Obama to Owners: Go Green

February 6th, 2011

U.S. President Barack Obama issued new proposals to entice developers and owners to make all commercial buildings at least 20% more energy efficient over the next 10 years.

Obama launched the new “Better Buildings Initiative” during a speech at Penn State University last week.

Here is the story from Engineering News-Record (a great magazine for anyone with commercial real estate in their blood).

And here’s a great example of a recent program launched to retrofit a major federal office tower in downtown Cleveland, courtesy of respected Chicago architecture critic Blair Kamin.

Spying on Devon’s Big New HQ

February 3rd, 2011

Devon Energy’s new headquarters tower now under construction in downtown Oklahoma City is still one of the country’s largest developments currently with cranes circling overhead.

The 50-story, $750 million project, which broke ground in October 2009, is set for completion in 2012.

Here is a look at the latest construction cam image — courtesy of www.OKCTalk.com — to give you a sense of its progress on the skyline (that white stuff on the ground is snow from the recent blizzard that struck the city):

DevonConstructionCam

Some Good News, for a Change

January 23rd, 2011

Bob Bach is one of those rare economists who actually knows what he’s talking about.

Bob has been with Grubb & Ellis for, I think, forever, and the good news is he’s seen a cycle or two and understands how the commercial real estate industry works.

He also has a neat weekly blog called “Good News Friday” that is well worth reading. Here is his posting from last week:

Bob BachSome Fridays, it’s easier to write this column than others, and this is one of those Fridays. The New Year is getting underway with some economic momentum from December when Congress passed the $858 billion stimulus package (cleverly disguised as tax cuts) and better-than-expected holiday retail sales.

· The manufacturing sector has moved beyond the inventory correction cycle – the bounce when manufacturers, wholesalers and retailers all restock at the same time from very low, recession-induced levels. There is sustained growth thanks to exports, business investment and moderate increases in consumer spending. The new orders component of the ISM manufacturing index hit a robust 60.9 in December, well above the break-even level of 50. Manufacturers such as Parker Hannifin, Johnson Controls and Rockwell Collins have reported strong quarterly earnings.

· The beleaguered housing market ended last year on a hopeful note as existing home sales rose 12 percent in December to an annualized rate of 5.28 million, although foreclosures continue to weigh down prices.

· The Conference Board’s index of leading indicators rose a solid1 percent in December, the sixth consecutive monthly increase and a sign that economic momentum is building.
 
· Jobless claims continue trending lower in fits and starts, falling to 404,000 for the week ending January 15th. The indicator looks set to move below the elusive 400,000 mark – which it did during the week of December 25th – and continue lower from there.
 
· I’ve saved the best for last – the 146 percent increase in the volume of capital investing in commercial real estate last year, according to Real Capital Analytics. Forecasts at the beginning of 2010 were for increases in the range of 20 to 30 percent. The level remains historically low, but that means the market has ample room to rack up further gains this year, building on last year’s momentum.
 
Have a great weekend.
Best regards,
 
Bob
      
 Robert Bach
 SVP, Chief Economist
 Grubb & Ellis
 312.698.6754
 

“Life in the Mortgage Capital Markets”

January 11th, 2011

I received an interesting note from Richard Howell with Oklahoma City-based Holliday American Mortgage, and thought it a nice tee-up to what we can all expect in 2011:

It may well be a Happy New Year.  For the first time in a few years, there seems to be some life in the mortgage capital markets.

An active mortgage market means more money available to finance transactions and that, in turn, increases transaction activity.  While the market’s rebound seems weak, any activity looks strong when compared to last year’s numbers.  About $14 billion in new U.S. Commercial Mortgage Backed Securities were sold last year, which compares with about $2.7 billion in 2009.  That is a 500% increase from the 2009 but a fraction of the $231 billion sold in 2007.

While more CMBS money is becoming available our life insurance companies are seeking to fund more commercial real estate mortgages.  Total originations last year by life insurance companies will outpace 2009 by a large margin.  In fact the life insurance companies have doubled their percentage of the mortgage capital market by 100%, capturing 20% of the available market.

For comparison, life insurance companies provided about $43 billion in commercial mortgages in 2007 and about $27 billion in 2008 before volume fall off in 2009 when $16 billion in commercial mortgages were closed according to data from the American Council of Life Insures.  It is estimated that the 2010 volume will near $30 billion.

With commercial mortgages becoming more available, transaction activity has moved from being strictly apartments and trophy properties to good assets in secondary markets.

While two legs of the three legs of the commercial real estate finance stool are getting stronger, the largest leg continues to limp.  Banks continue to be burdened by problem loans.  However transaction activity is increasing assisting the banks in their evaluation of these assets allowing the stronger banks clean up their balance sheets.

Increased activity has also made loan pricing clearer today which implies that the market is becoming more efficient.  Commercial real estate mortgage interest rate spreads over Treasuries are tightening.  Spreads, the risk premium over a government security are determined by the quality of the asset and loan characteristics.

As we begin 2011 we are all concerned that when the government stops its quantitative easing, interest rates will raise.  We believe that 2011 may one of the best times in recent memory to lock in attractive long term fixed rate financing. 

Thanks,

Richard Howell

Holliday American Mortgage

6501 N Broadway Suite 250, Oklahoma City, OK 73116

Work 405.302.0652; Cell 405.833.5753

rhowell@holliday-american.com

WWW.Holliday-American.com

Reaching for the Sky

October 12th, 2010

It’s really, really hard NOT to notice the progress on Devon’s new corporate headquarters tower in downtown Oklahoma City these days. At around 14 floors high, it is a far cry from its eventual 50-story final height, but it is already exerting a presence on the skyline.

When completed in late 2012, it will become the tallest office building in Oklahoma, and it is currently the largest major office construction project in the entire U.S. of A. Not bad for little old “Oklahoma City,” eh?

Check it out:

OKC skyline2 10-11-10

 

 

 

 

 

 

 

 

 

 

OKC skyline 10-11-10

iPad is Coming to a Target Near You

September 24th, 2010

Attention all of my commercial real estate friends: Target just announced it will start selling Apple’s iPad in all of its 1,743 stores in 49 states beginning Oct. 3.

ipadShoppers can choose from a range of iPad models, including the 16GB Wi-Fi model starting at $499.99, the 32GB and 64GB Wi-Fi and the Wi-Fi+3G models.

“Target is very excited to offer the revolutionary iPad to our guests nationwide,” said Mark Schindele, senior vice president, merchandising, Target. “We are committed to providing our guests with the best products and we think iPad will be at the top of our guests’ holiday shopping lists.”

As nearly everyone on the planet already knows, the iPad allows users to connect with their apps and content in a more intimate, intuitive and fun way than ever before. Users can browse the web, read and send e-mail, enjoy and share photos, watch HD videos, listen to music or play games, and read e-books, all using iPad’s revolutionary Multi-Touch interface. iPad with Wi-Fi+3G models are just 0.5 inches thick and weigh just 1.6 pounds – thinner and lighter than any laptop or netbook – and deliver up to 10 hours of battery life for surfing the web on Wi-Fi, watching videos or listening to music, and up to nine hours of surfing the web using a 3G data network.

More good news: Target will also sell a selection of accessories including cases, iBook and iTunes gift cards, chargers and more along with iPad.

Prominent Magazine Sues Developer

July 19th, 2010

Generally speaking, there is a long history of animosity between the press and real estate developers. Ok, so maybe that’s not such a big surprise to most of you, but still, in many a journo’s view, developers are right up there on the list of least-favored citizens along with lawyers (though it is true that lawyers often make the best CEOs of real estate firms).

Even so, it isn’t every day that the press actually takes action and sues a developer, but such is the case right now in Austin, Texas.

I read with great interest a story over the weekend in one of the best darn newspapers left standing in America, the Austin American-Statesman. It turns out that Emmis Publishing, which owns Austin-based Texas Monthly magazine, one of the most highly decorated magazine properties in the country, is suing the developer of its new office building.

Forget for a moment that lenders foreclosed on the eight-story building, that’s a story for another day. In the here and now, TM moved into its new building just off I-35 last August, and much of the surrounding development promised by the developer has not happened, including a hotel and restaurants. This is just a wild guess, but I’m thinking the sour economy might have had something to do with those plans.

Anyway, I’m surprised we aren’t reading more about these types of situations, half-finished projects and unhappy tenants. Maybe we will…

Here’s the full story from the paper.

Beware “Exploring Strategic Alternatives”

July 14th, 2010

For crying out loud, who’s next? That’s what I find myself asking these days. Just when you think things in the U.S. economy might be turning around, wham, your instincts are shattered.

Two new announcements this week are proof positive of the state of things.

benihanaBenihana, one of my all-time favorite places to watch people play with knives and get away with it, announced that it is “exploring strategic alternatives,” which is just another way of saying “we’re going to sell ourselves to whoever might want to buy us, or we’re going out of business.” Period. Those are the only “alternatives” my friends.

Check out the formal statement:

MIAMI–(BUSINESS WIRE)–Benihana Inc. (NASDAQ: BNHNA; BNHN), operator of the nation’s largest chain of Japanese theme and sushi restaurants, today announced that its Board of Directors has decided to explore strategic alternatives available to the Company, including a possible sale, in order to maximize shareholder value.

Richard C. Stockinger, Chief Executive Officer, said “While the Company strongly believes in the renewal program and that significant progress has been made toward achieving its goals, the Company has also stated its intention to commence an expansion plan through restaurant development and/or acquisitions. However, growth would be predicated on raising additional capital, and the Company is reluctant to issue new equity at current price levels. Furthermore, several large shareholders have expressed disagreement with the Board and have indicated a desire to seek Board membership to pursue a change in the Company’s strategic direction.”

Mr. Stockinger concluded, “The combination of issues relating to raising new capital and the divergent views of these shareholders have made it extremely difficult for the Company to implement with confidence a growth plan that would include organic growth as well as acquisitions at this time. As a result, the Board has determined that the best course of action is to engage in a formal review of strategic alternatives available to the Company with the assistance of a qualified financial advisor, including a possible sale. The objective would be to enhance shareholder value, while also maintaining and furthering the strategies the Company has initiated.”

The Company does not intend to disclose developments with respect to the progress of its strategic review until such time as the Board has approved a transaction or otherwise deems disclosure appropriate.

A day earlier, another seeming stalwart firm (at least to me anyway), the owner of the Bugaboo Creek restaurant chain (I kid you not on the name), announced its own solicitation of “alternatives”:

MOUNTAINSIDE, N.J.–CB Holding Corp., parent company of Charlie Brown’s Steakhouse, Bugaboo Creek Steak House and The Office Beer Bar & Grill restaurants, today announced its engagement of investment banking firm Raymond James to assist it in its evaluation of strategic alternatives for its Bugaboo Creek Steak House brand. Bugaboo Creek Steak House was acquired in 2007 by CB Holding Corp.

“Bugaboo Creek Steak House, with its high standard of affordable hospitality and entertaining experiences, holds a unique and compelling position in the casual dining restaurant category. We remain passionately committed to our valued Bugaboo Creek Steak House customers and our restaurant employees while we evaluate the best strategic plans for the brand,” said Sam Borgese, president and CEO of CB Holding Corp.

Bugaboo Creek Steak House serves more than 3.5 million guests each year at its interactive and charming lodge setting restaurants. The brand consists of 30 restaurant units along the eastern seaboard and employs 1840 people.

Can anyone please tell me what on earth the world is coming to when a cool restaurant concept using motorized black bears, beavers and moose (is that plural?) can’t make it?

Choppy Choppy Times We Live In

July 6th, 2010

The signs of churn are all around us. Some days it’s two steps forward and others it’s one step back.

Is it just me or are commercial real estate transactions picking up steam? Several big office towers, for example, have traded in recent weeks in major metros.

A second major CMBS issue has now come to market in 2010, which is a promising signal that industry might be coming to life once again.

Even Ernst & Young issued a new report last week noting “The real estate market is starting to stir. The trends point to increased transaction volumes and varied activity in 2010, including a rise in loan sale transactions.”

Obviously the biggest concern is the jobs picture, which has more elevation changes than a roller coaster ride at Six Flags. One week they’re up, the next they’re down.

In many major markets, it’s a choppy scene at best. Take Dallas for example, where the DFW metro economy has improved of late, adding 3,400 jobs in the past year and where the unemployment rate dropped to 8.2% in April from 8.7% in January.

Unfortunately since CRE generally lags the economy, office absorption in the local market was a negative 550,000 sq. ft. and the vacancy rate shot up to 18.5% in the second quarter from 18% in the first quarter, according to Delta Associates, the research affiliate of Transwestern.

That didn’t stop CB Richard Ellis Investors from buying two high-profile office buildings in the local Preston Center market for a rumored $130 million, making it one of the largest sales in North Texas this year.

The DFW industrial scene is a different story, with 492,000 sq. ft. of absorption achieved in the second quarter and 836,000 sq. ft. of space occupied this year, compared to negative 1 million sq. ft. in the first half of 2009. That’s a vast improvement, but will it last?

It looks like those choppy waters are going to be around for just a tad longer.

Front Pages From Around the World

June 18th, 2010

newspapersIn our never-ending search for what’s new, current and just plain fascinating, I found a new website that gives a look at the front pages of newspapers from around the world.

While I still have this ongoing debate with friends, family and fellow marketers and journalists about the death of the daily newspaper, they still provide a great snapshot of current events. That’s what they do best, especially when there is the type of global event like the BP oil spill and the dramatic stage show that is better known as a Congressional hearing.

Here’s the link.