Anything but .01%… The Case for Commercial Real Estate Investment

I’m not so much concerned
about the return on my money
as the return of my money.
- Will Rogers, 1933

Billionaire Bill Gross of PIMCO makes the case for an alternative to money market accounts in his December newsletter. With interest earned on money markets and bank accounts in the range of 1 to 50 basis points he suggests looking at alternative forms of investment. His conclusion is that utilities are the place to park money in this environment in order to achieve a 5-6% yield.

Visit Bill Gross’ December Outlook

What his analysis does not consider is commercial real estate. Below is a list of the cap rate targets for the end of 2010 prepared by ULI.  While real estate is much less liquid than utility stocks, well located, solidly underwritten commercial real estate is expected to achieve unleveraged returns in the 8-10% range. Considering how real estate values have dropped, commercial real estate can now be purchased for a substantial discount to replacement cost. I believe that now is the time to buy well located properties for cash flow today and substantial capital gains in the future.

 

Is Commercial Real Estate a Zombie Filled Black Hole or Double Down Opportunity?

D.C.-area developer Jeff Neal gives the Huffington Post Investigative Fund a tour of empty commercial properties just blocks from the Capitol. He says we were, “drunk on a binge of easy credit and the bartender (the market) took away the bottle (credit).”

BLOGGER COMMENT: Private equity groups are looking to double down. They are building massive cash war chests to acquire properties from banks and distressed sellers for a fraction of replacement cost. Should the government create a false bottom or allow the market to find the true bottom where transactions can take place to eliminate the “Zombie overhang” on the market?

 

CMBS Savior? Developers Diversified Deal Is Nearer

CMBS Savior? Developers Diversified Deal Is Nearer – WSJ.com

Posted using ShareThis

By LINGLING WEI

A closely watched deal that may help uncork the commercial-property debt market is picking up steam after being threatened by some queasiness by the Federal Reserve, according to people familiar with the matter.

The Fed is sending signals that its concerns over the deal are easing, paving the way for the first sale of commercial-mortgage-backed securities, or CMBS, through a major rescue program called the Term Asset-Backed Securities Loan Facility, or TALF. The credit-starved real-estate industry has been hoping that the debt sale by shopping-center giant Developers Diversified Realty Corp. would lead to other CMBS sales. (see link above to read the entire story)

BLOGGER COMMENT: I recently attended the Crittenden Commercial Real Estate Finance Conference. The commercial real estate world is abuzz talking about TALF. If DDR can pull off this transaction the thinking is that there will be CMBS securitizations in 2010. While not to the level of 2007 CMBS getting some traction should encourage commercial real estate lenders to begin lending again.  This will also break the ice for CMBS 2.0 with non-recourse rates between 7-8% fixed for 10 years on a 30 year amortization schedule. Leverage is not expected to be 80% as in the last cycle, but 70% LTV sure beats 0%.

 

The Geography of Jobs

The Geography of Jobs – TIP Strategies

Watch this 30-second animated map showing job creation starting in 2004 and massive job loss starting in 2008.

Posted using ShareThis

 

Building Your Personal Brand

I’m back from South Beach after moderating a panel discussion on personal branding at the Crittenden Commercial Real Estate Conference. I was lucky to have an all star panel of:

Robert Barber, CCIM of Accelerated Real Estate Services

Dr. Diana Driscoll, O.D. of Ridgeline Hospitality, LLC

Eric Odum of Net Lease Commercial Advisory

M. Jeffrey Vinzani, Esq. of Nexsen Pruet, LLC

At a conference blanketed by the dark skies of the uncertainty and dread facing commercial real estate professionals, this panel was a ray of hope that if you work hard to build your personal brand using low-cost social media, you can survive and prosper while other folks are paralyzed by doubt and inaction.

Anyone that would like to view our presentation (Building_Your_Personal_Brand) can download it in pdf format from this blog in the box.net widget to the right. Looking forward to your comments.

Dave

PS – after our brief panel intro we showed the short video “Is social media a fad” to get folks in the mood

 

Crittenden Fall Commercial Real Estate Conference

Crittenden South Beach - Fall 2009

Conference begins Monday, October 26th at the Ritz-Carlton in South Beach, Miami. The conference features 17 panel discussions and endless networking and deal making opportunities. You can still register online or you may register onsite beginning Monday.

David Repka

I’m moderating a panel on “Building Your Personal Brand” at the Crittenden Fall Commercial Real Estate Conference in Miami Beach on October 26-28.

Key concept: the days of staying at the same shop for 30 years and retiring with a gold watch are over. Our panel will be discussing the need for commercial real estate professionals to build their personal brand that is separate and distinct from their company. My fellow panel members are skilled in new social media marketing such as SEO, LinkedIn, Facebook, Twitter, blogging & eNewsletters.

Hope to see you there. If you would like to get a copy of our presentation, please send an e-mail to dave@bisonfinancial.com with the phrase “Build My Personal Brand”.

 

Plan Coming Together to Restructure Commercial Real Estate Loans

By DAMIAN PALETTA in The Wall Street Journal

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.

Federal Deposit Insurance Corp. Chairman Sheila Bair told a Senate subcommittee that reworking the terms of these loans could help banks avoid larger losses. She likened it to the push regulators made last year for banks to rework troubled residential mortgages.

Reworked commercial real estate loans “should be encouraged, not criticized,” she said. “We are encouraging banks to restructure these loans.”

View original article in the Wall Street Journal

BLOGGER COMMENT: This gives hope to mortgagors with performing loans that go in technical default due to loan maturity. With CMBS securitization volume down 99.99% – did it ever make sense to send a default letter to a borrower that was paying as agreed? Here’s hoping that common-sense business practices will prevail and lenders will be able to restructure loans in a win-win fashion for  both borrowers and lenders rather than blindly following strict, illogical guidelines imposed by regulators.

 

Multifamily Economist: The Worst Is Over

Nadji Mfe2009

View more presentations from bthompson.

This 20-slide presentation was prepared by Hessam Nadji, managing director of research services at Marcus & Millichap for the recent Multifamily Executive Conference in Las Vegas.  Nadji has indicated that the housing market has bottomed, though he expects prices to continue declining for nine to 12 months due to foreclosures. But the really good news, in Nadji’s mind, is that the government averted a collapse of the financial system. “The government did avert the worst-case scenario. A year ago, we were very close to a run on the banks… As bad as things are, they could have been a lot worse.”

BLOGGER COMMENT: I attended a Wells Fargo Private Bank Economic Summit this past Wednesday in Tampa… They flew economist Ronald Florance in from California to speak to our luncheon crowd. Great quote: ‘risk is on sale around the world… now is a great time to buy multi-generational assets at a significant discount to replacement cost.’ What this says to me is that the rich will get richer and highly liquid investors will use the lack of liquidity in the real estate market to their advantage and buy legacy assets for much less than intrinsic value.

 

CMBS Volume down 99.99% and cap rates only up slightly, huh?

BLOGGER COMMENT: For more stats download the file labeled “CMSA-Compendium” from the box.net widget on this blog. You may also want to see the graph detailing the 99.99% plunge in CMBS volume from my October 6, 2009 blog entry.

 

Barbara Corcoran’s Top 10 Markets in the U.S. to Buy A Home: #1 Sarasota & #6 St. Pete

View 5m 55sec video interview of Barbara Corcoran on The Today Show selecting Sarasota as the #1 and St. Petersburg as the #6 turnaround residential markets in the USA. God Bless America!!
http://www.bisonfinancial.com/resources/top10.htm