Many economic issues converged late last year to slow commercial real estate’s recovery. In addition, the uncertainty of vintage commercial mortgage-backed securities loans coming due this year and for the next several years has buyers, sellers, and investors speculating on the continuing availability of capital.

To get a clearer picture of the capital markets’ activity this year, Commercial Investment Real Estate asked an economist and two mortgage banking executives to weigh in on the subject.

Participants

George Ratiu is manager of quantitative and commercial research for the National Association of Realtors in Washington, D.C.

David Rifkind is principal and managing director for George Smith Partners, a real estate investment banking firm located in Los Angeles.

James R. Kirkpatrick, CCIM, is vice president of production for Grandbridge Real Estate Capital in Houston.

More than $55 billion in CMBS loans are set to mature this year, the most of any year to date, according to Standard & Poor’s. Of them, $19 billion are five-year loans originated in 2007, at the height of the market. How is this going to affect the lending environment for commercial real estate in San Diego?

George Ratiu: The main impact of maturing debt will be felt in the banking sector, which has had to contend with these loans for the past three years. And based on both bank practice and regulator guidance, banks have been extending or restructuring loans based on multiple factors, such as asset performance, market, and management. Overall, given banks’ post-financial crisis aversion toward commercial loans, the lending environment will likely remain tight in 2012, with private and equity capital continuing to serve as the main source of funding.

David Rifkind: 2012 is the beginning of the refinance wave, fueled by historically low interest rates. The peak will be somewhere between fourth quarter 2013 and second quarter 2014. Every healthy lender is prepared to compete for a piece of this business. We are actively tracking maturities for our clients. This is the leading theme of the mortgage banking business for the near and intermediate term.

Jim Kirkpatrick, CCIM: The bottom line is that in a yield-hungry world, real estate is looked upon favorably. A lot of lenders are under allocated in real estate and we are seeing new CMBS platforms emerging. Assuming continued economic growth, the lending environment for the foreseeable future should remain strong.

As this tsunami of loans continues, reaching its peak in 2017, will it have any other effects on the San Diego commercial real estate leasingmarket? Will specific capital sources, cities/regions, or property types be affected?

Ratiu: Some of the effects have been manifesting over the past year. Capital has been chasing high-quality, stabilized properties in gateway cities such as New York, Boston, San Francisco, Washington, D.C., and Chicago. This has led to an increase in prices in these markets and a decline in capitalization rates.

Secondary and tertiary markets have been contending with a lack of financing due to the underlying strength of local economies and weaker fundamentals. As the supply of investment-grade properties in top markets dwindled, some secondary markets became attractive to investors looking for higher yields. A broad improvement in macroeconomic conditions will likely boost this trend, providing increased flows of capital to these markets.

Rifkind: The maturity wave is drawing money and attention back to the commercial real estate markets. Three themes are converging to create what may become a powerful new market cycle. First is low rates/liquidity: Capital is aggressively seeking yield at every point on the risk curve. Banks must book positive loan growth and many are aggressive. Life companies and pension funds have reallocated large amounts of capital to commercial real estate. CMBS wants to come back and be a force in the real estate capital markets. Opportunity funds and real estate investment trusts are innovating to participate higher up in the capital stack.

Second is the return of fundamentals. Rents and occupancy levels are stabilizing in many markets. With little new supply over the past five years, there is a solid case for a positive trend in property performance. The distress theme is still relevant and there will still be transactional opportunities motivated by debt maturities. This is especially true for properties in markets where fundamentals have not yet recovered to a level to qualify for loans from the primary debt providers.

There is enough liquidity to address the capital needs of the market going forward. As long as the underlying fundamentals continue to improve, we should see a robust recovery in many markets.

Kirkpatrick: I am based in Texas and we have been blessed with a strong economy and the accompanying job growth. Going into the recession, we had very little overbuilding so our real estate markets are in fairly good shape. Most of the refinance opportunities we are seeing will underwrite and those that don’t can mostly be accommodated with some of the new mezzanine platforms that are coming out. In other words, the owner does not need to write a check to get their loan refinanced.

I wish I could say our good fortune extends across the country, but my guess is that it doesn’t. Those loans maturing in 2012 that were originally highly leveraged or with little to no amortization over the term and in regions of the country with limited economic growth/high unemployment are probably going to require the infusion of some fresh equity to get them refinanced. Therefore, by extension, the ability of ownership to write these checks could impact real estate values.

What other factors are affecting the capital markets this year?

Ratiu: The European banking concerns will likely remain a major factor for U.S. capital markets. Some U.S. banks do have exposure to European sovereign debt, which will likely impact their overall willingness to extend capital for commercial projects. In addition, the Dodd-Frank Act and the yet-to-be drafted regulations will continue to provide a source of uncertainty in 2012, as regulators work to enact and implement new rules. Against this backdrop, commercial banks are expected to remain cautious on commercial lending.

Rifkind: The leading factors are macroeconomics and politics. These are the same factors that have provided head winds for the past six months. How the European liquidity crisis plays out is important. The upcoming U.S. elections are important.

Kirkpatrick: Where are interest rates going? I tend to side with the camp that says interest rates have to go up, but as I write this, the benchmark 10-year Treasury is 1.97 percent, virtually unchanged from August when Standard & Poor’s downgraded U.S. credit. Sticking to my guns, when rates do go up, a steady climb can be accommodated, but sharp spikes, particularly in some of the short-term money such as Libor, could wreak real havoc.
In addition, continued growth of the CMBS markets will affect capital markets, but more to the point, what is the underwriting that will be necessary to drive this growth?

Will buyers and investors in commercial real estate in San Diego have difficulty finding financing in 2012?

Ratiu: Given the 2011 bifurcation in commercial markets along property values, buyers at the top end of the market will continue to find access to financing in 2012. With record amounts of cash and the ability to issue bonds or equity for financing, large corporations and equity funds are expected to remain active in the market this year. Buyers at the other end of the valuation spectrum will likely encounter a similar environment in 2012 as last year: restricted capital availability, relatively tight underwriting standards, and a higher risk aversion on the part of lending institutions.

Rifkind: Buyers will have less difficulty finding financing this year. Qualifying for new loans will remain difficult for some. Credit requirements remain strict. Borrowers need strong reserve liquidity and credit to obtain loans. Property level underwriting is also very conservative and leverage will remain relatively low, requiring a larger equity contribution from the buyer. Ultimately, this is healthy for the markets and I hope lenders will continue with disciplined underwriting standards as competition for loans heats up.

Kirkpatrick: There should be plenty of money available to refinance those loans coming due, as well as to finance new acquisitions or development. At the end of the day, the real question is whether or not the owner/borrower is prepared for all of the scrutiny associated with borrowing in today’s environment.

While the general economy seems to be recovering at a quicker pace than originally predicted, commercial real estate activity retreated during the second half of 2011. What is the cause of the disconnect between the two? What factors may spur a similar uptick in San Diego commercial real estate leasing’s recovery this year?

Ratiu: Commercial real estate investment activity tends to be more sensitive to developments in financial markets. As the European sovereign debt crisis unfolded, it took a darker turn in the second half of the year. Concern of a resolution moved farther away, prompting capital markets and investors to scale back the pace of acquisitions. In addition, until the tail end of the year, stubbornly high unemployment figures remained at the forefront of economic news, as signs of a robust recovery proved feeble. Moreover, actions in the international and political environment added reasons for investor concern.

For 2012, a continuing rise in economic growth coupled with improving fundamentals in commercial markets would go a long way toward shoring up last year’s moderate rebound. In addition, the prospect of the resolution of the presidential election cycle is likely to provide a clearer medium-term horizon for investors.

Rifkind: I don’t see a disconnect. The U.S. economy slowed significantly in the second half of 2011. Commercial real estate activity also slowed down from its initial burst of activity. Capital markets’ volatility came into play in the middle of 2011 with the debt ceiling debate and the downgrade of the U.S. debt rating. This was followed closely by Greece and the EU liquidity crisis. This raised the caution flag and slowed activity.

Commercial real estate is a long-term store of value and not a quick trade. It is difficult to view it with a short-term lens. Recoveries are not always linear. 2011 was no exception. The market healed significantly in 2011 and this trend will continue.

Kirkpatrick: In my opinion, the disconnect between the improving economy and the retreat of commercial real estate activity was the result of two factors. Too much money was chasing those deals that came to market. With all of this competition, the result was predictable: Prices increased and yields fell. In the latter part of 2011, I think many investors decided to take a step back to see if rent growth would actually materialize to justify the going-in yields being paid.

Then, after a fast start in 2011, the CMBS market stumbled — many of the new CMBS platforms shut down, some commitments were not honored, and for those that remained, spreads widened dramatically. The message here is that CMBS is an important part of the commercial real estate equation.

The good news is that the U.S. economy continues to improve. Jobs are being added, which in turn will lead to increased demand for commercial real estate. It will just be a matter of time before investors return to the market. On the debt side, CMBS has settled down. Spreads have come in and investors seem to have reached a comfort level with current underwriting. Banks and life insurance companies seem to be actively pursuing new lending opportunities. I wouldn’t look for a return of 2006, but 2012 has the makings of being a solid year for commercial real estate.

Source: This article was edited by Sara Drummond, executive editor of Commercial Investment Real Estate. CCIM Institute

Before you make the decision to invest in San Diego real estate, you need to take the time to find out about the most profitable buildings in your area, and this can be a slightly complex decision to make.

The most profitable San Diego real estate is not always the most expensive, so keep this in mind when you are trying to make your decision.

As you go through your options, focus on a few important factors that are going to determine whether or not you are making the right decision with regards to the properties that you purchase, and if you find that you get stuck along the way, do not hesitate to contact the professionals who will assist you in this process.

Usually, when you want to purchase San Diego real estate, you will have to apply for a loan through the bank. When you are going through this process, it is important to ensure that you are able to get the lowest possible interest rates on the market, so that you do not end up paying more than what is necessary for the property. If you are going to purchase a building simply to sell it off at a profit as soon as possible, you can always opt for the more fluctuating interests rates that start out low, but could rise at any moment. This might be a bit of a risky option, but if you manage to sell off the building in the appropriate amount of time, you will end up making a lot more money out of the deal.

If you are going to be leasing out your San Diego real estate, you will want to ensure that you are able to get your hands on a fixed loan so that you do not have to worry about skyrocketing interest rates driving you to financial ruin. Take some time to speak to the professionals about this type of option so that they can provide you with some sound advice on purchasing property and applying for the right types of loans.

Investing is one of the best ways to increase your wealth, but you will also need to ensure you are indeed going to be able to benefit from this decision by considering all of your options very carefully. It is always best to prepare for the worst when you invest in San Diego real estate, even though you might end up not having to make use of your safety nets.

Source: SEOhaus

If you are a business looking for commercial real estate in San Diego in which to set up your new company, it is important that you find the perfect building to suit the specific needs and requirements of your business.

From the moment you begin looking through commercial real estate in San Diego, you will have to make the decision about whether to purchase or lease out these buildings, and this can be a rather tricky decision to make. Take some time to think about the lifespan of your business. How long has your business been running? Are you bringing in a stable amount of profits each month? Can you afford to purchase? Once you have the answers to these questions, you can make a much more sound decision with regards to your future.

At the end of the day, most startup businesses would rather lease commercial real estate in San Diego than purchase, since it is cheaper and allows them to get on their feet before they start making any large purchases. If you have recently started looking for a building in which to set up your own company, it might be a good idea to start out small and move up, rather than paying a large portion of your profits to keep up appearances in a large, luxurious building. Remember, you will probably end up having to furnish the space that you lease, so make sure that you can fill it appropriately.

If you would rather purchase than lease, it is important for you to look at commercial real estate in San Diego that will benefit your company in the long run. Take some time to find out a bit more about your clients, as well as the parts of the city where your business would thrive; if you want to ensure that your customers consider your business a strong force within your specific industry, you need to make sure that your address matches their expectations.

One of your most important considerations when you are picking out real estate, is the amount of money that you can afford to spend on this type of property each month. If you do not have the money to buy, it might be best to lease out a better property rather than to purchase a small building that was not properly maintained. At the end of the day, you need to make sure that you look after your business, and the right commercial real estate in San Diego can help you do just that.

Source: SEOhaus

When you contact a company that offers property management in San Diego, you will quickly find that some of these professionals take care of every aspect of owning a commercial or residential building, while others will only take care of the basics.

If you want to make sure that you have left your needs with regards to property management in San Diego in the hands of the best possible professional in the industry, it is important to take some time to find out a bit more about the services that are usually offered by these companies, as well as your specific needs with regards to the professional that you want to handle your property.

Property management in San Diego is a complex task, especially when it comes to dealing with tenants and ensuring that the rent is paid each and every month. While this might seem like a small facet of owning and managing a building, your profits are going to stem from here, which is why you need to take this task very seriously. Dealing with tenants, as well as their complaints, is something that you should do on a regular basis, so that you can ensure you keep reaping the benefits of your hard work. The happier your tenants are, the fewer problems you will have to deal with later on, so make sure that you keep this in mind.

While the finer details of property management in San Diego are important when it comes to focusing on the big decisions, you need to ensure that you take the time to weigh your options carefully and invest in opportunities that have the highest possible chances of success. By opting to invest in certain types of buildings, as well as those in specific locations, you will find that you can decrease your chances of failure and increase the chances of making larger profits at the end of each month.

It does not matter whether you are just starting out in this industry or whether you have a wealth of knowledge where property management is concerned, it is always a good idea to turn to the professionals for advice every now and again. When you make use of the resources that professionals have to offer you, even if it is a simple suggestion here and there, you can increase your chances of successful property management in San Diego and allow your wealth to increase with every passing year.

Source: SEOhaus

Ensuring that you can choose from everything from a buy-lease-back option to an outright purchase will help you to determine which San Diego commercial real estate option you would benefit from most at the end of the day.

So, where do you find all of these options? One of the best sources of this type of information is a company that specializes in managing this type of investment.

By turning to management companies when you choose to invest in San Diego commercial real estate, they will not only be able to provide you with a wide range of options concerning your purchase, they will also be able to provide you with the added service of running your properties for you. These types of professionals usually have a lot of experience in this industry, which means that they understand what it takes to run the properties properly and ensure that your tenants are content at all times.

When it comes to maintaining your San Diego commercial real estate, you will have to ensure that you invest some time and money into this task, or you might end up with a crumbling building to show for your investment at the end of the day. Taking the time to inspect the buildings is the first step; if any problems are found, you will have to ensure that they are taken care of as quickly and as efficiently as possible. The more time and effort you spend in maintaining your properties, the more you will benefit from this at the end of the day, so keep this in mind at all times.

While investing in properties might be an exciting task, if you are not up to the job of managing the buildings, you will have to ensure that you enlist the services of those professionals who understand what this takes. Make sure that you take the time to determine what you should be looking for in a company that provides San Diego commercial real estate management so that you can put your investments, as well as your trust, in their hands and begin benefiting from their experience.

 Source: SEOhaus

Wealth is something that you can grow with the right decisions, but you can also risk a lot when you invest inappropriately. At the end of the day, weighing the pros and cons of investments such as commercial real estate in San Diego will allow you to make a sound decision with regards to where you choose to invest your money and whether or not you are taking a risk.

You need to remember that while most people assume that commercial real estate in San Diego is always a great investment, this is not always the case; at least, not if you are going to be obtaining a loan to purchase one of these properties.

The question of whether commercial real estate in San Diego is a good investment or not depends greatly on where you are getting the money from. During different phases of the economy, there might be times when you are going to be expected to pay exceedingly high interest rates when you apply for a loan from a bank, and this will ultimately raise the cost of the building. When you make a purchase at the right time, you can rest assured that you will benefit from lower interest rates and make much higher profits at the end of the day.

During the good times and the bad, commercial real estate in San Diego should always be in use, as long as you make sound decisions with regards to where you purchase in this city. If you purchase buildings in unpopular areas, you might find that these are the first to empty out when businesses start struggling, and this means that you need to make sure your buildings are popular no matter what the economy is like. Companies that make it through difficult financial periods are also those that will lease out properties in the most popular locations within the city; if you invest in these areas, you will not have to worry about struggling to find paying tenants.

While it might not always be a good idea to invest in commercial buildings when you take this opportunity at the right time, you can rest assured that you are going to benefit from your decision at the end of the day. By making sound financial decisions that will benefit you for years to come, instead of simply right now, you and future generations will continue making money from commercial real estate in San Diego.

Source: SEOhaus

On April 25, 2012, Cheri Wallace and Mack Langston of Pacific Coast Commercial attended the Friends of IREM Chapter 18 Wine Tasting Event.

Business Networking Event - Visiting the Wineries of Temecula Valley.

Press Release – Monday, April 23, 2012  

The 101,818-square-foot Glasshouse Square shopping center at 3146-3156 Sports Arena Blvd., San Diego 92110, has been sold for $24 million as the “upleg” portion of a 1031 exchange begun last fall.

The center, at the junction of Rosecrans Street and Sports Arena Boulevard, was purchased by Rosecrans Plaza Kiffmann LLC, an entity controlled by San Diego investor Helmut Kiffmann.

The property had a list price of $25.64 million immediately prior to the sale according to The CoStar Group (Nasdaq: CSGP).

Kiffmann paid $11,148,000 down and assumed what remained on an original $14.5 million loan made by Wachovia Bank — now held by Wells Fargo Bank (NYSE: WFC) — in July 2004.

Glasshouse Square — which The Daily Transcript had reported as being a 92,900-square-foot center — last sold for $11.5 million in May 2001. It had previously sold for $10.6 million in November 1998.

The seller this time (assessor’s parcel 441-600-05) was Glasshouse Square LLC, with Great American Homes Corp. as its manager. 

The buyer was represented by Brian Crepeau, Ken Robak, Robert Phillips and Bo Gibbons, of Pacific Coast Commercial. 

The seller was represented by Pete Bethea and Kipp Gstettenbauer, of Cushman & Wakefield.

The center originally dates back to 1956. There was an addition in 1958, but the property didn’t undergo a modernization until 1981, when the UA Glasshouse 6 Theater was constructed.

While the theater complex brought in visitors at the outset, many retailers weren’t benefiting due to a lack of street visibility.  Tenants departed, and the center gained the moniker of “ghosthouse square” by area brokers in the early 1990s.  The center was then effectively turned inside out, and the front of the property was broken into multiple units. 

While the tenants began to return, owners found the multiplex theater didn’t have the draw it had had in the 1980s, and elected to close it in 1999.

The gamble paid off. The theater was replaced by the Peninsula Athletic Club, which itself was replaced by a Gold’s Gym that is one of the center’s strongest anchors. The center was again renovated in 2003.

In the meantime, fast food pads were added for In-N-Out Burger and Del Taco.  Major tenants at Glasshouse, now 100 percent leased, also include Staples, Chuck-E-Cheese, Ultrazone, 7-11, Subway, Panda Express, T-Mobile and Sleep Train, among others.

“People know this property,” Crepeau said. “It’s the gateway to Point Loma and it has strong tenants. There really aren’t any ‘mom and pops’ in there.”

Escrow services were provided by Renee Marshal, of Chicago Title, and title services were provided by Linda Menashe, also of Chicago Title.

Assumption of existing debt was coordinated through Pacific Southwest Realty Services.

Pacific Coast Commercial has also been hired as the property management and leasing agents for the property.

The other leg of the 1031 exchange happened last November, when a partnership controlled by Kiffmann sold the three-building, 106,500-square-foot Wateridge Summit Property on Wateridge Circle in Sorrento Mesa for $45.6 million.

The buyer of that property was a unit of Rancho Bernardo-based BioMed Realty Trust (NYSE: BMR), one of the nation’s largest biotechnology property REITs.

Kiffmann has been an investor in numerous San Diego-area properties over the years. In December 2009 one of his partnerships paid $3.9 million to acquire a 45,120-square-foot industrial building on Yarrow Drive in Carlsbad.

Kiffmann has led several local entities including Capital Assets LLC, the Kiffmann Family Foundation and Coastal Community Homes.

Over the last 31 years, Great American Capital and its affiliated companies such as Great American Homes have developed or purchased a combined value of more than $4 billion of real estate in 500 buildings throughout Las Vegas, California and Arizona, according to a company website.

Pacific Coast Commercial Celebrates Our April Birthdays 

HAPPY 30th BIRTHDAY!

Shannon Evans and Sarah Ames-Waitt

When you start adding properties to your financial portfolio, you might have a lot of time to manage them, which means that you will be able to complete this task to the best of your ability.

The moment you find that you own too many properties to pay the appropriate amount of attention to each one, however, it might be a good idea to consider investing in commercial property management in San Diego.

Without the appropriate professionals conducting your commercial property management in San Diego for you, it might be difficult to get as much as you can out of these investments, which will ultimately void the point of having acquired them in the first place.

If you want to make money with your investments, you can turn to professionals that offer commercial property management in San Diego and allow them to make some sound financial decisions for you. These companies will constantly ensure that your buildings are properly maintained, which could end up saving you a lot of money in the long run. Over time, buildings tend to wear down, and if you prevent smaller problems from ruining your property over the years, you will benefit much more from them at the end of the day. Maintaining the building properly will not only ensure that your buildings last longer; this will also go a long way in keeping your tenants happy, which means that they will continue to lease out your properties.

Another benefit of making use of the services of companies offering commercial property management in San Diego is the fact that these businesses are usually able to provide you with some sound advice on the buildings that you should and should not be investing in. Those that are just starting out in this industry might not always have a good idea about the properties and areas that are very popular, which means that turning to the assistance of the professionals can assist these individuals in making the right choices.

The next time you find yourself trying to decide whether or not to take on the services of a professional who is going to help you manage your investments, it is important that you weight the pros and cons of this type of service. You will have to pay these individuals a certain amount each month, but they can also ensure that your buildings bring in the highest possible profits by through the appropriate use of commercial property management in San Diego, allowing you to begin investing in more properties the moment you get the chance to do so.

Source: SEOhaus