Posts Tagged ‘commercial real estate’
Bernanke On the Outlook of the Economy
Posted by Sibet B Freides in Real Estate Economics on November 25th, 2009
I want to share with you a quick excerpt about Federal Reserve Chairman Ben S. Bernanke. He spoke at the Economic Club of New York last week about the policy on commercial loans. Perhaps this will keep commercial real estate from dipping s far as residential did.
While I am on the topic of bank lending, I would like to add a few words about commercial real estate (CRE). Demand for commercial property has dropped as the economy has weakened, leading to significant declines in property values, increased vacancy rates, and falling rents. These poor fundamentals have caused a sharp deterioration in the credit quality of CRE loans on banks’ books and of the loans that back commercial mortgage-backed securities (CMBS). Pressures may be particularly acute at smaller regional and community banks that entered the crisis with high concentrations of CRE loans.
In response, banks have been reducing their exposure to these loans quite rapidly in recent months. Meanwhile, the market for securitizations backed by these loans remains all but closed. With nearly $500 billion of CRE loans scheduled to mature annually over the next few years, the performance of this sector depends critically on the ability of borrowers to refinance many of those loans. Especially if CMBS financing remains unavailable, banks will face the tough decision of whether to roll over maturing debt or to foreclose.
Recognizing the importance of this sector for the economic recovery, the Federal Reserve has extended the TALF programs for existing CMBS through March 2010 and newly structured CMBS through June. Moreover, the banking agencies recently encouraged banks to work with their credit worthy borrowers to restructure troubled CRE loans in a prudent manner, and reminded examiners that–absent other adverse factors–a loan should not be classified as impaired based solely on a decline in collateral value.
You can read the entire write up of Bernanke’s address here.
Treatise on Specialties Required for Brokers and Developers
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on April 13th, 2009
- Image via Wikipedia
Successful commercial Real Estate Brokerage and Development requires one to have a keen grasp of many fields. Going light on depth in any single specialty can evidence itself by creating holes in your practice or your development that can cost you business or clients or tenants or a certain quality in a project that may affect its profitability or sustainability. Strive to become precise and practiced in all these areas;
LAW. One must have grasp of the complexities of the field of law in order to even get off the ground. Protecting your fee or your equity, protection against unfettered litigation, an unscrupulous lender, or partner is imperative. Be prepared to lock horns with any practitioner in this field. Learn contract law so as to quote in your sleep. Do not fear, but respect legal issues and make sure to use them in your favor. You should hope to be outlawyered early in your career, before you have much to lose.
ECONOMICS. Should be a lifelong study. It is here where you will pass your peers. Free enterprise is only one economic system. Know the others. It is the most efficient, and the most efficient price is always determined by the intersection of functions of supply and demand. But this is of course a theory which is based on the precepts of perfect knowledge. Which does not exist. Distinguishing between theory and the real market is where one makes money. Having the most perfect knowledge comes with research, hard work, and homework.
ART. Yes we are actors on a stage and the best actor gets the part, gets the listing, wins the assignment, gets the financing, wins over the equity investor, and closes the deal. Likewise for the sharpest graphics and most artistically inspired presentation. On the tangible side, your architect and/or planner makes or breaks your deal, as design creates value. The most functional space is designed that adds a quality of life but is both practical and enduring. Being financeable can be a big help as well.
PSYCHOLOGY. Students of the human mind, how it works, what motivates it, what it fears, what it craves, and the various psychoses that affect decision making will always have an edge. When confronting a client or a decision maker on a deal, are you able to classify that person into one of the four personality types that person exhibits and how best to achieve a win/win outcome? Learn this and close more deals, not to mention saving you and your clients time and money.
I could go on here stressing like needs and importance for practitioners in our field to have dexterity also with MATHMATICS, FINANCE, HISTORY, POLITICAL SCIENCE, and GOVERNMENT, etc. You don’t need to know everything. But know someone who does, like Market Solutions Group.
Article Written by Bruce A. Davis, Senior Partner of Bryant Commercial Real Estate Partners, LLC of Atlanta, GA, and member of Market Solutions Group.
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Commercial Real Estate Business in Uncertain Times
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on March 10th, 2009
Someone recently asked me what should be done to survive as a commercial broker in today’s market. Several things come to mind against the backdrop of all the calamitous bad news that we face everyday.
This is a good time to go meet and talk with your clients. They certainly aren’t working on deals. Go see them and get to know them all over again. Reforge relationships. You will be more poised than your competitors to be conversant with and their capabilities as opportunities begin to resurface.
Take advantage of distressed projects now on the market. There are more and more opportunities coming on the market where lenders and partners took possession of underperforming or cash strapped projects everyday. They cant manage/lease/operate these deals. Find the developers who are liquid, or better yet match them up with equity sources who stand ready to plunge first into areas of the best opportunities that can be bought at fractions on the dollar of previous basis. CASH is KING.
Identify, prospect and get to know the equity sources. You bring a tremendous value to your developer clients when you are able to match them up with the right equity sources which will enable them to access more deals and to effectuate deals. To do this you must be able to ‘talk the talk’ of CFO’s and have the ability to generate and walk through proforma’s and analysis. This is a much better way of getting involved with a favored project if you do not control the listing than simply trying to bring a buyer. CASH is KING.
Last but not least, the market has experienced a new paradigm. For 15 years, financing, credit and leverage has been easy to come by. For that reason there were more buyers than product to go around. Product was scarce and Listings were an emphasis. That was then, this is now. Find and establish relationships with buyers who have deep pockets. You may even have time to cultivate foreign money and investors, like you’ve been telling yourself to do for years.
While you are at it, upgrade the quality and size of your transactions. In a downturn such as this, a general flight to quality will exacerbate itself. Try to work on projects for which the quality justifies institutional exit strategies. There is more money at the top.
Article Written by Bruce A. Davis, Senior Partner of Bryant Commercial Real Estate Partners, LLC of Atlanta, Ga www.bryantcre.com and member of Market Solutions Group
