homesmillbrae.com » Commercial Sector

142 big O.C. buildings are ‘distressed’

Mon, 13 Feb 2012 01:28:25 +0000

Paul Habibi is a lecturer at UCLA’s Ziman Center For Real Estate as well as principal and co-founder of Habibi Properties LLC, one of the largest private apartment owners in the Los Angeles area. We asked him to share his insights about what’s happening with the commercial real estate loan crisis …

Us: What’s the status of the commercial mortgage crisis? Are things getting better?

Paul: There are roughly $1.4 trillion of loans coming due by 2014, nearly half of which are currently under water. I’d estimate that when all the dust settles, $100-$150 billion will go back to lenders or get sold at a loss. I’m certainly on the bullish side, but the reality is that low interest rates and improving fundamentals have averted the commercial real estate crisis that many thought was imminent.

Us: Will lenders be nicer to commercial borrowers than to homeowners in working out loan modifications, extensions, etc?

Paul: Thus far, the success rate for workouts in the commercial sector far exceeds that of the residential sector. However, there isn’t nearly as much political pressure to help out commercial borrowers. As much as it is criticized as a non-strategy, extend and pretend worked. It bought borrowers time for the market to correct and for banks to avoid the costs and ripple effect of massive defaults.

Us: Are we past the peak? How much longer until the commercial real estate market is back on its feet?

Paul: With fundamentals on the upswing, we are well past the peak of distress. While the popular rhetoric will have you believe the recovery is sluggish, economic output today is ahead of pre-recession levels and corporate profits are very healthy. As it pertains to real estate, just the realm of real estate, concerns about the unemployment rate are overblown – it’s absolute job growth (size of the pie) that fills buildings and increases rents.

Us: How do commercial defaults in Orange County compare to the national market?

Paul: In Orange County, there is currently $2.3 billion of distressed across 142 properties, and nationally there is $170 billion across 12,243 properties.

While Orange Country commercial real estate experienced a tough time in the aftermath of the housing bubble, it is also healing fast. In the past year, looking at changes in commercial occupancy across the top 20 national markets, Orange County placed second only behind the San Francisco Bay Area.

Us: What’s the approximate value of commercial real estate defaults since the market crash in 2008?

Paul: Since 2008, we have seen over $340 billion worth of distress hit the market. Most of these loans are in various stages of default, but the resolution of each specific situation is what matters most.

To date over $40 billion has been taken back by lenders and classified as REO. Approximately $130 billion remains troubled and outstanding, and the balance of $170 billion has either been restructured or resolved.

Us: How much have lenders lost in the commercial real estate market collapse?

Paul: My estimates are somewhere between $70-80 billion. This number would be significantly higher in absence of the various cushions provided by quantitative easing, loan extensions and changes in mark-to-market accounting standards.

Article source: http://www.ocregister.com/articles/big-339920-ucla-buildings.html

Fewer vacant office spaces

Fri, 28 Oct 2011 08:27:17 +0000

By Mark Puente, Times Staff Writer

In Print: Friday, October 28, 2011

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The Tampa Bay commercial real estate market is no longer in the basement but remains far from the penthouse.

A bright spot in a national report released this week shows the commercial sector has improved in the bay area and other parts of Florida amid the languishing economy and lackluster job growth.

The report ranked the bay area as the 33rd best of 51 metro areas for investment in commercial real estate. Overall, the bay area improved to fair this year from poor last year, according to the “Emerging Trends in Real Estate” report by the nonprofit Urban Land Institute and accounting firm PricewaterhouseCoopers.

“It shows we’re moving in the right direction,” said Ray Sandelli, head of the Tampa office of the CB Richard Ellis commercial real estate firm. “It will also challenge us to improve.”

Experts attribute the improvement locally to the commercial market not being overbuilt during the boom, and real estate prices correcting downward to match today’s market.

Statewide, Miami ranked 17th and recorded the biggest gains among major markets for investment opportunities. Foreign cash is flowing into the city because of political instability in Latin America, the report said. Orlando ranked 29th; Jacksonville ranked 40th. Detroit, Cleveland and Las Vegas were at the bottom.

Apartments are the safest place to park cash here and across the country, the report said. Nationally, brokers and investors of industrial properties, shopping centers, hotels and office buildings face a “slowing, grind-it-out recovery” in 2012.

Investment cash is gushing toward the 24-hour global gateways: Washington, D.C., San Francisco, New York City, Boston and Seattle. Money is also following young professionals to pedestrian-friendly cities such as Portland, Ore., Seattle and Austin, Texas.

Not all experts buy into the report.

Larry Richey, senior managing director of Cushman Wakefield in Tampa, said the bay area is doing better and will never be near the top when compared to big metro areas on the East Coast and West Coast. But it would rank high among similarly sized metro areas.

Vacancy rates have dropped in office and industrial buildings as companies move to bigger offices or relocate from outside the region, he said. He pointed to Time Warner’s recent pledge to create 500 jobs in Hillsborough County and to spend $5 million on new facilities over the next five years.

The report, Richey said, doesn’t reflect all the gains made in 2011.

“It’s the most improvement we’ve seen in the last five years,” he said.

[Last modified: Oct 27, 2011 09:54 PM]

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Article source: http://www.tampabay.com/news/business/realestate/tampa-bays-commercial-real-estate-sector-rebounds-report-says/1198914