consigliere

Protect your cash: Commercial Investment Real Estate Remains Stable

In light of this week's financial sector meltdown, a long time client and friend said to me "You know Thomas, I have seven figures cash in Bank of

America

today.  With what's happening with the other financial giants and BofA saving Merrill Lynch, it really makes me nervous to have that much cash in one bank or any number of banks.  I have decided to take a good portion of it, 60-70%, and put it into more income producing commercial real estate.  There are good deals out there to be had."  I agreed completely.  We are now actively looking for shopping centers with in-place income at 8%+ of purchase price.

Yesterday, another client said he was pulling his hair out while watching MSNBC to see if his $500,000 invested with Morgan Stanley was going to go up in smoke.  He then expressed his confidence in his income producing commercial real estate as compared to the stock market.

Contrary to the news of faltering banks and the stock market diving, commercial investment real estate fundamentals in most markets throughout the U.S remain stable and will continue to do so in the current interest rate environment. Apartment Buildings and Trailer Parks are a hot commodity among investors these days due to the turmoil in the housing market; vacancy rates are dropping and rents are trending upward.  Demand for office and retail properties is down but risk can be mitigated through lower leverage, buying on actual income numbers rather than proforma and through value-add or lease-up incentives.

There are good deals to be found in all US markets from as low as $1MM to $100MM+ across all commercial income property types.  Most everything our clients buy is relatively hands-off for them as owners by nature of a property manager or lease structure such as a triple net lease. These hands-off investments provide stable steady cashflow, appreciation and good residual value.  Many clients are purchasing properties in different geographic areas from themselves and their other properties to diversify risk. Many times the subject property is 3, 7 or even 10 states away from where they reside due to the low to no management needed.

The following table overviews conservative achievable yields in today's market:

To preserve your cash from stock market declines or failing banks, consider a stable long term investment such as commercial income property today.  As your professional commercial investment advisor, I analyze your personal investment situation in terms of yield v. risk to select the right property in the right market to achieve your goals.  Call or email me right now to add or diversify your investment portfolio. We do deals nationwide.

Be well out there,

Thomas

About the Author:

Thomas Morgan, CCIM, CIPS is exclusive global real estate advisor to high net worth individuals, families and their ancillary advisors.  Thomas has been called the "go to guy" for ultra-wealthy clients worldwide who want to use real estate to protect and build their wealth.  Thomas advises clients on all aspects of real estate holdings including commercial investments; private residences; investment analysis; and portfolio strategy and optimization through deliberate asset management.  Thomas can be reached directly at 1.866.539.1777 or thomas@cmcommercial.net

on the ground: grand cayman ritz

I am here in Grand Cayman for a few days for a shareholder's meeting with clients.  We are staying at the Ritz on Seven Mile Beach.  Yes, it is "ritzy". 

The resort is 144 acres and has 365 rooms, 5 restaurants and 2 bars.  They have quite the program set-up for real estate purchasers and several projects in the works.  To name a few ...The Residences and The DeckHouses have been met with an outstanding reception, Orion Developers is building upon its previous success with an impressive new development of vacation homes known as

Secret

Harbour.  Designed by the firms Zurcher Architects and VITA Planning & Landscape Architecture, the Secret Harbour vacation homes will have a unique charm inspired by the special spirit and atmosphere of maritime Mediterranean villages.  Located on a private island within the acreage of the resort's property, Secret Harbour will be composed of 120 residential units and will have mainly boat access to travel locally rather than car.

Ownership of the resort's real estate has its privledges.... a fleet of BMW's and a chauferred Rolls Royce Phantom (sticker $333,000) and a few  Riva boats hand made by Ferretti in Europe (only 24 made each year).  And...if you buy the 20,000 sf "Seven South" house a Phantom will be included in the purchase... price tag:  a cool $44MM.

Permanent Financing for Retail Properties

Authored by consigliere guest blogger: Mark Jeffries, Vice President, Q10 | Essex Financial Group

Over the past 9 months or so, the credit markets have experienced a shake-up unlike any in recent memory.

The main impact of this on retail property permanent financing is related to the fall-out of Conduit or CMBS (Commercial Mortgage Backed Securities) lenders.  As recently as the summer of 2007, retail property owners and purchasers were able to obtain 80% loan-to-value financing from a CMBS lender without much difficulty.  Life Insurance Companies were typically offering 70-75% financing with similar fixed rates to CMBS.  Today, without the need to compete with CMBS, Life Insurance Companies have scaled back to leverage levels in the 65-70% range.  The good news is that fixed rates from Life Companies are currently in the 5.75% to 6.5% range, are most often non-recourse, and can offer fixed terms of up to 25 years.  One of the potential dangers on the horizon is inflation, which could lead to higher interest rates across the board.

If a property owner is considering a refinance it makes sense to lock in a rate soon rather than later in my opinion.  We’re happy to provide financing estimates and analysis to assist borrowers in making difficult strategic capital decisions.  Retail properties continue to be viewed favorably by Life Companies as vacancy rates remain low in most markets.  We anticipate the capital markets will stabilize later in the year, and CMBS will return to the scene but likely on a more limited basis.

Mark can be reached at 303.843.4023

Hot Colorado Market

Investors Targeting Colorado Springs (as reported on www.crenews.com )

Out-of-state investors are pumping capital into the Colorado Springs, CO, real estate market, according to a report by market tracker Turner Commercial Research. Last year, a record $1.1 billion worth of commercial real estate was purchased in the Colorado Springs area. Of that total, out-of-state buyers accounted for $775 million, nearly five times the amount they purchased in 2001. The report cites growing confidence in Colorado Springs and its economy as among the reason for investor interest.

Commerical Real Estate Market remains strong

National Association of Realtors reports 11/22/06:

The Commercial Leading Indicator for Brokerage Activity, a leading indicator for the commercial real estate market, has increased for six consecutive quarters showing that continued growth can be expected in commercial real estate sectors......  Commercial real estate practitioners can anticipate leasing and sales activity in the first quarter to be approximately 2.9 percent higher than the first quarter of 2006.

Full Story here.

"On the Ground"

Tired of the normal market reports found in brochures, OM's, websites, or magazines?  Yes, those market reports have their place and are a very important part of a real estate investment decision. But....

How about this?  Introducing "On the Ground" Market Reports.  "On the Ground" as seen through opportunistic eyes (such as mine) or other brokers or principals. 

Every time I go somewhere business or pleasure, I find my self looking at real estate and the market (does that mean all my trips are a business write off?).  Thinking to myself, what is the play here? Or what is the opportunity for an investor or developer?  What is the home run?  Call me obsessive.

So with that said, I will try to mix one part hard data and two parts subjective perspective to give you an "On the Ground" Market Report.

Do you have an "On the Ground" experience you want to share?  Let me know and we can post it.