Manufacturing Expansion
Loss of Values since 2007
Conduit Loans Returning
Opportunities Are Growing Locally

                                                                                                                              Mike Moloney, President

CREI NEEDS YOUR HELP (see last paragraph)


MANUFACTURING IS EXPANDING NATIONWIDE

The Institute for Supply Management collects data and compiles monthly an index called the Purchasing Managers’ Index. The latest index for manufacturing in December 2009 was 55.9, the highest since April 2006. Any number greater than 50 indicates expansion of manufacturing activity. Historically, the average is about 80, but the increase is an indication of manufacturing growth. Another service, which is comprised of a survey over more than 50 national economists (the Blue Chip Economic Indicator Report) projects that industrial activity in the US should increase 3.7 to 4% in 2010. These changes and indications are not dramatic but they do indicate movement in the right direction and suggest that increased employment in the industrial sector may be forthcoming, as we documented 2 weeks ago.

MOODY’S REPORTS 40+% LOSS IN CRE VALUES.

Moody’s recent study indicates that commercial real estate on a national average has lost approximately 40+% of its value since the “high” in October, 2007. In general it can be said the values are approximately at the 2003 levels. The loss so far is not nearly as dramatic as the losses in value of many homes, some of which are selling in overbuilt communities at 1985 prices.

CONDUIT LOANS MAY BE FORTHCOMING THIS YEAR

Several large investment banks, including Deutsche, JP Morgan, and others are planning to originate conduit loans with money raised through the securities market, once again. This would be good news for the CRE industry as a whole, since banks do not appear willing or able to do so in the near future. This will be possible, in part, due to the US Federal government’s purchase of more than $1TR of performing Collateralized Mortgage Securities from those investment banks, thus pumping cash back into the investment pool. (The government appears to have decided – perhaps wisely – to NOT purchase the NON-performing CMBS’s.)

NON-PERFORMING LOANS ARE ALREADY BEING SOLD IN THE PRIVATE MARKET.

Read next week’s CREI Newsletter for some examples in Phoenix or Las Vegas. Most are under $10M.


$1M TO $15M CRE WILL USE LOCAL COMMERCIAL AGENTS

“What about us, out here on the street?”, you ask. Some activity is headed our way. Community Banks hold most loans on small CRE. Those loans that are not performing are generally not large enough to attract the Wall Street investment banks. The banks are foreclosing, and will need to re-sell them, right in your hometown. Initiate conversations with local bank executives to get the listings, or get some of those investors who have been buying up 50 houses at a whack, and become their Buyer Rep. The big national brokerages will get the listings for larger properties and portfolios but local banks need local commercial agents for the properties under $1M to $15M.

CREI NEEDS YOUR HELP

Our class sizes have diminished to below “break-even”. How can you help? Can you refer potential Certified Specialist candidates to us? Do you have suggestions for changes we could make? We are planning some great seminars on distressed CRE, but our bread-and-butter does not taste so good right now. Please email us at: HelpCREI@Commercial-Real-Estate-Institute.com

Thanks!
 

More next Friday, Feb.19.