Archives for August 2013

September 4, 2013
7:15 a.m.
Location:  Albuquerque Marriott (Louisiana & I-40) Click for map.
Register online or Print flyer
CARNM and other real estate entities are hosting a forum for city council candidates to discuss issues relevant to real estate and construction.

The most common form of borrowing for commercial real estate transactions is the first-lien commercial mortgage loan. With principal running anywhere from $300,000 to many hundreds of millions, the financing of most (but nowhere near all) industrial, office, retail and multifamily property tends toward this form of debt, which is commonly priced somewhere between 75 and 150 basis points above 10 year US Treasuries.
Naturally, it’s often a combination of debt and equity that finances a commercial property transaction. And equity isn’t always the simple “down payment” residential brokers are familiar with. Far from it: commercial property financing options abound to add to the first-lien loan, including mezzanine loans to bring the loan to value (LTV) up even as high as 100%. Other strategies include A-note an B-note division of debt, or even “preferred equity” where a third party secures a loan with equity in the property that has an edge on other lenders in the competition for cash flow off the property in the event of default.
But commercial real estate is a complex beast, not limited to a market in tangibles. The role of CRE in economic development is critical, which means future propositions – new construction – needs financing just as much if not more than ownership transactions do. What do properties that sport no cash flow (because they don’t exist yet) have to bring to the table to get the financing they need?
The most common forms of financing for these are the construction loan. Secured by properties that are under construction, with no cash flow, these loans are considered higher risk that first lien, which makes sense when you consider the construction lender’s prospects include a lien on nothing more than a hole in the ground and a pile of unassembled building elements . More often than not, the borrower(s) set up a reserve account at the origination time of the loan in order to pay the interest on the principal. Loans tend to mature in 12 to 36 months and principal reflects the construction’s budget plus a modest contingency. The loan’s repayment is contingent on completion of construction, that magic time when the intangible becomes tangible and permanent financing can be established.
The distinct and unique risks of construction finance also call for the provision of the principal in stages associated with construction progress. As with so many subsections of commercial real estate, expertise is earned with focus and professional development that comes with experience. Examining the shapes and sizes of construction finance is instructive from both the lender and borrower sides. One of my favorite sources on the topic is the Associated General Contractors of America’s Guide To Construction Financing, a concise review of common practices across all 50 states.
Click here for source article

Falling vacancy rates and modest rent growth are predicted for each of the major commercial real estate sectors, according to the National Association of Realtors’ (NAR) quarterly commercial real estate forecast released Aug. 26.
NAR is forecasting commercial vacancy rates nationwide to decline 0.2 percentage points in the office sector and 0.6 points in both the industrial and retail sectors. Lawrence Yun, NAR’s chief economist, said the multifamily vacancy rate is not expected to change much as the sector will continue to have the tightest levels of availability.
“Office vacancies haven’t declined much because total jobs today are still below that of the pre-recession level in 2007, but rising international trade is boosting demand for warehouse space,” Yun said. “Consumer spending has been favorable for the retail market, and rising construction is keeping apartment availability fairly even, though at low vacancy levels.”
Lower vacancies are continuing to have an especially pronounced effect on the multifamily sector’s rental rates, according to Yun.
“That, in turn, is pushing apartment rents to rise twice as fast as broad consumer prices and average wage growth,” he said.
Average apartment rents will rise 4 percent in 2013 and another 4 percent next year, according to NAR’s forecast. However, NAR said that with new construction rising to meet increased demand in the multifamily sector, it will likely see vacancy rates edge up only a tenth of a percentage point, from 3.9 percent in the third quarter to 4.0 percent in the third quarter of 2014.
NAR is estimating that vacancy rates in the office sector are expected to decline from a projected 15.7 percent in the third quarter of 2013 to 15.5 percent in the third quarter of 2014.The industrial vacancy rates are projected to fall from 9.3 percent in the third quarter of this year to 8.7 percent in 2014. Retail vacancy rates are expected to decline from 10.6 percent in the third quarter of this year to 10 percent in the third quarter of 2014.
When it comes to rent growth in the other sectors, NAR expects office rent to increase 2.5 percent this year and 2.8 percent in 2014. Industrial rents are expected to grow by 2.4 percent this year and 2.6 percent in 2014, and retail rents are likely to increase 1.5 percent in 2013 and 2.3 percent in 2014.
By: Carisa Chappell (REIT.com)
Click here for source article

At the September 4, 2013 Deal Making Session, Fingerprint Express will be providing these services. This will make the fingerprint requirement for your real estate license much more convenient. The fee is $20 per person, cash only, payable at the time of service.
Please let Meg know by August 29 if you intend to use the service, so we can make the process run as smoothly as possible: office@carnm.realtor or (505)503-7807