Newer multi-family defeasances increase as Wall of Maturities nears

14425526680_d34d3b66e6Over the past several years, multi-family loans have consistently defeased in greater volume than any other property type.

Due to sustained low rates and continued strength in the sector, owners of multi-family properties are moving at a quickening pace to defease loans against their properties. The intent is to maximize proceeds from disposition or refinance loan proceeds as the Wall of Maturities inches closer. Read more

Don’t Discount Retail: 4 Reasons Bricks-and-Mortar Remains Strong

escalator-711793_640It’s easy to write-off the future of retail properties based on a few headlines spelling out the demise of some major U.S. retailers. The closing of big-box stores such as Sears or the bankruptcies of major brands such as Radio Shack get plenty of attention.

The truth, however, shows bricks-and-mortar retail shopping centers, mixed-use developments and stand-alone out parcels in many cases to be in fine condition. Lenders and investors are eager to finance and own these properties as consumers return to shopping, fueled by job and wage growth. Read more

Are smart retail borrowers defeasing now?

Borrowers sprinted to defease their retail properties in the early months of 2015.

graphicAbout 300 percent more borrowers defeased loans for retail properties in the first quarter this year compared to 2014, according to a Defease with Ease® analysis of Bloomberg data. The trend signals the Wall of Maturities, along with fear of rising rates, is prompting a greater sense of urgency to consider a sale or refinance of their CMBS loan early. Approximately $300 billion in defeasance-eligible loans will mature between now and 2017. Read more

Peering over the Wall of Maturities

3wBPUcDrR9KaduD3PvkY_DSC_0915The Wall of Maturities has arrived. Are you ready to scale it?

Hundreds of billions of dollars in commercial real estate loans will mature over the next three years as thousands of 10-year CMBS products from 2005-2007 reach full-term. Approximately $300 billion in defeasance-eligible and prepayment-eligible loans are set to mature.
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Nationwide, Retailers are Pulling Out of Shopping Centers

11788630744_1faaf5f939According to Bloomberg, shopping centers across the country are still struggling to fill empty store fronts from retailers who went out of business years ago.

Reis, a company which has analyzed the CRE industry for over 30 years, says that over the last year, vacancies at U.S. regional malls rose from 7.9% to 8% in the fourth quarter. This is due in part to Sears Holdings Corp. store closures. Unfortunately, as more and more national retailers (i.e., RadioShack, J.C. Penny Co., Borders, etc.) close stores, the real estate recovery for neighborhood and community shopping centers will remain extremely slow.
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Apartment Investors; Millennials Turn to Suburbs

According to a recent Bloomberg article, “after years of clamoring to buy the most centrally located rental buildings in major urban centers, U.S. apartment investors are rediscovering the suburbs.”
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Nationwide, purchases of apartment buildings outside the urban core climbed 8.2% last year to a value of $82.5 billion.
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CRE Market Conditions Stable – Defeasance on the Rise

round-glass-building-1123032-mLast week, the Federal Reserve released its report on regional economic conditions, which summarized district information from each of the Federal Reserve Banks. Based on the information contained in the report, it was clear that bank branch directors agree that the commercial real estate market is stable or improving in most districts.

The report, which is formally called the “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” evaluates the regions in which Federal Reserve Banks are located. For example, the “Boston” report describes all of New England and “Chicago” pertains to most of the Midwest.
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Multifamily is where it’s at in 2015

Last week, members of the Commercial Defeasance team attended the RealShare conference in Miami. During the conference, over 250 CRE leaders discussed issues and trends related to the multifamily sector in the Eastern U.S.
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It was clear that attendees wanted to know if a decrease in home ownership is a paradigm shift or a demographic shift. They also discussed how certain trends are benefiting the multifamily industry.

According to recent statistics, the U.S. homeownership rate fell to the lowest level in more than two decades. This has caused vacancy rates for rental homes to decrease. U.S. vacancy rates for rented homes fell to 7 percent in the fourth quarter, down from 8.2 percent a year earlier and the lowest since 1993.
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The Future of Retail

Until recently, street retail throughout the country had fallen out of favor and into disrepair. Millennials and empty nesters are moving back to the cities, and investors are once again increasing their portfolio allocation in the street retail category.
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“We’ve been in street retail for a long time, but it’s a greater focus for us now,” says Christopher Conlon of Acadia Realty Trust. “Previously, street retail made up a much smaller percentage of our portfolio, but we chose to make it a big part of our growth plan coming out of the recession.”
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Demand for Health Care Properties

Since the recession, senior housing, medical-office buildings and other health-care-related properties have been outperforming most other commercial real estate categories.

Recent data from Marcus & Millichap showed that approximately $5 billion in medical-office buildings in the U.S. were sold in 2014 – compared to $4.3 billion in 2013.
Medical Office
This should not come as a surprise. As baby boomers retire, the over–65-age bracket will grow by 36 percent and that age group traditionally consumes three times the medical services of younger people. Additionally, due to the Affordable Care Act, more individuals have access to health care, which means office visits are on the rise and space is in great demand.
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