Archive for August, 2010
If you are an occupier of commercial real estate it is a great time to lease space. We’re still getting calls from occupiers that only want to buy and won’t consider leasing. If that’s you’re attitude, good luck. Getting all of the stars to align for that perfect building at $0.25 on the dollar, in the perfect location, size and meets your functional requirements is extremely tough to near impossible.
Advantages of Leasing: Availability of Cash; Location; and last but not least Focus. Leasing allows the user to concentrate on his primary business without the distraction of managing real estate.
Also, if you own your real estate and need an infusion of cash, consider a sale-leaseback [read more].
In the Deal of the Week column in the July 21, 2010, Wall Street Journal., Maura Webber Sandovi discusses the impending purchase of an office building in Falls Church, VA by Northrop Grumman Corporation for its new headquarters relocating from southern California. The underlying message was that by purchasing the building rather than leasing, Northrop was motivated by coming changes in accounting rules which will require leases to be shown on balance sheets as liabilities instead of expenses. Businesses will look for shorter-term leases to protect their borrowing capacity which will in turn impact landlords’ ability to obtain financing.
The Legends at Oak Grove, located off Washington Pike, is offering a number of amenities but one may be unique to the Knoxville market. The new, gated property, now in lease-up, has one-, two- and three-bedroom units with the usual high-end interior finishes and features along with clubhouse and fitness center but the swimming pool is attracting the most attention. Instead of a conventional, chlorinated poll, the pool at the Legends is filled with saltwater. Proponents claim that the saltwater system maintains chlorine at stable levels so there is not a chlorine smell or taste and hair and suits won’t discolor. The concentration of salt is about 10% of the level of sea water and does not have a noticeable taste.
An article by Jeffrey Lee in the April issue of UNITS points out that operating costs are substantially lower for saltwater pools also with savings both on chemicals and maintenance labor.
CoStar data shows that three of the five worst multifamily markets for distressed sales at a percentage of total sales were in the south. Atlanta led the way with 72% and two Florida markets, Jacksonville (#2) and Tampa-St. Petersburg (#5) were at 62% and 49% respectively. Stockton-Modesto, CA (#3) and Las Vegas (#4) rounded out the bottom five.
CoStar reports that the first half of 2010 is looking increasingly attractive yet competitive for mulitfamily investors. [read article]
The Property Report in the June 16 Wall Street Journal., written by Dawn Wotapka, passes along some encouraging news on the multifamily leasing front. Large landlords report declines in rent rates have ceased in most markets and rates are actually increasing slightly. Two factors contributed to the reversal of direction. First, the economy is adding jobs and the mood of pessimism is lifting, leading to increased confidence to sign leases and, second, the expiration of the first-time home-buyer tax credit has slowed the exit of renters to home-ownership. Major players such as AvalonBay Communities, Equity Residential and UDR all show improved earnings estimates.
After notching gains totaling 19.4% in the 4th quarter 2009, and 1st quarter 2010, REITS faded by 3% during the 2nd quarter but still did better than equities as the DJIA slipped by 8% over the same period.
One bright spot, however, was apartment REITs which were up 7%, driven by homeowners who have lost homes to foreclosure turning to rentals and lack of financing for new product over the last two years limiting competition.
Source: The Property Report, by Nick Timiraos and A. D. Pruitt, Wall Street Journal., June 30, 2010.