Real estate entrepreneur Gerald Marshall recently sat down with us to discuss the state of the property market and how his firm, Amerimar Enterprises, is uniquely positioned to capitalize on the opportunities created by these tough economic times. This is what he had to say…
Q: What do you see happening in the commercial real estate market today?
A: Well, the real estate capital markets are almost completely frozen, and the economy is in a relatively dismal state, making debt financing almost impossible to obtain and future real estate cash flows extremely difficult to forecast. As a result, it is estimated that transaction volume is down about 85 percent. All this is happening as we enter a three-year period when approximately $500 billion of commercial debt will be maturing and about 1/5 of that will not be fully secured by the underlying collateral, likely resulting in forced sales.
What does this mean? For properties to clear the market, prices will need to drop significantly. We believe the next three years will present the best opportunity to acquire U.S. commercial real estate since the early 1990’s.
Q: Which product type or asset class will present the greatest opportunity?
A: We think the earliest opportunities in this cycle will be on the debt side buying loans at a discount, either whole loans or junior notes that are in the money. We don’t feel there is a need to inject further equity into the system, as long as we can generate equity-type returns with debt-type risk.
After a plan is secured for the trillion dollars or so of the toxic debt on the balance sheets of commercial lenders, we believe the first attractive property targets will be in the office sector where you can buy properties with term on the leases to help get through an extended economic downturn. Later in the cycle as the economy rebounds, we will begin to pursue hotels and as job creation begins, multi-family properties.
Q: Are you waiting for the market to hit a bottom before you begin buying?
A: In the real estate business, bottoms can only be called in hindsight. So if you’re waiting for the bottom, then you will certainly miss it. You need to go into every deal prepared for a protracted downturn and adequately capitalized to ride it out.
We generally believe if you are buying at a time when there is very little acquisition debt available and many players sidelined dealing with presumed asset and liquidity issues, you will look back a few years later and be very glad you bought.
Q: How big is this opportunity, quantitatively speaking? And how will you take advantage of attractive pricing if there is no debt available to finance your acquisitions?
A: Between 1993 and 1995, we experienced similar market events and opportunities to what we anticipate over the next three years. In that time, Amerimar projected average IRRs of 18-20 percent. But what actually happened? We achieved IRRs in excess of 40 percent on properties purchased in that period, more than doubling our projections. Effectively, we earned 20 percent from executing on our value-add business plans, and we gained another 20 percent or more from improved property and capital markets, as tenants expanded, rents corrected, and debt became available to buyers.
To answer the second part of your question, these returns were achieved using very low leverage, as it simply was not available. In fact, of the nine properties we purchased between 1993 and 1995, five of them were acquired all equity.
Q: Tell me a little more about Amerimar, and why the company is poised to take advantage of the current market weakness.
A: Let me take this one in two parts. First, Amerimar is a privately held, owner-operator of U.S. commercial real estate, headquartered in New York and Philadelphia, with satellite offices in Denver and San Francisco. We are very hands on as both asset and property managers on our deals. As a result, issues and trends are reported up from the properties and down from senior management on a real-time basis. The insights we gain by being on the ground enable us to make nimble, informed decisions across markets and business disciplines, not only improving our performance as operators but also as buyers and sellers, thereby providing our investors with better results and less risk.
What do we look for in an acquisition target? We look to opportunistically purchase an underperforming property and add value by repositioning it, with the conservative use of leverage. That said, our core business competency is the creation of value through enhanced real estate operations, which I think is an important distinction in an economy tattered by overleveraging. I’m proud to say that Amerimar’s weighted average loan-to-cost at acquisition is approximately 56 percent on the 44 properties we acquired since 1993, and we have never been in default on a loan that we took since I started with the company in 1989.
As for the second part of your question, our portfolio currently consists of approximately $700 million of office, hotel, multi-family, retail and mixed-use properties. Since 2006, we have been net sellers of real estate, paring back our portfolio from 23 properties in 2005 to just 14 today. Yet, we have the same executive team and same size staff that we had in 2005. So, when we fully deploy the fund we are raising, we will not be overextending our team as our portfolio will be returning to about the same size it was 2005.
Source: NuWireinvestor.com
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Showing posts with label Luxury Beachfront Condos. Show all posts
Showing posts with label Luxury Beachfront Condos. Show all posts
Friday, March 20, 2009
Tuesday, March 10, 2009
Unexpected Jump in Home Sales in February
Sales of previously owned homes in the United States showed unexpected strength in February, offering a glimmer that the tumbling housing market may be searching for a bottom even as economists brace for another wave of foreclosures driven by rising job losses.
The National Association of Realtors reported on Monday that sales of existing homes rose 5.1 percent in February after a 5 percent decline in January. Home sales in the Northeast, South, West and Midwest all gained ground for February as buyers scooped up foreclosure properties.
“We are close to seeing a bottom in both new and existing home sales,” Michael T. Darda, chief economist at MKM Partners, wrote in a note to clients.
But all real estate is local, and whether the housing market has begun to finally scrape bottom remains a question of location, location, location.
Economists and real-estate experts said the worst-hit parts of the country looked like they were starting to emerge from the wreckage of the housing bust and a tide of foreclosures. Other markets like New York or Washington, where prices have not tumbled so starkly, will probably face more stagnant sales and sliding prices in the months ahead.
In the West, where home prices have dropped 30 percent from last February, homes sales rose 30 percent last month from a year earlier. In the Northeast, where housing prices have only dropped 4.8 percent, to $251,200, over the last year, sales are down 15 percent for the year. “The areas that fall the fastest are going to recover,” said Guy Cecala, publisher of Inside Mortgage Finance. “There’s going to be a floor established. Seven hundred thousand dollar houses are $250,000 — that’s what’s bringing people back into the markets.”
The Obama administration and the Federal Reserve have introduced aggressive moves to try to lower borrowing costs, keep homeowners out of foreclosure, and stem two years’ of losses in the housing market, which lies at the center of the financial crisis.
Last month, President Obama unveiled a $275 billion plan to help as many as nine million homeowners refinance or avoid foreclosure using a variety of incentives to lenders and homeowners. The administration also included an $8,000 tax credit for first-time homebuyers in the stimulus package.
And last week, the Federal Reserve, which has already cut overnight interest rates to nearly zero, announced it would buy some $1 trillion in government debt and mortgage-backed securities in an effort to chip away at mortgage rates.
The nationwide average for a 30-year fixed mortgage is 5.08 percent compared with 5.62 percent a year ago, according to Bankrate, and many lenders are offering loans with interest rates near 4.75 percent.
The Realtors’ group reported that the median home price in February was $165,400, slightly higher than a revised $164,800 in January, but down 15 percent from a year ago. Median home prices peaked at $230,100 in July 2006. Source: nytimes.com
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The National Association of Realtors reported on Monday that sales of existing homes rose 5.1 percent in February after a 5 percent decline in January. Home sales in the Northeast, South, West and Midwest all gained ground for February as buyers scooped up foreclosure properties.
“We are close to seeing a bottom in both new and existing home sales,” Michael T. Darda, chief economist at MKM Partners, wrote in a note to clients.
But all real estate is local, and whether the housing market has begun to finally scrape bottom remains a question of location, location, location.
Economists and real-estate experts said the worst-hit parts of the country looked like they were starting to emerge from the wreckage of the housing bust and a tide of foreclosures. Other markets like New York or Washington, where prices have not tumbled so starkly, will probably face more stagnant sales and sliding prices in the months ahead.
In the West, where home prices have dropped 30 percent from last February, homes sales rose 30 percent last month from a year earlier. In the Northeast, where housing prices have only dropped 4.8 percent, to $251,200, over the last year, sales are down 15 percent for the year. “The areas that fall the fastest are going to recover,” said Guy Cecala, publisher of Inside Mortgage Finance. “There’s going to be a floor established. Seven hundred thousand dollar houses are $250,000 — that’s what’s bringing people back into the markets.”
The Obama administration and the Federal Reserve have introduced aggressive moves to try to lower borrowing costs, keep homeowners out of foreclosure, and stem two years’ of losses in the housing market, which lies at the center of the financial crisis.
Last month, President Obama unveiled a $275 billion plan to help as many as nine million homeowners refinance or avoid foreclosure using a variety of incentives to lenders and homeowners. The administration also included an $8,000 tax credit for first-time homebuyers in the stimulus package.
And last week, the Federal Reserve, which has already cut overnight interest rates to nearly zero, announced it would buy some $1 trillion in government debt and mortgage-backed securities in an effort to chip away at mortgage rates.
The nationwide average for a 30-year fixed mortgage is 5.08 percent compared with 5.62 percent a year ago, according to Bankrate, and many lenders are offering loans with interest rates near 4.75 percent.
The Realtors’ group reported that the median home price in February was $165,400, slightly higher than a revised $164,800 in January, but down 15 percent from a year ago. Median home prices peaked at $230,100 in July 2006. Source: nytimes.com
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Saturday, February 28, 2009
Housing Stimulus and Stabilization Will Help Economic Recovery
The following is a statement by National Association of Realtors® President Charles McMillan:
“The American Recovery and Reinvestment Act is important for the U.S. economy and contains some important housing provisions. Eliminating the repayment provision in the $7,500 first-time home buyer tax credit will help bring buyers to the market and reduce housing inventory. NAR has been advocating that this provision be improved – the change will stimulate more than 200,000 additional home sales, which will help stabilize home values.
“Reinstating the higher loan limits for FHA, Fannie Mae and Freddie Mac for mortgages in high-cost areas is also important and will help reduce inventory and improve liquidity in the overall mortgage market. The allocation of resources for neighborhood stabilization efforts to help communities purchase and rehabilitate foreclosed and vacant properties is also very promising for the housing market. This funding will help protect communities across the country and preserve home values from further decline.
“As the leading advocate for homeowners and the real estate industry, NAR will continue to address issues facing Americans who are trying to purchase a home, protect their current home or preserve investment opportunities in residential and commercial properties. NAR recognizes the efforts of the members of Congress who understand that without a housing recovery, an overall economic recovery is impossible.
“NAR believes that positive steps are being taken to improve the housing market and will continue to work with President Obama, Congress and regulators to make housing stabilization a key component of any federal recovery plans.”
Source: Realtor.org
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“The American Recovery and Reinvestment Act is important for the U.S. economy and contains some important housing provisions. Eliminating the repayment provision in the $7,500 first-time home buyer tax credit will help bring buyers to the market and reduce housing inventory. NAR has been advocating that this provision be improved – the change will stimulate more than 200,000 additional home sales, which will help stabilize home values.
“Reinstating the higher loan limits for FHA, Fannie Mae and Freddie Mac for mortgages in high-cost areas is also important and will help reduce inventory and improve liquidity in the overall mortgage market. The allocation of resources for neighborhood stabilization efforts to help communities purchase and rehabilitate foreclosed and vacant properties is also very promising for the housing market. This funding will help protect communities across the country and preserve home values from further decline.
“As the leading advocate for homeowners and the real estate industry, NAR will continue to address issues facing Americans who are trying to purchase a home, protect their current home or preserve investment opportunities in residential and commercial properties. NAR recognizes the efforts of the members of Congress who understand that without a housing recovery, an overall economic recovery is impossible.
“NAR believes that positive steps are being taken to improve the housing market and will continue to work with President Obama, Congress and regulators to make housing stabilization a key component of any federal recovery plans.”
Source: Realtor.org
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