Comments (0)

By AZ Advisory Team, January 22, 2010 3:40 pm

Lenders Remain Cautious, but Encouraging Signs Emerge. Banks will remain the primary source of financing for commercial real estate, with the exception of apartments, which will continue to benefit from agency lending. Life insurance companies are showing renewed interest in lending, but a 2010 surge is unlikely due to capacity limitations. While traditional CMBS is not expected to become a major source of financing in the near term, the first TALF-eligible CMBS issuance was met with strong demand and paved the way for a few non-TALF deals in the weeks that followed.

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.

Comments (0)

By AZ Advisory Team, January 13, 2010 12:33 pm

Looking at a report by our commercial real estate research partner, Real Capital Analytics — it says that “Foreign interest in buying US property is high and will grow in 2010. Asian investors will provide some of the newest capital in the market, but German funds and high net worth buyers from around the globe will also be active. The increased capital from Asia that has just started to emerge will particularly benefit the West Coast whereas more traditional European investors prefer the East Coast. Potential changes to the Foreign Investment in Real Property Tax Act (FIRPTA) could remove some barriers that have discouraged foreign investment in the US. Over the past few years, just 10% of US property acquisitions have involved cross-border investors, well below the global average of 28%. A repeal of FIRPTA is unlikely, but one likely change could facilitate greater foreign investment in US REITs, yet another reason why the REIT sector looks so promising for 2010.”

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.

Comments (1)

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.

Comments (1)

By AZ Advisory Team, December 16, 2009 2:37 pm

Moody’s Investor Services, learning from lessons received 20 years ago, predicts in a report that U.S. life insurers will suffer a less due to commercial-mortgage losses compared to banks. The commercial real estate market last went through a crisis 20 years ago which resulted in major losses for the life insurers.

“Life insurers’ portfolios today demonstrate that they have learned from past missteps dealing with commercial real estate,” said Senior Vice President Jeffrey Berg. Right now, the sector has only moderate exposure to commercial loans and these loans were well-diversified across geographies and property types as well as these loans were conservatively underwritten and maturities were well-distributed.

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.

Comments (1)

By AZ Advisory Team, December 14, 2009 11:02 pm

Bridger Commercial Funding announced today that it will resume originating new commercial real estate loans on income-producing properties. Loans made under Bridger’s new program will be underwritten to eligibility standards for securitization under the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF. Separately, Bridger also announced that it has hired the personnel from Whitegate Advisors, a New York-based real estate capital markets specialist firm, in order to support its new CMBS origination activity.

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.

Comments (2)

By Alex Zylberglait, November 16, 2009 9:32 am

As we continue to track the amount of debt in distress across all product types and geographies, it is evident that it’s a matter of time until lenders begin to divest these assets. Even though they currently do not have as much pressure to realize losses immediately they will eventually have to do something about it. Considering they are not generally lending money at this time, the increased defaults will only make their balance sheets that much more unattractive. Having said that, I do not believe that we are likely to see an RTC 2 of some sort but rather the divestiture of troubled or toxic assets will likely come in the form of waves; that is as bank’s balance sheets gradually improve they will likely divest of certain assets over time. The wildcard in all of this, of course, is any kind of government intervention that would act to accelerate or decelerate this probable scenario.

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.

Comments (1)

By AZ Advisory Team, October 23, 2009 10:45 pm

With five of the selected nine asset managers for the Treasury Departments Public Private Investment Program now fully funded with their debt and equity capital commitments, there is some $12.27 billion in purchasing power aimed at the so-called legacy – or to be more precise, toxic – assets still clogging the real estate markets. In short, the program is close to execution as the asset managers now begin what they were ultimately chosen to do: seek out and purchase toxic debt.  Read full article here.

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.

Comments (1)

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.

***
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.

Comments (0)

By Alex Zylberglait, September 21, 2009 10:05 am

Now let’s talk about the Public-Private Investment Program or PPIP

The proposed government-private partnerships aimed at moving toxic assets off of banks’ balance sheets were initially well-received and promising, but implementation has proven difficult. To start, banks have raised large amounts of equity capital without having to sell assets at deep discounts, reducing their motivation to participate in the program. Furthermore, some potential participants are reluctant to partner with the government, wary of possible restrictions that could be imposed at a later date.

As of the end of July, PPIP was moving forward but at a scaled-down level. PPIP had targeted the removal of up to $1 trillion of legacy loans and securities from banks’ balance sheets; however, as financial markets improved, the government reduced its target for the first round to $40 billion in legacy securities only. The impacts of a scaled-back PPIP on commercial real estate investors are mixed. While it may take more time for banks to clear their balance sheets of toxic mortgage-related securities, their lack of enthusiasm for the program signals that mortgage term extensions and workouts are likely to continue as a major focus, especially for higher-quality assets.

• Legacy Securities Program. As part of the PPIP, the Legacy Securities Program allows prequalified fund managers to receive an equity contribution and favorable financing from the government to purchase legacy securities. These securities include existing CMBS that were highly rated at the time of issuance. If successful, the program could provide an important price discovery tool, one of the first steps in restarting credit markets and freeing up capital for new lending.
• In early July, the Treasury formally announced its list of nine prequalified fund managers to participate in the first round of the Legacy Securities PPIP. Fund managers have 12 weeks to raise at least $500 million each in private capital, in addition to investing a minimum of $20 million of their firm’s capital into the Public-Private Investment Fund (PPIF).
• The government committed $30 billion to the program to match equity capital raised from private sources and to provide up to 100 percent financing of the total equity in the PPIF. The first round of the PPIP holds the potential to remove up to $40 billion of legacy securities from banks’ balance sheets.
• Legacy Loan Program. In conjunction with the PPIP, the Legacy Loan Program was intended to help banks move whole loans off of their balance sheets. In June, the FDIC postponed a pilot sale by open banks through its Legacy Loan Program, citing banks’ ability to raise capital successfully without moving these assets off of their balance sheets. At the same time, however, the FDIC announced plans to test a similar funding mechanism to sell receivership assets of failed institutions this summer. While the platform may draw from the model utilized by the Resolution Trust Corp. (RTC) in the early 1990s, the list of failed banks consists of mostly smaller institutions; therefore, the quantity, size and quality of assets offered by the FDIC in the foreseeable future will likely pale in comparison to the RTC days.

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

***
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.

Comments (3)

By Alex Zylberglait, September 18, 2009 8:00 am

In summary…

Term Asset-Backed Securities Loan Facility (TALF)

• TALF was expanded in May to include highly rated commercial mortgage-backed securities (CMBS). Spreads on AAA-rated CMBS have since narrowed dramatically.
• At its first subscription date in July, the legacy CMBS component of TALF received requests for $670 million in loans. All but one of the bonds submitted were accepted as collateral for TALF loans.
• Two REITs are expected to soon test the new CMBS component of TALF, with each projected to borrow up to $600 million against assets in their portfolios. A substantial amount of the capital raised will likely be utilized to pay down maturing debt.
• As a result of the lengthy ramp-up time for this program, TALF has been extended through March 31, 2010, for existing CMBS and through June 30, 2010, for newly issued CMBS.

A growing number of large property owners, investors and lenders will take advantage of the program by year end.

Read Part 1
Read Part 2

***
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.