Mortgage Metrics: Commercial - Scotsman Guide http://www.scotsmanguide.com/default.asp?ID=3211 RSS Web Feed for Mortgage Metrics: Commercial - Scotsman Guide (Generated by Feedity.com) Feedity/2.94 (+http://feedity.com) Sun, 20 May 2012 19:30:27 GMT Sun, 20 May 2012 19:30:27 GMT Generated by Feedity.com http://feedity.com/images/feedity-logo-small.gif http://www.scotsmanguide.com/default.asp?ID=3211 1440 What We're Reading: July 7 Multifamily properties continue a strong recovery as average effective rents rose 2.4 percent and vacancies fell to 6 percent this past second quarter, according to The Wall Street Journal [subscription required]. “The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier, according to a report scheduled for release Thursday by Reis Inc., which tracks leasing data for 82 markets. Second-quarter rents rose in all but two markets. “Rent levels rose fastest in San Jose, Calif., to $1,501 in the second quarter. The average effective rent in San Francisco was $1,806; Wichita, Kan., $495, and New York, $2,826. “Vacancies, meanwhile, fell in 72 of the 82 markets during the second-quarter vacancy rate to 6%, the lowest since 2008 and compared with 7.8% a year earlier, according to Reis. Vacancies declined fastest in Charleston, W.Va., Greensboro/Winston-Salem, N.C., and Richmond, Va. "‘Rising rents and falling vacancies are the perfect situation for landlords,’ said Rich Anderson, an analyst for BMO Capital Markets. ‘It's like drinking without the hangover.’” There were, however, some signs that the recovery could be slowing down: “But there were some cautious signs in the data. Landlords filled a net 33,000 units in the second quarter, a slowdown from the 45,000 units they filled in the first quarter. That was somewhat surprising because typically, the net "absorption" rate falls faster during the summer as college graduates leave campus and descend on cities in search of jobs. Some analysts said the slower absorption rate could be linked to slower job growth, although it is too soon to know for sure. The peak apartment renting season runs from May to September.” -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 <p><a href="http://www.pheedo.com/click.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=d6752a216ae442249b6cd15a3ac178d4"><img src="http://www.pheedo.com/img.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=d6752a216ae442249b6cd15a3ac178d4" border="0"/></a></p> Lenders Turn Cautious Again In our June 30 post, we saw that lender reply rates on Scotsman Guide Loan Post had pulled back for most categories of commercial lending. In this post, we take a different look at lenders’ interest levels based on differences in posts with and without replies. The chart below shows average debt-service-coverage ratios (DSCRs) for posts with no replies and posts with at least one reply for the past 17 quarters on Scotsman Guide Loan Post. The quarterly results of the Moody’s/REAL National Commercial Property Price Index (CPPI) also are displayed on the graph. As we discussed in our Dec. 30 post, in a normal market, average DSCRs for posts with at least one reply are typically higher than posts with no replies, given that lenders generally display greater interest in properties with higher DSCRs.  In the fourth quarter of 2009, just after the Moody’s/REAL CPPI bottomed, average DSCRs for posts with at least one reply fell below those of posts with no replies, indicating that lenders turned cautious and started avoiding deals of all types, including those with solid DSCRs. In this past first quarter, average DSCRs for posts with at least one reply fell back below those of posts with no replies, indicating that lenders are, once again, cautious. And on June 22, the MIT Center for Real Estate reported that the Moody’s/REAL CPPI hit a new low in April, declining 3.7 percent from the previous month. We wonder whether this is just a short-term blip on a slow road to recovery — or perhaps it is signaling the beginning of another down leg for commercial real estate. -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 What We're Reading: July 6 The recovery in office properties appears to have slowed down with flat vacancy rates and over 20 markets still seeing decreasing rents in the second quarter of this year, according to Reuters. That may explain why office property owners were rushing to sell their properties earlier this year.... “The U.S. office vacancy rate stood at 17.5 percent at the end of the second quarter, according to Reis. The rate was the same as the first quarter, when vacancies posted the first decline in nearly four years. “Washington D.C. was the tightest market, with a vacancy rate of 9 percent, while New York was second with 10.7 percent, according to Reis. Detroit had the highest vacancy rate at 26.7 percent, followed closely by Phoenix at 26.5 percent. “The average asking rent rose 0.2 percent to $27.72 per square foot, according to Reis. Factoring in months of free rent and other concessions landlords offer to attract tenants, the so-called effective rent also rose 0.2 percent in the second quarter, to $22.25 per square feet. “Effective rents in San Francisco grew the most of markets Reis covers, up 1.3 percent to an average $31.23 per square foot. But New York, where effective rent grew 0.6 percent, remained the most expensive at an average of $46.22 per square foot. “During the quarter, 22 out of 79 markets Reis tracks showed effective rents decreasing, down from 34 and indicating the improvement is spreading, [Reis economist Ryan Severino] said.” -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 Welcome new lenders We would like to welcome the following new commercial lenders to Scotsman Guide for our July online update [brackets denote which matrix(es) you can find the advertiser’s programs in]: Allstar Financial Services Inc. [Hard Money] Centennial Bank [Commercial] Lantern Finance Co. [Commercial, Hard Money] LDI LLC (Loan Depot) [Commercial] Wallace Capital LLC [Hard Money] -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 <p><a href="http://www.pheedo.com/click.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=7492bd1e23914651a25f37fd4271fcc1"><img src="http://www.pheedo.com/img.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=7492bd1e23914651a25f37fd4271fcc1" border="0"/></a></p> What We're Reading: July 1 Small-balance commercial real estate sales (i.e., sales under $5 million) rose 12.4 percent in the first four months of 2011 over the same period last year, while price declines have slowed down, according to SmallBalance.com. “Despite weak fundamentals and economic uncertainty, small-cap CRE sales under $5 million have risen 12.4% in the first four months of 2011 compared with the same period last year. With financing increasingly available and at attractively low rates, private investors are seeking property acquisitions among all asset classes in solid locations nationwide. “Nationally, small-cap sales prices hit a cyclical low, as the SCPI-100 for 103 metro areas eased 0.4% on a preliminary basis. Even so, the national index is proving resilient with minimal losses of only 0.1% over the last three months and 1.8% over the last 12.” -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 What We're Reading: June 30 As the hotel industry continues its recovery, MSD Capital, Michael Dell’s personal investment fund, has been shoring up its investments in the sector by paying off delinquent mortgages and repairing or rehabbing its hotels in Hawaii and California, according to The Wall Street Journal http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 Reply Rates Pull Back In our June 23 post, we noted that the majority of the commercial real estate market is continuing to struggle, with Moody’s/REAL Commercial Property Price Index down 49 percent from its peak. With that in mind, we decided to gauge lenders’ interest in deals by measuring lender reply rates on Scotsman Guide Loan Post. The chart below shows lender reply rates by category for the past 17 quarters. Reply rates peaked in early 2010 and have come down a bit over the past few quarters. The multifamily category lead the decline with a drop of 12 percentage points to an average reply rate of 78 percent from the fourth quarter of 2010 to the first quarter of 2011. On a year-over-year basis, the hard money category has shown the biggest decline with a 16 percentage point decline to 79 percent. Based on several conversations with lenders, this could be more a reflection of a constrained capacity to lend rather than a lower interest level in commercial deals, however. Based on these numbers, it looks like lenders are still interested in funding deals, but perhaps are a bit more cautious than they were a few quarters ago. Perhaps the deterioration of underwriting standards in the commercial mortgage-backed securities market has had something to do with that. -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 <p><a href="http://www.pheedo.com/click.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=c33e5ccbcbf744fd853205c79f882740"><img src="http://www.pheedo.com/img.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=c33e5ccbcbf744fd853205c79f882740" border="0"/></a></p> What We're Reading: June 29 Another article cautions on the recent deterioration in commercial mortgage-backed security (CMBS) underwriting standards, this time from Investment News. “Following the recession, only the best properties are getting loans, so buyers are looking to the CMBS market to provide the debt for less-than-perfect real estate. “Competition is already stiff, which is forcing CMBS lenders to loosen the tougher post-crisis requirements they adopted. “Underwriting on the underlying mortgages in the CMBS loan pools once again is of the ‘pro-forma’ variety, and, in some instances, ‘valuations are questionable,’ especially within larger loans for highly prized properties, according to recent reports issued by Standard & Poor's and Trepp LLC, a provider of commercial-mortgage-backed-securities and commercial-mortgage data and analytics. This trend adds liquidity but also adds risk to the deals, as well as potential problems for the real estate market, industry insiders said.” According to Joe Smith, founding partner of real estate investment firm Glenmont Capital Management, the flaws from before the financial crisis still have not been resolved: “CMBS documents haven't changed from the peak of the market. … Most investors complained about flaws and issues with CMBS, and most of those flaws and issues have not been resolved. It's fairly amazing; the mechanism is still in place even though it led to issues in the marketplace.” -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 What We're Reading: June 28 Real estate investment trusts (REITs) raised large amounts of capital this past first quarter, making them active acquirers of commercial real estate properties and portfolios, according to Pensions and Investments. “In the first quarter alone, REITs raised $16.9 billion through secondary offerings, dwarfing the $3.5 billion raised by private equity-style real estate investment funds in the same period, according to data from the National Association of Real Estate Investment Trusts, a Washington-based trade group, and Preqin, a London-based research firm. “And what are REITs doing with that money? They're investing some of the cash, buying up properties and portfolios. “Just this month, apartment REIT Camden Property Trust entered into a deal to buy 11 apartments from Verde Apartment Communities for $321 million. “Over the last 12 months, there have been three REIT mergers with a combined value of about $29 billion. Two were announced this year: Industrial REIT AMB Property Corp merged with a larger rival, Prologis; and health-care REIT Ventas Inc. is merging with another health-care REIT, Nationwide Health Properties Inc.” -- Dan Yeh http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 What We're Reading: June 27 The recent recovery in strip shopping centers may be faltering because of higher vacancies relative to shopping malls and lingering problems from the recession, according to The Wall Street Journal http://www.scotsmanguide.com/default.asp?ID=3211&part=1 http://www.scotsmanguide.com/default.asp?ID=3211&part=1 <p><a href="http://www.pheedo.com/click.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=232e092a64dc42c5b6ae03efe7171000"><img src="http://www.pheedo.com/img.phdo?x=f49c333b0d4c41009fbfa077d383afda&u=232e092a64dc42c5b6ae03efe7171000" border="0"/></a></p>