http://markp.cbvegas.com/blog/archive_201103/sort_entrydatetime-desc/ REIT's have been on a tear in the past year and apartment REIT’s have been doing particularly well. NAREIT finds that apartment REITs had a return of 47% compared to 15.06% for the S&P 500[i]. Actually I found even the S&P returns to be better than I expected as we headed into 2010. I still don’t believe in a lot of public earnings but then again, I am a real estate analyst rather than a securities analyst. The REIT returns have been even more shocking.Why is the apartment sector faring better than other assets? While I can’t comment on the REITs other than in general terms, we are seeing declines in homeownership as owners are displaced through foreclosure or short sale and enter the rental market. One temporary stop may be apartments. For echo boomers, many of which are in or are approaching the age of possible first-time homebuyers, are often choosing to rent or cannot obtain financing. This has served to buoy rent rolls.REITs and other significant investors have also been on the search for yield. 3.6% treasuries are not going to do it for those being pressured to grow investor’s money. As a result we have seen Class A apartment buildings in particular become desirable. This is not the typical “distressed” or “challenged” properties we are often approached about. Many of these firms do not need to feel like they stole the asset and are simply happy getting returns with a lower variance. Only strong rent rolls will do.Combining this search for yield, REIT money financed through sales of stocks or bonds and other itchy monies tired of waiting on the sidelines, we have seen cap rate compression. This has been observed nationally[ii] and we have observed it occur on one occasion in Las Vegas and have heard stories of it occurring elsewhere in the Las Vegas Valley. We are talking about cap rates in the 5.5 to 6% range. We do believe this is largely limited to the multifamily sector so far. I don’t see how that could happen in local industrial or office buildings with the elevated vacancy rates we have.[i].http://www.reit.com/Articles/Vacancies-Decline-for-Apartment-Owners.aspx[ii] http://businessnewsexpress.com/commercial-real-estate-shows-slow-recovery/8777366/ http://markp.cbvegas.com/blog/776/multi-family-news/ Tue, 29 Mar 2011 05:38:13 -0800 Costar has published a fascinating discussion of distressed real estate trends and distressed debt. Ron Opfer discusses Las Vegas below in this direct quote from the Costar Article.The Craig Promenade deal is typical of what Las Vegas insiders are seeing these days. "There have been three 90,000-square-foot plus retail centers, (one was retail/office), close in the last 90 days. None of them are grocery anchored, and, most of them have been plagued with leasing trouble," said Ron Opfer, director of commercial real estate, special asset solutions for Coldwell Banker Premier Realty in Henderson, NV. "Nonetheless, it indicates the kind of activity Las Vegas is having from a distressed point of view." "None of these deals would stand out as the kind of deals you would brag about to your friends on the golf course," Opfer said. Nonetheless, there is a lot of excitement for such deals in Las Vegas, where commercial activity in December 2010 was the markets best month in more than three years. "Attention is focused like a laser on the extremely distressed markets such as Las Vegas where industrial vacancies are up nearly 400% fom the good times, land values are down 27% oer 2009 which was one of our worst years on record, and the retail and office market still exhibit recession type fundamentals," Opfer said. "There is a preference for specific property types," Opfer added. "Apartments top the list for nearly every distressed property group. Medical office or high profile retail usually follows. At the bottom of the list are unfinished office or industrial projects." One thing is for certain about Las Vegas, Opfer said: "Every broker in the country has a buyer for a Class A asset 90% ocupied selling for 10 cents on the dollar. My phone rings every week with an investor looking for this type of asset. Unfortunately, in our market, these deals don't happen. The investment dollars are like piranhas hungry for a Class A center, but, settling for whatever they can get." Please read the full article which discusses Houston, North Carolina and other areas.http://www.costar.com/News/Article/Three-Deals-that-Capture-the-Current-State-of-Distressed-Investing/126882 http://markp.cbvegas.com/blog/838/distressed-commercial-real-estate/ Thu, 03 Mar 2011 09:34:07 -0800