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Lansner on Real Estate ~ The latest news about the housing market from Orange County Register columnist Jon Lansner.

Archive for the 'troubled' Tag

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Apartment owner’s pitch before collapse questioned

November 22nd, 2009, 1:00 pm by Jeff Collins
ppa-oppfund

Jebb Harris/The Register

An Irvine-based apartment investor offered to pay up to 30% in interest to investors just weeks before it suspended monthly payments on about $90 million.

Pacific Property Assets, which owns nearly 50 small to medium apartment buildings, ultimately ended up seeking Chapter 11 bankruptcy protection in July.

But some of the firm’s investors now question its actions earlier in the year, when PPA, as it’s called, tried to raise cash for an “Opportunity Fund” so it could buy distressed properties at bargain prices.

Interest rates of 12% to 15% would be doubled for the first few months for those investing by April 30. On May 4, the company suspended interest payments to all its investors, including those investing in the Opportunity Fund.

Jebb Harris/The Register

Gene Stewart

“They cut everything off on April 30,” said investor Gene Stewart of Yorba Linda. “Then, all of a sudden on May 1, they were broke.”

But company CEO Michael Stewart, no relation to Gene, denied that the company knew it would halt interest payments to 674 investors at the time it was seeking a fresh infusion of cash.

“I can tell you unequivocally on a stack of Bibles that there’s no way that would have ever occurred,” Michael Stewart said. “We had absolutely no clue until minutes before the payments were suspended. And at that point, we stopped raising money.”

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Posted in: Commercial property • Top tale • • • | 8 Comments »

Hotels in really big trouble

November 17th, 2009, 6:00 pm by Jon Lansner

really

Real estate news and views from around the globe that make you go, “Really?”

  • FLORIDA: Foreclosure targets two Marriott-branded hotels in Miami (South Florida Business Journal) MORE HERE!
  • COLORADO: Hard times send Denver’s Residences at the Ritz-Carlton into foreclosure (Denver Post) MORE HERE!
  • HAWAII: Waikiki’s Hawaiiana Hotel being phased out (The Associated Press) MORE HERE!
  • JERSEY: Embattled Hotel Pitman shut down in foreclosure (NJ.com) MORE HERE!
  • ALBUQUERQUE: Copper Square slips into foreclosure status (New Mexico Business Weekly) MORE HERE!

—————-

Check HERE for our coverage of hotel troubles

Posted in: Commercial property • Odds & ends • • • | Post a Comment »

‘Housewives’ star not alone, short sales up 63%

November 11th, 2009, 10:00 am by Jeff Collins
click to enlarge

click to enlarge

Short sales — getting the bank to help sell a troubled home before foreclosure — aren’t just for TV personalities like Tamra Barney, one of cable TV’s “Real Housewives of Orange County.”

We’re reporting (HERE) that Barney’s family home in Ladera Ranch is in escrow as a short sale. It was listed for $1.149 million.

But short sales are up countywide as well.  Figures from the Southern California Multiple Listing Service show that the usually difficult short sale, or sale of a home for less than is owed on its mortgages, has had an almost uninterrupted climb this year.

A rise in short sales may account for increased home transactions at a time when they’re usually falling. Sales of all homes increased from August to September. And early October figures show that sales may have been up in that month, too. Sales usually begin to taper off after August.

DataQuick analyst Andrew LePage believes that September and October sales bumps may be due to an increase in summer short sales, which take longer to close because a lender’s approval is required.

SoCal MLS began tracking distressed property sales this year, including short sales. The numbers show:

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Posted in: Selling patterns • Top tale • • | 17 Comments »

55% of commercial loans due by 2014 are under water

November 2nd, 2009, 12:18 pm by Jeff Collins
maguire-parkplace

Maguire Properties recently returned six Orange County properties to lenders and sold others as income fell below mortgage payments.

Two recent news reports highlight growing concern about the impact mounting commercial real estate defaults will have on the recovery.

Bloomberg news reported today that the default rate for commercial mortgage-backed securities, or CMBS, hit 4.5% in the third quarter and is expected to exceed 6% by the end of the year.

And the Wall Street Journal reported Saturday that 55% of commercial loans that are due to be paid off in the next five years are under water.

Citing a report by Foresight Analytics, the WSJ reported that about $770 billion of $1.4 trillion in commercial loans due by 2014 had debts exceeding current property values. The WSJ added:

“Regulators have been expressing increasing concern that problems in commercial real estate could unglue the nascent economic recovery by slamming financial institutions with billions of dollars in new losses.”

Bloomberg cited a report by the New York-based real estate research firm, Reis Inc., saying that the rate of defaults and late payments on CMBS surged more than fivefold in the third quarter and may worsen. Bloomberg added:

“The credit crisis and recession are reducing occupancies and rents for apartments, offices, shopping malls, warehouses and hotels, cutting the cash flow landlords need to repay debt.”

Who’s in trouble in O.C.: More than a dozen Orange County firms and homebuilders have defaulted on loans in the past year or may be at risk of default. For a list of notable cases, CLICK HERE!

Big real estate woes:

Posted in: Commercial property • Polls • Top tale • • | 16 Comments »

Investor loses $50 million on Santa Ana office tower

October 14th, 2009, 10:00 am by Jon Lansner

blog-3macplaceAn 11-story Santa Ana office tower near John Wayne Airport will be sold soon — at a price $50 million-plus below what an Australian investor paid for it in 2007!

  • Tishman Speyer Australia Limited announced it will soon be closing of the sale of 3 MacArthur Place for $30 million.
  • Colliers identifies the buyers as Highridge Partners.
  • The Wall Street Journal notes that: “The sale of the Orange County building, which was about 78% leased in June, is expected to fetch about US$30 million. In 2007, Tishman paid $83.7 million for the property, according to company documents.”
  • When Tishman bought the property in 2007, it told investors the tower was: “an “A” grade asset in a market which we believe has superior long term growth prospects and which, with its existing vacancy, may benefit from the application of Tishman Speyer’s operating platform. We continue to remain confident that the portfolio is well positioned to benefit from continued strengthening in the U.S. office markets.”
  • Says the landlord’s Web site of the buiilding: “The property is situated in the center of one of Orange County’s strongest transitioning submarkets, South Coast Metro. The amenity rich area, including the world-renowned South Coast Plaza Shopping Center, makes MacArthur Place a highly desirable live-work-play environment in Orange County.”

Big real estate woes:

Posted in: Commercial property • Top tale • • • • | 46 Comments »

Big borrowers hit by falling values, skimpy lenders

October 5th, 2009, 3:12 pm by Jeff Collins

maguire-500orangetower

More than a dozen Orange County firms and homebuilders have defaulted on loans in the past year or may be at risk of default.

And a host of commercial defaults are likely to occur in the next year because financing remains scarce and loan repayments are coming due.

Scott Brown, a partner with Capital Restructure Group in Monarch Beach, said commercial property owners are being squeezed.

“Loans are coming due, and the underwriting criteria have changed,” Brown said. “The values of the buildings also have changed.”

For example, lenders are requiring higher down payments and higher earnings in proportion to debt, Brown said. But earnings for commercial properties are down because of higher vacancies.

And because property values are down, their new loans will be too small to cover the debt owed on the old ones.

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Newport Beach receiver Taylor B. Grant, who is overseeing a portion of the John Laing Homes bankruptcy, warned a Dallas conference recently that so many commercial real estate defaults are coming, there’s likely to be a shortage of experienced professionals to deal with them.

Grant cited reports stating that $393 billion worth of commercial mortgages will mature by the end of 2010.

Lower property values and stricter lending guidelines means that about 65 percent of the riskiest loan types – totaling $100 billion — won’t qualify for new loans when they become due in the next few years, he said. (Read more HERE!)

Stan Ross, board chairman of the USC Lusk Center for Real Estate, said that in addition to bank financing, $200 million of commercial mortgage backed bonds are coming due by the end of 2009 and about $275 million going into 2010.

“Since there’s no liquidity in the market, there is no known direct source of replacing those commercial mortgage backed bonds,” Ross said. “So far we haven’t seen a big dumping of commercial portfolios on the marketplace for discounts. But standby.”

For a list of defaulting property owners, CLICK HERE!

Big real estate woes:

Posted in: Commercial property • Top tale • • | 5 Comments »

Big properties seen holding huge loan risks

October 3rd, 2009, 2:00 am by Jeff Collins

Taylor B. Grant, founder of California Real Estate Receiverships in Newport Beach, recently warned industry members at the Dallas RealShare Distressed Assets conference that America is facing a shortage of experienced turn-around executives and receivers to cope with the growing number of commercial real estate defaults expected in the coming years.

He predicted that property owners could default on 5% to 7% of the commercial loans coming due by the end of 2010. And that up to $100 billion in commercial loans will be at risk of defaulting by Jan. 1.

Before becoming a full-time receiver, Grant worked as a real estate loan officer and as a developer of office buildings, retail centers, industrial parks, self-storage complexes and homes.

He currently is serving as receiver for Bank of America in the John Laing Homes bankruptcy, overseeing more than 30 housing developments in California, Colorado and Arizona.

Us: How much commercial real estate debt will mature in the next year or so and how much of that will likely end up in default?

taylorgrantmugTaylor: $393 billion worth of commercial mortgages will mature by the end of 2010.

Studies indicate that between $1.3 trillion and $1.7 trillion in commercial debt (including apartments) exists, and construction and development loans total about $535.8 billion.

Total debt from commercial mortgage backed securities (or CMBS, which are sold to investors on Wall Street) is approximately $700 billion.

Us: What proportion of that is at risk of going into default?

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Posted in: Commercial property • Insider Q&A • Top tale • • • | 7 Comments »

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