<p>Commercial real estate is turning up…</p>
<p>Loans are becoming available…</p>
<p>This developer I know is buying back some of his properties at 50+% less than the cost of building…but he is getting very positive about things in his space.</p>
<p>Things are not going to boom…no bubble…</p>
<p>Just writing this because I have been kind of gloomy about the economy for awhile but things are getting better… :)</p>
<p>I am that world and in 2012 I will make less money than I did in 2002.</p>
<p>Do you see any improvement from 2010-2011?</p>
<p>Loans are becoming available but be prepared for your documents being flyspecked. I closed an office re-fi deal in November in which they totally nitpicked the SNDAs. The SNDAs? That used to be one of the easiest parts of the loan transaction.</p>
<p>It looks like the lenders are really trying hard to protect themselves…</p>
<p>We see lots of the larger deals in the NW. It has picked up with apts leading the way. Sales of super-prime trophy buildings also have taken off. Cap rates in the 5% range. Anything below that is still tough except apts and owner/user buildings. Many loans that are rolling are still underwater by 20% or more. Still not much CDO type work.</p>
<p>So barrons, what happens when properties are 20% underwater? Do the owners have to put up more capital to refinance?</p>
<p>Ideally yes. Banks can’t usually renew the loans with too high a LTV ratio. When things were really bad they just let it ride as they did not want another property back. Now as things are improving they are getting tougher about putting feet to the fire for more equity or calling the loan and forcing foreclosure. Still case by case. With low rates even though the overall LTV might be off, the cashflow is enough to cover the payments so they can extend the loan another year.</p>
<p>Barrons, thanks.</p>
<p>lots of work out in the business. so lot less foreclosures. we have not seen the same number of residential foreclosure in commercial. i have not heard that ppl have to put in more equity to stay afloat.</p>
<p>in pockets of commercial re, it is very hot, especially in leased national credited tenants arena. vacant buildings are very difficult to sell.</p>
<p>no developers are building condos or town houses…land value is in the tanks. they pay half price for condo mapped land to build apartments. and apartments are hot.</p>
<p>I agree that apartments are hot. Way too hot. My city has started turning down apartment projects. We don’t need to have a city full of apartment complexes just because that is the only financing developers can get.</p>
<p>I teach in three separate medium sized commercial (office) buildings around the Northeast. All have been significantly empty (approx. 1/2) for three years. All are starting to fill up. One is a tenant consolidating and taking the top floor offices including a complete rebuild. The other two are new tenants coming in. FWIW.</p>
<p>^^ Incidentally Jeff from Colliers was the speaker of the IMF brokers meeting last week. He is the expert on office sale/rental/leasing market. One of the most important point he brought up was that for a building owner to bring in a NEW tenant with 5 years of lease, the cost out weight the benefit because the rent is so low. So, unless you are in the office business, comments on new occupancy is just an observation.</p>
<p>In the office market, its definitly a buyers market. Recently our office completed a Class A office building transaction in TX, of the 150,000 SQFT 10 story office building, only the bottom floor is rented. The bank sold the building, just based on the rent, the cost per sqft is less than $20 while the replacement cost exceeded $200…</p>
<p>From what I have observed apartment purchases are hot in West Los Angeles and Santa Monica. Many buyers are coming in with all cash. Lenders are making apartment loans but it takes more work to get approval for an apartment loan versus a single family home. These are already built and occupied buildings.</p>
<p>My DS works in commercial real estate in Palo Alto. He sent us an article early in the week with RE veterans saying this is the best market they’ve seen in 30 years. In that area residential is starting to go crazy too. The recent IPOs are making it boom times in a few towns.</p>
<p>DS says it isn’t spreading across the Bay Area as it has in the past, Facebook chose Menlo Park, next to Palo Alto, when they could have gone to much cheaper nearby towns. The thinking is companies will have fewer employees in the US, so they will concentrate those they have in choice locations.</p>
<p>We joked we would start buying cheap RE, but he says this is the comeback of expensive RE.</p>
<p>I don’t think things are looking up in commercial real estate in Atlanta as it relates to office buildings. Some activity in the hottest part of town, but otherwise, lots of empty office buildings even in major employment centers.</p>
<p>Waverly…does your son think the boom he is seeing in real estate will extend to other parts of the bay area?</p>
<p>Artloversplus…do you ever read “The Space Place” newsletter? It is written by a leasing broker.</p>
<p>And on a slightly different topic…did you ever look at buying a condo in the city…for you or one of your kids?</p>
<p>And… I enjoy reading all the fellow posters’ comments on the re market.</p>
<p>
</p>
<p>Dstark:</p>
<p>We bought our in-town condo in River North, Chicago three years ago this month. Paid substantially less than the original purchasers. We use it 2-3 weekends a month, and lend it out to friends and family. Every time we come we feel that we are on vacation. Tonight we are going to a play at Roosevelt University, and then out to dinner. So many options; so many things to do; such a beautiful city view from our 18th floor. </p>
<p>I’m pretty sure we will loose money when we sell it in three years or so. We worked hard, and continue to do so. This is our reward.</p>
<p>Tsdad, I remember that Chicago is a very nice city. Are you leaving the midwest and Wisconsin in a few years?</p>
<p>I don’t know Chicago that well. I worked a little on S Wacker. You are a little north of S Wacker?</p>
<p>I think I usually stay at the Marriott on East Ontario near Michigan Ave when I go to Chicago…which is east and a little north of your condo?</p>
<p>If yes…your condo is in a very nice area.</p>
<p>I try not to go too often to Chicago because some of the people I work with in Chicago are psycho. :)</p>
<p>I was talkimg to a leasing broker yesterday and he said something that surprised me.</p>
<p>In SF…office rents are the same as they were 30 years ago.</p>
<p>A few things come to my mind immediately…</p>
<p>Companies are not really more profitable than they were 30 years ago…</p>
<p>If interest rates did not plummet over the last 30 years…where would office building values be?</p>
<p>Why do so many investors invest in office buildings?
Tax breaks? Leverage?</p>
<p>What happens when interest rates go up? Some day…out in the future…they will…and then cap rates are going to rise…</p>