Fresh hope for commercial realty
Like their residential counterparts, commercial Realtors saw values slide after the crash of 2008. But things are looking up, say regional brokers.
John Barrett, vice president of sales for Massey Knakal, based in New York City, but focused on the Westchester marketplace, says banks have to be willing to lend. “There is lending being done in the multifamily sector (15-100 units per building) but banks are looking for a better loan-to-value ratio. In the past when banks were lending at 90-70 LTV (loan to value), but that”™s not the case today. Lending is still very profitable for them; they may not be doing as much of it, but it is at a healthy rate of return for them.”
Banks are also more willing to work with the federal Small Business Administration in the era of tumbling prices. “That”™s another plus,” said Barrett. “It”™s become more popular in the last year because of the SBA”™s 504 program. It is a tremendous asset for properties where owners need capital to rehab.”
Steve Perfitt, managing director of Pyramid Brokerage in Newburgh, an independently owned member of Cushman and Wakefield Alliance, works the Hudson Valley region from Rockland to Columbia counties. “We are extremely busy in investment properties. Our center of activity is probably in Orange County, but we are doing some work in Sullivan,” he said. “We finished a strong fourth quarter in 2009 and are projecting a healthier 2010. We think we are coming out of the economic slump.”
Pyramid has just taken on Hudson Valley Crossings, with 1.2 million square feet of shovel-ready property in the town of Montgomery. “It is a ”˜Grow New York”™ site right here in the mid-Hudson, one with all the approvals in place. We are in negotiations with a couple of parties for that property right now,” said Perfitt. Monroe Ford in the town of Monroe, originally on the market for $9.5 million in 2008, “is now under our wing with an asking price of under $6 million, and we do have an interested buyer.”
James Walker, newly elected president of the Hudson Valley chapter of NYS Commercial Association of Realtors””an offshoot of NYS Association of Realtors — sees 2010 as promising:Â “Predominantly, the deep pocket people are looking to come in…banks are loosening things up as far as letting go of some of the products they have been trying to get a good price for right now.”
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Walker holds banks accountable for the snail”™s pace in the commercial marketplace. “They are bundling assets and selling off””a lot of countries buying the commercial-backed mortgages have gotten hurt big time””and they are troubled. They don”™t have the money or assets to buy these. There is a ”˜constipation”™ in the banking industry and a lot of cash sitting on the sidelines.
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“Sellers are starting to realize they will no longer get the price they got three years ago. Both sellers and banks are waking up and coming to the table. It”™s up to us as brokers to educate both sides. Let them know what is going on out there. It”™s a slow crawl back but I think we are going to make it,” said Walker, who said the Hudson Valley/metro region has fared much better than other parts of the country. “There are some markets that billion dollar investors will not touch””California, Indiana, Michigan and Ohio””we”™ve been fortunate. We are working with them, and there are no financial contingencies on any deals we are working on.”
Charles Frankel, managing director of KW Commercial Realty in Central Valley, says “the number of transactions are comparatively few and far between on the buying side. People are looking for ”˜fire sales”™””but they aren”™t going to find them. No one is in a panic or distressed. We”™ll be watching what happens from mid-year 2010-2012, when many loans that were done 5-10 years ago will be maturing. Some have 20-25 year amortization rate but term of loan is 5-10 years. Back in 2008, people were concerned the repercussions of refinancing would be a hardship, but it will not be as severe as once thought.”
Walker says brokers need to step up to the plate “and focus on federal capital gains. It is at its lowest point in years. If you wait for the market to ”˜come back,”™ who knows what the capital gains will be at that point in time. It”™s up to us to educate the public.”
For those long-term retail lessees trying to renegotiate a cheaper per-square-foot price, don”™t count on it. “For those who took leases after 2006, landlords are definitely willing to negotiate with them. They may have leased at $40 per square foot where prices are now down to $29-30 a square foot,” said Barrett. “Landlords are also open to short-term leases in retail, where they hope to see the market come back in 4-7 years. For those willing to take those short term leases, that”™s the way to go. There are more vacancies in Westchester than there were 18 months ago, even in ”˜good”™ areas. It”™s a similar scenario in the other counties in the mid-Hudson region.”