Although FDIC’s “Problem List” Increased from 884 to 888 Institutions During the Quarter, Nonresidential Assets Continue Slide, Construction & Development Problems Abating, Multifamily on Verge of Turnaround

By Mark Heschmeyer

June 29, 2011

While commercial real estate continues to burden the nation’s 7,584 insured banks and thrifts, the severity of the CRE-related impairment is gradually decreasing. Most of the recuperation is stemming from write-downs and attrition in construction and development loans, the dearth of new lending and from improvement in the multifamily sector.

As deteriorating conditions lessen, the amount of capital that banks have available to loan should increase. Banks are already setting aside fewer dollars to deal with the losses, according to the FDIC. New provisions for loan losses fell to $20.7 billion in the first quarter from $51.6 billion a year earlier. This marks the sixth quarter in a row that loss provisions have had a year-over-year decline. It is the smallest quarterly loss provision for the industry since third quarter 2007.

“Certainly this has been aided significantly through the continued low interest rates engineered by the Federal Reserve,” noted CoStar Group Senior Real Estate Strategist Christopher N. Macke. “If the termination of QE II or some other factor leads to rising interest rates, banks will have to rely on strengthening property fundamentals to offset the rising rates – commercial real estate’s version of “The Amazing Race.”

The total amount of CRE loans outstanding fell by $32.3 billion (2%) during the first quarter. At the end of March, insured institutions reported holding $1.58 trillion in CRE-related loans, down from $1.61 trillion at the end of 2010.

The total amount of construction and development loans on bank books fell by $25.9 billion (8%) to $295.6 billion.

The total amount of nonresidential loans (including owner-occupied buildings) on bank books fell by $6 billion (less than 1%) to $1.07 trillion.

However, the total amount of multifamily loans on bank books was flat falling by just $300 million to $214.5 billion.

The total amount of distressed CRE assets (delinquent loans, foreclosed assets and restructured loans) at banks stood at $170.9 billion, just 1.3% of all outstanding bank assets.

Total delinquent CRE loan balances (loans 30 days or more past due or in nonaccrual status) fell by $3.5 billion (2.8%) during the first quarter. At the end of March, banks and thrifts reported $121.6 billion in delinquent CRE-related loans, down from $125.1 billion at the end of 2010.

Delinquent construction and development loans fell by $4 billion (6.9%) to $53.8 billion.

Delinquent multifamily loans fell by $400 million (3.8%) to $10 billion.

However, delinquent nonresidential loans grew by $900 million (a 1.6% increase) to $57.8 billion.

The balances of foreclosed assets continued to grow at the nation’s banks from $30.9 billion at the end of the year to $31.2 billion as of March 31. All of that increase was in nonresidential properties, which grew by $500 million to $10.7 billion.

The amount of foreclosed construction and development projects fell about $100 million to $18 billion; and foreclosed multifamily properties also fell by about $100 million to $2.5 billion.

The total amount of restructured CRE loans at the end of the first quarter stood at $34.9 billion, (the amounts are not available for previous quarters). Of those restructured loans, $16.7 billion (48%) were again delinquent or in nonaccrual status.

The number of insured commercial banks and savings institutions reporting financial results in the first quarter declined from 7,658 to 7,574 in the first quarter. One new reporting institution was added during the quarter, while 56 institutions were absorbed through mergers and 26 institutions failed.

From the big picture of gradual recuperation in CRE bank assets, we’ve pulled together some of the highlights from the individual bank numbers.

• The number of institutions on the FDIC’s “Problem List” increased from 884 to 888 during the quarter. Assets of “problem” institutions increased from $390 billion to $397 billion.
• Of the 7,584 insured banks in the country as of March 31, distressed CRE assets made up 1% or less of total assets at 4,298 banks.
• 566 banks out of the total of 7,584 (7.4%) hold more than 80% of the distressed commercial real estate on bank books. The 10 largest banks in the country hold $49.4 billion in delinquent, foreclosed or restructured assets (29%).
• Wells Fargo Bank holds $2.24 billion of commercial real estate properties on which it has foreclosed, including $1.14 billion in construction and development properties and $868 million in nonresidential properties. Citibank holds the largest amount of foreclosed multifamily properties at $710 million. While high in dollar amounts, the total amount of CRE distress at these two banks is 1% or less of their total assets.
• Distressed CRE assets make up more than one-third of total assets at five banks: Builders Bank, Chicago, IL; First Choice Community Bank, Dallas, GA; High Trust Bank, Stockbridge, GA; Security Exchange Bank, Marietta, GA; and Cortez Community Bank, Brooksville, FL.

BY DAVID BRACKEN – Staff Writer

Published in: Economy

That was one of the key points made by John Silvia, chief economist for Wells Fargo in Charlotte, during a conference call Tuesday to discuss the state’s economic outlook for 2012.

Silvia and another Wells Fargo economist, Michael Brown, discussed North Carolina’s recent economic performance as well as the metro areas of Charlotte, the Triangle, Greensboro and Asheville.

“Yes, we have forward momentum, but just not at the pace we’re used to,” Silvia said.

Among the problems facing the state is that although economic output is growing, that increased output is not creating the same number of jobs that it has in the past. That is particularly the case in sectors such as manufacturing.

“A lot of these manufacturing firms are achieving growth, but they’re doing it through productivity gains, better capital and enhanced manufacturing practices but certainly not in adding on a lot of workers,” Silvia said.

The Triangle is “improving far faster than any of the other metro areas across the state,” Brown said.

The region’s unemployment rate is 7.9 percent, compared with 9.7 percent for the state. The national average is 9.1 percent.

The professional and business services sector is creating the most jobs in the Triangle. The area is also adding local government jobs.

“There’s been less of a disruption to the tax collections in Raleigh than there has been in other parts of the state,” Brown said. “The local government, at least, has not been as strapped for cash as some of the other metro areas.”

Brown predicted that the Triangle would continue to add higher-paying technical jobs as well as positions in health care.

“In a matter of months, literally, we’re looking for almost a complete recovery at least in the Raleigh metro area in terms of the employment situation,” Brown said.

Another view: few jobs

That outlook is quite a bit more optimistic than the results of a Manpower employment outlook survey released Tuesday.

The results showed that employers in the Raleigh-Cary area expect to hire at a conservative pace during the third quarter. The Raleigh-Cary outlook is one of the weakest in the nation among the markets Manpower surveys. The survey is the result of interviews with more than 15,000 companies across the country.

Manpower’s local outlook reinforces the gloomy outlook of corporate financial executives in recent surveys, which points to weak hiring as factors such as high energy prices and the housing slump continue to dampen economic activity.

The Triangle is home to nearly 70,000 unemployed people, the N.C. Employment Security Commission reported last month. In April, that total saw the biggest one-month increase since the recession started.

Incomes rises

Still, Wells Fargo’s Silvia said Tuesday that incomes in the state have started increasing after a long period of stagnation.

He said the state is undergoing a structural shift in its labor market whereby jobs that can be done cheaper overseas are disappearing and not coming back.

Workers will need to be retrained to qualify for skilled jobs in areas of the economy that are growing.

“I think it’s just important to understand that the structure of the labor market is changing,” he said. “It’s changing in terms of what employers expect from their workers and the availability of those workers.”

david.bracken@newsobserver.com or 919-829-4548

Posted By susanne On April 7, 2011 @ 3:45 pm In Business Development,Business Outlook,Consumer News and Advice,Home Buying 101,Marketing,Real Estate News,Real Estate Trends,Training | Comments Disabled

Research Triangle Region, N.C. – The Research Triangle Regional Partnership (RTRP) has launched a new Web site that showcases the Research Triangle Region’s competitive assets, world-leading clusters and innovative companies that make the region one of the most economically competitive in the world.

“A high-impact Web site is an essential marketing tool for economic development,” said Charles A. Hayes, president and CEO of RTRP, which leads economic development for the 13-county region.

“Companies and site selection consultants often narrow their short list of potential locations using online data before anyone even knows they are looking for a site,” Hayes said. “Our new Web site is designed intentionally to help visitors see quickly and clearly why this region is one of the best places in the world for innovative companies to locate and grow.”

RTRP’s new Web site, www.researchtriangle.org, is designed to support the region’s brand, offer essential data and information in an easily accessible format for those who are making location decisions, and provide a valuable online marketing resource for economic development partners across the region, said Lee Anne Nance, RTRP’s senior vice president for strategic initiatives, who led the redesign project.

The site offers key new features:

• Landing pages for each of the region’s 13 counties to showcase their unique assets and amenities and demonstrate how they support the region’s industry clusters.

• Detailed information on the region’s targeted clusters, lists of organizations within those clusters, and proof points showing why the region is uniquely positioned to support the growth of those clusters.

• Tight integration with the N.C. Department of Commerce Economic Development Intelligence System (EDIS), which provides extensive and continuously updated regional and county demographic and business data.

• Extensive use of graphics and mapping to present data and information in an easily accessible format.

• “Partners” section with links and descriptions of the many business, government, academic and business support organizations that collaborate to promote regional economic development.

• Contact information on every page to direct visitors to the person who can handle specific inquiries and requests.

• News and accolades customized for each county and cluster.

• A sophisticated content management and analysis system, providing easy-to-use tools to keep content fresh and relevant and extensive analytics to show how visitors are accessing and using the site.

“We intend to make use of these rich analytic tools to better understand who is using our site, what they are interested in seeing and doing on the site, and what enhancements will best allow them to experience the many assets and amenities our region has to offer them,” Nance said. “The Research Triangle Region is a world leader in life sciences and technology, a magnet for talented, creative workers, and one of the best places in the world to live, play and do business,” she said. “Anyone who visits our new Web site should be able to clearly see that and realize that we simply provide one of the best environments in the world for their company to grow and thrive.”

The Research Triangle Region of North Carolina is home to The Research Triangle Park and the counties of Chatham, Durham, Franklin, Granville, Harnett, Johnston, Lee, Moore, Orange, Person, Vance, Wake and Warren. The Research Triangle Regional Partnership leads the region’s economic development strategy, The Shape of Things to Come. For more information, visit www.researchtriangle.org or call (919) 840-7372.

FROM:  RTRP – Research Triangle Regional Partnership

Read more: http://blogs.newsobserver.com/business/north-raleigh-apartment-complex-sells-for-35-million#ixzz1CiTkAsok

See the article below about the apartment market in the current economy.  We have the ability to analyze these deals and help you determine the quality of  an investment and project potential returns. 

Contact us with your investment objectives and we can search for investment properties that will meet your needs.

Dan Smith

Millridge Commercial Real Estate

919 554-4165

APARTMENTS:

Transaction Volume Rises More in Apartment Than in Other Property Types

Distress is hitting home in the multifamily sector, and as more assets become troubled, the bid/ask spread will tighten in 2010 and cause sales volume to rise quickly. In the last cycle,apartment-sales volume peaked in 2005 (due to the condo-conversion craze), while office,retail, and warehouse sales volume peaked in 2007. This timing, combined with the sector’s shorter lease terms and tumbling NOIs, is resulting in expedited distress. Delinquencies in the apartment market have risen by 590 basis points in the last 12 months as of the third quarter, compared with just 390, 290, and 240 basis points for retail, warehouse, and office,respectively. The typically higher loan-to-value ratios and lower debt-service-coverage ratios in this sector are certainly not helping matters, either, and just as delinquencies are mounting, the vultures are circling. Since apartment investment has been sliding since 2005, there is plenty of pent-up interest in the sector. And if PPR’s client activity is any indication, that interest is growing daily. As of December, 61% of all client activity on the PPR Portal in the last 90 days has been apartment related, and this proportion has been steadily increasing. The apartment sector’s strong drivers going forward (including healthy demographics, an increasing renter pool, and stabilization in the labor markets) are driving investor interest. And, of course, the greater availability of debt in the multifamily sector will propel investment volume through 2010. As Fannie and Freddie continue to finance multifamily loans, apartment investors have a leg up on their other commercial counterparts. But should the GSEs cut down on their apartment lending activity in the second half of 2010, sales volume could certainly take a nosedive.

Exhibit 9). In addition to the pretty rough fundamentals environment through year end, with record high vacancies and plummeting rents, the cap rate question is really one of spreads. Right now, apartment cap rates of around 7% on 10-year Treasuries of about 3.5% equates to a spread of about 350 basis points. As fundamentals improve, cap rate spreads will come in a bit during the recovery; however, given the stimulus and the potential for higher inflation, we expect the 10-year Treasury rate to head towards 5.5% — if not in 2010, then in 2011. Therefore, a 250- or 300-basis-point spread results in cap rates of 8%–8.5%, depending on the market. However, if we handicap this prediction, particularly for 2010, we expect that we are a bit too conservative — i.e., rates could surprise on the upside and remain low, and spreads could come in a bit more than we expect.

White Paper

Real Estate/

Portfolio

Strategist

January 2010

vol.14 no. 1

page 14

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Wake Forest named a top U.S. growth city

Triangle Business Journal

Wake Forest is one of the top high-growth communities in the country, according to a ranking compiled by research firm Gadberry Group.

Gadberry, which provides location information and household data for clients such as retailers, on Tuesday announced the top nine cities in its “from 2009” report.

Little Rock, Ark.-based Gadberry evaluated various metrics, including growth in households and income. Wake Forest placed sixth in the ranking. The city grew from 8,150 households in 2000 to 17,803 in 2009, a 118 percent increase, according to Gadberry’s analysis. The average annual household income for Wake Forest increased from $70,148, to $82,771.

The top city was Atlanta suburb Braselton, Ga., which saw its household income increase 67 percent from 2000 to 2009. Houston suburb Atascocita, Texas followed. Texas was well represented with four cities. Besides Wake Forest, no other North Carolina community made Gadberry’s top rankings.

“As a Wake Forest native, I’ve recognized the explosive growth that our community has experienced,” Don Stroud, Wake Forest Area Chamber of Commerce board co-chair said in a statement. “The Gadberry data will give us the quantitative tools we need to continue to draw new development to Wake Forest.”

Published: Sep 22, 2009 03:40 AM in The News & Observer

Mid- Year Review notes from 23 July 2009

 On the 23^rd of July a hundred or more real estate and associated business professionals attended the Mid-Year Space review held by the Triangle Business Journal at the Embassy Suites in Cary, NC. Here are a few notes I took on each section, along with the presenters name and subject.  Please see the attached slideshow from the presentation as a reference.

 Keith Crisco/Keynote Speaker:  North Carolina Secretary of Commerce.  He discussed how North Carolina is aggressively competing for new businesses against neighboring states in the region and how important tax incentives can be.  He also stated that these incentives are tied to performance and the ability of the incoming company to employ the number of people they projected.  So if a company does not employ 90% of their projected number of new jobs, they do not get the incentive for that year.  He also said that there have been 4500 new jobs created in the state since JAN 2009.

Matt Riggs/ Construction Costs: Vice President of Centurion Construction.  Construction costs are down 40% from OCT 2008.   He said there are a number of issues that will cause construction costs to increase in the future: Infrastructure building in China which will effect raw material costs, “Green” building concepts that may be integrated into building code,  the possibilities of companies being required to provide healthcare .

Mike Munn/ Regulatory Issues: Vice President of the John R. McAdams Company.  The proposed franchise Tax for LLC’s and LLP’s has not passed yet.  There has been some development extensions which extends permits for current developments (Bill  SB831).  The Jordan Lake rules became law on June 30,2009 and increase the standards for stormwater management.  The Falls lake rules are under revision and expect to see more changes as a result of the drought of 2007, which also resulted in a tiered water rate which increased water costs.  Expect to see a new term emerge called LID or Low-Impact Development which will be the next LEED.  Expect  to see new regulations that stress the importance of water quality and quantity.

Bernard Helm/Residential Market: Market Opportunity Research Enterprises (MORE).  New home sales down 30-40%.  The average price of a new home is down 8% when comparing 2Qtr 2009 with 2Qtr 2008.  Volume of home sales is down 30% when compared to the peak in 2006/2007.  Many lenders are holding large numbers of properties and many homeowners are holding on to their properties instead of selling right now.  On the positive side the rate of decline is slowing. www.morereport.com for more info and see TBJ SPACE slides.

Amanda Jones Hoyle/Real Estate By the Numbers: Real Estate Reporter, Triangle Business Journal.  The Flex market is stable right now with little increase or decline in vacancy rates with warehouse vacancies increasing.  Office vacancy topped 18% which is the highest it has been in the last 20 years.  Very little new space will be built over the next few years.

Rex Thomas/ Looking Ahead, What’s in Store: Chairman and CEO, Grubb& Ellis/ Thomas Linderman Graham.  Historically recessions have lasted about 3 years, but this is not a normal recession.  The vacancy rates are projected to peak in 4^th QTR 2010 or 1^st QTR 2011 with unemployment rates to increase through mid 2010.  Retail trends are going to change significantly since people have changed their spending habits.  The triangle is expected to emerge from this recession ahead of the National Market with the triangles population expected to double by 2025.  The accolades from National magazines have made this an attractive place to relocate to and start businesses.

Matt Rhoad/ Legal Trends: Lawyer, Smith Anderson.  The legal trends right now are toward more lawsuits and less deals.  There is an increasing importance on comprehensive community planning which tend to drive rezoning approvals.  Matt referred to the city of Raleigh 2030 draft plan (431 pages) that was released DEC 2008 and includes 17 different categories of future land uses and has a future land use map.  There is still some time to influence this plan since it will probably be voted on in SEP 2009.  After the comprehensive plan is voted on their will be an overhaul of the UDO(Unified Development Ordinance) and development regulations.