From the Editor
BY JENNIFER E. GARRETT, EDITOR
In the Past Month
Since the delinquency rateS for commercial mortgage-back SecuritieS
(cmbS) firSt began to climb Steadily, Speculation in the market about the
future of these securities has been rampant. Predictions of waves of massive defaults
have been hanging over the industry, and each upward tick in distressed CMBS has
elicited fears that the time had finally come for that wave to hit.
Whether these prognostications will hold true or not, it’s definitely rough waters ahead for the
CMBS market. Many of the securities issued at the height of the real estate boom in 2007 will
mature this year. In fact, CoStar Group expects $100 billion in CMBS-pooled loans to mature
this year, $70 billion of which is coming due for the first time. 1st Service Solutions’ Ann Hambly takes a look at what the future may hold for CMBS — and what damage a serious wave of
defaults could wreak — on Page 20.
And while CMBS loans are maturing this year, it’s also time for many lodging properties to
renovate. Hotel brands mandate certain upgrades, so commercial mortgage brokers should
be aware of property owners looking to finance these often costly renovations. Jon S. Wright
and Heather Duvall of Access Point Financial discuss what’s in the works for the hotel market
this year on Page 26.
Renovations also may be just what distressed properties need, according to Richard Muhlebach LLC’s Richard Muhlebach. On Page 28, he discusses how renovations can help reposition a property to make it competitive in its market. Although it will require more serious work
and heavier financing, converting the property to something more in demand, like adapting an
office building to a hotel, also can solve a property’s problems.
With CMBS markets troubled and liquidity an issue, commercial mortgage brokers and their
clients may need to turn to unconventional financing options. Retail Capital’s Erik Stamell discusses how merchant cash advances may offer a viable alternative to bank lending on Page 40.
Finally, we turned to E.J. Burke, vice chairman at the Mortgage Bankers Association, to get his ideas
on what the year ahead may hold for the commercial mortgage industry. Read his thoughts on
what will happen with CMBS, the multifamily market and more in the Q&A on Page 16.
Regardless of what the experts anticipate, by staying on top of changes in the industry and
keeping up-to-date on different markets, commercial mortgage brokers can make sure their
year will be successful.
jenniferg@scotsmanguide.com
BEYOND;OUR;BORDERS
Argentina
The third-largest national economy in Latin
America grew by 9.2 percent in 2010 and was
expected to maintain a similar pace in 2011.
Argentina’s year-over-year growth reached
7. 7 percent this past September. Global concerns, the Brazilian devaluation and the low
value of commodities have dimmed the outlook for this year, however, with just a 4.2 percent growth-rate forecast by the World Bank
and a moderate 5.1 percent predicted by the
economy minister.
In Buenos Aires, more than 142,000 square
meters of Class-A and A+ office space were
under construction this past third quarter, of
which nearly 130,000 square meters is scheduled to be completed this year, according to CB
Richard Ellis. Government-imposed currency
controls threw doubts on project-completion
deadlines. Asking rents for Class-A and A+
office space averaged $27.03 per square meter per month this past third quarter. The office
vacancy rate was 7.2 percent this past June, according to Colliers International.
—;RANIA;OTEIF Y
7.7 Gross-domestic-product
growth;rate;in;September;’ 11
Square;meters;of;office
construction;projects;in;Q3;’ 11
142,000
7.2%
June;’ 11;office;vacancy;rate
in;Buenos;Aires
$27.03
Average;monthly;rent;per;square;meter
for;Class-A;and;A+;office;in;Buenos;Aires
GDP revised lower for third quarter
WASHINGTON, D.C. — This past December, the U.S.
Commerce Department lowered the third-quarter gross-domestic product (GDP) estimate from 2.5 percent to
1.8 percent.
The original estimate, issued in October, showed a gain
of 2.5 percent. In November, that was lowered to 2 percent. The third and final estimate reflects the availability of more data, which showed consumer spending not
as robust as previously thought.
Consumer spending rose 1.7 percent in the July through
September quarter, lower than the earlier estimate of
2.3 percent.
Consumer Price Index increases slightly
WASHINGTON, D.C. — The Consumer Price Index for
core prices rose 2.2 percent this past November on an
annual basis, one tick higher than October and within
range of a federal target.
Core prices, which exclude food and energy items, rose
2.1 percent on a 12-month basis. The U.S. Federal Reserve’s target is for 2 percent inflation on an annual basis.
For the second consecutive month, energy prices declined, which offset the index for food, which had prices
increase 4. 6 percent on an annual basis and 0.1 percent
compared with October.
Consumer prices for all items were up 3. 4 percent from
October on an unadjusted 12-month basis, a drop from
October’s 3. 5 percent annual inflation rate for all items.
Next release
Consumer Price Index: feb. 17
Consumer confidence up two months in a row
NEW YORK — Consumer confidence in the U.S. increased for the second consecutive month this past December, according to the Conference Board.
After hitting a two-year low in August and posting a
slight gain in September, confidence slipped again in
October.
The index then jumped sharply from 40. 9 to 55.2 in November. In December, it climbed to 64.5, the Conference
Board said.
The index is now back to levels seen in April 2011, when
the economy was frequently defined as being in the
early stages of a recovery.
Next release
Consumer confidence: feb. 28
Factory orders slide
WASHINGTON, D.C. — U.S. factory orders fell this
past September and October, the U.S. Census Bureau
reported.
Factory orders decreased 0.4 in October, in line with expectations. The bureau revised September’s 0.3 percent
rise to a 0.1 percent decline, however.
New orders turned slightly higher, up 0.1 percent with
defense orders excluded from the data. Excluding
transportation orders allowed all other orders to rise
0.2 percent.
As that suggests, new orders under the category of
transportation — big-ticket items such as trains, ships,
trucks and planes — had the largest decrease in the
month, with orders down 5.1 percent.
New orders for non-durable goods — goods not expected to last three years — decreased by 0.3 percent.
