DLA Piper Despite the slow economic recovery and modest job growth following the financial crisis that knocked the commercial property market to its knees, an overwhelming majority of commercial real estate executives report feeling optimistic about the industry’s prospects for 2013, according to DLA Piper’s 2013 State of the Market Survey. Real estate executives cite the strengthening economy, low-cost financing afforded by artificially low interest rates and easier access to capital as the top reasons they are feeling good about the year ahead. The survey, measuring the attitudes and perspectives of 189 top executives within the commercial real estate industry, reveals that 85 percent of respondents describe their 12-month outlook for the U.S. commercial real estate industry as “bullish,” reversing a far more pessimistic outlook that prevailed in 2011 when only 30 percent of commercial real estate executives described their outlook as bullish. This is also a tremendous leap forward from 2008, when just 10 percent of respondents had a positive mindset for the sector. While most executives don’t expect to see a sustained, broad economic recovery lift real estate fundamentals this year, most expect real estate capitalization rates to remain steady or even go down some, keeping commercial property …
Richard P. Rizzuto When life hands you lemons, make lemonade. For those of us involved in the retail real estate sector, that second part should probably be changed to “open a lemonade stand.” The well-known saying echoes the importance of resilience and adaptability in the business world because more often it’s not the strongest who survive, but the ones who are the most responsive to change who can tread the waters. The brick-and-mortar retail model that has worked for years is continuing to evolve and there’s a strong sense of caution in the air. Lenders are willing, but only if retailers extra-qualified. Gone are the days when companies were growing at a rapid pace. For example, a company like Quick Chek, which previously might look to open 40 stores in a year, is now being far more selective and opening only eight in prime locations. Not because they can’t open more, but because they see the value in “less is more” — the quality over quantity mindset. Retailers who are doing well and expanding are ones such as Dollar General, Walmart, Super Target, and Walgreen’s, who have realized that the consumer mindset has shifted with value now being of prime …
Matt Valley ANNAPOLIS, MD. — The occupancy rate remained essentially flat during the first quarter of 2013 in the seniors housing industry, while the pace of annual rent growth accelerated slightly and overall construction activity rose. The mixed bag of results comes from NIC MAP, a data and analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC). Overall, the average occupancy rate for seniors housing properties in the first quarter of 2013 was 89.1 percent, unchanged from the prior quarter and a 0.8 percentage point increase from a year earlier. The first quarter of 2013 marked the first time since the second quarter of 2010 that the average occupancy rate in seniors housing failed to rise. While the recovery in occupancy stalled, it remains 2.2 percentage points above its cyclical low of 86.9 percent during the first quarter of 2010. The occupancy rate for independent living properties and assisted living properties averaged 89.3 percent and 88.8 percent, respectively, during the first quarter of 2013. Compared to the prior quarter, independent living occupancy rose by 0.2 percentage points, while assisted living occupancy declined by 0.2 percentage points. The occupancy rate for independent living is now …
Loan delinquency rates are declining, but there are still ample opportunities for investors to purchase distressed commercial properties. Before forking over money for those troubled assets, however, investors should make sure they have suitable real estate experience. Those were some of the observations and tips provided by a panel of experts in distressed real estate on a recent broadcast of the “Commercial Real Estate Show” hosted by Michael Bull, founder and managing broker of Atlanta-based Bull Realty. The show provided an enlightening look at the issues surrounding the acquisition of troubled commercial properties. Topics included CMBS delinquency rates, selling notes and due diligence. Delinquencies Dropping The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) fell to 9.42 percent in February, its lowest level in a year, according to Tom Fink, a senior vice president with the analytics firm Trepp LLC based in New York City. “It’s come down significantly, and we expect to see that number continue to decline,” he said. Investors who acquire those commercial properties still experiencing distress should have plenty of real estate experience, Fink cautioned. “If you’re looking at a distressed property, you’re looking at something that from a real estate …
Lynn Peisner AUSTIN, TEXAS — InterFace Student Housing 2013 wrapped up last Friday at the Hilton Austin after several informative sessions, networking events and the sold-out Innovator Awards dinner and ceremony. The awards herald excellence in development, marketing, financing and other categories. Two projects each won three awards for the first time: The Retreat San Marcos in Texas, developed by Landmark Properties with financing and eventual purchase by American Campus Communities, won awards for most creative financing, best architecture in a property of 200 beds or more, and best new development of a property with more than 200 beds. The last two categories were the most popular this year, garnering more than 30 entries combined. The architect for the Retreat San Marcos was Niles Bolton Associates. Cardinal Group Management swept the leasing and marketing category of the third annual Innovator Awards held in Austin, Texas on April 11. Cardinal Group Management (CGM) swept the marketing and leasing categories, taking home three innovator awards for Auraria Student Lofts in Denver. CGM won for best social media campaign, best mobile marketing campaign and best marketing and lease-up program. Accepting for CGM was Tealios, the community’s mascot (reminiscent of the Blue Man Group) …
Lynn Peisner AUSTIN, TEXAS — The fifth annual InterFace Student Housing Conference is underway in Austin, with a gathering of more than 900 developers, investors, managers and numerous others associated with this popular sector of commercial real estate. The conference began Wednesday with a golf outing that went off in spite of rain. Wednesday’s events included several informal roundtable discussions about leasing, tax assessment, architecture and other topics and a lively cocktail reception in the exhibit hall. Thursday's full schedule of panels and events began with CEOs from student housing's three public REITs weighing in on trends and the industry's momentum after 2012, which was a stellar year of positive activity and large portfolio acquisitions. CEOs, from left, Bill Bayless of ACC, Ted Rollins of Campus Crest and Randy Churchey of EdR sit on the first general session panel at InterFace Student Housing. Peter Katz, senior vice president of investments for Institutional Property Advisors, moderated the panel. The CEOs discussed potential roadblocks ahead that include rising construction costs, over-supply, and a too-heavy focus on courting students with high-income guarantors. Additionally, online degrees have many wondering how those “virtual” students might affect the rising enrollment trends everyone associates with purpose-built student …
Matt Valley The U.S. labor market has hit a “pothole,” according to Robert Bach, national director of market analytics for brokerage firm Newmark Grubb Knight Frank, raising new questions about the pace of recovery in the near term. Employers added 88,000 net new payroll jobs in March, well below expectations for around 200,000 and below the four-month average of 221,000 from November through February. “[The report] from the Labor Department indicates the recovery will continue, but not at the accelerated pace that some indicators earlier in the year had suggested,” wrote Bach in a research note Friday shortly after the Bureau of Labor Statistics released the nonfarm payroll employment figures for March. The unemployment rate slipped from 7.7 percent in February to 7.6 percent in March, its lowest reading since December 2008. However, the unemployment rate declined for the “wrong reason,” points out Bach, as the labor force fell by 496,000. The labor force participation rate sank to 63.3 percent, its lowest level since May 1979, as many discouraged job seekers ended their searches and baby boomers retired. The decline in job creation last month was not totally unexpected, pointed out the veteran economist. The ISM manufacturing and nonmanufacturing indices, …
Matt Valley NEW YORK — The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) inched higher by eight basis points in March to 9.5 percent after reaching the lowest level in a year the prior month, according to Trepp LLC. Overall, the rate has fallen 84 basis points since hitting its all-time peak of 10.34 percent at the end of July 2012. Loan resolutions continued to drop in March, falling from just under $1 billion in February to almost $850 million. There was $2.8 billion in newly delinquent loans reported in March, up slightly from the previous month. There is currently $52.1 billion in U.S. CMBS loans 30 or more days delinquent, excluding loans that are past their balloon date but current on interest payments. There are about 3,300 loans totaling $64.8 billion currently in special servicing. “A close examination of the data reveals that the weakening experienced in March is not nearly as worrisome as it seems,” said Manus Clancy, senior managing direction of Trepp. “The jump in the rate was caused primarily by a reversal of status of a number of floating-rate hotel loans.” Among the five major property types, hotel loans led …
John Nelson The theme of the recent 25th annual Hunter Hotel Investment Conference was “Moving Forward with Confidence,” which was apropos based on the comments of four hotel operators during the conference’s president’s panel. The prevailing sentiment from the panel was that the U.S. hotel industry can expect healthy gains in revenue per available room (RevPAR) and average daily rate (ADR) this year and beyond. The panel lauded the U.S. hotel industry’s performance in recent history, despite the rough years experienced during the recovery from the Great Recession. “We’ve been in a sluggish, unstable economy and we’ve had a couple good years,” reasons Wayne Goldberg, president and CEO of Irving, Texas-based La Quinta Inns & Suites. The four panelists, who oversee hotel operations for properties ranging from midscale assets to luxury hotels, included Goldberg; Steve Joyce, president and CEO of Choice Hotels International in Silver Spring, Md.; Richard Kessler, chairman and CEO of The Kessler Collection of Orlando, Fla.; and Mark LaPort, president and CEO of Concord Hospitality in Raleigh, N.C. The conference was held at the Marriott Marquis in downtown Atlanta. More than 900 industry professionals attended the annual event. Wayne Goldberg (far left), president and CEO of La …
Staff reports WASHINGTON, D.C. — With congressional tax-writers intensifying their efforts to overhaul the U.S. tax code, The Real Estate Roundtable is urging a pro-growth approach to tax restructuring that recognizes commercial real estate’s vast economic contributions and includes appropriate “transition rules” to help minimize disruptions to real estate and other economic sectors. “The nation’s tax laws need to be revamped to unleash entrepreneurship, investment, capital formation and job creation,” wrote Real Estate Roundtable President and CEO Jeffrey DeBoer in his March 21 letter to House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Sander Levin (D-Mich.). “But this process poses risk and, therefore, it must be undertaken with great care. We urge the Ways and Means Committee to be mindful of how proposed changes in commercial real estate taxation can dramatically affect the health of the U.S. economy, jobs, retirement savings, lending institutions, pension funds and, of course, local communities,” added DeBoer. As an example of the unintended consequences of tax reform, DeBoer noted the destabilizing effect of the 1986 Tax Reform Act on commercial real estate values, financial institutions and tax bases — due largely to significant policy changes that were applied to pre-existing real estate investments. …