Pain Persists, But Worst May Be Over for Nation's Industrial Real Estate Market

Tenants Have Shed Nearly 200 Million Square Feet of Warehouse, Factory and Flex Space Over the Past Five Quarters

The vacancy rate for U.S. industrial space eclipsed 10% and negative absorption topped 44 million square feet in the third quarter of this year as companies continued to shed warehouse, flex and manufacturing space in the face of continuing job losses.

But the most precipitous of the occupancy losses may be over, according to CoStar Group's Third Quarter 2009 Industrial Review. Looking ahead to next year, CoStar forecasts that, although the national industrial vacancy will rise as high at 11%, the amount of net vacant space on the market should begin to taper off over the next two quarters.

The vacancy rate jumped to 10.2% in the third quarter -- a 180-basis-point increase from the 8.4% reported during the same quarter last year and up from 9.8% at midyear 2009, according to the third-quarter industrial review delivered by Jay Spivey, CoStar's senior director of research and analytics, in an Oct. 20 webinar. The additional 44.1 million square feet of negative net absorption brings the year-to-date total to 147 million.

CoStar and economists at Property Portfolio and Research, Inc. (PPR), the global real estate analysis firm acquired by CoStar in July, project another two quarters of continued but moderating levels of negative absorption. By mid-2010, (barring a double-dip recession) the industrial market is expected to slowly resume leasing activity generating fairly robust quarterly positive absorption through 2013.

With new construction on industrial property largely in check, CoStar forecasts that the national vacancy rate should peak at around 11% next year, though rents are not expected to start climbing again until 2012-13. Net operating income (NOI) growth for industrial building owners, which flattened last year and had fallen nearly 6% as of midyear 2009, will continue to decline through 2011.

"The bad news is, we've got a little bit more to come in terms of rising vacancies. The good news is, we believe most of the negative absorption is behind us," Spivey said.

Between mid-2001 and mid-2002 following the collapse of e-commerce and other dot-com companies, which especially affected office buildings, the industrial market recorded 70 million square feet of negative absorption during four quarters, with no more than 30 million square feet given back in the worst quarter. The current downturn is clearly much worse by comparison, Spivey observed.

"This [recession], we've had five quarters of negative absorption totaling 194 million square feet, and we're probably not completely done yet," Spivey said.

Economy: Encouraging Signs, But What About the Jobs?

The general economy, now said to be in a state of torpid recovery, is also providing some encouraging signs. The nation's gross domestic product (GDP) fell a lower-than-expected 0.7 in the second quarter and may finally turn positive when third-quarter numbers are released this week. Imports and exports are have increased in recent months, though they're still down from their pre-recession highs by 33% and 26%, respectively.

The Federal Reserve's Industrial Production Index, a manufacturing indicator, gained slightly in August, and the Institute of Supply Management (ISM) purchasing managers index moved above 50 for the second consecutive month in September. Any reading above 50 indicates growth in manufacturing, while below 50 is contraction.

However, the pain for building owners is deep-seated. Owners of transactions negotiated at the height of the market in mid-2007 will see their properties' equity and value, which has been gradually eroding for two years, fall below the balances on their loans beginning early next year, with values continuing to trough through 2011, Spivey said.

And of course, the big negative and question mark remains unemployment. Though it may be ending or even over, the recession is now officially the worst in terms of job losses since World War II, and jobs are continuing to be shed. Labor market recovery will be slow and irregular across the country, Spivey said, with the ripple effect from job losses causing more negative absorption, higher vacancies, depressed rents and shrinking net operating income.


Development Still Idled

Quite simply, 2009 will likely be the slowest year of the modern era for new development. But that dubious record will be short-lived, as 2010 will probably be slower, according to CoStar projections.

Of the meager construction that's under way or in the pipeline, more than half is in four markets, Houston (3.3 million square feet) Philly (3.2 million SF) Dallas/Fort Worth (2 million SF) and Chicago (1.5 million SF), Spivey said. Developers have stopped development, especially on spec, and restricted their construction to previously committed projects or build-to-suit projects for specific buyers.


For example, take a look at the Inland Empire in inland Southern California to see how dramatically industrial development has fallen. Riverside and San Bernardino counties had 23.5 million square feet under construction in third-quarter 2007 and 10.8 million square feet a year ago in third-quarter 2008.

The Inland Empire's third-quarter 2009 total: a scant 400,000 square feet under construction. Likewise, Atlanta, which had 17 million square feet under development in 2005 and 5 million as recently as second quarter of last year, now has 24,000 SF.

Leasing Down, Vacancy Up

Even in the construction-constrained market, 44.1 million square feet of negative net absorption pushed up industrial vacancy rates to 10.2% in the quarter, well past the highest vacancy of the dot-com era of 9.6%. The upward spike in the vacancy curve is pretty steep and not likely to turn around in the next couple of quarters, Spivey said.

Overall gross leasing activity is down sharply year over year, 287 million square feet through Sept. 30 versus 367 million SF during the same period in 2008. That said, gross leasing hasn't fallen at nearly the volume of the beleaguered office market, where landlords have been slower to release empty space back onto the market.

Houston remains the sole major U.S. market to post positive industrial absorption at just under 1 million SF, according to CoStar data. The bottom 5 markets include Chicago (negative-13.6 million SF), the San Francisco Bay Area (-12.3) Los Angeles (-11.5) South Florida (-9.5 million) and Philadelphia (-7.8).

Among the 20 largest industrial markets, Long Island, NY, had the lowest vacancy rate in the country at 4.3%, followed by Los Angeles (4.9%), Orange County, CA (6.6%), Milwaukee (6.7%) Houston (6.9%). Markets with the highest average rates are Detroit (13.5%), previously fast-growing markets since as Atlanta and the Inland Empire (both 12.7%), Dallas-Fort Worth (12.1%), Boston (12%) and Chicago (11.8%). South Florida had the sharpest year-over-year increase in vacancies at 3.3%, followed by Dallas at 2.6%.

Investment Market: Waiting For the Thaw

Properties are remaining on the market for longer and the number of properties being taken off the market due to lack of buyers is rising, Spivey said. Only owner-users have been net buyers of industrial real estate in 2009, with private companies and REITs disposing of property and private equity and institutions staying mostly on the sidelines, neither buying nor selling.

Industrial cap rates leveled off in the third quarter and are showing signs of a slight decrease in the current quarter, but remain up 35% from their low of 6.2% in 2007 following several years of steady compression. However, they're hovering right around the long-term average of 8.5%

Per-square-foot prices rose 113%, an average of 6.4% per year, between 1995 and 2008.Since third-quarter 2007, like virtually all commercial real estate sectors, they've fallen 23%. Still, industrial prices remain above their historical average since 1995 and are faring better than office and retail prices, which are down more than 50%. The exception of flex industrial, where prices are down 57% from their highs and well below their historical average.

Overall industrial prices are down across the board in 2009 compared with the previous year, with the exception of Houston, which has seen an 11.8% increase. The biggest price declines are in Philadelphia, minus-36.2%, the Bay Area (-35.8%) Atlanta (-29.7%) Los Angeles (-23.1%) and Chicago (-22.6%).

The number of industrial sale transactions is down 64% and the dollar volumes are down 81%, according to CoStar. Smaller deals are suffering less than larger transactions: Sales of less than $5 million are down 60% while sales of over $20 million, hindered by lack of credit, are down 90%.

In individual markets, Chicago has seen $1.33 billion in industrial property change hands, followed by Los Angeles, $743 million, Northern New Jersey, $589 million, Atlanta ($515 million) and the Bay Area ($504 million).

By Randyl Drummer

Federal Regulators Reported Close to Issuing Guidelines for Commercial Mortgage Modifications

On Wednesday, October 14, 2009, FDIC Chair Sheila Bair testified with others from the banking industry at a hearing of the Senate Banking Subcommittee on Financial Institutions. At the hearing, Bair stated that regulators are close to issuing new guidance for banks to use in modifying troubled commercial real estate (CRE) loans. Workouts for these loans, said Bair, are often in the best interest of all parties involved during tough economic periods. The forthcoming guidance will reflect this, and is intended to give banks the necessary resources to restructure weak credit relationships and manage real estate holdings in an organized way. At the hearing, Bair, along with several other witnesses, expressed concern over the state of the CRE market. Indeed, Bair cited CRE loans as "the most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters."
Read the testimony

Jeff Lischer 202-383-1117, Daniel Blair 202-383-1089

Hotels: Don't Buy Them Now, But Start Looking

While Room Revenues and Occupancies Decline, Industry Sees a Coming Pipeline of Heavily Funded Properties in Need of an Exit

While it might seem paradoxical to talk about hotel acquisitions at this point when the industry is in the tank and sinking, that's just what the major hotel chains are doing. Not only are they talking about it, at least two in the past week have filed registration papers with the Securities & Exchange Commission for plans to raise acquisition money.

Hyatt Hotels Corp. in Chicago filed revised paperwork for a $1.1 billion initial public offering. And while almost all of the money raised will go to selling stockholders and not the company, Hyatt could come up with money for acquisitions if underwriters exercise their option to purchase additional shares.

Also, DiamondRock Hospitality Co. in Bethesda, MD, filed paperwork for a $75 million follow-on stock offering, the proceeds of which could be used to add on to its portfolio of 20 premium hotels and resorts with 9,600 guestrooms.

"Let's not kid ourselves," Gregory Marcus, president and CEO of The Marcus Group, a theater and hotel chain operator based in Milwaukee, told investment analysts at his most recent quarterly conference call. "This is a tough time to be in the lodging business."

Marcus Corp. is experiencing the same problems as the rest of the industry: reduced and falling revenues per available room with the group business segment being the most challenged; and reduced and falling occupancies, particularly at the perceived luxury end of the hotel spectrum.

Still, with that in mind, Marcus added: "We certainly are encouraged by some of the recent economic news that suggests that better times lie ahead. We feel we are starting to gain some traction from the individual business traveler, although the booking window remains very short."

Host Hotels and Resorts Inc. noted similar positive trends in its earnings call this past week.

"While overall demand continues to be weak compared to pre-downturn levels and this weakness is translating into much softer room rates across all segments, we did see several positive trends develop this quarter," said W. Edward Walter, president and CEO of Host Hotels. "Starting with our transient business, for the first time in seven quarters we did not experience a significant decline in transient room nights as the number of room nights sold this quarter matched the prior-year total. Demand in our corporate and special corporate segments fell by just 10% which was the lowest decline in the last five quarters."

What follows are pertinent comments by the CEOs of Host Hotels, Marriott International Inc. and DiamondRock Hospitality during their earnings conference calls this past week about the current and short-term hotel investment market.

Host Hotels Investment Outlook

"On the investment front there are a few signs of [evolving] markets as publicity around real and potential foreclosures continues to grow. As of yet there is little on the market that we find tempting but we continue to monitor activity and we expect to see deal flow improve in 2010 as the combination of lending debt maturities and depressed operating results create more motivated sellers or inadvertent owners," Walter said. "In fact, looking forward through 2014, there is over $30 billion of hotel CMBS debt that is coming due and although difficult to precisely calculate, we think there is over $100 billion of hotel, bank and [life insurance] company debt coming due during that time period."

"Given the reductions in cash flow the industry has experienced and the prevalence of higher initial leverage levels on many of these loans, we would expect we would see additional assets begin to enter the market over the course of next year and into 2011," he continued. "We intend to be opportunistic as market conditions evolve and are optimistic about the future prospects in this arena."

That doesn't mean that Host Hotels would necessarily be acquiring distressed properties, Walter added, saying it is not likely they would be picking up properties with negative cash flow.

"If there was a situation with mismanagement or the opportunity to change brands, something like that, that might create a situation where we would make that type of an acquisition," he said.

Walter said they would be looking at properties that would offer a return somewhere between 11% to 13% on an unleveraged IRR basis.

"I think for us we have typically not bought properties with property specific debt as part of the financing package. We typically have done our acquisitions on an all-cash basis and then figured out the leverage, either using corporate debt or in some cases secured debt," Walter said.

As for pricing, it is hard to discern where property values are right now, Walter added. Effective cap rates on properties that Host Hotels has sold this past year were in the 6% to 6.5% range. Thus, he said, they would be even lower at the higher-end properties where the damage has been greater.

"The other thing I would add by the way is that while it is sort of exciting to talk about distressed acquisitions and everything else, the reality is there will be other properties that will come to market outside of just that environment," Walter said. "You are still going to see some acquisitions and dispositions that are happening in some ways for the same reasons ours were. We were not a distressed seller. We did not need the capital but what we were making is a judgment that in the long run those assets did not belong in our portfolio and we saw a better use for that capital. I think you will also see that happening with other people who are transitioning their business in some fashion and may see a better place to invest capital in which case they are a seller even if they are not under distress."

Marriott Investment Outlook

Arne M. Sorenson, president and chief operating officer of Marriott International, said the hotelier started to experience improved occupancy in the third quarter. However, new hotel supply expected in 2010 will still provide headwinds against near-term improvement in business fundamentals, especially in the upscale segment.

Sorenson said Marriott is monitoring when and how investment transaction volume will start to step up.

"It has not been significant to date. There are obviously a significant number of hotels out there of all varieties that have debt loads which put some pressure on their structure," Sorenson said. "In the world we're in and in which banks are still wrestling with their balance sheet and also thinking about whether or not this is the right time to try and sell an asset, right now they're probably generally kicking the can down the street and not forcing transactions to happen."

"I think as we get closer to maturity of debt or we get closer towards an environment in which there are buyers out there with pricing that seems to make sense, we could well see transaction volume step up," she added.

"There is a lot of equity out there ready to do these deals, a lot of our good partners are out there ready to do these deals," Sorenson said. "Our druthers, of course, would be to do the deals with our partners and take management or franchise contracts along the lines of our model, but still participate actively in converting hotels to our system. And we could also look at doing some of those deals on our own. If we did, it would be based on valuations and I have a strong confidence that we would be able to turn around and sell those assets in the relatively near term and retain the management contracts going forward."

DiamondRock Hospitality Investment Outlook

Mark Brugger, CEO of DiamondRock, said his company is looking forward to the coming acquisition environment.

"The lethal combination of dramatic declines in hotel cash flows and the use of excessive leverage during the last peak will inevitably lead to good acquisition opportunities," Brugger said. "Just looking at hotel CMBS debt alone, nearly $30 billion of hotel CMBS debt is maturing through 2012 and about $8 billion in total is already unable to meet debt service. The open question remains, just when will these opportunities ripen?"

Brugger said it’s too early to call it a buyer's market just yet.

"Obviously people are trying to call the time," he said. "I think some of it is just world perspective how optimistic people are about the future deals versus what they may have in hand today. We are not seeing a tremendous volume of deals coming through our doors at the moment."

Of the deals coming through the door, they are "coming in two flavors," he said.

"First," Brugger said, "are hotels with negative operating cash flow where the banks are kind of forced to take them. And you will see those more in the hardest hit markets like Hawaii and San Francisco. Some of those deals are difficult to deal with a public company with a negative cash flow, unless there are really compelling valuations. So we will see some more of those deals and we’ve seen those increase in volume over the last couple months."

"The second type of deals that we are starting to see are the ones in markets that haven’t fallen this far, markets like Washington, D.C., where there still might be some equity left with some of the private equity players, but they have a loan that matures in the next year or two," Brugger added. "Those are probably more interesting for the public companies like us as early deals."

By Mark Heschmeyer
October 21, 2009

Global Investors Following Decline in U.S. Property Values with Growing Interest

While there has been a noteworthy decrease in the amount of cross-border real estate investment in the Americas since the beginning of the economic crisis, new activity is springing optimism that foreign investors are increasing their interest and preparing to re-enter the Americas next year, according to Jones Lang LaSalle's International Capital Group at a presentation this past at the Expo Real show in Munich, Germany.

For the first half of 2009, global investment transaction volumes netted just $76 billion, according to JLL. The United States experienced the largest decline-falling by 77% year-over-year. Japan surpassed the United States and United Kingdom as the most active investor region with $15 billion in transactions in the first half of 2009. The United States was a close second at $14 billion, followed by the United Kingdom with $11 billion.

But the U.S. situation may be improving based on recent news and deals.

China Investment Corp., a $200 billion sovereign fund based in Beijing, last month agreed to invest up to $1 billion with Los Angeles-based private equity fund Oaktree Capital to buy distressed U.S. assets ranging from real estate to infrastructure. China Investment Corp. is also reportedly weighing putting equal amounts into two other U.S. funds for the same purpose.

Action is coming from other countries as well.

"In the last two months, we've seen German and Asian investors increase their interest in U.S. investment," said Steve Collins, managing director of Jones Lang LaSalle's International Capital Group. "Several stateside closings also are providing some early encouragement that foreign investors are slowing rising off the sidelines for the right opportunities in the best markets."

"Right now, the coastal markets such as New York, [Washington, DC], and San Francisco are drawing interest from a select few foreign investors bidding and winning on off-market investments today," Collins added. "It seems the German open- and close-end funds and the Asian development companies are getting ready for an investment push in first quarter 2010."

Also just this week one of Israel's largest holding company, The IDB Group, agreed to purchase the 452 Fifth Avenue Tower, HSBC's U.S. headquarters, for $330 million in an all-cash deal. IDB signed on a New York-based partner Joe Cayre, chairman of Midtown Equities, in the deal that is expected to close early next year. Under the terms of the agreement, HSBC will lease back floors one to 11 for a 10-year term, as well as other parts of the building over a one-year term. The 29-story 452 5th Ave Tower is comprised of approximately 865,000 square feet.

Stateside investment activity started increasing in late summer, according to Jones Lang LaSalle. Notable transactions included the largest U.S. transaction to date in the sale of Worldwide Plaza at 825 Eighth Ave. in Manhattan. Local owner/operator George Comfort & Sons bought the former Macklowe property for $605 million in a joint venture with RCG Longview. Macklowe paid $1.7 for the previously fully leased building in 2007. The purchase reflects a net initial yield of 6.3% on what is now a 40% vacant building. If and when the building becomes fully stabilized in three or four years, the yield will likely be closer to 12%. It is widely believed in the market that the purchaser has new tenants lined up already.

The other significant deal was also in Manhattan: SL Green's sale of its 49.5% interest in 485 Lexington to a joint venture between Gilmore USA and Optibase Ltd (an Israeli technology company). The joint venture paid a little less than $21 million and assumed the $450 million of existing debt on the building. This is Optibase's first real estate purchase in North America as it attempts to diversify its portfolio by investing in commercial real estate. Once the transaction closes, the joint venture reportedly plans to provide SL Green with a $20 million loan secured by an SL Green pledge to sell an additional 49.5% stake.

A little farther down the East Coast in Washington, DC, the large public REIT Vornado sold 1999 K St. NW to Deka's Open Ended Fund for $208 million in the largest DC property transaction this year. The property, designed by Helmut Jahn, was completed just last month and is leased to the law firm Mayer Brown for 15 years. The purchase price equates to $830 per square foot.

The last building to trade at such a high level was 2099 Pennsylvania Ave. NW, a Jones Lang LaSalle brokered and closed in April of 2008 that set a high watermark for DC office transactions at $867/square foot. Another trophy DC market transaction was Credit Suisse's purchase of 1099 New York Ave. NW from Tishman Speyer. It reportedly traded at a 7.4% for $90.5 million ($517/square foot). The building is 61% leased with a major law firm as the anchor tenant. Invesco was also active in D.C. and purchased the newly redeveloped headquarters for the Immigration and Customs Enforcement agency from Prudential Real Estate Investors for $153.6 million. The nearly 500,000-square-foot deal was all cash; however its non-core location yielded only $310/square foot.


By Mark Heschmeyer

Old Jacksonville Road Repairs to Begin Moday October 12

Construction will begin Monday on a portion of Old Jacksonville Road.
The work includes shoulder improve­ments and a pavement overlay. The proj­ect begins near Koke Mill Road and ex­tends to just west of Farmingdale Road.
The work should be completed by June 2010, according to a release from the Sangamon County Highway Depart­ment.

THE STATE JOURNAL-REGISTER
Posted Oct 11, 2009 @ 08:18 AM

Part of Washington Street Colosed

Westbound lanes of Washington Street between Glenwood Avenue and State Street will be closed during the day starting Monday for sewer repair. The repair should be completed in one week but may be delayed by weather.
Motorists are asked to use alternate routes.

By Staff Report
THE STATE JOURNAL-REGISTER

Housing Chief Rebuts Warning of FHA Bailout

A former Fannie Mae executive warned a House panel Thursday that the Federal Housing Administration is destined for a multibillion-dollar taxpayer bailout in 24 to 36 months, an analysis that the agency's top official immediately dismissed as "completely unfounded."

At a hearing before a House Financial Services panel, Edward J. Pinto predicted that the FHA will suffer $40 billion in losses, leaving it unable to cover its bad loans without taxpayer help. Pinto, a real estate finance consultant who served as Fannie Mae's chief credit officer from 1987 to 1989, said he testified so lawmakers would "not be able to say that no one told them of the magnitude of the impending losses."

His testimony came at a sensitive time for the FHA, which faces increased scrutiny now that it has backed nearly a quarter of all loans made this year. The loans it insures are the sole source of financing for most people who lack good credit or cannot make hefty down payments. But its defaults have been climbing, raising concerns that taxpayers may be forced to kick in if bad loans overwhelm the FHA.

The agency recently said that a soon-to-be-released audit will show that its reserve fund has fallen below the level required by law, meaning it will not be enough to cover 2 percent of all outstanding FHA mortgages.

But absent a catastrophic decline in home prices, "we will not need a bailout," FHA Commissioner David H. Stevens told the panel.

While the reserve fund is at a historic low, it represents only part of the money the agency can tap to cover its losses, Stevens said. There's a second fund the agency can also use when loans go bad. In total, the two funds had $30.4 billion to meet future losses as of June 30.

The data from the forthcoming audit, performed annually, also project that the reserves will rebound to the required level within two to three years, largely as a result of the recovery in the housing prices, Stevens said.

Home prices should bottom out in early 2010, according to IHS Global Insight, the firm responsible for the price forecasts used in the audit. "According to a number of measures, housing prices are stabilizing," said Patrick Newport, the firm's U.S. economist told the panel.

In his testimony, Pinto called the audit's underlying assumptions "overly optimistic." The FHA's escalating default rate, its rapidly eroding reserves, and a recent dramatic increase in the amount of money people can borrow on FHA loans will have disastrous consequences, he warned the panel. FHA loans are especially vulnerable because they require only a 3.5 percent down payment -- well below the 10 to 20 percent private lenders demand.

Pinto compared the FHA loans with Fannie Mae's book of loans in 2006, which he said have similar characteristics, and he applied the default rate on the Fannie loans to the FHA mortgages. By that measure, the FHA was short $40 billion on its main financing account as of Sept. 30, in effect stripping the reserve account of its required funding and leaving it $14 billion in the hole, he said. The FHA, based on its history, will not be able to modify enough loans to thwart the losses.

Pinto suggested that the FHA raise its down payment requirement to 10 percent, reduce the cap on how much money FHA borrowers can borrow, and require FHA-approved lenders to co-insure the loans.

In an interview, Stevens said Pinto's analysis is flawed in part because many of Fannie Mae's loans at the time did not require borrowers to verify their income, something the FHA requires of all its borrowers.

After the hearing, Rep. Maxine Waters (D-Calif.), the subcommittee's chairwoman, said she found Stevens's presentation "convincing."

"I am feeling very confident about FHA," Waters said. "I think it's going to be able to continue to be a major source of support for home mortgages."

By Dina ElBoghdadyWashington Post Staff Writer Friday, October 9, 2009

Chinese Drywall IS a Growing U.S. Problem

Thousands of lawsuits by Americans complaining that drywall imported from China is causing them health problems are awaiting action in federal and state courts. A consolidated class action will be heard beginning in January.

“There could be 60,000 to 100,000 homes that are worthless and have to be ripped completely down and rebuilt,” said Arnold Levin, a Philadelphia lawyer and co-chairman of the plaintiffs’ steering committee.

Later in October, the Consumer Product Safety Commission will release the results of its study to determine what’s wrong with the drywall and what mediation programs might work.

Knauf Plasterboard Tianjin, a German company with manufacturing plants in China that supplied about 20 percent of the Chinese drywall said its own tests showed the drywall didn’t cause health problems. Some experts believe that the reason that drywall seems to be causing respiratory problems and headaches is because American homes are built tighter than those in Asia, where the drywall was also sold.

Source: The New York Times, Leslie Wayne (10/07/2009)

Banks Making Short Sales Tougher

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

"It drives me up a wall," says Robert G. Hertzog of Summit Home Consultants in Phoenix. "[The bank is] holding my client hostage."

Source: BusinessWeek, Christopher Palmeri (10/09/2009)

Freddie Mac expects multifamily bonds quarterly

Freddie Mac expects multifamily bonds quarterly

US mortgage rates slide, 30-yr at 5.08 pct-Freddie Thursday, 3 Sep 2009 10:14am EDT
NEW YORK (Reuters) - Freddie Mac (FRE.N)(FRE.P) said on Wednesday it plans to sell about $1 billion of multifamily mortgage-backed securities next week and expects new issues at least quarterly.

The program is meant to provide "liquidity, stability and affordability" to the multifamily housing market, the government-controlled company said in a statement.

Freddie Mac, the second-largest U.S. home funding provider, hired underwriters led by Deutsche Bank Securities and Goldman Sachs to lead manage the K-004 offering. Pricing is expected on October 7 for settlement on or about October 22 for the securities, known as "K Certificates."

The certificates are backed by 46 recently originated multifamily mortgages and are guaranteed by Freddie Mac.

Freddie Mac last sold more than $1 billion in multifamily-backed bonds in early June.
"Spurred by our successful offering of K Certificates earlier this year, we have a growing and active pipeline of multifamily loans for securitization," David Brickman, vice president of multifamily and CMBS Capital Markets for Freddie Mac, said in the statement.

The September pipeline grew to almost $3 billion, including loans used in the new offering.
"We expect offerings going forward on at least a quarterly basis, which will enable Freddie Mac to continue to provide even greater liquidity to the multifamily housing market," Brickman said.
Previously, multifamily loans were held in Freddie Mac's mortgage investments portfolio rather than packaged as collateral for guaranteed securities sold to investors.

(Reporting by Lynn Adler; editing by Jeffrey Benkoe)

Outlet Centers Rise to the Top During Recession

Vacancy, Leasing and Retail Sales Trends Show Outlet Centers are a Force to be Reckoned with in Retail Real Estate

While most of the nation's shopping centers and malls struggle to hold onto tenants and deal with increasing vacancy during this recession, landlords and leasing agents for the country's outlet center have enjoyed continually tight vacancy rates during this time, and many have also seen improvement over the last six months.

According to CoStar Property Analytics, outlet center vacancy hit a high of 5.56% at the end of first quarter 2009. Since then, the shopping center category is the only one to put togethr two consecutive quarters of declining vacancy this year. Currently, the outlet center vacancy rate stands at 5.12%, far outshining the 8% - 10% average vacancy rates currently found in the lifestyle, power, community and neighborhood shopping centers categories (click to see chart at end of article).

According to a CoStar Property Analytics statistical forecast, outlet center vacancy could return to its lower, pre-recession level of less than 4% by the end of second quarter 2010.

One major contributing factor to this low vacancy is the level of positive net absorption within this category. Outlet center net absorption amounted to 1.1% of the category's total square footage so far this year, which is a much higher level than other shopping center types -- power centers have absorbed .8%, followed by lifestyle centers (.6%), neighborhood centers (-.1%), community centers (-.2%), and malls (-.3%).

CLICK HERE TO VIEW THE REST OF THE ARTICLE

By Sasha M Pardy
September 30, 2009

Preservationists Campaign to Save Old Windows

Preservationists Campaign to Save Old Windows

One of the biggest expenses involved in restoring a historic home is bringing the windows up to a modern, energy-efficient standard. The cost of restoring a house full of windows can end up costing double what it cost to buy the home.

Some communities have very strict requirements while others are more willing to work with home owners to come to some compromise.

To raise awareness about the importance of maintaining the historic integrity of windows, the Historic Landmarks Foundation began a campaign this summer that put historic windows on its 10 Most Endangered List.

“We are doing our best to teach people that historic windows are character-defining features, and we encourage people to keep them. Vinyl windows don't communicate the same character and definition as the old windows," said Mark Dollase, vice president of preservation services for the Historic Landmarks Foundation in Indianapolis.

Source: Gannett News Service, T.J. Banes (09/28/2009)