Advisory Services News

Fannie Mae And Freddie Mac Facing Possible Takeover By U.S.

2008-07-18T12:34:00.000-07:00

SOURCE: The New York Times

The mortgage foreclosure crisis has hit both Fannie Mae and Freddie Mac extremely hard. The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing (and commercial lending) market.

Both Fannie and Freddie shares have been dropping due worries by shareholders. This has caused their cost of borrowing to rise. In a statement issued by Fannie Mae they stated "Our company has raised more than $14 billion in capital since November 2007, including $7.4 billion most recently in May," the company said. "As our regulator has stated, and has reiterated in public statements this week, we are adequately capitalized."

The biggest worry is that if Fannie Mae and Freddie Mac are unable to resolve their difficulties, that the economy will be affected not just within the U.S. but worldwide. The securities of both Fannie and Freddie are held by many financial institutions, central banks, and investors overseas.

Read full report »

High-Yield Possibilities In Commercial Real Estate

2008-05-18T14:23:00.001-07:00

SOURCE: Forbes

A high-yield way to get into commercial real estate can be through net-leases. A net-lease is when a building owner sells the building and then leases it back, typically for a long period of time. The building owners do this as a way to raise cash and yet keep their location and storefront. The new owner will likely have a well-protected stream of income for 20-30 years.

Another way to get into high-yield commercial real estate is through net-lease real estate investment trusts (REITs). These REITs own the actual building rather than the mortgage and do much better on returns than equity based REITs.

Even though most sale-leasebacks involve deals worth greater than $20 million there are still many opportunities for individuals. They can participate by piggybacking since REITs and other institutional net-lease buyers often sell off some of their properties individually. This allows them to turn a profit or balance holdings geographically. Currently, 60% of the 11,000 single-tenant retail outlets available are priced below $2 million.

One investor, Jack A. Diamond, became a net-lease holder for a Checkers drive-through hamburger outlet. He paid $387,000 for one of the Checkers stores that was being sold by Trustreet Properties. "I like the steady income stream and not having day-to-day responsibility" for managing the real estate, says Diamond, a retired building supply executive, who co-owns five other net-lease properties via an S corporation.

Read full report »

Foreign Buyers Making Moves

2008-05-12T09:47:00.001-07:00

SOURCE: The Washington Post

The lack of competition in the U.S. commercial real estate market is proving a prime time for foreign investors to make their move. The results of a first-quarter survey performed by the Association of Foreign Investors in Real Estate (AFIRE) have just been released. The findings show that their international investors rank the U.S. as the most attractive market in the world.

U.S. investors are finding it difficult to find money due to the credit crunch. This is playing a large part in the lack of competition that foreign buyers are seeing. Another important factor is that more conservative U.S. investors are waiting for prices to fall somewhat. Not only that, the inventory of upper echelon Class A commercial buildings is relatively small and all this combined is setting the stage for some record setting deals.

The interesting thing is that foreign investors aren't getting any real bargains. They are paying premium prices for premium properties. These properties typically have a solid base made up of long term, credit-worthy tenants. The great value here is having such a strong hedge against the volatile market that the U.S. is enduring at the moment. One of the things that does make for a bargain though is that the U.S. dollar is worth a lot less compared to many foreign currencies. With the real estate market down along with the dollar, it makes for a double discount on commercial property.

The time needed to familiarize foreign buyers with the commercial real estate market is another factor that is available now. Before, properties were moving so quickly that they didn't have time to really feel confident about placing their money in the fray. Now that a lot of the competition is holding back, they are able to move into the U.S. market with the ability to do their homework before investing.

Read full report »

Apartments And Self-Storage Help REITs

2008-04-17T12:37:00.000-07:00

SOURCE: Wall Street Journal Online

A rally in real-estate investment trusts for the first quarter was brought on due to strong gains realized by two of the industries that benefit from the housing bust. These industries are apartments and self-storage. Eight of the top 10 performers last quarter by way of total returns -- a combination of stock-price appreciation and dividends -- were apartment or self-storage REITs.

The self-storage industry is doing well, right along with apartments, because people who can't afford the cost of their homes are moving. Mike Kirby, director of research for the investment-research firm Green Street Advisors, says "The simple logic there is that as people downsize their housing, they need some place to store their stuff."

Apartment REITs have a real advantage over the other REIT classes. They are able to borrow from Fannie Mae and Freddie Mac which helps to provide a stable source of capital to them. Because Fannie and Freddie are government-backed lenders they have a mandate to provide credit for affordable housing.

WSJ Subscriber only report »

First Drop In Business Office Rentals

2008-04-08T19:53:00.000-07:00

SOURCE: Wall Street Journal Online

Demand for office space dropped for the first time since the economy emerged from its downturn earlier in the decade, according to first-quarter data from Reis Inc., a New York research firm.

Throughout the nation, the vacancy rate for office space has increased to 12.8% from 12.6% in the previous quarter. During the 2003 downturn after the technology bust, the rate hit 16.9% but it is felt that these levels won't be seen this time.

Even though some areas are hurting, some bright spots can be found. "The energy markets are booming," says Ric Clark, chief executive of office company Brookfield Properties. Houston topped the list of 79 markets that Reis surveys in terms of rent growth, up 3.5% last quarter. Denver, Tulsa and Oklahoma City also fared well.

WSJ Subscriber only report »

Collapse of Bear Stearns Is Alarming For Economy

2008-03-30T10:22:00.001-07:00

SOURCE: USA Today

The debt binging that the caused a lot of the
financial crisis the economy is facing has not been alleviated by the Feds. This is certainly the worst financial crisis in the last 50 or 60 years," says Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard.

The best-case scenario that the financial markets
can expect is that the Feds can lead them to a recovery in the housing market. No one wins if this economic breakdown spreads to other banks and beyond. "It's a really dicey moment we've come to." says Seattle-based money manager William Fleckenstein.

A good article by USA Today which answers a number of questions regarding the collapse of Bear Stearns and its effect on the economy can be found by following the link. It discusses the issues that are worrying the economy and what some analysts feel may take place.

Read full report »

General Electric Hoping To Raise Investment Funds

2008-03-21T18:32:00.000-07:00

SOURCE: Wall Street Journal Online

The tough commercial real estate market fund-raising business could be difficult to enter for some but GE feels it will do well for a number of reasons. A falling market poses more challenges but the large and long time real estate investor has a proven track record that should help them in this credit crunch.

One advantage GE believes it has is hundreds of local agents looking into commercial real-estate markets. The funds will get a first look at any potential properties that fit the profile they are hoping to take advantage of. Joe Parsons, chief executive of GE Real Estate's newly formed global investment-management division, said that GE's investment strategy is different from funds focused on distressed situations. Instead of waiting for fire sales, or those properties down about 50% in price, GE is looking at properties discounted in the 10% to 15% range.

GE's goal is to take advantage of the current pricing adjustments while striving to be one of the largest real estate asset management firms within five years. Even GE executives agree that the market is mixed for new funds but are optimistic in their ability to invest well. Mr. Parsons, who recently ran GE Real Estate's North America equity arm, agrees that buying opportunities are scarce right now. "We're hoping the liquidity returns slowly to the market and that presents more opportunity for investing." he said.

WSJ Subscriber only report »

Are REITs Holding Up in the Credit Crunch?

2008-03-12T11:32:00.000-07:00

SOURCE: Seeking Alpha

REITs have outperformed other major market benchmarks, states the National Association of Real Estate Investment Trusts (NAREIT) in its latest monthly update.

NAREIT also states that for those "looking for income with relatively low risk" REITs provide a comparatively attractive investment.

In a challenging credit market where investors worry about many companies being overleveraged, most REITs continue to be conservatively leveraged.

David Gaffen of WSJ.com's marketbeat blog "The creditworthiness of this debt is extremely strong," notes Guy Lebas, but of course, that doesn't matter in this environment.

Read full report »

A Commercial Mortgage Crisis Not Necessarily So

2008-03-07T16:51:00.001-08:00

SOURCE: Courant.com

As the subprime meltdown continues some worry that commercial mortgages may be in for the same ride. There are some major differences between the two types of loans which make a commercial mortgage crisis far less likely. One of the key points to note right now is that delinquency rates on commercial mortgages remain very low, and the risks aren't the same as with residential loans.

There are good reasons to think that the commercial mortgage crisis will not materialize. Actual delinquencies on commercial mortgage bonds were only 0.28% at the end of 2007. Even if that rates toes up, as it's expected to, it is nowhere close to the near double-digit default rates seen on subprime loans

Commercial loans require much more due diligence on the part of the underwriter. There are far more factors that are considered before a loan is issued. The "No Doc" loans that permeated the subprime fiasco are not remotely the norm for a typical commercial loan.

Read full report »

Announcing Two New Exclusive Investment Opportunities

2008-02-26T11:27:00.000-08:00

Regency Tower Apts
Price: $15,300,000

Regency Tower Apartments

We have just listed The Regency Tower, a 274 unit, "B" class, high-rise apartment building located in heart of downtown Oklahoma City. According to RealFacts, the December 2007 year-over-year rent growth in Oklahoma City was 5.2%, a level equaled in only a few prosperous West Coast markets. This investment opportunity provides a strong going in Cap Rate in a rental market that is showing significant growth. There is also additional upside should the new owner decided to bring the property up to an "A" class project by upgrading the interior of the units.
Investment opportunity »

Villa Solara Apts
Price: $8,450,000

Villa Solara Apartments

Villa Solara is a 348 unit garden style apartment building that is located 6 miles east of downtown Tulsa. According to The Journal Record of Oklahoma, the 2007 average sales price per unit for complexes built before 1980 averaged $28,894 per unit. Villa Solara is aggressively priced at $24,282 per unit, or approximately 15% below the 2007 average. Additionally, the average rents for all unit types at Villa Solara are approximately $100 below the Tulsa MSA average of $570. Villa Solara is an attractive investment for the opportunistic buyer.
Investment opportunity »

Investment Advisory Services

Steelhead Investment Advisors brings the knowledge and experience to guide you though the investment process. We pride ourselves on the ability to work with each client on an individual and personal basis, staying involved throughout every step of the transaction.

Contact us today for a no-obligation consultation to learn more about how Steelhead can help you maximize your investment portfolios.

Respectfully Submitted,
Matthew K. McLeod, Vice President
Steelhead Capital Investment Advisory Services

Commercial Real Estate Online

2008-02-21T18:00:00.000-08:00

SOURCE: The New York Times

Not long ago locating commercial real estate to purchase was an onerous task. This has been made much easier now that there are online resources available.

Some of these sites are specifically for finding properties while others are for locating mortgage brokers and funding. Some sites even offer the current rates available so that the purchaser has a basic idea of what kind of investment is going to be required.

For example, the Steelhead Capital website is an excellent tool for locating a commercial mortgage broker. Their brokers work closely with the purchaser to make sure that the property is the right fit for them and is a solid investment. They also have an extensive network of funding available that can be brought together quickly to help make a deal go as smoothly as possible.

Read full report »

Online Commercial Real Estate Resources Make Investing Easier

2008-02-14T17:15:00.001-08:00

SOURCE: New York Times

Locating commercial properties available to purchase used to be much more difficult. Today, online resources such as Steelhead Capital Investment Services make commercial real estate investing far easier. These types of sites provide valuable information for anyone considering purchasing commercial real estate. Some sites like Steelhead Capital will connect you with an advisor who will help you weed out less desirable properties as well as to help you find the financing needed.

Other sites provide actual listings and data on different properties. These services have enabled the investor to accomplish deals more quickly and with better results. Even with the great volume of information available now online, an investment advisory service is still worth its weight in gold as they provide an objective viewpoint to determine which properties could be right for each investor.

In today's market, it pays to access the different online resources so that the investor can have as much information as possible, as quickly as possible. The commercial real estate market is far more complex than residential but online listing sites are a great place to begin. Especially for the small investor, the knowledge provided by an accomplished mortgage broker or advisory service is still an important piece of the puzzle. Steelhead Capital is ready to help you achieve your goals.

Read full report »

LoopNet Is A Small Cap Commercial Real Estate Stock Worth Looking At

2008-02-06T18:34:00.001-08:00

SOURCE: The Motley Fool

A leader in stocks in the less volatile commercial real estate market is LoopNet (Nasdaq: LOOP). The company boasts that it is the largest network of it's kind with 2.5 million registered members. As well, it claims to be the most heavily trafficked commercial real estate website with an average of 915,000 visitors.

The site offers a wide variety of services to their subscribers which include the ability to market and list property, search and research properties, and finance commercial real estate as well. All these features make it extremely attractive to industry professionals, especially with the shear number of properties available.

With over $425 billion in commercial property available to purchase, there will be something for everyone who is interested in buying into the commercial real estate market. The ablility to match buyers to sellers is why LoopNet is considered the "eBay" of the industry.

Read full report »

Investors Look At How To Best Use The New Rate Cuts

2008-01-30T18:15:00.000-08:00

SOURCE: USATODAY

The new rate cut from the Federal Reserve hopes to prevent a recession.

The Federal Reserve cuts short-term rates when it wants to boost the economy. It lowers the target for the federal funds rate. This rate cut lowered its target rate for fed funds by three-quarters of a point, from 4.25% to 3.5%.

The lower the interest rate, the easier, and less expensive it is for businesses and individuals to borrow money. Lower rates mean there is more money to lend. Companies find it easier to get commercial loans for new factories and trucks. As companies expand, they can hire workers. That also stimulates the economy.

Lower rates also help boost the housing market. Lower mortgage rates mean more people can buy houses.

Homeowners are a huge engine of economic growth. And that's why the Fed is so worried about the housing slowdown. When you buy a house, soon you're buying a lawnmower, drapes and a replacement furnace.

Read full report »

Commercial Real Estate Investors Ready To Turn The Page

2008-01-11T16:55:00.000-08:00

SOURCE: The New York Times

There may not be a major turn around in commercial real estate investing throughout most of 2008.

With the continuing credit crisis and weakening economy, there isn't a lot of hope that 2008 will bring some relief to most real estate markets in the US.

There is going to be a greater downside risk in the next year than the commercial real estate markets have faced in over two decades. This is according to the "Emerging Trends in Real Estate" report by PricewaterhouseCoopers and the Urban Land Institute.

That said, there are some areas in the country and some markets that will continue to perform above the national average.

Read full report »

Commercial Real Estate Still Big With Big Investors

2007-12-28T12:46:00.000-08:00

SOURCE: The New York Times

Big investors are hungry for higher yields and hoping for a repeat of 2006's stellar returns. Seasoned money managers were caught off-guard with the rally in real estate funds.

The mounting appetite for commercial real estate from institutions like pension and private equity funds, as well as real estate investment trusts, have continued the long rally in real estate funds. Unlike residential real estate where the unsold inventory has been mounting, there is a limited supply of commercial buildings.

Big investors are pumping capital into dividend-paying REITs and have privately acquired entire portfolios of office buildings and other commercial property.

Read full report »

Negative Returns Have Investors Pulling Away From REITs

2007-12-17T14:51:00.000-08:00

SOURCE: Investment News

Due to loss of returns, investors are letting go mutual funds that invest in real estate investment trusts.

Financial advisers believe now is not the time to pull out of the holdings, however commercial real estate investors and even some advisers do not agree.

In the latest data available, year to date through October, monthly shows outflows are taking their toll. Investors pulled out $431 million dollars out of the category than they put in. This trend followed outflows of $1.48 billion in August, $2.35 billion in July and $1.92 billion in May.

This trend is expected to continue the category in 2008.

Read full story »

A Painful December for Wall Street

2007-12-10T18:08:00.000-08:00

SOURCE: Reuters

Big players on Wall Street are expected to lose money because of subprime related securities.

Even with subprime defaults rising throughout 2007, Wall Street's biggest investment banks convinced investors that their exposure to risky loans was limited.

Some of the architects of both the residential and commercial mortgage crisis now face mega-write-downs, net losses and more high-profile ousters of top executives.

Read full report »

Sale-Leaseback Deals Helping Small Business Owners.

2007-12-06T18:05:00.001-08:00

SOURCE: CNN Money

Sale-leasebacks are an innovative way for business owners to gain cash and leasing may have tax advantages too.

With the current residential mortgage slump, now might be the time to think about investing in the commercial real estate market. Creative financing helps both the small businessman and the new building owner.

Read full report »

400-Unit Property sells for $63M

2007-10-04T14:56:00.000-07:00

400-Unit Property trades for $63M

RENTON, WA-Berkshire Property Advisors of Boston has purchased the Carriages at Fairwood Downs, a 400-unit, class B apartment complex here that is 95% occupied. The seller was BlackRock Inc. of New York City. The sale price was $63.3 million or $158,000 per unit.

While the specific cap rate on this transaction was not available, cap rates for class B apartment loan product in the region has been in the low- to mid-5% range. Although deal flow has slowed, cap rates haven’t risen much in the Puget Sound because apartment fundamentals are still strong, with 10% rent growth in 2006 and 11% growth so far this year.

Please contact Matt McLeod of Steelhead Investment Advisors regarding B & C class apartments in the Renton, Washington submarket.

Welcome to our Investment News Blog

2007-09-10T20:15:00.000-07:00

Greetings,

We'd like to welcome you to our new website, and especially our Investment News blog that we're launching here today. Please stay tuned, and we'll do our best to provide you with unique and valuable information to guide you to success in your real estate investments.

While you're with us online, be sure to check out the new Investment Advisory Services that we've just recently announced. More than ever before, the benefits of having our highly experienced team working on your portfolio definately make it worth your while to drop us a line anytime you're researching your next transaction.

Thank you for stopping by!

Best Regards,
Matt McLeod
Vice President
Steelhead Capital