Come to Us for Central Massachusetts Commercial Real Estate
Sperry Van Ness has just introduced the next issue of THE ADVISOR, a magazine devoted to commercial real estate investors, owners and advisors. Watch a quick preview of what you can see and benefit from on this short video.
You and we know the commercial real estate market is in turnmoil. Perhaps The Advisor will help make sense of it.
Getting your copy of THE ADVISOR is easy. Just click here, download your copy, then sit back and enjoy individual articles that will help your investment strategy.
I'll welcome your comments about the magazine and also any questions you have where we might be able to help you. Call or email and we'll respond.
This article submitted by: Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
bobyale@svn.com
Direct Line: 508-351-7079
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Wow! For anyone that enjoys riding a roller coaster, this is a fantastic ride. The news one day is up, the next day down. Unemployemnt drops below 10% to 9.7% and we hit a high. Then we read about foreclosures and we go into a dip. How do I get off this ride?
The best view I've heard is to look carefully, act carefully and follow good business sense.
We all know that prices rose too high a couple of years ago. Anyone with a sense of history could anticpate we'd have a correction. Now we're in that correction. Have we bottomed out yet seems to be the question.
Well, here's the problem. We'll never know when we've hit bottom until about two quarters beyond that time. By then, prices will have gone up again, rates will have increased and deals will become more scarce. So, the safe way is to follow the herd and wait until all the problems have been corrected.
How about another view?
Consider your goals, look for value in the current market and make a decision based on the current factors.
If you're a buyer you can see that many sellers have adjusted to the reality of the current market and adjusted their asking prices. If sales prices have been reduced, so have lease rates - important to the investor. Calculate your potential return in the current market factoring in an appropirate amount for vacancy. Try the calculation tool below as a sample to see how that investment you might be considering will work.
We'll be glad to help. Call me and I'll ask one of our prefessionals to get the information that will help you decide if today is the right time to make an investment. It just might be the best time.
This article submitted by Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
bobyale@svn.com
508-351-7079
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Is Your Glass Half Full or Half Empty?
Whether you're currently active in buying, selling or operating commercial real estate, the chances are that it affects you in some way. Am I right?
Fortunately for those of us in the Central Massachusetts area, our market is slightly better than the nation as a whole. Part of this is due to our diverse business market which includes medical, financial, retail, manufacturing and the catch all "high tech". The most recent figures indicate our jobless rate dropped from 9.2% to 8.9% and - there are jobs being advertised. Employers are hiring! My view is that this statistic is the critical element and more job growth is needed before we see a true economic recovery and before we see empty office and warehouse space "filled up". So, we're headed in the right ddirection.
In fact, on Christmas Day, the Boston Globe reported that the recent trend of a declining Massachusetts population has reversed itself in the past year. Based on immigration trends and birth rates, we saw a positive increase in polulation from July 2008 to July 2009. Where it was forecasted that we might lose a congressional seat, this is no longer a given. To see the entire article, click reversing population trend.
I'm interested in your view of where we're headed in our hiring and general growth pattern in Central Mass. Does your crystal ball foretell more hiring in the first quarter? Second quarter? If you have any specific thoughts I'll be glad to share them with our other readers.
The various news media try to report their data accurately, I'm sure. But let's face it. We tend to create a market for bad news. If a boy scout helps a little old lady across the street - that's not reportable news. If that same scout accidentally bumped that little old lady off the side walk into the path of a moving vehicle - that's front page! And that's how I see the news media reporting about the real estate market in general and the commercial real estate market specifically. It's more newsworthy to report that mortgage defaults and foreclosures are up than to comment that a local employer in a Worcester industrial industry just rehired laid off employees or that a new company came to town and set up a new operation. These are often found on the first page of the business section, but not the front page.
My goal is to tell the story about the glass half full.
Share your stories in the comments section below so we can all feel a little better about our market. The realtiy is that as we feel better we'll respond in kind and begin to make things happen.
So, are you a glass haf full or a glass helf empty type of business person?
This article contributed by:
Robert L. Yale, CCIM
bobyale@svn.com
508-351-7079
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
When you have money to invest in commercial real estate, or want to do a tax deferred exchange from one property to another, how do you know which markets are most likely to give you the highest return on your investment? We've learned in these past two years that there are no guarantees anywhere, but we also know that some areas or states or cities will consistently produce a higher return.
In that spirit, we are able to offer you four publications produced by Sperry Van Ness International that demonstrate for the investor some of the more logical places to invest.
Feel free to download any or all of these publications to study at your leisure. If you have any questions or would like assistance in researching a market or a specific property almost anywhere in the country - that's what we do. Just call one of our advisors for a conversation concerning your interests and we''ll see how we can be of help - or just answer your questions.
Enjoy your reading; just click on the title to download the study of interest.
Top Markets - Office - 2009
Top Markets - Industrial - 2009
Top Markets - Retail - 2009
Top Markets - Multi Family - 2009
After you've looked over this material, please feel free to comment about the usefulness of the material. We like to hear your ideas.
This article submitted by
Robert L Yale, CCIM
508-351-7079
bobyale@vn.com
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
John Reeder, our friend and colleague from the SVN | Mimi Song Realty Group in California, has graciously allowed us to share his article concerning distressed commercial property with you. Read on:
I have noticed among some people that I talk to that seems to be an odd distinction made between pricing for distressed and non-distressed properties. Or maybe the better way to put it is that there is a belief that is held by some that there is a difference between pricing for distressed and non-distressed properties. I've even heard some lobby groups attempt to advance the idea that appraisals should account for whether the property being appraised is like recent sales in terms of level of distress. I've always thought that there is something odd and illogical about this distinction. In my mind, the market price is the market price. Prices generally set to whatever level you have willing Buyers. Whether the property is distressed, or non-distressed, shouldn't really impact the price. I'll explain and also try to address an objection that I could see someone making in response to my thesis here.
To view the full article, please click here
John can be contacted at:
John Reeder
Sperry Van Ness | Mimi Song Realty Group
Cell: 951-847-6928 | Office: 909-989-8590 x 110
Reeder@svn.com
Article submitted by
Robert Yale, CCIM
Sperry Van Ness/ComVest Realty
508-351-7079
bobyale@svn.com
http://www.svndealbreaker.com/
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Damian Paletta of the Wall Street Journal has reported in the article below that the Feds are considering a new plan to allow banks to create workouts on commercial loans rather than letting the loans go into default. We realize that this would ulitmately have the potential to cause more bank failures if too many commerecial loan losses accumulate in the bank's portfolio.
As more tenants are renegotiating lease terms with their landlords, the investor's situation is most likely deteriorating potentially causing them to go into loan default. We know that many lenders have been doing workouts on their own initiative. It's good to see the feds working toward a practical solution while the commercial real estate market sorts itself out over the next few years.
"WASHINGTON - Federal bank regulators are close to issuing guidelines that would encourage lenders to rework troubled commercial real-estate loans, a sector of the economy they expect to topple scores of additional financial institutions."
Click here to read the full article
This article sumitted by Robert Yale, CCIM
contact bobyale@svn.com
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Would you recommend that I drop my asking price in today’s commercial real estate market? Y
You’ll hate this answer since it seems to waffle, but my answer is, “it depends”.
After all, what’s the definition of value? “What a willing buyer will pay a willing seller”. If your property is priced to attract buyers in our current market and it’s not selling, then there may be other factors such as location, condition, visual appeal - or is it a specialized user building with a high conversion cost? These can prevent offers from coming in from buyers.
But if your property is priced - not based on the current market, but rather on what you paid for it, what your mortgage balance is or what you just plain want for it – then be prepared for a long wait. Buyers today are not the same as buyers of even two or three years ago. At that time, investors were over paying based on true economic value because they too often felt there would be someone else out there who would over pay at an even higher rate. And perhaps they panicked thinking that if they didn’t buy the building of their dreams then, it wouldn’t be there in a short time.
That period of buying frenzy is now a foot note in history. It’s best to forget it and form a strategy based on what today’s market will bring. No one knows what the commercial real estate market will look like in one, two or even five years. The smartest people I’ve listened to predict at least a five year period to return to a “normal” market, whatever that is. No one predicts that it will look like the hyper inflated market of the earlier part of this decade.
The Wall Street Journal reported that “Feds Fret About Commercial Real Estate”. More financial pain is expected as they force banks to recognize losses. There’s even one dire prediction that as many as 45% of loans could be at risk. If your mortgage loan is “under water”, perhaps you should consider how to dispose of the property before your lender decides to foreclose. Some strategies might include a short sale with the lender’s cooperation, a voluntary auction or simply adjust your asking price to current market rates.
Some sellers want to keep their price artificially high hoping that a buyer will make an offer based on that price. This seldom works. Most buyers won’t make the effort to offer what they feel to be the real current value because they “might insult the seller”, or just don’t feel it’s worth the effort to go through a protracted negotiation when there are so many other properties available today. In the meantime, the commercial market prices are still trending down and future pricing is guesswork. If the Wall Street Journal’s pessimistic outlook is correct, prices will fall dramatically.
So, what will your pricing strategy be? Our purpose here is to help you create a plan that will bring you the best value available - today. The past is histiory, the present is now and the future is, well, muddled at best.
We'll be glad to offer our help in developing that strategy with you, or use your own real estate professional. The most important point is to be aware of current market conditions and price your property to sell.
This article submitted by Robert L Yale, CCIM
contact Bob at bobyale@svn.com
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Why? It boils down to fundamentals. We recently experienced an unprecedented upward spiral in commercial real estate (CRE) values with some properties selling at unrealistically high prices compared to their underlying real value. Too many investors bought at low CAP rates in the 3 to 5% range without paying enough attention to the true value of some of the leases, the tenants, and the local market. And they over leveraged their purchases at 80% loan to value or more. This didn't leave a lot of room for the loss of a key tenant or, as is the case now, tenants coming back to the landlord to renegotiate their rents downward - or just vacating before their lease terms expire.
I heard a report this morning suggesting that there are $1.7 Trillion dollars of CRE mortgages outstanding today. Not all of these are in trouble, but the estimate is that 25% of these, or over $400 Billion worth, are "under water". Of this figure, lenders have only recognized about 10% of these troubled assets.
No one knows what the real number is, but let's say $350 Billion of troubled assets are still to be recognized and dealt with in some manner. How will this affect you?
We already recognize that, in general, values have dropped from 30% to 50% from their peak in 2006-07. If this is true in your market and for your property type, then your 70% loan to value mortgage is under water and subject to be called by the lender. The momentary favorable news is that lenders don't want your property and are tending to "kick the can down the road" as one commentator put it. In other words, defer action and see if the problem will go away.
I'm a glass half full guy and I hope the problem will go away, but I was in this business during the late 80's and early 90's and saw that these problems tended not to go away.
Are there steps that you can take today? Yes, although I don't want to imply that any single fix will correct everyone's problems. Each owner's asset must be looked at carefully with consideration to the points above and more. The US commercial real estate market is made up of thousands of local markets. No one brush can paint them all equally. So even within a portfolio there may be different solutions suggested.
As part of a national real estate firm we're in a position to put you in touch with the right experts to offer a solution. These parties may be local, part of our national Asset Recovery Team (SVN ART) or one of the many outside firms with whom we have affiliations for specialized purposes.
Whether you contact Sperry Van Ness or another source, take a look at your CRE properties now, recognize the true value of your property and compare it to your mortgage value. Include in this a risk analysis for your tenant base and discount any growth you may have built into your operating statements - since the growth may go the other way.
This artilce contributed by Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
Northborough, MA 01532
508-351-7079
bobyale@svn.com
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
Yes, there is money available for strong properties and borrowers with good credit. However, we get too many calls from borrowers we cannot help because they are simply not realistic. They are either in denial or are unaware of the problems that our industry is facing.
Transactions in the commercial real estate business are reportedly down over 85%. While there are many reasons for this, clearly one problem is that sellers and borrowers are valuing their assets substantially higher than buyers andl enders.
Well in this reporter's humble opinion, it's time for sellers and borrowers to "get real." Read on for my rant on this subject.
Ed. Note. Our thanks this week to Mr. Joe Forman, CEO and President of Bond Street Capital Companies, for allowing us to reprint this article. Bond Street is located at 5236 Colodny Drive - Suite 101, Agoura Hills, CA 91301.Their phone is: 818.865.4100.
His article cuts to the heart of what so many owners and borrowers, lenders and buyers, are experiencing today. The CRE market is in a state of change. The rule book won't stay steady, so how can anyone know what to do?
We feel our SVN ART (Asset Recovery Team) can be of help. Ask for more information if you find yourself in this puzzle.
Central Massachusetts Commercial Real Estate
Come to Us for Central Massachusetts Commercial Real Estate
If you are the borrower with a commercial loan that was originated after 2005 or that is maturing during the next 24 months, chances are that you are not sleeping as well as you once did. That's because there is a substantial likelihood that deteriorated market conditions have undermined your property's performance and value to the point that you are no longer able to service your debt, or if your loan is maturing, there is no realistic source of capital to re-finance the maturing debt (even if your property is otherwise performing). In either case, the question is "what can I do"?
To find out what modification/workout strategies are potentially available on a commercial real estate loan (even one that is securitized); read the entire article, Understanding Modification Options Under Portfolio and CMBS Loan Stuctures.
This excerpt (and the full article available by clicking above), was offered to us courtesy of Brian S. Weinhart of Steckbauer Weinhart Jaffe, LLP of Los Angeles. Brian's full contact information is included with the article.
We realize that this subject is becoming of critical importance to a growing number of commercial mortgage holders around the country. Take a scenario in which a building was purchased three years ago for $1 million with an 80% loan to value mortgage. That $800,000 principal amount hasn't reduced much in three years. The lender now decides to have the property reappraised and discovers that current market value is, let's say, $700,000. The lender says they're willing to continue the loan - at 80% of the new appraisal. All the borrower has to do is send a check for $240,000, the difference between the new 80% value of $560,000 and the old 80% value of $800,000.
Whoops, I can't write a check for that amount. What can I do?
Mr. Weinhart's article offers a glimpse into how such loans are often addressed under a portfolio or securitized situation. Our Sperry Van Ness Asset Recovery Team can also help in many cases. Take a look at our web site describing our services for this purpose at http://www.svnart.com/.
And please call us at Sperry Van Ness/ComVest Realty where we can help you locally or start the process with other experts.
Robert L. Yale, CCIM
Sperry Van Ness/ComVest Realty
508-351-7079
bobyale@svn.com
Central Massachusetts Commercial Real Estate