MCB Accounting Blog

As economic conditions have improved, the U.S. commercial real estate (CRE) lending business has begun to pick up.  For the first time in five years, a majority of banks are talking about their ability to increase their loan portfolios.

Although this feeling is not unanimous, nor is the projected lending growth strong, bank executives have begun to signal that they are ready to return to CRE lending. Opportunities are appearing in select markets and particular asset classes.  However, some banks are still being aggressive in writing off some loans, particularly construction loans, and are trying to sell off their foreclosed real estate inventory and nonperforming loans as best as they can. 

The Federal Reserve Board's latest Senior Loan Officer Opinion Survey confirmed anecdotal evidence. U.S. bank loan officers reported that demand for CRE loans had strengthened over the past three months. Domestic banks reportedly eased maximum CRE loan sizes and trimmed loan rate spreads.

Growth in CRE lending is likely to be limited and cautious in 2012, but investors who financed at the peak of the market five years ago may find that the lending environment couldn't be better. As mortgage production increases, investors will see banks being more competitive in pricing.

Initially, it is likely that those that are good shape that will stand to benefit first, and financing terms are likely to continue to be tight.  Banks also may use the opportunity to restructure the makeup of their portfolios--weeding out the less creditworthy.

One area that may do well in 2012 is existing CRE-lender relationships. As they become more active and further credit extensions are allowed, amortization and other prepayments may be helped.  The REIT arena may be more active as well.

Some bank executives feel that the principal CRE marketplace is generally strong.  In many cases, loan-to-values (LTVs) are very low, indicating that there is a lot of money in investing in real estate. Commercial loans at low LTVs are very attractive.

Refinancing is a hot topic among CRE lenders.  Many loans with five-year maturities are not yet matured and are being looked at as to whether they are good prospects for renewal or repricing. Some banks are discussing refinancing existing loans and are lowering rates.

In general, loan growth will be selective by market and asset type. Multifamily was frequently mentioned as an area of potential growth, along with middle-market industry segments such as restaurants, health care and energy.

Click here for the complete CoStar Group News article.

Contact an MCB Real Estate Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.  MCB has relationships with several commercial real estate bankers and would be pleased to refer you to a banker based on your commercial real estate lending needs.

Hotel fundamentals are improving slightly in the United States, but industry analysts say the real growth in the industry is happening in international markets, especially in developing economies.  Large hotel corporations, including Hilton and Hyatt, are entering markets like China and India to build new properties. The Brazilian market is also expected to grow significantly in the coming decade, with the hosting of the FIFA Soccer World Cup and the Summer Olympics in 2014 and 2016, respectively.

Jones Lange LaSalle Hotels is forecasting that international hotel transaction volume will hold steady in 2012.  Their experts are expecting 2012 worldwide transaction levels to at leach match 2011 levels.  That represents a 13 percent increase over 2010 volume.

The construction of new hotels in the U.S. market has historically grown at an average of approximately 2 percent per year, but the recent growth rate has been less than 1 percent. This low growth rate is expected to continue as demand does not warrant significant growth.

Major markets such as New York, Chicago and Boston are likely to see more demand than the secondary markets.  In addition, the U.S. industry is starting to see smaller boutique properties being developed to meet the preferences of a new generation of travelers.

Click here to view the complete REIT.com article.

MCB has over 35 years of real estate and hotel accounting experience providing audit, tax and financial statement services.  Contact an Adviser today at info@mcb-cpa.com or call 703.218.3600 to discuss your hotel accounting and tax needs or to receive a proposal for your next financial statement audit.

The best thing to come out of the recent recession was a reminder that cash is king, according to outgoing Marriott International CEO Bill Marriott during Monday's opening general session at the American Lodging Investment Summit.

"Corporate America has more cash on hand than ever before," Marriott said. "That's probably the brightest thing on the landscape."

Sam Zell of Equity Group Investments agreed that cash is the biggest advantage a company can have.

"Liquidity equals value," he said. "At no time in my career has it ever been more clearly brought home to me than in the 2008-2009 period. If you had liquidity, you had value....Everything comes down to liquidity, everything comes down to exit strategies, everything comes down to knowing when you get in how you are going to get out."

Real estate, in general, is not yet out of the woods when it comes to having a difficult financial environment, Zell said.

"There has been a very limited solution to the overleveraged real estate industry," he said. "Pretend and extend was a really great thing in 2008-2009, but reality is going to have to take its place. An enormous amount has to be done in 2012 and 2013 to recapitalize overleveraged assets all over this country."

To hear more from Marriott and Zell at ALIS, click here to access the complete HotelNewsNow.com article.

MCB has over 35 years of real estate and hotel accounting experience providing audit, tax and financial statement services.  Contact an Adviser today at info@mcb-cpa.com or call 703.218.3600 to discuss your hotel accounting and tax needs or to receive a proposal for your next financial statement audit.

U.S. malls and shopping centers experienced a slight improvement in occupancy during the fourth quarter of 2011.  However, any recovery remains precarious and the outlook for 2012 remains mixed.  Some retailers--such as Forever 21, Dick's Sporting Goods and Dollar General Corp. are expanding, but others--such as Sears and Gap Inc.--are struggling.

The fourth quarter typically is the strongest for retail landlords and their tenants.  However, fourth quarter 2011 was the strongest since the recession hit in terms of rising rents and occupancies. Malls in the top 80 U.S. markets posted an average vacancy rate of 9.2% for the quarter, down from the 11-year high of 9.4% in the third quarter.  The vacancy rate had been climbing since 2007, when it fell as low as 5.5%.

Demand for neighborhood and community shopping center also strengthened, with stores occupying an addition 3.1 million square feet in the top 80 markets.  Because of new construction, the vacancy rate for this category remained at 11%, where it has been for three quarters.

The average annual rent at U.S. malls rose to $38.92 a square foot in the quarter, a 0.3% increase from the third quarter, and the second consecutive quarterly gain.  Mall rents had been mostly flat or declining since 2008. New construction is at a virtual standstill.  Only 4.5 million square feet of shopping center space opened in 2010, the lowest figure in 31 years.  The amount was slightly higher in 2011, at 4.9 million square feet.

Contact an MCB Real Estate Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

The United States is expected to remain the top choice of most global commercial real estate investors in 2012, according to the 20th annual survey of Association of Foreign Investors in Real Estate (AFIRE) members.  The country has lost ground to Brazil, which ranked No. 2.

The United States is seen as offering the most stable and secure option in commercial real estate.  However, investors said improvements in rents and occupancy growth and the repeal of a 1980 foreign investment tax would have the strongest impact on their investment decisions.

For about the past year or so, investors in U.S. commercial real estate have focused on gateway cities such as New York, Washington, DC, Boston, San Francisco and Los Angeles, driving prices up and yields down.

Some 60% of respondents said they plan to increase their investment in U.S. real estate in 2012. This is down from a record 72% last year.  Additionally, 42.2% of respondents said the United States in 2012 would offer the best opportunity for the price of their commercial real estate investments to increase. This was down from 64.7% in last year's survey.

AFIRE's survey respondents hold more than $874 billion of real estate globally, including $338 billion in the United States.

Click here to view the complete CNBC.com article.

Contact an MCB Real Estate Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Employment in the private sector rose by 212,000 jobs in December 2011, reducing the unemployment rate two-tenths of a percentage point to 8.5%, according to the U.S. Bureau of Labor Statistics. This is the lowest unemployment rate since February 2009.  Job gains were mostly in transportation and warehousing, retail, manufacturing, health care and mining.

Employment in professional and business services changed little in December, for the second month in a row. The industry added, on average, 42,000 jobs per month during the first ten months of 2011. Government employment changed little in December, but it was down by 280,000 jobs over the year. Job losses in 2011 occurred in local government; state government, excluding education; and the U.S. Postal Service.

Click here to view the complete AccountingToday.com article.

Contact an MCB Tax Adviser for your tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.

Now may be an opportune time for a good deal on office space.  Despite record growth in 2010, the Washington, DC, region's office market is beginning to decline. Performance in the third quarter of 2011 was the worst since late 2009. This is a sharp contrast to the boom the area saw throughout 2010, when total office space absorption within the city limits was a record-breaking 4.3 million square feet.  Because the government sector occupies up to 40% of the city's office space, recent moves to cut the federal budget deficit and control federal spending, and uncertainty about the size of the government workforce in the future have caused the market to shift downward.

The amount of occupied space rose by a mere 1,200 square feet in the third quarter of 2011. By comparison, the amount of occupied space increased by 2.2 million square feet in the third quarter of 2010.

The region's vacancy rate increased to 14.1% from a post recession low of 14% reached in the second quarter of 2011.  About 3 million square feet of government leases that were in the works have been delayed or canceled. In addition, area employers, from law firms to defense contractors, that are heavily reliant on the federal government and would be affected by government cutbacks are rethinking move and expansion plans.

Contact an MCB Real Estate Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.