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MIG Targeting Texas, Seattle, Portland and Salt Lake City for Acquisitions - CoStar Group

MIG Targeting Texas, Seattle, Portland and Salt Lake City for Acquisitions - CoStar Group

Top Commercial Real Estate Trends to Remain Same in 2012

Commercial Real Estate Comeback?

Longhorn Steakhouse New McAllen Location

Petro Gas Opens McAllen Location

UPS Moves South Texas Operation to McAllen

10 Stocks That Show the Real Estate Boom Has Arrived

By Frank Byrt   3/6/2012


Stock quotes in this article:HME, ESS, UDR, SPG, PSA, HCN, PLD, BXP, AVB, ACC 


(Story updated to add that Simon Property Group is in agreement to develop a retail outlet center in Shanghai.)

BOSTON (TheStreet) -- The U.S. real estate market is in two worlds, with residential housing in the dumps and not yet worthy of consideration for investing. But commercial real estate, in the form of real estate investment trusts (REITs), is prospering.

For example, demand for rental apartments is booming because an uptick in employment has people relocating to areas with job opportunities. While at the same time, home ownership is at 12-year lows and not seen growing significantly anytime soon, and that boosts the earnings outlook for apartment-owning REITs.

And demand for commercial real estate, which includes shopping malls, office buildings and storage facilities, is showing steady growth, aided by years of almost no new construction, limiting supply, while a strengthening economy increases demand.

"Help from the current, very modest recovery has been enough to lift occupancy and rental rates for an industry group that includes office buildings, shopping malls, warehouses, industrial spaces, apartments, and hotels, to name a few," Fidelity Investments said in a research note. "These positive fundamentals have, in turn, boosted net income for REITs."

That recovery has been little noticed by many individual investors, given their still-strong memories of the mortgage-backed securities crisis and the plunge in residential home values, which has poisoned their views on all things real estate.

But REIT securities have been climbing since March 2009. The benchmark FTSE NAREIT Equity REITs Index is up 5.8% this year versus the S&P 500's 9.3%, after gaining 8.3% last year compared to the S&P 500's 2.1% rise. And that was after two straight years of 28% annual increases in the FTSE NAREIT Equity REITs Index.

Industrial property REITs are doing the best this year, with a 15.6% return, while mixed use (office and industrial) REITs are up 13%. As for residential REITs, S&P Capital IQ recently raised its fundamental outlook for the sub-sector to "positive" from "neutral."

"In our view, many Americans may ...

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Warren Buffett: It’s Time to Buy Real Estate

Warren Buffett: It’s Time to Buy Real Estate

Commercial Real Estate: Back in the Saddle?

Cheaper Rates, Vigorous CMBS Activity Send Positive Signal about the Commercial Real Estate Market in 2012, According to John B. Levy & Company

Richmond, VA (PRWEB) February 28, 2012

After a Tale of Two Cities year in commercial real estate that gave lenders and borrowers alike the best of times and the worst of times, the outlook for 2012 is both positive and encouraging. According to “Commercial Real Estate: Back in the Saddle?” – the latest podcast produced by John B. Levy & Company (available online at http://www.jblevyco.com) – early indicators suggest that CMBS is back with a force.

“After the European debt crisis and US government bonds gave us a rocky ride in 2011,” says John Levy, founder of John B. Levy & Company, “commercial real estate is back in the saddle for 2012. The conduit business gives us a perfect indication of what we can expect. First of all, rates are cheaper. Ten-year fixed-rate money is 5 percent or less, which is 100 basis points better than what it was this past fall. In addition, second- and third-tier cities are now in the mix. Deal-making has moved from cities like Washington, New York, and Chicago to a broader array of markets . . . Albuquerque and Amarillo, Nashville and Richmond.”

"While CMBS is expected to make a strong statement in 2012, preferred equity and mezzanine debt will continue to bring additional leverage to transactions," according to Levy. In fall 2011, as well as earlier in the year, mezzanine debt and preferred equity fell in the 13 to 15 percent range, if not higher. Those prices are currently in the single digits, the result of low interest rates on US Treasurys. In no uncertain terms, current Federal Reserve policy is playing a significant role in the pricing of preferred equity and mezzanine debt.

“Perhaps nowhere is it more clear that the Bernanke fiscal policy is working than in the preferred equity, mezzanine debt arena,” says Levy. “Look at the 5-year Treasury note. It’s 1 percent. So if you secure mezz debt at 9 percent over five years – which sounds cheap by historical standards – you’ll still get a return that’s 800 basis points over Treasurys. By keeping interest rates extremely low for at least three years, Fed policy penalizes investors for parking their money, and it forces them to invest in the market. The result? Higher leverage is cheaper.”

While the multifamily housing market has performed well over the past several years, Levy believes that trend may be nearing its end. Several factors account for the success of that sector and, as such, hint at its easing. First, the market for single family homes has been abysmal, so people rented rather than bought. Second, multifamily housing has been the beneficiary of extremely cheap government-sponsored mortgages.

“Multifamily housing has been the darling of commercial real estate, and it owes a huge debt of gratitude to a single-family market that has been in the tank for years,” says Levy. “But what has really driven the success of multifamily is cheap money from Fannie Mae, Freddie Mac, and FHA. That’s my money, your money, government money. It’s puzzling as to why the government provides mortgages for less than what the private market charges.”

Firm Background
John B. Levy & Company, Inc. is a real estate investment-banking firm headquartered in Richmond, Virginia. Since John Levy founded the company in 1995, the firm has structured over $3.5 billion in financing for developers and owners of commercial and multi-family projects nationwide, often investing its own proprietary funds into transactions with its clients.

Mr. Levy is an expert on commercial real estate financing and the effects of interest rates on commercial real estate markets. He is the originator and author of the Barron’s/John B. Levy & Company National Mortgage Survey, which Barron’s published for 23 years, and co-creator of The Giliberto-Levy Commercial Mortgage Performance Index (sm), the first and pre-eminent index to measure and analyze the performance of investments in the commercial mortgage industry. Additionally, he is a former member of the Board of Directors of Anthracite Capital Inc., a New York Stock Exchange REIT managed by BlackRock, Inc. and a former director of Value Property Trust.

A seasoned speaker, Mr. Levy has presented nationwide to major real estate associations and key industry groups, including the Mortgage Bankers Association and the Urban Land Institute. He has also appeared on Bloomberg and CNBC. Mr. Levy also appears regularly as a guest commentator on FoxBusiness.

For more information about John B. Levy & Company, please visit our website at http://www.jblevyco.com or call Julia Grant at 804-644-2000, extension 258. You can also follow us on Twitter at http://www.twitter.com/jblevyco and become a fan on Facebook.