Features

In an environment marked by robust development and tenuously low interest rates, now is a time of action for owners of seniors housing properties, according to the 2016 Seniors Housing Market Outlook from Senior Living Investment Brokerage. Bradley Clousing, a managing director with the Glen Ellyn, Ill.-based brokerage firm, says that short-term owners need to sell while the prices remain high, and long-term owners need to lock in interest rates on their debt before the inevitable rate increases arrive. Owners looking to reposition properties need to proceed cautiously, he says, as interest rates will change bottom-line numbers in the near future. “Build margin and room for an increasing interest rate environment,” said Clousing. “Interest rates cannot remain at this level indefinitely.” For the seniors housing market, 2015 was a banner year for mergers and acquisitions. Several portfolio sales approached the $1 billion mark, with some even eclipsing that figure. A few acquisitions made major headlines during the year, including the purchase of skilled nursing operator Trilogy Health Services by a joint venture of Griffin-American Healthcare REIT III Inc. and NorthStar Healthcare Income Inc. for $1.1 billion and Capital One’s acquisition of GE Healthcare Financial Services for $9 billion. But the …

MCLEAN, VA. — Freddie Mac has become the nation’s leader in multifamily lending for the first time, with $47.3 billion in loan purchase and bond guarantee volume in 2015. The total is up 67 percent from Freddie Mac’s 2014 total of $28.3 billion. “We thank our dedicated seller/servicer network and loyal borrowers for enabling us to reach this historic volume milestone,” says David Brickman, executive vice president of Freddie Mac Multifamily. “I am very proud of the Freddie Mac team who worked tirelessly all year serving and supporting the market and ensuring that we were able to achieve this significant result.” In comparison, Fannie Mae’s volume was $42.3 billion. This is the first year that Freddie Mac’s volume topped that of Fannie Mae. Of the total new business volume, $17.3 billion was not subject to the Federal Housing Finance Agency loan purchase cap of $30 billion and included loans for affordable housing, smaller multifamily properties, seniors housing and manufactured housing communities. “We had very strong growth in our loan purchase business in 2015, and expect our volumes this year to align with the market’s overall growth,” says Brickman. Freddie Mac Multifamily purchases and securitizes mortgages on apartment buildings nationwide. The …

NORTHBROOK, ILL. — Cap rates in the fourth quarter of 2015 for the national single-tenant net lease retail sector remained unchanged from the previous quarter at their historic low rate of 6.25 percent. According to The Boulder Group, a Northbrook-based boutique investment real estate firm, cap rates for the office and industrial sector reached new historic lows of 7 percent and 7.4 percent, respectively. During 2015, cap rates for retail, office and industrial properties declined by 15, 35 and 26 basis points respectively as investor interest has increased due to the safe and stable returns this asset class generates, according to the report. Cap rates for all major sectors remained unchanged or declined in the fourth quarter. This can be attributed to the limited supply of product in a market with high demand despite a wide spread expectation of higher interest rates in the future. From the third quarter of 2015 to the fourth quarter of 2015, the overall supply of net lease assets decreased by more than 11 percent. Retail assets experienced the largest decline of 12.5 percent. Investor demand has continued for this asset class despite the decline in cap rates over the course of 2015. The increased …

Consistent demand, low supply and supportive economic trends continued to improve fundamentals in the U.S. retail market through the third quarter, according to the Q3 U.S. Retail MarketView report by CBRE. The national availability rate for all retail properties declined to 8 percent in the third quarter — a 10 basis point drop from the second quarter, standing only 100 basis points above its 2006 low. Demand for space from food services and drinking establishments, smaller-format grocers, and healthcare and medical users remains very strong, while sales volume at department stores and mid-market general merchandisers has come under pressure. These new tenants are driving demand and diversifying the tenant base of many malls and shopping centers, and enhancing the attraction of retail destinations, according to CBRE. Despite early indications of lower GDP growth in the third quarter, U.S. employment levels continued to grow steadily and the outlook for economic growth is favorable. The forecast for 2016 is consequently very positive, with retail sales growing at their fastest pace since 1999. The decline in gasoline prices, a tightening labor market and increasing upward pressure on wages and income are supporting U.S. consumer activity in the market today. Year-over-year growth in nominal …

NEW YORK CITY — At a seasonally adjusted annual rate of $563.3 billion, new construction starts in November fell 5 percent from the previous month, according to Dodge Data & Analytics. The decline represented a partial pullback after the 13 percent increase reported for total construction in October, as nonresidential building lost some momentum following its improved October pace. Decreased activity was also reported for housing in November, while the nonbuilding construction sector, consisting of public works, electric utilities and gas plants, held steady. During the first eleven months of 2015, total construction starts on an unadjusted basis were $597.9 billion, up 8 percent from the same period a year ago. The November statistics lowered the Dodge Index to 119, compared to 125 in October. November was still above the lackluster activity reported for August and September, when the Dodge Index averaged 114. “The pattern of construction starts on a month-to-month basis is rarely smooth, and October and November do show improvement after the subdued activity in late summer,” says Robert Murray, chief economist for Dodge Data & Analytics. “The construction expansion, while often hesitant, should be able to continue in coming months as the result of several factors.” Nonresidential building …

Wednesday’s decision by the Federal Open Market Committee (FOMC) — the branch of the Federal Reserve Board that determines monetary policy — to raise the benchmark federal funds rate for the first time in almost 10 years raises an important question: What impact will this increase have on commercial real estate? The rate hike will have a “minimal impact,” predicts Jeffrey Rinkov, CEO of commercial real estate brokerage firm Lee & Associates. “Based on a strengthening and stabilizing economy, I believe this was a logical move by the Fed,” says Rinkov. “While the Fed is driven by data, I think this signifies its belief that the economy can operate in an environment with a normalizing monetary policy. Relevant to real estate investment, long-term interest rates should remain at historical low levels, which will continue to incentivize investment.” Prior to Wednesday, the Fed kept the federal funds rate — an overnight interbank lending rate — in a band between zero and 0.25 percent since December 2008, when it lowered rates in the midst of the Great Recession. On Wednesday, Federal Reserve Board Chairwoman Janet Yellen announced that the FOMC had voted to raise the federal funds rate by a quarter percentage point …

Publicly traded REITs have consistently traded at a discount to net asset value (NAV) since the beginning of April, according to SNL Financial. As of Dec. 14, the SNL U.S. REIT Equity Index was trading at a 6.4 percent discount to NAV. In the retail REIT sector, Inland Real Estate Corp. (NYSE: IRC) traded at a 12.3 percent discount to NAV as of Dec. 14. In fact, IRC has been trading at a discount to NAV since early February of this year the data shows. Against that backdrop, IRC announced Tuesday that it had entered into a definitive agreement to be acquired by real estate funds managed by New York City-based DRA Advisors LLC (DRA) for approximately $2.3 billion, including the assumption of existing debt. IRC owns and operates open-air neighborhood, community and power shopping centers located in the central and southeastern United States. As of Sept. 30, IRC owned interests in 135 shopping centers (or retail assets) containing approximately 15 million square feet of leasable space. Under the terms of the agreement, DRA-managed funds will acquire all issued and outstanding common stock of IRC for $10.60 per share in cash. Following the completion of the acquisition, Oak Brook, Ill.-based …