Mexico Shows Promise as a Location for Retail Expansion
Jun 28th
While Mexico is evolving into a promising site for retail expansion by U.S. based firms, the country’s full potential cannot be realized until economic conditions improve and crime is contained.
The dramatic evolution of the retail landscape over the past 20 years has been driven by a number of factors such as education, the shift in the age composition of the population, and the emergence of the middle class. The main catalyst behind the emergence of the Mexican retail landscape has been the significant growth of the middle class, with a substantial demographic shift from a “have and have not” socio-economic composition to a more socially tiered structure. The middle class continues to grow both in numbers and in disposable income due primarily to a stable financial industry that has reintroduced the availability of credit (car loans, Visa/Master Card and now mortgages). More >
CMBS Observations
Jun 25th
According to Trepp, the number of loans transferring to special servicing is growing exponentially. As of May 31, 2010, there was $81.3 billion (4,558 loans) in special servicing, compared with $12.5 billion (1,276 loans) at the end of January 2009. And, Fitch Ratings expects the number of loans transferred to special servicing will be approximately 20% of outstanding CMBS by 2012.
Fitch also notes that on a more positive note, during 2009, over 75% of the loans transferred out of special servicing were either returned to the master servicer as corrected or paid in full with almost no loss. This transfer percentage fluctuated from 60% in 2006 to 90% in 2009. The 2009 recovery rate for these loans was consistent with the results dating back to 2006. Many of the loans that returned to the master servicers were modified; it remains to be seen how well those modifications will prevent the loans from returning to special servicing. More >
Gulf Oil Spill Not Likely to Impact Commercial Real Estate
Jun 22nd
Gulf Coast Commercial Property Experts See No Long-Term Effect on Supply or Demand
The BP oil spill that has continued for more than 60 days has caused widespread environmental damage and is already affecting shipping, fishing and tourism, but commercial property experts in the region do not believe the accident will have a significant impact on Gulf Coast real estate markets, according to a special report released today by NAI Global. More >
Economic Recovery Relieves Threat of Foreclosed Property Flood
Jun 21st
Everyone expected the floodgates of foreclosed properties to be opened by now, but it just hasn’t happened. And it doesn’t appear likely either. The fear that a massive wave of distressed property would hit a cash starved illiquid market has been forestalled. Instead the banks and their underwater borrowers have been given reprieve; as vast capital formation has occurred, product has slowly eked out into the market. In this now supply constrained-environment prices are moving up rather than crashing. The scarce core quality assets that have hit the market have had multiple bidders and realized cap rates up to 100 basis points lower than the bottom. More >
Commercial Real Estate Workout Workload Increasing Nationwide
Jun 21st
In the U.S., there are currently 7,881 FDIC insured institutions. Only a minority of these banks have ever made a commercial real estate loan. Thus a small minority of FDIC insured institutions currently possess the majority of the distressed commercial debt.
A Congressional Oversight Panel report dated February 10, 2010, states that between 2010 and 2014 approximately $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are “underwater” – that is, the borrower owes more than the underlying property is currently worth. More >
Markets Which Investors in U.S. Tend to Favor
Jun 18th
Unstable global credit markets, job losses, and a tottering U.S. economy subdue prospects for cities and suburbs from coast to coast in 2010. In “a flight to quality,” investors hunker down in familiar locations. Markets performing well before the crash will perform better coming out of it; markets lagging before will continue to lag.
- · Global gateway markets on the East and West coasts featuring international airports, ports, and major commercial centers.
- · Cities and urbanizing infill suburbs with 24-hour attributes — upscale, pedestrian-friendly neighborhoods; convenient office, retail, entertainment, and recreation districts; mass transit alternatives to driving; good schools (public and/or private); and relatively safe streets. More >
Demand for Restructurings Increases as Wave of Maturities Come Due in 2012
Jun 17th
Lenders and servicers are being inundated with defaulting loans. Banks have been exhibiting an “extend and pretend” mentality, with loans being extended in hopes of future real estate appreciation. This has been a gradual process with banks spreading out their markdowns to boost quarterly earnings.
However, this attitude is quickly coming to an end as lenders realize that marking to market and taking write-downs will be required to accelerate the process to a meaningful “reset” so that the capital markets may stabilize and normalize again. Lenders realize that their performing loan may risk leaning towards non-performing loan as the capital markets remain relatively frozen and securitizations are slow to aggregate loans to restart the CMBS markets. More >
One World Trade Center Presents New Opportunities
Jun 16th
Following a year of historical economic struggles, 2010 is showing slow, yet promising signs of recovery. After years of delays, the new World Trade Center is moving forward quickly, breathing new life into the investment and office markets in New York City. The construction of the Freedom Tower at One World Trade Center is progressing rapidly, already at the 26th floor. The structure is expected to reach the 50th floor by the end of the year and will hit its target of 104 stories by 2013. More >
NAI Global Forms Alliance with NRC Realty & Capital Advisors for Online Sealed-Bid Auctions
Jun 14th
NAI Global has formed an alliance with NRC Realty & Capital Advisors, LLC. NRC will work with NAI Global brokers across the U.S. in disposing of single commercial properties and real estate asset portfolios via online sealed bid auctions.
NRC Realty & Capital Advisors, through its proprietary technology, database and sealed-bid marketing and sales process, is a national leader in conducting accelerated sales programs for commercial real estate. Its process includes designing and implementing the highest profile marketing and advertising plans to maximize exposure for assets, and communicating with the maximum numbers of qualified buyers to generate competitive bidding and obtain the highest sale prices. The sealed bid creates a ‘price discovery’ process where true market values are determined. The process is managed closely to ensure rapid closings. More >
When to Sell your Hotel
Jun 10th
A lot of factors weigh in on the decision to sell a hotel. Grouping these factors into three categories may help create a more objective way of approaching this important decision. These categories include 1) the market, 2) the property and 3) the owner’s personal/corporate circumstances.
Like it or not, there is very little that a property owner can do about the market. The mistake that is too often made is to ignore the market and to make decisions based on expectations that are inconsistent and unrealistic to market conditions. Transaction volumes, cap rates, operational trends, financing terms and conditions, to name a few, are for the most part determined by the market. Although a property can perform within a market range, optimizing all aspects of your properties operations and marketing will for the most part only get you a value within that market determined trading range. Unfortunately, no matter how good of an operator you are, you do not control the market. Therefore, the prudent owner will value their property and the probability of terms and conditions of a sale within a market determined range. More >
