Tuesday, December 31, 2013

CBRE Capital Markets Lender Forum | December 2013

Real estate capital markets entered Q3 2013 amid a cloud of uncertainty following interest rate hikes in late spring, the prospect of a government shutdown and slowing economic activity. 

Despite these headwinds, lending and investment sales markets maintained forward momentum during the quarter.  Lending by banks and CMBS issuers remained strong, which has brightened our short-term outlook for lending growth as we move towards 2014.

This report reflects the partnership between CBRE Global Research and Consulting and CBRE Capital Markets to provide a rich database and charts on which to gauge the progress of this recovery. Examining a proprietary database of loan data, CBRE Research and Consulting has created an index tracking the momentum of deal activity in the market for commercial mortgage loans. Key trends include:

  • Markets stabilized during Q3 2013, after a sharp widening of rates and spreads in May and June.  Lending momentum improved despite the earlier capital market disruptions.

  • Banks had a strong quarter, capturing the highest share of commercial originations among the principal lender types.

CMBS activity also was resilient.  However, new risk retention rules may raise CMBS loan pricing in the coming years

http://f.tlcollect.com/fr2/613/65213/LenderForum_Dec2013_v3.pdf

Monday, December 9, 2013

Commercial property: Opening up to retail investors

The following is an interesting article touting investments in Indian real estate, which demonstrates the availability of investable capital among the Indian middle class.


India --(Indian Express)--
Buying an office or retail space is a huge investment, which is why commercial realty has been traditionally seen as an asset class that only institutional investors or high net worth individuals could invest in. That, however, is changing. Many retail investors are now getting into the office real estate game.

For a perspective of the opportunities in Indian commercial real estate, consider this – Manhattan in New York has 450 million square feet of Grade A stock, while London has 200 million square feet. In comparison, India's collective office space stock accounts for only 375 million square feet. This showcases the long-term potential for office space at all levels in India. The next few years will see a spurt in the services and knowledge sector, opening up opportunities for the retail investor.

INVESTMENT ROUTES
There are three ways to invest in commercial real estate: directly buy office space from a developer, buy stocks of a developer in the commercial realty space, or invest in a real estate fund focused on commercial real estate. As the quantum of investment is usually huge, the buyer needs to take informed decisions. Another option, real estate investment trusts (REITs), is expected to be opened up shortly by the government. REITs are pooled investment entities where the corpus is invested primarily in completed, income -yielding real estate assets and distribute a major part of the income generated among their investors. Many developers, especially in cities such as Mumbai, are today offering smaller units (as small as 500-1,000 square feet) in Grade A buildings given the higher vacancy and pressure on pricing. This is in sharp contrast to the scenario a few years ago, where only larger units were available – making it tough for a small investor. Investors considering retail space can now look at a multitude of affordable options in free-standing high street outlets or shops in malls. The advantages of smaller units are two-fold: it is easier to find tenants, and the premises can also be used by their owners. Today, professionals like doctors, auditors, stock brokers and lawyers are buying commercial properties for investment and self-use. Banks are willing to lend up to 50-60 per cent of the loan to value for this segment. The investor should focus on a few carefully selected markets with a diverse economic base and a deep pool of tenants. While looking at under construction projects, the investor should look at developers who have a track record of delivering high quality projects on schedule.

WHAT TO LOOK FOR
Despite the availability of more rationally priced options, investing in commercial realty is most definitely not child's play. It requires forethought, research and planning:
  • Investors need to establish the soundness of the location and its demand/supply dynamics. Otherwise, they may end up buying into micro markets which have or will have high vacancies.
  • They need to factor in the economy, job market, future infrastructure development and population growth in the market.
  • They need to check developer credentials, access to public transport and quality of property management.
  • They need the services of a knowledgeable real estate agent and a lawyer.
  • If they are investing in a retail store, they need to consider the frontage, foot-fall and the dynamics of the adjoining catchment. For an income producing office asset, one should look at:
  • The break-up of cash flows, and the vacancy factor.
  • Expenses such as maintenance, property tax and building insurance.
  • Lease term, lock-in period and expiry dates.
  • Long term capital appreciation, refurbishment, and repositioning potential.

LOOKING AT YIELDS
The rental yield for commercial property is usually 9-11 per cent. In contrast, the yield for residential property is much lower at 2-3.5 per cent. The demand for office space in India is likely to stand at around 200 million square feet over the next five years. Post the global financial crisis, prices in markets like Mumbai have dropped around 35-40 per per cent and have bottomed out in most micro-markets, offering investors a good opportunity. Remember, you do not only make a profit on the sale of appreciated commercial property – the rental cash flows of a well-located office or shop space are considerable. Unlike in residential property, the income that can be generated from commercial property is what determines its value.

http://www.indianexpress.com/news/commercial-property-opening-up-to-retail-investors/1204517/0

Forecast sees continued improvement in Springs-area commercial real estate market

Real estate prices in the Pikes Peak region seems to have stabilized, with noted acquisitions, such as Stan Kroenke's purchase of Academy Place shopping center.  Vacancy rates are falling among office, industrial, and retail spaces, and home building is recovering.


Colorado Springs --(The Gazette)--
The Pikes Peak region's commercial real estate market, plagued by high vacancies and stagnant rents in recent years because of the poor economy, will continue to improve in 2014 - albeit slowly, according to a forecast by Quantum Commercial Group in Colorado Springs.

"Have we turned the corner?" asked Michael Palmer, a Quantum broker. "We've certainly turned the corner from the downturn. But I think we're in the middle of a very slow grind upwards."

Improvement in the market will be fueled by interest in Colorado Springs on the part of investors, developers and retailers; trickle-down benefits from commercial activity in Denver and other markets; and a better jobs picture, Quantum officials said.

"It's slow growth across all the sectors," Quantum president Dale Stamp said of the office, retail, industrial and land markets. "It's positive. You've got an air of confidence in the entire city."

Colorado Springs already has seen investments from some high-profile out-of-towners, such as this year's purchase of the Academy Place shopping center at Academy and Union boulevards by a company controlled by billionaire real estate and sports mogul Stan Kroenke, said Quantum broker Susan Beitle. At the same time, a Kroenke real estate development continues to plan a new retail center in Monument, she said.

"Those are two good examples of money coming into Colorado Springs," said broker Andy Oyler.

A strong Denver economy has driven up real estate prices there, prompting some investors to turn to the Springs as an attractive secondary market where they can get solid returns on their investments, Palmer said.

"Colorado Springs is seeing the benefit of that," Palmer said. "That's why there's activity, just because it's a better value market right now than some of the others."

According to Quantum's 2014 forecast:

- The vacancy rate for office space fell late this year to a little less than 11.5 percent, down from nearly 20 percent in 2009. An additional 560,000 square feet of office space was occupied, or absorbed, this year - more than double the annual absorption average over the last five years. And lease rates of $17.11 per square foot were up slightly from the five-year average of $16.36.
In 2014, Quantum expects another slight decline in the area's vacancy rate, while absorption and lease rates will continue to rise slowly.
- Industrial vacancy rates fell to 8.4 percent this year after being near 14 percent a few years ago. Although the Department of Defense budget remains a concern, Quantum officials believe the industrial vacancy rate could drop below 7 percent in 2014.
- The local retail vacancy rate improved only slightly by year's end to 6.8 percent from 6.9 percent a year ago. The rate will remain relatively unchanged in 2014, according to the forecast, although the amount of space that will be occupied will rise next year over 2013.
- As homebuilding recovered, sales of land for residential development increased sharply in 2013 and will continue in 2014.

Special-Servicing Rate at 4-Year Low

The special-servicing rate for securitized commercial mortgages dropped sharply again last month, hitting its lowest level in four years.

The proportion of mortgages in the hands of special servicers was 9.35% as of Nov. 30, down 56 bp from a month earlier, according to

Trepp. That key measure of credit quality for commercial MBS loans peaked at 13.65% in February 2012. The rate has been decreasing virtually nonstop for the last year, by an average of 27 bp per month. The improvement reflects a contraction in the volume of loans in special servicing by an average of $1.7 billion per month during the last year.

There were 2,805 loans with a combined balance of $49.6 billion in special servicing at the end of November, down from $52.1 billion a month before. The all-time high for the aggregate balance of loans in special servicing was $89.9 billion in September 2010.

Another factor pushing the special-servicing rate down last month was a fresh batch of CMBS offerings. The overall amount of securitized commercial mortgages outstanding jumped by $5.2 billion in November, to $530.4 billion — the largest monthly increase since before the credit crisis. That figure serves as the denominator when calculating the rate.

Since peaking at almost $800 billion in 2007, the CMBS universe has been shrinking as new deals have failed to keep pace with the runoff of legacy loans. But that decline has slowed this year amid soaring issuance, and the monthly total has now ticked up three times in 2013.


 

Job Alert: CMBS Associate Analyst 1 with Moody's


Listing Info:

Moody's Investors Service is among the world's most respected, widely utilized sources for credit ratings, research and risk analysis. In addition to our core ratings business, Moody's publishes market-leading credit opinions, deal research and commentary that reach more than 3,000 institutions and 22,000 subscribers around the globe. Successful candidates will join our commercial real estate finance (CREF) team in New York, which is responsible for the monitoring of bonds backed by multi-billion dollar commercial mortgage backed securities (CMBS) pools of fixed and floating rate commercial real estate loans. The surveillance team is responsible for maintaining the outstanding ratings of CMBS securities as well as publishing in-depth research on relevant credit issues.

Responsibilities will include analyzing all credit aspects of CMBS transactions, such as; property specific cash flow analysis, financial modeling and formulating and substantiating a credit opinion. Duties include presenting transactions effectively and comprehensively to rating committees and writing accurate and insightful press releases. In addition, the associate analyst is expected to complete various special research projects, develop in-depth knowledge of the CMBS sector and take thought leadership initiatives to enhance our analytics and research impact; as well as analyze and complete Rating Agency Confirmation (RAC) requests. Resumes submitted in Microsoft Word format are preferred.

Thank you for taking the time to express your interest in employment opportunities with Moody's Investors Service.


Requirements

Interested candidates should have a Bachelors or Masters degree in Finance, Economics, Real Estate, Accounting or related field

3-5 years experience in the commercial real estate industry is a plus.

Must be proficient in Microsoft Excel.

The ability to manage multiple projects, work closely with others as well as independently to produce accurate, detailed work in a dynamic, fast-paced environment is a must.

In addition, the individual should have well-developed analytical skills along with strong written and oral communication capabilities.

Prior exposure to commercial real estate credit analysis or valuation is desired.


 To Apply, click the following link:
http://www.bright.com/jobs/job/77790_j3f4m575gk3q089njhg/?bfid=31&job_title=Associate+Analyst+1%2C+CMBS+Monitoring&ref=ziprecruiter&utm_source=ziprecruiter&utm_medium=feed&utm_campaign=masterfeed&subid=z7h54rjjc509e&_zat=UqXFj38AAAEAAEs9OdwAAAAh