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Archives for April 2024

An Albuquerque stadium project advanced last week. This group wants to see more like it.

April 17, 2024 by CARNM

When Albuquerque’s Environmental Planning Commission (EPC) heard a proposal on April 11 to amend the Balloon Fiesta Park master plan, allowing a large soccer stadium for local team New Mexico United on park grounds, more than 100 people tuned in, far surpassing usual EPC hearing turnout.

Those 100-plus people included many folks from a new group in the state aimed at seeing United’s proposed stadium — and many other projects like it — come to fruition across the Duke City and other parts of Central New Mexico.

Called Generation Elevate New Mexico, or GENM, the membership-based organization wants to educate people about supporting what it sees as “pro-growth” development. It plans to do that by notifying members of upcoming public comment opportunities for projects, providing letters of support members can share and engaging members and other stakeholders on social media.

It’ll pick projects to support based on the vote of GENM’s nine-person leadership committee. There are several factors that go into the organization’s project-selection decisions, which include if a project maximizes density, improves walkability and transit, promotes housing growth and improves property values, among others.

Collaboration between project developers and local residents, too, is another important factor in GENM’s decision-making process, said Sal Perdomo, one of the organization’s founding committee members and the director of acquisitions and development for Titan Development.

Perdomo said one part of GENM’s focus in supporting certain projects is pushing back against NIMBY-ism in New Mexico — an acronym that stands for “not in my backyard” and is typically used to categorize groups that are against certain types of denser, larger developments in local areas.

“A lot of people who might fall in that category complain that we don’t have an IKEA here, or ‘my kids had to move to Dallas because a lack of opportunity,'” Perdomo said. “What they don’t realize is that when they fight projects and they fight growth, you’re losing out on that IKEA. You’re losing out on tax dollars that are used to pave that road over there. You’re losing out on job opportunities for your kids.

“We want New Mexico to be a place where your kids are not leaving because a lack of opportunity,” he continued. “The only reason they would leave is they want a different opportunity, not lack of opportunity. It’s important that people have enough opportunity here to stay here and grow this state.”

Despite the frequent stereotypes that come with NIMBY-ism, Darrell Dady, neighborhood coordination specialist at the City of Albuquerque, said neighbors are often open to discussions with organizations such as GENM to better understand the full scope of proposed projects.

“[Neighborhood associations] would certainly not be totally opposed to the group you’re mentioning,” Dady said. “If [there’s a project] they feel would work well with their neighborhood, they’re not unreachable. But you do need to approach them with care and make sure that [the project] is not too noisy or [creates] too much traffic. I think if it meets those criteria, [the project] doesn’t go there.”

Details on the inaugural project backed by GENM

The first project GENM picked to support is New Mexico United’s planned soccer stadium.

To voice his and GENM’s support for the project, Perdomo, part of GENM’s founding committee, attended the EPC special hearing on the stadium proposal on April 11, speaking on behalf of the organization. During that hearing, he pointed to three primary reasons for support, saying the stadium represents a “key investment” in Albuquerque, the fact the project is an infill development and will revitalize what he feels is an underutilized parking lot and its sustainable and environmentally conscious components.

“I can’t convey enough how important this project is to the growth of Albuquerque,” Perdomo said during the hearing.

Following a detailed 9-hour discussion, EPC commissioners unanimously voted in favor of the proposal to amend the Balloon Fiesta Park master plan to allow for the stadium in a 7-0 vote. Two commissioners were not present.

Although the EPC initially passed the proposal last November, the Land Use Hearing Officer (LUHO), Steven Chavez, elected to remand the case back to the EPC, citing “improper notice” to nearby neighbors who expressed concerns about heightened traffic, noise pollution, light disturbance and the potential impact of fireworks on local wildlife.

New Mexico United’s updated plans attempted to address concerns over traffic, light and noise and presented public support from community members such as Perdomo, Sen. Antonio “Moe” Maestas; D’Val Westphal, executive vice president of policy and programs for the Greater Albuquerque Chamber of Commerce; and Howie Kaibel, brand manager at M’tucci’s Restaurants.

“We need to build a city where young people want to live in, where people can thrive and create, and build out a beautiful future for our city,” Maestas said during public comment. “I think the city and the developers have done an incredible job of trying to mitigate the issues that have been raised.”

Dady was unsure whether neighbors were still actively opposing the EPC’s verdict.

“[Neighbors] still don’t want noisy situations and more traffic then they’ve got already with the Balloon Fiesta,” Dady said. “They deal with it once a year and they really would like to keep [the area] pretty quiet for the most part.”

The proposed stadium, which will hold 8,000 to 10,000 fans, is slated to host 17 games each year. Following the EPC’s decision, the case will now be sent back to the LUHO for further review. A date for the hearing has yet to be scheduled, Vincent Higgins, City of Albuquerque public information officer, said.

“Once the LUHO makes a recommendation to City Council, the appeal will be heard and voted on at a regular City Council meeting,” Higgins said in an email statement to Business First on April 2.

“GENM is encouraged by the EPC’s unanimous vote to approve the requests allowing for the United Stadium to be built at Balloon Fiesta Park,” Perdomo said in an email statement on behalf of GENM. “Our membership will continue to support the United Stadium at City Council, and look forward to supporting more impactful projects in New Mexico.”

Background, future of the upstart organization

GENM has been in the works for about one year, Perdomo said, before it formally launched in mid-March. JT Mitchell, another founding committee member and market research specialist at DXD Capital, said developments that create “economic-base jobs” in the Albuquerque and Central New Mexico community are another preference of the organization.

There’s not a preference, however, between in-state versus out-of-state developers.

“Whether it’s a local developer or an out-of-state developer, as long as they’re engaging with the community appropriately and the project ultimately is going to benefit New Mexico in the way we think it is, that’s not a distinction that is important to us,” Mitchell said.

Perdomo said there are two other projects in GENM’s “pipeline” currently, although he didn’t share details on what those projects are. He said the organization’s goal is to support five projects this year.

GENM membership is open to anyone through an application form on the organization’s website. It has about 50 members currently, Mitchell said, and has just over 250 followers on LinkedIn.

It’s also received a bit of money for operations through private donations but isn’t seeking additional funding at the moment. Perdomo declined to disclose who backed GENM but said more fundraising could come down the road as the organization’s work expands; organization membership is free.

In addition to Perdomo and Mitchell, GENM’s nine-person leadership committee currently includes: Ciaran Lithgow, redevelopment project manager for the Metropolitan Redevelopment Agency; Dante Armand Gonzalez, project engineer at Bradbury Stamm Construction; Frankie Hermosillo, business development association for New Mexico Angels; Kyle Biederwolf, external affairs manager for Comcast; Micah Gray, real estate advisor for NAI SunVista; Omega Delgado, redevelopment project manager for the City of Albuquerque; and Renn Halstead, associate architect at FBT Architects.

Source: “An Albuquerque stadium project advanced last week. This group wants to see more like it.“

Filed Under: All News

US regional banks seen booking more commercial property losses, loan sales

April 17, 2024 by CARNM

U.S. regional banks are expected to set aside more money to cover potential commercial real estate (CRE) losses and sell more property loans as the sector remains under pressure a year after the collapse of Silicon Valley Bank and Signature Bank.
Most multifamily loans are made by regional banks, so when New York Community Bank (NYCB.N), opens new tab posted a surprise fourth-quarter loss it intensified fears about the industry’s exposure to commercial real estate. Multifamily properties with more than five units are a major concern, especially since the bank had booked losses on its real estate portfolio.
Scrutiny of regional banks has increased after Silicon Valley Bank’s collapse prompted by high borrowing costs that exceeded its income from low-rate loans following the Federal Reserve’s aggressive rate hikes since March 2022. Many banks have unrealized losses on securities portfolios, including mortgage-backed paper.
A slew of regional banks report first-quarter earnings starting April 16.
“I expect to see more of a reserve buildup,” said Stephen Buschbom, research director at consultancy Trepp.
Buschbom said office loans remain the “biggest pain points” for banks, but he also expects stress in the multifamily sector especially construction loans.
Office loans have been hit as many employees still work from home after the pandemic, leaving vacancies that make it tougher for building owners to repay their mortgages. Multifamily is also under pressure, opens new tabin cities like New York and San Francisco that, right before the pandemic, severely limited rent hikes on regulated apartments based on record low interest rates and inflation at the time.
Non-performing CRE loans as a percentage of U.S. banks’ portfolios doubled to 0.81% by the end of 2023 from 0.4% a year earlier, the International Monetary Fund said in its semi-annual Global Financial Stability report. Banks have continued to increase provisions for bad CRE loans, the IMF noted on Tuesday.
Several analysts and investors are predicting higher reserves. Morgan Stanley forecast a 10- to 20-basis point increase in CRE reserve ratios for regional banks this year, said Manan Gosalia, an analyst at the Wall Street bank, in a research note. Aggregate provisions are 20% above consensus, she added.
Stephen Biggar of Argus Research agreed, saying high office vacancies have reduced cash flows, and the Fed’s stance on keeping interest rates higher for longer makes financing expensive.
CRE holdings are significant across the U.S. banking industry, comprising 13% of large banks’ balance sheets and 44% for regional banks, an Ares Alternative Credit report showed.
Reflecting investor sentiment, the KBW regional bank index (.KRX), opens new tab is down 13.5% year to date versus the S&P bank index’s (.SPXB), opens new tab 6.8% rise.
S&P Global Ratings downgraded the outlook for five U.S. banks in March because of stress in CRE markets, which it said may hurt their asset quality and performance.
The banks cited, including M&T Bank (MTB.N), opens new tab and Valley National Bancorp (VLY.O), opens new tab, declined to comment.
“The CRE delinquency rate for banks is more benign than the commercial mortgage-backed securities market, but deteriorating,” Stuart Plesser, managing director (at rating agency S&P Global Ratings, told Reuters, saying he sees some reserve increase for banks.
The delinquency rate at regional banks is 1.2% for loans 30 days due as of the end of the fourth quarter, according to S&P Global, below the 4% for CMBS.
Buschbom, however, said the level of support from potential buyers, including private equity investors, will help reduce some downside risks for banks. Office loans are selling at deep discounts, while multifamily properties have smaller discounts, industry sources said.
“Numerous community and regional banks are exploring their options and, as a result, we are seeing more deal flow than we have since the global financial crisis,” said David Aviram, co-founder of real estate investment firm Maverick Real Estate Partners.
A senior Wall Street banker who declined to be named discussing sensitive information said banks are expected to offload existing loans to private lenders and that those lenders would originate new loans.
Among such deals, regional lender PacWest last year sold construction loans with a $200 million discount, a regulatory filing showed.
In December Signature Bridge Bank, whose predecessor Signature Bank collapsed in 2023, sold 20% of its equity stake in a venture that held a $16.8 billion real estate loan portfolio to a Blackstone-led (BX.N), opens new tab consortium for $1.2 billion. The discount on the portfolio was nearly 30%, based on data from the announcement by Blackstone.
“We see banks taking a more conservative approach and anticipate additional write-offs in coming quarters,” said Ran Eliasaf, founder and managing partner at Northwind Group, a private equity firm over $3 billion assets under management.
“There’s a much more dramatic drop in values than what the market estimated in 2023.”
Analysts, however, do not expect turmoil from the banking sector’s exposure to commercial real estate.
“This is a slow wreck, not a high-speed crash,” said Biggar of Argus Research.
Source: “US regional banks seen booking more commercial property losses, loan sales“

Filed Under: All News

After Two Year Slump, Prime Multifamily Metrics Uptick in U.S.

April 16, 2024 by CARNM

Recent research from CBRE indicates that prime multifamily assets have seen a slight improvement in going-in cap rates, exit cap rates, and unlevered internal rate of return (IRR) targets in Q1, 2024. This marks the first improvement since early 2022, when the Federal Reserve started hiking interest rates. These positive changes suggest that key underwriting metrics might have reached their peak, with potential rate cuts anticipated later this year.

The gap between going-in and exit cap rates, which previously narrowed over eight consecutive quarters, has now stabilized at 12 basis points (bps) in Q1. This stability is likely to persist unless there is a significant economic downturn.

CBRE notes that, while the overall average exit cap rate for prime multifamily assets is expected to remain above the going-in rate in the near term, some markets like Chicago, Washington, D.C., and Philadelphia have already seen cap rates invert. Conversely, Phoenix and Seattle have returned to a positive spread this quarter after previously achieving cap-rate parity, which continues in New York and San Francisco.

There was a slight decrease in both going-in and exit cap rates, which fell by 6 bps to 5.00% and 5.12%, respectively, in Q1. Expectations for annual asking rent growth over the next three years also declined marginally to 2.3%. Unlevered IRR targets fell by 9 bps to 7.59%. Except for Chicago and Philadelphia, all other prime multifamily markets tracked by CBRE showed stable or reduced IRR targets, with Denver and Los Angeles experiencing the most significant reductions.

Austin continues to display the lowest risk requirements for the 10th consecutive quarter. Quarter-over-quarter, most markets remained stable, though Los Angeles and Phoenix improved slightly in their rankings due to better underwriting metrics.

Regarding cap rate movements in Q1 of 2024, Denver, Los Angeles, Phoenix, and Seattle experienced moderate decreases in going-in cap rates, while eight markets saw no change. Minor increases of less than 25 bps occurred in Chicago, Miami, and Philadelphia. For exit cap rates, twelve markets showed no movement, but slight decreases were noted in Chicago, Denver, and Los Angeles.

Matt Vance, Head of Multifamily Research for the Americas at CBRE says, “We are observing notable improvements in underwriting metrics for prime multifamily assets, marking the first improvement seen in two years. This indicates a potential turning point in the market, with going-in and exit cap rates, along with the stabilized positive spread, showing positive trends. These developments suggest that key underwriting metrics may have reached their peak as the market anticipates potential rate cuts in the future. It is crucial for investors to closely monitor these positive developments as they navigate the multifamily market.”

Source: “After Two Year Slump, Prime Multifamily Metrics Uptick in U.S.“

Filed Under: All News

US Office Outlook – Q1 2024

April 16, 2024 by CARNM

The first quarter of 2024 brought mixed results for the U.S. office market—while the macroeconomic picture and occupier demand are improving, negative net absorption remains stubbornly high as major occupiers continue to trim meaningful amounts of space from their portfolios. But despite persistent downsizing, the market is being rebalanced through a robust conversion and redevelopment pipeline that has grown at a near exponential pace over the short term.

View Report Here

Source: “US Office Outlook – Q1 2024“

Filed Under: All News

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