Sunday, August 31, 2008

TRIM Notices Are Here...Fight!

Got my trim notices about 10 days ago. My property taxes actually went down across the board (as well as my insurance). Some clients of mine are not so lucky - some are reporting increases in assessed value. According to the Palm Beach Post, the tax assessor's office is preparing for a record number of challenges this year. Story below:

By ALEXANDRA CLOUGH

If you own property in Palm Beach County, chances are you recently received a notice in the mail, explaining how the property appraiser's office valued your property as of Jan. 1, 2008.

And if you're like most people, in years past you might have been in the habit of tossing the notice on top of the pile of other paperwork to be filed.

But not this year.

Owners of both residential and commercial properties are expected to scrutinize their TRIM (Truth In Millage) notices in ways they never have before. These TRIM notices are important because they include a tentative tax notice.

Lower property values mean lower taxes, and that's something of interest to everyone.

Given the precipitous decline of the real estate market, many people will be pleased to see the market and assessed values of their property decline. But others will conclude their property value should be lower than the numbers determined by the country's property appraiser. Experts predict a wave of property value changes by homeowners hoping to cut their taxes.

"The economy is so bad, everybody is counting their dollars," said Jason Sharff, a North Palm Beach entrepreneur who has started a business to help homeowners challenge their property values.

During the go-go days of the recent real estate boom, the values of residences and commercial properties shot up, pushing values to astronomical levels. Taxes based on those higher values zoomed up, too. But since the market began its decline in late 2005, values steadily have fallen.

Not enough for some people, though, especially since the market is, and feels, so much worse than it did at the beginning of the year. Therefore, many property owners are expected to file petitions challenging the values of their homes or businesses.

The property appraiser's office is ready for it. Along with TRIM notices, the appraiser this year also sent out a detailed guide explaining the notice. (Check out the guide at www.co.palm-beach.fl.us/papa/index.htm). For the first time, the county also is allowing property owners to file an on-line petition to challenge values by clicking on the county clerk's Web site, at www.pbcountyclerk.com.

But it's likely most residential property owners won't even need to go that far.

First, "take a deep breath," said Tom Barnhart, director of appraisal services for the Palm Beach County Property Appraiser's office. Then, pick up the phone and call the property appraiser's office. At that point, property appraiser representatives can explain that even though home sales have cratered during the past few months, only the comparable sales pegged by Jan. 1, 2008, count.

"It's that snapshot in time, one day," Barnhart said.

While the property appraiser will consider sales that took place later in the month, it's really the sales from 2007 that help determine a property's value, Barnhart said. Sometimes a property's value can be adjusted if the homeowner provides data that supports a change in the value. Barnhart said the vast majority of challenges are resolved without a hearing, either because the homeowner accepted the appraisal or the appraiser's office received more information about a home that did change its value.

"We're here to work with you," Barnhart said.

If both sides can't agree, however, homeowners can spend $15 and file a petition to challenge their property value and appear before the Value Adjustment Board.

Some people would rather just hand off the process to someone else, however. In that case, there are professionals who can be hired to handle appeals for property owners. Delray Beach real estate attorney Michael Weiner, who handles property tax petitions for clients, predicts a "huge cottage industry" of companies designed to help more property owners challenge their property values.

One of those is Sharff's company, Real Estate Property Tax Fighters (www.reptf.com). Sharff, a 26-year-old armed with a business degree from the University of Florida, said he recently was brain-storming ways to capture business from the real estate downturn.

He came up with the idea of a business that, for a flat fee, will handle property value challenges for residential customers. For $59, he'll handle the paperwork and assemble comparable sales culled from the Multiple Listing Service (MLS) used by real estate agents. Then he'll provide this information to homeowners who can then move forward with their challenges. But for $169, or "the package deal," his company will take the added step of representing homeowners before the Value Adjustment Board.

"It's an intimidating appeals process," Sharff said, explaining why he saw a need for his business. And he thinks many customers signing up for his service just don't want to be bothered with the process, which is why more people are signing on for the $169 service that relieves them of having to make a personal appearance to challenge their property values.

Read the full story here.

Regs to Orion Bank: "Better Get It Together"

Looks like Orion just got slapped by regulators and have been told to straighten up. From the Sarasota Herald Tribune.

By John Hielscher & Michael Braga
STAFF WRITERS

Published: Saturday, August 30, 2008 at 1:00 a.m.
Last Modified: Saturday, August 30, 2008 at 1:09 a.m.

Federal and state banking regulators slapped Orion Bank with a major enforcement action, criticizing its lending practices and oversight by the board of directors.

Naples-based Orion, a major real estate lender in Sarasota and Manatee counties, was ordered to take a number of steps to maintain its "financial soundness."

The Federal Reserve and the Florida Office of Financial Regulation made public on Friday a 15-page "written agreement" with the bank and its parent company, Orion Bancorp Inc.

Orion faces a series of deadlines -- some as soon as next week -- to tighten its loan policies, better monitor its borrowers and charge-off as uncollectible more of its soured loans.

The agreement is one of only 15 such enforcement actions taken by the Federal Reserve against a U.S. bank so far this year.

"The Fed would not have made this public unless they determined it was a serious enough situation for them to do it," said bank analyst Ken Thomas of Miami.

Orion, a nearly $3-billion-asset bank, posted a profit of $8.3 million through mid-year.

It reported $108.9 million in non-current loans and leases as of June 30, up from $5.2 million one year earlier. That represents 5.25 percent of Orion's entire loan portfolio.

A sizable chunk of those bad loans were apparently made in Manatee and Sarasota counties, where the bank operates four branches.

In the past 18 months, Orion has foreclosed on 20 loans totaling $74 million in the two counties.

Sarasota home builder Ron Mustari accounted for $11.3 million of the defaulted loans. Condo converter Warren Hickernell accounted for $11.7 million.

Manatee home builder David Lewis accounted for $1.8 million in bad loans, and Siesta Key developer Jack LeFrock accounted for $1.3 million.

Orion's financial picture could change under the Federal Reserve agreement.

Within 10 days, the bank must eliminate from its books an unidentified amount of assets it now classifies as losses but has yet to charge-off.

The privately owned Orion has long been headed by Jerry J. Williams, who acts as chairman, president and chief executive officer.

Neither he nor his public relations firm returned calls Friday seeking comment.

The 31-year-old bank has been consistently profitable, boasting of industry recognition as a top-performing Florida bank.

The agreement's first order directs the bank to improve the board's oversight of management and operations. Thomas said it is unusual for the board to be cited first thing in such an action.

"It's suggesting that the current board is not strong and needs to be strengthened," he said.

Speaking generally and not about Orion specifically, Thomas said banks whose CEOs are also board chairmen often wind up with rubber-stamp boards and too much power concentrated in one person.

The bank has 90 days to submit a plan to reduce its concentration of commercial real estate loans.

Within 60 days it must revise its loan policies on renewing credit to existing borrowers, and revise its loan-to-value limits to follow federal regulations.

Enforcement actions by federal or state banking regulators are considered serious actions.

First Priority Bank of Bradenton was hit with a "prompt corrective action directive" by the Federal Deposit Insurance Corp. just one month before it became the nation's eighth bank failure of 2008.

Venice-based Community National Bank of Sarasota County entered into a "formal agreement" with the Office of the Comptroller of the Currency in April to toughen its lending operations after the agency discovered "unsafe and unsound" banking practices. Read story here.


Integrity Bank Goes Down

Another one goes down for the count. From Bloomberg.com.

Integrity Bank Becomes 10th U.S. Failure This Year (Update2)

By Alison Vekshin and Ari Levy

Aug. 29 (Bloomberg) -- Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators today, the 10th bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Great Depression.

Integrity Bank, with $1.1 billion in assets and $974 million in deposits, was shuttered by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. Regions Financial Corp., Alabama's biggest bank, will assume all deposits from Integrity, which was run by Integrity Bancshares Inc. The failed bank's five offices will open on Sept. 2 as branches of Regions, the FDIC said.

``Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance,'' the FDIC said.

Banks are being closed at the fastest pace in 14 years as financial companies report more than $505 billion in writedowns and credit losses since 2007. California lender IndyMac Bancorp Inc., which had $32 billion in assets, was closed July 11 in the third-largest bank seizure, contributing to a 14 percent drop in the U.S. deposit insurance fund that had $45.2 billion at the end of the in the second quarter.

Regions will buy about $34.4 million in assets and will pay the FDIC a premium of 1.01 percent to assume the failed bank's deposits, the FDIC said. The FDIC estimates the cost of the Integrity failure to its deposit-insurance fund will be $250 million to $300 million.

Told to Raise Capital

Integrity was ordered by federal and state regulators in May to present a capital-raising plan within 60 days. At the time, the company had been trying without success for at least eight months to raise $40 million after loans to residential and commercial developers were hurt by the collapse of the real estate market.

``Banks must meet certain regulatory minimums to ensure safety and soundness,'' Georgia bank commissioner Rob Braswell said in a telephone interview. ``When those minimums are not able to be met and solvency is in jeopardy, we have no choice but to close the institution and to place it into receivership.''

Integrity Bancshares, which sold for more than $14 a share in January 2007, closed today at 4 cents in over-the-counter trading.

The FDIC insures deposits of up to $100,000 per depositor per bank, and up to $250,000 for some retirement accounts at 8,451 institutions with $13.3 trillion in assets.

`Problem' Banks

The FDIC this week said 117 banks are classified as ``problem'' in the second quarter, a 30 percent jump from the first quarter. The agency doesn't identify ``problem'' lenders.

``More banks will come on the list as credit problems worsen,'' FDIC Chairman Sheila Bair said at an Aug. 26 Washington news conference.

The credit market turmoil may topple some of the nation's biggest banks, Kenneth Rogoff, former chief economist at the International Monetary Fund, said in Singapore Aug. 19.

``Like any shrinking industries, we are going to see the exit of some major players,'' Rogoff told Bloomberg, declining to name the banks he expects to fail. ``We're really going to see a consolidation even among the major investment banks.''

Before today's action, the FDIC had closed 36 banks since October 2000, according to a list at fdic.gov. The U.S. shut 11 banks in 2002, the highest in the period. In 1994 the government had closed a dozen institutions by the end of August.

U.S. regulators this year also closed Columbian Bank and Trust of Topeka, Kansas, on Aug. 22; First Priority Bank of Bradenton, Florida, on Aug. 1; Reno-based First National Bank of Nevada and Newport Beach, California-based First Heritage Bank in July; Staples, Minnesota-based First Integrity Bank and ANB Financial in Bentonville, Arkansas, in May; Hume Bank in Hume, Missouri, in March; and Douglass National Bank in Kansas City, Missouri, in January.

Thursday, August 28, 2008

Economy Has Some Businesses Facing Eviction Notice

I don't think there's a statistic for the amount of commercial evictions occurring locally, but I would bet the Sarasota/Manatee market is similar to that of Miami/Dade's. It's a tough time to start a business, and just as tough to keep the lights on when your customers are cutting back on spending. Unfortunately, I think we're going to see more of the same. It's certainly as trying of a time for landlords as it is for tenants. A lot of people I talk to are very tentative about expansion and many landlords are equally worried that even good credit tenants may leave. The domino effect this has is pronounced. The good part is there are landlords out there who will attempt to work with their tenants in this market (see story below).
From Daily Business Review, by Polyana da Costa

When the owners of Tiger Allie, a Boca Raton children’s clothing store, signed a retail lease in 1997, they likely never imagined the financial and legal woes they’d face.

More than 10 years later, they are at least five months behind on their rent, a sign advertising a liquidation sale is on the door and a lawsuit seeking the store’s eviction is pending.

When Tamarac Fortune Partnership, which owns a three-story office building on University Drive in Tamarac, leased an entire floor to a group of businesses in the medical field in late 2006, the landlord had no inkling the tenants would default on the five-year lease. In July, however, the partnership sued to evict the businesses, which it says defaulted on lease payments beginning in April.

And at Boca Raton’s tony Mizner Park, at least two stores, an art gallery and an antique shop, have fallen behind in payments, according to eviction lawsuits filed against those stores.

As the economy flirts with recession, these and hundreds of other small South Florida businesses — including medical offices, art galleries and clothing stores — are struggling to keep pace with their rents. Increasingly, they’re failing. That means a sharp uptick in evictions, a boost in work for real estate lawyers and greater strains on the legal system.

The volume of all evictions filed in Miami-Dade, Broward and Palm Beach counties is up an average of 10 percent compared to last year, according to the clerk’s offices in each jurisdiction.

For example, June was a record month for lawsuits seeking evictions in Palm Beach County — 1,076 were filed compared with 877 in the same month last year. (The figures include residential evictions since the clerk’s office does not track separate actions against commercial tenants.)

Most store owners facing eviction lawsuits don’t want to comment. Representatives of Tiger Allie, the Boca Raton clothing store facing eviction, did not return a phone call.

The suits seeking evictions represent only a small number of commercial tenants who’ve fallen behind on their rents. Many landlords are choosing to work out deals with struggling tenants, said John Scott, director of client solutions at Cushman & Wakefield.

Scott said the company, which manages about 10 million square feet of office, warehouse and retail space, has not seen a mass of evictions at its properties. It has helped its landlords work with tenants who are financially strapped. The options have included lowering tenants’ rents for a period of time and rolling over the shortfall to the end of the lease, he said.

“Landlords aren’t just looking to eliminate their tenants,” he said. “The market is not as strong as it was a couple years ago. It’s hard to replace a tenant in this market. Our brokers have been working harder than ever.”

Read the rest of the story (Registration Required)
Copyright 2008, Daily Business Review

Tuesday, August 26, 2008

Interest Rates Likely to Increase at Next Fed Meeting

Not sure how much this matters to many because so few are able to borrow right now (at the soon-to-be-previous rates, that is). This may help wake lenders out of their current funk, that's at least one possibility. We shall see.

Aug. 26 (Bloomberg) -- Federal Reserve officials agreed at their meeting this month that their next move in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision, records of the gathering show.

``Although members generally anticipated that the next policy move would likely be a tightening, the timing and extent of any change in policy stance would depend on evolving economic and financial developments,'' according to minutes of the Aug. 5 Federal Open Market Committee meeting released in Washington.

The minutes today show a debate over the magnitude of the inflation threat, with two groups of officials making different judgments on the impact of the recent slide in commodity prices. Policy makers also diverged on whether financial turmoil continues to pose the risk of a more severe credit crunch.

The Fed left its benchmark lending rate unchanged at 2 percent for the second straight meeting on Aug. 5. At the time, traders estimated a 31 percent chance of at least a quarter- point increase by the end of the year, futures prices show. Now, that probability is 22 percent.

``There is a big split on the FOMC, no doubt about that,'' said Lyle Gramley, a former Fed governor and senior economic adviser at Stanford Group Co. in Washington. ``We know there is a severe credit crunch, but it is difficult outside the housing market to pin down how much impact it is having on the economy.''

Read More At Bloomberg

US Banks to see more write downs. This time, Commercial Real Estate Loans!

Courtesy Proactive Investors.

No good news is emanating from the US banking sector. This time it is commercial real estate loans. Markets were suffering from sub-prime mortgage issues as related residential mortgages turned out to be not so good loans after all. Concerns are now mounting over commercial real estate loans following suit.

Concerns were prompted by Riverton Apartments, a 12-building residential development, in Harlem New York, when it warned last week that it might not be able to honour a $225 million mortgage payment by September. Riverton’s mortgage was also wrapped into a commercial mortgage backed security which was subsequently structured and sold as bonds. According to New York Times, a default by the complex would be New York’s largest in the current housing crisis. Wall Street banks are estimated to hold approximately $100 billion of commercial mortgage-backed securities.

The news has raised concerns over the commercial real estate market and loans as its deterioration could lead to more write-downs in the already suffering banking sector. Several major banks have exposure to the sector which includes Deutsche Bank (NYSE: DB) (estimated $25.1 billion), Morgan Stanley (AMEX: AMK) (est. $22.1 billion) and Citigroup (NYSE: C) (est. $19.1 billion). Lehman Brothers (NYSE: LEH) is estimated to have the highest exposure (est. $40 billion) according to New York Times.

We discussed in a previous note Lehman’s attempts to raise capital from Asian Sovereign Funds. Lehman however is not alone here and all are on the look out to dispose of commercial real estate loans made up of hotels, retail malls and offices.

Cracks have already started to appear. Moody’s REAL Commercial Property Price Index (CPPI) has continued to fall in June with a 3.3% monthly decline, marking a 9.6% decrease from year-ago levels. June is the fourth straight month the index has declined and in total CPPI has fallen 12 percent from its dizzy heights in last October. All four property types measured in the index have posted negative returns in 2Q2008. The national industrial market has suffered most with 9.3% decline during the quarter. The national apartment market, offices and retail have also fallen 7.1%, 5.9% and 4.6% respectively.

For the savvy investor however, there were enough early warnings. Morgan Stanley and Wachovia announced large write downs related to commercial mortgage losses in late last year and 1Q2008 respectively. More similar write-downs to follow it appear making hopes of a banking sector revival bleak.

Courtesy: New York Times, Moody’s, CEP Newswires

Thursday, August 21, 2008

Some Businesses Turning to Credit Cards In Place of Loans

What can only be described as one form of desperation, a recent survey by the National Small Business Association revealed that many small businesses are turning to high interest credit cards in place of hard-to-get commercial loans. Money is certainly scarce, but one has to wonder exactly what kind of fallout this is going to cause down the road.

The 30% interest rate on their small business credit card shocked James and Heather Hills enough to stop using it entirely in April. The couple had turned to credit cards in early 2006 to get their Elgin (Ill.) startup, mhn Internet Marketing and PR, off the ground, after three loan officers told them that they wouldn't qualify for a bank loan without capital equipment to put up as collateral. So the Hills, who have no outside employees, took out a $50,000 home equity line of credit and two personally guaranteed small business credit cards.

They had a handle on their debt until a partner abandoned a planned joint venture in March 2007 and the Hills were left with almost $10,000 for the project on their Advanta (ADVNA) card. Since then, they say they've been late on a couple of payments, and their interest rate has steadily increased from 11.74% to 30.99%. "It suddenly starts being several hundred dollars worth of interest charges," James Hills says. Even without new purchases, they don't expect to pay off the remaining debt, still over $6,000, before 2009. (Advanta, citing privacy laws, declined to comment.)

While data on small business borrowing is scattered, indications show that entrepreneurs are increasingly relying on credit cards to finance their businesses, especially early-stage companies. The percentage of firms using credit cards has jumped from 16% in 1993 to 44% today, according to surveys by the National Small Business Association, a trade group. In the same period, the proportion using bank loans dropped from 45% to 28%. A Federal Reserve survey showed that the percentage of firms using business credit cards jumped from 34% in 1998 to 48% in 2003. And numbers from the NSBA and the Fed show that between 20% and 30% of all small businesses carry a revolving credit-card balance, rather than paying their bills in full each month.

"We don't have an alternative right now," says NSBA chair Marilyn Landis, a former bank executive who now runs Basic Business Concepts, a financial consulting business. "If there were alternatives, business owners would go there." It's a particular problem for service or information companies that don't have equipment or inventory to secure commercial loans. In testimony before the Senate Small Business Committee in April, Landis described applying for bank lines of credit and receiving credit cards instead. But relying on cards, rather than on fixed-rate loans or credit lines, can saddle small companies with unexpected and expensive debt.

Read more at Business Week...

SIOR Commercial Real Estate Index Reflects Country's Economic Woes

WASHINGTON, Aug. 20 /PRNewswire The Second Quarter 2008
SIOR Commercial Real Estate Index, compiled by the Society of Industrial
and Office Realtors (SIOR) in association with the National Association of
Realtors (NAR), indicated that commercial real estate markets have not yet
begun their rebound to market equilibrium. The national Index, which
measures 10 variables pertinent to the performance of U.S. industrial and
office markets, dropped fo
r a sixth straight quarter to an overall total of
76.4 points. This point drop placed it 23.6 points below the 100 point
criteria that represents a balanced office and industrial marketplace and
43 points below its record high in spring 2006.

The SIOR Commercial Real Estate Index is a diffusion index (see
Methodology) where a sco
re of 100 indicates markets in balance. A score of
76.4 reflects conditions that are significantly less favorable for
landlords and sellers, but excellent for tenants and purchasers.

SIOR commercial real estate professionals provided their views on
second quarter 2008 market conditions in their respective markets in a July
survey.

An unprecedented number of SIOR members -- 83 percent -- report that
their local markets are feeling the impact of the decline in the national
economy. This number is 59 percent higher than just one year ago. Leasing
activity is down according to 75 percent of respondents. Concessions
benefiting tenants are riding above normal and have increased 29 percent
from the same quarter one year ago. Twenty-three percent of respondents
indicated that there was virtually no new construction going on in their
marketplace and according to 67 percent of respondents construction in
general is down. Concerns about where the economy is heading are clearly
impacting commercial real estate business -- and will continue to do so as
50 percent of respondents predict a 1-15 percent decline in activity for
3rd quarter 2008.


Read the rest of the story


Wednesday, August 20, 2008

Moody's: Commercial Real Estate Prices Dip in June

NEW YORK - Commercial real estate prices continued to decline in June, according to Moody's/REAL Commercial Property Price Indices, Moody's Investors Service said Wednesday (8/20).

The index fell 3.3 percent from May, and was down 9.6 percent from the year-ago level.

June was the fourth consecutive month that the index declined, Moody's (nyse: MCO - news - people ) said. The CPPI now stands 11.8 percent below its peak in October 2007.

The index is based on repeat sales of the same properties across the U.S. at different points in time.

All four property types measured by the index went negative during the second quarter, Moody's said. The national industrial market saw the largest price drop, down 9.3 percent during the quarter. National apartment market prices fell 7.1 percent, while office prices slipped 5.9 percent and retail declined 4.6 percent.

Through the first half of the year, transaction volume dropped more than 25 percent compared to the first half of 2007, Moody's said. There was a slight increase in both number and dollar value in June from the previous month, the company said.

The June uptick may be the first sign of stabilizing transaction volumes, which could point to future price stabilization, said Moody's Managing Director Nick Levidy. However, "it may also be a transient or seasonal effect, and future data will need to be examined in order to identify any trends." From Forbes.com

Copyright 2008 Associated Press. All rights reserved.

Tuesday, August 19, 2008

ICSC Panel = Be Nice To Your Tenants + Some POSITIVE News

Some positive news at ICSC this past week. A report released by the group states that Florida's retail occupancy is much healthier than much of the nation and that the state is poised for very aggressive, positive growth once the broader economy gets healthier. Good to know, but the ICSC panel noted foreclosures will be spiking as loans reset.

Stanley Tate, president of North Miami, Fla.–based Tate Enterprises and an advisor to the Federal Reserve, cautioned landlords to play nice" with their current tenants. "An occupied store is better than an unoccupied one," he said. "Even if it is at half the rent."

Owners of distressed retail properties will need to do some fancy footwork to stay afloat in the coming year as many of their loans come due, speakers said at ICSC's Florida Conference in Orlando, Fla., today. Without enough cash flow to maintain mortgage payments, these owners will need to try and re-negotiate loan terms with lenders and rethink CAM and other operating costs to help troubled tenants keep up with their rent payments.

More than $1 trillion worth of U.S. commercial properties will undergo foreclosure in the coming year as owners default on their loans, predicted Stanley Tate, president of North Miami, Fla.–based Tate Enterprises and an advisor to the Federal Reserve. "It's just beginning to start. Those who are heavily leveraged are going to have a very difficult time," Tate said. He pointed out that the FDIC has hired 500 new regulators to help shut down 85 banks within the next 30 days. As more and more subprime borrowers default on loans, "there are very serious problems in the banking industry," he said.

Not all of that foreclosed commercial property will be retail, but Tate expects a significant portion to be small open-air centers tenanted by mom-and-pop shops. Such tenants have been hit hard by inflation and are having trouble keeping up with rent payments, he said. And landlords can no longer count on securing new debt to stay afloat. "In the past few years, every deal was bailed out by more easy money," said John Kozyak, a commercial bankruptcy lawyer with the Coral Gables, Fla.–based firm of Kozyak, Tropin, Throckmorton. "Now, with a lot of loans coming due next year, the easy money has run out."

Troubled owners should not put off trying to renegotiate loans until the last minute, Kozyak said. "The main thing is to get to your lender early and with accurate information," he said. "Lenders are demanding more information in the current economy and they're not tolerating the sneaking around that's been going on in the past 18 months."

To avoid write-offs, lenders are willing to be flexible and work with distressed borrowers, particularly insurance companies and publicly traded lenders who might be more willing to play ball as their quarter is drawing to its close, said Raul Valdez-Fauli, president and CEO of Coral Gables, Fla.–based CNL Bank. "Banks are dusting off forebearance agreements, which include the extension of amortization periods and even reduction of mortgage payments for several months if a borrower can prove that an impending increase in cash flow is on the horizon,"
Valdez-Fauli said.

Landlords should do their part to help troubled tenants make rent and keep cash flow up, said Craig Sher, executive chairman of St. Petersburg, Fla.–based The Sembler Co. "Developers will have to reduce CAM expenses penny by penny, and try to save money on insurance. We've attacked every appraiser," he said. "Save tenants money on the expense side so they can afford to pay rent."

Tate recommended that landlords approach troubled mom-and-pop tenants now to renegotiate rents and lease terms. "An occupied store is better than an unoccupied one," he said. "Even if it is at half the rent."

Copyright 2008, International Council of Shopping Centers

Saturday, August 16, 2008

What a Mess

It's happened before: a 1031 intermediary shuts its doors and takes investors' cash along with. The worst part about these kinds of failures is that the IRS does not care that you lost your money. Obviously, without the proceeds cash to complete the 1031, you're pretty much SOL. It's still your responsibility to pay those (thought to be) deferred taxes. No one's really sure how much money has been lost...the largest 1031 loss so far was the implosion of The 1031 Tax Group LLC in 2007 with $130-million in 1031 funds missing. The latest catastrophe is that of Vesta Strategies. See below.

Former clients of Vesta Strategies LLC have been livid that the facilitator of tax-deferred real-estate transactions shut its doors last month without returning several million dollars of their money. Now California authorities are getting involved.

The district attorney's office in Santa Clara County last week searched four properties associated with Vesta, including two Vesta offices and the homes of its former chief executive, Robert Estupinian, and former operations chief, Peter Ye. The investigators seized 60 boxes of Vesta documents, according to Santa Clara Deputy District Attorney Mike Fitzsimmons.

"I'm getting calls from all over the country from investors who gave their money to Vesta," Mr. Fitzsimmons says. "We're going to...coordinate our efforts as appropriate with other agencies."

Mr. Estupinian, who left Vesta last November, said Tuesday that he is cooperating with the DA's office. Mr. Ye didn't return messages seeking comment. John Terzakis, a Chicago businessman and majority owner of Vesta, on Tuesday mailed settlement offers to several Vesta clients, his spokesman said. Mr. Terzakis and Mr. Estupinian have sued each other in federal court, each accusing the other of embezzling from Vesta.

As a so-called qualified intermediary, Vesta held money for investors who had sold a property and intended to use the proceeds to purchase another. Under section 1031 of the Internal Revenue Code, investors doing such like-kind transactions can defer paying certain taxes on the deals if they adhere to criteria such as parking the money in the interim with a disinterested intermediary. From WSJ.

Thursday, August 14, 2008

FYI: What is a LEED-Certified Building?

With all the latest interest in preserving the environment, it's no surprise that standards have been developed to promote the design and construction of "green" work and living spaces. I'm sure many have heard of the term "LEED" by now.

The acronym LEED stands for The Leadership in Energy and Environmental Design. According to the U.S. Green Building Council, "LEED is a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. LEED gives building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance. LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality."

According to the site, buildings are responsible for:

• 70% of electricity consumption,
• 39% of energy use,
• 39% of all carbon dioxide (CO2) emissions,
• 40% of raw materials use,
• 30% of waste output (136 million tons annually), and
• 12% of potable water consumption.


The LEED standard is way too complicated to get into on a blog like this one, but a visit to USGBC.org will help shed some light on the subject.

Some examples of LEED-certified commercial buildings in Sarasota:

CPI up 5.6% in the past year, biggest increase in 17 years

More lousy news today as the Labor Department released figures stating the CPI grew 0.8% in July alone. Tenants with CPI escalations are definitely going to feel this at renewal time, possibly driving more to default or raise prices to their customers.

The only real saving grace here might be that commodity prices have come down noticeably in August. Either way, it hurts.

WASHINGTON (MarketWatch) -- U.S. consumer prices jumped a greater-than-expected 0.8% in July, marked by big increases in energy, food, clothing and cigarettes, the Labor Department reported Thursday.
The core consumer price index, which measures retail-level inflation after excluding volatile food and energy inputs, rose 0.3% for the second straight month. Read the full report.
Coming in much worse than anticipated, the pair of red-hot inflation readings seem certain to swell the chorus of critics urging the Federal Reserve to raise interest rates to quell inflation.
Economists had predicted that the seasonally adjusted CPI would rise 0.5% and that the core CPI would increase 0.2%, according to a survey by MarketWatch. See Economic Calendar.
Consumer prices are up 5.6% in the past year, the biggest year-over-year increase since January 1991. The CPI has surged at a 10.6% annualized rate in the past three months.
The core CPI has risen 2.5% in the past year, the biggest gain since January. The core rate's rising at a 3.5% annual rate in the past three months.
The CPI rose 1.1% in June, with the core rate up 0.3%.
So far, Fed officials, with a few vocal exceptions, have stuck to their forecast calling for inflationary pressures to moderate as the economy stagnates. Wages, a key linkage in any inflation spiral, have stagnant.
CPI for August should be much cooler, as petroleum and gasoline prices have fallen significantly since mid-July.
As far as July overall goes, the picture was undoubtedly ugly, with just a few bright spots on the inflation front.
Owners' equivalent rent, which accounts for nearly a quarter of the CPI, rose just 0.1%.
Medical-care prices nosed up 0.1%, including a 0.2% drop in medical commodities.
New car prices increased 0.2%.
But elsewhere, inflation raged.
Energy prices rose 4% in July, led by increases of 4.1% for gasoline and 7.4% for natural gas.
Food prices increased 0.9%, with the price of food at home jumping 1.2%. Prices rose by 1.8% for cereals and bakery goods, by 1.6% for dairy products, and by 1% for meat, poultry and eggs.
Apparel prices rose 1.2%, the most in 10 years.
Tobacco prices also increased at a 1.2% clip.
Housing costs increased 0.6%, boosted by a 3.8% increase in energy costs. Rents rose 0.3%, while the price of lodging away from home was up 0.7%.
With prices for urban wage earners up 0.9%, wages flat and hours worked falling, real weekly wages (adjusted for inflation) fell 0.8% in July. In the past year, real weekly earnings have fallen 3.1%.
In a separate report, the Labor Department said the trend of new applications for unemployment benefits rose to a six-year high, while the number of continuing claims hit the highest mark since late 2003.

Wednesday, August 13, 2008

Business-Property Outlook Sours

The hits, they just keep on coming. As reported in the Wall Street Journal this morning, Real Estate Roundtable conducted a survey of executives from around the country who reported - surprise, surprise - the market has actually gotten worse. What was most interesting to me was the comment that many have become more negative as to things turning around in the near future.

Business-Property Outlook Sours
By JESSICA HOLZER
August 13, 2008; Page C14

WASHINGTON -- Real-estate executives' outlook for the commercial-real-estate market has deteriorated as hopes dim for improvement during the next year, according to a Real Estate Roundtable survey.

More than 80 out of 100 senior industry executives asked said the general market has worsened during the last 12 months.

The share of executives expecting the market to bounce back even slightly in the coming year dropped to 53% in July from 63% in April.

Respondents cited the credit squeeze and the weakening economy as the chief culprits hurting the commercial-real-estate market. Nearly 90% of respondents predicted that commercial-real-estate prices will drop or stay flat during the next 12 months.

"Even though loan delinquencies to the sector are very low, the ongoing lack of credit for real estate has led to weaker property values and has stalled transactions," Roundtable President and CEO Jeffrey D. DeBoer said.

More than 80% of the executives surveyed said the availability of credit was "much worse" than it was a year earlier, although roughly two-thirds expect the debt market to improve during the coming year.

Respondents were more optimistic about the equity market, with roughly half judging the availability of equity financing as "somewhat worse" than a year ago.

However, more than half surveyed said that overall conditions in the real-estate market would be "somewhat better" over the next year.

The survey was conducted during the third week of July.

Monday, August 11, 2008

Tight Credit Markets May Extend Well Into 2009

According to a Wall Street Journal article today, stricter lending practices may extend well into the first half of 2009.

According to an Associated Press news release, a July survey of 50+ banks conducted by the Federal Reserve found that "A majority of banks tightened their rules for granting loans to businesses and consumers. The survey shows little appetite at banks to lend for home mortgages, credit cards, home equity loans, commercial real estate loans, or commercial and industrial loans."

On loans for commercial real estate, about 80% of domestic banks said they tightened lending standards, the same fraction as in April. About 35% of foreign banks, down from 55% in April, said they had tightened standards on these loans.

Every Hour a Store Closes

Click the photo for a full list (courtesy of CEO Economic Update). Here's the short roster:

Ann Taylor closing 117 stores nationwide.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots will close all 78 of its kids and men’s stores plus another 22 underperforming stores.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world’s largest home improvement store chain has ever closed a flagship store.

Movie Gallery – video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall as part of bankruptcy.

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.

Wilsons the Leather Experts – closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

KB Toys closing 356 stores around the United States as part of its bankruptcy reorganization.

CompUSA (CLOSED).

Info courtesy of CEO Economic Update.

Visit the CEO Economic Story Here.

Related Link, BUSINESSWEEK: Bankrupt Retailers: Pushed to the Brink. Changes in the law have sharply reduced retailers' ability to reorganize, driving many to liquidate quickly


Peek Traffic Lease 3rd Largest in Tampa Bay

According to CoStar, the Peek Traffic deal handled by myself and Staubach Cos. (now Jones Lang LaSalle) ranks as the 3rd largest lease transaction in the entire Tampa Bay region so far this year based on square footage. It ranks as the largest lease of its kind in Sarasota/Manatee counties for the first six months of this year. The property, which is located at 2906 Corporate Way in Palmetto is 56,000 square feet and was built in 2007. The building, which sits atop six acres of land, is owned by Gammerler, LLC. Peek traffic was recently sold to Signal Group (Houston) for $20-million in cash.

Survey: Homeowners in denial about falling values


Although not a story about commercial property, I know quite a few commercial brokers who would agree that this same seller sentiment is consistent within our own market. There is a lot of denial going on within the commercial sector as well, albeit not as bad, but it's there.

Zillow.com finds that a majority of homeowners believe their homes are insulated from the housing crisis, which has seen 77 percent of the nation’s homes fall in value during the second quarter.

The online real estate company’s second-quarter homeowner confidence survey found that 62 percent of homeowners believe their homes have increased in value despite the nation’s widely reported housing woes and market data indicating the contrary.

Homeowners are even more optimistic looking ahead as they anticipate their homes will be worth more in six months. Still, many homeowners are concerned that foreclosures in their area could hurt values over the next year.

Zillow said preliminary results of its second-quarter real estate market report, to be released Aug. 12, show 77 percent of the nation’s homes dropped in value during the second quarter, while 19 percent rose in value and 5 percent stayed the same.

“Whether it’s apathy, confusion or just plain denial, homeowners seem to believe the housing crisis affects every other home but ‘not my house,’ underscoring a wide gap between homeowners’ inflated perceptions of their home’s value and the gloomy market reality,” Zillow said.

The company created an index to measure the disparity, called the Home Value Misperception Index. It measures the difference between the percentage of homeowners who believe their home value increased over the past year and the percentage of homes that actually increased in value.

Nationally the index stood at 32 in the second quarter. The West, with the highest proportion of homes that declined in value during the second quarter at 88 percent, has the narrowest gap between reality and actual home values as measured by an index reading of 23. The South had the widest gap, with an index reading of 36. The Northeast, where 74 percent of homes decreased in value, had a misperception index of 29.

Zillow’s findings are based on a survey of 1,361 U.S. homeowners conducted by Harris Interactive.

Thursday, August 7, 2008

Retail Leasing Sector: Bad, Bad, Bad

Excellent article in Globe St today about how the national retail sector is doing at the moment. It doesn't look good. From my own personal experience, stores are doing everything they can to get customers through the door. I tend to buy a lot of clothes for work and the sales are just too numerous to name at the moment. Recently I had a coupon mailed to me by Express Stores offering $30 off of any purchase of $75 or more. That's pretty significant and I was a bit skeptical, but lo and behold, I bought some slacks and a few other (heavily marked down) things from there for $76 and ended up with a $46 bill. On Monday I got yet another $30 off coupon mailed to me from Express. Although it got me in the store, I wonder how much this is all costing them. I wandered into my local Dillards last Friday and was amazed by the sheer number of markdowns everywhere. This is good if you're a bargain hunter, but not so good if you're a commercial real estate agent or landlord relying on retail leasing for your livelihood.

To underscore my point, one shopping center near my house (which was recently purchased by Developer's Diversified), has gone from 98% occupied to 65% occupied in a span of three months. This wasn't because one large user left, either. Six or seven inline tenants just vaporized over a period of 12 weeks (Coldwell Banker, Patio America, Manatee Mattress, etc). One former tenant, Party City, angrily stuck a sign in the window of their vacant unit reading "Lease Expiring...Cannot Afford the New Lease". I took a photo of this which is posted above.

We're living in interesting times, that's for sure.

From Globe St...click link below for the rest of the story at GlobeSt.com:

Slowing Economy Nibbles Away at Retail Fundamentals

There are two economic storms brewing in the US now – one on Wall Street and one on Main Street. The retail real estate sector sits squarely in the middle of both -- a fact that was illustrated earlier this month when Starbucks announced it was closing 500 stores by mid-2009. But Starbucks is hardly the only retailer to confront slowing sales with a cutback in real estate. Build-A-Bear Workshop will dramatically cut back on store openings next year, it announced this month, it announced this month, as will Regis Corp., the parent of Supercuts and other salon chains, which plans to close about 160 stores, most of them in malls to name just a few examples.

While all the commercial real estate sectors are suffering from the capital market freeze, retail developers must also contend with occupancy and rent projections that are looking more and more grim. “Right now retail is in the crosshairs of two trends: a slowdown in leasing due to slow retail sales, and a capital market that is reluctant to lend,” says Ray Cirz, CEO and managing director of Integra Realty Resources. He points to an iconic lifestyle center on the eastern seaboard that has been reluctant to issue a date for a grand opening. “Construction is complete and they have signed a number of major anchors but they are having trouble filling the inline space,” he tells GlobeSt.com. “Leasing has been that slow.”


Click here for the entire article.

1,323 SF Goes to Juvenile Diabetes Research in Lakewood Ranch

7-AUG-08: Juvenile Diabetes Research Foundation (JDRF) leased 1,323 SF of office space in the Lakewood Ranch Tech Park at 7341 Professional Parkway for three years. Based out of New York City, JDRF has 100 locations and is the leading charitable funder and advocate of type 1 (juvenile) diabetes research worldwide. Since its founding in 1970 by parents of children with type 1 diabetes, JDRF has awarded more than $1.16 billion to diabetes research, including more than $137 million in FY2007.

Anthony V. Migliore, P.A. of Coldwell Banker Commercial NRT represented the landlord, GOP I, LLC, and Diane Lawson of Abbey Realty represented the tenant.

Comm-Ex Story on The Deal

Wednesday, August 6, 2008

Report: Real estate agents willing to cut commission


When it comes to residential real estate these days, it seems everything is subject to negotiation.

That includes the real estate broker's cut on the deal, according to a report issued Monday by Consumer Reports. Based on a recent survey of home sellers, 46 percent of people trying to sell their homes through agents tried to negotiate a lower commission rate. Of those home sellers, 71 percent succeeded in getting the real estate agent to take less.

Haggling, the nonprofit Consumers Union publication noted, didn't mean home sellers were getting less from their agents or were less satisfied with the outcome. Sellers who paid commission rates of 3 percent or lower were just as satisfied with their broker's performance as those who paid 6 percent or more, the report noted.

Despite the nationwide slump in residential real estate sales, 86 percent of Consumer Reports' readers who put their homes on the market made a sale, while only 8 percent gave up and took their homes off the market.

Agents with large brokerage firms scored just as well as independent brokers when it came to customer satisfaction, but the magazine recommends home sellers base their choice of agents on factors that include personal recommendations.

The magazine recommends home sellers price their homes realistically, and drop their asking price between 4 percent to 6 percent if they don't receive an offer within four to six weeks.

The Washington (D.C.) Business Journal is a sister publication of The Business Journal Serving Greater Milwaukee.

Just Listed the Binz Building

Just a note: I am not intending to write about my listings here as that's not the point of the blog, but this one is worth a mention. I took this listing over from another agent in my office and, quite frankly, it's one of the coolest buildings I've had the pleasure of marketing. I've been driving by it for years and always thought the place would make a great loft to both live and work in. It's not zoned for that kind of use, but I could envision someone putting their business in the downstairs and (wink, wink) living upstairs.

Since so in many in town seem willing to tear the bulk of our historical landmarks down to make way for shiny new glass and steel buildings, you really don't see this type of commercial property in Sarasota anymore. FWIW, the last time I was in a vintage freight elevator was when I was in Brooklyn several years ago.

Check out the video below.

Monday, August 4, 2008

Giant Homebuilder WCI Files Chapter 11


Okay, let me get this straight: Carl Ichan offers WCI $22 a share, roughly $1-billion US, back in April of 2007. And WCI tells him basically to "get lost" at the time. Today, with WCI facing the possibility of defaulting on $1.8-billion in debt and the NYSE halting trading at 9:31 this morning at 66 cents a share, the company filed for bankruptcy in Delaware. It's one thing to fail but it's another to fail so spectacularly in view of everyone.

Full story here (South FL Business Journal)

New CoStar Industrial Report Shows Increasing Vacancies

A new Tampa Bay industrial survey released today by The CoStar Group shows industrial vacancies for the region edging up to 7.2% for the second quarter ending June, 2008 vs 6.2% for the first quarter. Rental rates sunk to $6.85/ft as opposed to the previous quarter. Net absorbtion for the area was negative 1,526,487 square feet vs. a positive 370,072 sf in the prior quarter.

Flex projects are showing the greatest vacancy, according to the report, at 10.4% at the end of Q2, 2008. That's up almost 1% from the previous quarter.

The warehouse sector is showing to be healthiest of all with a 6.8% vacancy rate, up only 0.7% from the previous quarter.

On the sales end, CoStar reports 24 industrial sales of buildings which are 15,000 SF and larger. The report shows the average price paid for these properties to be around $59/ft. Those sales are down from 28 transactions in 4Q 2007, averaging around $57/ft.

Cap rates are up to 7.93% compared to 1Q 2007, when they were at $7.75%.

Link to CoStar

Manatee EDC Business Survey: Down But Not Out

I haven't had a chance to thoroughly read the entire study, but seems from some of the responses that folks are at least optimistic. I did note more businesses saw positive revenue growth as opposed to the previous study.

Below is an excerpt, check out the full PDF report by using the link below.

"The overall business climate in Manatee County appears to be on a downward trend. When asked to compare the general business climate in the county with two years ago, over 72% said it was worse, and less than 7% said it was better. The most optimistic group was businesses operating for 6-10 years, and those with 51-100 employees. What is not clear in this response is to what extent this attitude is influenced by the overall economy, and how much is influenced by issues primarily driven by local factors."

Click here for the full survey (PDF)

Sunday, August 3, 2008

First Priority Shutdown Makes National News

Small Florida bank is 8th U.S. failure this year
Friday August 1, 9:51 pm ET

WASHINGTON (Reuters) - Bank regulators closed a small Florida-based bank on Friday, the eighth U.S. bank to fail this year under pressure from a weak economy and a credit crisis precipitated by falling home prices.

The Federal Deposit Insurance Corp said First Priority Bank had $259 million in assets and $227 million in deposits and its failure will cost the federal fund that insures deposits an estimated $72 million.

SunTrust Banks Inc (NYSE:STI - News) has agreed to assume the insured deposits of First Priority, whose six branches will reopen Monday as branches of SunTrust Bank.

Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.

It is the first bank to fail in Florida since Guaranty National Bank of Tallahassee failed in March 2004, according to the FDIC, which blamed the failure on exposure to the real estate market, predominantly in the construction lending area.

Florida is among several states whose housing markets have seen the sharpest declines.

The biggest bank failure by far this year is IndyMac (Other OTC:IDMC.PK - News), seized on July 11 with $32 billion in assets and $19 billion in deposits as of March, and the third-largest bank insolvency in U.S. history.

The FDIC oversees an industry-funded reserve used to insure up to $100,000 per account and $250,000 per individual retirement account at insured banks.

The agency also has running tally of problem banks that its examiners closely monitor. At the end of first quarter, 90 institutions were on that list.

The FDIC does not name the institutions on the list, which is expected to be updated this month for the second quarter.

(Reporting by John Poirier; Editing by Tim Dobbyn)

Story Link Is Here

Friday, August 1, 2008

Sarasota, Manatee Office Market Demand Down

This was a national story. Interestingly enough, my newest lease deal (which went to Juvenile Diabetes btw) is mentioned in paragraph 2.
Sarasota, Manatee office market demand down
Tampa Bay Business Journal

It's a good time for businesses to rent Class A office space in Sarasota or Manatee counties: Rents are down and vacancy rates are up.

That means extra incentives are being offered to would-be tenants. One Lakewood Ranch building owner recently enticed a new tenant with 12 months free rent.

The second-quarter overall Class A vacancy rate rose to 17 percent, up from 13.7 percent the previous quarter, a report by Colliers Arnold Commercial Real Estate Services says.

That vacancy spike resulted in lower rental rates for Class A space. The average asking rate was $24.22 a square foot, down from $26.32 in the first quarter.

The overall office market, however, fared better. Overall asking rental rates remained steady at $22.17 a square foot. About 9.4 percent of the 16.3 million-square-foot office market was vacant.
Click here for the story on TBBJ.