Features

By Scott Fisher After each commercial real estate downturn, the real estate industry tries to learn from its mistakes and take the hard lessons learned into the next cycle. An important lesson learned by investors in the most recent real estate downturn was that they need more control of crucial decisions when a joint venture is in critical economic condition. At that juncture, the perspective of the partners in the venture may be quite different. The promoter/developer (the “promoter”) may be looking for ways to preserve its increasingly distant back-end “promoted economic interest” while avoiding personal liability. Its judgment may be influenced by the absence of an economic upside. Simultaneously, the partner(s) that provided the equity to the venture (the “investor(s)”) is trying to preserve its investment and maximize the likelihood of a return on that investment. The impact of the investor’s preferred course of action may be to push the promoter’s interest further down the capital stack. The perspective that prevails ultimately depends on the terms of the management sections of the joint venture agreement. Before 2006, typical real estate joint ventures allocated to the promoter the right, subject to “major decisions” requiring investor approval, to run the day-to-day …

Construction employment expanded in 175 metro areas, declined in 106 and was stagnant in 58 between February 2013 and February 2014, according to a new analysis of federal employment data released this month by the Associated General Contractors of America. Despite the gains, construction employment remained below peak levels in all but 19 metro areas. “It is encouraging that contractors added workers in so many locations despite severe weather that delayed some project starts,” says Ken Simonson, the association's chief economist. “At the same time, it’s clear that the upturn in construction is far from universal. Activity is flat or declining in many metro areas, while contractors in the hottest locations are having trouble finding skilled workers.” Houston-Sugar Land-Baytown, Texas added the largest number of construction jobs in the past year (9,600 jobs, 5 percent), followed by Santa Ana-Anaheim-Irvine, Calif. (8,600 jobs, 12 percent) and Los Angeles-Long Beach-Glendale, Calif. (8,000 jobs, 7 percent). The largest percentage gains occurred in Monroe, Mich. (65 percent, 1,300 jobs), El Centro, Calif. (32 percent, 600 jobs); Reno-Sparks, Nev. (31 percent, 2,600 jobs) and Pascagoula, Miss. (26 percent, 1,400 jobs). The largest job losses from February 2013 to February 2014 were in Gary, Ind. (-4,700 …

NEW YORK — The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) fell 24 basis points in March to 6.54 percent, according to New York-based Trepp LLC. The last time the delinquency rate was below this level was more than four years ago in January 2010. Today's rate is 288 basis points lower than where it stood a year ago. Trepp credits some of the month-over-month improvement to the ongoing CWCapital distressed asset sales. In the first three months of 2014 alone, the CMBS market saw 114 basis points of downward pressure on the delinquency rate due to previously delinquent loans being resolved with losses. While not all of these resolutions are a result of the CWCapital assets, they have contributed significantly to the rate's improvement. “The CMBS market had the pleasure of singing the same happy refrain in March, as delinquencies continued to fall,” says Manus Clancy, senior managing director at Trepp. “We had anticipated a large drop in the rate due to the CWCapital assets, but that descent has been extended, as the notes didn't really begin to make it through remittance cycles until [early 2014]. We suspect the rate will stabilize somewhat …

By Michael Bull, CCIM What’s up with seniors housing? Consumer demand, investor interest and sales prices — that’s what. With more than 10,000 baby boomers turning 65 years old on a daily basis and the ranks of the newly insured growing, the seniors housing industry is certainly poised for growth. Those were a few of the points made on a recent “Commercial Real Estate Show” episode about seniors housing. I interviewed a few industry icons about the current and future performance of this property sector. Something for Everyone “When you consider the main types of seniors housing products, assisted living has had the most investor demand,” said Rob Whitmire, president of the national seniors living group at brokerage firm Bull Realty Inc. You can break down the four basic types of seniors housing based on care delivery. With its community-oriented feel, independent living offers housing for seniors that are mostly able to take care of themselves. Assisted living is a state-licensed facility with 24-hour medical care that varies based on the needs of the individual. These properties focus heavily on the social aspect as well. Skilled nursing offers state-licensed, 24-hour medical care. Finally, continuing care retirement communities allow a person …

Online-only retailers didn’t exist 15 years ago, but today there are more than 100,000 e-commerce retailers active in the United States. While e-commerce is growing by leaps and bounds, online transactions only represent 6 percent of total retail sales, according to the JLL’s Retail Group based in Atlanta. While that number is set to double by 2020, brick-and-mortar stores will remain a key driver to growth. Online-only sales strategies represent the ultimate in flexibility and cost-cutting, but the recent report by JLL, titled “Clicks to Bricks: Why Online Retailers Are Opening Stores,” concluded that an increasing number ofweb-only retailers are planting a stake in old-fashioned, brick-and-mortar storefronts to maximize their sales. “The virtual shopping game is changing. Even the most tech-savvy shoppers sometimes need to touch and feel the products they’re buying,” says Lew Kornberg, national practice leader of retail tenant representation at JLL. “It isn’t enough to have a purely bricks-and-mortar location, and we’re quickly finding out the same goes for a digital-only platform,” continues Kornberg. “To get the best of both worlds, e-tailers are reevaluating their current sales strategy to include physical locations because the more touch points retailers can offer to shoppers, the better.” While retailers are …

WASHINGTON, D.C. — Construction employment expanded in 195 metro areas, declined in 90 and was stagnant in 54 between January 2013 and January 2014, according to a new analysis of federal employment data by the Associated General Contractors of America. Despite the gains, construction employment remained below peak levels in all but 21 metro areas. Los Angeles-Long Beach-Glendale, Calif. added the largest number of construction jobs in the past year (8,100 jobs, 7 percent), followed by Houston-Sugar Land-Baytown, Texas (7,900 jobs, 4 percent), Santa Ana-Anaheim-Irvine, Calif. (7,800 jobs, 11 percent) and Dallas-Plano-Irving, Texas (7,200 jobs, 7 percent). The largest percentage gains occurred in Pascagoula, Miss. (46 percent, 2,100 jobs), El Centro, Calif. (39 percent, 700 jobs) and Steubenville-Weirton, Ohio-W.V. (38 percent, 600 jobs). “It is a sign of the continued strengthening of the construction industry that nearly 60 percent of metros added construction jobs from a year earlier despite the severe winter conditions in much of the country this January,” says Ken Simonson, the association's chief economist. “Nevertheless, the industry’s recovery has a long way to go with only a smattering of metro areas exceeding their previous peak January level of employment.” The largest job losses from January 2013 to …

ANNAPOLIS, MD. — Beth Burnham Mace has become the first-ever chief economist for NIC and the seniors housing and care industry, the organization announced Monday. In this new position, which she began March 10, Mace also serves as director of capital markets outreach. Her economic forecasting experience spans more than 25 years. Prior to joining NIC, Mace was a director with AEW Capital Management in AEW’s research group. She worked with the firm’s direct investment group to provide primary research support to its core and value-added investment strategies and supported the group in underwriting, asset and portfolio management decisions. In addition to Mace assisting NIC with its mission to facilitate informed investment decisions in the seniors housing and care industry through outreach to the capital markets, she will collaborate with NIC’s research and analytics team in the development of data products, the shaping of analytics and advancing NIC’s research initiatives. “She will leverage not only NIC’s various data time series, but also numerous economic, demographic and financial data series to provide insights into the market dynamics of seniors housing and care,” says Chuck Harry, managing director and director of research and analytics with NIC. As a member of NIC’s board …

By Matt Valley WASHINGTON, D.C. — Economists breathed a collective sigh of relief last Friday morning after the Bureau of Labor Statistics (BLS) reported that U.S. nonfarm payrolls rose by 175,000 in February, beating the average forecast estimate of 149,000, says Bob Bach, director of research for the Americas with Newmark Grubb Knight Frank. What’s more, the BLS also revised the December and January figures upward by a combined 25,000, which was welcome news considering the tepid job gains in each of those months. Nonfarm payrolls rose by 84,000 in December and 129,000 in January, up 9,000 and 16,000, respectively, from initial estimates. “February’s report supports the view that we’re not backsliding, but it doesn’t settle the question of whether we’re accelerating,” says Bach. “It will take a couple more months to see if the acceleration is real or another case of false hopes, which we’ve seen multiple times during the recovery. “I think the bar for success in the labor market has been lowered. Maybe 175,000 jobs [per month] is the new 250,000.” Old Man Winter Tightens Grip The U.S. economy has added an average of 129,000 jobs per month during the past three months, based on the revised …