Local Broker Featured in the August Issue of Texas Real Estate Business

Mike Blum, Partner & Managing Broker, of NAI Rio Grande Valley in McAllen, TX was a recent contributor in this month's Texas Real Estate Business publication. To read his article: "Texas Snapshots: Rio Grande Valley Retail" click here

If you are having trouble with the above hyperlink, copy/paste the below link in your browser:
http://www.texasrebusiness.com/articles/AUG11/snapshot3.html

Visit http://www.nairgv.com to learn more about NAI Rio Grande Valley or email Mike directly at mikeb@nairgv.com

Five Reasons HUD/FHA Loans Are Gaining Popularity

Aug 24, 2011 8:47 AM, By Laura Saull-Smith and Ken Charbauski, NREI Contributing Columnists
National Real Estate Investor

With interest rates near record lows, the multifamily housing and health care real estate markets are in the midst of a refinancing boom. Private-sector lending remains constrained since the financial crisis, however.

To meet their credit needs, a number of commercial borrowers are turning to the U.S. Department of Housing and Urban Development (HUD) and its mortgage insurance arm, the Federal Housing Administration (FHA). In the process, they are discovering the qualities that make HUD/FHA loans attractive in any economic cycle.

Here are the most compelling reasons to give these federally backed instruments a try:

1. HUD’s below-market rates generate substantial debt-service savings: Because loans secured through HUD/FHA programs are backed by the federal government, the lower risk they carry allows lenders to extend such loans at below-market interest rates. The resulting debt-service savings are greater than what is available through refinancing alternatives.

In recent months, many owners of multifamily and health care properties have been able to refinance their debt by locking in new, 35-year loans with fixed rates near 4%. That compares with interest rates on non-HUD/FHA loans that are closer to 7%.

In a recent refinancing we arranged for the owner of a senior living apartment complex in Virginia, our client was able to cut its borrowing rate by nearly 200 basis points, lowering its annual debt-service cost by nearly $150,000. 

2. Prepayment penalties don’t have to stand in the way: Mortgages frequently carry significant prepayment penalties that can discourage borrowers from attempting to lower their interest rates by refinancing. But given the significant rate discount on HUD-insured loans, borrowers can easily digest prepayment penalties without sacrificing debt savings.

For example, a recent refinancing closed in September 2010 successfully absorbed a 3% prepayment penalty while generating more than $230,000 in annual debt savings. Had the client waited for the prepayment penalty to burn off, he might have lost out on this opportunity to improve his financial standing by refinancing at today’s low mortgage rates.

3. HUD allows the highest leverage available: HUD will allow an owner to cash out as much as 80% of the property’s value, provided enough equity has been built up. In instances where repairs are necessary, owners can still receive half of the cash back before improvements are made.

HUD allows even more leverage with affordable-housing properties. Tax credit properties can qualify for loans of up to 85% of the property’s value; the loan-to-value limit increases to 87% for properties where 90% or more of units receive rental assistance.

4. Refinancing can provide an opportunity to refurbish the property or boost replacement reserves: HUD will require the lender to complete a physical condition and needs assessment (PCNA) when applying for a refinance for any project. The PCNA will identify two types of repairs: critical and non-critical. Critical repairs must be completed prior to the loan closing. Non-critical repairs can be completed up to a year afterward.

Both repair types can be funded with mortgage proceeds. Loan proceeds may also be used to fund or increase the replacement reserve if the balance is too low.

5. Properties already in the HUD-insured portfolio can qualify for unique benefits: Loans already in the HUD-insured portfolio can be refinanced through the 223(a)(7) program. One unique feature of this program is that borrowers can request a refund of half the agency’s standard examination fee of 0.3%. 

In addition, HUD may extend the term of the existing loan up to 12 years, resulting in further debt service savings. If repairs are needed or reserves are too low, the loan can also be adjusted back to the full original mortgage amount to cover the borrower’s closing costs.

What borrowers need to know

While HUD/FHA financing can be a reliable and beneficial form of financing for owners and developers ...

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5 Tips for Finding New Commercial Real Estate Revenue Streams

the Source a blog by CommercialSource

As the economic recovery lags, businesses realize they need to do even more to cut expenses, reduce payrolls, and find new sources of revenue. But what is left to cut? Where can they find new streams of revenue?

Real estate is often a company’s most valuable asset, and real-estate related moves can yield the biggest return on investment. In the July/August issue of CIRE magazine, Martin N. Burton shares 10 strategies that commercial real estate professionals and their clients can employ to find additional savings and new avenues for cash flow. Here are five highlights:

1. Divide and Prosper – If the time has come to sell off an asset, owners can maximize the chances of sale and total return by selling off smaller parcels instead of a single large one. Not only do smaller parcels typically sell for higher per-square-foot values, but their lower overall prices attract more potential buyers.

2. Embrace This Audit – Some companies have begun to adopt green practices, such as switching to fluorescent bulbs, or making sure employees turn off lights and computers regularly at the end of each day. But a comprehensive energy audit can help leverage the benefits of these improved practices to achieve even greater savings.

3. Bond with PACE – Property Assessed Clean Energy bonds can make green retrofitting even easier, allowing cities to finance a property owner’s green improvements. The owner repays the loan through tax assessments on that property over 20 years. In many cases, the money saved in reduced energy expenses is enough to cover the loan and bring in cash flow.

4. Increase ... click here to read more

High-End Retail Locales throughout the Americas Thriving in 2011

Posted by Michael Gerrity 08/24/11 1:48 PM EST
www.worldpropertychannel.com

Based on CB Richard Ellis' (CBRE) recently released Summer 2011 Urban Retail Markets Report, the majority of the most sought-after urban retail corridors in the Americas experienced strong market activity during the first half of 2011 as luxury and specialty retailers expanded their brands in many of these High Street markets.

"The pronounced decrease in rents and increase in vacancy rates over the past few years have created opportunities for well positioned retailers," said Nina Kampler, head of CBRE's Urban Retail Group in the Americas. "With tightened availability in the best locations, asking rents either stabilized or rose and tenants have been willing to pay top money for the prime spaces."

According to CBRE's report, New York's Fifth Avenue continues to be the top retail destination in the United States, with high demand from national and international brands actively seeking sites on this luxury corridor. Notable first and second quarter transactions include Zara's purchase of the former NBA store at 666 Fifth Avenue for approximately $400 million.

The Beverly Hills retail market remains tight with little availability along Rodeo Drive. By the end of the 2011 calendar year, this prime stretch of retail real estate is expected to be 98% occupied as asking rents continue to demand $500 per sq. ft. The newest tenants to the market include Lanvin, Agent Provocateur, Vertu and Richard Mille.

San Francisco's Union Square leasing transaction volume picked up in 2011 while rents remained flat. Much of the leasing activity has moved south toward the Westfield San Francisco Centre on Market Street which recently published sales at $679 per sq. ft.

For international and local visitors to Downtown Vancouver's shopping scene, Robson Street remains a staple. Low vacancies and a strong base of international and local retailers have kept demand relatively high for this corridor. Most major brands-- including Zara, Mexx, Guess, Aldo, MAC and Roots--have their flagship stores on this fashion corridor.

Located at Rio de Janeiro's south zone and close to famous beaches such as Ipanema, Copacabana and Leblon, Garcia D'avila Street is the most luxurious urban retail destination in Rio de Janeiro. This street houses well-known retailers such as Mont Blanc, Trousseau, H.Stern, Louis Vuitton and Puma. Nike is expected to open its Brand Experience store on the corner of Garcia D'Ávila and Visconde de Pirajá.

Inbound Foreign Investment Ramps Up

CCIM.com Newscenter  Posted August 18th 2011

Buyers from mainland China are increasing their U.S. investment activity, according to The New York Times. In Manhattan, luxury condominiums valued from $500,000 to $10 million or more are garnering the most interest. And while most of these new buyers are not interested in purchasing trophies, they are always focused on investment rationale, said Neil Palmer, chief executive of Christie’s International Real Estate.

The uptick in activity can be attributed, in part, to China’s newly relaxed banking regulations, which streamline the process for moving money out of the country. “Foreign exchange restrictions have not been entirely lifted but loosened,” Palmer said. “There is more ability to move funds offshore effectively and perfectly legally.” Approximately 50 percent to 75 percent of New York transactions involving Chinese investors are paid for in cash exclusively.

As inbound investment activity expands beyond the major metros, CCIM members can leverage Institute resources to capitalize on new opportunities. The Country Liaison Program was created to strengthen the CCIM Institute's presence outside North America and to provide a resource for North American CCIM members interested in doing business in the liaisons' host countries. Liaisons are currently assigned to China, Japan, Korea, Mexico, Norwa ...

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Despite the Market Turbulence, There Will Be No Double-Dip Recession

Aug 23, 2011 7:35 AM, By Victor Calanog, NREI Contributing Columnist
National Real Estate Investor

The tumultuous events of the last four weeks have prompted downward revisions to economic forecasts, and for good reason. On July 29, U.S. GDP growth figures for the second quarter came in at an anemic 1.3%, with first-quarter figures revised down to 0.4%.

Then came the debacle over the debt ceiling debate, and the S&P downgrade. The probability of a double-dip recession has now risen to between 30% and 50% based on consensus estimates, up from a relatively low 15% earlier in the year. 

And yet there is good reason to believe that the economic recovery will continue to putter at an uninspiring pace, but progress nonetheless. Monthly job growth has been positive for 10 straight months since October 2010. Some 930,000 jobs have been created in the first seven months of 2011, about as much as the 940,000 jobs that were created in all of 2010. 

Yes, it is disappointing that projections made early this year calling for 3.5% to 4% annualized GDP growth never materialized, but this is hardly like late 2008. Back then, major institutions were failing and had to be bailed out, and the economy shed hundreds of thousands of jobs beginning in January 2008.

Sentiment is a powerful force

The main problem is not an economy on the ropes, but a weak recovery plagued by institutional gridlock, and changing expectations of whether U.S. policymakers can encourage job creation while managing debt and deficit levels. We are at a critical juncture given the decidedly mixed nature of economic and financial data.

If we lose confidence as individuals and curtail spending quickly, and if businesses lower expectations and pull back on hiring, then we just earned ourselves the kind of low growth and high inflation environment that characterizes periods of stagflation. 

Already we’ve observed ...

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McAllen Awaits Approval for EB 5

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Investors propose destination theme park, retail development off Expressway 83 in McAllen | mcallen, park, destination - TheMonitor.com

August 24, 2011 8:47 AM

Dave Hendricks

The Monitor

McALLEN — Last week, a group of investors approached McAllen with an offer: Let us transform Boeye Reservoir — the city-owned, manmade lake on Expressway 83 — into a theme park and retail development with a River Walk-style feel.

McAllen Attractions Inc. outlined plans to build a 31-acre theme park on the property’s eastern side and an “upper-end lifestyle center” on the remaining 38 acres bordering 23rd Street. The project would be funded with $7 million from private investors, a $6.5 million loan and city assistance, according to McAllen Attractions’ formal proposal submitted Aug. 17.

The theme park would become a regional attraction, drawing people from across the Rio Grande Valley, said Gabriel Kamel, the 42-year-old Mexican businessman who organized McAllen Attractions and represents a large group of investors.

“I think the Valley needs this to get the people to come often and stay longer,” Kamel said. He stressed the proposal is just a concept, subject to negotiation.

Kamel’s business partners include Ricardo Cortez II and Jaime Cortez, sons of Mayor Richard Cortez, who has a longstanding business relationship with Kamel. The mayor has signed conflict-of-interest forms and recused himself from city discussions of the reservoir redevelopment project.

It’s not the first proposal to redevelop Boeye Reservoir, located south of Expressway 83 between 23rd Street and Bicentennial Boulevard.

In 2007, Dallas-based developer Henry S. Miller Sustainable Partners proposed turning the reservoir into a trendy development with an urban feel. The much-touted plan fell through, a victim of the recession and resulting credit crunch.

McAllen officially killed the so-called “Central Park” project Jan. 24, terminating a partnership with Henry S. Miller III and requesting an accounting of how he spent $275,000.

The city went back to the drawing board June 5, requesting ...

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Investors propose destination theme park, retail development off Expressway 83 in McAllen | mcallen, park, destination - TheMonitor.com

INVESTORS SHOW FAITH IN JC PENNEY, BARNES & NOBLE’S FUTURE

AUG 24, 2011 8:05 AM, BY ELAINE MISONZHNIK, RETAIL TRAFFIC ASSOCIATE EDITOR

Recent stock market volatility has had at least one beneficial effect on the retail sector—it’s spurred investment in some publicly-traded retail chains.

Amid the brutal selling, two large national retailers—department store JC Penney and bookseller Barnes & Noble—reached deals to receive sizable equity infusions. While driven by the fact that the shares for each firm were trading at deep discounts, the moves also illustrate investors’ faith in the long-term prospects for the two chains.

On Friday, Bill Ackman-led hedge fund Pershing Square Capital got approval from JC Penney Co.’s board of directors to up its stake in the retailer from its current 16.5 percent. Pershing Square will make the investment through a “synthetic long position” to make its exposure equivalent to 26.1 percent. A synthetic long position typically refers to a derivative contract in which the investor receives cash payments if a company’s shares rise. Pershing actually reduced its voting rights to 15 percent of shares outstanding.

JC Penney has a restriction in place preventing shareholders with more than 10 percent of its stock to buy additional common shares without its board's approval.

The news about Pershing’s investment in JC Penney came a day after media conglomerate Liberty Media Corp. signed a deal to buy a 16.6 percent stake in bookseller Barnes & Noble for $204 million. Liberty’s investment will be made through the purchase of convertible preferred shares equal to about 12 million common shares or 17 percent of Barnes & Noble stock. The deal values Barnes & Noble shares at $17 apiece.

Barnes & Noble has been looking for a buyer since last summer, and Liberty Media has been the only one to make a bid for the retailer this spring, valuing Barnes & Noble’s stock at $17 per share in May and offering to take a 70 percent stake in the retailer. It has since abandoned the ambition to buy the bookseller outright, opting instead for the smaller stake.

The switch to a smaller investment likely reflects Liberty’s desire to limit its risk in view of the challenges the book sector faces from the popularity of digital e-readers, says Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm. The fact that ...

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Survey Reveals Key Retailing Trends Among Millennials

Survey Reveals Key Retailing Trends Among Millennials Call them Gen Y, or Echo Boomers, or the more fashionable Millennials. But retailers have been asking this question a lot more of late: What does this power-buying generation really want? What does it matter? The Millennial generation represent the largest retail consumer group, larger than both the Baby Boomer generation or Gen X. Now a new study, “American Millennials: Deciphering the Enigma Generation,” has a few updated answers. The study was conducted by Barkley, one of the largest independent marketing agencies in the U.S., in partnership with Service Management Group and The Boston Consulting Group. Based on a survey of more than 5,000 respondents and 3.9 million data points, the study provides new information on a range of digital and social media habits of American Millennials as well as their attitudes in the areas of cause marketing, grocery, restaurant, apparel and travel. “Since the Millennials generation is larger than the Baby Boomers and three times bigger than Generation X, marketers’ understanding of Millennials’ needs, tastes and behaviors will clearly shape current and future business decisions,” says Jeff Fromm, senior vice president at Barkley. Here are a few highlights from the survey: Millennials Are Aware of Youth-Oriented Cause Campaigns Millennials compared to other generations reported greater awareness of newer, youth-oriented cause marketing campaigns, such as Dove’s Campaign for Real Beauty (33% versus 21%) or Gap RED (26% versus nine%).They report greater exposure to campaigns through social media (40% versus 22%) and online news (28% versus 22%), while Non-Millennials rely on newspaper and direct mail. Millennials Consume 42% of TV Online Millennials appear to have substituted television and print media for the increased online activity and media consumption. Millennials watch significantly less TV than Non-Millennials; fewer Millennials report watching 20-plus hours/week (26% versus 49%). When they are not watching live TV, Millennials are much more likely to watch shows mainly on their laptops (42% versus 18%), with DVR (40% versus 36%), or On-Demand (26% versus 18%). Millennials Seek Peer Affirmation & Advice Perhaps because of their need to share and to find commonalities, 70% of Millennials reported feeling more excited when their friends agreed with them about where to shop, eat and play. Only 48% of older adults were as heavily influenced by their friends and colleagues. Additionally, Millennials gather information on products and services from more channels - more Millennials than Non-Millennials reported using a mobile device while shopping to research products (50% versus 21%). Millennials Are More Prone to Grocery Shop in Groups While majority of all respondents shop alone (60% Millennials, 69% Non- Millennials), Millennials are more likely to shop with others versus Non-Millennials. Plus, Millennials report more shopping than Non-Millennials with family unit, spouse and children (13% versus six%) and with adult friends (four% versus two%). Millennials Crave Adventure Millennials seek a broader range of activities, think globally, and report a greater desire to travel. The large majority of Millennials (70%) want to visit every continent in their lifetime. Fewer than half of older adults report that goal. Millennials Prefer Casual Dining Environments and Snack More Not only do Millennials report a desire for adventure, but they also think life should be fun. Whether shopping, dining out, or immersed in their mobile devices, Millennials prefer the music turned up and a casual atmosphere. Millennials accounted for 18% of their monthly restaurant spend in the fast-casual format, compared to only 13% for Non-Millennials. Additionally, Millennials crave snacking opportunities, and are more than twice as likely as older people to seek them out mid-morning, mid-afternoon and late at night. Retail Associates Play a Critical Role When female Millennials were asked a series of questions about where they purchase fashion brands, it became clear that if store associates do not know the trends or look the part, Millennials are far less likely to be drawn in by the store. Millennials demand more knowledgeable and fashionable sales associates (29% versus 19%) while Non-Millennials value sales associates who know to apply discounts and offer promotions (65% versus 51%). More Insights to Come at Share.Like.Buy. Conference More detailed findings from the study will be shared at the “Share.Like.Buy.” conference on September 22-23, 2011, in San Francisco, Calif. Aimed at all marketers who must forge new relationships with American Millennials, the conference will educate attendees on how to market with Millennials rather than to them. Confirmed conference participants and speakers include representatives from Facebook, MTV, Sony Music, Frito-Lay, Forbes Magazine, Forrester, Spiral 16 and many other thought leaders from the marketing industry. To learn more about the study and conference, visit sharelikebuy.com, or contact Barkley’s Jeff Fromm at 816.682.5401.

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Commercial Real Estate Glossary

Acre: Area of land equal to 43,560 SF (4,047 M2).

Bulk Warehouse (Warehouse): All modern distribution facilities 25,000 SF (2,500 M2) or greater. Quoted annual rate, net basis.

CBD (City Center): The central business district is a market’s primary concentration of business activity, much like a traditional downtown.

Class “A” Office (Prime): Excellent location (5,000 SF or 500 M2), highquality tenants, high-quality finish, excellently maintained; usually new, or old buildings that are competitive with new construction.

Class “B” Office (Secondary): Good location (5,000 SF or 500 M2), fairly highquality construction and tenants. Buildings with only minimal deterioration or obsolescence.

Community Power Centers (Big Box): Retail centers over 250,000 SF – 600,000 SF (25,000 M2 – 56,000 M2), which include one or more “category killers”, life-style centers and outlet centers.

Development Land Prices: Based on land sales recorded between October 2006 and October 2007. The guide quotes the rate paid for land with available utilities and zoning in place for the use noted.

Downtown Office (City Center): Sites in the market’s central business district.

Downtown Retail (City Center): Any prime ground floor retail space in the market’s central business district, excluding space in enclosed malls. United Kingdom and Ireland presented on Zone A Basis.

Education Index: The Education Index was calculated by dividing the number of people with a college degree and some college education by the total population in that Market and by then dividing that quotient by the same figure for the United States. Data provided by SRC, LLC.

Effective Average Rent: Net present value rate taking concessions, such as free rent and escalations into account.

Full Service Basis: Indicates that the landlord pays all expenses.

Government Index: The Government Index was calculated by dividing an estimate of total government services employment by total nonagricultural employment for a Market. This quotient was then divided by the same data for the United States. Data provided by SRC, LLC.

Health Services Index: The Health Services Index was calculated by dividing an estimate of total health services employment by total non-agricultural employment for a Market. This quotient was then divided by the same data for the United States. Data provided by SRC, LLC.

High Tech/R&D (Flex): Modern buildings with space dedicated to research/product development, or buildings in industrial settings with high percentage of office/ showroom style finish.

GLA: Gross leasable area.

GSA: General Services Administration, the US Government’s property procurement agency.

Hectare: Area of land equal to 2.47 acres.

Highway/Commercial Land: Refers to any commercially zoned land that has frontage along, and access to, a major state or interstate highway.

Income Index: The Income Index was calculated by dividing per capita income in a Market by the average national per capita income. Data provided by SRC, LLC.

Industrial Rents: This report quotes the annual rate on a net basis.

Manufacturing Space: All facilities of 25,000 SF (2,500 M2) or greater used in the production or development of goods.

Neighborhood Service Centers (Retail Units on Parks): Retail centers ranging in size from 75,000 to 250,000 SF (7,500 M2 to 25,000 M2), anchored by foot and/or drug stores providing general services to the local market—including pad sites. United Kingdom and Ireland presented on Zone A Basis.

Net Basis: Indicates the tenant pays for most of the operating costs such as utilities, maintenance, repairs and cleaning.

Office Index: The Office Index was calculated by dividing an estimate of office employment by total non-agricultural employment for a Market. This quotient was then divided by the same data for the United States. Data provided by SRC, LLC.

Office Rents: This report quotes the annual rate as full-service basis. Europe quoted as annual rates, net basis.

Population Growth Index: The Population Growth Index was calculated by dividing the projected five year population growth rate for the Market by the same projected value for the United States. Data provided by SRC, LLC.

Regional Mall (Regional Shopping Center): Suburban or downtown properties over 600,000 SF (60,000 M2) with at least two major department store anchor tenants.

Retail Rents: This report quotes the annual rate on a full-service basis. Europe quoted as annual rates, net basis.

Retail Services Index: The Retail Services Index was calculated by dividing an estimate of total retail services employment by total non-agricultural employment for a Market. This quotient was then divided by the same data for the United States. Data provided by SRC, LLC.

SF; s.f.: Square foot or square feet, depending on the reference. 1 square foot = 0.093 M2.

SM; sm; M2: Square meter. 1 S.M. = 10.764 square feet.

Solus Food Stores: Stand-alone large supermarkets or hypermarkets from 50,000 SF (5,000 M2) and up. Quoted as annual rates, net basis.

Suburban Office: Stand-alone buildings and business parks not within the metro city limits.

Vacancy Rate: The percentage of market space being directly offered by the landlord or properties forlease and the amount of sublease space being offered by tenants. In cases where the space is under lease but not occupied, count it as part of the vacancy.

Wholesale Index: The Wholesale Index was calculated by dividing an estimate of wholesale employment by total non-agricultural employment for a Market. This quotient was then divided by the same data for the United States. Data
provided by SRC, LLC.

Zone A: The area at the front of the shop at pedestrian level. It is usually 6.1 meters deep, this measurement equating 20 feet. In a very limited number of locations, Zone A can be 30 feet deep (9.1 meters).