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By AZ Advisory Team, December 22, 2009 11:00 pm

Similar to the report released by the CCIM Institute and the Real Estate Research Corporation, Moody’s Investors Service said today that prices of commercial real estate continue to decline, but the speed of the decline may be slowing. The Moody’s/REAL Commercial Property Price Index declined 1.5% in October to 107.98 from 109.61 in September. Based on the index, prices for commercial real estate were 36.4% lower than in October 2008 and 43.7% below the peak measured in October 2007. The index is based on repeat sales of the same properties across the U.S. This is a very clear indication that we are very near the bottom.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, December 21, 2009 6:28 pm

Financing, pricing gap and wait for distressed sales are blocking the path for commercial real estate investors.

According to an exclusive survey produced jointly by National Real Estate Investor and my company Marcus & Millichap, buyers are preparing to forge ahead with acquisitions in 2010. Two-thirds of investors (65%) who responded to the 6th Annual Investment Survey plan to boost their investment in commercial real estate over the next 12 months. That figure is up from 56% in the third quarter and 51% a year ago. The fact that buyers are once again returning to the table is a huge vote of confidence for a commercial real estate industry that has been slammed in the past year by falling property values, occupancies and rents. Respondents to the annual survey who do plan to expand existing portfolios anticipate an average increase of 26%, up from 24% in the third quarter and 22% a year earlier.

Contact me to receive the full report.

Are you one of the 65% of investors who are looking to expand portfolios and go ahead with acquisitions on bargain commercial real estate properties in the next 12 months? Contact me in advance for me to find a good strategic acquisition for you.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, December 18, 2009 10:15 pm

Price declines in the commercial property sector around the nation are dwindling slightly according to a report by the CCIM Institute and the Real Estate Research Corporation. And that a potentially meaningful recovery is projected to in about six months, the report said.

The quarterly report noted volume increases in the office, retail, apartment, and hotel sectors on a quarter-to-quarter basis, but it is still declining overall on a 12-month trailing basis.

In its 2010 forecast, the report said that credit is projected to remain stiff, and as more loans reach its due, bank foreclosures are expected to swell.  Commercial real estate sales volume and transactions are expected to increase as more entrepreneurial and opportunistic funds will flow into the market.

Contact me if you want to explore and seize opportunities in commercial real estate across the nation as I find the best investment strategy and the best fit between investors and property assets.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, December 17, 2009 2:30 pm

In a report by Reuters, Bank of Canada Governor Mark Carney said that about the U.S. real estate that: “It is going to be a difficult situation for a period of time but it is not going to be a shock to the system. And there’s a big difference between the two.”

Meanwhile, Wells Fargo Securities said in its 2010 outlook report that  the economy will rebound, but will take a couple of years to return to levels seen a few years ago.

“Housing and commercial real estate are central to the recovery. It has been complicated by the stimulus programs. The future will be determined by the fundamentals, it is not likely to improve until employment and income improve, ” said Mark Vitner, senior economist at Wells Fargo. “We expect a 20 percent rebound in 2010 and 2011,” he said.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, October 13, 2009 3:47 pm

What’s the outlook on commercial real estate for next year? For the next two years? What are the rising trends in the office, medical, and industrial classes? Should I buy, sell, or hold?

Is the economy recovering? Is the commercial real estate market in trouble? Has it bottomed yet? Will it bounce back fast? How should I position my property in the market? Should I offer financing?

Where do I get intel on the commercial real estate market as it applies to my property or investment needs?

These are just some of the questions investors and property owners like you are asking.

Get in-depth data and expert views from our regular release of Market Reports to help you strategize and make informed Commercial Real Estate Investment decisions by going here: Marcus & Millichap Commercial Real Estate Market Reports, and get advice from Alex Zylberglait – Your Commercial Real Estate Investment Expert to help you find the right fit based on your objectives and get the transaction done.

Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, October 2, 2009 11:18 pm

Here’s the continuation of my post last Wednesday taken from a section of the Marcus & Millichap Special Outlook on Government Programs and Maturities Report.  To get the full report, go here and sign-up.

Negative Investor Psychology vs. Long-Term Opportunity

Government programs to jumpstart the credit markets are promising, but they are only the first step in reversing the negative feedback loop currently in play throughout the commercial real estate segment. One of the most challenging issues to overcome for the investment market will be the negative psychology that has permeated the commercial property sector. Many investors are awaiting the return of economic growth to redeploy capital into commercial real estate. These investors run the risk of missing acquisition opportunities, particularly for properties that rarely change hands, as more of these assets are now available at reasonable prices.

Central Clearinghouse for Troubled Commercial Properties Unlikely

While the FDIC will begin to accept bids on failed bank assets this summer, offerings are unlikely to include a significant number of individual commercial properties. In the early 1990s, the RTC helped to liquidate real estate- and mortgage-related assets of failed Savings and Loan Associations (S&Ls). At that time, it was typical for institutions to hold whole loans on their balance sheets. The situation today is far more complex due to the securitization of mortgage debt, which grew out of the S&L crisis. Furthermore, compared to the S&L crisis, the number of bank failures during the current downturn has been relatively low. Even if a central clearinghouse was established to liquidate bank assets, it would likely be on a much smaller scale than the RTC. Disposition of troubled loans has largely been left up to individual institutions and government agencies.

Opportunities Emerging

Unlike stocks and bonds, real estate investors must wait for properties to be offered for sale, and some assets rarely trade. As sellers become increasingly motivated due to maturing debt or capital needs for other assets in their portfolios, a wide array of commercial properties should emerge. This will mark a unique window to acquire assets that fit long-term strategies at attractive returns, including core, stable properties in solid locations. Investors with expectations of unrealistic discounts relative to quality will find it difficult to participate.

Plenty of Capital Parked on Sidelines

There is already a significant amount of private and REIT capital available for well-priced, quality assets to be offered for sale. During the first six months of this year, REITs raised approximately $19 billion, some of which will be used to pay down existing debt, but it is likely a portion has been set aside for acquisitions. As lower-leverage investors, REITs may face limited competition for large assets, since obtaining financing for properties priced at more than $15 million has become particularly challenging.

Special thanks to my colleagues here at Marcus & Millichap, Erica Linn – Senior Analyst, and Hessam Nadji – Managing Director.

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, September 30, 2009 4:46 pm

What opportunites should we see coming in this period?  This is a 2-part post which I am posting today Wednesday and on Friday.

Anyway, I think that a huge number of commercial properties in all classes will hit the market as sellers become increasingly motivated due to debt maturities and needs for capitalization.  Investors are now scaling up their radar and preparing their resources  today to ensure they find attractive properties and can move quickly when these assets become available.

Read the rest of this post below which came from a section of the Marcus & Millichap Special Outlook on Government Programs and Maturities Report.

Tight Credit Hampering Commercial Real Estate Sales

The escalation of the credit crunch to a full-blown financial crisis in the fall of 2008 led to additional constraints on tight commercial real estate financing, reducing sales activity further through the first part of 2009. Prior to the near shutdown of credit markets last fall, commercial real estate sales volume was already down 70 percent from peak levels. The trend gained momentum through the end of 2008 and first half of 2009, with sales volume 90 percent below its peak as of the second quarter.

Buyer/Seller Disconnect Easing

In addition to the tighter financing climate, the wide gap between buyers’ and sellers’ price expectations is a major contributor to the drop-off in property sales. The disconnect became more severe in recent quarters, as buyers anticipated far deeper discounts due to rising distress and weaker fundamentals. There is some evidence emerging that sellers are becoming more accepting of current market sentiment, with cap rates on newly offered properties up approximately 50 basis points to 100 basis points from last year. At the same time, buyers are recognizing the difference in pricing based on market and property quality. Many investors remain on the sidelines, but interest in commercial real estate has increased, as have available inventory and offer activity.

Commercial Real Estate Investors Re-Evaluate Strategies as Downturn Continues

Until earlier this year, many owners were operating under the assumption that they were well-positioned to ride out the downturn. The deepening of the financial crisis last fall, however, led to severe job cuts across industries, as many companies were unable to secure short-term financing to fund basic operations. As a result, space demand deteriorated rapidly, cutting into NOIs and property valuations. With forecasts calling for continued economic weakness in the near term and rising distress in the commercial real estate sector, more property owners will opt to adjust prices rather than risk further equity erosion or a foreclosure.

Special thanks to my colleagues here at Marcus & Millichap, Erica Linn – Senior Analyst, and Hessam Nadji – Managing Director.

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, September 28, 2009 1:35 pm

Lenders, in many cases, are working with borrowers on a modification of loan terms and avoid foreclosures. Buyer interest has been increasing as more properties become available at realistic prices as sellers-backed financing increase making up 50% of transactions compared with only 11% a few years back.

Read the rest of this post from a section of the Marcus & Millichap Special Outlook on Government Programs and Maturities Report below.

Portfolio Lenders More Amenable to Commercial Mortgage Modifications

Many portfolio lenders are actively working with borrowers to modify loan terms and avoid foreclosures. The situation is more difficult for owners with CMBS loans, as multiple parties hold an interest in the mortgage. Delinquent CMBS loans also are transferred to special servicers that have strict limitations related to property foreclosures and distressed sales, further delaying a large inventory of discount sales coming to market.

Distress Spreading

Since the start of 2008, the volume of distressed commercial real estate has swelled to an estimated $115 billion. Distress was initially concentrated among failed development and condo conversion deals, but the office sector took the lead in the fall of 2008 as the financial crisis intensified. The composition of distressed properties has since shifted again, with retail properties now accounting for the greatest share, or 30 percent of the total, up from less than 10 percent one year ago. Of the core commercial real estate sectors, retail recorded the most significant speculative construction in recent years as developers chased, and even built ahead of, rooftops into far-reaching suburbs. The reversal of housing-related fortunes and shrinking stock portfolios have contributed to the loss of $13 trillion from the overall net worth of U.S. households since mid-2007, resulting in a drastic pullback in consumer spending and a growing propensity to conserve cash.

Commercial Lending at Bottom?

Commercial mortgage originations continued to decline during the first half of 2009, reflecting further reductions in loan demand and broad-based constraints on debt capital. In the first quarter alone, originations were down 26 percent from the fourth quarter of 2008 and were nearly 90 percent below levels reported prior to the onset of the credit crunch two years ago. Fannie Mae and Freddie Mac have recorded the lightest decrease in originations over the past year, as their multi-family loan portfolios continue to perform well.

With the exception of Freddie Mac’s recent securitization, CMBS issuance has been at a complete standstill since last June, while life insurance companies generally remain on the sidelines. Over the past several quarters, real estate investors have relied largely on commercial banks for new loans, which have become wary of originating large loans and increasing their risk exposure to individual assets. The limited amount of debt available from traditional lenders has resulted in a drastic increase in assumed or seller-backed financing in transactions, which now accounts for more than half of the marketplace, compared with only 11 percent a few years ago.

Read Part 1

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By Alex Zylberglait, September 25, 2009 8:00 am

Wave of Maturing Commercial Mortgage Debt Approaching

The tight financing climate is not only hindering acquisitions but adding another layer of complexity and challenge for commercial property owners with maturing debt. In the next two years, an estimated $550 billion of commercial mortgage debt is scheduled to mature. A significant share of this debt is unlikely to qualify for refinancing without equity contributions by the owner. Issues could become more severe as debt originated from 2005 to 2007 matures, since loan-to-values (LTVs) during this period were at historically high levels, and many loans were underwritten based on overly optimistic occupancy and rent growth assumptions. The impact on the market is likely to be substantially minimized by lenders’ focus on workouts and modifying loan terms, at least in the short term.

Delinquency Rates Rising

During the first quarter of 2009, CMBS delinquency reached 1.85 percent, up from less than 0.5 percent early last year and the highest level on record. The delinquency rate for loans issued by banks and thrifts jumped to 2.28 percent in the first quarter, a 90 basis point rise from six months earlier and on par with the rates reported in the mid-1990s. Commercial mortgage delinquencies among life insurance companies Fannie Mae and Freddie Mac also have increased in recent quarters but remain low at less than 0.35 percent, as these lenders maintained conservative underwriting standards throughout the most recent real estate boom.

I’ll post part 2 on Monday, September 28, 2009.

Special thanks to my colleagues here at Marcus & Millichap, Erica Linn – Senior Analyst, and Hessam Nadji – Managing Director.

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.

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By AZ Advisory Team, September 23, 2009 5:52 pm

Marcus and Millichap CEO, Harvey Green talks about:

●  What transactions are getting done
●  The state of the CMBS market
●  commercial real estate outlook

Click here to watch the video.

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Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.