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

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

New York Residential BuildingsIt’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 York advocacy group. Even worse, the numbers haven’t been this high since the Great Depression. But some landlords have managed to find a lucrative return from a commercial real estate angle.

Though the methods differ, and opposing views persist, the goal – more homeless individuals and families housed – is aligned, to a degree. Landlords can use their real estate to offer shelter to the percent of New Yorkers who need a place to stay. As reported by the New York Times, landlords can receive up to $3,000 (from the Department of Housing Services), and some are offering tenants up to $25,000 to move out of their current homes to make room. Somewhat problematic, these are often rooms without bathrooms or kitchens. The conditions, as reported by some, are worse, due to drug use, violence, and even prostitution.

Meanwhile, the Department of Housing Services (DHS) has been critical of Mayor Michael Bloomberg’s handling of New York’s homeless population, and recently claimed that the homeless shelter population under his administration increased by 61 percent. Additionally, the shadow of Hurricane Sandy looms rather large, albeit the numbers are not included in the report, it can be inferred that a number of displaced New Yorkers affected by Sandy are likely in the system. The DHS concludes that “for the first time since modern homelessness began, the City now provides no housing assistance to help homeless children and families move from shelters to permanent housing.”

According to the Wall Street Journal, the budget for adult shelters has gone up 43 percent to $317.2 million since 2008, while family shelters now cost $464 million a year, up 15 percent from 2008. And in the past two years, the city has added nine single-adult shelters, six adult family shelters and 11 shelters for families with children. Two hundred and thirty-nine shelters are in the system. So, a shortage of shelters, means opportunity for some land owners. Whether it takes advantage of the system (and displaced New Yorkers) is another matter best left for politicians and newspaper opinion pages.

The facts are this: in January, an average of 11,984 homeless families slept in shelters each night, which was a rise of 18 percent from the previous year. And advocates on both sides have valid arguments. Is it morally gray to offer less-than-favorable apartments to individuals and families in transitional housings? Possibly. But when the shelters are more crowded, and the options for moving from transitional housing has stalled, other solutions should at least be examined.

A policy in response to court settlements in 1979 and 2008, pushed for every homeless person in New York to have some type of housing that would be provided by the city. Landlords willing to house the homeless were given freedom to set their own rental prices and terms. In 2005, Bloomberg’s administration ended the  policy, which had up to that time allocated a share of federal public-housing apartments and federal housing vouchers to homeless families.

The action plan outlined by DHS points to ending “the so-called cluster-site/scatter-site shelter program (i.e., apartment buildings used as temporary shelter at enormous cost),” and phasing out the use of commercial hotels and motels as temporary shelter for families. New mayoral candidates have already started their stump speeches to include this issue. But, really, where does the discussion on this really begin? True, you will possibly have a number of landlords who will use the plight of the homeless as a way to make a profit. However, the idea, if properly implemented with at least a modicum of oversight, could allow for positive results to surface.

When transitional housing and commercial real estate converge – or collide – in New York, there’s bound to be a passionate response. At best, we should be able to find a middle ground. One where real estate thrives, and more people have access to a higher quality of life, moving outside the homeless system, and into independence. It’s good business for everyone.

Posted on by admin in Commercial Real Estate, Housing Market, Residential Real Estate Comments Off

Is Two Really Better Than One? Fannie and Freddie Work Together to Find Out

United Realty Discusses Fannie Mae and Freddie MacIt’s barely spring, but the housing market news is starting to warm up. The recent announcement by Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA), that Fannie Mae and Freddie Mac will consolidate functions by starting a securitization firm, has the industry buzzing. This new firm would presumably cast a red hot beam on home loans as they are processed today, easing some of the government involvement in the process. It’s reconstruction on a grander, reasonable scale, and it might just work. Speaking to the National Association for Business Economics, DeMarco outlined a scenario that would be built on cooperation, sure, but more importantly, an aggressive consolidation whereby the company would have its own chief executive and board, jointly owned by Fannie and Freddie.

As the natural step, a sort of quantum leap from the pessimism of 2008, when the Federal Government bailed out numerous companies including Fannie and Freddie, the ground seems almost poised to produce a future harvest, or at best, the beginnings of a more stable and robust market. What are the broader implications? Less government should result in less strain on the U.S. Treasury (both companies have drawn nearly $190 billion to stay in business), at least in theory. Additionally, the goal is to shrink Fannie Mae and Freddie Mac down by 10 percent in the loan market for multifamily homes. According to Reuters, Fannie Mae and Freddie Mac collectively finance about two thirds of the loans in the U.S. Reuters also reported that Fannie and Freddie will aim to complete $30 billion in single-family credit guarantee business in 2013, in effect, sharing some of the risk with the private market. Transactions could include mortgage insurance or other types of debt securities. The Chicago Tribune reports that by next year, both companies will be required to reduce the less liquid portion of their portfolio of mortgages by 5 percent.

The offspring of Fannie Mae and Freddie Mac may share some of the junk DNA inherent in today’s mortgage loan guidelines, but tougher regulations and a new outlook could be enough to make this firm a successful up-start (if you could call it that). The housing turnaround – a rebound, if you’re closing watching the numbers – is poised for yet another collection of positive headlines, as the general climate moves from pessimistic to cautiously optimistic. It won’t happen today, and it certainly won’t happen tomorrow, yet the cogs of the machinery are getting pushed into motion. Springing forward, just took on a whole new meaning, especially if you’re on the right side of commercial real estate.

Posted on by Jacob Frydman in Commercial Real Estate, Housing Market Leave a comment

The Virtual Reality of Commercial Real Estate and Mobile Technology

Real Estate and Mobile Technology
The commercial real estate market is rebounding, and with that bounce-back, comes the increased use of mobile technology.

Commercial real estate used to rely on newspapers, magazines, radio and television ads to carry the message to the consumer, but those methods simply aren’t as effective in the 21st century. A “direct line” is more often than not facilitated by satellites in space, GPS towers, and apps downloaded onto a smart phone. To reach people where they truly live, you must slip into the virtual reality inherent in cloud computing, social media, and viral Web content. In a very real context, change has indeed come.

A recent report by inMotion Real Estate cited that mobile usage in commercial real estate is up 61 percent. And we can reasonably expect an increase this year if the trend holds. The report lists the iPhone, iPad, Sony Ericsson LT 15i Xperia Arc, HTC EvO 4G and the Motorola Droid X, as the top mobile devices of last year, with 25 percent of Internet consumption in the U.S. derived from mobile devices. In short, we carry the future of commercial real estate in our pockets. And more people are taking advantage of this technology.

Last month, the BE-Mobile app (from Building Engines), marked 1,000 downloads, and this should come as no surprise. The app helps the user to manage key operational tasks including work orders, preventive maintenance, incidents, and inspections – it’s all paperless.

And here’s something else to consider: Google Maps can now host your property with its Google Maps Floorplans app, which allows tenants or investors to better understand a building’s accessibility, suite layout, parking field and more. Additionally, it can be combined with Google Maps in 3D and a 360 Panorama by Occipital and you have a real virtual reality tour.

See? The future is truly occurring in real time. Mobile technology is the great equalizer at play in today’s society. How we capitalize – and innovate – within this seismic shift will depend on our ability to embrace this new present for a profitable future.

It’s a reality, however virtual, worth pursuing.

Posted on by Jacob Frydman in News 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

The Perfect Storm For Commercial Real Estate Investing

This article originally appeared as an Op-Ed  from  United Realty CEO Jacob Frydman on ValueWalk.com, a website dedicated to Breaking News in Business, Finance, Politics, Tech and Investing. The link can be found by clicking here.

Most of us know that timing is everything when it comes to investing. If you bought equities during the tech bubble over a decade ago, you’re investment probably hasn’t grown much over the last decade. Despite the crisis in housing market, many folks are wondering if now is the right time to get into real estate.

Some worry that the drop in real estate values over the past three years contributed to the economic downturn we have experienced and real property values will remain flat for the foreseeable future. I know it may be contrarian, but this could be the best time I’ve ever seen to get into the real estate market, especially commercial real estate.

The decline in prices since 2007 makes it possible to acquire good properties for considerably less than it would have cost even 3 years ago and often at below replacement cost. We are also in a historically low interest rate environment, which means financing the purchase of a building today is the cheapest it has ever been. Leverage is one of the components that make real estate so attractive and provides enormous returns on the upside.

I believe we are fast approaching a “perfect storm” for acquiring properties now. Over the next few years, several other trends will occur that make the opportunity even better. By 2013 an unprecedented number of securitized loans will be coming due, at debt levels that will be difficult, if not impossible, to refinance. That should create further buying opportunities for smart commercial real estate investors.

The global sovereign debt crisis and the sluggish economy have forced governments to take actions, such as quantitative easing, which nearly everyone agrees will eventually lead to inflation. For all these reasons, we at United Realty Partners believe we can acquire properties at great prices, finance them with low interest rate debt, improve the value of the rental stream as inflation starts to kick-in, and then dispose of the assets at higher prices towards the end of our holding period.

While stocks and bonds have their place as traditional instruments of investment, investors are increasingly looking towards alternative investments – real estate, hedge funds, private equity and commodities to engineer an overall enhanced performance of their portfolios.

Historically, real estate has been relatively un-correlated to the broader stock and bond market. Said differently, investments in real estate typically do not fluctuate based on the broader stock market, and therefore, real estate helps to diversify a portfolio. Real estate provides an investor with the opportunity to earn current cash-flow, while serving as a hedge against inflation.

Institutional investors have historically allocated a portion of their overall portfolios to direct real estate investments. In 2010 that allocation was 8.53% of their overall portfolios, but has been steadily rising as equities prove more volatile and fixed-income yields remain low. Many experts believe that investors should allocate at least 20% of their portfolios to real assets.

While most small investors do not have access to commercial real estate deals, they can invest through a well-managed Real Estate investment Trust (REIT). Choosing the right REIT can be difficult, but those that acquired property during the boom and have little capital for new investments should probably be avoided. Remember, timing is everything.

Posted on by Jacob Frydman in Commercial Real Estate 1 Comment

RENT-ing is Sweet Music to Brooklyn Investors.

Real Estate NYCYou don’t need to have a Broadway hit to enjoy rent. Brooklyn is booming.

Although the American dream is still to own property, renting has taken off in the years since the Financial Crisis, especially in highly desirable neighborhoods like Brooklyn. That has caused a flurry of activity among commercial real estate investors looking to capitalize on rising rents and low financing. A recent report in the New York Times mentioned sale of 111 Kent Avenue in Brooklyn for $55.5 million, or more than $895,000 for each of 111 Kent’s 62 apartments. The NYTimes article goes on to mention that the price paid per apartment is a record for such properties outside Manhattan, according to the data company, Real Capital Analytics.

Steiner Studios recently acquired a 60-unit rental in the Carroll Gardens neighborhood of Brooklyn for $24.5 million, or $408,000 a unit, and is in contract to buy another rental building in the borough. Other big sales include Invesco Real Estate’s purchase of 75 Clinton in Brooklyn Heights for $50.8 million, or roughly $686,000 a unit. Invesco also bought the Arias Park Slope at 150 Fourth Avenue for $57.5 million, or roughly $605,000 a unit. Equity Residential bought 175 Kent Avenue in Williamsburg for $76 million, or nearly $673,000 a unit. The Naftali Group recently bought a vacant site at 267 Sixth Street in Park Slope that was intended to be a condominium and is instead building a 12-story, 104-unit rental building.

Reports point to several factors behind the trend, including a strong rental market and low interest rates. Rents in the borough increased by 10 percent in 2010 and were estimated to increase by 7 percent last year, according to a market report by TerraCRG.

Even those people who want to purchase a home are having difficulty obtaining a mortgage, according to The Times article. So they turn to renting instead. In addition to a strong rental market, Brooklyn is attracting waves of investors because of the many stalled condominium sites that are primed for conversions into rental buildings.

The Real Deal reports that studios have recently been heating up in the rental market. Previous months have shown that studios lagged behind the one and two bedroom categories for the month-to-month price change, but that is changing. Leading the way was Williamsburg with the highest monthly studio price increase.

Data from MNS shows that Boerum and Cobble Hill are listing rents that are about $100 less than last month. Although the discounts are primarily in walk-up buildings, renters looking for a hot location with a little sacrifice in luxury should hop the F/G trains and start looking. MNS reports that compared to last spring, Park Slope has achieved the highest year-on-year price increase of 33% in the borough. Two-bedrooms are up over $1,000 and new inventory, as well as rental product in condo buildings have pushed the rents up in the neighborhood.

 

Posted on by Jacob Frydman in News Leave a comment

There Are Still Clouds Amid Housing Sector’s Silver Lining

Real Estate ContractAmid mounting evidence that the extended real estate market recession is finally abating, investors are still advised to display considerable caution before jumping back into the market without the advice of competent investment counsel. Over the past few sessions, newly released industry and government data would seem to raise recovery hopes as the residential home market has shown some encouraging signs of reversal. Sales of new homes as well as resales have suddenly ratcheted upward and prices in key markets have been recovering from multi-year lows. This enthusiasm was further encouraged by Toll Brothers’ fiscal year 2012 second-quarter results which showed its revenues rose to $373.7 million with deliveries of 671 units, as compared with revenues of $319.7 million and 591 deliveries in the year ago period. But of greater market impact, according to analysts, was the fact that Toll said it ended the second quarter of its 2012 fiscal year with a backlog of $1.50 billion, for 2,403 housing units, an increase of 49% in dollars terms and 37% in units, compared to the year-ago second-quarter-end backlog of $1.01 billion and 1,760 units.

As the leading builder of luxury homes, analysts consider Toll’s encouraging results to be a possible bellwether for the housing sector in general. Nevertheless, some housing market economists have suggested that the price recovery may be more a reflection of dwindling supply, as new construction has been sharply curtailed over the past couple of years. It will take a couple of months of sustained growth in new starts numbers coupled with firming prices to confirm that a turnaround is taking hold. In the meantime foreclosure activity in outstanding mortgages from the boom years of the mid-2000s continues as a drag on the sector and the pace of loan modifications still appears to be lagging expectations. Sub-prime mortgage securitizations from the issuance boom in 2007-2008 remain well under water and even senior tranches are available at distressed sale levels. The situation is being acerbated by the reluctance or inability of banks or servicers to actually take responsibility for maintaining foreclosed properties. As a result they often are caught in unwanted litigation from tenant or tenant groups over property maintenance. Litigation serves to further delay any corrective activity leading to even greater property deterioration with the result that property values recede even further below outstanding mortgage balances.

Nevertheless, astute investors that avail themselves of well researched market intelligence should be able to identify deals that are discounted to such levels that astute management and patience should be well rewarded. For this reason it is important to seek out professional management that has experience in dealing with such mortgage instruments and that is also in touch with the market and aware of the current state of actual ground level conditions. Such an organization will be able to guide investors towards the best opportunities at any given time. But more important, they will be able to keep investors away from situations that may appear lucrative on the surface but that may actually be fraught with longer term dangers.

Posted on by Jacob Frydman in Housing Market, News Leave a comment

Recovery in Retail CRE Under Way, Proceed With Caution

It might not be ‘shop til you drop,’ but a recent report by commercial real estate services provider Cassidy Turley notes that the retail sector absorbed 3.1 million square feet in the first quarter, following a pace of 3.4 million square feet in the fourth quarter of 2011.

The pace over the last six months is five times faster than any point in the recovery cycle. Further, vacancy fell 10 basis points to 10.9% — the first decline in five years. Average asking rents, which have fluctuated in the past year, increased slightly in the first quarter of 2012 to $19.00 per square foot. Markets with the highest percentage of rental growth include Austin at 3.4%, Charlotte at 2.9%, Oakland-East Bay at 2.7%, and San Jose and Seattle at 2.6%. Manhattan claims the top per-square-foot rate with an average asking rent of $56.96.

“We may have a long way to go to reach what’s considered full recovery, but the U.S. retail sector also has made tremendous strides from our depths,” said Cassidy Turley’s Chief Economist Kevin Thorpe in their May 22 report.  We don’t see the middle-class consumer returning to its old spending patterns, much less the credit-fueled ‘aspirational shopping’ of the mid-2000s, for a number of years. This simply is not going to happen until the housing market recovers and much of the equity lost in the downturn is restored.”

Moreover, some investors remain cautious when it comes to retail CRE. Even through a recovery, given the long-term impact of online shopping on bricks and mortar, as well as the shopping habits of American consumers, one must be cautious about retail real estate.  The market is bifurcated, with high end luxury brand urban locations such as Fifth Avenue in New York, the Miracle Mile in Chicago and Rodeo Drive in Beverly Hills, continuing unprecedented increases in demand resulting in significantly higher rents, contrasted with an oversupply of suburban strip centers, which likely will be negatively impacted as consumers increase their online shopping trends.

First-tier shopping centers – those in vibrant urban markets or top suburban intersections or trade corridors – are posting marked improvement, with the highest rate of deal activity and, in most cases, rental-rate growth. Second-tier locations – shopping centers lacking strong anchors or not “on the main drag” – in the nation’s strongest market are generally posting rent growth as well. The trend is not replicated in weaker markets as third-tier shopping centers face challenges in nearly every market. This goes to prove again that real estate is all about location.

One of the most encouraging signs for the industry is that the era of massive big-box vacancies appears to be over, according to Retail Traffic Magazine. Several big chains stores including Ulta, Five Below, TJ Maxx, Ross Dress for Less, REI and Whole Foods have been snapping up those big-box vacancies, Thomas W. Gilmore, executive vice president with Los Angeles-based Madison Marquette, told the magazine recently.

“Landlords at high quality, well-located shopping centers no longer have to give in to tenants when it comes to rents. At those centers, the power equilibrium has returned to leasing negotiations. In the strongest markets in the country, landlords are even able to push rents,” Matthew K. Harding, president and COO of Levin Management Corp., told Retail Traffic.

That momentum is likely to continue as retailers try to gain a better understanding of their customers and real estate, marketing and merchandising departments interact with each other in order to make the best decisions on store openings.

Posted on by Jacob Frydman in Commercial Real Estate Leave a comment