Newspaper article THE JOURNAL RECORD

NAIOP Chairman: Potential Changes Keep Commercial Real Estate in Holding Pattern

Newspaper article THE JOURNAL RECORD

NAIOP Chairman: Potential Changes Keep Commercial Real Estate in Holding Pattern

Article excerpt

A mixed bag of key financial concerns dominated Wednesday's commercial real estate rundown by the chairman of the National Association of Industrial and Office Properties.

William E. Hunt, who is also president of The Elmhurst Group of companies in Pittsburgh, outlined several trends and issues before Tulsa's NAIOP chapter meeting at the Mayo Hotel and Residences.

Although continued financial pressures still require that investors place large amounts of their own equity in deals, Hunt said signs point to an easing of the coastal biases held by institutional investors since the recession. He said this could lead to more funds from these sources going to midland transactions and developments.

But many large investors also remain in a holding pattern over possible changes in health care reform, taxes and other issues brewing in Washington.

"A lot of people say, 'I've got tenants all lined up for an expansion of the plant, but we just don't know what's going to happen,'" he said.

The key point there is the uncertainty.

"Even if it's bad news, I can factor that in right," he said of deal pricing. "Right now, I just don't know where that's going to go."

Similar uncertainties explain why many lenders now put more emphasis on the background of those involved in transactions and developments than of the deal itself.

"A lot of times, it's the resume of that sponsor that's the most important," he said.

Today's low interest rates complicated that somewhat. Hunt said that points to one reason why the recession's widely forecast wave of foreclosures has yet to happen, defying three years of tenant "flights to quality" that forced many property owners to swallow lower rental profits.

"A lot of developers and a lot of property owners, with these low rates, have been able to hold on, even if they have to negotiate lower lease rates," he said. "That seems to be happening quite a bit."

Anyone looking for potential financing help from a former stalwart may be disappointed. Although commercial mortgage-backed securities are making a comeback - Hunt estimated that about $60 billion in such funds could be available next year, double the resources seen this year - he said that financial market remains a shadow of the $300 billion-plus levels enjoyed before the recession. …

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