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www.reit.com Those anticipating a “fire sale” of distressed assets in the commercial real estate market may have to keep on waiting, according to Vivek Seth, managing director and head of the Raymond James Real Estate Investment Banking Group. In a video interview with REIT.com at REITWorld 2010 NAREIT’s Annual Convention for All Things REIT at the Waldorf=Astoria Hotel in New York, Seth said the federal regulatory system isn’t pushing owners of distressed assets to immediately unload their holdings. “There’s an orderly liquidation underway for those who need to get out,” he said. Additionally, buyers are chasing “quality” assets, according to Seth. As a result, demand for distressed situations remains weak. “Large center city properties, well-located assets — for those, there’s a very viable market in all sectors today,” Seth said. “Until that whole space clears out, I don’t think we necessarily have to deal with the distressed real estate in a fire sale fashion.” Looking ahead, Seth noted that the commercial real estate market will likely need an equity injection of nearly $1 trillion in the coming decade. As a result, the market for initial public offerings for REITs will heat up in “fits and starts,” he speculated. “In the long term, the IPO markets are going to play a very useful role in re-capitalizing the sector,” he said. Seth pointed out that valuations in the public and private markets for commercial real estate portfolios are relatively close. The requisite …
HNIs high on commercial real estate
The super rich in India are not just buying trophy homes, but they also betting their money on pre-leased commercial properties offering good rental yields.
Read more on The Times of India
Ray Rap Realty Brokers Major Retail Lease for Ashley Furniture in Eatontown New Jersey
As a sign that the commercial real estate market is improving, Ray Rap Realty has placed a major national furniture concern directly across from the Monmouth Mall at the Eatontown NJ Route 35 and 36 Circle. Ashley will occupy the former 50,000 s.f. Levitz building and this transaction represents one of the largest retail leases in this market for 2011. …
Read more on PRWeb via Yahoo! News
Research and Markets: Greece Real Estate Report Q3 2011 – Political problems have contributed to a sharp fall in rents
DUBLIN–(BUSINESS WIRE)–Research and Markets (http://www.researchandmarkets.com/research/93fdbf/greece_real_estate) has announced the addition of the “Greece Real Estate Report Q3 2011″ report to their offering. Business Monitor International’s Greece Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations …
Read more on Business Wire
K. Hovnanian Homes focuses on greener homes, new communities
While much of the real estate industry seems to have been treading water these past few years, holding out until the economy comes back around, one Tampa Bay builder has used the down time as an opportunity to make strategic moves and expand its offerings.
Read more on The Tampa Tribune
Commercial Real Estate Loans – Overcoming Rejections
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Home Page > Finance > Commercial Real Estate Loans – Overcoming Rejections
Commercial Real Estate Loans – Overcoming Rejections
Posted: Feb 13, 2008 |Comments: 0
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One of the most frustrating and confusing situations for a business owner occurs when lenders disapprove commercial real estate loans. Since rejected business loans are quite common, it is advisable for commercial borrowers to have a contingency plan in place for commercial loans.
Business owners are likely to be distressed when a commercial loan application is turned down and will be unsure as to why it took place and how to avoid a similar problem again. For each of the five primary reasons that a commercial lender might decline commercial real estate loans, a practical solution is suggested for transforming the rejected commercial funding into approved business loans.
Two reasons (tax returns and business plan requirements) could impact virtually all commercial loans. Many loan officers will begin their review of potential commercial real estate loans by stating “We will need to see at least three years of tax returns” and “Can you show me your business plan?” before proceeding.
Small business mortgage requests are sometimes too unique for a traditional commercial lender. In these situations (even if a business owner has an adequate business plan and favorable tax returns), it is not unusual for commercial borrowers to be declined for business loans by a traditional commercial bank.
The reasons provided below do not represent obscure issues. It is likely that two or three of the reasons described will be important for typical commercial real estate loans.
(1) Commercial Real Estate That is Used for Special Purposes. Reason number one for business loan rejections is that the lender does not make commercial mortgage loans for the type of business involved. In a typical example, fewer commercial banks are offering financing for bar and restaurant properties. In a similar fashion, an auto service business is often given expensive and unnecessary environmental stipulations. There are many special purpose commercial properties such as campgrounds, churches, funeral homes and gas stations that most traditional lenders have eliminated from their commercial lending program.
Strategy number one for converting the disapproved business loan into an approved commercial mortgage loan is realizing that there are reasonable options beyond traditional commercial lenders. There are capable lenders that are interested in special purpose properties. The best loan might be available only from a non-traditional commercial lender when traditional banks won’t make the requested commercial loan.
(2) Tax Returns. Reason number two for commercial loan disapprovals is when loan officers find a problem on an income tax return that disqualifies a commercial borrower under the bank’s loan guidelines. This “problem” will typically be related to net income after business deductions, but when loan officers review tax returns, there are many possibilities which will result in the same outcome.
Strategy number two for converting the declined commercial mortgage into an approved commercial real estate loan is to apply for a “Stated Income” commercial loan. Very few traditional banks use Stated Income (no tax returns, no income verification, no IRS Form 4506) for business loans. Borrowers should search for commercial lenders using Stated Income commercial financing. Unfortunately, this suggested solution will not work for all loans because of a normal maximum loan amount of about $2-3 million for a Stated Income loan.
(3) Cash Out Limitations. The third reason for rejection of business loans will be seen frequently during refinancing attempts which involve a need to obtain cash by the borrower. It is common for a traditional commercial lender to limit what the funds are used for and to restrict the amount of cash to as little as $100,000. Even though the bank will provide the commercial loan, if they won’t offer the amount of cash requested by the borrower, this is equivalent to a loan disapproval.
Strategy number three for converting the declined commercial mortgage into an approved commercial real estate loan is to seek alternative business financing. An important goal for a commercial borrower is to find a lender that will not impose unfair restrictions in how refinancing cash is to be used.
(4) Collateral Required. Reason number four for commercial mortgage loan disapprovals is that the bank will not make a commercial loan without sufficient collateral such as a lien on personal assets.
Strategy number four for converting the declined commercial mortgage into an approved commercial real estate loan is for commercial borrowers to seek out lenders that do not “cross collateralize” assets as a condition for obtaining a business loan. This will provide greater flexibility for the commercial borrower and avoid unnecessary (and unwise) connections between personal and business assets.
(5) Required Business Plan. 0Reason number five for commercial mortgage disapprovals is when a bank’s loan officer determines that the business plan does not support the needed commercial loan.
The fifth strategy is to avoid lenders which require a business plan, and this approach can save both time and money. This can result in several primary advantages:
(A) Decrease commercial mortgage costs by several thousand dollars. A typical business plan (prepared to normal bank specifications) costs $5,000 to $10,000.
(B) Reduce the period needed to complete business financing. A typical time for a business plan to be prepared is one to two months.
(C) Commercial financing approvals will involve fewer requirements when a business plan is not mandatory.
Unfortunately, the circumstances described in this article are responsible for many commercial finance difficulties. However, as noted above, the five key reasons for loan officers rejecting business loans can be overcome by most business owners. Similarly, with proper advice and strategies for small business mortgages, commercial real estate loans that are disapproved for other reasons (beyond the five issues described here) can also result in successful and effective commercial loans.
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Stephen Bush is a small business cash management expert – learn how to avoid problems with business loans and obtain candid business cash advance advice at AEX Commercial Financing Group => http://aexcommercialfinancing.com
The US industrial market has been helped out by improvements in manufacturing, capital goods shipments, and business and consumer spending. Overall vacancy is declining in the sector and a recovery is underway for many cities. As a result, the portion of US industrial stock in recovery is expected to surge over the next 15 months.
The barometer shows that the best-performing sector in the industry is the US multifamily market, which is dominated by the recovery phase of the real estate cycle and is segueing more and more into the expansion phase annually through 2014. In fact, not one of the 81 multifamily metro areas included in the barometer will be in recession over the next four years.
Information about subscribing to the PwC Real Estate Investor Survey can be found at www.pwc.com/us/realestatesurvey. Members of the media can obtain an electronic copy of the full report by contacting Scott Cianciulli at (212) 986-6667 or cianciulli@braincomm.com.
About the PwC Real Estate Investor SurveyTM
The PwC Real Estate Investor Survey, now in its 24th year of publication, is one of the industry’s longest continuously produced quarterly surveys. The current report provides overviews of 31 separate markets, including ten national markets — regional mall, power center, strip shopping center, CBD office, suburban office, flex/R&D, warehouse, apartment, net lease, and medical office buildings. The report also includes a review of 18 major US office markets including Atlanta, Boston, Charlotte, Chicago, Dallas, Denver, Houston, Los Angeles, Manhattan, Northern Virginia, Pacific Northwest, Philadelphia, Phoenix, San Diego, San Francisco, Southeast Florida, Suburban Maryland, and Washington, DC. In addition, the report covers three regional apartment markets – – Mid-Atlantic, Pacific, and Southeast.
The second quarter 2011 report also features up-to-date information relating to forecast periods, structural vacancy replacement reserves, forecast values, tenant improvement allowances, and vacancy assumptions. In addition, each issue of the Survey contains over ten tables of market data focusing on value expectations, tenant improvement allowances, forecast periods, structural vacancy, and growth rates. Also in this issue is the semiannual National Development Land Market.
About the PwC Network
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information.
© 2011 PwC. All rights reserved. “PwC” and “PwC US” refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Scott Cianciulli / Ray Yeung
Brainerd Communicators
Tel: +1 (212) 986 6667
cianciulli@braincomm.com
yeung@braincomm.com
This article comes from Hotel News Resource
http://www.hotelnewsresource.com
The URL for this story is:
http://www.hotelnewsresource.com/article55931.html
As Reported by: Scott Cianciulli / Ray Yeung of Brainerd Communicators on June 22, 2011
Average overall cap rates decrease in 27 of the survey’s 31 markets
Despite a skittish US economy, most commercial real estate investors remain upbeat and cautiously optimistic about the industry’s future, with very few being dissuaded from eagerly acquiring assets and seeking opportunities across all commercial real estate sectors. In fact, many investors are aggressively pursuing deals as they continue to see signs that the industry’s overall fundamentals are stabilizing and even improving in certain sectors and regions, according to the second quarter 2011 findings of the PwC Real Estate Investor Survey, released today.
According to the report, rental rates remain below peak levels for most property types and regions, although there is a sense among surveyed investors that they have stabilized. This quarter, the average market rent change rate assumption reported by Survey investors increased in 25 of the report’s 31 markets, further demonstrating investors’ sense that an ongoing, albeit slow, recovery is occurring.
“The trajectory of the commercial real estate industry’s recovery is largely dependent on the health of the US economy. The ability of the economy to add jobs instills optimism in both businesses and consumers,” said Mitch Roschelle, partner, US real estate advisory practice leader, PwC. “Despite recent disappointing labor reports and falling home prices, commercial real estate investors continue to look to the positive aspects of the industry as they remain cautiously optimistic that the recovery path will continue. The significant lack of new supply over the past several years serves as the catalyst of the ongoing recovery. As tenant demand continues to grow, positive absorption has begun to drive rents up. The prospects of rent growth have driven much of the aggressive bidding by investors in certain top-performing markets.”
“In addition to improving fundamentals, the volatility of the stock market, weakening currencies, and the low fixed income coupons have fueled a rotation into hard assets such as precious metals, commodities and commercial real estate,” Roschelle added. Most institutional investors, particularly pension funds, are targeting top-performing assets in strong markets with some surveyed participants indicating that they’re concentrating on opportunistic plays. Moreover, there are a growing number of distressed assets that are trading as bank regulators put more pressure on lenders to deal with nonperforming loans – yet another sign that the US commercial real estate industry is on the mend.
Office Sector Leads Quarterly Overall Cap Rate Decline
The average overall capitalization (cap) rate, the initial return anticipated on an acquisition and a reflection of an investment’s anticipated ownership risk, decreased in 27 of the 31 surveyed markets, increased in three, and held steady in one during the second quarter 2011. The steepest declines occurred for the national central business district (CBD) and national suburban office markets, as well as the Dallas office market, where the average declined 51 basis points.
While the apartment sector has led the industry’s recovery and has experienced continued cap rate compression over the past 18 months, the office sector was slow to rebound due to a sluggish labor market. However, as employment has improved and business profits have risen, the sector has gained traction and, as a result, more investors are focused on acquiring office buildings, causing overall cap rates to decline – especially for core assets in top markets. Over the next six months, the Survey found that participants expect overall cap rates to either hold steady or decline due to strong buyer interest, low interest rates, and a positive economic outlook.
According to Survey findings, the Manhattan office market’s average overall cap rate has fallen below 6.00 percent for the first time since 2008 and represents the lowest average of the 18 individual office markets in the Survey, reflecting investors’ confidence in Manhattan’s ability to lead the recovery and rebound faster and stronger than most other metro areas. An optimistic outlook for Manhattan is also reflected when reviewing the Survey’s average market rent change rate assumptions, or what investors foresee rental rates increasing by over the next year. When comparing this key indicator for the Manhattan office market to the Survey’s national CBD office market, it is clear that investors in Manhattan were quite aggressive with their rent expectations during the expansion, but became very pessimistic during the recession.
Investors are back on track with pre-recession growth expectations for Manhattan, as well as the national CBD market. As shown in the accompanying chart, average market rent change rate assumptions in the Manhattan office market have steadily climbed back since the lowest point during the recession in third quarter 2009, when it was hovering around -6.50 percent, up to 3.00 percent in the second quarter 2011. The national CBD office market, which was at -2.00 percent in fourth quarter 2009, is now at 1.39 percent. These trends support the notion that investor sentiment is improving in CBD cores, especially top-performing markets.
“Surveyed investors are treading carefully as they realize that troubles could arise if interest rates rapidly increase at the same time and a large pool of commercial maturities peaks over the next two years,” stated Susan Smith, editor-in-chief of PwC’s quarterly survey. “If those factors play out, overall cap rates would likely rise and negatively impact property values. Luckily, though, most of the participants have told us that they maintain an optimistic outlook for now, even if cautiously so.”
© 2011 PwC. All rights reserved. “PwC” and “PwC US” refer to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.REO Apartment Building in Los Angeles Coming to Market Soon
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East West Commercial will be bringing to market a remodeled 4-plex apartment building in Los Angeles in July. Contact Michael Duhs, Managing Director of East West Commercial, to find out more about this property. Call us at 949-939-8352 or contact us at: 
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