Commercial Loan Agreements and Disagreements: Understanding and Negotiating Your Commercial Real Property Loan

Wednesday, February 6      8:30 - 10:00 a.m.

Speaker: Kevin M. Dollison, Esquire

Cost: $15 SAR Members/$20 Non-Members 

Join us for our newest information-packed course, which focuses on commercial real property loan transactions. Our speaker will dissect a commercial loan agreement and provide practical examples of what a successful loan agreement should entail. Kevin will also clarify the significance and impact of various loan documents and offer recommendations for negotiation with your lender. Finally, typical terms and conditions that can sometimes haunt borrowers well after the loan closing (if overlooked) will be covered. This class will include:       

• Types of Commercial Real Property Loans & Letters of Intent
• Commercial Loan Agreements and Related Documents
• Loan Defaults and Enforcement

Making his debut appearance at SAR, Kevin Dollison is a top-notch expert in the field and will share his expertise to help your deals happen with ease and finesse. Make the commitment to your clients and enhance your professionalism. Register today! Call Brian at (916) 437-1210 to register or click here.   

Save the Date!

Commercial Legislative Update, A "Lunch and Learn" program with Christopher Hanson, Esquire

Wednesday, March 6 -- 11:30 a.m. - 1:00 p.m.

Review of the C.A.R. Commercial Purchase Agreement with Bob McCormick, Esquire

Wednesday, March 20 -- 10:30 a.m. to 12:30 p.m.

How Will Changing Demographics Affect Commercial Real Estate? 

How will changing demographics affect the commercial real estate market? Steve Lubetkin interviews award-winning speaker Todd Clarke, CCIM to find out what commercial practitioners need to know about Gen X, Gen Y and the echo boomers. Listen here

2012 Wrap Up and a Sneak Peek at 2013

NAR Treasurer Bill Armstrong takes a look at accomplishments and events of 2012 impacting commercial REALTORS®, and what is on tap for 2013. Listen here

UNDERSTANDING CALIFORNIA'S PROPERTY TAXES

Although this was circulated late last year, the California Business Properties Assocciation (CBPA) is sending it again because the stakes are so high. Please take some time to look at the Legislative Analyst Office's report entitled "Understanding California's Property Taxes," which provides an excellent primer on the different types of commercial and residential taxation, as well as an explanation of several landmark voter approved laws including Proposition 13 and Proposition 8.
Even if you think you know how property taxes in California work, reading this report will be beneficial. CBPA expects this subject area to be a hot topic of conversation in the next Legislative Session. Click here for the video version. Click here for the full report. 

by Mark Anderson

With little prospect for interest rates to rise in 2013, banks are likely to continue tightening purse strings to help profits in the year to come. The same cost-cutting pressure may push some to merge.

The move toward greater efficiency is required because even four years past the recession, money isn't moving around very much. Families, companies and investors are hoarding cash -- and that doesn't do much for bank profits. It is when money is exchanged -- and especially when money is borrowed -- that bankers do best.

The federal funds rate set by the Federal Reserve Board of Governors will remain low, meaning commercial loans rates will stay low as well. This may be the year that businesses actually begin to take advantage of those rates, however.

"Without question, we're positive going into 2013," said David Taber, CEO of American River Bankshares, parent of American River Bank. Anecdotally, he said, businesses have been doing better all through 2012 and they are seeing improvements from their clients. That, along with the addition an improving real estate market, should allow businesses to feel positive about expanding. The fiscal cliff, while a stiff shot of uncertainty to start the year, should only be a short-lived episode, he said.(Sacramento Business Journal) Banks Shaving Costs

The brightest story for real estate this year should be the continuation of the local housing rebound that started in 2012. That rebound includes both home construction and sales.

In October, Zillow predicted a 5.6% increases in prices for existing homes through the first three quarters of 2013. And Pat Shea, President of Lyon Real Estate, predicts a 2.5% to 5% boost in sales of existing homes as appreciation brings more homeowners out of negative equity and into the ranks of sellers.

Homebuilders, likewise, are fairly optimistic about next year's prospects - much more so than their colleagues in commercial construction. "We do see an expansion," said Kevin Carson, Division President of the New Home Company in Sacramento. The usual winter slump in sales didn't occur in 2012, he said: "It usually is dead until the Super Bowl, and that is not the case this year."  Commercial construction companies see a much bleaker situation in the capital region. The recovery so evident in the San Francisco Bay area and Southern California is lagging in Sacramento, where the biggest employer, government, is a drag.

"If we put a circle around Sacramento, all of our work is outside the region in 2013," said Teri Jones, Vice President of Sundt Construction Inc. in Sacramento. "Based on our forecasting, 2013 will be another very flat year in Sacramento. While office and other types of commercial construction won't likely explode in Sacramento, the new year should bring continued reduction in vacancies. And title companies and residential real estate-related business should slowly expand.

"We'll see this as an active market segment in 2013," said Adam Nelson of CBRE. "However, it will be on a much smaller scale than the previous cycle." Next year also could start to bring spillover to Sacramento from the red-hot Bay area. Businesses priced out of that area could start sniffing around for opportunities in the capital, and obsolete office buildings in older areas could be converted to other uses. (Sacramento Business Journal)

By Randyl Drummer

by Kris Hudson

U.S. malls and strip centers saw slight growth in the fourth quarter, but experts say the wobbly economy and recent disappointing holiday-shopping season point to a lackluster 2013 for retail landlords.

The average vacancy rate at malls in the quarter declined to 8.6%, down one-10th of a percentage point from the previous quarter, according to a new report from real-estate research firm Reis Inc. Mall vacancy has declined five quarters in a row since the industry hit a 12-year high of 9.4% in the third quarter of 2011, said Reis, which tracks the top 77 U.S. markets.

 
At strip centers, the rows of shops facing a common parking lot and often anchored by a grocery store, average vacancy declined to 10.7% in the fourth quarter from 10.8% in the third. That is just 0.4 percentage point from the highest vacancy rate in this category since Reis began tracking the figures: 11.1%, registered in the third quarter of 2011 and at year-end in 1990.

Retail landlords and analysts expect only tepid progress this year in the wake of the recent shopping season. Holiday sales increased by only 4.1% in 2012, compared with a 5.6% boost in 2011, according to preliminary numbers put out by the National Retail Federation late last year. The group will publish its final tally next week. (Wall Street Journal) Retail

by Robert Carr

If "uncertainty" was the buzzword for the 2012 office market, the catch phrase for 2013 is "just slightly better," as a slower-than-usual economic recovery will keep office velocity at a crawl for everywhere except the energy and technology hub cities.

National office activity for all of 2012 was considered basically flat, as tiny gains in the fourth quarter, following the election, only offset the lackluster year. Economic and political turmoil overseas added to the uncertainty.

This year, for the most part, won't be the outlet for the office demand pressure, according to experts from companies such as Jones Lang LaSalle and Cushman & Wakefield. However, the gains by the energy and tech markets show where the office market could be if jobs return in force.
"We're seeing pretty high levels of office activity in cities such as Houston, Dallas, Denver, San Francisco and Fort Worth, Texas, and even secondary tech areas such as Boston and New York City," says John Sikaitis, Director of office research at JLL.

Sikaitis says the two industries were so active in 2012 that California and Texas alone accounted for 60.3% of the country's total net absorption of 28.2 million sq. ft. Also, with most housing markets beginning to recover, the mortgage industry powerhouse cities in the South and Southwest will likely see gains, he says.

The national office vacancy rate hasn't strayed much from the 17% mark in the past year, and the needle isn't expected to budge much during the first six months of 2013 as companies continue to shrink real estate footprints to maximize efficiency. (NREIOnline)

by Bendix Anderson

A look at REIT share prices reveals a recovery or at least the perception of recovery-spreading beyond apartments to other property types.

The multifamily sector has long been the brightest spot in the commercial real estate sector. And that's held true for REITs as well. But because apartments have performed so well and been such a popular investment, yields have dropped. Investments in apartment REIT shares yielded just 6.9% in 2012, including a 3.7% dividend, according to numbers from NAREIT.

So why is the bloom off the rose? Multifamily properties have some of the strongest fundamentals in commercial real estate. Apartment managers report strong demand; average vacancy rates for investment-quality apartments fell to 4.6% in the third quarter of 2012, according to MPF Research, down from an already low 4.8% the quarter before. Vacancy rates are falling close to the lows set during the boom years.

The outlook for the future is strong. Sure, developers pulled permits to build at a seasonally adjusted annual rate of 285,700 units in the third quarter, but that's far below the peak of over 400,000 units a year during the boom years. Apartment REITs are now solid, consistent performers.
All that means there is less room for appreciation. That means that for investors in search of greater yields are betting on other property types, such as industrial REITs.

 by Randyl Drummer 

With the fiscal cliff averted, at least until the U.S. Treasury runs out of money next month, commercial real estate advocacy groups are giving Congress bouquets for provisions of the American Taxpayer Relief Act that extend tax benefits for building owners and investors. At the same time, they're concerned about the other shoe dropping after lawmakers once again failed to address spending and continue to face what's certain to be another contentious debate on the raising of the government's debt ceiling.

The compromise legislation passed the House of Representatives last week at the 11th hour, helping fuel a rally in U.S. stock prices, not to mention a surge in year-end property sale transactions ahead of the market uncertainty. The legislation permanently maintains the reduced 2001 and 2003 tax rates adopted during the Bush era for individuals earning up to $400,000, and $450,000 for married couples, while allowing income above that to be taxed at rates rising to 39.6%.

The fiscal cliff legislation also resolves several issues of keen interest to CRE advocacy groups, including an extension of the tax provision that allows certain leasehold improvements to be depreciated over 15 years rather than 39 years. Further, the bill leaves in place current rules on the tax treatment of carried interest as capital gains that some observers feared would discourage investment activity.

At the same time, the act defers huge sequestration spending cuts for just two months, setting the stage for familiar partisan battles over entitlement reform, debt reduction and the raising of the debt ceiling.

"Real estate is still hanging onto the cliff," said Jeffrey H. Cooper, executive managing director at Savills US. "The act didn't do anything to pull it back up from the cliff." (CoStar) Fiscal Cliff Compromise

Predictions for the top ten megatrends in the green building industry this year includes a strong building rebound in North America, greening existing buildings, and a focus on cloud-based wireless controls, according to Green Building and Sustainability Consultant Jerry Yudelson.

"It looks like a good year ahead for the green building industry. Based on our experience, it seems clear that green building will continue its rapid expansion globally in 2013 in spite of the ongoing economic slowdown in most countries of Europe and North America. More people are building green each year, with 50,000 LEED projects underway by the latest counts; there is nothing on the horizon that will stop this Mega-trend or its constituent elements," Yudelson said. Yudelson's "Top Ten Green Building MegaTrends" for 2013 include:

1. Green building in North America will rebound strongly in 2013, in terms of LEED project registrations. Yudelson said, "Even with commercial and governmental projects proceeding at a lower level, there should be faster growth in green retrofits, with surging college and university projects, along with NGO activity."
2. The focus of the green building industry will continue its switch from new building design and construction to greening existing buildings. The fastest growing LEED rating system the past three years has been LEED for Existing Buildings Operations and Maintenance (LEED O+M), with cumulative floor area in these certified projects now greater than in new construction. Jerry Yudelson's green building book, Greening Existing Buildings, documents the strategic and tactical components of this trend.
3. Green Buildings will increasingly be managed in the "Cloud," represented by the large number of new entrants and new products in fields of building automation, facility management, wireless controls and building services information management in 2011 and 2012. Yudelson said, "2013 could well become 'The Year of the Cloud' for how quickly this trend will manifest."
4. Awareness of the coming crisis in fresh water supply, both globally and in the U.S., will increase. Leading building designers, owners and managers will be moved to take further steps to reduce water consumption in buildings by using more conserving fixtures, rainwater recovery systems and innovative new onsite water technologies. Jerry's recent water conservation book, Dry Run: Preventing the Next Urban Water Crisis, shows how this is being done in green buildings all over the developed world.(Green Building USA) Top 10 Green Megatrends 

 by Ron Nyren

Online retailing has had the biggest effect on the industry and has reduced demand for space overall. It will continue to reduce demand for space. It's also changing the nature of the remaining retail space. A recent  study recently  found that online purchases make up 5% of overall sales, but certain sectors of retail are much more heavily impacted by online retailing, like books, apparel, and electronics.

Retailers are also building smaller stores with less inventory, and they're building fewer stores. Technology has helped them have more elaborate delivery systems. People can go into a store, get an idea of what they want, maybe even try something on for size, and then buy it at the store for delivery. You can see, touch, feel the product, but the actual product you buy may not actually be in the store.

The iPhone and tablets have had a huge impact on the hotel industry. Several hotels are installing iPads in rooms so guests can receive the morning newspaper digitally, view room service menus, and control temperature, air conditioning, lights, or the draperies. With the iPhone, people are able to choose apps to book their rooms and conduct price comparisons. Some consumer-¬oriented apps allow people to walk down a street and see which hotels have rooms available and view the best rate offering available. As a result, people are being much more fluid in their travel decisions. (Urban Land Institutue) Technology Outlook

by Mark Heschmeyer

As 2013 approached, offshore investors rejiggered their U.S. commercial real estate holdings with many foreign investors closing out both successful and unsuccessful ventures just as a new batch of funds were emerging to jump in on the ground floor of the U.S. economic recovery.

Several high-dollar property sales transpired in the last few weeks of 2012 and early this year, with investors from The Netherlands, Australia, South Korea and Germany selling U.S. property holdings, and funds from Canada, Bahrain, Israel, Norway and Germany lining up new deals.

The U.S. real estate market was overwhelmingly ranked first in providing opportunities for capital appreciation, according to members of the Association of Foreign Investors in Real Estate (AFIRE).

For the first time since AFIRE began surveying its members in 2001 to rank the top global cities for investment dollars, four of the five cities they selected are in the U.S.: New York, San Francisco, Washington, DC, and Houston. London was the fifth. (CoStar) Reshaping Foreign Strategies

by Craig Karmin and Eliot Brown

The Canadians are coming.

Pension funds north of the border have poured about $9 billion into U.S. commercial real estate in the past three years, after largely steering clear of owning hotels, office buildings and apartments in the U.S. before then. While there are only a handful of big funds that are active abroad, they are having a disproportionate impact on the U.S. market by funding ambitious plans that domestic investors have been afraid to touch.

Canadians funds see value in the U.S. as they expand beyond their own overheated property market. And, since the Canadian market wasn't hit as badly as the U.S. during the financial downturn, these pension funds are less gun shy about putting money to work in riskier projects.

"The majority of institutional investors would say the U.S. is No. 1 on their list today," says William Tresham, President of Global Investments for Ivanhoe Cambridge. "People are concerned where Europe is heading. Asian markets aren't well understood. Canadian assets are around an all-time high."

Canadian commercial-property prices fell during the financial crisis but not as sharply as in the U.S., says Ross Moore, Head of Canadian Research at CBRE Group Inc. Canadian values are now close to record levels seen in 2007. Investment volume, unlike in the U.S., also is hovering near peak levels. (Wall Street Journal) The Canadians are Coming