Headlines – Week of March 21, 2010

March 26, 2010

Is the Hotel Industry Set for a Recovery?

PKF Hospitality Research recently announced that U.S. hotels should enjoy double-digit revenue growth by 2012. The information was published in the March 2010 edition of Hotel Horizons®.

PKF-HR is forecasting hotel room revenue to grow 10.5% on a per-available-room basis (RevPAR) in 2012. The strong growth in RevPAR is driven by Moody’s Economy.com’s forecasts for income and employment. In 2012, Moody’s is projecting income to grow at a 4.4%, a rate not seen since 2006.  In addition, their 3.2% forecast for employment growth in 2012 is an all-time high since 1988.

Until 2012, however, market conditions will remain relatively soft. For 2010, PKF-HR is forecasting a 1.1% decline in RevPAR, the third consecutive year of falling RevPAR for the U.S. lodging industry.

Despite the decline in RevPAR this year, they predict lodging market conditions will turn and improve throughout the year as demand for hotel rooms has been greater during the first quarter of 2010 than it was during the same period the prior year. This growth in demand is expected to persist throughout the year and result in an annual increase in rooms occupied of 1.5%.

Smith Travel Research (STR) is forecast room supply to grow only 1.2% in 2010, down from the 3.2% net increase in new rooms that were opened in 2009. With demand rising at a 1.5%, the average occupancy rate for the U.S. lodging industry is expected to increase 0.3% to 55.2% in 2010.

pkf-us-lodging-industry-annual-change-2009-actual_2010-forecast-tableAccording to PKF-HR, rate discounting will continue in 2010 with national occupancy levels are below the 60% level. The company does not believe that quarterly ADR will exceed 2009 levels until the third quarter of 2010. They forecast ADR will increase 3.4% in 2011 after declining 1.4% in 2010.

Article from Hospitality.net

Deloitte Reports Commercial U.S. Real Estate Potentially Hits Bottom in 2010

According to Deloitte’s Perspectives on Real Estate: Uncovering Opportunity in a Distressed Market, while declining values, debt maturity and tight credit access, and stalled construction may continue to plague commercial real estate in the United States for the remainder of 2010, economic indicators point towards the potential for economic recovery this year. For investors, this environment reveals a window of opportunity in 2010 when investment in distressed assets may prove to be opportune.

According to the report, the challenges that affected owners and operators in 2009 will extend over the next nine to 18 months.  They include:

 1. Declining real estate values U.S. commercial real estate values have decreased significantly; according to some reports, up to 40% across all property types since their peak in 2007. Declining values are driven by job losses and declining consumer spending. As a result, vacancies are up and rents are down which lead to decreasing values, especially in office and retail assets. In Midtown Manhattan, for example, brokerage CB Richard Ellis Group Inc. reports that the amount of available office space has increased by 16 million square feet since the beginning of 2008; building owners subsequently have dropped their asking rental rates by more than 30% since November of that year.

2. Debt maturity and credit access – Organizations which took out large loans to purchase property during the market’s boom did so assuming that rents and occupancy rates would continue to rise; instead, both have fallen dramatically. Declining real estate values exacerbate the ability of property owners and investors to find or refinance debt. According to Deutsche Bank, more than $1.4 trillion in commercial mortgages will come due by 2013, and as much as 65% of these will have difficulty getting refinanced. Although capital markets for credit and debt have opened to some extent, the situation is different than before since lenders are allowing less leverage on new loans. Also, debt is more expensive, in part, because lenders are only willing to lend at a lower loan-to-value rate. Finally, the commercial mortgage-backed securities (CMBS) market, a huge source for real estate debt capital in the past decade, has virtually disappeared, severely affecting the supply of debt capital. Owners and mortgage holders will likely continue to struggle with debt maturity in 2010 and beyond, with an expected increase in foreclosures and deeds in lieu. Opportunistic investors, many who raised significant capital for this purpose, are using foreclosed properties and distressed debt as a strategic opportunity to make opportunistic acquisitions and expand their real estate portfolio.

3. Stalled construction – There will likely be almost no new construction activity in any asset class in 2010, (evidenced by the glut of office space in Midtown Manhattan and other major markets, as well as an oversupply of full- and/or limited-service hotel inventory and multi-family residential properties in areas such as Florida, Nevada, Arizona and parts of California) leading to historic low levels of new construction with excess capacity in almost every asset class.

4. Bottom out, then recover Some real estate asset classes are expected to bottom out and then start to recover in 2010. Rent levels will begin to rise with job growth and increases in consumer spending and gross domestic product (GDP), although this will likely be a slow rise. Some industry observers believe that the hospitality market has already bottomed out. Occupancy rates in 2009 were extremely low due to significant declines in leisure and business travel, which drove down the average revenue per available room (RevPAR). Multi-family residential may be the first to rebound because of the short term nature of their leases, with longer-term leased assets like retail, office and industrial recovering more slowly. Single-family home prices seem to have solidified, although it could take years for home values to truly recover.

5. Markets to watch– Although a handful of hospitality markets, including San Francisco and Atlanta, are expected to post positive room rate growth, the majority will need to wait until 2011 for a return to profitability. Bright spots in the office market include Washington, D.C., which has benefited from the federal government expansion, and New York, which has begun to turn around due to increased hiring at investment banks. Residential oversupply remains a problem across Miami, Atlanta, Phoenix and Las Vegas.

6. Where are the investors? – Capital is available and waiting to deploy, and the financing environment has improved somewhat, yet most commercial real estate investors have waited on the sidelines for a sense that values have reached bottom. Many of these investors will remain sidelined until better employment figures and consumer spending numbers spur a subsequent resurgence in real estate. However, some deal making that was evident during 2009 bodes well for 2010.

Public capital markets have shown increasing interest in commercial real estate, a trend that should continue in 2010 most notably via real estate investment trust initial public offerings (REIT IPOs) and secondary offerings. The U.S. should see a significant influx of foreign capital from Asia (especially China and Korea), Germany and the Middle East, as well as from domestic investors. Well capitalized REITs and funds will likely see increased opportunities to make distressed acquisitions, both geographically and across property types.

Full Report

Florida AG McCollum warns of commercial foreclosure crisis

Attorney General Bill McCollum recently wrote to legislative leaders urging them to take note of the potential for “massive” foreclosures on commercial real estate, as many commercial real estate loans from Florida’s most recent boom reach the end of their terms about the same time.  

McCollum is Florida’s current Attorney General and a gubernatorial candidate.

In his letter to Florida House Speaker Larry Cretul, McCollum wrote. “As one of the largest markets in the nation for commercial real estate loans, Florida faces a significant risk of financial loss.”

McCollum is urging lawmakers to look at some of the actions other large states have taken, including the passage of laws that require that all claims be consolidated into a single action, or prohibit certain lawsuits that seek to hit up borrowers personally before proceeding against the borrower’s collateral.

McCollum’s office created the Interagency Mortgage Crisis Task Force in 2008 designed to help educate and assist homeowners about to go into foreclosure. The task force has hosted community forums on the problem, providing distressed homeowners with access to lenders, counselors, voluntary bar associations, and state and federal housing and finance agencies.

McCollum believes that commercial real estate has a greater potential than residential housing to negatively impact the state and national economies over the next four years. Nearly $1.4 trillion in commercial real estate loans will reach the end of their terms between 2010 and 2014, and may trigger defaults, according to a February report of the Congressional Oversight Panel.

That could trigger economic damages to financial institutions, small business and families across the nation, McCollum said.

Other large states with similar demographic and growth issues already have put laws in the book that could ease the pain of commercial foreclosures. McCollum believes Florida should look at those laws to emulate.

One example of the laws passed in other states is the “one action” rule where all claims can be consolidated into a single action or prohibit lawsuits seeking relief from borrowers personally before proceeding against the collateral, he said. Other laws seek to establish a clear methodology for deficiency judgments, right of redemption and foreclosure defenses so that there are no ambiguities in the process.

Full Article

Posted by Scott R. Lodde

Headlines – Week of March 14, 2010

March 21, 2010

Miami Condos Filling Up

According to a new study by the Miami Downtown Development Authority, in partnership with Goodkin Consulting/Focus Real Estate Advisors, 74% of all Miami area condominiums built since 2003 are occupied.  The area represented in the study stretches from the Brickell district south of downtown Miami north to State Road 112.  The area represents 22,079 condominiums defined as “urban” units.

This reflects a 20% increase over the 62% occupancy rate reported in a similar study completed in May 2009 and means the glut of new condos is being absorbed more quickly than expected. Sharp price cuts and a willingness to rent units, rather than sell them in a down market, have made a huge difference.

A wave of new urban residents began arriving last year as developers and lenders got more aggressive about cutting prices to move units. At the same time, individual owners, who bought condos for investments, realized renters could at least generate some revenue to cover their mortgages

The study found that 68% of these new condos have been sold, a 6%jump from the May 2009 survey. The average sale price downtown was $300,306, although prices were significantly lower than that in every area of the greater downtown area except Brickell Avenue.

The study shows there are still 7,010 unsold units in the new downtown area compared with the 8,000 that existed seven months earlier. 51% of the unsold units  are in the Brickell area, followed by 23% in the Central Business District.

If occupancy trends continue, the study predicts that downtown Miami’s existing condo inventory would effectively be eliminated over the next 25 months.

Renters account for about 52% of the occupied condo units in the downtown.

As the condo buildings fill up with new residents, it’s having an increasingly positive effect on downtown Miami’s commercial base. Residents want places to eat, drink and shop.

The number of retail businesses in downtown Miami grew by 42 in 2009, according to the study. That marked the third straight year the district has seen 40 or more net new openings. Since 2005, 152 new retailers have opened downtown.

A recent Integra Realty Resources survey of the 50 largest markets in the U.S. found that downtown Miami’s retail vacancy rate of 5.06% is among the five lowest in the nation, a huge drop from mid-2008, when the vacancy rate climbed as high as 12.5%.

Full Report

Comptroller Dugan Urges Action on Commercial Real Estate Concentrations

Comptroller of the Currency, John C. Dugan said that the recent surge in community bank failures raises difficult questions and that commercial real estate concentrations warrant special attention.

The Office of the Comptroller of the Currency was created by Congress to charter national banks, to oversee a nationwide system of banking institutions, and to assure that national banks are safe and sound, competitive and profitable, and capable of serving the banking needs of their customers in the best possible manner.

Dugan would like to revisit the issue of the appropriate regulatory response to commercial real estate lending concentrations, especially for construction and development lending.

He stated that experience from the late 1980s and the early 1990s, and from the current period showed that significant concentrations in CRE lending leaves banks vulnerable to an economic downturn.

According to Dugan, while a healthy economy will mask problems with poor underwriting for a while, a rapid buildup of commercial real estate loans is likely to overwhelm risk management controls, and some concentrations are so large that even the most sophisticated control systems cannot protect the bank from a serious economic downturn.

Dugan said policymakers should consider a range of options such as harder limits, increased capital requirements, a more granular approach to defining concentrations (since not all CRE is the same), minimum underwriting standards, more stringent requirements for concentrations supported by substantial amounts of non-core funding, or some combination of the above.

He also warned that regulators should exercise care in moving ahead during the current economic environment since it  would exacerbate the current problems of distressed banks.  He believes that any course of action would have to be carefully phased in taking into account the current activities of all banks.

The Comptroller said that while the vast majority of community banks are sound (nearly 80% of community national banks have strong ratings) problem banks represent almost 9% of all insured depository institutions at the end of 2009. Since the start of the crisis, 195 banks (nearly all of them community banks) have failed, and projected failures this year are expected to exceed the 145 that were closed last year.

Dugan stated that given the surge in losses, problem banks, failures, and costs to the deposit insurance fund, healthy banks will have to bear the burden for a very long time.

News Release

Mortgage Rates Could Spike As Federal Reserve Program Expires

On March 31, the Federal Reserve will stop buying mortgage-backed securities from Fannie Mae and Freddie Mac, returning control of interest rates to private investors. For months, industry observers have predicted that once government supports are removed, interest rates will rise quickly, pushing many of the first-time buyers critical to housing’s recovery out of the market.

In late summer and fall 2009, lured by fixed 30-year mortgage rates under 5%t and the first $8,000 tax credit, which expired Nov. 30, first-timers pushed sales of previously owned homes to the highest levels in at least three years, reducing record inventories and braking price declines. That tax credit was renewed Nov. 5 and expanded to buyers who had not purchased a property in five years, although the credit for repeat buyers is $6,500.

The second credit expires April 30, is unlikely to be renewed.

As the date for the Fed pullout approaches, analysts now generally agree that an immediate rate spike is no longer the likely result. Many believe rates will increase a quarter to one-half of a percentage point.

If the old buyers of these notes don’t come back many believe the Fed will intercede again to ensure rates will not go so high as to stymie an economic recovery.  Many now see that the lenders have instituted rigorous enough standards to ensure that the Fannie Mae and Freddie Mac paper are good loans.

Lawrence Yun, chief economist of the National Association of Realtors rates will rise by year’s end due to natural macroeconomic forces such as a recovering economy and the high budget deficit not because of the Fed’s action.

Economist Brian Bethune of IHS Global Insight believes the possibility of renewed Fed intervention will likely prevent rate increases resulting from private investors demanding large risk spreads.

Posted by Scott R. Lodde

Market Watch 2010 – Residential

March 16, 2010

This is a follow-up posting regarding my attendance at the February 25th Market Watch event at the Harborside Convention Center in downtown Fort Myers, FL.  Last week I provided a summary of the commercial portion of the presentation given by Stan Stouder.  This week I will focus on the residential presentation by Denny Grimes.

As background, Market Watch has become a major annual business event in Lee County and is sponsored by the Fort Myers News Press.  This year’s event was attended by over 700 real estate professionals and featured presentations on both the residential and commercial real estate markets. 

Denny Grimes is President of Denny Grimes & Company, a residential real estate broker located in Fort Myers, Florida.  He has been presenting for the Market Watch program for many years, first teaming with the late Frank D’Alessandro and now Stan Stouder who presents the commercial segment of the program.

Like Stouder, the Grimes presentation was filled with slides laden with statistics that told the story of the residential crash.  As Grimes stated during the presentation, “Our market had to crash, we were the world’s fattest market.”  Grimes believes we have now reached the bottom of the market as prices have begun to turn upward.

market-watch-sales-price_numberHis main question this year is “how much longer we’ll have to hold on?”

His slides on existing single family homes sales (Lee County) tell an interesting story.  In 2007, Lee County sales hit an all-time low at 5,920 units.  September 3rd was the day in 2009 when sales tied the previous all-time high at 12,701 units.  For all of 2009 sales set a new record, eclipsing the previous record set in 2005.






However, even with the record sales achieved in 2009 there remains excess inventory in the market as the following slide indicates.


The excess inventory resulted in lower average prices.  In Lee County, prices finally reached a point in 2009 that triggered a wave of buyers as 71% of sales were either bank owned or short sales. 

The median sales price for an existing house was $278,200 in 2005 but only $90,400 in 2009. In 2006, just 12 homes were listed for sale in Lee at under $100,000. In February 2009, there were 4,285 listed.

The median price of a home on the market is currently $98,000. That is 18% higher than the median price of $79,900 in June 2009.

Despite a 40% increase in the number of sales over 2008, sales rose only 16% in total dollar volume as a result of significantly lower sales prices. For real estate agents, the average real estate commission has sunk to just $3,750 in 2009, down from a peak of $10,250 in 2005.

market-watch-average-commission-per-saleAs a result of falling prices, owner’s equity hit an all-time low as well. More than 77% of all homes with a value under $100,000 have negative equity.  Even market segments with higher home values are significantly over leveraged (SOL).


market-watch-solAnother interesting portion of Grimes’ presentation was his introduction of “buyer’s market indicator” (or BMI) in which he analyzes the various sub-markets based upon the relative length of time necessary to sell a home.  If the length of time is between zero and six months, it is a “seller’s market”.  If the time period is six months to ten months, the market is in “balance” and if the time period to sell a home is ten months or more, the market is a “buyer’s” market.

market-watch-bmi-by-submarketBased upon this BMI, Grimes believe the Bonita Springs/Estero market is the best area to find bargains in 2010, as sellers begin to move prices downward in an effort to move inventory.



Posted by Scott R. Lodde

Headlines – Week of March 7, 2010

March 14, 2010

Best Locations for 2nd Homes

According to an article in Barrons, prices for primary residences, which plunged at least 20% from the peak in 2007, appear to have bottomed out. The article states that in some of the high-end locations, scattered bidding wars are breaking out and prices are turning upward.

Barron’s sized up the market for upscale second homes, one of the greatest luxuries in residential real estate. Prices are way down — 40% off the peak in some locations

Barron’s has selected the 10 best places in America for second homes; however, their selections are very subjective, the prices cited are based mainly on conversations with locals, not hard data and they admit that in many locations, the homes take some time to rise in value.

Here are their top ten markets for second homes:

Location Drop From Peak
1. Maui  27%
2. Kiawah Island, S.C.  21%
3. The Hamptons  30%
4. Park City, Utah  45%
5. Aspen, Colo.  6%
6. Pebble Beach, Calif. 20%
7. Palm Beach, FL  11%
8. Captiva/Sanibel Island, Fl  40%
9. Asheville, N.C.  38%
10. Gasparilla Island, Fl  18%

 Full Article

 It’s Not If Interest Rates Will Rise But When

According to Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University, mortgage interest rates are low right now but don’t expect that to last.

Currently, Mortgage rates are currently at their lowest in the past 40 years. A review of average mortgage rates over the past four decades illustrates just how affordable current rates are.

Average Mortgage Rates

Average Mortgage Rates

Dotzour says that mortgage rates were low at the end of 2009 for two reasons.  First, the global consensus among bondholders appears to be that inflation will remain low in the United States for an extended period of time. This caused the ten-year U.S. Treasury rate to fall to between 3.2 and 3.6 percent for much of the second half of 2009.

Second, in 2009, the Federal Reserve Bank began an unprecedented purchase of nearly all the mortgage-backed securities issued by Fannie Mae and Freddie Mac in 2009 totaling more than $1 trillion for the year.  This program has only been extended through the end of March 2010.

As a result, when the Fed terminates its buying program many experts think that rates could move up one-half to 1 percent.

Full Article 

Rising Loan Defaults Challenge FHA

According to an article published in the Washington Post, the share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures.

The agency’s figures show that about 9.1% of FHA borrowers had missed at least three payments as of December, up from 6.5% a year ago.

The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.

According to the article, if the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses.  This would be a first for the agency, which has always used the fees it charges borrowers to pay for its losses.

Agency officials have announced higher qualifying fees for borrowers and the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would help the FHA to cover unexpected losses.

Just about every major measure of the agency’s financial health is worsening as the number of loans in foreclosure were up 26 percent in the last quarter of 2009 from a year earlier.

Plunging home prices have exacerbated matters by leaving some FHA borrowers unable to sell or refinance their homes because they owe more than their homes are worth. Yet with unemployment running high, many borrowers can’t afford to keep up their payments.

Adding to the trouble was a previous FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses.

A recent audit, released in November 2009, found that the cash the FHA set aside to pay for unexpected losses had dipped to historic lows, well below the level required by law. As of September 2009, those reserves were estimated at $3.6 billion, down from nearly $13 billion a year earlier.

Last year, the agency banned 268 lenders from making FHA loans, more than double the total terminated in the previous eight years.

Full Article

Posted by Scott R. Lodde

Market Watch 2010 – Commercial

March 9, 2010

On February 25th, I attended the Market Watch event at the Harborside Convention Center in downtown Fort Myers, FL.  Market Watch has become a major annual business event in Lee County and is sponsored by the Fort Myers News Press. 

This year’s event was attended by over 700 real estate professionals and featured presentations on both the residential and commercial real estate markets.  In this posting I will focus on the commercial segment of the SW Florida market and examine the presentation by Stan Stouder, a local commercial real estate agent with CB Richard Ellis. Next week on will focus on the residential segment of the presentation.

Like many other investment professionals, Stouder believes that the commercial real estate market has yet to hit bottom and the coming year will see increased foreclosures.

His presentation focused on the cause of much of this distress; high unemployment and shaky capital markets.  One of his presentation slides quoted a recent Newsweek article written by George Will which stated  “Today’s unemployment rate is 10 percent; the underemployment rate – the unemployed, plus those employed part time, plus those discouraged persons who have stopped looking for jobs – is 7.3 percent.”   He noted that between December 2008 and December 2009, Lee County lost 32,000 jobs.

His information showing the massive increase in government jobs startled the crowd. Quoting a December 2009 article from USA Today, a slide showed that in 2007 the Defense Department had only 1,868 civilian workers earning more than $150,000.  As of June 2009, the Defense Department had 10,000 workers earning more than $150,000.  The statistics were similar for the Department of Defense.  In December 2007 there was only one employee earning more than $170,000.  As of June 2009, there were 1,690 employees earning more than $170,000. 

On financing, Stouder believes that a “Hurricane” of Commercial Real Estate defaults is coming, noting that it is estimated that between 15-20% of all commercial notes will become delinquent in the next two years.  This has caused commercial lenders to pull back on financing as they found themselves unable to lend because of the increasing numbers of bad debts.

He stated that this has led to a collapse of commercial construction, noting that for the first time since they were keeping records, in January 2010, there were zero commercial permits pulled in unincorporated Lee County. In 2009, commercial permits in Lee County fell 46% from 2008.

Lee County Commercial Permits

Lee County Commercial Permits

Stouder predicted that although the commercial market is in bad shape now, it will recover more quickly because owners are businessmen who will make decisions a lot quicker to let go of properties if it doesn’t make sense to hold on. 

Although this may be true, many of the decisions to let go will be in the hands of commercial lenders who are traditionally slow to make these types of decisions.

The market data information was probably the most informative portion of Stouder’s presentation.

According to the data presented, the commercial real estate market is cratering both in terms of vacancy rates, net absorption, lease rates and sale prices per square foot.  All areas are being affected including Industrial, Office and Retail properties and the median per square foot price of land has dropped over 68% since 2009.  In 2009, there was negative absorption in all asset classes.

lee-county-lease-market-summaryHe noted that SW Florida International Airport served more than 7.4 million passengers in 2009 and was among the top 50 airports in the U.S. for passenger traffic. Although passenger traffic was down 6.8% nationwide, it was only down 2.5% at SW Florida International.

The information Stouder prepared on the area’s sales spoke to the dramatic decrease in the overall sales activity throughout 2009.  As noted in this slide, only 13% of all commercial listings sold in 2009 of which almost 12% were bank sales.  According to the information provided, there were 19 commercial foreclosures in 2009.

Market Watch - Overall sales activity 2009

Market Watch - Overall sales activity 2009

As to the future, Stouder stressed the need for the area to diversify its economic base from being totally reliant on construction, tourism and agriculture to “clean tech” industries.  He noted that he global clean energy market is projected to reach $500 billion per year by 2020 and 55% of clean energy firms surveyed had seen an increase in sales.  The potential to attract these firms is enormous since Florida has 85% of the maximum photovoltaic (solar) potential of any place in the U.S.

He noted the recent awarding of a $10 million grant through the FIRST incentive program to Algenol, a company that produces ethanol from algae as a major breakthrough to help diversity the area’s economy.  The First incentive program is an initiative by Lee County to encourage business growth and community development for these types of industries.

Stouder also mentioned the Fort Myers Regional Partnership which is offering tax exempt financing for Lee County businesses to help the local economy.  The financing is offered through an allocation of $56 million in Federal Recovery Zone Facility Bonds by the American Recovery and Reinvestment Act.

Ending the program, Stouder tried to coax the audience into action and stated his belief that “commercial real estate transaction volume will be up in 2010 as banks purge their balance sheets”.

Full Presentation

Posted by Scott R. Lodde

Headlines – Week of February 28, 2010

March 8, 2010

Jones Lang Predicts Increased Hotel Lending (from the Jones Lang LaSalle Hotels Debt Capital Markets Update)

A recent edition of the Jones Lang LaSalle Hotels Debt Capital Markets Update predicted that a broader recovery in the debt capital markets has begun and it is extending into hospitality assets. The update noted that hotels have been blacklisted by many lenders over the past 18 months but have recently drawn the attention of the more traditional lending institutions.

They note that hospitality lending now offers better locations, coverage and pricing than most other asset classes.  Hotels have caught the attention of both foreign and domestic lenders looking to deploy capital early in the year.

Similar to other recent publications, they note that  pent-up equity capital is geared to return to the market and these providers are turning to creative hospitality structures. They note the increase in “rescue capital'” wherein a new equity provider injects fresh capital into a deal in conjunction with the lender agreeing to re-balance the debt and the borrower agreeing to subordinate their returns.

They note these recapitalizations as being a win-win-win situation for the borrower, lender and new equity provider. Distressed borrowers are able to live to fight another day, lenders are able to pay down their exposure while re-structuring the remaining debt according to today’s underwriting, and the new equity gets to deploy capital at attractive returns. Rescue equity recapitalizations have the effect of removing the hotel from the distressed asset list while keeping both the borrower and the new equity motivated to perform at a high level.

Florida Expected to Grow Again (from the University of Florida – Bureau of Economic and Business Research)

A new estimate from the University of Florida indicates that Florida’s population should rebound this year from its first loss in more than half a century.

Florida is expected to add about 23,000 residents between April 1, 2009, and April 1, 2010, following a loss of almost 57,000 residents the previous year, according to projections released by the University’s Bureau of Economic and Business Research.

Despite these gains, the report states Florida will not return to its average annual increase of 300,000 until 2014 or 2015.  The state’s population grew by more than 400,000 residents a year during the housing boom between 2003 and 2006.

Due to the bursting of the housing bubble and the severe national recession, Florida lost more than 800,000 jobs between the fall of 2007 and the fall of 2009, and the state unemployment rate rose from about 4 to 11 percent. The declining economy led to a huge slowdown in population growth between 2007 and 2008 and a population loss between 2008 and 2009. The loss was the first since military personnel left the state at the end of World War II.

The study estimates the total number of state residents will grow from 18,750,000 to 18,773,000 between April 2009 and April 2010. According to long-term projections, state population is expected to reach approximately 21,247,000 in 2020, 22,574,000 in 2025, 23,821,000 in 2030, and 24,971,000 in 2035.

The biggest numerical increases forecast between 2010 and 2035 are in large counties. Orange County is projected to add the most new residents, 512,200; followed by Hillsborough, 471,800; and Miami-Dade, 457,200.

In terms of percentage increases, the biggest leaders over the next quarter century are projected to be Sumter and Flagler counties, growing by 111 percent and 109 percent, respectively.

The Villages, a huge retirement community in Sumter County will be one of the biggest factors in this growth.

Monroe is the only county projected to lose population over the next 25 years, declining by about 4 percent.

Full Article

Top 10 Cities with Climbing Home Prices (from Forbes.com)

Home prices aren’t tanking everywhere. In some cities they have bounced pretty high off the bottom, according to a report in Forbes magazine.

For the report, Forbes used the research firm, Altos Research. Altos Research pulled data for every U.S. city with at least 100 homes on the market (roughly 8,000 cities), and found those with the biggest price jumps from the previous year. Altos produced data on an individual city level, rather than using Metropolitan Statistical Areas. Altos used median asking prices based on a 90-day-rolling average as of Feb. 12, 2010 and tracked asking prices for single-family homes but not condominiums.

1. Lexington, Mass., +36 percent
2. Bay Village, Ohio, +32 percent
3. Sunnyvale, Calif., +32 percent
4. Poway, Calif., +27 percent
5. University City, Mo., +28 percent
6. Ambler, Pa., +26 percent
7. Allison Park, Pa. , +25 percent
8. New Braunfels, Texas, +25 percent
9. Kemp, Texas, +24 percent
10. Arcadia, Calif., +24 percent

Full Article

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