Industry Insiders: Under $10M Commercial RE Holding Up - Housing Tracker

Quote of the Day

“There is no desperation in the marketplace. That is based on positive, fact-based information.” - Hessam Nadji, the firm’s managing director of research at Marcus & Millichap. (Globe St., May 20th)

Commercial Real Estate and Real Estate Investment Trusts [REITs]

Lincoln Property Buys 700 Acres in Southeast Georgia. “Lincoln Property Co. (LPC) has purchased almost 700 acres abutting Interstate 95 in southeast Georgia where it plans to develop a massive mixed-use project known as Tradewinds… East of the site are the seaside tourist destinations of Sea Island, St. Simons Island and Jekyll Island. Tony Bartlett, a senior VP with LPC: "We believe this Coastal Corridor region will see rapid growth in population, tourism and commerce over the next decade.”LPC is planning roughly 3 million-sf of industrial space, 1 million-sf of commercial space and more than 2,500 residential units.” (CoStar Group, May 20th)

Place Properties Developing Apartments for Military Nationwide. “Place Properties L.P., a privately-held real estate development firm headquartered in Atlanta, announced the opening of its first five off post military housing communities for soldiers, contractors and local civilians. The communities are at Texas' Ft. Hood and Ft. Bliss, Georgia's Ft. Benning and Ft. Stewart, and Ft. Sill in Oklahoma. A sixth community is underway at Ft. Campbell in Kentucky. These new Independence Place communities represent more than $300 million of private investment to develop apartments for soldiers who are obliged to live off post because the on post barracks are full or obsolete.” (Commercial Property News, May 20th)

Bulls vs. Bears: Who Wins? “James A. Stolpestad, managing director at GE Real Estate (GE), New York: “Good, well-maintained properties in good markets will hold their values.” As far as how all of that translates in dealmaking: “The under $10-million [property sale] market is holding up,” Bernard Haddigan, managing director of Marcus & Millichap’s national retail group, said. “Over $10 million is off by upwards of 60% in transaction velocity.” (Globe St., May 20th)

New Developer Signs $1 Billion Deal to Transform West Side Railyards. “Less than two weeks after the collapse of a billion-dollar deal to develop the railyards on Manhattan’s Far West Side... Stephen M. Ross, CEO of Related Companies, signed an agreement Sunday night with the Metropolitan Transportation Authority to develop 12 million-sf of office towers, apartment buildings and parks over the 26-acre railyards, which sit on both sides of 11th Avenue, between 30th-33rd Streets… Mr. Ross essentially agreed to the same tentative $1.054 billion deal that Tishman had signed in March. An elated Mr. Ross: “We knew we had this one opportunity. We weren’t going to start negotiating.” (NY Times, May 20th)

Economic Outlook. “According to our April Senior Loan Officer Opinion Survey on Bank Lending Practices, a large majority of banks, which are the largest provider of commercial mortgages, reported tightening standards on commercial real estate over the preceding three months.2 The issuance of securitized commercial real estate loans, which funds a little more than one-fourth of all outstanding commercial mortgages, has slowed to a trickle. Sales of commercial properties fell sharply in the first quarter, and late last year prices appeared to have begun to decline.” (Forex Hound, May 20th)

UDR Breaks Ground on $1B Mixed-Use Project in Dallas Suburb. “United Dominion Realty Trust (UDR) broke ground this month on Vitruvian Park, a $1 billion multifamily, retail and office development in Addison, TX… The six-phase, 99-acre redevelopment is Addison's first major green initiative. The first phase is designed to include 667 apartment units as well as 82,100-sf of office space with street-level retail, with an estimated completed date of Q1’10. Vitruvian Park will include a total of 5,500 dwelling units and 300,000-sf of office and retail space.” (CoStar Group, May 20th)

Moody's: Commercial Real Estate Prices Slipping. “Moody’s: Prices for commercial real estate slipped more than 2% in March as it became tougher to borrow money to buy property… The Moody's/REAL Commercial Property Price Indices fell 2.3% in March from February, the largest one-month decline since the inception of the index. Prices are still up 0.9% from last March, Moody's said… Prices for retail properties were down the most, while prices for apartments, offices and industrial properties also slipped.” (Forbes, May 19th)

Home Builder To Relocate Offices To New Complex. AZ: “Pulte Homes (PHM) plans to move its Scottsdale offices from the Raintree Corporate Center, 15111 N. Pima Road, to the first phase of the Terra Verde Corporate Campus project at 16767 N. Perimeter Drive. The home builder has signed a lease for more than half of the 173,000-square-foot building and will be the anchor tenant of the first phase, which broke ground last fall. The company plans to move in fall 2009. Plans for the $140 million Terra Verde project call for about 500,000-sf of office space in three buildings.” (AZ Central, May 19th)

CalPERS Misjudges the Landscape. “The California Public Employees' Retirement System, which poured about $1 billion into a troubled real estate deal, is in negotiations to keep a related loan default from turning into a bankruptcy. CalPERS, the nation's biggest public pension fund, and its partners acquired a controlling interest in 15,000 acres of undeveloped land in the Santa Clarita Valley early last year… [for] $2.6 billion. [It] has dropped considerably in value since then… CalPERS and its partners in LandSource Communities Development are in talks… to restructure $1.24B in debt. LandSource received a default notice of default on April 22…. S&P predicted that LandSource would file for bankruptcy this month.” (LA Times, May 19th)

Apollo To Raise $1 Bln European Property Debt Fund. “Apollo Real Estate Advisors said on Monday that it was planning a $1 billion European real estate debt fund after absorbing the team from niche firm Stoneleigh Capital to run its new European property debt finance business. The U.S. private equity group said it was "looking to fill the void left by lenders' retreat" by offering mezzanine credit finance to real estate investors and was eyeing opportunities to buy distressed property debt from banks. Mezzanine debt is often used in funding leveraged buyouts by private equity firms. It ranks below senior debt but above equity.” (Reuters, May 19th)

Hanover Capital Mortgage Holdings Reports Net Loss. “Hanover Capital Mortgage Holdings, Inc., a REIT that invests in subordinate mortgage-backed securities, announced Monday that the company recorded a net loss of $23.3 million, or $2.71/diluted share, for Q1’08. [In Q1’07,] the company had a net income of $0.9M, or $.11/share.Hanover: “Significant changes in the company's financial position are primarily related to the decline in the estimated fair value of its Subordinate MBS portfolio and the reduction in size of its whole-pool Fannie Mae and Freddie Mac mortgage-backed securities portfolio.” Despite experiencing delinquencies on loans, Hanover says its delinquencies are “still significantly below those of Alt-A and subprime collateral.” (Default Servicing News, May 19th)

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