Features

By Cara Aliek Despite the ups and downs everyone is feeling in the current economic slump, one thing remains the constant in this storm: we’re all getting older. According to the American Association of Retired Persons (AARP), the number of persons age 65 and older is expected to grow to 70 million by 2030. With this tidal wave of emerging baby boomers (age 45-64), new trends are emerging in the senior housing sector, which is likely to be commercial real estate’s silver lining in 2009. Debt Metrics The National Investment Center for the Seniors Housing & Care Industry (NIC), reports loan volume and performance remained strong for the senior housing and care industry during second quarter 2008. Loan volume placed was $1.55 billion, up 68 percent from first quarter 2008. Loan performance was tracked at 99.5 percent, with just 0.5 percent restructured or delinquent. Robert Kramer, president of NIC, says this loan performance matched the all-time high, which was recorded in fourth quarter 2007. “Similar to other commercial real estate asset classes, senior housing had not yet seen any significant deterioration in loan performance,” says Kramer. “In terms of loan volume, one must remember that these data results predate the …

Mark Zurlini, Palisades Financial The current credit crunch and recession most of the world is experiencing will continue to erode real estate values for the foreseeable future. At some point the theory of supply and demand will prevail resulting in a positive effect on real estate values in the long run. We need to take a step back, to the fundamentals of real estate where properties are purchased with low to moderate leverage and held as long-term investments and not traded as if it were a short-term commodity. Higher equity requirements by lenders will impact the quality of investor. Recessions are known to “weed out” the amateurs who were able to enter the real estate game through access to cheap capital and were able to profit through artificially inflated values driven by a buying frenzy. As property values continue to drop there are numerous buying opportunities for those disciplined investors who have maintained manageable leverage on their real estate holdings and have accumulated cash and/or have access to patient capital. Those able to buy at the “right price” and hold onto the investment until values increase will make a fortune. The right price is different for each investor gauged by …

By Paul Kiernan, Holland & Knight Being happy may be a little harder than it was 20 years ago when Bobby McFerrin sang that tune. Worrying? It’s back in style. Our current credit/financial/economic/kitchen-sink crisis is so worrisome because no one wants to bet his own dollars on how long the crisis is going to last or who it’s going to whack next. Just like a good horror movie where you hear “The Nameless Beast” and you sense it’s out there in the dark, but you never quite see its exact shape. That’s much scarier than seeing “The Beast” face-to-face. The autumn-into-winter freeze on productive activity is showing up in court. Deals that were a lock are falling apart. Sterling lenders are tarnishing. And household names are being posted on the docket down at the bankruptcy court. Things that pundits said just a year ago “would never happen” seem to happen on a weekly basis. For the commercial and retail landlord, the issue is timing. As you see your tenant’s problems multiplying — or you are worried that the problems may be snowballing — at what point do you think about litigation? The first late check? The first request to offset …

By Mark Bhasin, Palisades Financial As U.S. policymakers attempt to navigate through America’s greatest financial and banking crisis since the Great Depression, the amount of regulation in America’s financial markets is becoming a major topic of discussion. The current systemic financial crisis is a vicious circle between a contracting real economy and massive credit and financial losses feeding off each other in a downward spiral. This financial crisis will likely imply total credit losses of somewhere between $1 and $2 trillion. Recent governmental intervention in America’s financial markets includes the bailout of the Bear Stearns creditors, the bailout of Fannie Mae and Freddie Mac, the use of the Fed balance sheet — hundreds of billions of safe and liquid U.S. Treasuries swapped for toxic illiquid private securities, the use of the other government sponsored enterprises’ to provide hundreds of billions of dollars of liquidity to distressed, illiquid and insolvent mortgage lenders, the creation of a new set of bailout facilities to prop up and rescue banks. Not to mention bailing out non-bank financial institutions, the bailout of AIG and a $700 billion U.S. rescue package. These actions come from the most ideologically zealot free-market, laissez-faire administration in American history. The …

By Cara Aliek Despite sharing the same name, Hollywood, Florida, is distinguishing itself from its California sister when it comes to making transit-oriented development (TOD) environmentally chic. A new $500 million mixed-use project called Sheridan Station will be located adjacent to Tri-Rail’s train station and will be Broward County’s first TOD. Attracting residents and shoppers alike, the project will feature 1,050 residential units, 300,000 square feet of retail and restaurant space, 299,000 square feet of office space, a 150-room hotel, 2,500 parking spaces, a 6-acre public park, and a dog park. Fort Lauderdale, Fla.-based Ram Development Co. and Miami-based Pinnacle Housing Group are developing the 40 plus acre project, while landscape architecture duties have been named to Hollywood, Fla.-based Witkin Hults Design Group. “The most important part of the project is that it’s going to be a very walkable community,” says Juan Pacheco, senior project manager with Witkin Hults. “It’s very urban — not your typical South Florida architecture project.” Located west of Interstate 95 between Sheridan and Taft streets, the project will be the largest shopping destination between Fort Lauderdale and Miami. Developers hope to attract professionals, who work in either of these cities, to the residential units by …

By Thomas A. Rizk, chairman and CEO, TractManager Real estate professionals are quickly learning that in this current fiscal environment, any transaction must be undertaken in an expeditious manner. Closing sales, signing leases, even just keeping financial documents in order, requires having up-to-the-minute knowledge of current market activity. And with the market moving faster than ever, it’s imperative that professionals keep the pace. Lenders are being impacted on a daily basis by what’s going on in the marketplace. We saw Lehman Brothers file for bankruptcy overnight. We saw Washington Mutual get acquired very quickly by JP Morgan. Sometimes, when these transactions happen, there arises an opportunity — a real estate owner can purchase his own debt at a discount or a building could be sold in order to avoid a default on a maturing mortgage. Given that today’s climate makes it incredibly difficult to refinance real estate, lenders and owners need to be able to take advantage of new opportunities, and they must do so quickly. But it’s impossible to take advantage of such a situation without the proper information in place. The process of performing due diligence can be time consuming and arduous. In the past, all due diligence …

By Ruta Greiner, ka architecture With the current state of the economy and slowdown in new development, many development and asset management organizations are now focusing on investment in existing properties to compete with lifestyle centers for tenants and customers. Neglected existing properties have become outdated and out of position with the current shopping demographic. The use of graphics in a mall renovation can have an enormous effect on its revitalization. The redesign of a signage, identity and way-finding system can create the perception of a new community destination drawing more tenants and customers and, in turn, increasing profits for the developer. Expanding and Rebranding Identity repositioning can be very useful as the demographics of communities change, as is shown with Brookfield Square Mall in Brookfield, Wisconsin. This CBL & Associates Properties (CBL) asset is located in a region that was once considered more rural, but over the past decade, the demographics changed making it a wealthier community with a very progressive new group of residents whose needs could not be met with the old facility. The community was ready for upscale restaurants and a more dynamic atmosphere. A high standard was anticipated for the repositioning from planning, to image …

By John W. Colagrande Jr., P.E.,Vice President of Engineering, Whitman When it comes to purchasing a commercial property, there are definite benefits to performing a pre-purchase assessment of the property. Commercial property investors have two potential tools available to them. A Property Condition Assessment (PCA), which can provide information on the condition of an existing building, and an Environmental Phase I, to evaluate potential environmental risks associated with the property. PCA’s can assist buyers of commercial real estate by providing information on the physical condition of the building and internal components prior to acquisition. This information allows the purchaser to factor the existing conditions of the building into their evaluation and may also provide an opportunity to further negotiate with the seller. This is accomplished by having a PCA conductor observe the physical features of the property as outlined in the American Society for Testing and Materials Standard. Depending on the complexity of the project and the size of the structure, a typical PCA can take a few days or several weeks and consists of four parts: Documentation review and interview A walk through The preparation of opinions of probable costs to remedy any physical deficiencies The property conditions report …