Multi-Family Properties Might Be The Way To Multi-Millions

In the current commercial real estate market, investing in multi-family homes should be on the radar. Multi-family properties don’t always have to be 20 floor sky rise apartments in a big city. They can be smaller duplexes, town homes Read more

New Real Estate View: Why The Homeless Are Big Business In New York

It's a grim scenario: In New York, there are more than 50,000 homeless. Of that number, 21,000 are children, an increase of 21 percent from last year, according to a report by the Coalition for the Homeless, a New Read more

Red Is the New Green – Chinese Investors Eye US Assets

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** American fund managers should be aware of current and future trends that may make the Chinese account for a more significant portion of overall foreign Read more

Gimme Shelter - Foreign Investors Seek Returns and Safe Haven in US Real Estate

***This blog entry is a guest post from Elton Steinberg, Marketing Associate at United Realty*** Foreign investment has been a significant driver of the US real estate market recovery. Investors from across the globe have been responding to negative stimuli Read more

News

The Fiscal Cliff and Commercial Real Estate

The Fiscal Cliff, or more appropriately, the reason we are dealing with the Fiscal Cliff, will undoubtedly impact our economy in such a way that opportunities will abound in commercial real estate.

The reason Congress has been dealing with the fiscal Cliff is because our nation’s $16 trillion in debt. Worse, we have $60 trillion in unfunded government pensions, Medicare, Medicaid and Social Security obligations. In other words we are a $76 trillion debtor nation.

The Fiscal Cliff is Congress’ way of dealing with the increasing deficit necessary to service our debt, it does not address the debt itself. Our real issue is the debt itself. We can only solve our debt problem by increasing taxes or cutting our spending. Since Congress is obviously not inclined to do either, our government needs to find an alternative way of solving this problem. I believe they have.

The Federal Reserve, which historically has dealt with interest rate policy on a quarterly basis, announced in an unprecedented move that it intends to keep interest rates at the Fed discount window at 0% through early 2015. This has created an artificial cap on interest rates. At the same time, by virtue of the Fed’s QE3 policy, the Fed is effectively printing $85 billion a month—without end. Undoubtedly this devaluation of the currency will help us pay our debt off in cheap dollars. It should also have an upward pressure on interest rates. But, by virtue of the fact that interest rates remain artificially low, we will not feel the effects of this printing of money until the Fed removes its cap on interest rates.

And when that happens, watch out. Interest rates should increase dramatically. Rising interest rates will have a significant impact on commercial real estate. Rising interest rates will bring with inflation. They will also bring with them increasing rates. Properties, such as triple net lease single tenant assets which have very nominal rent increases, typically lower than CPI, will start to act and look like bonds, diminishing in value with rising interest and capitalization rates. By contrast, inflation-protected real estate, those assets with underlying leases that adjust for inflation, should be able to maintain or increase in value.

Adding to the opportunity,  we’re approaching a time when many properties can be purchased at below replacement costs, and financed at historically low interest rates. Investors are able to acquire real estate assets at below replacement cost prices, finance them with long-term low-rate financing, and protect them with inflation-protected leases will benefit from the inflationary cycle we see coming.

While the drama on Capitol Hill is certainly causing headaches for economists around the world, those in the commercial real estate industry should see opportunity amidst the frustration.

Posted on by Jacob Frydman in News, United Realty Leadership Leave a comment

CRE Opportunity in 2013

Office Buildings NYC - Real Estate NYCThe Mayans might have had a bleak vision of 2012, but the financial forecast of 2013 – as far as the commercial real estate market goes – is a future worth exploring, and possibly living in. It’s been a hard road for many Americans since the recession began eating away at the economy as far back as 2007, resulting in a calamitous decline in property values, and a rise in foreclosures. But while other sectors are slowing, the Wall Street Journal reported that the U.S. Housing market remains a key economic driver.

According to the National Association of Realtors’ (NAR) chief economist, Lawrence Yun, the market has been slowly building momentum, and the economy is expected to grow by 2.5 percent next year. The NAR’s quarterly real estate forecast finds that vacancy rates over the next four quarters are forecast to decline 1.0 percentage point in the office market, 0.6 point in industrial, 0.2 point for retail and 0.1 point in multifamily.

In a recent article, the New York Times reported home values in the first six months of the year were up by 5.9 percent (the best it’s been in seven years), and a report by The Conference Board, a private group, have pointed at an increase in consumer confidence since September. Throw in the Labor Department’s report earlier this month citing the addition of 146,000 jobs in November (which brought the unemployment rate down to 7.7 percent), and a more optimistic view is clearly on the horizon.

Forbes contributor Bill Conerly, has a less enthusiastic view of 2013, and sees only marginal improvement ahead as it relates to commercial real estate, with a real boost occurring either in 2014, or 2015. But perhaps, the real lesson here has more to do with the country’s mood than with hard numbers and statistical projections. True enough, improvement in commercial real estate will likely hinge on improvement of the national economy, but good news can be its own catalyst.

Just take a look at your own neighborhood. Some homeowners are already seeing an increase in their home’s value, however small. And more people are renting with an option to lease, as a way of getting around the stricter criterion for traditional mortgages.

While no calendar exists to give us a glimpse of 2013 before it actually happens, the evidence, so far, seems to suggest a more robust economy than we’ve seen in years, which should have a positive impact on commercial real estate.

So what comes next? If you ask me, there is plenty of opportunity out there.

Posted on by Jacob Frydman in Commercial Real Estate, News, United Realty Leadership Leave a comment

Preparing For Coming Inflation

Whenever you turn on the news, you hear about our country’s $16 trillion of national debt which we cannot pay off.  Unfortunately, that’s just a small portion of our country’s financial problems.  Did you know that we also have more than $60 trillion of unfunded government pension obligations, unfunded Medicare and Medicaid and social security liabilities?  And that this debt is increasing at more than $1 trillion per year?

Just think – the US owes more than $76 trillion that iInflation Hits Real Estate Investments In Philadelphiat can’t pay off.  Worse, none of our politicians are willing to raise taxes or cut spending to deal with that problem, because if they raise taxes or cut spending they get booted out of office! As expected, they are more concerned with holding on to their jobs.

So how is our government going to deal with this problem? The same way governments have dealt with this problem throughout history – they print money.

By printing money they inflate the currency, and pay off the debt with cheap dollars, and while that may be good for the government, it is terrible for investors.

When the government prints money, people who saved their money and people who invested in fixed income, bonds and other liquid assets get hurt badly.  In some cases they can get wiped out.

And what’s worse – this time around, the government is artificially keeping interest rates at zero until early 2015 so they can keep inflating our currency without much backlash.

Ask yourselves a few questions:

  • When was the last time you remember not being able to get any interest on money in savings accounts?
  • When was the last time you remember the 10-year treasury at below 1.5%, or corporate bonds at 3%?
  • When was the last time you remember the Federal Reserve printing $40 Billion a MONTH, without end, (which they are now doing and calling it “QE-3”)?

So how do you protect against inflation?  — WITH HARD ASSETS – and frankly, there is no better hard asset than real estate.  Unlike gold or commodities, real estate can generate current income and grow in value with inflation – it has historically been used to generate cash flow and capital appreciation, and is also considered a hedge against inflation.

We are living in unprecedented times, and these events will create risks for some, and opportunities for those who prepare.

 

Posted on by Jacob Frydman in Commercial Real Estate, United Realty Leadership Leave a comment