NEWS & VIEWS

9 June 2017

Valbridge Property Advisors’ Robert Saia, MAI, SRA Writes First Book of Its Kind on Appraising Manufactured Home Communities

Valbridge Property Advisors' Robert Saia, MAI, SRA Writes First Book of Its Kind on Appraising Manufactured Home CommunitiesLOS ANGELES, June 01, 2017 (GLOBE NEWSWIRE) -- Robert S. Saia, MAI, a Director at Valbridge Property Advisors, today announced the launch of "Appraising Manufactured Mobile Home Communities and Recreational Vehicle Parks,” the first book of its kind to constructively analyze this subject matter"

A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/92fab12d-3bd0-4da2-a461-bbd44eeabc97

Rob is a Senior Appraiser/Director at Valbridge Property Advisors – Los Angeles/Inland Empire, part of the largest independent national appraisal company in the U.S. with 68 offices and 200 MAI-designated appraisers nationwide. Valbridge Property Advisors provides comprehensive commercial real estate valuation and advisory services for corporations, institutions, and private and public clients.

Published by the Appraisal Institute®, this well-researched book defines the complex legal, physical and economic challenges facing owners of mobile home communities and RV parks. It also provides appraisers with a broad overview of this fast-growing segment of real estate which requires a particular level of expertise to understand.

"Nearly 8% of Americans live in manufactured home communities (mobile home and RV parks)," says Rob, "which amounts to 38,000+ mobile home parks and 9,000 to 10,000 RV parks. Once thought of as low-quality housing, this real estate segment is now being built with many upgrades including nice landscaping, sidewalks, pools, saunas, tennis courts, recreational facilities, security features and other amenities that make it comparable to a good-quality, site-built subdivision."

Mr. Saia notes that manufactured homes make up a substantial part of America’s housing and come with a unique set of social, legal and environmental aspects that appraisers need to know about because they differ significantly from typical site-built housing in the U.S. Manufactured homes’ popularity is due, in part, to the enormous cost savings they provide. Saia says it costs approximately $93 per square foot for a site-built home while a typical manufactured home runs about $44 per square foot.

Additionally, RV parks are now offering upgrades, never before seen, as in Disney’s destination park which offers live entertainment, swimming pools, golf courses, marinas with boating and fishing, high-quality restrooms and showers, and the availability of the requisite dump stations. In this book, Mr. Saia explains that while mobile home communities and RV parks are high-risk endeavors, they also typically offer higher rates of return over other ownership holdings when properly managed. However, operators and appraisers need to be aware of any local ordinances that govern this type of real estate, which can differ state to state and county to county.

"RV parks in particular require a high degree of business acumen," he says. "You want your appraiser to be a specialist in this area because of all the nuances of manufactured homes. It’s important to have an appraiser who really understands these properties when they are doing an appraisal because it’s a business entwined with real estate."

According to Jim Amorin, MAI, SRA, and 2017 President of the Appraisal Institute, "Saia’s book, Appraising Manufactured (Mobile) Home Communities and Recreational Vehicle Parks, provides appraisers with a broad overview of the mobile home and RV industries and the methods used in valuing mobile home and RV communities. Because this book provides insight into the methodology applied in analyzing these properties, it can also be useful to investors, regulators, owners, and buyers and sellers of mobile home and RV parks."

Robert S. Saia, MAI, SRA has been a real estate appraiser since 1981. His previous book, "A Guide to Appraising Recreational Vehicle Parks," was published by the Appraisal Institute in 1998. He is currently a Director with Valbridge Property Advisors – Los Angeles/Inland Empire in the Pasadena office.

Valbridge Property Advisors’ Southern California real estate appraisal and consulting services cover a wide variety of commercial and geographic areas, including: Los Angeles County, Orange County, Riverside & San Bernardino Counties (Inland Empire), among others.

For a quote on an appraisal for manufactured home parks, RV parks, industrial developments, retail shopping centers, office or multifamily properties, or any other commercial properties, please email us at LA@valbridge.com or call us at 626-486-9327.

25 May 2017

Commercial Appraisals: The Role of Cyberattacks in Assigning Value

Commercial Appraisals: The Role of Cyberattacks in Assigning ValueShould a cyberattack be a considered factor when assigning value in appraisals?

Cyberattacks are a well-known risk to individuals and businesses alike. The fact that someone could invade a business’ IT system or any other digitally-connected device and access company data and financial transactions is a serious risk.  But should you factor in the risk and security that’s been put in place to combat cyberattacks?

Commercial Real Estate and the Risk of Cyberattack

Cyberattacks in general are increasing, and no business is immune. In 2016, there were eight major ones that Forbes identified as some of the largest attacks in history, and a survey by Deloitte found that cyberattacks are a top concern for nearly 75% of corporate executives. Most people are aware of the major cyberattacks against retail giant Target and search engine company Yahoo, but fewer think about them affecting commercial real estate organizations.

The truth is, though, that commercial properties – and those who own or manage them – are vulnerable to any number of attacks. Many business systems for office suites and other commercial properties are managed and controlled remotely, and on-site managers may not take the precautions necessary to protect the properties they oversee.

Commercial real estate companies may not be making the headlines for cyberattacks, but the businesses contain a wealth of data assets that make them a solid target for people looking to inflict harm. Security measures must be implemented, and company leadership needs to assess how their existing technological practices may leave them vulnerable to cyberattack.

Cyberattacks and Appraisals

The role of the appraiser is to produce a credible estimate of a commercial property’s market value. That can get complicated when considering the  risk of cyberattack. Does a cyberattack fall under the definition of a hypothetical or extraordinary assumption and, if so, should it impact the value of the property?  

When a property derives much of its value from the rental rates received, what happens if those rents can’t be collected? Failures from a cyberattack can hurt not only cash flow, but reputation and therefore leasability of properties.

Heightened awareness of the risk of cyberattacks has forced owners and managers of commercial buildings to incorporate security enhancements in an effort to counter such activity. Likewise, appraisers need to consider not only the risk of attacks, but the impact of security measures on a property. If the threat of cyberattack is real, is it quantifiable? And if so, do security measures make a property more valuable than one without them?

Conclusion

The commercial appraisal industry is just beginning to understand cyberattacks and what role they, and the security measures put in place to thwart them, play in assigning value. What’s known for certain is that no industry is safe from a cyberattack. The topic will require continued assessment and vigilant planning. At a minimum, the appraisal industry needs to have conversations about  the risks and whether to consider them, and  protection measures a property owner or manager has in place, when assigning value to a commercial property.

 

15 May 2017

The Rights Remaining

The Rights RemainingConsidering The Value Impact Of An Easement Acquisition

By Kenneth Cantrell, MAI

I recently appraised several parcels for a major power company that involved rebuilding an older power line through densely developed areas of Atlanta, Georgia.The powerline and its associated easement rights had existed for over 60 years, but the power company needed to acquire additional easement rights in order to reconstruct the line. When easements overlay other easements, it can get extremely complicated.

Read the full article in Right of Way Magazine

28 April 2017

Multifamily Developers are Getting Creative to Attract Renters

The multifamily property market continues to outperform other sectors and has the lowest vacancy rates of all major property types. It's a market driven by solid economic fundamentals, and one that many experts feel confident will continue to grow. It's predicted that renter households will increase in every generational demographic, with millennials leading the way. To attract them, developers are getting more creative, experimenting with new designs, offering modern amenities, and taking an innovative approach to marketing.

Amenities Evolution

Amenities-rich multifamily housing is shaping the now and future market. Mixed-income, mixed-use neighborhood developers are offering up a slew of amenities designed to both attract and compete. Nice pools and large fitness centers are now mostly a given, but they aren’t the only communal amenities residents seek when choosing the perfect place to live. Today’s multifamily dwellers want all the amenities they’d find in a single-family suburban market, and are searching for perks like:

  • Ample off-street parking.
  • Recycling facilities.
  • Storage space outside the unit.
  • Community Wi-Fi and a business center.
  • Secured access.

Many mixed-use developers are also including grocery stores and other retailers who offer residents quick access to life’s necessities. Many millennials state they want a place to live, work, and play without ever getting behind the wheel.

Innovative Design

One design trend taking the market by storm is micro-apartments, which have found impressive success in coastal cities with a high cost-of-living. Even inland cities like Cleveland, Detroit, and Pittsburgh are taking a chance on micro, building properties that feature units that are typically 400 square feet or less. They’re betting that younger renters will prefer the smaller, but more luxurious, spaces that often come fully furnished and feature millennial-friendly amenities such as high-speed internet and rooftop vegetable gardens.

Other trends include housing designed with aging-in-place in mind. Empty nesters are also attracted to multi-family living and are looking for a low-maintenance, walkable experience enhanced by amenities that address their age-specific needs.

Co-Branding

One of the more innovative and exciting trends in multifamily housing is non-real estate brands moving into the market’s development phase. Luxury brands in particular are looking to expand into diverse markets that let them showcase their expertise in design and craftsmanship. The Aston Martin Residences in Miami are a great example. The 66-story, 390 high-end condominium tower will boast Aston Martin-designed interiors, including seven penthouses, a two-story fitness center, and a full-service spa.

Other brands like Versace, Bulgari, and Armani have also dipped their collective toe in the multifamily housing design pool. The brands believe it offers them a great opportunity to expand into new arenas in exchange for lending their respective brand’s prestige and unique design touch. Key to the success of such co-branding endeavors is a developer partnering with a brand it believes will resonate with its desired target audience.

Marketing That Makes a Connection

Renting is no longer a simple transaction involving building banners and lease agreements. And where renting was once considered a stepping stone to homeownership, the new American dream for a large segment of the population is a rental to call home. To adapt to this new reality, developers, owners, and management companies are reconfiguring their marketing strategies to include a more emotional component.

The best way to reach potential residents on an emotional level is by understanding why they’re choosing to rent in the first place. Today’s renters want their space to feel like home, not a temporary holding location. They want all the same conveniences and amenities homeowners enjoy, want their friends nearby, and want to feel they are part of a real community. Developers who are able to tap into a renter’s heart and mind will have the greatest impact in today’s multifamily housing market.

25 April 2017

Marcus & Millichap Multifamily Forum

Marcus & Millichap Multifamily ForumATLANTA, Georgia - April 13, 2017 - Valbridge was in attendance at the Multifamily Forum. Thanks to M&M for putting on an informative event.

Keynote Speakers included:

Dennis Lockhart, Former President and CEO, Federal Reserve Bank of ATL.

Hessam Nadji, CEO, M&M

John Sebree, FVP of National Multi Housing Group, M&M

  • Discussion centered around future of Interest rates, and their expected level trajectory for the next 12-18 months.
  • True home ownership will / should be around 60-62%, down from the inflated numbers that approached 70% prior to the 2007/2008 Crash
  • Demographics driving solid demand for many different MF products
  • Loan volume expected to grow in 2017 as deal pipeline continues
  • Demand drivers still remain job growth, Supply, age demographics
  • Class B is the new Darling of the MF properties
  • Spreads expected to come down between OARs and Treasuries as time goes on. Spreads now are some of the widest in recent memory.

Other speakers included Marvin Banks, M.Banks Realty Partners; Steve Carlson, Waterton; Jack Fiorella, Equity Resources;

21 April 2017

Valbridge Becomes Wealth Management Group’s Preferred Provider

North America’s Largest Independent Commercial Valuation Firm Teams Up With FEI

NAPLES, Florida - April 18, 2017 - Valbridge Property Advisors (Valbridge), North America’s largest independent commercial valuation firm, is pleased to announce their selection as the preferred provider of appraisals and business valuation services for The Financial Engineering Institute’s (FEI) network of over 2,200 wealth management professionals.

"We are excited to add Valbridge to our Expert Sourcing Team," said FEI President and Managing Partner, Nick Gregory, ChFE, CEBA, ChFWA. "Accurate, compliant property appraisals and business valuations are a necessity when it comes to comprehensive wealth management. Valbridge’s national presence and expertise in this market make them a natural fit for our team."

Valbridge CEO Rick Armalavage, MAI added, "To achieve the wealth management goals of a family or business and remain fully compliant, you have to assemble a great team. We are honored to join one in FEI’s Expert Sourcing Team."

With this announcement, Valbridge joins an arsenal of best-of-breed expert sourcing firms to provide services to FEI’s network of wealth management firms, investment and insurance advisors, attorneys, and CPAs across the nation. The result is the fusion of advanced knowledge, experience, services, and products with sound engineering principles to create a synchronized hub for family and business wealth building.

Valbridge Property Advisors is the largest independent commercial valuation firm in North America, with 200 MAI-designated appraisers, total staff of over 675, and 68 locations. They offer comprehensive valuation services including all types of commercial property appraisals, market & feasibility studies, consulting/advisory services, litigation support, business valuations, and construction consulting. For more information about Valbridge Property Advisors, visit www.valbridge.com 

The Financial Engineering Institute (FEI), headquartered in Tampa, FL, serves over 2,200 wealth management firms, investment and insurance advisors, Attorneys, and CPAs across the nation. FEI helps these professionals harmonize the complex wealth of families and businesses through the organization’s WealthBlueprintingTM Process. FEI is also the governing body and grantor of the Chartered Financial Engineer (ChFE) professional designation. For more information about The Financial Engineering Institute, visit thefei.com or call 888.884.3332

13 April 2017

White Paper - Fractional Interest Discounts Real Estate

White Paper - Fractional Interest Discounts Real EstateBy: John D. Penner, MAI

A fractional (or partial) interest discount on the value of a real estate property is allowable by the IRS when there is less than a 100% interest in the business entity that owns the real estate. The discount relates to the fact that the ownership interest has a "Lack of Control" over the operation and disposition of the real estate and a "Lack of Marketability" due to the difficulty in selling an interest that is not publicly-traded and is not easily financeable.

Examples of ownership entities that own a fractional interest include:

  • Limited Partnerships (LP)
  • Limited Liability Partnerships (LLP)
  • Limited Liability companies (LLC)
  • Tenants in Common (TIC)

The two instances where this discount generally applies are for the gifting of a fractional interest or upon the death of a person that owns a fractional interest in real estate.

Courts have held that discounts for lack of control and marketability exist in the market and should therefore be considered when valuing a fractional ownership interest. The amount of the discounts can vary depending upon the:

  • Particular ownership entity to be valued
  • Percentage of ownership
  • Rate of return on the investment
  • Amount of debt
  • Market time and conditions in which it is to be considered

Based on our experience in the market we have seen discounts as low as 15% and as high as 67%. The majority of these transactions ranged from a discount of 25% to 40%. In each instance, the ownership interest needs to be valued based on its own specific merits.

Finally, it is noted that upon submission, the IRS requires support in the form of an appraisal for the determination of a discount pertaining to a fractional interest. Per IRS guidelines, the appraisal must consist of a "qualified appraisal" and be completed by a "qualified appraiser."

Valbridge Property Advisors is the largest independent commercial valuation firm in North America and includes a proprietary national database of fractional interest sales. Our appraisals are the most comprehensive in the industry and will help your client sleep better at night.

For more information or questions contact the National Director for Fractional Interest Valuation John D. Penner.

Email: jpenner@valbridge.com
Phone: (714) 449-0852

27 March 2017

Air ways

Air WaysAn appraiser floats several options to determine highest and best use for a dirigible hangar

By Jeffrey S. Harris, MAI

The nation’s only steel hangar for blimps remaining from World War II stands near Elizabeth City, North Carolina. The building is massive, measuring 960 feet by 328 feet and standing 190 feet tall, and its steel construction allows it to flex several inches to withstand wind forces. The property is zoned for industrial use, and improvements total 317,500 square feet of net leasable space

Read the full article in Valuation Magazine

24 March 2017

Valbridge Opens Boston Office

North America’s Largest Independent Commercial Valuation Firm Expands

NAPLES, Fla. - March 21, 2017 - Valbridge Property Advisors (Valbridge), North America’s largest independent commercial valuation firm, is pleased to announce the opening of a new Boston office. Located in Sudbury, MA, the office will be led by James J. Marotta, MAI, a 30+ year appraisal veteran in the area, and Matthew Merrill, a 15+ year veteran.

The new office will offer Valbridge's full scope of independent commercial real estate valuation and advisory services, with particular expertise in affordable housing.

Mr. Marotta on the announcement: “I could not be more excited to join the Valbridge family. Becoming part of a team of over 200 MAI-designated appraisers and having access to Valbridge’s state-of-the-art appraisal technology means there is no job too big for us to handle.”

"James’ wealth of experience in such an important market reinforces the Valbridge philosophy of having a national reach while maintaining local knowledge," added Valbridge CEO, Rick Armalavage, MAI.

Valbridge Property Advisors is the largest independent commercial valuation firm in North America, with 200 MAI-designated appraisers, total staff of over 675 and 68 locations. They offer comprehensive valuation services including all types of commercial property appraisals, market & feasibility studies, consulting/advisory services, litigation support, business valuations, and construction consulting.

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Media Contact:
James J. Marotta, MAI
jmarotta@valbridge.com
(978) 443-3515

10 March 2017

The Value of Property Taken

The Value of Property TakenAppraising real estate acquired through eminent domain

By Kenneth Cantrell, MAI

A typical appraisal provides an opinion of market value and is required for lending and other real estate purposes. However, in cases where eminent domain is involved, the market value is essentially an interim step leading to the final conclusion of just and adequate compensation.

Read the full article in Right of Way Magazine

1 March 2017

NOTES FROM MBA CREF San Diego, California February 2017

NOTES FROM MBA CREF San Diego, California February 2017Earlier this week, more than 3,000 commercial real estate professionals descended on San Diego for the MBA CREF conference.

Valbridge Property Advisors was pleased to be an exhibitor at the event, and enjoyed meeting current and future clients. We were represented by professionals from California, Texas, Georgia, Virginia and South Carolina. In addition to visiting with so many professionals, education sessions were also on the schedule. Below are a few highlights from the perspective of a life insurance company panelist.

Multi-Family Product Class

The life company panelist stated they were focusing more on Class B apartments because they have historically had lower volatility than Class A or Class C apartments. Class A is strong when the economy is good, but suffers when tenants step down to Class B during bumps in the economy. Class C does better when economic times are uncertain, but suffers when the economy turns and tenants move up to Class B.

In both scenarios, Class B apartments are buffered from changes in demand.

Production Forecast for 2017

Life companies are continuing to have record production years, due to struggles in the CMBS world, and expect 2017 to be another strong year. However, many forecasts are for loan production to temper in the near future due to decreases in loan renewals, interest rate increases and unforeseen world events that affect financial markets.

8 February 2017

Valbridge Opens Baltimore Washington Metro Office

Nation’s Largest Independent Commercial Valuation Firm Expands

NAPLES, Fla. - February 7, 2017 - Valbridge Property Advisors (Valbridge), the country’s largest independent commercial valuation firm, is pleased to announce the opening of a new Baltimore Washington Metro office. Located in Marriottsville, MD, the office will be led by David H. Brooks, MAI, a 30+ year appraisal veteran in the area, and Michael Haller, MAI.

The new office will offer Valbridge's full scope of independent commercial real estate valuation and advisory services, with particular expertise in commercial real estate and fractional interest valuations throughout Maryland, Washington, D.C., Northern VA, and Delaware.

Mr. Brooks on the announcement: "Opening a new office can be a challenge. Thankfully, we're in an area we know and love, and have the amazing Valbridge team to help make this a smooth transition."

"David’s wealth of experience in such an important market reinforces the Valbridge philosophy of having a national reach while maintaining local knowledge," added Valbridge CEO, Rick Armalavage, MAI.

The office will include two MAI appraisers, two certified general appraisers, and two associate appraisers, as well as support staff.

Valbridge Property Advisors is the largest independent commercial valuation firm in the country, with 200 MAI-designated appraisers, total staff of over 675 and 68 locations. They offer comprehensive valuation services including all types of commercial property appraisals, market & feasibility studies, consulting/advisory services, litigation support, business valuations, and construction consulting.

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Media Contact:
David H. Brooks, CRE, MAI
DBrooks@Valbridge.com
(443) 333-5525

8 February 2017

Valbridge Opens Miami-Ft. Lauderdale Office

Nation’s Largest Independent Commercial Valuation Firm Expands

NAPLES, Fla. - February 7, 2017 - Valbridge Property Advisors is pleased to announce the opening of its new office in the Miami / Ft. Lauderdale area. The new office is located at 8200 N.W. 41st Street, Doral, Florida and serves the Broward, Miami-Dade, and Monroe County markets. Geri F. Armalavage, MAI, CBA, CVA, CMEA will manage the new location.
 
Ms. Armalavage, a 30-year appraisal veteran and Chairwoman of the Board of Directors of Valbridge Property Advisors says, "We’re excited to be a part of the dynamic Miami-Ft. Lauderdale market.  Our new location provides greater reach for us in Southeastern Florida and will better serve our existing client base throughout this flourishing real estate market."
 
"This new office strengthens our commitment to be the industry leader for independent commercial real estate valuation services across the U.S. while having a local presence," added Valbridge CEO Richard L. Armalavage, MAI.

Valbridge Property Advisors, headquartered in Naples, FL, is the largest independent commercial real estate valuation and advisory services firm in the country, with over 200 MAI-designated members of the Appraisal Institute among over 675 professionals and 69 offices nationwide.  The company’s proprietary technology platform allows for proficient and secure delivery of services nationwide.

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Media Contact:
Suzette Smith
ssmith@valbridge.com
(305) 639-8029

30 January 2017

Estate Planning & Valuation in the Age of Trump

Estate Planning & Valuation in the Age of TrumpIn the not-so-distant past, taxes drove everything in estate planning. Today, a new administration, recent changes in tax laws, and the fact that less than .02% of Americans pay any estate taxes have many people rethinking their estate plans. No matter what the new president does, however, there are still many issues on the table that should drive clients to your door, and many of them require an accurate, independent valuation of the assets involved.

State Taxes

President Trump may work to repeal federal estate taxes, but that still leaves the issue of estate taxes at the state level. With state rates as high as 20% (Washington state), individuals will have plenty of reasons to need estate planning services. Currently, fourteen states and the District of Columbia have an estate tax, six states have an inheritance tax, and Maryland and New Jersey have both.

New Capital Gains Tax?

One idea the new president has floated is a new capital gains tax if he is successful in repealing the federal estate tax. There are few specifics, but an exemption of at least $10 million to protect small businesses and farm owners has been discussed. The application of the tax is unclear however, particularly regarding whether it would apply to unrealized gains or only when the assets are sold. Regardless, as stated by Adrienne Penta of Brown Brothers Harriman,

"If the estate tax is replaced by a capital gains tax, it could be even more complex to administer and to produce the documentation on cost basis."

Estate Valuation

Benjamin Franklin’s well-known phrase that an ounce of prevention is worth a pound of cure could not be more true than when applied to estate planning. Far too often, people leave estate planning and its related issues until it’s too late to take advantage of the benefits available to them and their heirs. Regardless of where estate-related rules and regulations are headed, do yourself and your clients a great service by having an accurate, independent valuation of estate assets completed.

The Valbridge Estate Planning Specialty Group can help you with any of your estate valuation needs, including:

  • Valuations for 706 and 709 filings for all types of real estate
  • Fractional interest valuation/discount studies for LPs, GPs, LLCs, and TICs
  • National Database of Fractional Interest Sales
  • Expert witness/litigation support
  • Partition actions
  • Business valuations
30 January 2017

Heckerling 2017

Valbridge Property Advisors was again a gold Sponsor of the 51st Heckerling Institute. Held in Orlando the Week of January 9-13, it is the premier conference for estate planning professionals providing unparalleled educational and professional development opportunities for all members of the estate planning team, including the task of Real Estate Valuation and Appraisals.

This year’s speakers covered topics of timely interest to attorneys, trust officers, accountants, charitable giving professionals, insurance advisors, elder law specialists, wealth management professionals, educators and non-profit advisors.

Highlights included:

  • a focus on the issues surrounding intra-family wealth transfers including planning with portability, obtaining greater divorce/creditor protection, using GRATs and other freeze techniques, planning for the retirement accounts of married couples, and business succession planning
  • an update on international planning including recent developments and trends in global tax transparency, planning for non-U.S. persons investing in the U.S., and advising clients seeking U.S. tax deductions for international charitable donations.
  • Discussion of tax aspects of fiduciary litigation, recent cases involving fiduciaries, the role of an attorney as an expert witness, how to identify critical pressure points in the estate plan, and how to avoid malpractice liability.

The Institute is also the home of the nation’s largest exhibit hall dedicated entirely to the estate planning industry. Valbridge was also a booth exhibitor, giving us the opportunity to meet and interact with many Estate Planning Professionals. And congratulations to our Allen Brothers Steaks give away winner, Heidi Bitterman with US Trusts. 

20 January 2017

Notes From CREFC Miami, Florida January 2017

Notes From CREFC Miami, Florida January 2017For the 3rd consecutive year, a Valbridge Property Advisors contingent attended the annual CREFC conference. The meetings were held the first week of January at the Loews resort in sunny Miami, Florida; except for the unwelcome day of rain, wind, and cool temperatures.

Following are a few notes that might be of interest.

Multi Family

  • Multifamily debt exceeds $1 trillion
  • GSE’s account for 44% of the debt
  • Freddie believes their business can increase 5% in 2017
  • About 50% of Fannie loans in 2016 were for purchases
  • Fannie is projected to have a volume of $54 billion in 2017

Rent growth is expected to slow to 3%, down from 4.5%

Markets that may see 5% growth include Portland and Seattle

Appreciation in value is also slowing

New York City is adding 13% new inventory to the market. NYC will join overbuilt markets such as Dallas, Atlanta and Nashville.

Foreign Investments

US is the number 1 place for safe investment

Favorite foreign investments are multi-family and industrial

There is foreseen change in this trend

Interest Rates

A survey of CBRE brokers says prices have adjusted 25 basis points since the rise in interest rates. So far, very few deals have been re-traded or terminated.

Government Actions

Marty of CREFC indicated tax reform in inevitable. It could be radical on the commercial side, but not as much on the personal side. There is some support for the elimination of the interest deduction.

There will be GSE reform in Q3 or Q4 of 2017.

Special Servicers

Risk to special servicers of not being enough funds in event of unexpected expenses or litigation

Advance Committees are being established to assist with expenses to alleviate special servicers from taking a hit.

Lending Trends

Insurance companies have shown the lowest losses of all lenders

Banks are now lending in every market, and on all property types. There is no over leveraging as in past cycles. Smaller banks have been pulling back, primarily due to regulatory concerns.

Portfolio transactions are down significantly

Life companies were up in volume for the first two quarters of 2016, while CMBS is down. Bank lending also increased

Forecast for 2017 is for bank lending to be flat, CMBS to be down, and life companies to increase.

The CMBS implementation of the 5% risk retention will have a negative impact. CMBS is pulling back from the higher leverage deals. This is creating uncertainty on takeout’s (maturing loans)

A great number of refis will require a capital infusion due to higher equity requirements.

There will likely be a broadening of cap spread between asking price and contract price.