Why New Apartment Projects Still Make Sense

It’s not too late to build. New apartment communities that open their doors in 2017 will probably still enjoy a strong U.S. apartment market—despite a slightly higher vacancy rate and slower rent growth.

“Even in 2017, apartments are going to look pretty strong,” says Michael Steinberg, senior associate of research and economics with New York City-based research firm Reis Inc.

Apartment developers have been very busy in 2015. They are likely to open even more new apartments in 2016. The number of apartments available will finally grow decisively faster than the number of people looking for apartments, pushing vacancy rates higher and rent growth down, experts says. But vacancy rates are now so low they are likely to remain historically low in 2017, even after creeping upward. What’s more, rents will likely keep growing, even if not as quickly as they did this year.

“We are coming off [a] historically very strong performance,” says Steinberg.

Construction boom

Developers will open more than 228,000 new apartments in 2016 and another 178,000 in 2017 in the top 54 apartment markets, according to research by CoStar Portfolio Strategy. In comparison, during construction booms of the past, like the one in 2001, developers barely finished more than 150,000 apartments.

Demand for new units should remain strong, but not quite strong enough to keep the vacancy rate at its historic low.

“You could work a good horse to death,” says Hans Nordby, managing director with CoStar. The average vacancy rate will rise to the mid-4-percent range by the end of 2017, CoStar researchers project.

You can view entire article in National Real Estate Investor here.

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Lead Contamination of Tea

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5 Eco-Conscious Home Upgrades to Save Money

Make these easy-to-fix upgrades for a more home more eco-friendly, while saving a bit of money on your utility bills.

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What’s Driving Deals in the Sale-Leaseback Market?

Corporations that own their properties have a good reason for cheer this holiday season: They are sitting on potentially vast sources of growth capital, depending on the quality of their real estate assets.

Activity on sale-leaseback deals has posted a steady upswing almost every year since 2010. Total deal volume for 2015 could reach $12 billion, matching the spectacular production that the market saw in 2013, according to a joint estimate from research firm Real Capital Analytics (RCA) and net lease specialist Stan Johnson Co.

The market took a brief breather from red-hot growth in 2014, when deal volume reached $10 billion, but that still surpassed the market’s previous production peak in 2007, when about $8 billion in sale-leaseback transactions were completed.

All of the conditions to support a healthy and active sale-leaseback market are firmly in place, including compressed cap rates, strong demand from institutional and high-net worth investors, and the drive, on the part of property owners, to convert a portion of their companies’ value into usable cash.

After churning out so much capital in 2015, will sale-leaseback dealmakers be able to post another healthy year in 2016? Market observers have a positive outlook as long as companies continue to use sale-leaseback proceeds to support growth.

The many engines driving sale-leaseback activity

In these times of ample liquidity, it is tempting to think that sale-leaseback deals are being done simply because the money is available. Companies can apply the funds in other, more productive ways, however. Firms can use the funds to expand their lines of business, invest in new equipment or even maximize returns after a merger or acquisition, according to the Stan Johnson Co.

The financial terms underpinning sale-leaseback deals also make them look attractive when compared with refinancing using traditional lending sources. Banks typically limit loan-to-value (LTV) on financing agreements to 80 percent, but sale-leasebacks allow a company to access the full amount of a property’s value. Also, underwriting standards have become tighter at banks and other traditional lending sources, according to Andrew Ackerman, managing director in the Atlanta office of Sands Investment Group, a company that specializes in the net lease market.

“A lot of our clients have said their banks are starting to become more stringent in their underwriting,” Ackerman says. “The banks are saying, ‘We think the [lending] market is getting a little overheated like it did in 2008, 2009 and 2010.’”

Read entire article in National Real Estate Investor.

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Malls, Outlets Are Risky Business For Lenders

A report by Integral Realty Resources shows lenders are finding regional malls and outlet centers riskier compared to other retail shopping centers. The report puts outlet centers at the highest average interest rate spread across all LTVs, with grocery-anchored centers at the lowest on all deals except ones between 76% and 85% LTV. (People have to eat, after all.) The difference between grocery and outlet centers maxed out at 91 bps in deals between 61% and 75% LTV.

Report: Regional Malls, Outlets The Highest Retail Risk Class For Lenders

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The Healthy Food Movement: Strength in Unity

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Resveratrol Impairs Exercise Benefits

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What Explains the French Paradox?

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Private Real Estate Lenders Move into Mainstream

Private lenders that used to float on the fringes of the commercial real estate financing sector are stepping out of the shadows and becoming a more accepted financing alternative.

One of the primary drivers behind the shift is the abundance of capital. There is a lot of new money flowing into private lender shops from a variety of sources, including hedge funds, private equity and even sovereign wealth funds who are trying to capture higher yields.

“If you asked 10 people what private capital is, you would probably get 10 different answers,” says Shawn R. Hill, a principal at The BSC Group LLC, a mortgage banking firm based in Chicago. Theoretically, the term private lender could be loosely applied to any lender that is not a regulated bank, ranging from mortgage REIT to private equity groups. However, those groups are clearly seeing an influx of capital, he adds.

Case in point is Eagle Group Finance Loan Corp. The Los Angeles-based company has seen steady growth in its business since it expanded into private lending in 2008. In fact, Eagle Finance expects to double its lending in 2015 with $100 million in loans.

“Even now when banks have so much money and they say they’re lending more—they actually aren’t. They are only lending more to their preferred borrowers who have pristine credit and property on Main and Main,” says Brian Good, president of Eagle Finance Group.

Over the past several years, Eagle Finance has seen steady demand from borrowers, most notably on deals the banks won’t touch. The firm provides non-recourse short-term bridge loans of less than three years on commercial real estate and multifamily properties in western United States. In most cases, the property is in transition or the borrower is looking to clear-up credit issues, notes Good. Loans range from $2 million to $20 million and terms from six months to three years.

The search for higher yields is certainly drawing more capital into the private lending sector. At Eagle Finance, for example, rates range from 8 percent to 12 percent, double that of a traditional bank. “There is a lot of money coming into this sector,” says Good. Hedge funds, for example, are not hanging out a shingle, but rather they are pacing capital with firms that specialize in real estate lending and have the expertise.

View entire post at National Real Estate Investor.

To discuss commercial real estate financing needs contact Liberty Realty Capital.

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Fabric Finds: Ideas for Removing Your Toughest Stains

Next time you drop spaghetti on your favorite outfit or your kids spill juice on the sofa, try these methods for removing tough stains.

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Africa Renewable Energy Initiative to build 10,000 MW of renewables in Africa by 2020

The project received $10 billion in backing, aiming to reach its goal by 2020.

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Things to Consider When Converting an Old Barn Into a Home

Discover a few of the main aspects to consider if you’re thinking of converting an aged barn into your home.

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Evidence-Based Nutrition

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Is the Fiber Theory Wrong?

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Congress made a transformational deal that could add 39GW of renewables over 5 years!

This is a big deal, it should add more solar capacity in the U.S. than everything installed before 2015.

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The Five to One Fiber Rule

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Tech Park Moving From Concept to Physical Reality

The planned Little Rock Technology Park has existed mostly in theory since voters passed a half-cent sales tax back in 2011 to provide $22 million for its development.

Having recently cleared its last property acquisition hurdle for phase one of the $100 million project, the Little Rock Technology Park Authority board now has full architect renderings in hand. Phase one will entail 86,000 SF encompassing 415-421 Main St., and it’s expected to be complete by late 2016 or early 2017. Work is expected to begin early next year.

Wittenberg Delony & Davidson of Little Rock is the architect and is working with Gaudreau Inc. of Baltimore; East Harding of Little Rock is the contractor. The 38,000 SF that makes up 415 and 417 Main will anchor the project and house technology-focused companies, startups and entrepreneurs in a combination of co-working, semi-private and private offices.

The Arkansas Department of Higher Education occupies 48,000 SF at 421 Main and will continue to lease the space, providing the park with operating cash flow. The lease is $755,448.40 per year with an additional $3,995 per month for 85 parking spaces on Main.

Tech Park Director Brent Birch calls that a huge factor in the park’s launch. The total project, for which there is no definitive timetable, entails more than 600,000 SF spread over five phases.

For now, the Tech Park board is focused squarely on getting phase one off the ground, almost five years after Little Rock voters approved a tax increase to fund development through 2021. And it’s been eight years since enabling legislation was passed in the Arkansas General Assembly creating the board authority. The idea for a tech park was first floated by city leaders in 2005.

Read entire article in Arkansas Business

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Organic Bedding Review: Coyuchi and The Clean Bedroom

Make the switch to organic bedding to reduce your exposure to harmful chemicals, support sustainability and sleep in luxury.

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5 Tips for Building a Green Home

Save money on utilities and reduce your home’s environmental footprint by making it eco-friendly with low-flow water fixtures, energy saving lightbulbs and other measures.

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How to Change Your Enterotype

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CBD Office Buildings Experienced 10-Year Price Appreciation of More Than 100 Percent

The latest Commercial Property Prices Indices (CPPI) report produced by Moody’s and Real Capital Analytics (RCA) shows that prices in the commercial real estate universe have experienced double-digit appreciation over the past decade.

According to the report, the national all-property composite index has shown cumulative appreciation of 38.0 percent since October 2005, while the index for core commercial assets has gained by 34.9 percent. Significant price appreciation was evident in the index for apartment properties, as well, which increased by 45.9 percent since a decade ago.

The greatest level of price appreciation over the past 10 years, however, was posted by office buildings in Central Business Districts (CBDs), which posted a 103.2 percent increase over that time period. The index for retail properties, on the other hand, showed appreciation of only 8.6 percent during the past 10 years.

See entire article in National Real Estate investor.

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What’s Your Gut Microbiome Enterotype?

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How Hotels Can Transform Downtowns

Hotel developments and redevelopments can be foundations for turning depressed submarkets into hip, attractive destinations for travelers, local residents and other developers seeking building opportunities. Oxford Capital CEO John Rutledge has contributed to this trend in the nation’s hottest markets and talked to us about projects that’ll spur redevelopment.

John says Oxford loves being a catalyst for transitioning areas and tries to be in early on these developing neighborhoods, repurposing classic buildings for modern uses. He primarily focuses on the top 20 MSAs, with a heavy focus on urban submarkets, but will enter select tourist markets if a deal feels right. One key to being a transformative hotel: creating mixed-use that’s been lacking nearby. John always implements a mixed-use component, whether it’s retail offerings or added residential. John and his team are big believers in building “social hotels” with nice communal spaces, food and beverage components, and a heavy emphasis on rooftop bars. He also feels Oxford’s downtown projects work mainly due to their flexibility.

John sees a similar situation at the Lexington in Boston, where Oxford is working on its 240-key Godfrey Hotel (shown). He believes the Godfrey can be a linchpin in redeveloping Boston’s Downtown Crossing. He says Boston is one of the country’s most coveted, and most supply-constrained, markets. RevPAR growth there is higher than inflation. John tells us the $60M project is a classic Oxford deal: multidimensional and multifaceted, taking advantage of tax credits and emptying out an office for repositioning.

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