markets could see overall cap rates decline by as much as 100 basis points in this time period.

Surveyed investors cited potential declines in near-term overall cap rates in the Manhattan office market, the national warehouse market and the national apartment market (all three segments down as much as 100 basis points). For the individual office markets in the survey, average overall cap rates remain lower for central business district (CBD) submarkets than for suburban counterparts, suggesting that investors continue to see less risk and better investment potential in the 24-hour work-live-play aspect offered by many major CBDs.

“While most investors sense that the worst is over in terms of market deterioration, supply greatly outweighs demand across all property sectors keeping overall vacancy rates high and rental rates on a downward trend,” said Susan Smith, director, real estate advisory practice, PricewaterhouseCoopers, and editor-in-chief of the survey. “Top-tier locations are showing the most signs of life with respect to tenant interest and recovery potential. However, inspiring leasing trends have yet to fully materialize, further contributing to this sense of market flux.”

Uptick in Financing for Institutional-grade Assets

Surveyed investors comment that financing has become more readily available for the right borrower seeking quality assets in better markets. The report finds that for second-tier markets and non-core assets, debt availability and buyer interest are very limited. Until uniform patterns of stability occur, surveyparticipants expect that the investment market will remain highly bifurcated with little attention paid to offerings with vacancy issues that do not deliver the highly sought after gains in value.

“There is a tremendous amount of capital targeting institutional-grade, quality assets. In fact, survey participants cited that strong competition among well-capitalized buyers is helping to elevate sale prices and lower overall cap rates for many prime properties. Furthermore, the low percentage of distressed trades as of late reflects investors’ preferences as most buyers are steering clear of “junk” and focusing only on core assets according to surveyparticipants,” added Smith.

Key Findings and Survey Highlights

The report finds that despite encouraging economic data reports for retail sales and job growth, the retail sector continues to struggle and present challenges to property owners. According to the report, U.S. retail sales growth has been propelled mostly by auto sales while temporary hires account for a large portion of the country’s recent job growth. In the office sector, overall vacancy rates show some signs of improvement as the rate at which space is being returned to the national CBD office market has slowed dramatically over the past year. In fact, many of the large gateway CBDs are seeing downward shifts in vacancies. Nevertheless, surveyed investors envision a slow rebound for the office sector, where a full recovery will lag behind that of the U.S. economy.

In the industrial sector, the report notes that market conditions continue to soften, but at a slower pace than in months past. As a result, quality warehouse assets are seeing multiple bids and strong interest from perspective buyers, which could result in a rise of offerings, according to surveyparticipants . The report also finds that the apartment sector is continuing to lead the recovery with investment appetite for high-quality assets in first-tier markets showing an uptick in transactions in the national apartment market. Surveyed investors find that while rental rates have stabilized, rent declines from the previous 24 months are still working through apartment rent rolls.

Information about subscribing to PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey® can be found at http://www.pwc.com/us/korpaczsurvey. Members of the media can obtain an electronic copy of the full report by contacting Ray Yeung (212) 986-6667 or yeung@braincomm.com.

About the PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey®

PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey®, now in its 23rd year of publication, is one of the industry’s longest continuously produced quarterly surveys. The current report provides overviews of 30 separate markets, including ten national markets — regional mall, power center, strip shopping center, CBD office, suburban office, flex/R&D, warehouse, apartment, net lease, and medical office buildings. Newly added to the report this quarter is a review of the Southeast region apartment market.

The report also includes a review of 18 major U.S. office markets including Atlanta, Boston, Charlotte, Chicago, Dallas, Denver, Houston, Los Angeles, Manhattan, Northern Virginia, Pacific Northwest, Philadelphia, Phoenix, San Diego, San Francisco, Southeast Florida, Suburban Maryland, and Washington, DC.

The second quarter 2010 report also features up-to-date commentaries concerning Technology News and Trends, Economic News, Domestic Self-Storage Market, National Development Land, special commentary on institutional-grade real estate, as well as information relating to valuation issues in the industry, such as tenant improvement allowances, market rent growth rates, forecast periods, and structural vacancy.

About PricewaterhouseCoopers’ Asset Management Practice

PricewaterhouseCoopers’ (PwC) asset management practice is a leading global provider of audit and assurance, business advisory and tax services to all areas of the industry, including real estate funds/advisors, REITs, homebuilders as well as hospitality and leisure. PwC is one of the leading providers of integrated professional services, with an integrated approach to problem-solving. Its international network of real estate professionals offer in-depth experience in a wide range of financial accounting and reporting issues; global tax solutions; investment fund structuring; capital market transactions; securitization issues; technological applications; systems and operations; due diligence and transaction support; and valuation management.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Source: PricewaterhouseCoopers

PR-USA.net – Deal Flow Remains Muted with Market in Flux, According to PricewaterhouseCoopers’ Korpacz Real Estate.

The Florida apartment market saw its largest one-year decline in value since index inception, dropping value of 29.9 percent, according to the Moody’s/REAL National All Property Type Aggregate Index from Real Estate Analytics LLC.

Despite its weak performance, Florida apartment index has fared better than its respective index in the South region.

Three of property types – office, retail and apartments underperformed their respective national property type index. The only exception was industrial, which fared better over the past four quarters. Office and retail sectors performed worse than their respective national indices, which recorded an 11.4 percent decline in retail. The apartment market was the worst performing sector and has now reached its lowest point since the inception of the index.

“The big picture is still that of an essentially flat market, with perhaps a slight upward trend on average and some bouncing around from month to month,” said Neal Elkin, President of REAL. “The proportion of “troubled asset” sales in the CPPI increased slightly from 25 percent in March to 29 percent?in April, with the lifetime price-change rate of return performance of the distressed sales increasing only slightly and remaining very low. Yet in spite of this, the overall CPPI advanced in April, due to the very strong performance of? healthy properties.

via Florida apartment buildings decline 30 percent in value, a Moody’s report says | Real Estate | HeraldTribune.com.

Ground broken for LWR vets memorial

JAMES A. JONES JR./jajones1@bradenton.com Among the veterans attending the groundbreaking for Veterans Memorial Park at Lakewood Ranch on Wednesday were, from left, Denny King, Dennis Merriman, Edward Devers and Frank Rogers.

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Read more: http://www.bradenton.com/2010/06/17/2368526/ground-broken-for-lwr-vets-memorial.html#ixzz0rc1sZfmZ

Tag technology coming to cell phones at Lakewood Ranch – Technology

magine a technology that would allow anyone using a web-enabled cell phone equipped with a camera to scan Microsoft Tags on buildings, businesses or even people, to tap into an instant information source.

When the cell phone scans a Microsoft Tag — a sort of bar code — it can open a web link, dial a phone number or launch a video.

A home buyer could scan the tag on a model home and receive a virtual tour and watch a video from the builder.

A diner standing outside a restaurant could scan and study the menu on a cell phone.

Or scan a tag at the cinema and play a movie trailer.

Using the new technology, Lakewood Ranch is preparing to become one of the first communities in the country to be tagged from top to bottom, said Candice McElyea, director of marketing and public relations for Schroeder-Manatee Ranch.

First introduced at the Consumer Electronics Show in Las Vegas in January 2009, more than one billion Microsoft Tags have been created by people and businesses all over the world. In April, more than 20 million magazines with tags were in the hands of U.S. consumers, Microsoft’s Anna Kim-Williams said in an e-mail Monday.

Lakewood Ranch is the first to widely deploy tags throughout its community in a variety of scenarios, Kim-Williams said.

Known for its green building standards and embrace of anything hi-tech, SMR plans to have the first phase of the new technology in place for the tour of homes that starts Nov. 6.

Builder models on the tour and businesses on Lakewood Ranch Main Street would be included in the first phase.

Phase two, tentatively set for January would add tags to wayfarer signs and amenities at Lakewood Ranch, everything from parks to polo.

In the third phase, SMR would launch a line of clothing to be sold on line and at the Lakewood Ranch Information Center, allowing a person to be tagged as well. The tagging process would be completed by April, McElyea said.

The first group to be introduced to the new technology were local Realtors, who received a presentation Friday.

“The technology has a wow factor. It’s very cool and edgy,” McElyea said.

Read more: http://www.bradenton.com/2010/06/22/v-print/2379192/tag-technology-coming-to-cell.html#ixzz0rc1c4OyV

By Richard Dymond, The Bradenton Herald, Fla.Jun. 11–LAKEWOOD RANCH — A Summerfield couple who are shooting their own independent romantic comedy in and around Lakewood Ranch are looking for 100 extras to populate Main Street on Saturday.”There's no compensation, but it's perfect for the person who has always wanted to be in a movie or see what it's like to be on a movie set,” said Richard Siggins, who is teaming with his fiancee, Brooke Reid, to create and produce “Wasband.”The title stands for “a husband who never was,” Reid said.Siggins says the movie is about a man who finally finds the person who “wants one extra kiss before he goes to work, who he wants to call or text during the day for no reason and who he wants to rush home to at the end of the day.”The extras, who can be any age or sex, are asked to dress casually and come to Main Street between 6:45 p.m. and 7 p.m. Saturday for a two hour shoot that will begin at 7:30 p.m.Anyone under the age of 18 has to have a parent or guardian with them at the shoot to sign for them, Siggins said.Siggins and Reid, who met chatting online two years ago, named their movie company, “Siggybunk,” which is short for Siggins and “Bunk,” Reid's childhood nickname.Reid's son, Eddie Duffy, 14, who will be a freshman at Lakewood Ranch High next fall and daughter, Lauren Duffy, 11, are in the movie as extras.”Wasband” is being made for about $9,000, part of a rising number of films with “micro” budgets, which means less than $25,000, Siggins said.A low budget film is less than $1 million, Siggins added.”Micro” budget movies generally are not action or science fiction since those usually require computer generated graphics.Through a few connections and Craigslist, Siggins and Reid got 15 professional actors who agreed to be paid only if the film becomes a success.”They are working for reels,” which is the film term for resume material, Siggins said.They also found Eric St. John, a composer, who created original music, and Rich Hubel, an experienced director of photography.Most of the expense, which is coming out the couple's savings, involves use of a high tech digital camera, Siggins said.The scene to be shot at 7:30 p.m. Saturday, among the film's final 10 of 46, calls for leading man Michael Newman's character to get to know leading lady Angela Austin's character in a romantic setting.Candice McElyea, Schroeder-Manatee Ranch's pro- motions and public rela- tions manager, suggested the filmmakers use Main Street, with its music, boutiques, restaurant and fountain, for a portion of the shooting. The filmmakers agreed.Siggins and Reid have shot scenes at the Polo Grill, Big Olaf's Creamery and Arts A Blaze on Main Street.They have also shot at Woody's River Roo in Ellenton, the Pink Pelican in St. Petersburg and Eckerd College, among other local venues.They have gotten permission for two days of shooting at Lakewood Ranch Medical Center later this month.”We really had no idea what to do when we started but we just decided to get out there and try,” said Reid, who describes herself as a romantic comedy lover who has seen “When Harry Met Sally” umpteen times.Siggins and Reid plan to enter “Wasband” into the Sarasota Film Festival in January in order to launch it.

via California Chronicle | Movie producers looking for extras.

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