CMBS Market Week in Review: Jan 27- Jan 31

Between CREFC, ABS, MLK Day, and various snow days across the country (come on, Atlanta), the first full trading week we've had in a while started on a "glass half full" note. With such a poor showing two weeks ago, mere stabilization was good news for both the major US stock indexes and CMBS. A jump in consumer confidence helped support our early optimism, as investors chose to focus on the positive throughout the week, such as decent earnings reports. As can be seen in the chart below, trading volume maintained respectable levels throughout the week. 

For those of you who read our monthly delinquency report, you know we have been anxiously awaiting the CWCapital note sales. Last week, Starwood Capital announced that it purchased 11 assets for $191 million. The loans are backed by 14 properties across four CMBS deals. The GSMS 2007 GG10 deal has the highest exposure to the sale, while MLCFC 2007-5 has the second greatest exposure. (Our January delinquency report will be out early next week.)

Finally, January loss severity came in at 58.51%, while liquidiation volume registered $1.28 billion. Loss severity was up more than 10 percentage points month over month.
 

	Volume	GG10	CMBX 6 AAA
Monday	$250 m	172 bps	86 bps
Tuesday	$300 m	170 bps	86 bps
Wednesday	$400 m	171 bps	89 bps
Thursday	$250 m	170 bps	88 bps
Friday	$200 m	167 bps	87 bps

California developers bullish on 2014 as new projects surge

Developers feeling jittery about the region's commercial real estate market: You're in the minority.

The latest Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey shows optimism throughout the state and across product types.

It's the first time since 2007 that the closely watched forecast has found a positive outlook across all markets. The survey compiles the outlook of developers three years out, providing better insight into development that's not yet "on the radar," according to the report. (You can download a copy of it here.)

The forecast found Silicon Valley office-developer sentiment hovering around 73 percent, far above the level of 50 percent that is considered to represent an optimistic landscape. Just over 50 percent of the Bay Area panelists said their companies would be starting one or more new projects in the next year.

Bay Area industrial-developer sentiment declined a smidge to about 60 percent, but "the bottom line for industrial space in California is one of strongly positive developer sentiment," the report notes.

Driving demand here: "The ability for these e-commerce people to make delivery of their products overnight, so you've got to be close," said Tony Natsis, a partner at Allen Matkins, in a forecast responseposted on YouTube. "If you're going to have next-day delivery to somewhere in the western region, then you've got to be in the western region."

In June, 67 percent of a Bay Area panel of industrial developers said they expected to begin new projects in the next year — and that number declined to 25 percent in the recent survey. But the forecast attributes the slump to the fact that some projects are now, in fact, starting.

On the multifamily side, San Francisco led the way in positive developer sentiment, but Los Angeles and Silicon Valley were also strongly positive.

That's "a reflection both of the strength of demand and a sense that even with building permits increasing at a rapid clip, there will not be enough multi-family housing in late 2016 to stem the rise in rental and occupancy rates," the report notes.

Real estate firms join forces

Sydney, Australia--

Consolidation of real estate agencies has led to the formation of LJ Hooker Commercial South Sydney, with a mandate to expand as the area moves from its traditional industrial tone to higher-end residential offerings.

As part of the merger, agency Alexandria Commercial was also recently acquired.

The director of LJ Hooker Inner City and managing director of City Commercial, Warren Duncan, said increased demand from local and overseas investors would dominate business in the coming year.

Last year Mr Duncan and Patrick Brush, head of LJ Hooker Commercial, joined forces with Kristen Marsh, managing director of Billicorp, a high-profile agency for the past decade in South Sydney.
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Ms Marsh is the new investment and development site specialist for the merged group, based in Shanghai. Mr Duncan said she would provide opportunities for Asian investors to get a foothold into the South Sydney residential market.

"This area has been one of the best-performing sectors across the Sydney metropolitan area and we expect a busy year ahead," Mr Duncan said.

"There is the Green Square development that will add commercial, retail and residential space, along with East Village for food and retail."

One of the key impacts on South Sydney has been the growing exit of the traditional industrial/warehouse business to the west and south west, which has left the properties ripe for residential projects.

Mr Duncan said growth in housing has meant the area is also emerging as an "eat street" precinct.

East Village Urban Marketplace is three kilometres from the Sydney CBD and within the Green Square Urban Renewal Project. Green Square is a catalyst for change across the entire suburb of Zetland, Danks Street area and Greater South Sydney.

The gentrification of the primary trade area began in the mid-1990s and is now characterised by the Danks Street precinct and neighbouring suburbs populated by a young, affluent professional market earning a high per capita income.

Mr Duncan said the increase in the cash from China would continue this year as many investors prefer to be near the City, but are attracted to higher density and off-the-plan new developments. "We envisage that more commercial and industrial space will be keenly sought after by cashed-up overseas investors who want to eat, live and work within close proximity for transport and the City," Mr Duncan said.

Handshake.com Launches a Virtual Community for Real Estate and Commercial Real Estate Professionals

Santa Monica, CA (PRWEB) January 31, 2014

Today, Handshake.com, launched its Internet based “Business Network” and “Virtual Community” dedicated to providing a “State of the Art” forum for the ethical and beneficial exchange between Real Estate Customers (Renters, Buyers and Investors) and the Professionals that serve them. Handshake’s goal is to establish itself as the pinnacle in Consumer and Professional confidence, from its logical and user friendly navigation, to its cutting edge informational and educational features. Bottom line, Handshake intends to produce industry leading results in the sale, rental, construction and development of “Real Estate” world wide.

“The handshake is commonly done upon meeting, greeting, parting, offering congratulations, expressing gratitude, or completing an agreement. Its purpose is to convey trust, respect, balance, and equality” explains CEO Torsten Kunert. “We acquired this premium domain name Handshake.com because it understood in every language” says Kunert.

Increasingly, people are participating in a wide range of online virtual communities. Interests range from sharing information to personal and business networking. Environments such as Facebook, YouTube and Linkedin are prime examples of exponential viral growth.

With 85% of first-time buyers and renters using the Internet to find apartments, vacation rentals, houses and commercial properties, Handshake.com, the first virtual community customer-centric site, is primed to step in as an intermediary to facilitate the buyer-seller, renter-landlord and location manager-relationships. With the industry's cutting-edge technology, the latest instruments to reach customers, and a superlative management team, Handshake.com will quickly position itself as the premier website to search when its time to move, buy, sell or invest.

Handshake.com has its foundation and inception in the formation of RentWave.com in 1999 by Torsten Kunert. Mr. Kunert founded the National Apartment Rental Company with $50,000.00 and it grew it into an enterprise that grossed $3.5 million dollars over a five year period. Handshake.com is the refinement, extrapolation and progenitor of this successful “Rental Market” search platforms. The premium domain alone was recently evaluated at $750,000.

At this juncture, Handshake.com has been self-funded by Mr. Kunert and his business partner, a USC Professor, Mr. Brian Olson. The company boasts connection with a nationwide network of over 130,000 residential apartment and commercial property managers. Most importantly Handshake.com has over 15 million custom sorted contacts that incorporate 55 different real estate related professions on a world-wide scope.

Handshake.com is unique in that it offers “State of the Art” Management and Marketing Tools and Apps to its subscribers. It offers the greatest convenience and largest data base for Consumers to find the right properties and the right professionals to facilitate their search and ultimately their transaction. Handshake offers the “Management Expertise” and “Technological Know-How” to utilize the latest search developments and marketing techniques available on the Internet to make sure that both sides of the equation can be brought together with expedience and satisfactory result.

Handshake.com’s main income stream is the package of marketing and management tools and Apps it offers its members. The tools and Apps vary in price. Handshake estimates that 500,000 members will be using these services by the end of 2015. The Handshake.com founders welcome potential investors and joint venture partners.

Industrial vacancy rates shrinking

Developers are adding distribution space in the Inland area but not a lot of buildings to house a small- or medium-sized factory.

Big-box warehouse users and manufacturing companies looking for smaller industrial buildings are finding a real estate market that is tightening, a series of recently released market reports found.

The overall vacancy rate for all industrial buildings in Inland Southern California, from large distribution centers to small factories, continued to decline in the fourth quarter. Several studies by brokerage firms and researchers estimated it at between 4.8 and 5.4 percent.

That would represent a substantial decline. According to a year-end report from real estate research group CoStar, the vacancies in this sector have dropped from 6.1 percent at the end of the third quarter and from 6.2 percent at the close of 2013’s first quarter, a decline of close to 20 percent in less than a year. CoStar’s report estimates the current vacancy level at 5.4 percent.

That might be squeezing out some smaller manufacturers who are looking for a home, people in the industry say. Last year saw several big distribution centers under construction, but not many facilities for a small- or medium-sized factory.

“We’re seeing some strong absorption, but the key is, the developers are not building replacement inventory for 100,000-square-foot buildings or below,” said John Boyer, executive vice president for the Ontario office of NAI Capital.

The tightening market for existing smaller properties comes at a time when some independent companies seem interested in buying. The number of small businesses interested in a 504 loan, a U.S. Small Business Administration-backed financing plan that allows entrepreneurs to own the facilities they operate, was up for most of 2013.

However, some of those business owners could be thwarted by the lack of inventory. Boyer said there is little space in the Ontario area’s warehouse hub for a smaller factory but some infill space farther east.

“Now developers are starting to do an ‘Aha’ ” about the need to build new facilities, Boyer said. “As the economy heals, the users who survived are looking to buy.”

Rick John, senior vice president at Daum Commercial Real Estate and president of the Inland Empire and Orange County chapter of the Society of Industrial and Office Realtors, said there’s been no shortage of new construction larger than 100,000 square feet in the area.

“For smaller buildings, there’s demand without supply,” John said. “Our market has not put any product out for these smaller buildings in the last five years.”

Part of the issue is price, John said. Developers frequently still believe the risks don’t justify the investment.

Also, part of the issue is traced to residents who don’t want industrial properties in their areas, said Bruce Springer, a senior vice president with Lee & Associates.

“The roadblock is the entitlement process, from California and from cities and counties,” Springer said. “It’s onerous, and it makes it difficult to build manufacturing buildings.”