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Our friend, Corey Weinberg, writes in this San Francisco Business Times article what we have been seeing over the past several years.  Specifically, Chinese investment has been driving the Bay Area real estate markets, and this is expected to be even more…
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  1825 28th Ave. Oakland, CA 94601 6 Units plus plans for additional 3 Price: $799,000 Each 2 BR Unit: 850 sf Total Building: 5112 sf Annual Rent Income: $67,932 Cap Rate: 5.79 Large lot – seller has drawn up plans for additional three units townhouse…
Outstanding Investment Opportunity
Outstanding Investment Opportunity
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Realtors® who practice commercial real estate reported an increase in sales transaction volume and medium gross annual income last year, according to the 2014 National Association of Realtors® Commercial Member Profile. NAR commercial members who were…
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The East Bay market ended the first quarter of 2014 with an office vacancy rate of 10.6%, according to the CoStar Group.  San Francisco, which usually leads the nation in lowest vacancy rate, came in at 9.2%.  This continues a trend we have seen over the…
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New CRE Loans Hitting All Time Highs

The U.S. commercial real estate market continued to recover steadily in the 1st Quarter, according to most analysts. Both the office and retail vacancies declined by about 10 basis points, but what we wanted to report on here is increase in commercial and multifamily mortgage originations as reported by Mark Heschmeyer on

Loan Performance Improving, but Loan Maturities Coming Down the Pike

During the fourth quarter of 2013, commercial and multifamily mortgage originations were strong, boosting mortgage debt outstanding to a new all-time high.

In fact, the fourth quarter marked the highest volume of commercial and multifamily mortgage originations since 2007, with all investor groups increasing their activity, according to the Mortgage Bankers Association’s just-released 2013 Data Book.

The level of commercial/multifamily mortgage debt outstanding reached $41.2 billion, or 1.7%, over the previous quarter.

Originations for commercial bank portfolios increased by 54% from last year’s fourth quarter. There was a 40% increase for life insurance companies, a 15% increase for CMBS and a 43% decrease in dollar volume of loans originated for the two big Government Sponsored Enterprises (Fannie Mae and Freddie Mac) loans.

Multifamily mortgage debt outstanding separate from CRE lending also rose to $895 billion, an increase of $11.5 billion, or 1.3%, from the third quarter and $36.6 billion, or 4.3%, from the fourth quarter of 2012. Rising property incomes and values continue to boost the performance of commercial and multifamily mortgage loans, the MBA noted.

Commercial and multifamily mortgages performed relatively well during the downturn, and for most investor groups, delinquency rates are now back in the lower end of their historical range.

Loan Maturities Hit Nadir, but Expected to Increase Dramatically

Although 2014 will mark the fourth straight year of declining commercial/multifamily mortgage maturities, volumes are expected to spike – by 72% in 2015 and an additional 34% in 2016, as 10-year loans made in 2005, 2006 and 2007 begin to come due.

The loan maturities vary significantly by investor group. Just 3% ($12.7 billion) of the outstanding balance of multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2014.

Life insurance companies will see 5% ($18 billion) of their outstanding mortgage balances mature in 2014. Among loans held in CMBS, 7% ($41.8 billion) will come due in 2014. About 15% ($19.2 billion) of commercial mortgages held by credit companies and other investors will mature in 2014.

Top Lenders

Wells Fargo was the top commercial/multifamily mortgage originator in 2013, according to MBA. Other top originators include J.P. Morgan Chase, Bank of America Merrill Lynch, Eastdil Secured, KeyBank, PNC Real Estate, HFF LP, Meridian Capital Group, CBRE Capital Markets and Prudential Mortgage Capital Co.
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Welcome to the new JMA Commercial Services Google+ page.  Look for upcoming market insights, success stories, items of interest and what we can do to help you with your commercial real estate needs.
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New Year Brings New Strategies for Single-Family Rental Giants
Mar 19, 2014 - CRE News

The fast-emerging business in which big investors scooped up thousands of single-family rental homes continues to morph along with the erratic housing recovery.

The big institutional investors that have acquired portfolios of thousands of homes for rent are shifting their acquisition strategies away from buying huge bulk portfolios to become more disciplined and market directed. 

In addition, they are looking to reduce their outstanding loan repayment obligations through single-family rental securitizations. 

The largest of the investor outfits, The Blackstone Group, announced last week that it was narrowing future single-family home purchases to a handful of markets: Seattle, Atlanta, Miami, Orlando and Tampa. It also said its acquisition pace has declined 70% from its peak last year. Blackstone owns more than 43,000 homes in 14 cities. 

The reasons for the change in strategy are pretty clear. 

According to CoreLogic, national home prices increased 12% year-over-year as of January 2014, but prices ranged from mid-single-digits to as high as 27% in Northern California. 

"The housing recovery has been uneven across the nation and we are no longer able to buying some of our Western markets, although we remain excited about many others, where we can still acquire homes at a discount to replacement cost and attractive rental yields," said. David Miller, president and CEO of Silver Bay Realty Trust, which was the first company to convert to single-family REIT. "Florida, for example, leads the nation with the highest foreclosure inventory at 6.7%, which should provide a continuing supply of distressed inventory in 2014." 

Like Blackstone, Silver Bay has decided to narrow its new purchases to select markets, including Texas and Atlanta. Not mentioned were two cities where it has its largest home ownership concentrations, Phoenix and Columbus, OH. 

Silver Bay owned a portfolio of 5,642 single-family properties as of year-end. 

American Residential Properties Inc., with 6,073 single-family homes in Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Nevada, North Carolina, Ohio, South Carolina, Tennessee and Texas, said it intended to maintain the pace of its acquisition activity, but it too planned to focus within certain target markets. 

“We would like to have at least 1,000 homes in four markets, Houston, Dallas, Atlanta and Phoenix, with 500 or more homes in Nashville, Charlotte, Orlando, Tampa and Chicago. We intend to continue to be opportunistic with respect to our acquisitions,” said Stephen Schmitz, chairman and CEO of American Residential. 

American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back their purchase volumes or markets, but for different reasons. 

For the next 60 days or so, American Homes 4 Rent, plans to slow down its pace of acquisitions as it prepares a single-family rental securitization. 

In the fourth quarter of 2013, it acquired 2,001 homes with 1,043 at auction or about 52%. So far this year it has acquired 1,900 homes and expects to acquire an additional 300 through the end of the quarter. It has surpassed 25,000 homes owned. 

“We expect the securitization to happen in the next 60 days, but we're going to have to slowdown a little bit on our acquisition pace until we have a better view or actually certainty of the capital being available,” said John E. Corrigan, COO of American Homes 4 Rent. 

Corrigan said the firm has approximately $220 million left on its credit line and plans to slow down its acquisition pace by focusing auction purchases until the capital expected from the securitization is available. 

Always the innovator, Blackstone Group completed the first and so far only such securitization backed exclusively by loans secured by single-family rental units, and all the SFR aggregators have taken notice. 

The securitization generated financing proceeds for Blackstone equal to 75% loan-to-value for approximately 88% loan-to-cost, with an all-in pricing of approximately 2% for a fully extended five-year term. 

“This is obviously very attractively priced debt capital and the Colony American Homes management team is actively analyzing various financing solutions, including securitization for its own purposes,” said Richard Saltzman, CEO and president of Colony Financial, its parent company. 

As the single-family rental (SFR) sector continues to evolve, with projected securitizations in both the single- and multiple-borrower segments, Standard & Poor’s Ratings Services said it has yet to see an SFR transaction with the level of credit enhancement and other risk-mitigating features that warrants the highest investment-grade rating. 

Standard & Poor’s primary reservations regarding the sector revolve around the industry’s operational infancy, historical performance, the current business model’s ability to withstand extreme economic conditions, and the ultimate liquidation values of the underlying properties, given the risks associated with short liquidation periods. 

Colony American Homes has been trying to address those concerns in the past year. Its portfolio totaled 15,300 homes across nine states at year-end 2013. It has been averaging 330 acquisitions per month, but it recently started culling homes from its portfolio that it said were not a good long-term strategic fit. It sold about 250 homes at an average gross sale price of 117% of its cost, including renovation expenses. 

Colony American Homes' postponed an initial public stock offering last summer to focus on property management, renovations, leasing and information technology operations. 

However, Saltzman said Colony American could likely re-approach the public markets and he is confident that its additional scale and operational maturity, debt capital markets executions and other key structural changes to the business would significantly improve the likelihood of consummating a successful public offering. 

Moody’s Investors Service cited several factors why it expects demand for SFRs will continue to grow. In addition to the slowly improving economy creating a boost in the number of households, Moody's expects increasing interest rates and increasing housing prices will make single-family homes less affordable for those looking to form new households. In addition, the availability of a mortgage remains limited for borrowers with checkered credit histories. 
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