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The primary reason that property owners express such a disdain for commercial mortgage-backed securities (CMBS) is that the financing vehicle is “mysterious.” There is no source or website anyone can go to that will explain how a CMBS loan really works, and there is no one the owner can speak to at the loan servicing shops who will demystify the process. CMBS loans are governed by IRS regulations and documents an owner will never typically see, let alone know about. As the founder of a company that serves as a voice for property owners and borrowers, I have dedicated my entire career to demystifying CMBS. One way I do that is through quarterly webinars. Each webinar covers a different topic. The 2015 webinar series has been specifically devoted to exposing the naked truth about CMBS. In a recent webinar, we focused on the eight myths of CMBS. What follows is a recap. Myth No. 1 — It won’t cost much to miss the payoff date of your CMBS loan by a few days: Most property owners are now well aware that a CMBS loan has what is called an “open period.” The loan can only be paid off during that …

Tax assessors across the country are drawing battle lines to pit new valuation theories against accepted appraisal methodologies. This fierce ideological assault threatens the sustainability of retail businesses weighed down by ever-increasing property taxes. Retail landlords who desire to have their real estate valued on a fee simple basis routinely face assessors who claim that these owners want their property valued as a “dark store.” This prickly issue originally focused on how to value big-box stores for property tax purposes, but its scope has widened to affect a range of retail property types. Controversy’s roots run deep Woolworth’s opened the first big-box store in 1962, the same year that McDonald’s introduced the golden arches and ushered in the concept of branding stores with identical interiors and exteriors. Over the following decades, Walmart, Kmart, Target and other retailers married the big-box format with McDonald’s-style branding. Replicating the same store in many locations increased consumers’ brand recognition and reduced the owner’s cost to develop, stock, open and operate new locations. Much of today’s controversy over assessments stems from alternative financing methods that caught on with these major retailers. The two most common strategies are build-to-suit and sale-leaseback arrangements, both of which generate …

In the first half of 2015, the seniors housing market saw steadily rising demand, acquisition volume and return on investment, according to CBRE’s 2015 Mid-Year Senior Housing Market Insight Review. Seniors housing demand is driven by the aging of Baby Boomers, a healthy housing market, an attractive spread between borrowing rates and capitalization rates, and relatively limited new development in aggregate since 2000. Through the second quarter of 2015, the seven-year total return on investment for seniors housing was 10.5 percent. The one-year return was 15.2 percent. These figures are based on property index performance data provided by the National Council of Real Estate Investment Fiduciaries (NCREIF). These returns are considerably higher than that of other major real estate property types, according to NCREIF.   During the past four quarters, occupancy has steadily risen, with the second quarter of 2015 ending at 90 percent occupancy. Acquisition volumes set new records in 2014, with last year seeing 294 transactions totaling approximately $25.5 billion in the seniors housing sector. The total transaction volume by dollar amount in 2014 represented a 130 percent increase over 2013, and almost a 13 percent increase over the transaction volume in 2006, which held the previous record at approximately $22.6 billion across 146 …

SAN FRANCISCO — The commercial real estate industry is increasingly focused on the needs of small firms employing fewer than 50 people, where job growth is outpacing larger firms by nearly five to one, according to Emerging Trends in Real Estate 2016, an annual real estate report co-published by PricewaterhouseCoopers (PwC US) and the Urban Land Institute (ULI). The report was released during ULI’s fall conference held recently in San Francisco. “Advancements in technology that are affecting how people live, work, learn, socialize, and get around are reflected in the rising popularity of cities other than the largest coastal markets as magnets for investment,” says Patrick Phillips, CEO of ULI. “More and more of these cities are gaining a competitive edge by positioning themselves as vibrant, more affordable places to live and work, with amenities that appeal to different generations.” Below are 10 trends to watch, according to the report: 18-Hour Cities 2.0 The real estate industry has growing confidence in the potential investment returns in “18-hour markets,” which are mid-sized cities whose downtown areas are active in the morning, afternoon and evening, but not late at night. The growth in investor sentiment is evident in the 2016 top 10 rankings — …

LOS ANGELES — The U.S. commercial real estate market showed continued healthy demand across all property types during the third quarter of 2015, according to CBRE Group Inc. Demand for the nation’s multifamily units remained strong with the vacancy rate declining 20 basis points from a year earlier, falling to 4.2 percent in the third quarter of 2015. Meanwhile, the office vacancy rate declined 10 basis points from a year ago to 13.4 percent during the third quarter, and has now been flat or has declined for 22 consecutive quarters. The industrial availability rate continued to decline compared to a year earlier, falling by 20 basis points to 9.6 percent. The industrial availability rate has also been flat or declined for 22 consecutive quarters. The retail availability rate declined 10 basis points to 11.3 percent, 30 basis points below its level a year ago. “The commercial real estate markets remain near a ‘Goldilocks’ equilibrium, neither too hot nor too cold,” says Jeff Havsy, Americas chief economist for CBRE. “The pace of supply is increasing, but demand remains solid and rent growth is increasing at a sustainable level. Economic fundamentals are pointing to a sustained U.S. office expansion in 2015, with …

NEW YORK — Tenant demand for U.S. office space remained strong in the third quarter of 2015, pushing average asking rental rates up in three-fourths of the country, according to new research by Cushman & Wakefield. Office rents in the U.S. increased 3.1 percent in the third quarter on a year-over-year basis — the strongest quarterly gain since peaking in 2008. Average asking office rents rose in 60 out of the 80 metros tracked, and the construction pipeline continued to expand. In the third quarter of 2015, there was 107.5 million square feet of new office construction, up 25 percent compared to the same quarter one year ago. Kevin Thorpe, Cushman & Wakefield’s chief economist, says the U.S. office sector continues on a strong, steady path despite a number of global economic headwinds. “There were plenty of reasons for the office metrics to slump this quarter: financial market volatility, China’s economic slowdown, the rapid appreciation of the U.S. dollar, uncertainty regarding monetary policy, along with the possibility of a government shutdown,” says Thorpe. “But what we are learning is that the U.S. economy and the property markets are proving, time and time again, to be resilient in the face of …

WASHINGTON, D.C. — The Federal Reserve’s recent decision to delay any increase in short-term interest rates appears to have been the correct call in hindsight based on last Friday’s disappointing news that total U.S. nonfarm payroll employment increased by only 142,000 in September, says economist Robert Bach. But the lackluster September jobs report released by the U.S. Bureau of Labor Statistics (BLS) also complicates the Fed’s task of communicating its plans to the financial markets, adds Bach, director of research for the Americas at Newmark Grubb Knight Frank. “Fed Chairman Janet Yellen recently stated she thought the Fed might still raise interest rates this year, but that is less plausible if the economy remains in a soft patch,” explains Bach. The Federal Reserve’s target for the fed funds rate — the interest rate at which banks and other depository institutions lend to each other on an overnight basis — has been between 0 and 0.25 percent since December 2008. The fed funds rate serves as a baseline for other interest rates. Ryan Severino, senior economist and director of research at New York-based Reis, says that based on the latest jobs data “we are probably looking at December, if not 2016,” …

DALLAS — Occupancy at privately owned student housing properties is rising while construction of 2016 deliveries is ramping up, according to a report by Dallas-based Axiometrics. Student housing properties were 96 percent occupied as of September. This rate was a 62-basis-point increase from the 95.3 percent occupancy rate in September 2014. Assets closer to campus had the highest occupancy rates, on average. Throughout the 2015-16 leasing season, leasing velocity has averaged at or above the pace of the 2014-15 leasing season, with a leasing velocity of 95.7 percent as of the end of August. Annual effective rent growth has remained steady at two percent nationally. Effective rent levels for properties less than a half-mile from the university averaged $646 per bed for the 2015-16 leasing season, up 2.4 percent from the average effective rent level for the 2014-15 school year. Effective rent levels for properties located between a half-mile and one mile from campus averaged $542 per bed, up 1.8 percent from 2014. The total new supply for fall 2015 was 47,830 beds, 24 percent fewer than the number of beds delivered for fall 2014. Deliveries for 2016 appear to be tracking at a similar pace with 48,216 beds identified to …

By Brian A. Lee Industrial REITs in the Midwest are gaining momentum by building from the ground up. E-commerce expansion and a highly competitive investment sector are spurring industrial real estate leaders to green light more development projects. According to JLL, the Midwest has recorded nearly 21.3 million square feet of industrial completions through mid-year with more than 23.5 million square feet currently under construction. Only the Southwest region exceeded that sum during the same period (25.3 million and 37.3 million square feet, respectively). “The most significant trend that we need to see in the industrial sector is overall GDP growth that is driving demand for space from a range of tenants across a wide span of industries,” says David Harker, executive vice president at Chicago-based First Industrial Realty Trust. “While growth has been measured, it has been good enough to spur incremental demand that has been exceeding new supply at a pace of about 1.5 times.” While shareholders may be less than impressed with total returns this year (see chart), Midwestern industrial REITs continue to post big numbers in other important investment categories as they aggressively target the region. “While their current returns are underperforming expectations, most REIT managers …