A recent study revealed that in a vast majority of the biggest cities in the United States, full-time salaries of young women are on average 8% higher than men in their peer group. Unfortunately, this reverse gender gap applies only to unmarried, childless women under 30, but the news is promising, as it attributes the earnings reversal overwhelmingly to one factor: education.

As president of CREW Network (http://www.crewnetwork.org/), an organization that aims to advance the success of women in the field of commercial real estate, I’m encouraged by the findings and the fact that a growing knowledge-based economy is feeding the rise in female wages.  CREW Network offers a number of professional development opportunities, as well as a university program (UCREW) that introduces and nurtures young women interested in entering the male-dominated profession of commercial real estate.

At the 2010 CREW Network Convention and Marketplace being held next month, we will be announcing our most recent survey results, which also offer encouraging data about women’s salaries. As women continue to rise in the ranks, I am proud to be a part of an association that helps facilitate their growth and success. I hope to see you in San Francisco and share all of our exciting news!

Kristin Blount is the 2010 President of CREW Network and Senior Vice President, Brokerage, at Colliers, Meredith & Grew in Boston

For more information about CREW Network, visit http://www.crewnetwork.org

This headline is being broadcast throughout the real estate industry and is stirring up optimism that more liquidity is returning to the marketplace.

The new loans are more conservative and have some nuances reflecting the decrease in risk tolerance of both the originators and the purchasers of the paper. The originator doesn’t want to be stuck with the paper and the purchaser wants to make sure the value or rating of the paper stays intact.

To identify the major differences in the new CMBS loans verses those offered during the credit boom, I’ve summarized a brief comparison below:

Present/Former

 Amortization: Required/Interest Only Common

Loan to Value: 65-70%/80%

DCR: 1.30X/1.20X

Debt Yield: 12%/None

Rate: 6.25%/5%-6%

Lock Box: Required/Negotiable

Warm Body: Required/Negotiable

Pool Size:$500MM/$2BB+

Debt Yield – The term debt yield means dividing net cash flow (the cash flow after reserves for tenant improvements, leasing commissions and reserves) by 12% and you arrive at your maximum loan amount.

Lock Box – if the debt coverage ratio drops below 1.10X then the lender collects your rents directly.

Reviewing the contrasts between the terms offered during the former and present periods it’s logical to see the peak versus trough correlation. Logic indicates as securitizations increase and competition arises for the new CMBS paper that gradually the present platform will evolve to look closer to the former. The question that remains is when?

As more players have entered the market, we have seen firms start hiring again as well as a break in pricing. From early 2010 to today we’ve seen CMBS rates drop from 7% to 6.25%. That’s good news for the capital markets and reflects a trend that demand exists for the paper.

If you’re contemplating a CMBS loan, go in with realistic expectations including the “present” terms outlined above, expecting the lender to mark your rents market as well as applying a market vacancy to your project. Additionally, like portfolio lenders, CMBS lenders will be less aggressive in markets that have a greater percentage of defaulting CMBS loans.

James DuMars
Managing Director
NorthMarq Capital Phoenix Office

2929 East Camelback Road, Suite 226
Phoenix, AZ 85016

(602) 508-2206 Direct
(602) 714-4202 Cell
(602) 954-6168 Fax

jdumars@northmarq.com
www.northmarq.com

It is a cold, windy and rainy day in Seattle. In looking for signs of spring, they are evident – there are tulips, sunbreaks, and cherry blossoms, and in being in our South Lake Union neighborhood, there is something bigger happening here – something that is about to transform this part of the city.

Amazon in moving in to our neighborhood – all 6,000+ of them. There are 11 buildings in various stages of completion, construction, and planning, developed by Vulcan Real Estate and Schnitzer West.  Today the first 3-building block is complete. It is the new heart, the epicenter of Amazon – and the most visible mark of that is now on the building. Amazon has started the beginning stage of their move in. The lounge furniture is in place, the grand fireplace is lit (a perfect day for that), the tables and lighting are in the cafe, and the doors are on the ceiling (Amazon likes their doors).

Amazon headquarters - South Lake Union, Seattle - NBBJ

In walking the neighborhood today, there are cranes, lifts, hardhats, orange vests - a bustling energy is everywhere. The larger vision here is for a newly enhanced urban environment between the downtown core and Lake Union. A desirable place for innovative businesses, urban professionals to live and to work, new restaurants, and retail – snowboards, home design, the REI flagship, and much yet to be realized. The streetcar running between downtown and Lake Union is about to increase it’s ridership.

A few years back when we designed our own headquarters along with the mixed use block at Alley 24 for Vulcan Development, this neighborhood was on the quiet fringe to the city. Some of the other developments that have been sitting vacant have recently announced new lease tenants. Still, there are many empty or under-utilized buildings – old warehouses, printing plants, manufacturing facilities, and even some single family homes in need of significant care or re-development.

Central plaza, Amazon headquarters - South Lake Union, Seattle - NBBJ

This is a great time to bring new energy into the city, and for Amazon to become part of the city again, with a great impact. We are in for a powerful transformation – a new epicenter in our rich and diverse city.

It’s definitely the first day of spring in our neighborhood.

It seems like we enjoy clichés each cycle to try and generalize the norm. For example, if “extend and pretend” applies to banks and “amend to the end” applies to CMBS then “unwilling to bend” may be the next catch phrase to describe life companies when it comes to work-outs and maturity extensions.

Why the lack of flexibility? The lack of flexibility on behalf of some life companies could rest with their MEAF.

MEAF – Mortgage Experience Adjustment Factor
The purpose of MEAF is to help calculate the appropriate amount of capital an insurer should hold (think cash reserves) based on the composition of the insurer’s commercial mortgage portfolio (think portfolio performance).

How MEAF may influence a life company at extension time or at loan modification request: I’ve spoken to some my life company contacts about MEAF. They report that when it comes to MEAF their portfolios are measured against their peers (all other life companies) and even one or two defaults can have a negative impact on their standing against their peers resulting in an increase in their reserves. So consider the state of the commercial mortgage market. CMBS and banks are experiencing massive defaults but insurance companies, who as a whole were markedly less aggressive during the credit boom, have experienced far fewer defaults. However, since their mortgage experience (the insurance companies) is measured against their peers alone, a couple of work-outs/defaults can cause them to have to increase their Risk Based Capital significantly.

One insurer tells me they would rather foreclose and sell the asset versus restructuring it and have it negatively affect their MEAF until the loan pays off in a few years. With foreclosure they get rid of the loan, sell the property and the problem is solved. I’ve witnessed this firsthand with a number of borrowers whose loans matured in the past 12 months. One particular life company asked for a cash infusion and personal guaranty. When the borrower was unable to provide the necessary capital infusion the life company requested that a receiver be put in place and began foreclosure proceedings.

In another instance, a borrower had a Class-A multifamily loan maturing. The borrower was unable to secure a new loan to take out the life company and was reluctant to sell in the soft market. The life company sighted MEAF as a motivating factor to foreclose and resell the property versus modifying it and living with a negative mark against their portfolio performance during the duration the loan continued to be on their books. They made it clear that it affects their entire portfolio rating to have a problem loan. Once they rework the loan it hangs over them until it eventually pays off. Understand that a below normal MEAF can lead to increased reserves against an insurance company’s entire mortgage portfolio. Considering this, one can see the reluctance on behalf of the insurers to offer any extensions or modifications without right sizing the loan.

James DuMars

Managing Director

NorthMarq Capital Phoenix Office

(602) 508-2206 Direct

(602) 714-4202 Cell

 jdumars@northmarq.com

www.northmarq.com

For those strong national and international brands that leaned out their operations, shifted merchandising to address new consumer attitudes (demanding both value and luxury), and for those who held back expansion and renovation plans during the steep slide of the past 18 months, 2010 is looking brighter.

In working with leaders of brands across fashion, food, and service retail, I hear some common themes. Survivors feel stronger and fitter than they did going into the recession, and more confident about their ability to change and move into the future. They are more in tune and focused on the behavior and psyche of their customers. They have adopted new technologies for more streamlined operations, and are focusing investment on enhanced customer experience and competitive advantage.

15th Avenue Coffee & Tea - Starbucks local coffee shop concept

Store numbers and size are down – and look for this to be a long term trend. Retailers are expecting higher productivity for every store, and will move quickly to close an underperforming location. Larger stores are looking at smaller formats, small stores are looking at densifying offerings. All retailers are integrating online shopping with in-store experience – it’s not one or the other, it’s both, and they are seeking the best integration strategies in providing all options, seamlessly, in responding to new customer expectations.

Anthropologie - localized design, multilayered merchandising concepts

The bar has lowered on barriers to sale – if a customer doesn’t believe in the value of offering, if they are inconvenienced, if the offering doesn’t fit their requirements precisely, they are willing to wait – or find it elsewhere. Loyalty is down, and customer loyalty programs are being enriched to compensate.

The challenges over the past year have strengthened those that are willing to respond without hesitation, for those that understand that today and the future require continual adaptation, for those that take on these challenges as opportunities to grow stronger.

As banks and special servicers continue to take charge of distressed assets ($200 billion at the end of 2009 reported by Real Capital Analytics), they have three primary options to recapture at least some of the value:  Foreclose on the asset, complete a short sale or sell the non-performing note. The first two options can be both very time consuming and expensive or require the non performing borrower’s cooperation, neither which may be appealing or possible. As a result, we expect Note Sales will be an emerging trend in 2010 and into 2011.

For states like Connecticut, New York and New Jersey, where “foreclosure proceedings” are driven by the court process, the process can take 12-24 months. A Note Sale, meanwhile, can be accomplished within 60 days, alleviating the special servicer of a non-performing asset and placing it in the entrepreneurial hands of note holders which are not restricted by regulations that govern special servicers. With approximately $618 billion (based on CBRE-EA’s  analysis of Mortgage Bankers Association’s annual survey) of commercial and multifamily  loans coming due between 2nd half of 2009 and 2011, there likely will be ample opportunity for investors to purchase these notes.

By way of example, our recent marketing of a note sale secured approximately 40 offers, proving there is ample capital looking for loans. This is especially true when the Broker can show the lull in the real estate market is only temporary and not due to long term structural weaknesses.

 

Each year, the U.S. Green Building Council hosts its Greenbuild Conference & Expo, the world’s largest green building conference.  Greenbuild 2009 is heading to Phoenix.  The American Southwest is a region with unique environmental and social challenges and opportunities, and the imperative is clear: green building can and must come home to all people, boosting the quality of life on main streets across the country and the world.  Every year, Greenbuild attracts leading architects, building owners, developers, contractors, educators, students, service providers and manufacturers, providing education and networking opportunities for everyone connected to the building industry.

 

With its humble beginnings of 4,100 attendees in Austin, Texas seven years ago, Greenbuild 2009, held November 11-13, 2009 in Phoenix, AZ is expected to attract 25,000 people and boasts over 100 educational sessions and 1,800 exhibit booths on the tradeshow floor. Former Vice President Al Gore will be the keynote speaker at the Opening Keynote & Celebration, followed by a performance by Grammy Award winning musician and environmental activist Sheryl Crow.  While Greenbuild is known to engage the most progressive discussions of the day, it is good to note that Greenbuild is valuable for everyone, whether you’re a green guru or not. There are educational sessions on topics ranging from green leases and valuation to the business case and technical implementation methods of LEED for Existing Buildings.

 

With the economic downturn forcing more organizations to focus on the existing building stock, USGBC has seized the opportunity to deliver a host of existing building-specific educational sessions.  Sessions include:

 

“How the LEED for Existing Buildings Certification Process Transforms Your Operations and Engages People”

“The Value of ENERGY STAR®”

“Economics of Corporate Sustainability”

“Greenwashed or Green … Single or Triple Bottom Line?”

“The Green Lease: A Two-Way Street”

“A Revolution in Existing Buildings – LEED for Existing Buildings: Operations and Maintenance”

“Existing Buildings: Opportunities for Development”

“High Profile Green Operations – Marquee LEED for Existing Building Projects”


Greenbuild is a forum to engage professionals from various industries and sectors and listen to peers talk about their experiences The many networking and educational opportunities, along with a first-ever Greenbuild job fair, are among the top reasons to attend Greenbuild,where you can listen to otherswhile making connections with likeminded  businesses.  Greenbuild is where the industry collaborates on sustainability, finding ways to save money, improve performance and reduce environmental impact.

More information on Greenbuild is available at www.greenbuildexpo.organd I hope to see you in Phoenix! 

 

President RDM

In Real Estate no square foot is the same. When it comes to commercial property, everyone measures space differently, and depending on the measurement method used the same property will have different square footage calculations. RDM, the leading provider of building measurement solutions for over 25 years, recently has written a white paper demystifying the national building measurement methods.

It is vital for the commercial real estate industry to have accurate property measurements in order to ensure maximization of revenues, especially in the current uncertain market. RDM’s White Paper aims to provide the reader with valuable information on building measurement methods, such as BOMA, Modified BOMA, and REBNY, and where each is to be used and why. It discusses trends in distinct markets in the United States and the importance of having the appropriate property measurements portfolio-wide.

The more informed you are about the methods of building measurement the more aware you are of how to maximize your gains. 

 

 

It is February 17th, and we are more than half way through the “Winter of our Real Estate Indecision”.  Two or three warmer days teased us earlier this month, only to hear that frigid conditions will be returning to Chicago this week.  However, we have learned that spring does return, and that is what motivates all of us to anticipate baseball, outdoor dining, golf and hot August nights.

 

  

Wow, does it not read like a page from the Wall Street Journal, or a current economic overview?  It appears that every piece of good economic news is “blasted” by five pieces sighting layoffs, public companies missing earnings expectations, or one more company filing for bankruptcy protection. 

  

However, we are seeing encouraging signs such as compromise on the passage of the government’s stimulus package, large tenants making commitments to existing projects in the central business district, and at least one company, Prologis, being reported to having received as many as eighty offers on pieces of the 33.23 million square feet of industrial space that they are marketing for sale nationwide.

  

I try to read only good news, be realistic of the challenges, but spend more of my time strategizing with colleagues on how best to continue to motivate my young professionals, add value to clients and celebrate successes, rather than dwell on the negativity.

  

Indecision is not an inherent trait that will last – business leaders have thankfully learned from the past that this is a very good time to reshape their workforce, identify talent, reduce expenditures, efficiently plan their space to be more cost effective, and recruit talent that has not been available in the last decade.

  

Real estate is still an asset that can be valued.  It has a determinable income stream that can be valued.  Once the future expectations for rent growth are clearly re-established then buildings will be priced accordingly, and product will test the marketplace.  Those values will be very different than prices paid in 2006 and early 2007 but new pricing with clear underwriting will start to bring about re-establishing confidence from debt sources to lend once again.

  

Bottom line, it is a great time to strategically plan, a great time to seize opportunity during this malaise of indecision, and in our industry a great time to add value to each of your clients in their real estate decision making process.

 

Perhaps the biggest challenge the Commercial Real Estate industry faces right now is the lack of capital.  All those billions of dollars pumped into the system over the last 10 years by CMBS have evaporated.  In many ways, there was too much money.  That led to heated competition among lenders to “win” deals by increasing loan-to-value ratios and reducing underwriting requirements.  It also was a huge factor in the rapidly increasing prices paid for real estate as low interest rates allowed cap rate compression.  I don’t have a crystal ball.  I have more questions than answers.  But perhaps some of the readers can chime in this week.

 

Where is the money going to come from?  Will CMBS ever be back?  If so, how will it be structured?  I have heard talk about guarantees, either by the government or private sector entities, of triple-A traunches in order to restart the engine.  Does that make sense?  Where are these guarantors going to get the kind of liquidity for those guarantees to be worth anything?  If it is government, what is in it for the government?  What’s in it for the taxpayer?  What kind of oversight is needed?  How will Rating Agencies get paid? 

 

Let’s hear from the readers this week, even if it is just to ask more questions.

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