Firm Looks at Implications of Mid-Term Elections on Commercial Real Estate

Via CitzBizRealEstate Atlanta, commercial real estate services provider Cassidy Turley recently analyzed the election results, and opines that the chances for major changes are not very great, noting that “divided” governments of the past have seen growth in government spending and the size of government… And they feel that the nature of this “lame duck” government will not be positive for business. However, they do feel that almost 4 million office jobs will be created over the next 5 years.  And introduction to the report begins:

Since World War II, the US House of Representatives has changed political parties seven times. Last week’s mid-term elections turned the shift of political power for the next two years in favor of the Republican Party in the House. With a divided Congress and opposing political parties controlling the Executive and Legislative branches, there are numerous implications for commercial real estate. Cassidy Turley Research provides a brief outlook on the mid-term elections in relation to federal debt, legislation, US employment, and the commercial real estate markets.

For a link to the entire report, click HERE.  What do you make of their assessment?

Have Commercial Real Estate Prices Bottomed Out?

As we have been writing over the past 3 or 4 weeks, there are more and more signs and reports that commercial real estate prices may be at or very near to the bottom. Perhaps the election results will also have a positive effect on commercial real estate. The latest report comes from CoStar, offering:

Investment grade real estate continued its positive trend from August with a strong 5.48% increase in September, according to CoStar Group’s newly released Commercial Repeat-Sale Indices (CCRSI).

Also, for the first time since the second quarter of 2007, all four primary property types within the commercial real estate repeat sales index (office, retail, industrial and multifamily) showed an increase in pricing in the third quarter.

The CoStar investment grade real estate index remains down 4.89% from the same period last year, and down 29.08% from two years ago. However, for the third quarter, the investment grade real estate index increased 5.46%. This is a significant reversal from the previous quarter, as the investment grade real estate index was down 3.24%. The CoStar investment grade index is therefore showing positive price movement quarter over quarter.

For links to CoStar for the full report, click HERE.  What do you make of the increasing reports pointing towards a stabilization?  Is this what you are seeing in your market place?

Distress Showing Every Sign of a Plateau via GlobeSt.com

We are seeing more reports almost daily that we may be at least near equilibrium regarding distressed CRE.  The latest report from GlobeSt.com offers:

Delta Associates will report later today that US distressed commercial real estate has hit a plateau. If that sounds familiar, it is–the research firm declared in its last quarterly report that signs were mounting that distress was peaking and heading into a long period of plateau. “We were right,” Delta CEO Greg Leisch tells GlobeSt.com.

For the rest of the story, click HERE.

Moody’s reports commercial property conditions improve

According to Bloomberg, commercial real estate is “moving up.”  This would help to confirm the sense we are also getting that conditions are improving.  From our Sperry Van Ness associates nationally, activity is increasing.  And more sellers are now ready to consider using auctions to move commercial real estate. The article begins:

Conditions in the commercial real estate market improved nationwide in the third quarter with all seven property types moving out of weak rankings, a study released by Moody’s Investors Services on Thursday showed.

For the entire Bloomberg article, and specific stats from each asset class, click HERE.

FDIC is praised for plan to dispose of failed banks’ assets

During last week’s Urban Land Institute fall meeting in Washington, DC, the FDIC was praised for it’s program for disposing of real estate from nearly 300 failed banks, which has totaled approximately $620 billion in assets.Builderonline.com reports the efforts of the FDIC:

The assets themselves have been a diverse bunch, ranging from massive portfolios of condo deals to single-family residential loans, REOs; and acquisition, development, and construction (AD&C) loans for residential and commercial projects…

…The deal options have typically included cash sales, loss-share agreements which limit the buyer’s potential losses on a deal, or structured transactions that offer successful bidders some type of leverage or financing to overcome the obstacles of what might otherwise be a very complex transaction.

That last option—a structured transaction, where the FDIC offered 0% financing to the buyers—was the choice for the failed Corus Bank’s $4.5 billion portfolio of condo loans, which was won by Starwood Capital Group in 2009.

“Providing 0% financing was genius,” said Barry Sternlicht, president and CEO of Starwood Capital. “We moved our bid $500 million. We can do math, you know.”

To read the rest of the article, click HERE

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Big news about the lift on foreclosure freezes

We’re seeing many headlines this week on Bank of America’s and GMAC’s announcements that they will resume foreclosure filings.  Coverage ranges from positive to indifferent to negative.  Regardless, this news prolongs turmoil that is swirling within many banks, and continues to impact their stock prices, and stock prices need to rebound for banks to feel comfortable in continuing to dispose of non-earning assets (foreclosed properties and non-performing loans).

Banks Restart Foreclosures via WSJ.com

Mortgage Securities Show U.S. Foreclosure Crisis Overblown: Credit Markets via Bloomberg

CMBS Delinquencies Still Rising

A new posting by The Distressed Debt Alert points out that CMBS problems continue to grow, with hotel loans remaining the worst-hit.  The report states:

Loans on hotels properties once again showed the sharpest increase in delinquencies of the major property groups, with a 41-basis-point jump, bringing the rate to 19.33%. At the other end of the spectrum, multifamily-housing delinquencies dipped 10 basis points to 14.43%.

For the full report, click HERE.

Are Commercial Real Estate Loan Prices On The Rise?

Atlanta’s citybizlist.com Real Estate section recently reports that Dr. Sam Chandon, Chief Economist of Real Capital Analytics, says that international buyers of U.S. commercial real estate have increased their activity, especially in 5 major markets: Washington DC, Chicago, New York, Los Angeles, and San Francisco. RCA opines that 3rd quarter is to be 15 – 20% over the second quarter of 2010. Separately, valuation of Commercial Loan Sales has seen another uptick, according to DebtX.  Could this be a shift in the right direction for CRE?  Are you hearing more from international investors?

To read the full article, click HERE.

Homebuilders Revive Stalled U.S. Projects as Banks Unload Lots

The 12 largest homebuilders have been buying developed lots at distressed prices for several months, and the actuations continue. And they are starting to build new homes, even in the face of declining prices and more foreclosures and other resales on the market. But they are taking advantage of buying lots at cheap prices, perhaps repositioning the development

(downscale), and often building smaller houses. Is it a good strategy to add new inventory at this time?

Read the full article from Bloomberg HERE.

CoStar Repeat Sale Indices: Distress Contributing to a ‘Shaky Bottom’ for CRE Sales, Pricing

According to CoStar, the surge in investment grade CRE prices in May could have been an aberration, stating that such prices have fallen 10% in the last two months, almost completely erasing the May gain. And yet general commercial real estate prices have shown increases recently. With substantial distressed volume occurring, CoStar opines that this is a “shaky bottom.”

To read the full article, click HERE.