Commercial Real Estate Finance

Posts Tagged ‘debt’

Commercial Real Estate Week In Review for the week of July 10-16.

- The Senate approved sweeping legislation to revamp financial regulation.

- Blackstone was appointed manager of Bank of America’s Asian real estate fund.

- Financial reform could affect GE’s real estate assets.

- Firms that sold MBS to Fannie and Freddie are being subpoenaed.  Uh oh.

- Will apartment REITs soon be facing headwinds? Credit Suisse thinks so.
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Commercial Real Estate Week in Review-June 6-12

-Obama to Congress: Get reform bills reconciled before G-20.

-GE Capital to cut real estate portfolio by 50%.

-Cassidy Turley looking to compete with Jones Lang LaSalle (NYSE: JLL) and CB Richard Ellis in commercial real estate.

-JP Morgan (NYSE: JPM) to potentially sell $700M+ in CMBS at 50bps higher than RBS (NYSE: RBS) did in April.

-Is the financial industry already changing before the regulations take effect?
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Commercial Real Estate Videos for the Week of May 16-22.

Larry Silverstein, developer of the World Trade Center, believes that the Commercial Real Estate market is much healthier than it was a year ago, especially in New York. He also claims that occupancy will not be a problem in the under-construction “World Trade Center 2.0.”

While the title of the video is sort of misleading, Phillip Blumberg offers his opinion about what caused the financial crisis. He claims that there was too much debt at peak pricing, and many derivatives that were being created were designed to make debt more liquid. It is his opinion that these two things caused the financial crisis. He makes an interesting point in saying that every real estate crisis has taken place in conjunction with a financial crisis.

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It was hard to follow the news in the past few weeks without hearing something about the desperate financial situation that Greece has fallen into.  The European Union intensely debated the issue of whether or not the nation should be “bailed out” in some fashion and if so, what form that economic stimulus package should take.  This past weekend, the EU finance ministry finalized a €30 billion aid-package to the nation struggling to meet its sovereign debt obligations.  After receiving the aid package Greece issued about €2 billion in short-term debt, and guess what…it was received with open arms.  Case in point: borrowers that have a shaky future can still get a loan if their balance sheet is beefy enough.  Sure, this is an example of sovereign debt, but the same theory applies in commercial real estate.

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Dubai government offers $9.5 billion in debt aid to Dubai World and Nakheel

Richard Sparks of Schaeffer’s Investment Research, and Daniel Alpert of Westwood Capital, Discuss whether it’s time to invest in commercial realty.

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There is an article in this week’s Philadelphia Business Journal about one of Texas-based Behringer Harvard’s Philadelphia assets.  BH owns, among other buildings downtown, 1650 Arch Street.  After having lost the real estate law firm Wolf Block (after its dissolution last summer) as one of its long term anchor tenants, the property faced significant challenges. While vacancy issues are a problem for all landlords (and can subsequently worry its tenants base…after all who wants to reside in a half empty building with a landlord who has to skimp on maintenance due to belt tightening?), BH showed that at the end of the day, cash is still king. Read the rest of this entry »

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Editor’s Note: Several of us at Llenrock Group have been teaching a course on the capital markets for commercial real estate broker’s continuing education requirements for the states of Pennsylvania and Delaware. As part of a three week blog series, Questionable Brokers will  posit questions we have received in such classes from various brokers from the Tri-State area regarding the capital markets. We felt it would be useful for other brokers to see the kinds of questions their peers are asking, and a useful tool to our other readers who may have some of the same basic questions on the capital markets. We will divulge names and companies for a fee. Just Kidding. On second thought…it depends on how much you offer. The first part of the series will examine questions regarding Real Estate Metrics.  Next week, we will feature questions regarding Types of Capital, and the following week, we will examine questions regarding Deal Structure. Enjoy!

Q: Does the IRR metric still carry the same weight as a measurement for property valuation given the state the market today?

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When I first started my career as an investment sales broker, a mentor taught me an effective method to have property investors reconsider their position in their properties.  While my goal was essentially to coax them into a selling frame of mind, there were myriad instances where selling simply did not make sense.  Yet, that didn’t mean there was no opportunity to do business with such a client. Instead of focusing on cap rates and price per square foot numbers, I could instead shift their focus from the stability of cash flow to the meager return they were receiving on the equity they had invested in the property.

“Mr. Property owner, I understand your building is full, you are free and clear of debt, the property is cash flowing well, and you want to pass the property down to your grandchildren.  But what is your return on equity?” Read the rest of this entry »

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Bloomberg published an informative article yesterday highlighting the reasons why debt financing is so much more expensive for governments than private companies.  You would think that governments that NEVER default on debt issuances and have unlimited tax revenue could issue debt at a cheaper cost than private companies.  Municipal bonds, however, are often issued at rates anywhere from 100 to 150 bps higher than private companies.  What’s the reason for this?  Moreover, what lessons can an owner/investor of commercial real estate learn about debt financing from the municipal bond market?

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Landlords are scrambling to find tenants and buyers at a reasonable price. Buyers are scrambling to pool funds together to buy distressed assets. Over the last 6 months or so, we here at Llenrock have been approached by a variety of would be investors seeking equity to start, in some form or fashion, a distressed asset fund.  The simple logic is that with asset values plummeting, there will be opportunity.  There HAS to be opportunity.  Its the basic “sell high, buy low” mentailty of Wall Street. We hear pitches like, “I have an opportunity to buy a Class A building in a good submarket for only $100 per square foot!  It’s a steal!  It’s a no-brainer that its a good buy!”

Well, it may be a no-brainer…not because its a good buy, but because the people aren’t using their brains to properly assess the market. Read the rest of this entry »

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