Tag Archives: commercial buildings

finance

Buying Commercial Property Through Commercial Mortgages

Buying Commercial Property Through Commercial Mortgages

As we’ve all heard; the sky is falling, everyone is unemployed and the there will be no more small business. OK, maybe I’m exaggerating a bit, but I can walk away from a local news broadcast feeling like I’ve been diagnosed with a fatal disease and have only three days to live.

Moments later I’m back in my office grinding out phone calls to existing clients and prospects that are looking to buy a commercial building with the right frontage and signage opportunities, but of course, they want to buy the building at 50% off. So no, the sky isn’t falling, small business is strong and growing and the commercial buildings with the right amenities are all but gone or have multiple offers on them.

This is my favorite question from clients: “What percentage does a seller typically expect to reduce their price by when they list their property with you?” Of course I tell them that the seller would most likely expect to get what they are asking for the property. Clearly, we are beginning to see the commercial real estate market become more of a seller’s market than a buyer’s market.

If a seller has a great piece of commercial real estate in a good neighborhood with C Class zoning or better it’s like having a rare coin – everyone wants it and buyers are seemingly willing to pay extra for it. I am speaking of Scottsdale and the areas of close proximity. Vandalism, theft, burglary and simple external obsolescence are just a few of the reasons other areas lose value and simply don’t come back for years until the entire area is redeveloped.

How did we get where we are today? As historical trends show and continue to show decade after decade; commercial real estate ebbs and flows follow residential free falls. We see this happen about every 8 to 12 years depending on the economic health and vitality of the country and world. We knew that property values here in Arizona eventually had to slow down but we didn’t expect the significant drop that we had. The great news – the Scottsdale real estate market hit bottom 17 months ago and we are slowly creeping back up; with very little inventory currently available.

Let’s not forget how this mess started; Mortgage Backed Securities, including but not limited to Residential and Commercial Mortgage Backed Securities. First, a quick definition of a commercial mortgage backed security – A mortgage-backed security (MBS) is an asset-backed security that represents a specific claim on cash flows that originates from mortgage loans through a process known as securitization.

The process of securitization can be complicated and convoluted, and is highly dependent on the jurisdiction within which the process is conducted. The basics are this: Mortgage loans or notes are purchased from banks and other lenders and assigned/sold to a trust, then the trust assembles these notes into pools. The trust then securitizes the pools of notes by issuing a mortgage backed security. Residential mortgage backed securities are backed by single family to quad-plex or four family housing units. Commercial mortgage-backed security (CMBS) are secured by commercial and multifamily properties, such as apartment buildings, retail or office, hotels, schools, industrial properties, commercial sites, etc. A CMBS is usually structured as a different type of security than an RMBS.

Fannie Mae and Freddie Mac are the most common securitization trusts in the United States. So what happened? It’s been suggested that the inherent complexity surrounding the securitization of commercially backed mortgages can suffer from and are highly prone to steep and quick changes in underwriting standards. It’s believed that the U.S. subprime mortgage crisis was in large part created by competitive private mortgage securitization. Additionally, there was a lot of securitizing that was “not on the books,” so a lot of the securitizing firms’ balance sheets were less transparent.

What does this mean for us here in the Phoenix and Scottsdale areas? Keep your eye on both the residential and commercial markets in your area; these provide excellent indicators of your ‘local market’. Are new small businesses opening up? Are rents getting more expensive? What I’ve found is that landlords and owners are charging more for rent and getting more when selling. This is a good thing and means that particular market is on the rise.

I always recommend retaining a professional commercial real estate broker familiar with the area you are interested in. Make sure your broker provides demographics, current sales and rental information and understands your needs.

Green Construction Code, Phoenix, Scottsdale

Phoenix And Scottsdale Adopt Green Construction Code

Phoenix, Scottsdale Green Construction CodeIt has been almost one month since the City of Phoenix adopted a voluntary green construction code to promote energy efficiency and sustainability in construction activities.

A keystone of the code is that both new and old projects can achieve the green standard without paying third-party fees; costly fees can often prevent projects from getting off the ground.

“Those who choose to ‘go green’ will have their projects reviewed and inspected to this standard,” says Michael Hammett, spokesman for the City of Phoenix in a statement. “There are no extra fees for plan review or permits.”

All those seeking certification must follow strict prerequisites before the city will certify the building as “green.” The code was enforced starting July 1 — although it may be too early to tell how effective it has been.

Phoenix is one of the first cities in the nation to implement such a code, according to a statement from city officials.

The city has set its aim high to attempt to mitigate waste and save energy.

The Phoenix Green Construction Code goals include:

  • Encourage the reduction of the building’s eco-footprint
  • Improve indoor air quality
  • 20 percent mandatory reduction of indoor water use
  • 15 percent mandatory reduction of energy use
  • Require that at least two percent of the building’s annual electrical use be produced by renewable energy materials
  • Encourage the implementation of green roofs, brown roofs and reflective roofs
  • Divert 30 percent of construction waste from landfills

The Phoenix Green Code was modeled after the International Green Construction Code (IGCC) and the National Green Building Standard (NGBS) for residential construction, a city news release said.

Commercial buildings will only have one type of IGCC certification, and residential buildings could have up to four, based on the NGBS standard.

This building code was created out of the Phoenix Green Building program and funded by grants from the Department of Energy.

[stextbox id=”grey”]Read Dustin Jones’ blog…[/stextbox]

Phoenix Mayoral Debate, Real Estate

Phoenix Mayoral Candidates Debate Commercial Real Estate Issues

Filling existing vacant commercial buildings, impact fees and economic development incentives were some of the issues discussed by the six City of Phoenix mayoral candidates Friday at Valley Partnership’s monthly breakfast meeting.

Anna Brennan, Wes Gullett, Claude Mattox, Peggy Neely, Greg Stanton and Jennifer Wright answered questions and made their pitch why they should be Phoenix’s next mayor before a packed audience at the Phoenix Country Club.

The first question: Arizona’s economy has taken its toll on commercial real estate is our state. What is your plan for attracting users to existing vacant commercial buildings and jumpstarting new commercial development in Phoenix?

Gullett said his focus was on helping small businesses, attracting new jobs, and making sure there is also job growth. He also said the challenge he sees is a lack of investment capital. His vision is for a partnership with banks to create an investment pool.

Neely stressed the importance of job creation, and the fact that the Valley needs to become more competitive as a region. Wright pointed out the 30 percent vacancy rate among commercial buildings in Phoenix. She added the city’s development department must be more business friendly.

The second question: Most cities in the Valley assess development impact fees on commercial development. Some subsidize certain categories of impact fees to attract certain kinds of development. Others have very limited categories of fees. What do you think the City of Phoenix’s approach should be to assessing impact fees for commercial development?

Stanton alluded to the ill-fated CityNorth project because it was a public-private partnership in which part of the impact fees helped build the development’s parking garage. He added that impact fees should generate “growth that pays for itself.”

The third question: Are you in favor of providing economic development incentives like infrastructure reimbursements to commercial projects?

Stanton, Brennan, Gullett and Maddox said yes. Gullet said it’s a “good gamble as jobs are created.. It has to be applied across the board.”

The fourth question involved a zoning case. A Fortune 500 company wants to relocate its corporate headquarters on Camelback Road and has a site tied up. They want 10 stories. If they can’t get 10 stories, the building goes to a Tempe Town Lake site. The General Plan dictates the Phoenix site can have a maximum of four stories. A highly organized neighborhood group says it was promised that high rises wouldn’t go this far east and that the city shouldn’t break that promise. How do you vote?

Wright, Brennan, Maddox and Neely voted in favor of rezoning the property. Gullett and Staton voted against.

And finally, when asked to describe their leadership style in one word, their responses:

Gullett – patience; Maddox – committed; Neely – decisive; Stanton – smart; Wright – determined; and Brennan – a facilitator.

The City of Phoenix mayoral election is Aug. 30.

 

 

 

 

Reviving the Construction Industry

Plan to Revive Construction Industry Unveiled

The Associated General Contractors of America released a new national plan today detailing measures to stimulate demand for construction. Officials said the plan was needed to reverse construction employment declines that have taken place in 317 out of 337 metro areas since January 2007, according to new data the association released today.

“Our goal is to rebuild a devastated construction market that has left millions jobless, littered cities with incomplete projects and sapped much needed revenue, commerce and customers out of our economy,” said Stephen E. Sandherr, the association’s chief executive officer. “Considering the scope and impact of construction job losses, the last thing any of us can afford is a repeat of the past four years.”

The plan, called “Building a Stronger Future, A New Blueprint for Economic Growth,” outlines measures to help boost private sector demand for construction, help tackle a growing infrastructure maintenance backlog and reduce needless red tape and regulations. Sandherr said the association developed the plan to overcome the years-long construction downturn that has left over 2.2 million construction workers unemployed and the industry’s unemployment rate at 21.8 percent, more than twice the national average.

Sandherr released the plan and the new employment figures, during a visit to Phoenix,  which has lost more construction jobs – 91,400 – than any other metro area since the start of the construction downturn in January 2007, a 54 percent decline. Nationwide, 28 cities lost 50 percent or more of their construction jobs, including Boise, Idaho; Fort Lauderdale, Fla.; Medford, Ore.; and Merced, Calif., Sandherr noted.

The metro areas that lost the most construction jobs during the past four years, besides Phoenix, included Las Vegas (-61,900 jobs, -61 percent); Riverside-San Bernardino-Ontario, Calif. (-57,700 jobs, -51 percent); the Atlanta area (-57,700 jobs, -42 percent); and the Los Angeles area (-56,200 jobs, -37 percent).

Lake Havasu City-Kingman (-65 percent, -4,200 jobs) and Bend, Ore. (-65 percent, -5,200 jobs) lost the highest percentage of construction jobs of any metro area. They were followed by St. George, Utah (-62 percent, -5,200 jobs); Las Vegas; and Naples, Fla. (-61 percent, -13,700 jobs).

Only 14 metro areas added construction jobs during the past four years, while employment levels were unchanged in another six. The five metro areas with the largest construction employment gains were all in Texas: Beaumont-Port Arthur (3,400 jobs, 21 percent); Longview (3,100 jobs, 26 percent); Midland (2,100 jobs, 15 percent); El Paso (1,900 jobs, 14 percent); and Odessa (1,800 jobs, 17 percent).

Pascagoula, Miss., experienced the highest percentage increase in construction employment (47 percent, 1,600 jobs) during the past four years. Other metro areas adding a high percentage of construction jobs included Longview; Beaumont-Port Arthur; Lawton, Okla. (20 percent, 300 jobs); and Odessa.

“In too many metro areas, the construction industry is a mere shadow of what it was just four years ago,” said Ken Simonson, the association’s chief economist, who prepared the new employment analysis. “This new data should make it pretty clear that the sector’s revival is anything but guaranteed.”

Sandherr said the recovery plan emphasizes boosting private sector demand, which once accounted for 76 percent of all construction activity, but now accounts for only 60 percent. It calls for approving pending trade agreements to boost demand for manufacturing and shipping facilities, repealing the alternative minimum tax and making permanent the tax cuts that were first put in place in 2001 and 2003.

The plan also identifies new tax credits to encourage retail and restaurant upgrades, improve the efficiency of commercial buildings and help contractors invest in new, more efficient construction equipment. And it urges Congress and the Administration to finally end the double taxation of U.S-based businesses that succeed in international markets.

Sandherr noted the plan includes measures to tackle infrastructure problems that cost American businesses an estimated $100 billion a year due to delays and lost productivity. It calls for significant reforms to federal surface, aviation and waterways programs. And it urges federal officials to refocus on efforts that are clearly in the national interest, streamline the years-long federal review process, and find new ways to leverage private sector dollars.

Sandherr added that the plan also includes comprehensive measures to reduce costly, time consuming and needless regulatory burdens. It calls on Congress to pass legislation limiting major new regulations, reform the approval process for new highway and transit projects and oppose well-meaning labor and Buy American mandates that do little to create new jobs and a lot to add costs and delay work.

The plan also highlights the need to repeal a costly new mandate set to begin next year that requires governments at all levels to withhold three percent of the cost of virtually all major construction projects from contractors. “For an industry where most firms are lucky to make three percent in profit on a project, this new mandate will either put a lot of people out of work or needlessly inflate the cost of public construction,” Sandherr cautioned.

Energy Efficiency

Green News Roundup – Energy Efficiency, Green Organizations & More

Welcome to our weekly green news roundup. This week we’ve gathered stories about energy efficiency auditing, promoting your company as a green organization and more.

Please feel free to send along any interesting stories you’d like to see in the roundup to kasia@azbigmedia.com. Also visit AZ Green Scene for informative articles about sustainability efforts in the Valley and state.

REEis Provides Independence From High Energy Costs
REEis, a local Valley company that specializes in energy efficiency auditing and contracting is hosting an Independence Day promotion in hopes to get more efficient homes on our streets. Utilizing low cost, energy efficient improvements to our homes and commercial buildings can greatly reduce energy consumption and our dependence on oil and foreign energy sources. “America’s Energy Independence Day Promotion” will be offered for one week starting June 26. REEis is also offering Arizona homeowners a $29 comprehensive energy audit if booked by July 4th. If interested please call (480) 969-7500 or visit the company’s website at: reeishome.com

Is it Energy’s Turn Now?
The New York Times Green Blog looks at the possibility of energy and climate change legislation being in the works for the government. As the financial regulation nears completion, some Democrats are hopeful that this next challenge can be met before Congress leaves town in August.

June Education Forum: Green Marketing
The Phoenix Green Chamber of Commerce is hosting their monthly education forum at Rio Salado College on Monday, June 28th at 5:30 p.m. The topic for this month’s forum is exploring best practices for promoting your company as a green organization. Learn about effective strategies to maximize your green marketing efforts and minimize impact on the environment. RSVP to the event here. For full details visit: www.arizonagreenchamber.org/Phoenix/

First U.S. offshore wind energy project faces lawsuit
Environmental groups plan to file suit in federal court against the Obama administration regarding the Cape Wind project in Nantucket Sound. The groups accuse the administration of violating the Endangered Species Act with the approval of the project. The suit states that the project, which calls for a set of 130 wind turbine generators to be installed on Nantucket Sound, would fail to protect endangered birds and whales. Yikes, don’t know how this will pan out but I hope the Obama administration finds a way to work this out amicably.