Commercial Real Estate Finance

Archive for May, 2009

The Week of May 22-29

- The 177-Store anchor Blue Denim chain filed for bankruptcy.

- HUD took action against 120 FHA -approved lenders earlier this week.

- Grubb & Ellis reported Wider Quarterly, and Yearly Losses.

- A new report came out detailing that Manhattan Sales have reached a 25 year low.

- FHA announced it is allowing first time home buyers to sue the much ballyhooed tax credit towards their down payment.

- Fitch Ratings has downgraded First Industrial.

- Giant real estate player Tischman Speyer has announced they will sell some California assets to pay down debt.

- News broke on Tuesday that two more banks have failed.

- Sequoia Equities announced the acquisition of a $75M multifamily luxury apartment complex in Orange County, CA.

- S&K Menswear will be closing all remaining stores in bankruptcy

- A Westin hotel developer accused a local councilman of extortion.

- Sunstone sold a 274-room Marriott.

- Paramount Realty bought a prime retail center.

- Freddie Mac could help out the commercial backed securities market with
K-Certificates.

- LandAmerica sold 6 of its subsidiaries last weekend.

Here at the Llenrock Group, we are huge advocates of environmental sustainability. Our printers never have paper in them because we try to save trees. The punishment in our office for throwing recyclable items into the regular trash bin is a public flogging with a bamboo rod.  Sometimes I wonder if our founder should have just set up the Llenrock office in Singapore.

In the spirit of our tree-hugging mentality at Llenrock, we have compiled a list of “The 10 Greenest Buildings” in the world. Obviously, there’s no way to determine what “the greenest” building in the world is, but we thought each of these projects was pretty cool for their environmental sustainability.

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The Llenrock Blog is proud to announce its new Executive Interview series. The interview questions are presented to carefully selected top-level real estate executives to provide our audience with insight into the minds of those that help shape our field.

Ken Kaiserman
Owner/President
Kaiserman Co.

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

A: It’s not really a niche. We have a mix of commercial (retail & office) & multi-residential properties on the theory that they won’t all go as deeply into the tank at the same time although in this economy it could happen. We’re proud of the service we provide. Retaining tenants in competitive markets, after you succeed in pulling them in, is the best key to long-term profits.

Q: What is your favorite part of your job? Least favorite?

A: My favorite part of the job is the planning of a new development or acquisition. My least favorite is keeping abreast of rent collections, which right now is really a rough chore. Read the rest of this entry »

Back in the late 1980’s and early 1990’s after the Savings & Loan crisis had seismically shifted the landscape of the commercial real estate market, many real estate players fell by the wayside. As you might remember, from this crisis came the economic adage, “Stay alive ‘til ’95.” Well, it looks like we have a new one — “Keep clean ‘til ‘13.” Despite some recent highly publicized signs of economic improvement, many feel that there is nothing but doom and gloom ahead for the commercial real estate market, and that burgeoning debt in the commercial real estate market will cripple the industry until at least 2013.

Phillip Blumberg of Blumberg Capital partners is one of those voices. He says he is certain the commercial real estate market will be “getting significantly worse.” Read the rest of this entry »

Developers of ground-up construction in today’s economic climate are piling up horror stories of projects they are working on that have stopped dead in their tracks due to short falls in financing. In some instances, developers have had to ask their contractors to immediately halt progress on a site just after laying the foundation for a new building.

However, these developers need not worry as they can still secure financing for completion of their projects. All they need to do is go to their local or regional bank and prove to the lender that they are in such great shape that they don’t require any capital whatsoever. The bank will then be happy to let them borrow. Yes, I realize that this makes no sense at all–it’s a classic Catch-22. But such is the current availability of financing for ground-up construction.
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You think its bad where you live? Check out Florida…and this isn’t just failed condo-conversions!

With an increasing number of building projects stalling out due to limited availability of debt financing, we are bound to see some development projects take much longer than expected. If you’re a developer working on a project that seems like it will never finish because you simply can’t get sufficient access to credit, have a look at this list of the 10 Longest Construction Projects. Maybe it will make you feel better. Of course, there’s also a chance it may make you feel worse…

#10 – The Parthenon (Greece)
Duration: 17 years

#9 – The Great Pyramid at Giza (Egypt)
Duration: 20 years

#8 – Sacsayhuman (Peru)
Duration: 63 years

#7 – York Minster Cathedral (U.K.)
Duration: 252 years

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And you thought real estate was to blame for the credit crisis….it’s all in the name! CREDIT! Now only if Barack Obama created a news conference to tell us to spend, rather than VISA, we might get out of this recession…

In Europe, advisers  say chief financial officers from London to Lisbon have been comparing the costs of raising finance through issuing new shares, bonds or by turning their own property into cash.

With stock prices down, share issuance is expensive because investors, fearing stocks could keep falling, are demanding hefty discounts.

Bonds are costly because yield premiums over government paper have widened over the past year, and investors are shying away from corporate debt from all but the highest investment-grade issuers. Banks that used to issue mortgages with just 20% equity are now demanding as much 45%.
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