LTI Denver Site Work Nearly Done

Site work is nearly complete on the LTI Denver Project.  The tenant improvements phase has begun in earnest and the project is looking great.

Lincoln Technical Institute – Demolition Set to Start

Construction is set to begin next week on the redevelopment of a former Samsonite warehouse building by Streech Properties.  The 210,000 square foot warehouse sits on 18 acres fronting I-70 and 45th Avenue just west of Peoria Street in Denver.  The property was acquired in late December and is being retrofitted to accommodate the Denver home of Lincoln Technical Institute (LTI).  LTI is a division of the publically traded Lincoln Educational Services Corporation (LINC:Nasdaq) of West Orange New Jersey.  The construction plans serve to reconfigure the building from a warehouse to an industrial trade school serving Denver’s skilled trade community.  The school is planned to open for students in the 2011-2012 school year.  Panattoni Construction Inc. is providing general contracting services for Streech Properties who serves as the project’s developer.

Web:

Lincoln: www.lincolnedu.com

Panattoni: www.panconinc.com

Bank Regulators Seal of Approval (or Good News/Bad News)

For the past nine months or so, the business media has predicted the dropping of the proverbial “other shoe”: commercial loan portfolios on bank balance sheets. As the economy crashed, tenants failed, rents weren’t paid, new prospects disappeared.  These are value drivers of commercial real estate.  You might recall the doomsday prediction that by the summer 2009, the commercial loan portfolios would be in full death spiral taking banks and developers with them.  Well here we are at Halloween and the predictors were wrong.

And now this.

The Wall Street Journal just reported here that “Banks Get New Rules on Property” thus all but assuring that the shoe wont drop. Regulators are going to back off their aggressive demands that lenders clean house: the banker’s game of “extend and pretend” now comes with the governmental seal of approval.

Clearly this ruling takes the pressure off of banks to aggressively clean their balance sheet. Prior to the rule change, falling values and loan covenants put the bankers in a position of demanding action.  In many cases, this pressure would force a change in property ownership and recognize the current, though temporal, lower valuations.

The new policy may have a couple effects, both intended and unintended.  First, the vulture funds created to take advantage of the anticipated RTC style feeding frenzy may not get their carrion.  These funds were relying on banks to aggressively light the fire sale.  Without pressure from the banks, developers and owners may not have to sell at today’s values and most likely, they wont.  The net result is that these vulture funds may not find enough property to purchase or may end up buying garbage real estate. Not what they had intended.

Secondly, this ruling may keep the lending and real estate markets in their current frozen state and prolonging this painful real estate recession. If there are no willing sellers at current valuations, there will be no transactions. As they say, it takes two to tango.

If you own commercial real estate that is in trouble, this rule change is likely good news. If you were hoping to pick up distressed property on sale, this ruling is bad news. 

Savings = Lending

It occurred to me that the increase in American savings rate should be creating a cash glut in the bank coffers. Bloomberg.com confirmed this in an older article HERE.

To maintain profitability from interest rate spread (the cost of deposits versus interest earned), these assets/deposits need to be lent.  As such, can the unfreezing of lending be far behind?  Let’s hope not.

Brokers

There are several types of commercial real estate brokers available to solve your real estate needs. Not all are created equal. Like a tool, the benefit of using the right broker is expediency.

National Scale

There are several big time brokerage houses: CBRE, G&E, Cushman & Wakefield to name a few.  These guys are great if you are a big corporation or huge developer. Typically they serve the client with multi-state presence.

Locally Big

These are the bigger houses within Major Metropolitan Areas that do not have the national reach by themselves. Typically they employ the brokers who are hard working experts in the MSA and will work hard for the locally active client.

Small Shops

These are the guys that have just a handful of brokers on their staff and specialize in a certain property type (industrial, office or retail) in a localized sub-market.  These guys are great for the small companies working in a specific area, one deal at a time.

One Man Band

This is your cousin Joe who runs his own shop from the front seat of his Benz. These guys typically have a massive contact base through years working at bigger shops. They have usually been around the block a few times and like to work on the quick deals.

The Answer

No big surprise that the news of the day is the loss of another 663,000 jobs.  8.5% unemployment rate.  In America no less.  So what will stem the destruction of the job market?  Entrepreneurship.

American is the toughest, most resilient group of cowboys ever assembled in the history of time.  A little depression isn’t going to keep the people down.  We are the “shining city on the hill” “a thousand points of light”.

5 million people woke up this morning without the job they had a year ago.  Certainly many will flop around wallowing in their circumstance.  But how many will walk to their front porch and hang the proverbial “shingle”?  1%? One percent equates to 50,000 new companies.  How great is that?

I hope the white heads in office are thinking about methods to foster the entrepreneurial spirit of the county.  With the level of creativity and ambition of the American workforce, we can’t help but come out of this depression much, much stronger.

 

Technorati Tags: economy,jobs,entreprenuership

The Rented Car

Interesting article in the Wall Street Journal  this morning regarding the the rental market boom in the exurbs.  Disregarding the fact that exurbs is another empty writer’s term for suburban fringe, the exurb is where you end up when you are young, poor and want to buy a home. 

Land is cheap and so are the homes.  The environmental cost in these areas is very high; nobody but the tree hugging greenies count these costs.

These areas are typified by single family, detached homes and strip shopping centers.  The home density in these areas is around 4 to the acre (4/du).  You don’t find very many apartments in the exurbs.

And that is the point of the WSJ article.  With the downturn of the housing market and the related increased foreclosure rate, the exurbs are substantially increasing the number of renters.

This is a curious trend.  Why would a person chose to live in the exurbs?  It seems to me that the increasing number of renters might shed light on the fact that Americans want space and do not like the feeling of being cramped into an apartment building.  The cost of getting this space in an urban environment is too high to be affordable.

This would suggest that if developers were able to build larger units with “open” amenities in the city at a comparable price, there might be a fairly strong market.  These open amenities might include what you need to raise children; good schools, large parks, safe environments etc.

Food for thought.

Technorati Tags: Developement,Real Estate,Apartment,Homes

Holy Home Sales Batman

Oh please, puhlease let this be the start of the good news…

Ryland Home dropped on us today that they are growing their home sales numbers.  Granted, showing growth in a minuscule number is not earth shattering.  However, considering the fact that even the small figures have been getting even smaller, this is a welcome reversal.  Ryland also claims that they have not prosecuted any unusual incentives that would account for this uptick. 

Here’s what is being reported:

Dreier went on to say that the company captured new orders for 165 homes in October, 151 in November, and 228 in December.

The good news was that things were looking up so far for the first quarter of 2009. In an uncustomary disclosure, Dreier provided analysts with a quarter-to-date update on sales. Thus far in January, the company’s new contracts for the month were roughly double the amount of contracts secured in October.

Robots must die!

An article in the morning’s NY Times describes a scene in which JPMorgan Chase is foreclosing on a medium sized home builder in Tempe, Arizona.  No real story there.  What is the story is that the “deadbeat home builder” hadn’t missed a payment and had been in good standing with the bank.  It appears from the article that the home builder’s revenues had substantially dropped and JPMorgan got nervous.

I am sure that this is a situation in which JPMorgan’s internal lending barometers triggered the loan to be called.  This is where reason should kick in to override JPMorgan’s internal robots.  Furthermore, it seems to me that this is a perfect situation for TARP money.  However, this robotic system is about computerized lending rather than relationship lending.

What is the lesson; there is no such thing as relationship lending!  Banks are robots.  Unless and until the knuckleheads running these banks allow for reasonable lending, our banking system will continue to be collapsed.  Furthermore, I really wish our Washington Leadership would wake up to the fact that THE ROBOTS MUST DIE!

And so it is.

As I have written and told everyone who would listen, Denver is the Green Capital of the World (I really don’t care that the word “green” is on the out).  While no panacea for the financial depression, Denver is reaping the green as evidenced by the story out of Boulder that the American Solar Energy Society and research firm Management Information Services completed a study that found, according to the Rocky Mountain News:

Funded by the state government, Xcel Energy, the city and county of Denver and others, a study released Thursday concluded that Colorado’s renewable-energy and efficiency industry created more than 91,000 jobs and generated $10.2 billion revenue in 2007.

Rock on Colorado!  It appears that we are leading the charge to resolve our own financial issues which is as it should be.