An Atlanta transit landlord goes vertical, avoiding the perils of studying the wrong thing, and Chicago’s River North celebrates its fifth decade of renewal. Its’ all here in the Commercial Real Estate News Roundup for Sept. 17, 2014
Survey Finds Commercial Real Estate Executives Overwhelmingly Optimistic About Next Year, REIT.com, Sept. 12, 2014 – Law firm asks its commercial real estate clients what the coming year will bring, explosion of exuberance results.
Commercial real estate professionals cite pension reform and taxes among Illinois’ most critical issues, REJournals, Sept. 9, 2014 – Even though the commercial real estate industry in Illinois gets pretty favorable treatment from tax set-asides like TIFs, tax cuts named near the top of critical issues in the state.
The Rise of Real Estate Tech, CityLab, Sept. 11, 2014 – Bits and bytes reach dizzying heights in Gotham.
Banks shed bad loans, but Chicago delinquencies highest in U.S., Crain’s Chicago Business, Sept. 8, 2014 – Chicago lags behind in the unwinding of troubled loans.
Tech Turns Chicago Skid Row Into Top Market, BusinessWeek, Sept. 11, 2014 – Chicago’s River North renaissance since the 1970s era of post industrial blight is really something to behold.
Start-up looks to solve start-ups’ real estate problem, Baltimore Sun, Sept. 8, 2014 – Start-up starts up, stalls as it searches for office space, the turns its experience in to a solution.
Amazon files plans to build two more office towers downtown, The Seattle Times, Sept. 11, 2014 – Emerald City orders up two more downtown office towers from Amazon. No word if the free shipping option was used.
The victims of open offices are pushing back, BBC, Sept. 12, 2014 – A backlash is forming against the wall-free notions recently popularized in office layout trends. As it turns out, there’s benefit to focus and concentration. Who knew?
Tulsa’s available industrial space continues to decrease, Tulsa World, Sept. 9, 2014 – The 1963 Gene Pitney hit recording of Burt Bacharach’s “24 Hours From Tulsa” notwithstanding, the trip downtown is seeing a little more commercial traffic.
E-retailing Boosts Industrial Demand, National Real Estate Investor, Sept. 10, 2014 – One more bit of evidence of the seesaw where online retail’s disrupting of traditional retail means heightened warehousing and logistics demand.
How Gentrification Impacts Retail Development, GlobeSt, Sept. 12, 2014 – When the neighborhood heightens, the same old retail solutions just don’t cut it.
Broker eats up data on New York City’s ever-evolving restaurant, retail scene, Real Estate Weekly, Sept. 15, 2014 - Wherein a young man is rescued from a diplomatic career to become an expert on Manhattan’s retail property scene.
MARTA moves forward to build atop rail stations, Atlanta Business Chronicle, Sept. 15, 2014 – Air rights in Atlanta are the topic as a transit giant decides to go vertical.
Developers warn of multifamily glut in NJ real estate, North Jersey Record, Sept. 12, 2014 – Is New Jersey building too many apartments? Some developers think so.
Apartments on the rise? Applications for multifamily projects jump 86 percent in Oregon, Portland Business Journal, Sept. 10, 2014 – Oregon’s residential real estate picture has lots of room for multifamily, says recent report.
Even with rising rents, apartment living dominates Omaha housing landscape, Omaha World-Herald, Sept 13, 2014 – Raising the rent in a market like Omaha isn’t the most common local trend among the secondary markets, but it sure is a welcome one for landlords.
Disrupting the taxicab industry is a job that needs more elbow room, the rise of the “dirt REIT”, and Phoenix, AZ (pictured above) rises from the ashes like a…well, like a Phoenix. It’s all here in the Commercial Real Estate News Roundup for September 10, 2014
Some Retirement Plans Include Private Commercial-Property Funds, WSJ, Sept. 5, 2014 – The 401(k) industry is learning that commercial real estate is an earner when equities don’t quite meet expectations.
Brokering New Ground in California Commercial Property, WSJ, Sept. 2, 2014 – The double-commission comes under scrutiny in the Golden State legislature.
Conshohocken, Pa., an Old Steel Town, Now an Office Hub, New York Times, Sept. 2, 2014 – Renovation, restoration and new vision in Pennsylvania’s steel country leads to a white-collar boom.
Prominent L.A. developer to build unconventional office at Playa Vista, LA Times, Aug. 28, 2014 – A major shaper of the downtown Los Angeles skyline returns to the development world, plans in hand.
Uber has already outgrown its brand new offices, SF Chronicle, Sept. 4, 2014 – Taxi-industry-demolishing web application’s home offices grow too fast for their floorspace. No word if Uber drivers will haul any packed-up boxes on moving day.
Silicon Valley Offices Are Stunningly Pricey, Just Like the Workers Inside, Wired, Sept. 3, 2014 – “You have to spend money to make money,” observes everybody who ever made money. Coincidentally, spending money is a great way to lose money, but few in Silicon Valley would admit it.
Shovels are turning for Twin Cities industrial projects, Minneapolis Star-Tribune, Sept. 6, 2014 – Twin Cities Metro area enjoying an industrial resurgence as projects aim to fill in the space between the 10,000 lakes.
Tesla: Envisioning the impacts on life in Nevada, Reno Gazette Journal, Sept. 6, 2014 – Big doings promised in the desert, as a 5 million square foot battery factory is planned by Tesla Motors.
Looking for retail, office space in downtown Mobile? Try this new tool, Alabama.com, Aug. 26, 2014 – Handy snapshot of retail space opportunities in downtown Mobile, AL.
SouthCoast malls adapt to fend off e-commerce giants, South Coast Today, Sept. 7, 2014 – Physical shoppers: they exist, they spend money, they prefer laying hands on product and they’re not all over 30. Take heart, retail sector.
Retail vacancies at five-year low, North Jersey.com, Sept. 2, 2014 – Absorption in the Garden State has driven vacancies down.
What slowdown? Phoenix, Valley cities considering a number of real estate projects, Phoenix Business Journal, Sept. 2, 2014 – The jewel in the desert, so recently marked by bustout residential developments, has picked up steam in the multifamily sector. Booms and busts come and go, but demand remains.
Many in Seattle are taking a stand against rise of micro-apartments, Seattle Times, Aug. 28, 2014 – Dorm-style housing is enjoying a boom in Seattle, but are residents happy with what comes attached?
Time to Buy the Farm? WSJ, Sept. 7, 2014 – Ladies and gentlemen, presenting dirt REITs.
Virginia farm real estate value increases, Hampton Roads Pilot, Sept. 2, 2014 – Tobacco and other cash crops are driving prices skyward in Virginia.
[Today’s post is the first in an exciting new series on the intersection of commercial real estate and financing with special guest blogger and FundWell CEO Chinwe Onyeagoro. FundWell is part of the REach 2014 class of companies, recognized for their work to expand financing options for the commercial market. See FundWell's website for more info and stay tuned here on The Source for updates about how to register for our upcoming webinar with Chinwe later this month! --WG]
There are many different kinds of financing options for commercial real estate deals. And understanding the mix of commercial loan products available to you and your clients could make the difference between completing a transaction and losing it. 2013 was a very good year for commercial real property investors. According to CoStar COMPs data, sales of office, industrial, retail, multifamily, hospitality and land totaled $366 billion. The vast majority of these commercial real estate acquisitions were financed using third party firms like banks, non-bank SBA lenders, and commercial real estate lenders.
The Five Commercial Real Estate Loan Products
There are five basic types of commercial real estate term loan products. (A term loan is a loan with a specific, fixed principal amount and a set maturity date and repayment schedule, which does not include line of credit financing (e.g., revolving construction lines)).
- Permanent Loan
- Mini Permanent Loan
- 7A Loan
- 504 Loan
- Bridge Loan
Below is a cheat sheet on these five loan products and some fun facts about each:
1. Permanent Loan
Description: Conventional, long-term commercial real estate financing from a bank
Eligibility Criteria: You must be near perfect. Translation: you need to have a 700+ credit score (or a good story as to why you don’t), lots of positive net cash flow businesses and/or investment properties, high balances in your business and personal bank accounts, and the property needs to have at least 1, but ideally 2 years of positive net operating income (NOI).
Permanent Loan Pros:
- 15 to 30 year terms
- Prime to near-prime interest rates
Permanent Loan Cons:
- Hard to qualify
- 30-60 days approval time
2. Mini Permanent Loan (Mini Perm)
Description: Conventional, short-term commercial real estate financing from a bank
Eligibility Criteria: You pretty much need to meet all of the criteria for a permanent loan, except the target property does not have to have positive net operating income (NOI). However, your Sources and Uses statement needs to show how you will use the loan funds to make the subject property income producing (e.g., acquire property, do construction/rehab, lease up, etc.) so you can qualify for long-term financing before your Mini Perm loan matures.
Mini Perm Pros:
- 1 to 5 year terms
- Prime to near-prime interest rates
Mini Perm Cons:
- Hard to qualify
- 30-60 days approval time
3. 7A Loan
Description: Alternative funding for commercial real estate, equipment, and/or working capital from a bank or non-bank lender certified by the U.S. Small Business Administration
Eligibility Criteria: Can only be used by eligible small businesses. If you are close, but do not yet qualify for a conventional loan from a bank you may qualify for this funding.
- Up to 25 year terms
- 6 to 10% interest rates
- Can also use for working capital and equipment
- Max loan amount: $5 million
- 30-60 days approval time
4. 504 Loan
Description: Alternative funding for commercial real estate and/or heavy equipment from a bank and a non-bank lender certified by the U.S. Small Business Administration
Eligibility Criteria: Can only be used by eligible small businesses who own or occupy 51% or more of the commercial property. If you are close, but are not yet qualified for a conventional loan from a bank you may qualify for this funding.
- 10 to 20 year terms
- 6 to 10% interest rates
- Can also use for working capital and equipment
- Lots of paperwork required
- 45-90 days approval time
- Max loan amount: $20 million
5. Bridge Loan
Description: Alternative funding for commercial real estate from a private and/or hard money lender
Eligibility Criteria: If you don’t yet qualify for funding from a 7A or 504 lender and you have a plan to acquire and/or improve an asset that will eventually secure better funding, then you may want to try a bridge loan. However, it won’t be a cake walk, the cardinal rule still applies. You need to show you have a history of mostly paying your bills on time (minimum 620 credit score) and enough cash flow from personal and investment income to cover the property operating expenses and the debt service (principal and interest) for all existing loans that you have and the new loan you are applying for.
Bridge Loan Pros:
- 1 to 5 year terms
- Easier to qualify
Bridge Loan Cons:
- 10-20% interest
- 30-60 days approval time
There they are: the five jewels of the commercial real estate financing market. Depending on who you are, what your financial profile is, and how you plan to use the commercial real estate, one or more of these loan products will be right for you.
Now that you have a good handle on what the options are and the pros and cons of each, you should take a look at your existing commercial real estate investment portfolio and make sure you are currently getting the best possible deal with respect to interest rate and term. If you are not, you could save yourself a lot of cash by refinancing. That’s cash that could be used to reinvest in your business, buy more commercial real estate properties, or reserve for a rainy day. And for those that work with and/or support commercial real estate investors, encourage them to explore their options and evaluate the financing on their current properties and/or planned purchases. If you help save them some money today, I can assure you, that you will continue to be their go to resource for commercial real estate in the future.
ABOUT THE AUTHOR
Chinwe is the CEO & Co-Founder of FundWell. Chinwe has a strong personal interest and a professional track record devoted to helping organizations raise capital. She co-founded, capitalized, and operated a boutique consulting firm that over the last seven years has successfully raised a total of $120 million in grants, competitive loans, tax incentives, government subsidies, and owner equity financing on behalf of clients across the country. Chinwe’s consulting experience includes McKinsey & Company, where she provided financial and strategic business advisory services to Fortune 1000 company executives, and while at Monitor Company (now owned by Deloitte) she provided strategy and financial analysis for public and private sector clients, and managed a $3 billion dollar real estate account. Chinwe has a B.A. in Economics from Harvard College and is a Henry Crown Fellow of the Aspen Institute.
FundWell (www.fundwellre.com) is an online resource that prequalifies and connects commercial real estate investors and small businesses seeking funding with a growing number of bank loans, non-bank debt funding, and other credit related financing options.
FundWell delivers a 75% loan approval rate in a marketplace where they typically face a 30% approval rate. FundWell helps commercial real estate brokers increase deal flow and speeds up closings by referring their clients to prequalified lenders that will fund their real estate needs and business expansion plans. FundWell also helps real estate brokers access financing to grow their businesses.
Since 2012, FundWell’s online financing marketplace and financial health information has reached over 24,000 small businesses, working in partnership with over 300 lending partners across the country that span 13 different types of loan products from conventional bank loans and SBA loans to factoring, equipment loans and commercial real estate loans.
One of Chicago’s most storied hotel properties has carried on its legacy – by borrowing again.
The Palmer House Hilton, located at State and Monroe in downtown Chicago first opened in 1871 only to burn down two weeks later in the Great Chicago Fire. Builder Potter Palmer immediately secured a loan to rebuild – $1.7 million in what was considered at the time to be the largest individual loan ever. It was built again.
This week, 143 years later, the venerable property went again to the financing well, albeit in somewhat greater volume. In a refinancing deal announced this week, the property traded in its $365 million debt for a lower- and floating-rate $420 million debt as REJournals.com reports:
The deal brought together Thor Equity Partners, a bond issue / CMBS loan by Morgan Stanley (five years floating rate) and Jones Lang Lasalle who represented the equity firm.
I’m not sure how I missed this, but miss it I did. NAR’s June 2014 Commercial Regulatory Report is available for free download, containing updates and summaries of recent NAR actions in the regulatory space, including FAA, EPA, SEC, GSA and SBA. If any property in your portfolio involves air, ground or finance (find me one that doesn’t!) you need to check out the report.
Check it out below or download a PDF from Realtor.org
Capping a wave of casino closures on the Atlantic City boardwalk is Revel, the $2.4 billion, 47-story hotel tower that debuted in April 2012. The September shutdown of the starkly designed gambling palace hits the New Jersey economy hard, contributing to closures that take away about one third of AC’s gaming space.
What changed to turn AC’s multi-decade run as a gaming mecca into a parade of glittering vacancies? Some point to Pennsylvania, whose recent expansions to gaming laws are keeping its players in its own state to play at standalone casinos such as Mount Airy, Sands, Rivers and SugarHouse.
Others suggest that the younger gaming customer tends to be a poker player, and Revel does not offer poker. As the NYT writes:
Internet gambling, which became legal in New Jersey last year, so far has not been a significant threat to the casinos. After initially forecasting that online betting could increase industry revenue by $1.2 billion in the first year, state officials sharply revised down forecasts for both revenue and expected tax receipts, which were scaled back to $34 million from $180 million.
“It hasn’t come close to what their projections were,” said Anthony S. Graziano Sr., executive director in the Coastal New Jersey office of Integra Realty Resources, a national real estate valuation firm.
Competition from out of state, especially in Pennsylvania, has been the main threat in Atlantic City, overshadowing any issues from the recession or Hurricane Sandy in 2012. Customers in eastern Pennsylvania now have a choice of gambling halls in Philadelphia, Bethlehem, Chester or Valley Forge, removing the need to drive an hour or more out of state.
The 2Q14 CCIM Quarterly Market Trends Report has “dropped,” as the kids say. What’s in the fine print? Growth. The second quarter of this year has extended a strong national trend in increased dealmaking for industrial real estate. The businesses of making and moving stuff — manufacturing, logistics, warehousing — are lending strength to markets in associated properties, with 82 percent of CCIM members reporting they had received more serious inquiries from buyers over the same time period last year.
Industrial transaction activity jumped for 70 percent of CCIM Institute members who responded to a May/June 2014 transaction survey. Members of the CCIM Institute, a global commercial real estate affiliate of the National Association of Realtors, also experienced positive overall transaction and investment activity in the second quarter, according to the organization’s Quarterly Market Trends report. Approximately 54 percent of CCIM respondents reported greater overall deal flow than the same period last year and 66 percent reported more inquiries from serious buyers year over year in 2Q14.
Industrial asset prices were higher for 52 percent of respondents and remained flat for 40 percent of members. Capitalization rates for industrial properties held steady for 60 percent of members; 32 percent said cap rates declined YOY. Industrial investments also registered highest on the investment value vs. price scale, coming in at 3.2 percent on a scale of 1 to 5 (with 1 being lowest and 5 being highest).
Industrial isn’t the only sector that has enjoyed year-over-year growth, with retail, office, multi-family and hotel also posting gains.
In what one architect referred to as “the last step in the rebranding of something that has disappeared,” New York’s World Trade center has settled on a new visual identity.
The work of a distinguished corporate branding shop headquartered in New York, the new abstract trident logo recalls shapes of structures both standing and lost. It manages to connote remembrance of the aftermath of the 2001 attacks while at the same time encompasses redevelopment, echoing structures standing and proposed today on the site. From David W. Dunlap’s piece in the New York Times:
Can you see a trident — an abstract trident recalling those three-fingered steel columns at the base of the twin towers, still standing after the 2001 attack, symbolizing New York City’s resilience?
It is there, in the World Trade Center’s new logo, which was revealed on Wednesday when the latest display panels were installed along a construction fence on Vesey Street.
Do you discern two parallel spaces in the upper half of the logo? They are intended to evoke the memorial beacons of the Tribute in Light. And the two bars on the lower half of the logo? The deep pools of the National September 11 Memorial.
Look again, and the five bars might be taken for five towers: 7 World Trade Center, long finished and open; 1 and 4 World Trade Center, nearing completion; 3 World Trade Center, under construction; and 2 World Trade Center, still on the drawing board.
And yes, now that you mention it, the whole thing is a stylized W — for World Trade Center, of course, but also for Westfield World Trade Center, the name of the luxury shopping center that is to open there next year.
A Classic Approach
Reaching back to the golden-era work of 20th century giants in corporate identity design such as Paul Rand and Saul Bass, the new WTC logo seems to act, as do so many of Rand’s and Bass’s, as a touchstone. The eye is guided by deceptively simple contour of shape, such arrangement offering a context for the work, appropriate in the wider world and ready to take its place as a background element in a crowded visual landscape.
And it’s because of that format that some might find the work wanting. The “say it, then blend in” principles of corporate identity design are eternally at odds with the gravity of 2001′s events and the remembrance they command.
But reactions to this logo that find it lacking are better understood as reactions to logos themselves and how they work. When seen as a complex identity packed into a simple set of shapes — when regarded as a classic American corporate logo — it really is a triumph of the trade.
Pretending the property business is easy, St. Louis and its hot industrial market, retail lagging the recovery (but not in Miami) and Macy’s goes shopping for commercial real estate talent – it’s all here in the Commercial Real Estate News Roundup for August 11, 2014.
- Low rates boost REITs, commercial real estate stocks, CNBC, Aug. 8, 2014 – In that part of the finance world where low interest rates make performing real estate look like a cash machine in comparison, REIT plays are looking juicier.
- Twin Cities commercial real estate draws out-of-state, foreign dollars, Minneapolis Star-Tribune, Aug. 8, 2014 – International capital flows find themselves attracted to the spots laying in between the 10,000 lakes.
- Investors in real estate getting hip to new ploy, Columbus Dispatch, Aug. 10, 2014 – Crowdfunding moves into prime time in the real estate industry
- New PivotDesk offering connects real estate brokers and small startups, Beta Boston, Aug. 8, 2014 – Tech entrepreneurs: flush with venture capital, ready to change the world and suddenly in need of actual office space.
- This Startup Wants To Be The E-Trade Of Real Estate, Business Insider, Aug 9, 2014 – Retail investment vehicles and property. The latest in the ongoing struggle to pretend property investment is easy.
- Exclusive: Prologis building $10M Orlando industrial spec building, Orlando Business Journal, Aug. 7, 2014 – One sign of a healthy market – spec developments in industrial. South Florida’s happy story lies therein.
- With Pappas Center’s recent gains, industrial is alive and well in Boston’s Seaport, Boston Business Journal, Aug. 8, 2014 – Waterfront development making Boston’s unique mix of industrial base a fine few quarters.
- St. Louis industrial market surging, St. Louis Post-Dispatch, Aug. 7, 2014 – Under the Arch, industry!
- Retail buildings on Miami Beach’s Lincoln Road sell for record $342 million, Miami Herald, Aug. 6, 2014 – Unconcerned by rising Atlantic waters, buyers here pay retail for retail.
- Macy’s adds veteran to real estate team, Cincinnati Business Courier, Aug. 11, 2014 – Macy’s goes shopping, finds a great deal on a CBRE exec.
- Retail real estate recovery continues in uneven fashion, Sacramento Business Journal, Aug. 4, 2014
- High rents, low inventory push S.F. multifamily market to new heights, SF Chronicle, Aug. 11, 2014
- Residential Construction in New York City Lags, WSJ, Aug. 10, 2014
- Apartment demand is sky high, supply low, Tampa News-Press, Aug. 10, 2014
- Millennials driving Phoenix multifamily market, but a drag on housing, Phoenix Business Journal, Aug. 6, 2014
- Porn Out, Hotels In as Sunset Strip Reborn: Real Estate, Bloomberg, Aug. 5, 2014 – It’s not often that the terms “aging landmark” and “erotica store” find themselves in the same sentence, but that’s L.A. for you.
- Hotels and Resorts: Investing Essentials, Motley Fool, Aug. 6, 2014
- Floating snowflake could be the world’s coolest hotel, CNN, Aug. 6, 2014
- Jailed Indian tycoon tries to sell New York Plaza, CNBC, Aug. 10, 2014
- Goodman wins bid to develop archdiocesan land, Philadelphia Inquirer, Aug. 10, 2014
- Industrial park land up for sale, NV Daily, Aug. 6, 2014
- Boca Raton city-owned real estate adds up to some serious green, Sun-Sentinel, Aug. 11, 2014
When the now-embattled Chicago Mayor Rahm Emanuel announced, shortly after his 2011 election, his plan to create an infrastructure trust, the idea sounded pretty good — at first. When the details came out – that the trust would be a private, opaque financing platform separate enough from government to not be beholden to public inquiry or FOIA requests — many privatization-weary Chicagoans braced for the worst. And why not? It turns out that so many Wall Street style “innovations” in real estate and infrastructure finance (the Chicago-style TIF comes to mind) do less to address civic need than they do to provide unaccountable disbursements to developers of already-desirable city land.
At the time, Bill Clinton characterized the idea as an “infrastructure bank”. But banks have one typical advantage that the Chicago Infrastructure Trust doesn’t: capital to allocate. As it turns out, far from a bank, the Trust is little more than a lightly-staffed financial innovation laboratory headed by a private equity guy. This is the lesson in a recent Crain’s Chicago Business piece, confusingly titled “Emanuel’s Infrastructure Trust Looks To Help Commercial Landlords“. I say the piece is confusingly titled because it appears the “help” landlords can look forward to consists mainly of a tax hike:
Yet Mr. Beitler manages to keep expectations high by touting a $1.5 billion pipeline of potential deals, including a voluntary property tax assessment of commercial properties to pay for energy-related improvements. The trust is evaluating a dozen proposals totaling about $1 billion from 15 firms for the Property Assessed Clean Energy program, although not all those Pace bids will be accepted, he adds.
The trust’s slow progress is the result of several factors, including the novelty of a middleman trying to bring together City Hall and investment firms. Despite its hype, the trust is a small venture, financed with an estimated $1.5 million in city funds over its first two years (see the PDF). And the deals are difficult to do, with Mr. Beitler discarding more than a dozen proposals.
While the cash-strapped city’s need for “transformative” improvements in transportation and other infrastructure has not gone away, the trust has suffered from overly ambitious predictions.
“When the trust was set up there were certainly some high expectations set up for it,” says Peter Skosey, an expert on infrastructure finance and executive vice president of the Chicago-based Metropolitan Planning Council, where the trust’s board holds its meetings. “Many of those expectations weren’t warranted.”
So it’s an infrastructure trust, if you consider swimming pools infrastructure. It’s an aid to commercial landlords – if those landlords aren’t paying enough taxes. It’s a bank – but it has no money to lend. And it’s somehow a boon to the public – as long as the private equity deals are complicated enough and profitable for a very few.