Your Real Estate Portfolio, Troubled Properties: Whats Happening Now

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Your Real Estate Portfolio, Troubled Properties
Whats Happening Now

• Professional Edge Series
• Monday, April 20, 2009
• 130 to 300

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Speakers

• James A. Evans, CPM, Moderator
• Bruce G. Pollock Associates
• Lawrence Yun, Ph.D.
• National Association of REALTORS
• Robert Toothaker, CPM
• CB Richard Ellis/Bradley

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Real Estate Market Outlook Through Economic
Recession
Lawrence Yun, Ph.D. Chief Economist NATIONAL
ASSOCIATION OF REALTORS
Presentation to Institute of Real Estate
Management Washington, D.C. April 20, 2009
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Stimulus Package

• 789 billion some good, some bad projects
• Housing stimulus
• 8,000 first-time buyer credit
• Higher loan limit to 729,000
• Continuing low mortgage rates (viaTARP)
• Commercial stimulus
• Preserve low capital gains tax rate
• Relax mark-to-market accounting
• Fed buy CMBS (via TALF and TARP)

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Economy Contracts
GDP annualized growth rate
Lastest Data
Forecast
Source BEA
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Consumers Tapped Out
Personal Consumption annualized growth rate
Source BEA
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Consumer Confidence
Source The Conference Board
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Stock Market Wealth(8 trillion loss from peak)
SP 500 Index
Source WSJ
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Housing Valuation (3 trillion loss in wealth
from peak)
billion
Source Federal Reserve, NAR estimate
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Job Changes in U.S.
One-month payroll job changes in thousands
Source BLS
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Retail Market Fundamentals
In thousand sq. ft.
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Retail Vacancy Rate
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Retail Investment Market
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Office Market Fundamentals
In thousand sq. ft.
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Office Vacancy Rate
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Office Investment Market
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Industrial Market Fundamentals
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Industrial Vacancy Rate
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Industrial Investment Market
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Multifamily Market Fundamentals
In thousand sq. ft.
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Multifamily Vacancy Rate
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Multifamily Rent Growth
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Multifamily Investment Market
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Recession Impact on Home Sales
Existing Single-family Home Sales
Source NAR
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Housing Affordability Index(Higher numbers mean
more people can afford to buy a home)
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Overshooting and Collateral Damage

• Consumer Spending Contraction from Negative
  Wealth Effect
• Primary Foreclosure Determinant Home Prices
• Mortgage Credit Loss Multiplier Effect on
  Credit Contraction
• Self-reinforcing pessimism
• Buyers sit on fence, Inventory builds, Prices
  fall, Foreclosures rise, Buyers sit on fence

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Federal Budget Deficit
million
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Economic Outlook
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Commercial Market Outlook

• 2008 to 2009
• Net absorption turns negative
• Rising Vacancy Rates and Stagnant Rent
• Markedly Fewer Transactions
• Property Prices Falling providing opportunities
  for parked cash
• Apartments holding up better
• 2010
• Economic recovery
• Commercial recovery with lag time
• Pent-up and delayed transactions
• Modestly Positive net absorption and rising rents

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PresenterRobert Toothaker, CPM

• Analysis of Current Economic Climate on
• Commercial Real Estate
• Introduction
• 1. General Professional and Business
  History
• 2. Personal involvement/history with
  Troubled Property

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Evaluation Of Economic Situation

• Comment on major take-aways from Dr. Yuns
  presentation
• Overview observation
• Indicators of current decline provide sign posts
  for the future
• Examples of sensing troubled times ahead

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Overview Of impact On Property Management

• Part 1 RCA December 15 and 16 meeting and IREM
  input
• 1. IREMs statement of policy
• 2. Proposed to NAR
• 3. Solutions implemented

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Part 2 IREM proposed goals and Solutions

• Goal 1 Stabilize and Provide Liquidity
• Solutions- A. mark-to-market accounting
  rules
• B. Treasurys Term Asset-
  Backed- Securities Loan
  Facility (TALF)

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Part 2 IREM proposed goals and Solutions

• Goal 2 Maintain or enhance federal tax policies
  that strengthen Commercial Real Estate
• Solutions- A. Retain capital gains and
  carried interest
• B. Improve depreciation
  and leasehold improvements
• C. Reduce investment
  impediments

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Part 2 IREM proposed goals and Solutions

• Goal 3 Stimulate and support commercial real
  estate investment
• Solutions- A. Provide federal funding
• B. Encourage energy
  efficiency and green building initiatives

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Actions to minimize your own businesss
vulnerability in troubled times

• Cut risk
• Return to fundamentals
• Leasing, leasing, leasing
• Keep clients up to speed
• Focus on marketing

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Actions to minimize your own businesss
vulnerability in troubled times

• Bill correctly
• More frequent communications
• Generate additional income
• Expand services
• Add consulting
• Expand to other property types

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Business Opportunities for Real Estate Managers
In Troubled Times

• The process
• Sources of Opportunities
• Commercial Loan Officer
• Other professionals
• Owners
• Examples of Opportunities
• Additional Opportunities- Receiverships

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Closing Remarks

• There is a need for superior real estate
  management

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Questions and Answers