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Four Strategies to Address Catastrophe Property and Liability Exposures in Real Estate Sector

October 13, 2015 by Randybaconin Real EstateLeave a Comment

Managing the various, often-volatile property and liability risks that commercial real estate owners and managers face daily requires a vigilant risk management strategy that includes frequently evaluating risks and assessing insurance programs to ensure proper coverages are in place. For instance, when it comes to estimating potential losses from such catastrophes as hurricanes and earthquakes, real estate companies are challenged by the inadequacy of modeling tools. The inherent low-frequency rate of catastrophic event also means standard actuarial techniques are not as effective. On the liability front, making sure policies align with contractual exposures requires a significant amount of due diligence combined with real estate risk management expertise. All of these challenges point to a greater need for real estate companies to partner with risk management experts that have a thorough understanding of the industry’s unique challenges. Additionally, companies need to stay informed on the changing risk environment and latest risk management techniques that can help to mitigate their financial exposures. Following are a few strategies addressing catastrophe property and liability exposures in real estate.

View entire article at National Real estate Investor.

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Moody’s, RCA: CRE Prices Top Pre-Recession Levels

October 8, 2015 by Randybaconin Real EstateLeave a Comment

Moody’s and RCA’s joint Commercial Property Price Indices (CPPI) reveal that the CPPI rose 1.6% in August, thanks in large part to a 1.8% rise in its best-performing segment, central business district. Central business district office has been the top performer for the past three months, rising 6.3%, while suburban office comes in second, rising 3%. The CPPI also topped its November 2007 peak for the first time, adjusting for inflation. It’s now 14.5% above its pre-crisis peak on a nominal basis, and 1.5% above when adjusted for inflation. Additionally, apartment prices exceeded their pre-crisis peak by 33%, with core commercial property prices about 8% higher than their previous peak. [Moody’s]

Read more at: https://www.bisnow.com/national/news/commercial-real-estate/core-commercial-segment-leads-a-rising-cppi-50820?utm_source=CopyShare&utm_medium=Browser

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Investor Competition Intensifies for Medical Office Properties

October 5, 2015 by Randybaconin Real EstateLeave a Comment

Demand for stabilized medical office buildings (MOBs) and new development is on an upswing, according to market experts, with cap rates matching pre-recession record levels.

The average cap rate for performing MOBs declined to 6.5 percent in the first half of 2015, almost reaching the record low of 6.2 percent achieved in the third quarter of 2007, according to a recent report from health care advisor firm Brown Gibbons Lang Real Estate Partners. Vacancy in the MOB sector has dropped to 10.9 percent, one of the lowest rates of any commercial property type.

The investment sales market is healthy from the demand perspective, according to the report, with 1,176 transactions completed through the first half of the year, totaling about $11.9 billion. In comparison, there were 950 transactions totaling $9.8 billion completed during all of 2014. Christopher Stai, managing director at Brown Gibbons, says among other trends, provider-based clients are conducting strategic reviews and looking closely at monetizing both core and non-core assets, transferring ownership and valuation risk, and redeploying capital towards growth opportunities and other core areas of their business, while maintaining a degree of control over the assets.

See entire article in National Real Estate Investor.

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Surge in Commercial Real-Estate Prices Stirs Bubble Worries

August 13, 2015October 6, 2015 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

Investors are pushing commercial real-estate prices to record levels in cities around the world, fueling concerns that the global property market is overheating.

The valuations of office buildings sold in London, Hong Kong, Osaka and Chicago hit record highs in the second quarter of this year, on a price per square foot basis, and reached post-2009 highs in New York, Los Angeles, Berlin and Sydney, according to industry tracker Real Capital Analytics.

Read entire article in Wall Street Journal here.

Demographic Trends Drive Investor Interest in Alternative Real Estate Assets

August 3, 2015October 6, 2015 by Randybaconin Real EstateLeave a Comment

At a time when real estate investors still have concerns about the future performance of many traditional property types, including office, retail and multifamily, some have started to set aside capital for alternative assets. Such assets, including student housing, seniors housing and medical office buildings, among others, have broad demographic trends supporting their success, proved immune to the recession and offer higher yields than comparable properties in other sectors. As a result, interest in these types of assets is expected to keep growing.

Immediately after the downturn, active investors stuck primarily with the five core property types because they were wary of taking on any level of risk, notes Spencer Levy, executive managing director with CBRE Capital Markets. Yet the cap rates on the best multifamily, office and retail buildings have fallen so low lately that it has become difficult to achieve decent yields. At the same time, investors ranging from REITs to pension fund advisors to private equity groups still have to fulfill their capital allocations to commercial real estate, which is why they are increasingly eager to acquire more specialized properties.

Read the entire article at National Real Estate Investor here.

To discuss commercial mortgage financing needs contact Liberty here.

Shadow lenders push deeper into risky commercial real estate

July 31, 2015October 6, 2015 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

Seven years after the financial crisis, private funds in the U.S. are extending their push into traditional banking.

So-called shadow lenders — asset managers that operate outside the banking industry’s regulatory oversight — have been making an increasing number of leveraged loans to midsize businesses.