The Savannah Morning News reports that David Garfunkel with AJ&C Garfunkel purchased Abercorn Commons for $24.2 million on Thursday.
Considering KimCo paid $40 million for Chatham Plaza in June 2007 and sold Largo Plaza in March for $10 million, this seems like a heck of good deal.
Kudos to the Garfunkels for bringing the development back to local owners and keeping the it in the local economy! Next step is to get the center back up to 100% occupancy, which won't take them long at all.
Portland Business Journal
by Rance Gregory, Morrison Street Capital
Date: Tuesday, September 4, 2012, 10:57am PDT - Last Modified: Tuesday, September 4, 2012
Yes, we've all been reading about colossal 1 ton shoes that will fall on the commercial real estate market. And yet it hasn't happened the way we've been expecting it. Rance Gregory explains why.
Summary and Key Quote.
Commercial real estate simply does not mark-to-market as quickly as do
stocks and bonds, no matter how many derivatives the industry puts in
place to make bets on the direction of the market or how badly some wish
it would be so. In reality, commercial real estate has been a
slow-motion train wreck for the past five years. There has been real
damage and pain, but it has occurred largely out of view, in loan
workouts, consensual foreclosures and complex recapitalizations,
resulting in paper writedowns and real losses.
Why then hasn’t the crash been loud and sudden? Why do many have the
feeling the industry is recovering or has recovered? It seems many
industry veterans were expecting to fight the last war, remembering a
saving and loan collapse and a consolidated government-sponsored (RTC)
fire sale of troubled assets. Instead, the actual mechanisms involved
provided banks with additional capital (TARP), or worked on healing the
background credit markets (CMBS) through programs such as TALF, PPIP,
etc, in the hopes of stabilizing the system and providing time for the
industry to work through its problems in a more organized way.
The answer is that it wasn’t one giant shoe, rather many thousands of
smaller shoes, dropping one loan at a time, scattering across a diverse
commercial real estate landscape, leaving behind alternating spots of
utter destruction and patches of renewal.
Summary: If one has impeccable timing, buying any investment vehicle will be profitable. If one doesn't, consider these three synchronous events for investing in real estate.
1) Buying debt on property is the cheapest it will ever be. Interest rates are artificially supressed longer than anyone expected.
2) $1.2 trillion in CMBS have been and are coming due. The financial industry has been hoping rising property values will save the day. But that isn't happening except in very specific real estate markets with specific properties. So get ready for more foreclosures to depress values.
3) The "Up Eurs" zone crisis is driving money to alternative investments. Et voilà, real estate.
The article I'm summarizing concludes with "Buy into REITs!" I showcased an article like this before, but the difference between this article and that on is that there is a light at the end of the tunnel! Buy low, add value (literally, revenue) and sell high!
CRE in Savannah is slow and steady. I am fielding more inquiries than ever for leasing, and the leases I complete are for longer periods of time (3-4 years vs. 1 or 2 years). Transaction attorneys at Lee, Black, Hollis and Rouse and busier than a partner there says.
Three recent news articles report market activity to watch though.
Summary: Real estate recovery continues, but at a slower pace. Not all segments will recover uniformly, but they are recovering.
Key Quotes:
The U.S. office market absorbed a little less than 1 million square feet during the quarter - far below the 8.6 million square feet averaged over the prior six quarters.
Nearly two-thirds of the 45 markets tracked demonstrated stable or declining leasing volumes.
Technology expansion and startup activity gained momentum in almost every market with prospects for growth.
Energy-heavy markets posted some of the largest leases and witnessed sales momentum and speculative new construction.
Despite declines in leasing volume, 57.8 percent of the markets saw gains in tour velocity and active tenants compared to the previous quarter.
Sales activity and volume was evenly distributed among geographies with nearly one third of markets reporting an uptick in sales.
Construction remained low across most markets; however, activity has increased from 18.1 million square feet under development to 33.7 million square feet.
Second, CMBS Slump As NY Fed Commercial Mortgage CDOs May Be Sold. This means the rumored sales of CRE collateralized debt obligations (CDOs) caused the value of CMBS to decline. This video explains CDOs really well. If CMBS decrease in value, it becomes harder to refinance them.
Third, Commercial Real Estate Woes Fueled Recent Bank Failures, two of which were in Georgia. As said in a previous post, if there is diminished (or no) cash flow or if real estate values are increasing as planned, then the notes aren't repaid and the banks can be at risk. Too much exposure to bad loans means the bank fails.
Savannah is doing well in its own little bubble, we just don't need the larger economy to burst it.
