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                                                                                                                                              September 7, 2012   

 I never think of the future -- it comes soon enough.    Albert Einstein 

In This Issue
Education
Regional Events
Legislation
Owners/Users Snap Up Office Buildings
Multifamily Rates Stabilize
Premium Property Deals Spurred By Wine
Singe-Person Businesses In Sac
Memory Care At Front of Investors' Minds
Mortgage Delinquency Rates Fall
Start-Ups Shake Office-Leasing Space
Small Is New Order For Struggling Malls
'Smart' Buildings Need Smarter Technicians
Non-Traded REITS Face Scrutiny
American Workplace Is Changing
High-End Hotel Investment Sales Hot
Can Growth Maintain Pace?
Exclusivity Periods Can Be Problematic
REITS Offer Shelter From Storm
Industrial Property In Europe
Foreign Investors Eyeing Indian Realty

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UPCOMING COURSES APPEAL TO WIDE AUDIENCE/NEEDS

The coming month will see four very different yet information-packed courses designed for commercial practitioners and even for those contemplating a career in commercial real estate. While the education value is extremely high, we keep the cost low for both SAR Members and the Northern California commercial real estate community.  

 

An SAR-Commercial favorite, attorney Bill Hunter will focus on tenant brokerage and more specifically, representing a tenant in commercial lease negotiations. Rental adjustments, building expenses, limitations on personal liability, construction responsibilities and payment of brokerage commissions are just a few of the topics Bill will cover in-depth with a significant Q & A session at the close of the event.  "Representing A Commercial Tenant' will be held next week (Wednesday, September 12) in SAR's Mack Powell Auditorium.

 

CCIM's "Introduction To Commercial Real Estate" will also be held on September 12 and 13th at SAR. This is one of the best courses on the market to discover the basic skills and terminology for a career in commercial real estate. Attendees will finish the course with an understanding of how to utilize a financial calculator for commercial real estate transactions, basic investment analysis tool usage, estimate net operating income, calculate the internal rate of return, project vacancy rates and much, much more. We are fortunate to have this program in Sacramento so attend it while it is here.

 

On Tuesday, September 25, join us for a "lunch and learn" program featuring, "Green Due Diligence -- Fact or Fiction?" With so many questions looming about legislation mandating compliance in the new "green" economy, expert Michele Skupic will answer your questions about how climate change and sustainability issues MUST be integrated into your property transactions plus how a due diligence program can yield significant cost savings. Join us for sandwiches and find out what is at stake and why you need to care about this issue.

 

Finally, CCIM Sheryl Smith will be at SAR on Wednesday, October 3 to cover the ins and outs of writing a proficient and legally-binding Letter of Intent. The Letter of Intent (LOI) is the central player in lease negotiations and this course will show attendees when to use it, the different types, how exhibits are used, how you get paid on a lease plus much more. Walk-away from, "How To Write A Letter of Intent" with an LOI structure you can use immediately. 

 

Please see below for additional course descriptions and flyers. You can register for any of the classes by calling Brian De Lisi at (916)437-1210. 

 

Additionally, if you are a speaker and would like to be considered for a spot on the 2013 commercial education schedule, please e-mail Janet Whitney at jwhitney@sacrealtor.org 

EDUCATION

Representing A Commercial Tenant

Wednesday, September 12 -- 8:30 - 10:00 a.m.

Instructor: Bill Hunter, Esquire

REALTORS® and SAR Members -- $10/All Others -- $15

 

For this program, Bill Hunter will focus upon tenant brokerage, i.e., representing the tenant in commercial lease negotiations. His outline will cover the tenant's pocket-book issues such as rental adjustments, building expenses, CAM charges, limitations on personal liability, construction responsibilities, and payment of the brokerage commission. Tenant "exit strategies," such as subletting and early termination rights, extension options, and non-recourse clauses and arrangements will also be discussed.  

  • What is a "triple-net" lease?
  • What is CAM in a shopping center lease?
  • Should office "pass-throughs" be negotiated?
  • What rules govern percentage rents?
  • How should a "going to market" clause be written?
  • What does "maintain and repair" actually mean?
  • Is the destruction clause "just boilerplate?"
  • What insurance can reasonably be required?
  • Who owes rents accruing after assignment of a lease?
  • How are the use and subletting clauses related?

As always, Bill will run an extensive Q & A period at the conclusion of this course. Register by calling Brian at 916-437-1210 or use this form.

 

 

CCIM's Introduction to Commercial Investment Real Estate Analysis

September 12 & 13

SAR's Mack Powell Auditorium

 

CCIM's introductory course teaches you the fundamentals of the commercial investment real estate industry and demonstrates how to apply these skills using real-world case studies. You will have the self-confidence to answer your clients' questions, anticipate their concerns and plan for their needs when you have a solid commercial foundation from which to start.

  • Solve investment problems using a financial calculator.
  • Perform basic mortgage calculations using compounding and discounting techniques.
  • Understand basic real estate investment analysis tools, estimate net operating income and estimate cash flows before tax.
  • Calculate the internal rate of return.
  • Evaluate similar properties, project vacancy rates and estimate absorption figures.  Course Flyer

 

Green Due Diligence - Fact or Fiction?  A "Lunch and Learn" Program

Tuesday, September 25 - 11:30 a.m. to 1:00 p.m.

Speaker: Michele Skupic

REALTORS® and SAR Members -- $10/All Others -- $15 

 

The emerging evolution of benchmarking and rating criteria for energy-efficient buildings continues to move swiftly and is forcing commercial real estate practitioners to determine how climate change and sustainability issues MUST be integrated into lease and sale transactions. The following questions will be addressed at this session: 

  • Why should I care?
  • Who is driving the green train?
  • What are the risks?
  • Where are the rewards?

Lunch is included in this session so you must pre-register! Let us know if you require a vegetarian option. Don't miss this new and informative program. Register by calling Brian at 916-437-1210 or use this course flyer.

 

 

How To Write A Letter Of Intent

Wednesday, October 3 -- 8:30 - 10:30 a.m.

Instructor: Sheryl Smith, CCIM

REALTORS® and SAR Members $15/ All Others $20                     

 

Leasing is a critical part of commercial real estate. When doing a lease transaction, the Letter of Intent (LOI) is the central player. It is also sometimes used for a purchase transaction, but mostly for leasing. Whether you are representing a tenant, landlord, buyer, or seller, an LOI can be an effective tool. This seminar is perfectly suited for incoming commercial practitioners and those revamping your skills. The following items plus much more will be highlighted:  

  • What is the purpose of the Letter Of Intent?
  • LOI or Purchase Agreement -- When to use what?
  • Are there different types of LOIs?
  • How are Exhibits used in an LOI?
  • How do I get paid on a lease?
  • How do I find space that is available for lease?

Join us for this fun and informative seminar and walk away with an LOI structure that you can use immediately. Call Brian at 916-437-1210 to register or use this form.

 

 

REGIONAL EVENTS

Investment Forum
Tuesday, September 11 -- 7:30 a.m.
R.J. Grins In The DoubleTree Hotel
E-mail mmurphy@tricommercial.com for additional information

Sacramento CCIM Chapter Luncheon -- SBA Hub Zone Opportunities

Thursday, September 13 at Downey Brand Law Firm
Call Blain Hardy at (360) 393-2494

 

CREW Luncheon & Networking -- "Davis: The Coolest School and the Coolest Project"

Thursday, September 13 -- 11:30 am

The Firehouse Restaurant, Sacramento

 

ULI's "Capitol Lofts Development" Tour & Discussion With Developer

Wednesday, September 19 -- 4:00 p.m.
Capitol Lofts Development on R Street between 11th and 12th Streets

Reception at Fox and Goose to follow

Information

 

Sacramento Real Estate Exchange
Friday, September 21 -- 10:30 a.m.
China Buffet in Citrus Heights
Call Ben Couch at (916)989-4652 for additional information

 

NAIOP Sacramento Valley Chapter Discussion Forum

Wednesday, September 26 -- 10:30 a.m.

Sacramento's Crest Theater

Registration


C.A.R. "Commercial Day"
Wednesday, October 3 -- 8:00 a.m - 5:00 p.m.
Anaheim, CA   Flyer

Commercial Investment Group Meeting of C.A.R.
Friday, October 5 -- 9:00 am to Noon
Anaheim, CA -- Additional Information Coming Soon

LEGISLATION

Last Friday (August 31) was the final day of the 2011-2012 Legislative Session. Hundreds of bills were being voted on in the final hours in both houses. Major issues including property taxes vote threshold, Healthy Families reinstatement, stricter environmental regulation, Pension Reform, Private Pensions, and many many other policies that could impact your businesses were on the docket. A more detailed report regarding the legislative session will be available in the next SAR Commercial Report.

 

Workers' Comp Reform Bill Headed to Governor 
 
In the final hours of the legislative session, lawmakers passed a bill revamping the California workers' compensation system. SB 863, which passed with only four opposing votes in each house, now goes to Gov. Jerry Brown, who greeted it with enthusiasm in a statement over the weekend.


"I commend the Legislature for an extraordinary workers' compensation reform bill that helps injured workers and averts an imminent crisis of skyrocketing rates," he wrote. "Again, Republicans have joined Democrats to work together -- perhaps, a portent of good things to come."
If the governor signs the bill as expected, it would cut hundreds of millions of dollars in costs out of the system partly through efforts to reduce fraud and to streamline processes.

 

OWNERS/USERS SNAP UP OFFICE BUILDINGS 

by Sanford Nax


Real estate agents say more small business owners are capitalizing on relatively low real estate prices, motivated sellers and low interest rates to buy property rather than lease.


"Owner/users are especially active in the buying market as they take advantage of competitive pricing on higher-quality properties," Jon Walker of Voit Real Estate said. "Health-related businesses are particularly active, and are leading the the way, especially in Roseville and Rocklin," Walker added.


The residential real estate market is showing signs of strength, but the commercial sector, with the exception of health care, is struggling. Voit's agents in Sacramento have directed six office lease or sale transactions totaling almost 47,000 square feet in the last several months and are seeing vacancies shrink in Roseville and Rocklin, but traction is still slippery.


"Office is a little more of a wild card," said Tyler Boyd, Voit's market research analyst.

(Sacramento Business Journal)  

 

MULTIFAMILY OCCUPANCY RATES STABILIZE, RENT GROWTH SLOWS 

by Bendix Anderson

 
Apartment rents are still growing across the country, but not as quickly as they were in the summer of 2011, when growth in effective rents peaked.


"Things have slowed since a year ago," says Jay Denton, Vice President of Research for data firm Axiometrics Inc., based in Salt Lake City. "The growth rate has slowed for rents -- the growth for occupancies is starting to flatten out."


Axiometrics predicts that average apartment rents will settle into a steady pace of growth over the next few years, similar to rental markets in the mid-1990s, as occupancy rates stay very high. 

The percentage of occupied apartments appears to be settling in at close to 95%. The national occupancy rate actually dropped very slightly in July, inching downwards 3 basis points to 94.33% from 94.36 percent in June. Occupancies are still up 71 basis points from 93.62% the year before, according to Axiometrics, which bases its numbers on monthly surveys of 5.5 million apartments in more than 140 metropolitan areas across the country.


Data from Reis Inc., based in New York City, also show the balance stabilizing between occupied and vacant apartments. Reis's count of the percentage of vacant apartments fell to 4.7% in the second quarter, from 4.9% in the first quarter. "A 20 basis point drop is, after all, the smallest quarterly decline in national vacancies in two years," according to Victor Canalog, Vice President of Research and Economics for Reis. (NREIOnline) Multifamily Occupancy Stabilizes

 

PREMIUM PROPERTY DEALS SPURRED BY TASTE FOR WINE 

Wine countryThe taste for high-end wines in the U.S. has created a sales spree for premium properties across California, with deals statewide set to reach $800 million by year-end, according to Bloomberg.


The rebound in deals comes after three years of falling demand for high-end wines from the state, a decline brought on by the recession.


Research shows sales of premium wines from California were up 14% for the year ending July 21, to total $410 million. Counties in the Sacramento region are also known for their wines and wineries, though they're not as high-profile as Napa. (Bloomberg News) Winery Properties 

 

HOW MANY SINGLE-PERSON BUSINESSES ARE IN SACRAMENTO COUNTY?

When does a business have no employees? When the tiny firm has an owner in a one-person show.


In Sacramento County, 88,029 businesses have no employees -- just the self-employed boss, according to an On Numbers analysis. That puts it at No. 36 in the nation. Such businesses in the county have $3,744,374,000 in receipts annually, which works out to an average of $42,500 per business.


More than 22 million U.S. businesses are classified as non-employer businesses by the U.S. Census Bureau, accounting for $950 billion of receipts in 2010. The typical non-employer business made $43,000 in 2010. (Sacrameno Business Journal) Non-employer Businesses

 

MEMORY CARE IS NOW AT THE FRONT OF INVESTORS' MINDS 

by Robert Carr


Memory care is getting a lot of developer and investor attention today because of projected massive growth of the sector. As the swell of seniors quadruples during the next 15 years, the demand will rise even faster for properties that can care for residents with limited mental capacities.


The amount of people 65 and older is expected to increase by 50 million in the U.S. by 2020. Though assisted living facility development has been a hot sector for the past decade, memory care has been just a small part of the offerings. However, advances in health care, medicine and physical fitness are expected to keep people living longer.
 
"While there have been many scientific advances in health of the body, they're still behind on figuring out how to keep the mind going," says Kenneth J. Carriero, Regional Director and Senior Vice President of the National Seniors Housing Group at Colliers. "Families who can't afford assisted living may have tried to take care of mom and dad, but when it gets into a memory care situation, there isn't really that option. You can't leave them home by themselves, and they require constant care." (NREIOnline)  Memory Care 

 

COMMERCIAL MORTGAGE DELINQUENCY RATES FALL 

by Carl Gaines


Chandan Economics and the Mortgage Bankers Association released data last week that points to continued improvements in the commercial real estate market.


Chandan released its Q2 2012 Bank CRE Default and Lending Report, which analyzed second quarter call report data. This data showed that the default rate on commercial mortgages held by banks had fallen to its lowest level since the middle of 2009 -- to 3.11%. This marked a 34 basis point drop when compared to the previous quarter.


The multifamily default rate improved as well, falling to 2.03%. At the same time, lending picked up for this sector. Net lending on behalf of banks to commercial property and multifamily borrowers increased by nearly $5 billion for the quarter.


The findings dovetail with recent findings from the Mortgage Bankers Association, which last week released its Commercial/Multifamily Delinquency Report. The MBA said that delinquency rates for commercial and multifamily mortgages held by banks had continued to drop for Q2 2012, falling to the 3.1% figure that the Chandan Economics research found. (Commercial Observer) Mortgage Delinquency Rates Fall 

 

START-UPS SHAKE UP OFFICE-LEASING SPACE 

Internet Start-Up

by Laura Kusisto

 

The office-space-leasing business has been slow to adopt new technology, but it is now getting shaken up by Internet start-ups.


New companies are offering online deal information and videos, and are putting tenants and landlords together without brokers on smaller deals. They say the brokerage business is long overdue for innovation.


"It's like trying to book a plane ticket in 1997," said Jason Freedman, Co-Founder of 42 Floors, a San Francisco-based start-up that has created a virtual office-leasing marketplace online, similar to listing sites for rental apartments.


The new companies -- all run by executives in their late 20s and early 30s-are targeting different parts of the leasing process. "View The Space" allows landlords to post videos of their spaces online. CompStak is creating a database of confidential details of leasing deals through crowd sourcing, in which brokers and other real-estate professionals gain access to the database in exchange for anonymous information.


These businesses pose challenges to the control of information enjoyed by major brokerage firms such as CBRE Group Inc. and Jones Lang LaSalle Inc. At the same time, they also could cause problems for the largest commercial-property-data company, CoStar Group Inc. CoStar charges brokerage firms monthly fees for its data services, and some customers have griped about the price. Ian Corydon, an analyst at B. Riley & Co., said CoStar's dominance has created enough dissatisfaction to allow young companies to expand. "If you look at CoStar specifically, they are really the only true national solution. There's a lot of desire on the part of CoStar's customers to have an alternative," Mr. Corydon said. (CoStar has declined to comment.)


The start-up that poses the greatest possible disruption to CoStar is CompStak, which is looking to cash in on an open secret in the industry: Brokers swap confidential information about leasing deals, including rents and how much the landlord is putting toward tenant improvements. (Wall Street Journal) Start-Ups Shake Office Leasing

 

SMALL IS NEW ORDER FOR STRUGGLING MALLS 

by Kris Hudson

 

Many struggling shopping malls are trying to find salvation by going small -- in their purchasers, sales prices and, in some cases, size.


As the nation's largest mall owners sell off or give up their most-troubled properties -- dogged by deteriorating neighborhoods, newer rivals and online sales -- smaller real-estate companies are snapping them up at discount prices and trying to find ways to pull them out their death spirals. Sometimes, that involves demolition.


Nationwide, the number of subpar shopping malls -- generally defined as malls generating less than $300 in sales per square foot -- is growing at a rapid rate, as the sluggish economy, shifts in consumer habits and chain-store closings reduce the number of tenants and the profits for retail landlords.

Of the more than 1,000 enclosed malls in the U.S., roughly 300 generate less than the $300-per-square-foot ratio, according to Green Street Advisors Inc., which tracks real-estate investment trusts. The industry average is roughly $370.


The dismal economics have led large developers like Simon Property Group Inc. to dump the properties, either handing them over to lenders or selling them to local investors. (Wall Street Journal) Small is New Order

 

NEW 'SMART' BUILDINGS NEED SMARTER TECHNICIANS 
by Mark Billingsley
 
Electricity hasn't changed at all since Benjamin Franklin flew his kite in a storm more than 250 years ago. It's still all about positive and negative, says Dennis Morin. But today's "smart," energy-saving buildings have electrical systems unimaginable to electricians just a generation ago.

That's where Morin comes in. He's the Director of the International Brotherhood of Electrical Workers Local 340's training center, a 16,000-square-foot building off El Centro Road in Sacramento. For more than 75 years, electricians have received the latest training to stay abreast of the changes in the commercial and residential building markets.

The challenge when working on a smart building "isn't electrical," Morin said. "That hasn't changed ... ever. But the programming techniques, setting up the control boxes and sensors, that's where the training comes in today."

The U.S. Department of Labor forecasts that employment for electricians will grow 23% between 2010 and 2020 and that by 2016 almost every individual in the electrical and electronics trades will need to be "green trained" to keep up with the increased use in alternative energy sources.

The economy and new environmental energy regulations are creating green jobs in building technology integration within three major areas -- energy efficiency, renewable energy and smart energy. Whether it's a retrofit or new construction, electricians will have to get even smarter to deal with tomorrow's smart buildings. (Sacramento Business Journal) Smart Buildings

 
NON-TRADED REITS FACE MORE SCRUTINY FROM BROKER-DEALERS 

by Jennifer Popovec


Broker-dealers are increasingly being selective about the non-traded REITs they include on their investment platforms today, and they're subjecting those investments to greater scrutiny.


"There are more non-traded REITs today than there has ever been, and as a broker-dealer, you have to make tougher choices," says Steph M. Laflamme, Managing Director of the financial services group for First Allied Securities Inc. He notes that most broker-dealers have reduced the number of non-traded REITs on their platform to allow for greater oversight and to mitigate sector duplication.


"We want to offer a robust set of options, but at the same time we want to make sure we're focusing on the best sponsors and the best investments," Laflamme adds. "We can be very choosy."


At First Allied Securities, the due diligence process has expanded to include a robust checklist of items, as well as a multi-person investment committee rather than a handful of decision makers, Laflamme says. "It's not as relationship-driven as it was years ago," he notes. "The decisions are more a matter of the merits of the sponsor and the REIT's ability to satisfy advisors and investors. We certainly don't let relationships drive the decision." (NREIOnline) Non-Traded REITS

 

THE AMERICAN WORKPLACE IS CHANGING: IS THE GOVERNMENT BEHIND THE TRANSFORMATION? 

by Oscar Perez

 
As the nation's largest property owner, the federal government owns or leases 1.2 million real estate assets, encompassing over 830 million square feet of buildings. And many of those facilities are underused, outdated or abandoned. Additionally, just like any land or building owner, the government has been hit hard by the recession and has pledged to evaluate its real estate holdings and consolidate where it can.


Although many would like to forget this recent economic crisis, most agree this is the beginning of an important and fundamental shift in the way we do business and where we do business. Particularly in the government sector, everybody is wondering, "How can we do things differently and better than what we were doing before?"


Specifically, the deficit debate in Congress that began in 2011 took a significant toll on the two largest federal landowners -- the Department of Defense (DOD) and the U.S. General Services Administration (GSA). For fiscal year 2013, for example, the GSA has a new-construction budget of nearly zero. The DOD, on the other hand, has a $2 billion budget, but voluntarily agreed to freeze spending on new-construction projects to revaluate priorities. Both agencies have shifted their focus towards renovation and energy conservation projects in their fiscal year 2013 budgets.


DOD and GSA consolidations are affecting employees, landlords, buildings owners, designers, and architects, but should we presume the worst?


Because the government has so much real estate, it drives the market, especially in the larger metropolitan cities. So what we're seeing as government agencies such as the DOD and GSA continue putting more properties in the pipeline for disposal is a burgeoning transformation of office building design.(NREIOnline) Government Backs Transformation 

 

HIGH-END HOTEL INVESTMENT SALES GETTING HOT AGAIN AFTER SIX-MONTH LULL 

Fancy Hotel by Randyl Drummer


After trading at a blistering pace last year, high-dollar hotel investment sales cooled off considerably in the first half of 2012. However, early third-quarter transaction activity suggests that lodging sales should finish the year on a strong note, according to CoStar sales data and comments from leading hospitality CEOs.

 

Total volume of sold hotel transactions valued at $25 million and above was $2.5 billion in the first six months of 2012 -- well below the strong $6.4 billion recorded in the first half of 2011, according to preliminary sales transactions analyzed by CoStar. Thanks to a handful of hotels that sold for top dollar, sales volume has already surpassed second-quarter 2012 and about equaled first-quarter figures just a month into the third quarter. The average price per key remained strong at around $233,500 at midyear.

 

The uptick in sales in recent weeks come as the U.S. hotel industry heads into the Labor Day weekend, traditionally one of the busiest travel and vacation periods of the year, and reflects what lodging analysts say is the continuing and growing strength in fundamentals in spite of this year's slow economic growth and fiscal uncertainty. (CoStar) Hotel Sales Hot Again 

 

AS TECH OFFICE BOOM ROLLS INTO THIRD YEAR, CAN GROWTH MAINTAIN IMPRESSIVE PACE? 

by Mark Heschmeyer


After two years of job growth and strong revenues in the high-tech sector fueling equally strong growth in rental rates and declining vacancies in tech-oriented office markets across the U.S., the question some investors are asking is, can it last? 


The tech sector has been a consistent bright spot in the economy even before the recession ended. Between 2009 and mid-2012, high-tech service jobs in the U.S. grew by 9.9%, while non-farm jobs grew by 1.7%, according to a new report released by CBRE Global Research and Consulting. The strong job growth was most evident in the San Francisco, New York City and Silicon Valley office markets. 


Equally far reaching, were the impacts felt in the office submarkets where tech firms dominate. Fifteen of the top 20 tech-oriented office submarkets across the U.S. saw office rents increase in the past two years. 


Rental growth was strongest in Silicon Valley's Mountain View submarket, with 83% growth, followed by San Francisco's SOMA submarket, at 59%; Boston's East Cambridge submarket, at 28%; and New York City's Midtown South, at 24%, according to CBRE, which says the high-performing tech markets offsets slower rates of growth seen in other office-using sectors. 


"The strengths of these tech-centric office submarkets, with strong rental rate growth and declining vacancies, are major factors supporting the overall office market recovery," said Colin Yasukochi, CBRE's director of research and analysis. "With the high-tech economy growing nearly six times faster than the national average, we expect that these submarkets will continue to outperform, helping to counterbalance tepid job growth in other sectors and the uncertain economic environment." (CoStar) Tech Office Boom Rolls 

 

WILLING BUT UN-ABLE: EXCLUSIVITY PERIODS IN LETTERS OF INTENT CAN BE PROBLEMATIC 
by Adelaide Polsinelli

With the intense competition today for "good deals," choosing the right buyer can become increasingly more difficult. A new breed of suspiciously sketchy buyers has entered the market.
Traditionally, a prospective purchaser would make an offer, secured by a certain confidence that she would be able to obtain enough financing from a lender and had enough equity to cover the cost of the property and closing costs and enough reserves to get through a period of stabilization of the asset.

That buyer would then enter into a contract of sale, put up the customary 5 to 10% deposit in escrow and proceed to secure all the elements necessary to get through the typical 60- to 90-day closing. At which point, clean title would transfer and the new buyer would take ownership of the property while the seller left the table with the proceeds. Both sides then went their separate ways.

More recently, the playing field has changed. A new buyer profile has digitized, throwing a curveball of mayhem into what was normally a predictable course of transaction events. These buyers have the unrealistic expectation that they can jockey for position in a deal with no money down and no skin in the game. It takes the art of flipping to a very different level. This behavior could be the result of greed and envy. No matter the cause, it must be anticipated, understood and eradicated. (Commercial Observer) Exclusivity Periods

 

 REITS STILL OFFER SHELTER FROM THE STORM
by Dinah Wisenberg Brin


Favorable industry fundamentals, strong balance sheets and a stabilizing US economy have combined to make real estate an attractive asset for investors, whose portfolios should continue to benefit for some time.


Publicly traded U.S. REITS, fully known as real estate investment trusts, -- with combined market capitalization of more than $500 billion -- have outperformed the broader stock market, although investors would be wise to choose holdings based on sectors, geographic markets and company quality.


The FTSE NAREIT All REITs Index also outperformed the S&P 500 over the past three years, with nearly 28% in average annual returns, compared with roughly 14% for the S&P 500, as of July 31. Annual returns over five years averaged some 4.5% for the REIT index, versus 1% for the S&P 500.


Low interest rates, rising rents, strengthening demand and limited property supply bode well for REITs, which appeal to investors as relatively safe havens that represent real assets and provide solid dividend income. REITs typically invest in apartments, office buildings, hotels or other property types.


"We like the growth and income story that REITs offer investors," Philip J. Martin, Morningstar's Director of REIT Research and Strategy, said. Morningstar, though, believes REITs are trading at a 10% to 15% premium to fair value, with multifamily housing companies at a 20% to 25-percent premium, healthcare REITs at fair value and other segments somewhere in between.


"We're being very selective in terms of business model, in terms of portfolio, in terms of location," Martin said. (CNBC) REITS Offer Shelter

 

INDUSTRIAL PROPERTY IN EUROPE DEVELOPS AS INVESTOR FAVORITE
by Anita Likus

Some of the most sought-after commercial real estate in Europe these days is also the most unglamorous: warehouses and industrial space.

Although values of industrial properties have been slower to recover in recent years than office buildings, shopping malls and other commercial-property types, investors are attracted to industrial buildings because the rent paid by tenants has been stable, thanks to long-term leases, and that produces strong income for owners.
 
Property investors are seeking out income streams from European warehouses like this one, which stores rice in Pavia, Italy. According to property-services provider CBRE Group Inc., European industrial and logistics property generated an average annual return of 7.8% in the past 10 years. That compares with 5.5% for offices and 6.2% for retail.

With the growth of Internet shopping, which requires warehouses across the world for storage and distribution centers close to big cities, some analysts believe demand for industrial space will continue to rise, despite Europe's current economies woes. (Wall Street Journal) European Industrial Property

FOREIGN INVESTORS EYEING INDIAN REALTY MARKET ON A SELECTIVE BASIS 

Indiaby V. Rishi Kumar


Foreign investors are looking at investing in Indian real estate market on a selective basis, according to Colin Dyer, Global CEO, Jones Lang LaSalle.


Providing a macro-overview of Indian realty sector, the CEO of international property consultancy, who spent a week in India recently, in a statement today said that foreign investors are looking at infusing capital behind successful investment managers and many are directly investing.


According to Dyer, the sector is faced with challenges such as liquidity, lack of availability of serviced urban land, procedural delays in approvals and the slow pace of infrastructural growth. Still there is relatively low transparency in real estate terms.


In commercial real estate, there has been a demand contraction of about 15% in 2011. The market will continue to be under stress for another four quarters. And the retail real estate market is seen to be maturing. In the residential property market, capital values are going up because of increased input costs.


Multinational companies are cautious about committing because their home countries are not doing well. They are in wait-and-watch mode. Mumbai and Delhi continue to have the inherent demand for residential properties. There have been fewer launches and developers' input costs have gone up. (The Hindu Business Line) Indian Realty Market Eyed By Investors