Month: February 2010

NNN Investment Group Affiliates With KW Commercial

KW Commercial, a division of Keller Williams Realty, Inc., today announced that it will partner with the National NNN Investment Group to offer triple net lease real estate investments to the company’s 73,000 realtors and brokers in the United States and Canada.

KW Commericial

Triple net, also known as NNN (net, net, net), real estate refers to commercial leases where the tenant pays the property taxes, insurance, and maintenance (the three ‘Nets’). Typically, these types of NNN investments are most attractive to long-time apartment property owners and passive investors seeking “hands-off” real estate to provide themselves a long-term and stable income. Many owners sell their current management-intensive properties and purchase an NNN investment as part of a “1031 tax-deferred exchange.”

“Based on current demand, we know that the National NNN Investment Group will significantly contribute to the success of agents throughout Keller Williams Realty,” said Buddy Norman, president of KW Commercial. “Our ultimate objective is to ensure that KW Commercial clients acquire the best quality triple net properties with the fewest surprises and National NNN Investment Group has the experience and track record to make this happen. Keller Williams’ agents can now offer their clients comprehensive end-to-end real estate solutions.”

Managing Director Andrew Barnes, a ten-year veteran of the triple net brokerage business, oversees a constantly changing inventory of available NNN properties at National NNN Investment Group. The group works directly with commercial developers who build retail and industrial properties for the largest US companies. A sampling of tenants includes Walgreens, CVS, Wal-Mart, Publix, Lowes, Sam’s Club, Best Buy, AutoZone, Advance Auto, O’Reilly Auto Parts, KFC, Jack-in-the Box, and Taco Bell.

In today’s changing market, the National NNN Investment Group continues to lead in its area of expertise. Closings this month include the sale of a property NNN leased to Walgreens in Jackson, Mississippi for $3,775,000. A prime location due to a hard corner site and surrounding population density, the property featured excellent assumable financing with a strong tenant credit on a 25-year lease.

“A triple net investment offers an exit from management-intensive real estate into properties that provide long term, passive income” stated Barnes, “This is particularly important to our clients nearing the end of their investment life cycle. For instance, they may have started out with a residential duplex twenty years ago, gradually traded-up along the way, and can now be proud owners of a commercial property leased for 25 years to Walgreens. In many ways, an NNN investment offers features similar to a corporate bond, with the continuing benefits of real estate ownership.”

Prior to joining KW Commercial and the National NNN Investment Group, Barnes was Senior Vice President with the triple net development, investment and brokerage firm Sansome Pacific Properties and prior to that, was Managing Partner and Co-Founder of the San Francisco-based real estate investment firm, Kyodai Holdings. He has been involved in over $575 million in real estate transactions and brings both buy- and sell-side expertise to his brokerage transactions.

Barnes holds an M.B.A from Waseda University in Tokyo and a B.A. from Penn State University. He is fluent in Japanese. He has completed graduate work at the United Nations in New York and undergraduate economics work at Universitat zu Koln in Germany. Additional studies at U.C. Berkeley have included advanced Real Estate Finance and Investment. He is a member of the International Council of Shopping Centers (ICSC), lives in San Francisco with his wife and is an active member of his community.

Long-Term Residential Mortgage Rates Rise to Over 5%

Freddie Mac recently released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.05% with an average 0.7 point for the week ending February 25, 2010, up from last week when it averaged 4.93%. Last year at this time, the 30-year FRM averaged 5.07%.

The 15-year FRM this week averaged 4.40% with an average 0.7 point, up from last week when it averaged 4.33%. A year ago at this time, the 15-year FRM averaged 4.68%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.16% this week, with an average 0.6 point, up from last week when it averaged 4.12%. A year ago, the 5-year ARM averaged 5.06%.

The 1-year Treasury-indexed ARM averaged 4.15% this week with an average 0.6 point, down from last week when it averaged 4.23%. At this time last year, the 1-year ARM averaged 4.81%.

“Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5% this week amid a mixed set of economic data reports” said Frank Nothaft, Freddie Mac vice president and chief economist. “For instance, the January producer price index jumped well above the market consensus, but the consumer price index remained subdued and consumer confidence declined to the lowest level since April 2009, according to the Conference Board.

“There were also varying reports as to the current state of the housing market. The S&P/Case-Shiller national home price index rose for the third consecutive quarter in the fourth quarter, albeit at a slower rate, and the 20-city composite index showed an increase in December 2009 for the seventh month in a row; six metropolitan areas experienced positive year-over-year growth, compared to four in November. New home sales, however, unexpectedly slowed in January to the smallest pace since records began in 1963, and the supply of homes at the current sales rate rose to 9.1 months, the most since May 2009.”

For more information, visit www.freddiemac.com.

9 Leadership Mistakes to Avoid as We Rebuild Real Estate

RISMEDIA, February 25, 2010—With 2010 expected to be another slow year for real estate, many industry executives and analysts are wondering what additional steps—beyond cost cutting and downsizing—can be taken to weather the turbulent times.

The answer, according to Bill Ferguson, author of the new book Keepers of the Castle: Real Estate Executives on Leadership and Management, is actually quite simple. Only leadership—strong, balanced, and experienced leadership at the executive level—will pull the industry through to the next upcycle. Continue reading “9 Leadership Mistakes to Avoid as We Rebuild Real Estate” →

Top Affordable U.S. Housing Markets

This article in Realty Times by Phoebe Chongchua lists the most affordable and the least affordable housing markets in the U.S.   An interesting statistic from the article is that over 70% of homes in the U.S. are affordable to families earning the national median income of $64,000.

The most affordable community:  Indianapolis.  Followed up by Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; Youngstown-Warren-Boardman, Ohio-Pa.; and Akron, Ohio.

The least affordable markets:  San Francisco; Honolulu; Santa Ana-Anaheim-Irvine, Calif.; and Los Angeles-Long Beach-Redwood City, Calif. Topping this list, once again in the fourth quarter of 2009, is New York-White Plains-Wayne, N.Y.-N.J.

I have just summarized the highlights.  Go read the whole article.  Some very interesting information.

The Coming Great Recession of 2011 – 2012

The American Spectator published an article written by James Srodes titled, “The Great Recession of 2011-2012”

Mr. Srodes hits the nail on the head.  He explains why, despite the rosy projections you read in the morning newspaper, we are headed for worse times in the next couple of years.  I don’t want to be a doomsayer, or create a sense of pessimism.  I just think the old adage that to be forewarned is to be forearmed is a good one.

I am not going to summarize the article here.  It is a very well-written and logically presented.  It is important to read it in its entirety.  I suggest you go here and do just that.  And then arrange your finances so that you will still be standing when we hit 2013.

While he writes about all the reasons 2011 and 2012 will be very difficult years financially for most Americans, he doesn’t mention one other factor that will contribute to the downturn.  There are billions of dollars of commercial mortgages that will mature in the next 18 months.  The borrowers will not be able to refinance those loans without contributing substantial cash equity.  As a hypothetical example, a borrower who borrowed $21 Million (70%) on a shopping center that was valued at $30 Million in 2006, will likely now find that he can only refinance 60% of a revalued asset now worth $25 Million.  That means he will only be able to get a new loan of $15 million to pay off a $21 Million loan.  He will either have to come up with $6 Million in additional equity, or run the risk of losing his property.  That bubble is still ahead of us and will make the bursting of the home mortgage bubble seem like a minor glitch.

All the signs are there.  You just have to read them.

Go to the American Spectator and read the whole article.

CBRE Has Optimistic Outlook for Industrial Sector

CB Richard Ellis (CBRE) has published its Industrial Leading Indicator Report for the first quarter of 2010 which has a favorable outlook for the industrial real estate market in the US.

To summarize briefly: The sector was not hit with the problems of the office and retail markets. Demand for space has continued and they expect the vacancies to peak at 15% and then drop to around 10%. Another reason is that industrial property owners tend not to leverage as much as owners in the other sectors. They expect that the industrial market will start to recover as we come out of the recession in 2012 and that the next three years will be years of high demand for industrial space as businesses gear up again.

With increasing consumer spending, firms will begin hiring again in 2010 and continue to rebuild their inventories. The demand for industrial space will rebound, it is expected to turn slightly positive by year-end 2010 but the average quarterly pace of demand will be lower than that seen during the housing boom with quarterly net absorption averaging only 30 million square feet through the end of 2011. Over the following three years however as consumers and firms make up for consumption deferred throughout the downturn, demand for industrial space will match the pace set in the boom period from 2004 through 2007 before settling into a more stable pattern in the years beyond 2015.

The report does not appear to be online, so I can’t link to it. If you are interested in the report, send an email to gaminoff at aminoff dot com and I will forward a copy of the report to you.

10 Things That Don’t Affect Home Value

I love this.  Glenn Bradley wrote this post on his blog, Ask Glenn Bradley, called The Nine Things That Don’t Affect Home Value:

Here are nine items that do NOT affect the market value of a home:

  1. the original purchase price
  2. the amount owed on the mortgage or home equity loan on the property
  3. the list price of other properties for sale in the neighborhood
  4. what the seller thinks it’s worth
  5. the amount of profit the seller needs from the sale
  6. the selling prices of homes in prior years
  7. an appraisal
  8. tax assessment value
  9. the position of the stars and moon

I’ll add one more:

10.   The price a similar house around the corner sold for two years ago.

The sole determinant of the value of a home for sale is the price someone is willing to pay for it.

Senator Dodd Urges Action on Commercial Real Estate

By Kevin Drawbaugh and Corbett B. Daly
http://www.reuters.com/article/idUSN2220875620100222

WASHINGTON, Feb 22 (Reuters) – U.S. Senate Banking Committee Chairman Christopher Dodd, citing concerns about the outlook for commercial real estate, asked regulators on Monday for action and a report on efforts to stabilize the sector.

“The weakness in the (commercial real estate) market requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy,” Dodd said in a statement.

“I urge you to redouble your efforts to provide appropriate oversight of this vital component of our economy,” he said.

Dodd asked regulators for an update on their work to stabilize the market. The letter went to Federal Reserve Chairman Ben Bernanke and other top regulators.

This month, a congressional watchdog panel said the commercial real estate market has fallen more than 40 percent from early 2007 and a wave of loan failures in the next few years could threaten the U.S. economy just as it struggles back to its feet from the worst recession in 70 years.

Dodd noted that a Fed official testified last month before the watchdog panel that examiners at the U.S. central bank are reporting a “sharp deterioration” in commercial real estate loan quality.

The letter comes amid a broader debate on Capitol Hill over rewriting the way the U.S. financial services industry is regulated in the wake of the financial crisis.

The Obama administration is urging lawmakers to support a U.S. financial consumer watchdog that is strong and independent, pushing Senate Democrats to resist compromises sought by Republicans and bank lobbyists.

Treasury Secretary Timothy Geithner said the administration is still fighting “to consolidate the fragmented authority of seven separate agencies into a single, independent and accountable Consumer Financial Protection Agency (CFPA).

Seeking compromise, Dodd in recent weeks has discussed multiple options with Republicans, who oppose the CFPA, but has not struck a deal.

The Connecticut Democrat is working closely with Tennessee Republican Senator Bob Corker, a committee member, on crafting an agreement they hope will win broad support. Its release is expected within days.