There have been fewer sales in 2008 and 2009 than seen in previous years. The reduced number of sales is due in some degree to the lack of credit available and the particular aversion to risk on behalf of lenders as well as investors in the current market. The uncertainty surrounding the ultimate fallout from [...]

Accurate valuation is enhanced by solid operating history. However, it is common to rely upon expense comparable data when valuing properties through direct capitalization. Understanding how operating expenses vary from region-to-region is key, especially for specialized lenders and investors looking to expand into other national markets. The table to the right is a sampling of [...]

Now that the effects of the credit crisis have become more fully evident while continuing to grip our economy, 2009 has revealed a repositioning within the real estate markets. Commercial real estate values are returning to the core fundamentals that always drove the market prior to the rise of Commercial Mortgage Backed Securities (CMBS). [...]

On April 25, 2009 we posted an article entitled Cap Rates on the Rise for Walgreens. Five months later, it appears that capitalization rates have stabilized for this asset class. The following is a discussion of the tenant, investment demand and evidence for prevailing Walgreens cap rates.

The Tenant – Walgreens is a national, retail drugstore chain that sells prescription and non-prescription drugs and general merchandise. The company was founded in 1901, and as of August 2009, operated 6,996 drug stores located in 49 states and Puerto Rico. The company is publicly traded on the NASDAQ National Market, the New York Stock Exchange, and the Chicago Stock Exchange under the symbol WAG, and is included in the Standard and Poor’s 500 Index and the NASDAQ 100 Index. Moody’s rates Walgreens long-term debt A2 and short-term debt Prime-1. Standard & Poor’s rates Walgreens long-term debt A+ and short-term debt A-1. The outlook from both agencies is stable.

By: Ben Wilcox, MAI
The impact of the recession and financial crisis on commercial real estate has been widely reported. With securitized lending out of the picture and banks less able to lend, purchase financing has been more difficult to obtain and available in smaller quantities. This has led to a slowdown in sale transactions for [...]

Woe is the market analyst who shoots from the hip. There is too much opportunity and rationale these days, or for that matter, at any time, for closer examination of the data, analysis, and conclusions set forth by appraisers reporting the decision-making processes of participants in the real estate market.
Who among us has not been [...]

Now that the reality of the credit market crisis, which really began in July 2007, has fully taken effect, 2009 has been a period of repositioning within the market.  Ironically, the repositioning will be a “return-to-the-old”.  Commercial real estate values are returning to the core fundamentals that always drove the market prior to the rise [...]

The medical office market is a subsector of the larger general office market. The current identity crisis of the real estate industry and general instability of the economy are creating the need to separately analyze the medical office subsector, as the supply/demand conditions impacting this asset class is vastly different than the overall office market. The following is an industry overview for medical office space in Oregon marketplace. Key supply/demand indicators are summarized in the following table.

Arriving at a decision on the best strategy for how to successfully navigate the commercial real estate market during these challenging economic times is vexing to many an investor. Do I, or don’t I??? That is the conundrum facing most commercial real estate investors in today’s market. Do I, or don’t I liquidate my portfolio (or at least my non-performing assets)? Do I, or don’t I stand on the sidelines and wait-out these turbulent times? Do I, or don’t’ I get aggressive and take advantage of the decline in property values and the spike in acquisition cap rates? In the text that follows I’ll put forth counsel based not upon the emotions of the times, but rather the forthcoming advice is based upon my years of experience in successfully advising clients in both advancing and declining commercial real estate markets.

Do you think the collapse of the real estate market place is determinism (by design) or randomness (everything means nothing)? We can not deny that we have experienced a “bubble”. A bubble merely transfers a share of the future demand into the present. It’s linked with dramatic valuations and always debt funded. It is this [...]

The dislocation in the commercial real estate capital markets that exists today in the second quarter of 2009 has frustrated users of capital and left them feeling hopeless. The small universe of debt and equity providers that are willing and able to provide capital today want to advance less loan dollars on your deal while also taking on less risk. Most of the time that means that it’s a deal you cannot make. Thankfully, after successive quarters of bad news, most of us are past the denial stage and are making attempts to exist in a broken market. The leverage being offered by capital providers today would make sense if cap rates were closer to double digits, but unless and until that market correction happens, there will be further frustrations as both borrowers and lenders are fighting to preserve their equity and maintain returns seen earlier in the decade. The following are some survival tips that could help your deal:

On April 15th, we posted an article that described some of the financial difficulties that Walgreens is experiencing, and how this company is retooling to ensure long-term sustainability given current economic conditions. The recent struggles with this company along with scarcity of loan dollars and decreased market demand for all triple net properties are causing [...]

Recent events in the financial markets have led real estate investors to question the impact on the value of investment grade real estate. Uncertainty breeds risk and risk in real estate requires higher yields. This will lead to continued declines in values for the first quarter 2009. However, good quality industrial assets should fare well [...]

By Greg Sukenik, Senior REIT Analyst, Zacks & Co.
Despite a slightly rally on April 6th, equity REITs posted a 32% decline in the 1st quarter (FTSE NAREIT Equity Index). In March, REITs we up about 4%.
Shopping center and Industrial REITs were the worst performing sectors, each declining about 41% in the quarter. Manufactured Housing was [...]

Capitalization rates reflect the degree of risk associated with an investment. Net operating income divided by the capitalization rate equals value.
Beginning in 2008, and carrying over into 2009, market conditions have led to a noticeable increase in capitalization rates.  These trends are a function of increased risk perceived by investors and more stringent lending conditions [...]

How have the Capital markets affected lending for the self storage industry?
Like most other income property classes, with the exception of apartments, financing for self-storage properties has been hard hit with limited capital available in today’s market. Because of the management intensive nature of self-storage, lenders including banks and insurance companies who once were willing [...]

“I rarely have a conversation these days where the topic of financing doesn’t arise as a serious concern for my clients. When the economy is robust, and the capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However during today’s recessionary times, the commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. Depending on which industry source you quote there is between $150 and $200 billion dollars of CMBS debt maturing in 2009 alone. This figure doesn’t include maturing loans from insurance companies, banks and other lenders, which means that many borrowers will be forced to secure financing in a market that presently offers little liquidity.” (”Getting your Property Financed” – Jackson Cooper, SVN – Boise, ID)

Walgreens is a national, retail drugstore chain that sells prescription and non-prescription drugs and general merchandise. General merchandise includes, among other things, beauty care, personal care, household items, candy, photofinishing, greeting cards, seasonal items and convenience food. Walgreens’ sales of pharmaceutical items account for approximately two-thirds of all sales.
Walgreens was founded in 1901, and as [...]

The tension was high at the special meeting called by the Colorado Banker’s Association in early December. The bankers were gathering to listen to Dr. Tom Hoenig, President of the Federal Reserve Bank in Kansas City, discuss the current recession and to get his predictions on how long it will last. With the reputation of [...]

“VALUATION TECHNIQUES FOR COMMERCIAL REAL ESTATE AMIDST A WORLD OF CHANGE”
Introduction

There is broad sweeping change in the mindset of the World economy caused by the credit crisis, economic downturn and long-term uncertainty, which is having a profound impact on the real estate market. Our job as appraisers is to interpret what is occurring in the [...]

Unless you have been living under a rock for the past year, you know we are in a recession. This recession has impacted everyone from the average Joe to leaders of fortune 500 companies. We know that the recession has hit retailers hard; but how bad is this situation affecting landlords?
Many retailers are searching for [...]

Many auto dealerships are going dark; over 21 in 2008 according to The Oregonian. In 2009 in the Portland Metro area alone we have seen some big names fall to darkness, most notably the Kuni Cadillac dealership that was located in Beaverton. For an auto dealership, the trade area expands beyond the immediate market area. [...]

PGP Valuation Inc is proud to bring you a Retail Newsletter for the first quarter of 2009. This four page newsletter talks about the economic market and its effects on the retail industry in the northwest and nationally.

Sales Volumes
Existing home sales were down consistently across all 4 counties in 2008 by 32 to 34%
New Detached sales followed a similar trend, with Clark, Washington & Multnomah down 29-33%, and Washington down 18%
Attached housing market faired the worse, down from 40 to 54% across all four counties.
Overall, the volume of home sales was down [...]

W. Grant Noring, Jeff Grose, MAI & Steven L. Waugh presented today at the Multnomah Athletic Club in Portland Oregon at the CCIM meeting. Below is the presentation. A copy can be downloaded by going to the Publications section of this site or you can view the presentation by clicking on “Continue Reading” below.