Improving lives and fighting for social justice through Rotary Community Corps

Service in Action

By Alex Johnson, President of the Rotary Club of Plano West, Texas, USA

Mose Stimpson was a slave transported to a small farm town in Texas called Plano. The master bought him to be his daughter’s playmate. When she grew up and got married, she gave him his freedom. Years before Mr. Stimpson’s freedom, Andy Drake arrived in Plano as a slave hauling logs from Louisiana to Texas. By 1860, Mr. Drake bought his freedom. Andy Drake is the first free African American to own land in Plano. Mose Stimpson is the second freed slave. We know these men as the forefathers of the Plano African American society. Around 1900, the African American people of Plano established themselves as the Douglass Community. The name honored the great abolitionist Frederick Douglass.

Fast forward to 2020. From its history, Douglass holds cultural importance to Texas. The small enclave carries a…

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Economy Adds 163,000 jobs in July

It is good to see that we are still seeing slight improvement.  Commercial real estate lags the economy so this bodes well for those of us that are in the CRE business.

Here is the Wall Street Journal article: Click Here

Here is the Wall Street Journal video: Click Here

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U.S. Weekly Jobless Claims Fall To Four-Year Low – Jobs Drive Commercial Real Estate!

RTT News
3/22/2012 9:13 AM ET
by RTT Staff Writer

First-time claims for unemployment benefits showed an unexpected decrease in the week ended March 17th, according to a report released by the Labor Department on Thursday, with claims falling to their lowest level in four years.

The report showed that initial jobless claims fell to 348,000 from the previous week’s revised figure of 353,000. The drop surprised economists, who had expected jobless claims to edge up to 352,000 from the 351,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since coming in at 347,000 in the week ended March 8, 2008.

Peter Boockvar, managing director at Miller Tabak, said, “Bottom line, the lowest amount of initial claim filers since March 2008 is encouraging, as we’ve a certain improvement in the labor market.”

“Seasonally speaking though, the mild winter impacted seasonal hiring’s and firings and thus throughout April and May we’ll see how much of the slowdown in job layoffs and improvement in job hiring’s was a pull forward,” he added.

The Labor Department also said its four-week moving average, which eliminates some of the week-to-week volatility, edged down to 355,000 from the previous week’s revised average of 356,250.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also dipped to 3.352 million in the week ended March 10th from the preceding week’s revised level of 3.361 million.

With the drop, continuing claims fell for the second consecutive week, falling to their lowest level since August of 2008.

The data adds to recent signs of a recovery in the U.S. labor market, which has seen a notable improvement over the past few months.

Earlier this month, the Labor Department released a separate report showing that the U.S. economy added 227,000 jobs in February, with an increase of 233,000 jobs in the private sector more than offsetting job losses in the public sector.

Additionally, the January spike in job creation was revised up to 284,000 from the 243,000 initially reported, while December’s job growth figures were revised up to 223,000 from 203,000.

The job growth, however, was not strong enough to bring down the unemployment rate, which held steady at 8.3 percent in February, in line with economist estimates.

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What issues are facing the lending market this year?

Capital Markets 2012

CCIM Commercial Investment Real Estate Magazine
March – April 2012 Issue

This article was edited by Sara Drummond, executive editor of Commercial Investment Real Estate.

Many economic issues converged late last year to slow commercial real estate‘s recovery. In addition, the uncertainty of vintage commercial mortgage-backed securities loans coming due this year and for the next several years has buyers, sellers, and investors speculating on the continuing availability of capital. To get a clearer picture of the capital markets’ activity this year, Commercial Investment Real Estate asked an economist and two mortgage banking executives to weigh in on the subject.

Participants

George Ratiu is manager of quantitative and commercial research for the National Association of Realtors in Washington, D.C. Contact him at economistsoutlook.blogs.realtor.org.

David Rifkind is principal and managing director for George Smith Partners, a real estate investment banking firm located in Los Angeles. Contact him at drifkind@gspartners.com.

James R. Kirkpatrick, CCIM, is vice president of production for Grandbridge Real Estate Capital in Houston. Contact him at jkirkpatrick@gbrecap.com.

Q: More than $55 billion in CMBS loans are set to mature this year, the most of any year to date, according to Standard & Poor’s. Of them, $19 billion are five-year loans originated in 2007, at the height of the market. How is this going to affect the lending environment for commercial real estate?

George Ratiu: The main impact of maturing debt will be felt in the banking sector, which has had to contend with these loans for the past three years. And based on both bank practice and regulator guidance, banks have been extending or restructuring loans based on multiple factors, such as asset performance, market, and management. Overall, given banks’ post-financial crisis aversion toward commercial loans, the lending environment will likely remain tight in 2012, with private and equity capital continuing to serve as the main source of funding.

David Rifkind: 2012 is the beginning of the refinance wave, fueled by historically low interest rates. The peak will be somewhere between fourth quarter 2013 and second quarter 2014. Every healthy lender is prepared to compete for a piece of this business. We are actively tracking maturities for our clients. This is the leading theme of the mortgage banking business for the near and intermediate term.

Jim Kirkpatrick, CCIM: The bottom line is that in a yield-hungry world, real estate is looked upon favorably. A lot of lenders are underallocated in real estate and we are seeing new CMBS platforms emerging. Assuming continued economic growth, the lending environment for the foreseeable future should remain strong.

Q: As this tsunami of loans continues, reaching its peak in 2017, will it have any other effects on the commercial real estate market? Will specific capital sources, cities/regions, or property types be affected?

Ratiu: Some of the effects have been manifesting over the past year. Capital has been chasing high-quality, stabilized properties in gateway cities such as New York, Boston, San Francisco, Washington, D.C., and Chicago. This has led to an increase in prices in these markets and a decline in capitalization rates.

Secondary and tertiary markets have been contending with a lack of financing due to the underlying strength of local economies and weaker fundamentals. As the supply of investment-grade properties in top markets dwindled, some secondary markets became attractive to investors looking for higher yields. A broad improvement in macroeconomic conditions will likely boost this trend, providing increased flows of capital to these markets.

Rifkind: The maturity wave is drawing money and attention back to the commercial real estate markets. Three themes are converging to create what may become a powerful new market cycle. First is low rates/liquidity: Capital is aggressively seeking yield at every point on the risk curve. Banks must book positive loan growth and many are aggressive. Life companies and pension funds have reallocated large amounts of capital to commercial real estate. CMBS wants to come back and be a force in the real estate capital markets. Opportunity funds and real estate investment trusts are innovating to participate higher up in the capital stack.

Second is the return of fundamentals. Rents and occupancy levels are stabilizing in many markets. With little new supply over the past five years, there is a solid case for a positive trend in property performance. The distress theme is still relevant and there will still be transactional opportunities motivated by debt maturities. This is especially true for properties in markets where fundamentals have not yet recovered to a level to qualify for loans from the primary debt providers.

There is enough liquidity to address the capital needs of the market going forward. As long as the underlying fundamentals continue to improve, we should see a robust recovery in many markets.

Kirkpatrick: I am based in Texas and we have been blessed with a strong economy and the accompanying job growth. Going into the recession, we had very little overbuilding so our real estate markets are in fairly good shape. Most of the refinance opportunities we are seeing will underwrite and those that don’t can mostly be accommodated with some of the new mezzanine platforms that are coming out. In other words, the owner does not need to write a check to get their loan refinanced.

I wish I could say our good fortune extends across the country, but my guess is that it doesn’t. Those loans maturing in 2012 that were originally highly leveraged or with little to no amortization over the term and in regions of the country with limited economic growth/high unemployment are probably going to require the infusion of some fresh equity to get them refinanced. Therefore, by extension, the ability of ownership to write these checks could impact real estate values.

Q: What other factors are affecting the capital markets this year?

Ratiu: The European banking concerns will likely remain a major factor for U.S. capital markets. Some U.S. banks do have exposure to European sovereign debt, which will likely impact their overall willingness to extend capital for commercial projects. In addition, the Dodd-Frank Act and the yet-to-be drafted regulations will continue to provide a source of uncertainty in 2012, as regulators work to enact and implement new rules. Against this backdrop, commercial banks are expected to remain cautious on commercial lending.

Rifkind: The leading factors are macroeconomics and politics. These are the same factors that have provided head winds for the past six months. How the European liquidity crisis plays out is important. The upcoming U.S. elections are important.

The NAR building and the U.S. Capitol in the b...

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Kirkpatrick: Where are interest rates going? I tend to side with the camp that says interest rates have to go up, but as I write this, the benchmark 10-year Treasury is 1.97 percent, virtually unchanged from August when Standard & Poor’s downgraded U.S. credit. Sticking to my guns, when rates do go up, a steady climb can be accommodated, but sharp spikes, particularly in some of the short-term money such as Libor, could wreak real havoc.
In addition, continued growth of the CMBS markets will affect capital markets, but more to the point, what is the underwriting that will be necessary to drive this growth?

Q: Will buyers and investors have difficulty finding financing in 2012?

Ratiu: Given the 2011 bifurcation in commercial markets along property values, buyers at the top end of the market will continue to find access to financing in 2012. With record amounts of cash and the ability to issue bonds or equity for financing, large corporations and equity funds are expected to remain active in the market this year. Buyers at the other end of the valuation spectrum will likely encounter a similar environment in 2012 as last year: restricted capital availability, relatively tight underwriting standards, and a higher risk aversion on the part of lending institutions.

Rifkind: Buyers will have less difficulty finding financing this year. Qualifying for new loans will remain difficult for some. Credit requirements remain strict. Borrowers need strong reserve liquidity and credit to obtain loans. Property level underwriting is also very conservative and leverage will remain relatively low, requiring a larger equity contribution from the buyer. Ultimately, this is healthy for the markets and I hope lenders will continue with disciplined underwriting standards as competition for loans heats up.

Kirkpatrick: There should be plenty of money available to refinance those loans coming due, as well as to finance new acquisitions or development. At the end of the day, the real question is whether or not the owner/borrower is prepared for all of the scrutiny associated with borrowing in today’s environment.

Q: While the general economy seems to be recovering at a quicker pace than originally predicted, commercial real estate activity retreated during the second half of 2011. What is the cause of the disconnect between the two? What factors may spur a similar uptick in commercial real estate’s recovery this year?

Ratiu: Commercial real estate investment activity tends to be more sensitive to developments in financial markets. As the European sovereign debt crisis unfolded, it took a darker turn in the second half of the year. Concern of a resolution moved farther away, prompting capital markets and investors to scale back the pace of acquisitions. In addition, until the tail end of the year, stubbornly high unemployment figures remained at the forefront of economic news, as signs of a robust recovery proved feeble. Moreover, actions in the international and political environment added reasons for investor concern.

For 2012, a continuing rise in economic growth coupled with improving fundamentals in commercial markets would go a long way toward shoring up last year’s moderate rebound. In addition, the prospect of the resolution of the presidential election cycle is likely to provide a clearer medium-term horizon for investors.

Rifkind: I don’t see a disconnect. The U.S. economy slowed significantly in the second half of 2011. Commercial real estate activity also slowed down from its initial burst of activity. Capital markets’ volatility came into play in the middle of 2011 with the debt ceiling debate and the downgrade of the U.S. debt rating. This was followed closely by Greece and the EU liquidity crisis. This raised the caution flag and slowed activity.

Commercial real estate is a long-term store of value and not a quick trade. It is difficult to view it with a short-term lens. Recoveries are not always linear. 2011 was no exception. The market healed significantly in 2011 and this trend will continue.

Kirkpatrick: In my opinion, the disconnect between the improving economy and the retreat of commercial real estate activity was the result of two factors. Too much money was chasing those deals that came to market. With all of this competition, the result was predictable: Prices increased and yields fell. In the latter part of 2011, I think many investors decided to take a step back to see if rent growth would actually materialize to justify the going-in yields being paid.

Then, after a fast start in 2011, the CMBS market stumbled — many of the new CMBS platforms shut down, some commitments were not honored, and for those that remained, spreads widened dramatically. The message here is that CMBS is an important part of the commercial real estate equation.

The good news is that the U.S. economy continues to improve. Jobs are being added, which in turn will lead to increased demand for commercial real estate. It will just be a matter of time before investors return to the market. On the debt side, CMBS has settled down. Spreads have come in and investors seem to have reached a comfort level with current underwriting. Banks and life insurance companies seem to be actively pursuing new lending opportunities. I wouldn’t look for a return of 2006, but 2012 has the makings of being a solid year for commercial real estate.

 

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Texas economy rose in December

By Bill Bowen
10:44 AM on Wed., Mar. 7, 2012
Dallas Morning News

The Texas economy continued to quicken its pace in December, according to a report of economic activity released by ComericaBank this morning.

The Comerica Bank Index of Texas Economic Activity notched up one point to 92, indicating that the state’s economy has gained back more than half of the momentum lost at its low point of 72 in summer of 2009. The index stood at 110 at its peak in late 2006.

It is also the latest evidence of a slowly rising economic recovery for the state, said Robert Dye, Comerica Bank’s chief economist. Dye cited stronger state exports and increased residential construction for the December uptick.
“Looking ahead, I expect to see ongoing gains to the Texas index through 2012, driven by broad-based job growth, strong energy markets and private-sector construction,” Dye said in written summary of the report. “Drags from caps and cuts in federal spending and the American Airlinesbankruptcy will not be enough to derail a vigorous state economy.”

It is the latest good news and indicator of a slowly rising economic recovery during 2011. Texas unemployment dipped to a seasonally adjusted rate of 7.8 percent in December, its lowest point since July of 2009 and the result of 204,500 created in the state during 2011, according to the Texas Workforce Commission. The Bureau of Labor Statisticson Monday reported that mass layoffs in Texas during 2011 were the lowest since 2007.
Comerica Bank is the commercial banking subsidiary of Comerica Inc., the largest U.S. banking company based in Texas.

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Another sign that commercial real estate is looking up

Insurers Breathe New Life into CRE Lending, Commercial Mortgages

Attractive Opportunities in the U.S. and Internationally
CoStar Group Headlines
February 29, 2012

Year-end loan numbers for some of the nation’s major life insurers show them increasingly willing to jump back into commercial real estate lending. Metlife, Prudential, Standard and American Equity Investment all posted strong increases in originations and/or portfolio build up.

MetLife Inc., through its Real Estate Investments Department, originated more than $11 billion in commercial mortgage loans in 2011, exceeding the more than $8 billion the company originated in 2010, and making it the company’s largest commercial mortgage production year ever.

MetLife continues to be the largest portfolio lender in the insurance industry, with $40 billion in commercial mortgage loans outstanding.

Robert Merck, senior managing director and global head of real estate investments for MetLife, said the company strategically navigated through the economic downturn during the past few years and remained an active lender in the market. “Our commitment to prudent risk management and our long-term investment approach has allowed us to take advantage of attractive opportunities in the U.S. and internationally, and we will continue to focus on top quality properties in major markets in 2012,” said Merck.

To reach its record commercial mortgage lending volume, MetLife Real Estate Investments completed a number of high-quality real estate transactions with loan sizes of $200 million and above, including: $350 million on 1540 Broadway, an office building in Manhattan; $255 million on 155 North Wacker, an office building in Chicago; $360 million on Park Meadows in Denver and a $325 million loan on International Plaza in Tampa, both super-regional malls.

MetLife also led a renewed effort among major life insurance companies to work together and “club” large, high-quality loans on several properties, including: 601 Lexington Ave. in Manhattan; 555 California in San Francisco; and Natick Mall in Boston.

Mark Wilsmann, managing director and head of MetLife’s mortgage lending group, said the firm’s ability to originate a number of larger loans on trophy office buildings and regional malls paid off last year. “We were able to originate top quality loans at yields that provided a pick-up of more than 100 basis points over comparable risk corporate bonds, adding long-term value to our investment portfolio,” said Wilsmann.

Outside the U.S., MetLife grew its lending activities in 2011, originating more than $600 million in mortgages in Mexico and nearly $800 million in London. MetLife is also an active lender in Japan, with more than 36 billion yen in lending in 2011.

CoStar’s London-based finance editor, James Wallace, reported that MetLife, the U.S. insurance company, is emerging as the U.K.’s largest “big ticket” senior debt lender with an appetite to write single real estate loans of up to $318 million this year.

The insurance company closed around $800 million worth of U.K. senior debt deals last year and has so far funded two deals this year, together worth just under $222 million, including its second largest UK deals.

Prudential Mortgage Surpasses 2010 Originations in 2011

Prudential Mortgage Capital Co. originated nearly $9.7 billion in commercial mortgages in 2011, surpassing its 2010 originations of $9.1 billion.

Dave Twardock, president of Prudential Mortgage Capital Company, said the company is looking to complete up to $11.6 billion in 2012 and expects financing for multifamily properties to comprise much of that, along with retail centers, industrial properties and some hotels.

His outlook on the U.S. commercial real estate market is optimistic, despite the debate over the U.S. debt ceiling and ongoing European financial crisis. He cautioned, though, that the future remains unpredictable.

“We continued to see compelling opportunities to increase our appetite in commercial mortgages throughout 2011 including our return to CMBS loan originations and our balance sheet program for unstabilized apartments. We are looking to grow our program across portfolio, balance sheet, Agency, FHA, and CMBS originations again in 2012,” Twardock said.

The company also announced that its 2011 origination included 26 billion Yen on new loans in Japan. The country will continue to be a focus in 2012, supporting Prudential Financial‘s growing insurance business there. Prudential Mortgage Capital also plans to expand its lending platform to include the United Kingdom.

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Commercial Real Estate Sales Prices Expected To Improve

This survey came across my desk this morning and I thought it was good enough to share:  http://www.realtor.org/research/research/cre_market_survey

The REALTORS® Commercial Real Estate Market Survey from the National Association of Realtors (NAR) measures quarterly activity in the commercial real estate markets. The survey collects data from commercial Realtors®.

Posted in Business, CCIM, Commercial Real Estate, Commercial Real Estate China Leasing Vacancy, commercial real estate realtors NAR CCIM Laurex Realty Advisors Alex Johnson Business, Commercial Real Estate Tools, Investments, Real Estate | Tagged , , , , , , , , | 5 Comments

More Commercial Real Estate Tools for 2012

Space Technology 5

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I wrote about Commercial Real Estate Tools for 2012 a few weeks ago.  In case you missed it, they were Site To Do Business (STDB), planEASe and REA.  I promised that I would tell you about more tools in the future.  Well, the future is here and here is now.  This week I would like to share with you some other tools that I use.  They may help you or at least point you in the direction of something that does help out.  There are a lot of great technology tools and applications out there and sometimes knowing what is possible is all that you need.

Let’s start with Dropbox.   Dropbox is a great way to share files with anyone anywhere.  One of the best features about it is that it is free.  Yes, I said F-R-E-E.    I think they make money by having people buy additional storage.  I haven’t had to do that in my three years of use.  I take advantage of the fact that when you get other people to use Dropbox that they give you more storage for free.  I don’t find it hard to get a person to use something that makes their life easier and it doesn’t cost them anything.  Okay, what exactly is Dropbox?   In my own words, it is cloud-based storage that can be used easily by anyone.    I most often use it for the transfer of huge files like environmental reports, property appraisals, CAD files or large due diligence files.  I just enter in the email address of the person that I want to share it with and they get an email asking them to sign up for this free file-sharing service.  In seconds, they are able to download these gigabytes worth of information without clogging up their email or worrying about viruses.  I think you understand what it is so I won’t go into anymore explanations.  Oh yes, one of the other cool features about it is that you can access your Dropbox folder from multiple computers and even your iPhone.  Very very cool.  Don’t forget…. It’s F-R-E-E.

Snag It is another application that I am always using.  Snag It is an application that allows you to easily screen shot anything at the press of a key stroke.  I know, I know…  You are thinking that screenshot capability comes with every computer.  You are 100% correct.  What Snag it does is allow you to ‘snag’ a portion of your screen that you actually want.  I am assuming that you don’t always want your entire screen in the JPG shot.  You don’t want the view of your computer desktop or the surrounding application menu.  You just want the information, graph, chart or picture that fits your requirement.  That is what Snag it does.  It allows you to draw a box on your screen and just screen shot within that box.  I use this for all of my marketing materials, course design or anything where I am using graphics, pictures or information to tell my story.  ‘Seeing is believing’ so you need to check out Snag it on your own and see why I love it so much.

I hope that you find these applications as useful as I do.   I must be honest in that I didn’t discover them on my own.  I found out about both of these from my friend and fellow CCIM, Jay Lucas.  He is the master of technology and told me about them a few years ago.  I checked them out and have been using them every since.

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How U.S. Lost Out On iPhone Work

Image representing iPhone as depicted in Crunc...

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I found this article very insightful on a number of fronts.  It was sent to me by friend and fellow CCIM Instructor Carl Russell.  Remember, jobs drive commercial real estate.  What comes to mind as you read this?

NYT: How U.S. Lost Out On iPhone Work

Published on the New York Times Website on January 22, 2012

… Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPadsand 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

… “Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

… “We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

Read More at the New York Times
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Measured Improvement in Commercial Sectors Expected

I ran across this article on the Realtor website.  I thought it covered the 2012 year well.  Let me know what you think of it.

http://bit.ly/y7Qhg8

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