75 posts tagged “economy”
The Federal Reserve Board released the latest Beige Book this week showing either stabilization or modest improvements in many sectors, but still finding commercial real estate on shaky legs with conditions described as either weak or deteriorating. An excerpt:
Commercial real estate continued to weaken across the 12 Districts, although even this sector had scattered bright spots. Each District indicated that demand for private commercial real estate was weak, with New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco all characterizing activity as declining further since the last report. An inability to obtain credit was often cited as a problem for businesses that wanted to purchase or build space. High vacancy rates were noted as a key concern especially for landlords who were not offering concessions. And, while industrial real estate in the Richmond District was generally weak, renewed interest by retailers to revisit postponed expansion plans was also noted. Finally, public nonresidential construction activity funded by federal stimulus projects was a source of strength in the Cleveland, Chicago, Minneapolis, and Dallas Districts, but gains were often offset by state and local government cutbacks.
For more news and information visit Blumberg Capital Partners.
The Wall Street Journal published an article examining the current climate for office building owners who are looking to keep the tenants they have in the face of one of the worst commercial real estate markets in decades. It's noted that while businesses are struggling they're also delaying property decisions and, in some cases, forced to move to cheaper spaces. As leases expire, property owners have to invest -- through rent reductions, building improvements and incentives -- to retain those tenants. "While competitive market occupancies continue to erode, we may be seeing the first signs of what will, with no doubt, be a slow market recovery," said Bill Hankowsky, Liberty Property Trust's chief executive.
Boston Properties Inc. reported this week that new tenants are paying 17% less in gross rents than prior tenants in the same space. SL Green Realty Corp. saw their revenue decline 7% in the third quarter to $249.6 million after adding nearly an extra month of free rent as a tenant incentive; the company said the current average starting rents in Manhattan were $47.31 per square foot, down from $66.78 during the same period last year.
For more news and information visit Blumberg Capital Partners.
Mortgage applications slumped again last week marking the third decline in three weeks, despite the slight dip in rates moving from 5.07% two weeks ago to 5.04% last week, reports the Mortgage Bankers Association (MBA). The association also released its forecast for 2010, summarized in CPE, "the good news is that the recession is over; the bad news is that the country will continue to reel from the ramifications next year."
And according to the Outlook for the Industry report by The Council to Shape Change, the real estate finance industry will face dramatic changes in the economy over the next five to ten years: in capital markets, in borrowers, products and processes, and in technology. The Council, an independent group of 19 real estate finance industry leaders, was created by the Mortgage Bankers Association as a means of helping the Association and its members better identify and prepare for the changes that the $12 trillion real estate finance industry will likely face in the next five to ten years.
For more news and information visit Blumberg Capital Partners.
Capmark Financial Group, the commercial real estate finance company, filed a voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware on Sunday. In the filing, Capmark listed assets of $20.1 billion and debts of $21 billion. "The Capmark bankruptcy reinforces that, in the case of institutions with large concentrations in commercial real estate, current disruptions to the market have the potential to impact their viability," said Sam Chandan, president and chief economist of Real Estate Econometrics, a commercial real estate consulting firm in Manhattan. "It's not a turning point. The problems are only starting," Dennis Yeskey, a senior adviser at AlixPartners L.L.P., a business-advisory firm in New York, said in a Philadelphia Inquirer article today.
Jay Levine, president and chief executive officer of Capmark, said: "We view this reorganization process as an unfortunate but necessary response to recent unprecedented conditions in financial and commercial real estate markets, which presented a significant challenge for Capmark and similarly situated finance companies. By constraining the availability of capital, these difficult market conditions had a negative effect on all our core businesses."
For more news and information visit Blumberg Capital Partners.
U.S. Bank failures for 2009 have passed the 100 mark, with 106 counted banks having fallen by market's close on October 23, the largest number since 181 collapsed in 1992 during the savings-and-loan crisis. The pace of the failures has been slowed, however, with 24 seizures in July, 11 in September and 11 in October, as regulators are being selective and electing to immediately close those institutions that pose an immediate danger to customers or the immediate financial system, while other banks flagged for risk of failure are left operational and thus possibly able to prevent their own closure.
The Wall Street Journal has created an interactive Google map and corresponding data chart detailing each of the bank closures since 2008. The map is interactive, allowing you to adjust the time period represented and illustrates the size of the bank's assets at the time of failure with scaled circles.
For more news and information visit Blumberg Capital Partners.
Edward J. DeMarco, acting Director of the Federal Housing Finance Agency (FHFA), addressed the U.S. Senate Committee on Banking, Housing and Urban Affairs last week to address the future of the mortgage market. The FHFA is serving as conservator of Fannie Mae and Freddie Mac which tally combined losses of $165 billion from July 2007 through the first half of 2009, with $47 billion accounting for the first half of 2009. DeMarco said that their financial performance continues to be dominated by credit-related expenses and losses stemming principally from purchases and guarantees of mortgages originated in 2006 and 2007.
"These two companies have $5.3 trillion in mortgage exposure. Given the Enterprises' importance in the mortgage market, Enterprise activities to stabilize the housing and mortgage markets are closely linked to conserving assets," said DeMarco. "Over the long term, effective mortgage modifications, refinancings, short sales, and other loss mitigation activities assist homeowners and neighborhoods and will save the Enterprises billions of dollars."
Commercial Property Executive published an article about the Fannie and Freddie mortgage defaults. An excerpt:
What DeMarco said to the Senate Banking Committee was a little more formal than a Yogism: "We remain concerned and recognize the risk associated with increasing numbers of seriously delinquent loans."
He then backed up that concern with some statistics: the rate of seriously delinquent mortgages at Fannie and Freddie total 4.2 percent and 3.1 percent, respectively. What the government plans to do about Fannie and Freddie, now that they have been de facto government agencies for about a year, is still an open question, though reportedly it will be addressed in the Obama administration's proposed 2011 federal budget, which will be released in February.
For more news and information visit Blumberg Capital Partners.
The Wall Street Journal published an article this week commenting on the current condition of office properties in Manhattan facing soaring vacancies and rents on the decline. Reis. Inc., a market research firm, suggests that the vacancy rates will continue to rise as firms are dissolved or downsized, moving from 11.5% by the end of this year and 12.3% next year, a decided contrast to the single-digit vacancies not seen in the market since 2007.
"The biggest source of uncertainty is when the World Trade Center will be built," said Victor Calanog, director of research at Reis. "I'm not sure the New York economy will have recovered to a significant degree even by that time to absorb that much space downtown," Calanog said. Development delays at Ground Zero are said to be hurting transportation and those living and working in the area. Currently only one office building in the development, the Freedom Tower, is fully financed, though not scheduled for delivery til 2013 or 2014, leaving the area still unsure of where the 11 million square feet of office space lost on 9/11 will be replaced longterm.
For more news and information, visit Blumberg Capital Partners.
The Federal Reserve releases its latest Beige Book, a running commentary on current economic conditions, based on information collected before August 31, 2009. The reports from the 12 Federal Reserve Districts indiate that the nation's economic activity continued to stabilize in July and August, but the data on commercial real estate suggest that the demand for space remained weak and that nonresidential construction-related activity continued to decline. The report summarized the Real Estate and Construction sector as follows:
Reports on commercial real estate markets indicated that demand for space remained weak and that construction continued to decline in all Districts. Atlanta, Philadelphia, Richmond, and San Francisco reported that vacancy rates increased, while rates held steady in the Boston and Kansas City Districts and were mixed in New York. Boston, Dallas, Kansas City, Philadelphia, and Richmond commented that the demand for space remained weak. Commercial rents declined according to Boston, Chicago, New York, Philadelphia, and Richmond. Rent concessions were reported in the Richmond and San Francisco markets, and Richmond noted that some landlords had postponed property improvements in an effort to conserve cash. Construction remained at very low levels, with modest improvements noted in public construction in the Chicago, Cleveland, and Minneapolis Districts.
For more news and information, visit Blumberg Capital Partners.
MI Developments secured the sale of its 196,000 square foot building at 2700 N. Broadway in Red Oak, Iowa to Greenbrier Rail Services, one of the largest railcar service networks in North America. Greenbrier will be relocating its American Hydraulics business unit to the new property to accomodate company growth. Binswanger represented MI Developments in the transaction, no sale price was disclosed.
"The transaction will impact the local economy and is a real morale booster for the town," remarked George Maher, the Executive Director of the Red Oak Industrial Foundation, "which lost 700 jobs as a result of closings." Greenbrier is expected to bring 135 jobs to Red Oak.
For more news and information, visit Blumberg Capital Partners.
Newmark Realty Capital, Inc. has arranged financing in the amount of $64,700,000 for Carillon Point, a 26 acre mixed-use property located in Kirkland, Washington, according to a Commercial Property Executive article. Michael Taylor of Newmark secured the financing for the owners with John Hancock Life Insurance Company. The loan has a fixed rate, a 20 year term and is amortized over 25 years. Mr. Taylor had arranged the original financing on the property in 2001, a debt replaced by the new fixed-rate loan.
Carillon Point includes 445,000 square feet of Class A office space, the boutique 100 room Woodmark Hotel and a 200 slip marina. The land has been owned by the same family since World War II and was developed to its current use between 1989 and 1991. "Carillon Point is one of the premier properties in the regions, and there was extremely low leverage on it, but the biggest challenge was its size," Taylor told CPE. "In this market, few lenders are making loans over $25 million, and for loans over $50 million, there are even fewer. For this property, we had lenders compete for it, but it was less than a handful; three years ago there would have been dozens."
For more news and information, visit Blumberg Capital Partners.
