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1601 Forum Place, Ste. 200West Palm Beach, FL 33401
Ph: 561 471 8000
951 Yamato Road, Ste. 102Boca Raton, FL 33431
Ph: 561 394 5200www.mhcreal.com
1601 Forum Place, Ste. 200West Palm Beach, FL 33401
Ph: 561 471 8000
951 Yamato Road, Ste. 102Boca Raton, FL 33431
Ph: 561 394 5200www.mhcreal.com
SOUTH FLORIDA
September 13, 2011
Presented by:
Neil E. Merin, SIOR, CCIMChairman
SHORT SALES & FORECLOSURES
PRESSURE DROP
Section 1
Flooding The Market
SOUTH FLORIDAPROPERTY SALES
Source: CoStar
Supply
Demand
Pricing
Income
SOUTH FLORIDASALES VOLUME & AVG. PRICE PER SF – ALL COMMERCIAL
Source: CoStar
SOUTH FLORIDASALE TRANSACTIONS – ALL PROPERTY TYPES
Source: CoStar
2010 Q3 2010 Q4 2011 Q1 2011 Q20
50
100
150
200
250
300
350
183
221
246
296
SOUTH FLORIDA SALESLAST 12 MONTHS
Source: CoStar
1,120 Transactions
• $3,200,000 - Average Sales Transactions
• 31,800,000 - Square Feet Sold
• 5,325 - Acres of Land Sold
• $119 - Average Price Per Square Foot
• $57,000 - Average Price Per Hotel Room
• $96,000 - Average Price Per Multi Family Unit
• $3,400,000,000 - of Commercial Transactions
SOUTH FLORIDA SALESPENDING AND FOR SALE
Source: CoStar
3,798 Properties
• 43,391,000 – Square Feet Of Commercial
• 1,863 - Hotel Rooms
• 9,765 – Acres Of Land
• 5,568 – Multi Family Units
• $7,730,000,000 - Of Total Value
SOUTH FLORIDANUMBER OF SALES BY PROPERTY TYPE
Source: CoStar
FLOODING THE MARKET
• INCREASING NUMBER OF FORECLOSURE SALES DRAWING MORE CAPITAL, COMPETITION AND INTEREST.
• VALUES ARE RISING OFF BOTTOM LEVELS
• COST BASIS OF OWNERSHIP IS FALLING FOR NEW OWNERS.
Section 2
Clearing The Pipeline
SOUTH FLORIDATOTAL AMOUNT IN SPECIAL SERVICING BY PROPERTY TYPE
December August % Change
Retail
Office
Industrial
Multi Family
Other
Hotel
$300,333,000 +87.55%$563,274,836
$295,195,000 $446,613,128 +51.29%
$39,265,000 $43,569,540 +10.96%
$86,900,000 $182,676,786 +110.21%
$237,565,000 $332,680,531 +40.04%
$83,800,000 $892,925,472 +965.54%
Total $1,043,058,000 $2,461,740,293 +136.01%
SOUTH FLORIDA CMBS LOANSDELIQUENT VS FORECLOSURES/REO
$3,000,000,000.00
$2,500,000,000.00
$2,000,000,000.00
$1,500,000,000.00
$1,000,000,000.00
$500,000,000.00
$0.00
$1,043,058,000
$2,461,740,293
0
$838,911,665
Dec. 2009Foreclosure/REO
Dec. 2009 Aug. 2011 Aug. 2011Foreclosure/REO
SOUTH FLORIDATOP FIFTEEN CMBS FORECLOSURES/REO
Property Name City Property Type Loan Amount
City Place West Palm Beach Mixed Use $150,000,000
The Shore Club Miami Beach Hotel $107,588,733
Rivergate Plaza Miami Office $58,500,000
Palm Beach Mall West Palm Beach Retail $49,199,148
Sawyer Portfolio Sunrise Multi Family $43,000,000
PGA Plaza Shopping Center Palm Beach Gardens Retail $33,450,000
The Sagamore Hotel Miami Beach Hotel $31,500,000
Shoppes of Wellington Green Wellington Retail $30,750,000
PGA Design Center Palm Beach Gardens Retail $30,000,000
Wellington Reserve Wellington Office $28,800,000
Bank of America Boca Raton Office $24,151,217
Horizon & Mellon Office Building West Palm Beach Office $22,400,000
4001 North Pine Island Road Sunrise Multi Family $19,690,395
Southpark Centre Pinecrest Mixed Use $17,272,160
Flamingo Market Place Pembroke Pines Retail $14,314,570
Total
$660,616,223
NON CURRENT LOAN BY TYPEFDIC INSURED INSTITUTIONS
0
5
10
15
20
25
30
35
29.45%
27.25%
12.68%
5.04%
11.07%
6%3.74%
2.2%
Development Commercial & Industrial
Retail & Office
Multi Family
9/10 9/109/10 9/10 6/116/116/116/11
COMMERCIAL REAL ESTATE HURTING SMALL BANKS
“The bulk of the rising delinquencies is falling squarely on the shoulders of small and regional banks. Small to regional banks – defined as banks holding less than $100 billion in assets – have $784 billion in commercial real estate loans on their books. That’s about 71% of the total market.”
Source: Independent Community Bankers Association of America
RECENT HEADLINES BANKS SELLING LOANS
Anglo Irish Reportedly Taps Winners in Commercial Real Estate Loan Sale
$9.5 Billion of commercial real estate loans on 250 properties sold to Lone Star Funds, Wells Fargo, and JP Morgan
$800 Million CRE Loan Sale CompletedThis week Mission Capital Adivisors had over $800 million is CRE loans on sale, giving bidders the
opportunity to acquire performing, sub- and non-performing assets secured by a variety of collateral types, including multifamily, office, student housing, condominiums, marina, industrial, residential and commercial
land, medical office, bank stocks, among others, throughout the U.S. Many of the loans have recent appraisals."The sale is an ideal opportunity for equity buyers looking to enter the market by purchasing one or several of
the individual loans," said Stephen Emery, managing director of sales and trading at Mission Capital.
HFF Completes $238 Million Loan Portfolio Sale on Behalf of a Major Financial Institution
RECENT HEADLINESBANKS SELLING LOANS
RBS Seeks Sale of Property-Loan Portfolio,
Sunday Times Says2.6 billion dollars of loans to be sold to
Blackstone Group at 50% discount
Barclays Bank agrees $
586m
Commercial Real Estate loan
portfolio sa
le
Regions Bank completes
$500,000,000 sale of non-
preforming notes
BANKS SELLING LOANS
CLEARING THE PIPELINE
• SPECIAL SERVICERS MOVING RAPIDLY FROM WORKOUTS TO FORECLOSURES.
• BANKS AND SAVINGS INSTITUTIONS ARE SELLING NOTES AND REAL PROPERTY TO CLEAR NON-PREFORMING LOANS.
• NOTE BUYERS ARE SEEKING UNDERLYING PROPERTIES AT SIGNIFICANT DISCOUNTS.
Section 3
Pressure Drop
SOUTH FLORIDAVACANCY & RENTAL RATES – ALL PROPERTIES
Source: CoStar
BROWARD & PALM BEACH COUNTYSALE TRANSACTIONS - OFFICE
Source: CoStar
BROWARD & PALM BEACH COUNTYSALES VOLUME – OFFICE BUILDING
Source: CoStar
BROWARD& PALM BEACH COUNTYSALES BY BUILDING CLASS – OFFICE BUILDINGS
Source: CoStar
BROWARD & PALM BEACH COUNTY AVERAGE PRICE PER OFFICE BUILDING SF
Source: CoStar
BROWARD & PALM BEACH COUNTYVACANCY & RENTAL RATES - OFFICE
Source: CoStar
BROWARD &PALM BEACH OFFICE FORECAST REPORT
Source: CoStar
BROWARD & PALM BEACH COUNTYVACANCY & RENTAL RATES - RETAIL
Source: CoStar
BROWARD & PALM BEACH COUNTYAVERAGE PRICE PER BUILDING SF – RETAIL SALES
Source: CoStar
BROWARD & PALM BEACHRETAIL VACANCY RATES
Source: CoStar
PRESSURE DROP
• COST BASIS FOR COMPETING PROPERTIES DROPPING.
• INCOME IS NOT RISING, AS NEW OWNERS CAN AFFORD LOWER RENTAL RATES.
• VACANCY NOT EXPECTED TO IMPROVE IN NEAR TERM (3 YEARS), AND RENTS WILL STAY LOW OR GO LOWER.
WORKOUTS ARE THE PAST,IT’S FORECLOSURE TIME
• We are at the very beginning of a massive amount of CRE foreclosures.
• Sales at dramatically lower prices than previous purchase prices will create lower basis for new owners.
• Despite flat line income growth, prices on CRE will continue to rise modestly, as buyers lower yield horizons and compete for product.
• New owners will be able to compete with low rents, forcing current owners to lower rates.
• Rents will be flat to falling over next 3 years, landlords will lack pricing power.
• More available for sale product will attract more buyers and capital.
1601 Forum Place, Ste. 200West Palm Beach, FL 33401
Ph: 561 471 8000
951 Yamato Road, Ste. 102Boca Raton, FL 33431
Ph: 561 394 5200www.mhcreal.com
Neil E. Merin, SIOR, CCIMChairman
