October 29, 2009
FOR IMMEDIATE RELEASE: OCTOBER 28, 2009
Alliance Group Principals Receive Designations
The Alliance Group is pleased to announce that its principals, Scott Lodde and John McCarthy have recently received two designations from the Institute of Inspection, Cleaning and Restoration Certification (IICRC). The IICRC is an independent, non-profit organization which promotes high standards and ethics within the inspection, cleaning and restoration service industry.
The two principals attended an intensive week long seminar along with two of its affiliates, John Sokol and Ray Franks of Harbor Constructors and received certification in Applied Structural Drying (ASD) and Water Damage Restoration (WRT).
The ASD certification covered the effective, efficient and timely drying of water-damaged structures and contents using comprehensive classroom and hands-on training. The WRT course explained the concept of water damage and its effects while teaching the techniques for drying of structures.
Gaining this essential knowledge is critical to the company’s Insurance Claim Support Services. Through this service, the company provides consulting support for Insurance Company Adjusters, Property Owners and Private Adjusters throughout the entire claim settlement process following any number of large and small disasters.
This service emanates from the experience gained through working together as a group during the restoration of the Sanibel Harbour Resort & Spa, which was severely damaged by Hurricane Charley in 2004.
The information gathered from the IICRC courses will provide the background necessary to help understand the procedures required to deal with water losses, sewer backflows, and contamination such as mold while assisting as a first responder in the initial evaluation of any water disaster.
For more information on the work the group performed following the events of Hurricane Charley, please read the Case Study entitled “Post-Hurricane Asset Restoration and Business Recovery” at the following link HERE.
Alliance Real Estate Asset Management Group, LLC
17170 Harbour Pointe Drive #835, Fort Myers, FL 33908
Telephone: (239) 344-7799
October 29, 2009
Much has been written about the upcoming demise of the commercial market, the so-called other “shoe” of real estate. Back in August I wrote an article for the blog entitled “Distressed Commercial Real Estate by the Numbers”. In it I quoted George Ratiu, a NAR economist. According to Mr. Ratiu, as of June of this year, the amount of commercial real estate in “distress” (defined as foreclosed, REO, or delinquent properties) had risen to $108 billion, a 107% increase in six months. Of that amount, the retail sector led the pack at around $17.8 billion with hotels coming in second at $11.8 billion.
In a more recent article published by KPMG it is estimated that, in the U.S, around $2.2 trillion of commercial properties bought or refinanced since 2004 are now worth less than the original price. According to the article, as of July 2009 around $124 billion of commercial properties have fallen into default, foreclosure or bankruptcy since prices started falling and fewer than 10 percent have resolved their financing issues. In the US, the banking industry is facing losses of around $200 – $230 billion on commercial property loans.
According to an article published in Florida Trend magazine, Florida banks have $56 billion in commercial loans or 34% of bank assets. Severely distressed loans (as a percentage of assets) are 15 times what they were in 2006 and at the end of the 2nd quarter, those banks had $5.1 billion in commercial, apartment and construction and land development loan in default, up from $274 million in 2006.
According to the article, Orlando has a17.4% office vacancy rate and Palm Beach and Jacksonville have some of the highest office vacancy rates in the country at 22.5% and19.9%, respectively.
Here in Lee County a number of high profile foreclosure proceedings have finally started against commercial developers/investors. Today, the Fort Myers News Press reported that an apartment complex which sold for record-breaking $79.6 million is now in foreclosure. The complex was bought as a condo conversion project in March 2006 and never moved forward. In this case, the foreclosure was initiated by the LLC which acquired the note from the FDIC after it declared Corus Bank, the original lender, insolvent September 11th of this year. In another instance, BankUnited filed a $6.8 million foreclosure lawsuit against Bonita Springs-based McGarvey Development, a major builder of commercial buildings and upscale homes in Southwest Florida. The newspaper also reported that Cape Coral real estate empire of developer/broker Greg Eagle is being hit by a barrage of foreclosures and court judgments. Lenders have begun eight separate foreclosure lawsuits in Lee circuit court for big parcels of land he was assembling for a regional mall.
It appears that the long anticipated “other shoe” may indeed be dropping.
Scott R. Lodde
October 14, 2009
Much has been written lately regarding the end of the American dream to home ownership. Earlier this year Harris Interactive on behalf of the National Foundation for Credit Counseling conducting a homeownership survey among 1,001 adults ages 18 plus.
The results of the survey showed that almost half of all American adults no longer view home ownership as a reliable way to build wealth, 42% no longer own a home and don’t expect to ever own one again and 31% don’t believe they ever will upgrade to another home or buy a vacation home. For many Americans, the long-held goal of owning your own home is no longer feasible or even desirable. Increasingly, Americans prefer to rent, rather than buy.
The same seems to be true for vacation and second home ownership. During the past two decades, many developers sold properties in resort areas to a seemingly endless pool of demand from the Baby Boom generation. While it is true that this generation is the best equipped age group to purchase resort real estate, a recent Consumer Travel Report by PhocusWright, a travel industry market research company, notes that recent economic conditions have impacted what is called the “trailing-edge baby boomers”, those currently of 45 to 54 years of age. The report states that this segment of the baby boomers is “stuck in a middle-aged slump, … with children in college, devalued homes and ravaged investment portfolios …”. However, the report goes on to say that, “while boomers still represent a critically important consumer group, the permanence of their risk-taking and resulting financial scars will change the way this generation spends money for a long time, if not forever.”
In a recent article published by Hospitality Valuation Services entitled Resort Real Estate: Preparing for the Recovery, author Andrew Cohen notes that the resort real estate market more closely follows the timing of the residential real estate market cycle than the Gross Domestic Product (GDP) which most closely correlates to the transient hotel market. Mr. Cohen notes that the principal driver of demand for resort real estate is wealth. 2007 was the turning point for the wealthiest of American families. The article quotes information published in the Merrill Lynch Capgemini World Wealth Report 2009, stating that the number of High Net Worth Individuals (HNWI) in North America declined by 22.8% to approximately 2.5 million individuals in 2008 compared with 2007. Worldwide membership in this elite group dropped by 14.9%, to 8.4 million individuals. The study defines HNWIs as individuals who hold more than $1 million in investable financial assets. The population of Ultra High Net Worth Individuals, with over $30 million each in investable assets, dropped even further, by 24.6% in 2008.
Even more frightening is a table in the report which details the dramatic decrease in resort real estate volume changes from 2007 to 2008. Annual Timeshare Sales (United States) decreased 8% (from $10.6 billion to $9.7 Billion), Fractional Interest Share Sales (North America) decreased 46% (from $485 Million to $263 Million, Private Residence Club Sales (North America) decreased 24% (from $1.2 Billion to $0.9 Billion, Vacation Homes Sold (United States) decreased 31% (from 740,000 to 512,000) and the Median Vacation Home Price (United States) fell 23% (from $195,000 to $150,000).
While these statistics are alarming, many in the industry don’t share these pessimistic views. In a recent speech at the University of Florida Center for Real Estate Studies’ annual Real Estate Trends and Strategies Conference, David Denslow, a University of Florida research economist predicts better times ahead as the baby boomers retire. He points to retiring baby boomers as a salvation for the Sunshine State. He sees that number fueling state growth for the next 15 years, though he agrees that many boomers must first recoup some of their wealth lost during the recession before they can sell homes and move south.
I’m in the optimistic camp. People in all socio-economic classes will continue to want home ownership once the recession begins to ease. Homeownership will once again be part of the American dream and housing prices will continue to rise but at a slower pace than in the past. The term “besting” or “better nesting” has been coined to describe the period between empty nesting and old age. I believe this trend will have a major impact on housing strategies, especially resort real estate as the 78 million baby boomers move into their retirement years.
Scott R. Lodde
October 2, 2009
In a separate report, the Fort Myers News Press disclosed that foreclosures in Lee County (Fort Myers/Cape Coral/Lehigh Acres) fell 34.6% in September 2009 from September 2008 (1,610 vs 2,462). While this initially appears to be good news, the article noted a big change in the “type” of foreclosures being reported. While the foreclosures in the past were largely from inexpensive home and lots owned by investors and speculators, the more recent foreclosures are coming from the “middle class”, largely more expensive homes taken back from owners who have lost their jobs and simply could not hold out any longer.
While foreclosure actions dropped substantially in Lee County from a year ago, a similar reality to South Florida exists in number of homes available for sale. As competition has heated up, the number of homes for sale has steadily dwindled. According to a local realtor group, there were 11,258 listed in August compared to 16,509 a year earlier, representing a similar drop of 31.8%. As noted above, South Florida listings dropped 34% from a year earlier.