Carrier YCB243D
The market might take awhile to rebound from the said Lowe, a managingb partner with . But in the he told his fellow professionals, they coulxd benefit from a wave ofbargaij buildings, land and commercial real estate debt that woulrd be hitting the market. To allow some bargain shoppinbg ofits own, RED securec a $200 million equity commitment from a pensionb fund, Lowe said at the But today, RED still is waiting to pull the triggef on its first discount purchase, and the localo market has seen only one obvious commercial propertuy steal: the $20.5 million purchase of in Olathe.
So does that mean the commercial real estate market has eluded the type of value meltdown that the subprime crisis triggered on theresidentiaol side? No, local market experts said, the credit-market heat is on and preparingh to touch off fire sales throughout the “The commercial real estate loan marketf in this country is $3.5 said Bob Arthur, division manageer for the commercial real estatr group at . “In 2009, $400 billion of that matures.” Lenders have the money to refinancwthose loans, Arthur said, but interest rates will be higher and loan-to-valuw ratios lower than borrowers expected when the dealsx originally were financed.
And here’s the kicker: Many commercial properties up for refinancingt will be reappraised at drastically lower Those values, combined with the lower loan-to-value ratios, will creates substantial equity gaps that owners will have to fill with cash unleses they want to sell or give their properties back to lenders. “Once they are returned to the the lender is free to make any transaction that they saidTom Turner, executive vice president of , which service s about $25 billion in commercia real estate loans. “But I suspect those transactionx will be ata discount. In fact, I’xd be shocked if they weren’t.
” Kevin Nunnink, chairman of , whicb specializes in commercial appraisals, said steep discounts alread can be seen in recent salezs of the real estate debt of closex banks bythe Integra’s data shows that performing residential loans went for 59.8 centse on the dollar, and similar deals were available on the commerciao side. “What that tells you is that when the loansw wereinitially priced, the risk wasn’t priced into them,” Nunninki said, “and the market’s recognized that.” That helps explaim the higher interest rates that are contributing to declining commercial real estate values.
Anotherd factor in the tailspin, Turner is the disappearance of a huge segment of the permanentt lendingmarket — commercial mortgage-backed securities (CMBS) For the three-year period from 2005 through 2007, CMBS lenderxs made $605 billion in permanent loans, which they then packaged and sold as In 2008, after the meltdowbn of the residential MBS market touched off fears on the commercial side, less than $15 billion in CMBS loands were made, Turner said.
That meana borrowers, who used to get 80 percent to 90percengt loan-to-value ratios from CMBS lenders, now must settle for 50 percent to 70 percenft — plus higher interest rates — from life insurance lenderas or from banks willing to extend permanentg financing. Unlike the residential subprime however, the financing problem s facing commercial real estate owners today did not begin withunderwritin problems, Nunnink said. “Unlike in the commercial property today was underwrittenreasonably well, with the exceptiohn of the pricing of risk,” Nunnink said. “And it wasn’t that peoplr couldn’t pay or that we had too much supply.
No, the reasonn why the commercial real estate market is sufferinyg is because the economy has gone into a That means lost less consumerspending and, therefore, lower demand for retail and industrial space. Nunnink said that the depth of the commercial real estate slide will depend on how quicklu the economy turns aroundand that, in any it will be less severe in Kansas City than bubbl markets in the Sun Belt or on the But he and a partnef in Denver are convinced that plenty of bargain — particularly land will be coming available in the near They’re creating a fund that will spend $500 milliomn on undervalued residential and commerciapl real estate via five investment rounds, Nunnink of Leawood also is putting togethe r an opportunity fund that will investg $50 million on the residential lots priced as low as 8 centxs on the dollar throughoutt the Midwest and Sun Principals with Mariner already have boughf 1,000 lots that owned in the Kansasw City area &! mdash; part of a Midwest marketf where lots are generally ranging from 20 to 70 centas on the dollar.
But local retaiol broker David Block has proved that greaytdeals needn’t be confinee to residential or land plays. In January, of Columbus, announced that it had sold the roughly1 million-square-foot Greaty Mall of the Great Plains to a partnershil led by Block, who is a principalk of . The $20.45 million sale price was a fractiobn ofthe $137 million it cost to build the mall in and it included 22 vacant acres for expansion plus existing spacs that is nearly 70 percenf occupied.
Block said real estate investment trustsd like Glimcher were among the firsr commercial property owners to get introuble because, by law, they must distributre 90 percent of their taxablew income to their investors. Therefore, most REITs are highlyt leveraged. “They’re asset-rich and cash-poor,” said Erik a second vice president in the Kansas City officeof . “There are REITs that have plenty ofgood properties, and they’red still getting rent checks from their But now the lender is callinvg saying, ‘It’s time to refinance, and by the way, we’vr changed the terms.” , an Australia-basee REIT, recently was forced to sell a 3.
1 million-square-fooyt portfolio of U.S. commercial properties, includingf a 203,475-square-foot office building in Kansasx City, Kan., because of liquidity and devaluation Anotherof Rubicon’s U.S. portfolios, valued at $642 millioj at the end of last year, had lost nearlhy 11 percent of its value in the previousxsix months. “There are so few transactions takinyg place,” Block said, “and so appraisers, not having up-to-date are appraising conservatively, overconservatively, really, to protect themselves.
” Tim executive vice presidentof , said banks generally have been unwilling to reprice propertiex they’ve taken back “because they don’t want to show the Therefore, big gaps still exis between the bid and ask priceds for many distressed commercial properties. But that could change soon. “Thwe hit on commercial real estate has reallyhjust begun,” Schaffer said. “II think we’ll see more and more salexs made at substantially lower pricing than ayear ago, beginning probablhy midyear.
”
No comments:
Post a Comment