Post on 20-Dec-2015
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U.S. Commercial & Multifamily Outstanding
Source: Mortgage Bankers Association May 2009
BY CAPITAL SOURCETotal $3.5 Trillion
9.2%5.5%
4.4%
21.4%
7.3%
5.4% 2.4%
44.5%
Commercial Banks Life Insurance Companies
Savings Institutions Agency- and GSE-back mortgage pools
CMBS, CDO, and other ABS issues Other
Government-sponsored enterprises State and Local Government
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$0
$50
$100
$150
$200
$250
$300
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Later
Billions
CMBS, CDO or other ABS Commercial Bank/ThriftsFannie, Freddie, FHA, and Ginnie Mae Credit Companies, Warehouse, and OtherLife Insurance Companies
Loan Maturities By Lender Type
Source: MBA
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Source: Realpoint
Maturing CMBS Mortgages By Property Type
$0
$20
$40
$60
$80
$100
$120
$140
$160
2009 2010 2011 2012 2013 2014 2015 2016 2017
Billion
s
Retail
Office
Mixed (Other)
Multifamily
Industrial
Hotel
Health Care
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$0
$50
$100
$150
$200
$25019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
YT
D 2
009
Vintage Loans: High % Interest OnlyHigh LTVLower DCR
’05 – ’08 ($615 Billion total Volume) Seven years of business in three years!
The Boom n’ Bust Led by CMBS Issuance
Billions
Source: Commercial Mortgage Alert August 2009
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Commercial Real Estate Transaction Volume…Debt Spawns and Stalls Activity
Source: Real Capital Analytics, Commercial Mortgage Alert
$0
$50,000,000,000
$100,000,000,000
$150,000,000,000
$200,000,000,000
$250,000,000,000
$300,000,000,000
$350,000,000,000
$400,000,000,000
$450,000,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD
Value
w/o privatization w/privatization US CMBS
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Delinquencies
Source: Mortgage Bankers Association
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CMBS Spreads…
Source: Commercial Real Estate Direct
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Source: Mortgage Bankers Association
Little Help on the Originations Side
Commercial/MH Mortgage Bankers Originations Index by Investor Group
0
100
200
300
400
500
600
70020
03Q
1
2003
Q2
2003
Q3
2003
Q4
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
Total ConduitsCommercial Banks Life Insurance CompaniesFannie Mae/Freddie Mac
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2009: What’s In & What’s Out
IN OUT
On-Book Lending CMBS
Conservative Leverage High Octane Capital Stack
Equity In-Deal Cash Out Financing
Risk Based Pricing Inefficient Pricing of Capital
Correspondent & Relationship Lending Loan Brokerage
High Touch Loan Servicer Securitized/Impersonal Servicer
Amortization- 25-30 Year Schedule Interest Only
Reserves Funded in Cash No Funded Escrow
450+/- Spreads 100+/- Spreads
Floor Rates Unlimited Float
DCR’s In-Place Proforma DCR’s
Recourse Non-recourse
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Source: Mortgage Bankers Association
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008Loan Breakout
Percenta
ge LTV
Equity
Pref. EquityMezzanine
B-NoteA-Note
Market is De-Leveraging
Yesterday and Today
Equity, 2 %
Pref. Equity, 8%
Mezzanine, 10%
B-Note, 15%
A-Note, 65%$80 Million
1st Trust
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008Loan Breakout
Percentage LTV
Equity
Pref. EquityMezzanine
B-NoteA-Note
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008Loan Breakout
Percentage LTV
Equity
Pref. EquityMezzanine
B-NoteA-Note
2007 Loan Breakout 2009
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Valu
e
A-Note, 45%
B-Note, 15%
Mezzanine, 15%
Equity, 25%
$45 Million1st Trust
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Capital Markets in Perspective
* For multifamily product amortization schedule will usually be spread over 30 years.
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Rent RollRent Roll
TenantRentable Area
(SF) % Total Rent/SF Monthly Rent Annual Rent Lease Start Lease Expire
Lowes 0% $0.00 $0.00 $0 NA NA
Dollar General 11,416 12% $7.00 $6,659.33 $79,912 Aug-04 Aug-14
Stage 22,400 24% $3.56 $6,645.33 $79,744 Oct-04 Jan-15
Furniture Gallery 15,000 16% $7.25 $9,062.50 $108,750 Jul-08 Jul-18
Snap Fitness 4,000 4% $15.50 $5,166.67 $62,000 Oct-07 Jan-12
Woksom, Brown 2,000 2% $9.50 $1,583.33 $19,000 Dec-05 Dec-10
Verizon 2,080 2% $13.00 $2,253.33 $27,040 Aug-09 Sep-12
GNC 1,770 2% $9.00 $1,327.50 $15,930 Sep-06 Aug-11
Subway 1,800 2% $12.00 $1,800.00 $21,600 Nov-09 Oct-14
Blockbuster 6,720 2% $9.00 $5,040.00 $60,480 Jul-89 Jul-10
Army National Guard 1,622 7% $11.63 $1,571.99 $18,864 Jun-06 May-10
Agilus Health 4,520 2% $11.50 $4,331.67 $51,980 Sep-06 Sep-09
Little Ceasers 1,400 5% $12.75 $1,487.50 $17,850 Apr-89 Jul-13
Affordable Dentures 2,846 1% $8.00 $1,897.33 $22,768 Nov-05 Nov-10
Computers 2 suit 1,153 3% $13.50 $1,297.13 $15,566 May-08 Jun-13
Money to Lend 2,160 1% $9.38 $1,688.40 $20,261 Nov-04 Nov-14
Dillon's Rest. LOI 4,002 2% $14.00 $4,669.00 $56,028 Apr-10 Mar-20
CENLA Dentistry 1,800 4% $17.50 $2,625.00 $31,500 Sep-09 Sep-07
Wing Stop 1,501 2% $17.50 $2,188.96 $26,268 Apr-09 Apr-14
Firestone 6,121 6% $12.52 $6,386.24 $76,635 May-88 May-13
Occupied Total 94,311 100.0% $8.61 $67,681.22 $812,175
Vacant1 0 0.0% $10.00 $0.00 $0
Totals 94,311 100% $8.61 $67,681.22 $812,175
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Operating StatementOperating Statement
Income
Base Rental Revenue $ 812,175
Tenant Expense Reimbursements 165,044
Gross Rental Revenue $ 977,219
Less: Economic Vacancy & Collection Loss 10% (97,722)
Effective Rental Revenue $ 879,497
Other Income $ -
Effective Gross Income $ 879,497
Expenses Per SF
CAM 0.80 75,685
Insurance 0.22 21,192
Real Estate Taxes 0.79 74,513
Administrative 0.03 3,000
Non-Reimburseable OpEx 0.18 17,373
Management 4.00% 0.37 35,180
Total Operating Expenses 2.41 226,943
Replacement Reserves $0.15 0.15 14,147
Net Operating Income $ 638,407
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Loan Analysis 2009Loan Analysis
Income Capitalization
2008 Net Operating Income1 $ 638,407
Capitalization Rate 9.25%
Estimated Value-Building & Primary Site Area $ 6,901,699
Rounded $ 6,900,000
Per Square Foot $ 73.16
Loan Request $ 4,500,000
Per Square Foot $ 47.71
Loan to Value Ratio 65%
Loan Terms
Term 10 years
Interest Rate Type Fixed
Index Yield 3.50%
Interest Rate Spread 3.50%
Effective Interest Rate 7.00%
Requested Amortization 25 years
Monthly Debt Service ($31,805.06)
Annual Debt Service ($381,660.77)
Debt Service Coverage Ratio 1.67x
Debt Constant 8.48%
Debt Yield 14%
1Brought forward from Operating Statement
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Loan Analysis 2007Loan Analysis
Income Capitalization
2008 Net Operating Income1 $ 638,407
Capitalization Rate 7.25%
Estimated Value-Building & Primary Site Area $ 8,805,617
Rounded $ 8,810,000
Per Square Foot $ 93.41
Loan Request $ 7,048,000
Per Square Foot $ 74.73
Loan to Value Ratio 80%
Loan Terms
Term 10 years
Interest Rate Type Fixed
Index Yield 4.63%
Interest Rate Spread 1.20%
Effective Interest Rate 5.83%
Requested Amortization 30 years
Monthly Debt Service ($41,489.10)
Annual Debt Service ($497,869.19)
Debt Service Coverage Ratio 1.28x
Debt Constant 7.06%
Debt Yield 9%
1Brought forward from Operating Statement
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Distressed Market
Source: RCA Troubled Assets Radar – US, As of June 26, 2009
$83.6 BTroubled
$15.8 BRestructured
Modified
$10.5 BLender REO
$109.9 BCurrent Distressed
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The Volume of Distressed Deals is Rising Rapidly
Source: RCA Troubled Assets Radar, June 2009
$0
$20
$40
$60
$80
$100
$120
2008Q1 Q2 Q3 Q4 2009Q1 Q2
$ B
illio
ns
Lender REO
Troubled Deals
Lender REO now accounts for 9.4% of total Distressed Assets
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Largest Owners of Distressed Properties
Source: RCA Troubled Assets Radar and TWR, June 2009
Owner Value (in Millions)General Growth Properties $ 15,113
Centro Properties Group $ 6,064
Lightstone Group JV $ 5,925
Macklowe Properties $ 3,848
Centro Properties JV Watt Cmmcl Props $ 2,318
Broadway Partners $ 1,741
Cabi Developers (GICSA) $ 1,606
American International Group (AIG) $ 1,402
Sunwest Management $ 1,279
Columbia Sussex Group $ 1,136
Bethany Group $ 1,124
Deutsche Bank AG $ 1,000
DBSI Group $ 839
Boca Developers $ 835
Glen Smith & Glen Development $ 800
Sault Ste. Marie Tribe $ 755
Babcock & Brown $ 748
Elad Properties JV IDB Group $ 625
Tarragon Corporation $ 607
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Largest Holders of REO Properties
Source: RCA Troubled Assets Radar and TWR, June 2009
Holder Value (in Millions)Deutsche Bank $ 1,000
Wachovia $ 726
Corus Bank $ 656
iStar Financial $ 450
JP Morgan Chase $ 407
GE Capital $ 323
Goldman Sachs $ 222
Bank of America $ 192
Eurohypo AG $ 189
UBS Bank Corp. $ 158
Fremont Investment and Loan $ 141
LaSalle Bank $ 127
Lehman Brothers $ 111
Credit Suisse $ 110
Colonial Bank $ 100
UMB Bank NA $ 98
Legg Mason Real Estate $ 81
Allianz SE $ 72
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Trouble Was Brewing in the Most Recent Quarter
-5
0
5
10
15
20
25
30
35
40
$ B
illi
on
2008Q3 2008Q4 2009Q1 2009Q2
Net Flow of Troubled Assets
LenderREO Resolved Restructured/Extension Troubled
Source: RCA Trouble Assets Radar, June 2009
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Metros with Most Distressed and Potentially Troubled Assets
0 5000 10000 15000 20000 25000 30000
New York
Las Vegas
South Florida
Los Angeles
Philadelphia
Boston
Washington, DC
SF Metro
Chicago
Phoenix
Atlanta
Dallas/Ft. Worth
Houston
Detroit
Honolulu
Orlando
Tampa
Seattle
Estimated Asset Value $ millions
Distressed
Potentially Troubled
Source: TWR, RCA Troubled Assets Radar, June 2009
The Metros below account for 63.5% of Distressed and Potentially Troubled Assets
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Implications: What does this all mean?
• Lack of trades creates a question of an asset’s value.
• Without comparable data points, sellers do not feel the pressure to realize losses.
• As a result of high loan to value (LTV) ratios for maturities in 2010–12 and a high absolute volume of maturities, the catalysts for acquisition opportunities is expected to be front-loaded in the 2009–14 window.
• Once incentives to trade are reinstated and banks’ balance sheets are cleared of toxic assets via government programs, the commercial real estate market will be poised for a high volume of transactions and financing opportunities.
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Commercial Real Estate Transaction Volume…Debt Spawns and Stalls Activity
Source: Real Capital Analytics, Commercial Mortgage Alert
$0
$50,000,000,000
$100,000,000,000
$150,000,000,000
$200,000,000,000
$250,000,000,000
$300,000,000,000
$350,000,000,000
$400,000,000,000
$450,000,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD
Value
w/o privatization w/privatization US CMBS
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*Includes PrivatizationsCapital Markets Activity includes all investment sales and financings in said period. Investment Sales data from Real Capital Analytics
1st Half 2009 Production ActivityUS Capital Markets Activity Levels
Property Type CBRE Total Market*
1st half 09 1st half 08 % chg 1st half 09 1st half 08 % chg
Office $1.1B $7.0B -84.3% $5.7B $30.9B -81.6%
Retail $0.4B $1.1B -63.6% $3.5B $12.7B -72.4%
Industrial $0.5B $2.8B -82.1% $3.6B $13.7B -73.7%
Multi-Housing $1.3B $4.0B -67.5% $4.8B $23.4B -79.5%
Hotels $0.1B $0.5B -80.0% $1.2B $7.8B -84.6%
Land $0.1B $0.4B -75.0% N/A N/A N/A
Inv. Sales Volume $3.5B $15.8B -77.8% $18.8B $88.5B -78.8%
Loan Origination Volume $3.2B $5.6B -43.9% N/A N/A N/A
US Capital Markets Activity $6.7B $21.4B -68.7% $18.8B $88.5B -78.8%