Posts Tagged ‘San Francisco’

Investors Are Choosing London

Thursday, January 28th, 2010

London beats Washington, D.C., as preferred destination for commercial real estate investment.London has overtaken Washington, D.C., as the preferred city for commercial real estate investment,  primarily because investors believe that prices have bottomed out and the time to get into that market is now. The British capital has overtaken the previous favorites of Washington, D.C., and New York, according to a survey conducted by the Association of Foreign Investors in Real Estate (AFIRE).

“London currently offers investors the advantage of a ‘re-priced’ market,” says James Fetgatter, AFIRE’s CEO.  “The re-pricing began sooner than it did in other cities.”  London’s score is 31 points higher than the perennial favorite Washington, D.C., and 40 points ahead of New York City.  A year ago, London occupied second place, ranking four points behind Washington.  The survey of the association’s approximately 200 members was taken in the fourth quarter of 2009 and represents ownership of more than $842 billion of commercial real estate.  Of that, $304 billion is invested in the United States.

London, along with the rest of the United Kingdom, has rebounded with investment rising 56 percent from the first to the second half of 2009.  Property values rose 2.4 percent in November, the largest monthly increase in 15 years.  Savills, the real estate advisory firm, is predicting London will eclipse New York as the fastest growing global financial center.

Despite London’s success, the United States is still preferred as the “most stable and secure real estate investment environment,” according to 44 percent of survey respondents.  This is the first time the United States ranked below 50 percent in the survey.  It ranked 53 percent in 2008 and 57 percent in 2007.  Germany occupies second place with 21 percent.  In terms of price appreciation, the United States ranks first, followed by the United Kingdom and China.

The preferred property for investment is multifamily residential, followed by office, industrial, retail and hotel.

House Sales, Prices on the Upswing

Wednesday, December 9th, 2009

Home prices nationally are on the rise again, according to a new report issued by the Standard &Poor’s/Case-Shiller Home Price Index. The average sale price rose 3.1 percent during the third quarter of 2009, the same percent increase reported during the second quarter.  On the downside, that statistic is still nine percent lower than the number reported one year ago.

In Chicago, prices rose 1.1 percent from August on a seasonally adjusted basis.  Local prices were still 10.6 percent below the level reported for September of 2008, the fifth consecutive month to report an increase.  At the same time, Chicago-area home sales jumped by one-third in October, compared to a year ago, according to the Illinois Association of Realtors.   The group cited lower home prices, affordable mortgage rates and the federal tax credit for first-time buyers as reasons for the rise.

According to David Blitzer, chairman of the Index Committee at Standard & Poor’s, “We have seen broad improvement in home prices for most of the past six months.”  Case-Shiller’s 20-City Composite index rose 0.3 percent compared with the August numbers.  The city with the worst-performing market is Las Vegas, where prices have fallen for 37 months in a row and now are 55.4 percent off their highs.  Chicago home prices rose 1.2 percent during the third quarter.

In another snapshot of the housing market, a report from First American CoreLogic revealed that nearly 25 percent of all mortgage borrowers are underwater.  This condition, as well as the high number of foreclosures, raise doubts about the staying power of the recent upward price trend.

Wells Fargo Wagon Rolls onto Wall Street

Friday, April 10th, 2009

The Wells Fargo wagon delivered good news to Wall Street when the San Francisco-based bank announced a record first-quarter profit of approximately $3 billion, or 55 percent per common share.  Contrast these numbers with the fourth quarter of 2008, when Wells Fargo reported a $2.6 billion loss.

The news sent the Dow Jones Industrial Average soaring 3.1 percent to finish the day at 8,083.38, the highest closing since February 9.wellsfargo

Wells credited the outstanding results to healthy lending margins driven by low interest rates and the resulting boom in mortgage lending activity.  “Our business momentum is strong, and we expect our operating margins to remain at the top of our peer group,” said John Stumpf, Wells Fargo’s CEO.  Applications for mortgages surged during the first quarter; Wells reported $83 billion in applications for new and refinance home loans during March alone.

Wells is the nation’s largest mortgage servicer and a leading home loan originator, so it benefited from the refinancing boom driven by extremely low short-term interest rates and the government’s purchases of mortgage bonds.

Although this is evidence that the Obama administration’s efforts to jump-start the economy by freeing up credit are starting to work, it is only the hint of a beginning for banks with significant mortgage portfolios.  Wells and competitors such as Bank of America, Citigroup and JPMorgan Chase remain dangerously exposed to falling asset prices, especially for commercial and residential real estate.

Lenders Get Green

Thursday, October 2nd, 2008

Marketing green is a new step in the emergence of sustainability.  In a tight credit environment when rates have climbed and LTVs have dropped, green may offer a way to ease the underwriting criteria on a deal.

The green-building revolution is spreading, and the underwriting community has embraced sustainable design because it enhances marketability and income.  To illustrate, net rent in a particular office market may include a $15 psf in base rent and another $8 in common-area costs – the latter driven largely by energy and water-use costs.  It adds up that if you reduce that common-area cost and pass the savings along to the tenant, your building will be more attractive because it operating costs are lower.

Community banks in environmentally conscious markets or in areas where local building requirements foster sustainable projects are offering standard loans with terms favoring green development.  In San Francisco, the New Resource Bank offers qualifying green projects a generous loan-to-value ratio of as much as 80 percent, and a slightly better interest rate than it does to conventional project developers.  Green lenders look for incremental steps such as preferential review, quarter-point interest-rate discounts, longer amortization and relatively small changes in return for LEED or Energy-Star certification.

In Houston, the Green Bank recently moved into a 20,000 SF headquarters specifically designed to earn LEED’s gold certification.  Previously known as the Redstone Bank, it was acquired by a local banker who rebranded it as Green Bank and launched in January of 2007 with a focus on sustainability.  Just 1 ½ years later, Green Bank has $275 million in assets and is creating a group of environmentally conscious companies and individuals.  One vital goal is to educate team members to identify green-oriented customers, whether they are recyclers or LEED-certified construction space users.