Wednesday, October 1, 2008

SPECIAL REPORT: RECI Notes Good and Bad News in Real Estate Capital Marketplace

CHICAGO, IL, Oct. 1, 2008 – It’s a good news/bad news real estate capital marketplace.

Mortgage markets are plagued by Wall Street (top right photo) market malaise and swooning prices, yet as far as commercial real estate debt is concerned, overall default rates and profit performance remain at historically favorable levels.

Funding sources and borrowers alike are very selectively funding and acquiring projects as re-pricing opportunities emerge in the wake of one of the nation’s worst financial crisis.

Dramatic market volatility created by major financial institutions failing along with selective governmental bailouts, wrecks havoc with real estate capital markets with some key trends developing, including:

--Skyrocketing Libor pricing (with rate premiums) now closely reflects domestic Bank Prime rates.

--Funding availability is the primary factor within the lending sector, surpassing pricing and leverage as key variables.

--Numerous balance-sheet lenders are temporarily suspending quoting on new transactions as market re-pricing continues (e.g. “catching a falling knife” syndrome)

--More funding sources are returning to pricing loans based on absolute net yields vs. spreads.

--New construction commercial-property financing is nearly at a halt, unless a substantial preleasing is available to credit tenants with preleasing required positive debt service coverage.

--Lending remains extremely restrictive, particularly for non-conventional property types such as lodging. Special-purpose and recreational properties.

--Commercial properties (retail, office and industrial) conservatively financed with maximum leverage of 65% based on capitalization rates in the higher single-digit range.

--Multifamily properties remain the most desirable and attractively priced funding opportunities in the capital markets as leverage levels remain close to historical norms and pricing spreads are in the mid-200 basis point range over comparable-term Treasuries.

--Government bodies including Freddie Mac, Fannie Mae and FHA/HUD continue providing competitively-priced mortgages for this sector.

--Borrowers are bridging equity gap by providing personal guarantees an additional collateral, perfectly with commercial banks

--Buyers and borrowers who are active in closing deals are rich with liquidity. Many use recourse and additional collateral to successfully finance projects.

Mortgage pricing is, at best, a “guessing game” as many lenders remain on the sidelines.

Nevertheless, overall mortgage pricing for different types of is shown below based on the most common commercial property types graded by Credit and Class A-B-C subcategories: (Chart source at right: Real Estate Capital Institute)

According to Jeff Davis, advisory board member of the Real Estate Capital Institute, “Except for select Agency programs such as FHA/HUD, most funding sources are waiting for more clear market signals for the remainder of the year.”

He adds, “Active lenders seem to have met their allocation goals as funds continue drying up within the securitized lending sector.”

ABOUT US:

The Real Estate Capital Institute® is a volunteer-based research organization that tracks realty rates data for debt and equity yields. The Institute posts daily and historical benchmark rates including treasuries, bank prime and LIBOR. Furthermore, call the Real Estate Capital RateLine at 7RE-CAPITAL (773-227-4825) for hourly rate updates.

CONTACT:

The Real Estate Capital Institute®
3517 West Arthington Street
Chicago, Illinois USA 60624
Contact: Nat Zvislo, Research Director
Toll Free 800-994-RECI (7324)
director@reci.com /

HFF closes sale of Fossil Creek Shopping Center in Fort Worth, TX

DALLAS, TX – The Dallas office of HFF (Holliday Fenoglio Fowler, L.P.) has closed the sale of Fossil Creek Shopping Center, (top right photo) a 68,492-square-foot retail center in Fort Worth, Texas.

The HFF investment sales team was led by senior managing director Jim Batjer (top left photo) and managing director Adam Howells (bottom right photo) who represented the seller, Dunhill Partners, Inc.

Sandstone Fossil Creek Associates, LLC purchased Fossil Creek for an undisclosed amount and assumed an existing $8.64 million loan on the center. Midland was the servicer.

Situated on a 6.4-acre site, Fossil Creek Shopping Center is located at 4296 – 4398 Western Center Boulevard and 6401 Beach Street adjacent to The Golf Club at Fossil Creek, and close to Interstate 35 West and Interstate Highway 820 in Fort Worth.

The property is shadow-anchored by Albertson’s and is currently 98% leased to tenants including Family Dollar, Card & Party Factory, Cato, Starbucks and H&R Block.
Dunhill Partners specializes in commercial real estate sales, leasing and management in Dallas and Fort Worth.

HFF (NYSE: HF) operates out of 18 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry.

HFF offers clients a fully integrated national capital markets platform including debt placement, investment sales, structured finance, private equity, note sales and note sale advisory services and commercial loan servicing. http://www.hfflp.com/.
CONTACTS:

Jim C. Batjer, HFF Senior Managing Director, 214 265 0880, jbatjer@hfflp.com
Adam T. Howells, HFF Managing Director, 214 265 0880, ahowells@hfflp.com
Laurie Fish McDowell, HFF Associate Director, Marketing, 617 338 0990, lmcdowell@hfflp.com

HFF secures construction/permanent financing for development of Silicon Valley Courtyard by Marriott Hotel

SAN DIEGO, CA – The San Diego office of HFF (Holliday Fenoglio Fowler, L.P.) has secured construction/permanent financing for the development of a 162-key Courtyard by Marriott Hotel in the Silicon Valley area of California.

Working on behalf of Huntington Hotel Group, HFF senior managing director Tim Wright (top right photo) and associate director Zach Koucos (top left photo) placed the 12-year loan with a fund advised by the U.S. real estate business of UBS Global Asset Management.

Huntington Hotel Group is a developer and manager of a portfolio of Marriott and Hilton select service brands.

Due for completion in December 2009, this Courtyard by Marriott will have seven stories and 95,000 square feet. The property is located at 655 Creekside Way, directly adjacent to Highway 17, in the city of Campbell, a southwestern suburb of San Jose.

“This new Marriott will capture demand from both business and leisure travelers as it is situated in the upscale community of Campbell, near the heart of Silicon Valley,” said Wright.
“Well positioned, just north of the East Campbell Avenue Master Plan Redevelopment Zone, the site benefits from its close proximity to the San Jose
International Airport, Downtown San Jose and Interstates 280 and 880,” added Koucos.



HFF (NYSE: HF) operates out of 18 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF offers clients a fully integrated national capital markets platform including debt placement, investment sales, structured finance, private equity, note sales and note sale advisory services and commercial loan servicing. http://www.hfflp.com/.

CONTACTS:

Timothy D. Wright, HFF Senior Managing Director, 858 552 7690, twright@hfflp.com

Laurie Fish McDowell, HFF Associate Director, Marketing, 617 338 0990, lmcdowell@hfflp.com

Sale of six-building office portfolio in south Houston closed by HFF

HOUSTON, TX – The Houston office of HFF (Holliday Fenoglio Fowler, L.P.) has closed the sale of a six-building, 225,859-square-foot office portfolio in the NASA/Clear Lake submarket of Houston, Texas.

The HFF investment sales team was led by senior managing director Dan Miller (bottom left photo) and associate director Marty Hogan,(middle right photo) who represented the seller, KBS Realty Advisors.

The properties were purchased by John Cole of Twenty Twenty Properties, Inc. for an undisclosed amount. Twenty Twenty Properties owns, manages and leases 20 office buildings in the Houston area.

HFF managing director Susan Hill (top left photo) arranged financing for the purchase through Viewpoint Bank.

“The marketing campaign had just begun when a very compelling preemptive offer was received and the ownership decided to take it,” said Miller.

The properties are located in south Houston near NASA, approximately 20 miles southeast of the central business district. Individual property details are listed below.
Armand Plaza (top right photo)– 16441 Space Center Boulevard 64,000 Square Feet 100%, Four Buildings

Camino Center I – 17629 El Camino Real 81,108 Square Feet 92.1%

Camino Center II – 17625 El Camino Real 80,751 Square Feet 74.7%

KBS Realty Advisors is a private equity real estate company and SEC-registered investment advisor founded in 1992 by Peter Bren and Chuck Schreiber.
CONTACTS:
H. Dan Miller, CCIM, SIOR, HFF Senior Managing Director, 713 852 3500, dmiller@hfflp.com
Martin T. Hogan, HFF Associate Director, 713 852 3500, mhogan@hfflp.com
Laurie Fish McDowell, HFF Associate Director, Marketing, 617 338 0990, lmcdowell@hfflp.com

HFF arranges loan bringing total financing to $100.72M for third phase of Southern California multifamily community



IRVINE, CA – The Orange County office of HFF (Holliday Fenoglio Fowler, L.P.) has secured $13.27 million in financing for the third phase of Homecoming at Terra Vista, (above centered photo) a Class A multifamily community in Rancho Cucamonga, California. This phase includes 80 units that were completed in 2007.

Working exclusively on behalf of Lewis Operating Corp. and one of its affiliates, HFF senior managing director Don Curtis (top right photo) placed the 14-year fixed-rate loan with Freddie Mac (Federal Home Loan Mortgage Corporation). HFF arranged the financing for Phase I and II of the property in 2005 and 2007 through Wachovia Multifamily Capital.

Total funding for all three loans is $100.72 million. Lewis Operating Corp. is a real estate developer specializing in California and Nevada.

The property is situated on 39.07 acres at 11660 Church Street within the master planned community of Terra Vista in Rancho Cucamonga. Homecoming at Terra Vista features 15 different one-, two- and three-bedroom apartment, townhouse and villa floor plans.

Units average 1,050 square feet each and have full-size washer/dryers, walk-in closets and one- or two-car attached garages. Community amenities include a pool, fitness center, children’s play area, business center, theatre, game room and library.

HFF (NYSE: HF) operates out of 18 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry.

HFF offers clients a fully integrated national capital markets platform including debt placement, investment sales, structured finance, private equity, note sales and note sale advisory services and commercial loan servicing. http://www.hfflp.com/.

CONTACTS:
Donald J. Curtis, HFF Senior Managing Director, 949 253 8800, dcurtis@hfflp.com
Laurie Fish McDowell, HFF Associate Director, Marketing, 617 338 0990, lmcdowell@hfflp.com