Posts Tagged ‘Real Capital Analytics’
Monday, January 10th, 2011
Distressed commercial real estate volumes seem to have reached a plateau of $186.9 billion in October, according to a report prepared by Delta Associates that crunched numbers provided by Real Capital Analytics. The trend has been apparent for several months, according to Delta’s CEO Greg Leisch.
Even as the industry breathes a collective sigh of relief, the question remains: When will the amount of distress start to recede? Industry experts believe that is unlikely to happen before 2012. According to Delta, the plateau first came onto the scene in the spring of 2010, though the firm doesn’t expect any consequential progress next year. Leisch says that lenders will continue to extend debt obligations, even as commercial property values stabilize in some markets. 2011 is likely to bring yet more pain, with $300 billion worth of CRE loans coming due. Delta’s report notes that the office sector has the greatest number of distressed assets, valued at $45.6 billion nationally.
There’s also good news in the fact that commercial property values increased 1.3 percent in October, according to Moody’s Investors Service. That’s the second consecutive monthly gain and represents a 3.2 percent increased over the previous year, notes the Moody’s/REAL Commercial Property Price Index. The Moody’s/REAL Index is 42 percent below the high point it reached in 2007.
Robert Bach, chief economist for Grubb & Ellis, Inc., said demand is rising for trophy office buildings in cities such as New York, San Francisco and Washington, D.C. In Chicago, 300 North LaSalle went for $655 million and the Hyatt Center fetched $625 million. Next year, investors may purchase lower-quality buildings in prime markets, and top-tier office towers in secondary markets. “This investor enthusiasm has been confined to core properties in primary, supply-constrained markets,” Bach said. “There’s still a lot of distress out there.” Despite the remaining distress, commercial properties sales doubled to $16 billion during the 3rd quarter when compared with the same timeframe in 2009, according to Real Capital Analytics. East Coast properties averaged a 22 percent increase over 2009, with prices rising 9.1 percent in New York City and 17 percent in Washington, D.C.
Tags: Bloomberg News, commercial real estate, CoStar Group, Delta Associates, Distressed commercial real estate, Globest.com, Grubb & Ellis, Moody’s Investors Services, Moody’s/REAL Commercial Property Price Index, Office sector, Plateau, Real Capital Analytics
Posted in Financing, General, Office | No Comments »
Tuesday, December 28th, 2010
The $625 million sale of the 49-story Hyatt Center at 71 South Wacker Drive is proof that the market is still strong for high-credit trophy buildings; the price represents a 6.1 percent cap rate. The purchaser is Southern California-based Irvine Companies, which plans to close the deal as quickly as possible.
The $419 PSF sales price is even higher than the anticipated $390 PSF when Pritzker Realty Group LLC initially decided to sell the approximately 1,500,000 SF office tower last summer. The Hyatt Center’s sale reflects a national trend where office building deals rose 124 percent in October to $2.1 billion, according to Real Capital Analytics, Inc (RCA). “Office investors focus on visible assets in major markets has resulted in stronger price pressures,” according to the RCA report.
The Hyatt Center was built in 2005 and has an A-list group of tenants that includes the Hyatt Hotels Corporation, law firm Mayer Brown LLP, and investment bank Goldman Sachs Group, Inc.
Tags: Cap rate, Goldman Sachs Group, Hyatt Center, Hyatt Hotels Corporation, Inc., Irvine Companies, Mayer Brown LLP, Penny Pritzker, Pritzker family, Pritzker Realty Group LLC, Real Capital Analytics, Trophy properties
Posted in Development, Economics, General, Office | No Comments »
Tuesday, October 5th, 2010
Real estate professionals who had been expecting a worst-case scenario – an onrush of distressed commercial properties coming onto the market – are still waiting for that to come to fruition. Ben Johnson, writing in the National Real Estate Investor, notes that “Keep on waiting/lurking seems to be the prevailing view. According to New York-based researcher Real Capital Analytics, the default rate for commercial real estate mortgages held by the nation’s FDIC-insured depository institutions did increase by nine basis points to 4.28 percent in the 2nd quarter, up from 4.19 percent in the 1st quarter. For those of you keeping score on a historical scorecard, at its cyclical low in the 1st half of 2008, the commercial mortgage default rate was 0.58 percent. A mere pittance. Year-over-year, the tale is more striking, with the commercial default rate up by 139 basis points.”
Instead of accelerating, Johnson says that the negative drift seems to be slowing. “Year-over-year increases had been accelerating for 13 consecutive quarters through the end of 2009, but have moderated more recently,” he said. The dollar volume of commercial mortgages in default recorded the smallest increase since the 2nd quarter of 2007. Approximately $46.2 billion of bank-held commercial mortgages currently are in default, an increase of $547 million from the 1st quarter of 2010.
Tags: Ben Johnson, commercial real estate, default, distressed assets, mortgage, Real Capital Analytics
Posted in Financing, General, Industrial, Office | No Comments »
Wednesday, August 18th, 2010
Although property investment – especially for trophy buildings – is coming back more strongly than industry analysts had anticipated, mid-tier properties are not yet enjoying a similar rebound. According to Real Capital Analytics (RCA), properties valued at $20.6 billion were sold during the 2nd quarter of 2010, an 86 percent increase over last year.
According to Dan Fasulo, an RCA analyst, owners of mid-tier properties are having more difficulty finding buyers. “Eventually the bidders who keep losing out on these competitions are going to readjust their expectations and will start to try other strategies, whether it’s investing in lower-quality property or going into a secondary market. It’s inevitable.”
Declining vacancy rates also could create renewed interest in mid-tier properties, said Ryan Severino, an economist with Reis, which believes that national office vacancy rate will fall from its 17.7 percent peak this year. “A lot depends on what happens to the office sector overall, but we are beginning to see the first glimmer of stabilization,” Severino said. Still, financing for smaller transactions is difficult to obtain – a stark contrast with trophy property deals.
Some smaller community banks are willing to provide capital to owners of mid-tier properties. In the 1st quarter of 2010, approximately 80 percent of mortgage originations refinanced existing projects, according to Randy Fuchs, a principal of Boxwood Means, a real estate analysis firm. In contrast, refinancing comprised just 50 to 60 percent of loan originations in 2006 and 2007.
Tags: Boxwood Means, commercial real estate, Dan Fasulo, mortgage originations, Randy Ruchs, Real Capital Analytics, Reis, Reis Inc, Ryan Severino
Posted in Development, Financing, Office | No Comments »
Thursday, June 3rd, 2010
Wells Fargo & Company and LNR Property Corporation are hunting for buyers for $1 billion each of distressed commercial real estate assets and loans. San Francisco-based Wells Fargo, the nation’s largest commercial real estate lender, is soliciting bids on $500 million to $1 billion worth of office and hotels. LNR, the nation’s largest CBMS special servicer, is looking for buyers for approximately $1 billion worth of defaulted loans.
“The availability of capital and better prices than a year ago are driving sellers to move things off their balance sheets,” says Matthew Anderson, managing director at research firm Foresight Analytics. “Depending on how the auction goes, you may see more of this.” According to Anderson, banks and special servicers currently are holding approximately $185 billion in distressed loans. Of those, Wells Fargo had $12.9 billion in non-performing loans in the 1st quarter. LNR is the special servicer for $24 billion in delinquent assets, according to Bloomberg.
Wells Fargo and LNR were left holding real estate debt once the global credit crisis and recession sent commercial values down a whopping 42 percent from their October of 2007 high. The majority – as much as 60 percent — of the assets that Wells Fargo is selling were inherited when the bank purchased Wachovia Corporation in October 2008. If Wells Fargo and LNR can sell the properties, the move would represent an improved market for distressed assets, according to Ben Thypin, an analyst with Real Capital Analytics, Inc.
“We’re certainly aggressive in terms of liquidating the portfolio,” said David Hoyt, who heads Wells Fargo’s wholesale banking arm. “At the moment, there is a lot of liquidity in the market to resolve problems.”
Tags: Bloomberg, Cerberus Capital Management LP, CMBS, distressed assets, Eastdil, Foreshight Analytics, global credit crisis, LNR Property Corporation, Real Capital Analytics, Wachovia Corporation, Wells Fargo
Posted in Development, Economics, Financing, General, Green, Industrial, Office, Residential | No Comments »
Wednesday, March 17th, 2010
A little-noticed bill was introduced in Congress in January that could bring a new source of liquidity to the commercial real estate sector – foreign investment. Legislation introduced by Congressman Joseph Crowley (D-NY) called the Real Estate Revitalization Act of 2010 would cut taxes that were introduced as part of the Foreign Investment Real Estate Property Tax of 1980 (FIRPTA). This required foreign investors to pay as much as 55 percent on capital gains from the sale of American real estate shares in REITS and other investment vehicles.
Crowley and the legislation’s other supporters believe that repealing FIRPTA could open the floodgates to needed liquidity at a time when commercial real estate loan defaults pose a risk to the nation’s recovery. According to the bill’s supporters, the FIRPTA tax penalizes foreign investors willing to infuse their cash into American real estate because they aren’t taxed similarly when they buy Treasury securities, corporate equities or corporate bonds.
Dan Fasulo, managing director of Real Capital Analytics, points out that foreign investors comprise only 10 percent of commercial real estate acquisitions in the United States. Fasulo notes that “Could (removing the tax) double the amount of investment activity in the U.S.? Sure.”
Crowley’s legislation has received little attention, although it has little vocal opposition, because it is being drowned out by Congress’ preoccupation with the healthcare reform debate. Peter Peyser, managing principal of the lobbying organization Blank Rome Government Relations LLC, believes the legislation will likely be attached to a larger bill to assure passage this year. “A small targeted provision like this one would need to be part of a larger package because it’s unlikely that something like this is going to gather enough steam to get through on its own.”
Tags: congress, Dan Fasulo, foreign investment, Joseph Crowley, Peter Peyser, Real Capital Analytics, Real Estate Revitalization Act, Real Estate Roundtable, recession, REITS
Posted in Development, Financing, Office | No Comments »
Tuesday, November 3rd, 2009
The Western European commercial real estate bright spot is the activity by German investors, according to the latest Global Capital Trends report from Real Capital Analytics (RCA). “In April, the Germans raised a half billion Euros — approximately $690 million – for their open-ended funds. That is in addition to the billion Euros raised in the first quarter,” says Robert M. White, Jr., RCA’s founder and president. Although that fund-raising mechanism is “kind of unique” to Germany, White adds that it doesn’t differ a lot from the non-traded REITs that have amassed capital from retail investors. “We’re definitely seeing more capital raised, and it’s not institutional,” he says. “It’s definitely the mom-and-pop, entrepreneurial type of investors capitalizing some of these deals.”
German investors have gravitated toward quality rather than distress. And they aren’t the only ones who have been active lately in cross-border transactions. White points out recent Saudi activity in London as a case in point of renewed sovereign wealth fund (SWF) investment. “There are a lot of foreign investors eyeing the U.S., but they tend not to be the first movers,” he says. White predicts that overseas buyers will be a major part of the recovery here, “but not the leading wave.”
SWFs are known to be extremely conservative in their investment philosophy and likely will stick with acquiring trophy and other Class A assets.
Tags: capital, Class A assets, commercial real estate, Global Capital Trends, Real Capital Analytics, REITS, sovereign wealth
Posted in Economics, Financing, Office | No Comments »
Wednesday, June 24th, 2009
Slowly advancing first-quarter sales may not make this the right time to pop the champagne corks-though it does represent a plateau compared with the previous quarter and suggests that the bottom may be in sight. This update comes from Real Capital Analytics (RCA), which warns that “there is no recovery in sight”.
In its June Global Capital Trends, RCA notes that property sales in the Americas totaled an estimated $8 billion during the second quarter, down just six percent from the first quarter, an 83 percent drop 
compared with last year. Second-quarter totals for EMEA markets are down 24 percent from the first quarter to just $17.3 billion, a 71 percent drop from 2008. The good news is in the Asia Pacific markets, where RCA projects an 18 percent gain over the first quarter with a total of $23.3 billion in sales, approximately half of the second-quarter worldwide numbers.
According to Robert M. White, Jr., RCA’s founder and president, “We’re probably at the bottom “in terms of transaction activity. Globally, the upturn will be sporadic. “If anything, the downturn was correlated more closely across property rates and geographic regions than the recovery will be. Activity in Europe is growing, especially in the U.K. And there is a buzz in the U.S., too. In the past few weeks, we’ve seen more and larger deals. I wouldn’t say it’s a quick rebound, but frankly I don’t think volume could sink any lower in the U.S.”
Pricing may be a different story, White cautions. “We may already be there, but none of it will be realized until these distressed deals close. We can look forward to move activity” in the fall and through year’s end.
Tags: Asia Pacific, China, Eastern Europe, EMEA markets, Europe, geographic regions, Global Capital Trends, globally, Japan, property sales, RCA, Real Capital Analytics, recovery, sales, UK, United Kingdom, US, Western Europe
Posted in Economics, Financing, Office | No Comments »