8A — September 14 - 27, 2012 — Mid Atlantic Real Estate Journal
www.marejournal.com
F INANCIAL D IGEST
By Bruce Coin, Bruce Coin Consulting, Inc. The current commercial mortgage market
N
otwithstanding sub- dued economic times or recessions, from
end” to close the books and not need to carry the asset, bookkeeping and taxes into another year. Buyers like to close so that they are off to a fresh start with a new asset and new budget as they start the subsequent year but also to obtain some tax benefits in the “short” acquisition year. Lenders often delay commit- ting as many loan dollars as they should during the first eight months of the year be- cause they think conditions and interest rates may be bet- ter by year end. By Septem- ber, whenmost have returned
from summer vacations, they usually wind up recognizing that they have under com- mitted to meet their calendar year target, have more funds to invest at this time than anticipated and so the rush is on to commit and close more deals during the last four months than at any other time during the year. The question is; will that be true again this year? Current evidence suggests that these last four months should see a decent amount of sales and financings. The recent NREI/Marcus
and Millichap Investor Sen- timent Survey showed that “investor confidence has once again surged forward”. The index hit a high of 166-the highest since the index began in 2004. Interest rates remain very low and with assurances from Fed Chairman Bernanke that the Fed will keep rates low through 2014 and that the Fed is looking to take other measures to stimulate economic growth. The out- look should remain positive. His comments from the late August meeting in Jackson
Hole, WY came too late to be included in this column. Best guess here is that “more of the same” will be discussed but with some better indica- tion of the additional steps the Fed will take over the next few months to help expand the economy. Watch for the comments and react accordingly. The benchmark 10 year U.S. Treasury rate, while often overly reactive to the news “dou jour”, has re- mained below 1.68 since spik- ing up from this year’s low of 1.38 percent on July 24th to 1.84 percent on August 15th. These low rates bode well for sellers, buyers and borrowers capable of satisfying current underwriting standards to re-finance. Continued 14 percent of- fice vacancy rates in most markets continues to restrict new construction. While the economy continues to grow at a snail’s pace, office va- cancy has been declining and should continue to decline, perhaps by as much as 1 per- cent during 2013. The lack of new construction that often would oversupply markets will allow existing facilities to improve their occupancy levels and possibly increase rents. As office buyers and lenders have focused atten- tion on class A facilities the abundance of capital now available combined with the better yields available from Class B properties and those located in other than major CBD locations should cause increased activity among that asset class. Apartments continue to be the asset class of choice with vacancy rates of most proper- ties expected to drop to that favored benchmark of 5 per- cent. Unfortunately, apart- ment cap rates are beginning to stabilize as purchasers and lenders seek better yields than those available with mortgage rate requests at rates as low as 3.5 percent and equity dividend yields of 6 percent or less. Sellers seeking the possibility to sell at a simple overall cap rate of between 5.5 and 6.5 percent would be wise to sell and not wait too long. The Presidential election will take place at the begin- ning of November. Historical- ly, no matter what party wins, continued on next page
my experi- ence the pe- riod between t h e w e e k after Labor Day and De- cember 15th of each year has histori- ca l l y been
Bruce Coin
one of the best times to buy, sell or finance income prop- erty. Sellers like to complete transactions before “year-
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