RealEstateJournal | Commercial Lending Is Showing Signs of Strain

RealEstateJournal Commercial Lending Is Showing Signs of Strain By Christine Haughney

Rating services are flagging some of the first signs of strain in the booming commercial-lending market.

Moody's Investors Service Inc., which rates and monitors commercial mortgages that are packaged and issued as bonds, says in a report released this morning that the commercial-mortgage market is showing two disturbing trends. Loan-to-value ratios, which measure the amount of a loan in relation to its market value, and debt-service coverage ratios, which measure the monthly amount the borrower pays in relation to the property's cash flow, are carrying more risks than they ever have before, according to the report.

"People are borrowing an amount equal to what the property was worth five years ago," says Tad Philipp, Moody's managing director of commercial-mortgage finance and the study's lead author. "It's reached a point where we're no longer comfortable."

While many issuers in the commercial-finance market have applauded the record amount of commercial mortgage-backed securities issued in 2005, about $169 billion, Moody's says it views these signs as records that are often "best not broken." Commercial-mortgage loans had increased to 15% of the gross domestic product as of the third quarter of 2005. That level hadn't been reached since the peak of the nation's last commercial real-estate cycle, in 1988.

Mr. Philipp said this real-estate cycle, unlike the last boom, hasn't suffered from overbuilding. During the last cycle, buildings remained empty and commercial rents were weak for years. Moody's research found that average yields, or returns on commercial real-estate properties, are at their lowest since the American Council of Life Insurers started to report such data in 1965. This decline largely has been driven by the high volume of loans that banks are making; as banks are willing to lend more, buyers are willing to pay more for buildings.

RealEstateJournal | Gritty Inner-City Lofts Make Their Way Into the 'Burbs

RealEstateJournal Gritty Inner-City Lofts Make Their Way Into the 'Burbs By June Fletcher
From The Wall Street Journal Online

Next month, Martin Sickles is moving into a loft apartment with all the hallmarks of a converted urban warehouse, from wrought-iron railings to a spare brick exterior out of the Industrial Revolution.

But his loft isn't in a century-old factory building on a gritty inner-city block. It's in a new development in rural Palmetto, Ga., surrounded by meadows, stables and an organic farm that will grow things like asparagus and edible flowers. 'It's my little piece of New York,' says Mr. Sickles. 'But New York is too urban for me.'

Coming to a subdivision near you: the McLoft. Amid ranch houses and McMansions, developers are putting up buildings that look like they're out of downtown Manhattan or Chicago. Unlike urban lofts, which started out as last-resort housing for arty types, these condos can be some of the priciest housing in suburbia. Instead of stepping out into sidewalks where vendors peddle gyro sandwiches and counterfeit handbags, residents are just minutes from mountain-bike trails or the mall. And while city lofts are known for creaky freight elevators and exposed ventilation ducts, their country cousins come with floating faucets, bidets and designer kitchens."

RealEstateJournal | Richmond Is an Affordable Option Compared to Northeast Real Estate

RealEstateJournal Richmond Is an Affordable Option Compared to Northeast Real Estate:
By Maura Webber Sadovi Special to The Wall Street Journal Online

Richmond, a city that played a pivotal role in the Civil War as capital of the Confederacy during most of its history, is still giving some northern states a run for their money. Located about 100 miles south of Washington D.C. and pricier real-estate markets in the D.C.-New York corridor, the area's relatively affordable housing and lower cost of living has helped attract companies like packaging giant MeadWestvaco Corp., which recently announced plans to relocate its headquarters to the area from Connecticut, bringing an estimated 400 new jobs and giving the Virginia capital bragging rights to a seventh Fortune 500 company headquarters.

This three-bedroom, two-bath Richmond bungalow is on the market for $250,000.
Richmond's third-quarter median home price of $214,500 was in line with the national median of $215,900, but quite a bargain compared to many markets to the north, such as Washington D.C. where the third-quarter median was $441,400, according to the National Association of Realtors.
The area's housing market offers a range of styles including bungalo"

Real Estate Journal | Office Space in Richmond Offers a Mixed Picture

Office Space in Richmond Offers a Mixed Picture
By Maura Webber Sadovi Special to The Wall Street Journal Online

While Virginia's capital city has been on the winning side of several recent corporate relocations, the area's commercial real-estate market remains mixed, as new construction has absorbed some of the demand in the office-leasing market.

Last week packaging group MeadWestvaco Corp. said it would move its headquarters into a permanent site in Richmond from Stamford, Conn., by the summer of 2008. That addition will give the Richmond region bragging rights to seven Fortune 500 company headquarters. It also gives Richmond the second-highest concentration of such corporate giants per million residents among the 54 major metro areas surveyed by Property & Portfolio Research Inc., a Boston-based real-estate research firm. Richmond has six Fortune 500 companies per million residents, behind San Jose, Calif., which has just over seven per million people, PPR said.

"Richmond is now hitting its stride," said David H. Downs, a professor of real estate at Virginia Commonwealth University in Richmond, noting that the area's still comparatively inexpensive real estate has put it on the radar screen of investors priced out of larger markets. Other relocations have included cigarette maker Philip Morris USA, a unit of Altria Group Inc., which completed its move from New York City in 2004, and is building a $300 million research facility downtown.

RealEstateJournal | Apartment Development Heats Up on U.S. Coasts

RealEstateJournal Apartment Development Heats Up on U.S. Coasts

Many multifamily real-estate investment trusts have been ramping up their development pipelines, but increasingly are building in only a handful of U.S. cities along the coasts.

About 96% of the new apartments being built by REITs at the end of the fourth quarter were concentrated along the East and West coasts, according to a Feb. 28 report by Morgan Stanley. That compares with about 87% in the fourth quarter of 2004.

Archstone-Smith Trust, for instance, had about $1.3 billion in apartment projects under construction at the end of the fourth quarter -- more than double the amount it spent on projects under construction three years ago -- with nearly all of it concentrated in a few coastal cities.

Part of Archstone-Smith's strategy is to target areas such as Boston, New York and Southern California, where there is a high cost of homeownership and barriers to competition, such as a shortage of developable land and an often-lengthy permitting process. "It's hard to find those characteristics in a market that isn't coastal," says R. Scot Sellers, chief executive of the Colorado-based REIT.

RealEstateJournal | St. Louis Left Untouched By the Housing Boom

RealEstateJournal St. Louis Left Untouched By the Housing Boom: "St. Louis Left Untouched
By the Housing Boom

By Maura Webber Sadovi
Special to The Wall Street Journal Online

The housing boom that has lifted median home prices in the U.S. by about 25% since 2003 seems to have left the St. Louis region behind. Housing prices in the heartland region that straddles both the Missouri and Illinois banks of the Mississippi River rose by about 13% through the fourth quarter of 2005 from 2003 levels, according to the National Association of Realtors."

RealEstateJournal | Commercial Market in St. Louis Is Showing Some Improvement

RealEstateJournal Commercial Market in St. Louis Is Showing Some Improvement

By Maura Webber Sadovi Special to The Wall Street Journal Online
Some 40 years after St. Louis completed its soaring Gateway Arch, the region still is fighting to regain a competitive edge, while its trailing economy has kept commercial real-estate values grounded.

Straddling the Illinois and Missouri banks of the Mississippi River, the Midwestern region is home to a largely suburban population of about 2.8 million. The area is anchored by the city of St. Louis, which has seen its population steadily shrink to 348,189 in 2000, less than half its peak in 1950, according to the U.S. Census Bureau.

There are signs that the region's prospects are improving. The area's health-care sector is on the upswing, driven by such companies as pharmacy-benefits manager Express Scripts Inc., which is building a new headquarters. Isle of Capri Casinos Inc. is relocating its corporate headquarters to the region from Mississippi, partly to avoid hurricane-related evacuations of its main offices and to be more centrally located. DaimlerChrysler AG's Chrysler Group is investing as much as $1 billion over the next four years to modernize two manufacturing plants in Fenton, Mo.

LA Times: Aussies see feeding frenzy in U.S. real estate

Business: "Aussies see feeding frenzy in U.S. real estate"
2006/3/27
By Evelyn Iritani Los Angeles Times

Thanks to a swelling pool of pension money, Chardonnay and Shiraz aren't the only things Australians are shipping to the U.S. with a frenzy.

Since November, a few leading companies have poured Aussies see feeding frenzy in U.S. real estate
leading companies have poured "

RealEstateJournal | Low Housing Prices Lure Employers to Albuquerque

RealEstateJournal Low Housing Prices Lure Employers to Albuquerque

By Maura Webber Sadovi Special to The Wall Street Journal Online
Albuquerque helped to launch Microsoft Corp., when Bill Gates and Paul Allen co-founded the fledgling software giant there in 1975 before moving to Washington state -- in part because of difficulty recruiting new hires in the then-remote desert region.

New Mexico's largest metropolitan area, overshadowed by faster-growing Western rivals such as Seattle and Phoenix, and dominated by smaller businesses, has long struggled to lure and keep big corporate players, says Lawrence Waldman, a senior economist at the University of New Mexico's Bureau of Business and Economic Research.

RealEstateJournal | Cities Look to Rivers As Key to Redevelopment

RealEstateJournal Cities Look to Rivers As Key to Redevelopment

By Thaddeus Herrick From The Wall Street Journal Online
DALLAS -- This city has long turned its back on the Trinity River, on most days a brownish stream bound by levees and straightened by a channel.

But now the river that Dallas has for much of the past century both controlled and neglected is at the center of a $1 billion plan to revitalize the city's downtown. Leaders envision bridges soaring above a vast greenway, with lakes, parks and a waterfront promenade. The city already has raised well over a third of the money it needs, and is ready to begin construction on the first bridge.
Dallas Mayor Laura Miller says the overhaul is the most important project the city will ever undertake. "I believe that," she says.

Increasingly, the nation's cities are viewing rivers as economic assets that will attract tourists and locals alike rather than as polluted, flood-prone liabilities. In cities east of the Mississippi River with substantial waterways, such as Detroit, that often means reclaiming sites on the banks that were once used by factories or mills. But in the West, cities often have to revive the river itself.

RealEstateJournal | Commentary: Don't Judge Housing Market By the Numbers

RealEstateJournal Commentary: Don't Judge Housing Market By the Numbers

By Dr. Irwin Kellner From Marketwatch

If the housing market is weakening, why are home prices still rising?

To answer this question, let us return to those thrilling days of yesteryear, when we first learned math. It was then we discovered that figures may not lie, but liars do figure.

You see, there are averages and there are averages. And when it comes to home prices, you need to know how they are calculated before you can conclude what's happening to the price of the average home.

Knowing what's actually happening to home prices will help you determine if the price of the home you are selling or buying is right.

RealEstateJournal | Investment Interest Deduction Remains Alive and Well

http://www.realestatejournal.com/buysell/taxesandinsurance/20060223-openshaw.html?rejcontent=mail

By Jennifer Openshaw From Marketwatch

Since 2000, Congress and the Bush administration have moved mountains to create more tax breaks for investors. Most people are aware of new lower tax rates on long-term capital gains and qualified dividends. But buried on Line 13 of Schedule A is a mystery deduction called investment interest. It's easier to use than you think.

A deduction for interest? You know that most mortgage interest is deductible. But you probably thought everything else like interest on credit cards, car financing and other personal loans went away in 1986.

But there is a survivor. Not only did Congress leave the investment interest deduction in place, it recently made it bigger and better. "

RealEstateJournal | Building Owner Sells Rental To Focus on Short-Term Buys

RealEstateJournal Building Owner Sells Rental To Focus on Short-Term Buys

The pitfalls: Responding to tenant concerns and building maintenance issues has been time consuming, says Mr. Verbeck, who lives 45 minutes by car from Denver. He says he's realized that he prefers buying and reselling properties to managing a rental property. He would prefer to not have his money tied up in a mortgage, he says, and would like to take the proceeds from the sale of this investment and use them for land development or other projects. "I'm more interested in using my skills as an architect than as a property manager," he says.