SITUS KEEPS JOBS IN SMALL-TOWN AMERICA
Situs, a global leader in Commercial Real Estate, is doing its part to keep jobs in the U.S.
On Monday, we celebrate our Ten-Year Anniversary at Situs’ Robbins, North Carolina rural operations center where digital jobs have been created in a shuttered sock factory, to bring employment to small-town America, a pledge President Donald Trump has vowed to accomplish.
Situs Executive Managing Director Steven Bean, who grew up in Robbins, NC, brought prosperity back and will lead the festivities.
“We are very excited; it’s all about our people and the community — giving everybody the opportunity to participate in the global workplace,” says Situs’ Bean. “The fact that we were able to turn around a bleak situation there — mills and clothing factories shut-down and jobs moved overseas — into giving our team job opportunities that aren’t readily available in rural America; you can’t beat that. Today, the Robbins office is our largest office, with nearly 100 employees. We have goals to grow it even more.”
Robbins was like hundreds of other mill towns across the Southeast. As closing textile and apparel plants across the region drained the lifeblood from these areas, residents were challenged to reinvent themselves and communities have struggled.
Bean saw the problem first-hand as his family stayed behind in Robbins. “I wanted to pay back the community that nurtured me,” says Bean. “I’ve managed both on-shore and off-shore operations, and understand the cost-benefit analysis of each— what each location does well and what they don’t do well.”
He says it wasn’t easy but, “I realized that if I came from Robbins and could succeed in this business, then obviously we could train others there to be CRE experts. For our team in Robbins, there was absolutely a role and place in the global marketplace to perform very high-quality tasks, at a very cost-effective price.”
So Situs not only created the Robbins facility but worked with local schools and businesses. “We fed the local colleges where we helped them create a commercial real estate curriculum and led a group including local banks, insurance companies and others to get behind the effort to build up Robbins,” he adds.
Bean has this advice for other U.S. corporations: “What they are leaving behind and forgetting is their community, and to me corporate America is too much about the numbers and metrics that you are measured by and nobody asks what you have done for your community and the future leaders of our country… you need to pay it forward!”
Some would say that what happened in Robbins was divine intervention, s
ays Situs CEO Steve Powel. “Situs, by way of its mortgage loan servicing business, was a large depositor in Wells Fargo Bank. Because of our large escrow balances retained at the bank, I had the fortune a few years earlier of meeting John Stump, then President and COO of the Bank. Situs had also been working on a Master Services Agreement for some 14 months, with little forward progress. This agreement was the make it or break it for Robbins at the time. So Steven Bean and I put our heads together and I decided it was time to pay Mr. Stump a visit. My sole objective of this visit was to ask him how important our few hundred million dollars in deposits were to the Bank.”
Situs’ Powel adds, “All I can say is that, within 30 days of the visit with Mr. Stump, Situs Robbins’ Outsourcing Solutions had its signed Master Services Agreement. This was extremely important for our operations because it was in 2008, when the market was in the early stages of the Great Recession. Over the next three years, Situs Outsourcing Solutions was one of Wells Fargo’s highest volume vendors to their commercial mortgage servicing operation. Today, Situs Outsourcing Solutions serves some of the largest financial institutions and mortgage companies in the world, to include the U.S. Government-sponsored multifamily lenders (Fannie, Freddie and HUD). I am very proud of our team in Robbins, and especially thankful for my business partner, Steven Bean and Wells Fargo.”
As Paul Harvey would close, “…and that is the Rest of the Story!”
-Part two coming on Monday-
A $90 Billion Debt Wave Shows Cracks in U.S. Property Boom
$90 billion wave of maturing commercial mortgages, leftover debt from the 2007 lending boom, is laying bare the weak links in the U.S. real estate market.
It’s getting harder for landlords who rely on borrowed cash to find new loans to pay off the old ones, leading to forecasts for higher delinquencies. Lenders have gotten choosier about which buildings they’ll fund, concerned about overheated prices for properties from hotels to shopping malls, and record values for office buildings in cities such as New York. Rising interest rates and regulatory constraints for banks also are increasing the odds that borrowers will come up short when it’s time to refinance.
“There are a lot more problem loans out there than people think,” said Ray Potter, founder of R3 Funding, a New York-based firm that arranges financing for landlords and investors. “We’re not going to see a huge crash, but there will be more losses than people are expecting.”
The delinquency rate for commercial mortgages that have been packaged into bonds is forecast to climb by as much as 2.4 percentage points to 5.75 percent in 2017, reversing several years of declines, as property owners struggle with maturing loans, according to Fitch Ratings. That sets the stage for bondholder losses.
Banks sold a record $250 billion of commercial mortgage-backed securities to institutional investors in 2007, and lax lending standards enabled landlords across the U.S. to saddle buildings with large piles of debt. When credit markets froze the following year, Wall Street analysts warned of a cataclysm, with $700 billion of commercial mortgages set to mature over the next decade.
“At the depths of the panic, it was just that: panic,” said Manus Clancy, a managing director at Trepp LLC, a firm that tracks commercial-mortgage debt. “That made people’s future expectations extremely bearish. Extremely low interest rates over the last four or five years have forgiven a lot of sins.”
Credit for property owners has once again become scarce in some pockets. Borrowing costs jumped following the surprise election of President Donald Trump, and Wall Street firms are being more cautious as new regulations kick in requiring them to hold a stake in the mortgages they sell off. Other lenders are scaling back on commitments to property types and locations where problems have gotten harder to ignore.
Lenders are taking an increasingly dim view of retail properties — especially malls — as the growth of e-commerce eats into sales at brick-and-mortar stores. Malls tend to have higher loss rates than other property types after a default, increasing the stigma for lenders, according to Lea Overby, an analyst at Morningstar Credit Ratings LLC.
When malls “start to go downhill, if nothing is done to turn the ship around, they plummet,” Overby said. “The fate of some of these malls is very, very uncertain.”
read more: Bloomberg
Mall Madness: Owners Rush to Get Out of the Business
Mall landlords are increasingly walking away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate.
As competition from online retailers batters store owners, some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks.
That, in turn, leaves lenders with little choice but to unload the distressed properties at fire-sale prices.
In the period from January to November 2016, 314 loans secured by retail property—totaling about $3.5 billion—were liquidated, 11% more loans than in the same period a year earlier, according to data from Morningstar Credit Ratings. The liquidations resulted in a loss of $1.68 billion.
“We’re seeing a boatload of these kinds of properties coming to market,” said James Hull, managing principal of Augusta, Ga.-based Hull Property Group, which bought five malls from foreclosure sales in 2016. “There have been some draconian losses for the enclosed-mall business.”
The moves are an echo of the housing crash, when mortgage borrowers stopped making payments and walked away from homes that had lost value. In some cases they sent back the keys in envelopes, a practice derided by critics as “jingle mail.”
As mall property values sink below their loan balances, “some mall owners are more aggressively taking the step to walk away,” said Morningstar Credit Ratings Vice President Edward Dittmer.
read more: Wall St Journal
ECB May Start Talk of Exit from Stimulus
The European Central Bank could soon start planning an exit from its unprecedented stimulus program, Executive Board member Sabine Lautenschlaeger said on Tuesday, a rare public discussion of ending its asset buying scheme.
A longtime critic of the ECB’s ultra-easy monetary policy, Lautenschlaeger has opposed many of the bank’s past easing measures and now becomes the only board member to publicly advocate an exit, a taboo for ECB President Mario Draghi, who has said that tapering, or winding down the 2.3 trillion euro ($2.5 trillion) program has not been discussed.
“All preconditions for a stable rise in inflation exist,” Lautenschlaeger, considered one of the top hawks on the rate setting Governing Council, said in a speech. “I am thus optimistic that we can soon turn to the question of an exit.”
But she also noted that a few more positive readings may be needed and the ECB should avoid reacting to a temporary inflation spike.
Acknowledging a firmer inflation outlook, the ECB last month agreed to cut its asset buys by a quarter from April but also extended the scheme until the end of the year, arguing that underlying inflation is still weak and the recovery is fragile.
read more: Reuters
‘FuhgeddAboudIt’: Brooklyn Likely To Continue CRE Hot Streak
For the first time in years, fewer Brooklyn properties traded hands in 2016 than the year before, but compared to Manhattan, Brooklyn commercial real estate has to be feeling pretty good about the way it ended the turbulent year.
In 2016, $7.8 billion traded hands in commercial real estate transactions, according to TerraCRG research. This is the second-highest number ever, but a significant drop-off from the red-hot 2015 sales market, in which $9.5 billion transacted.
Keep an eye out for portfolio transactions changing hands as those institutions look to reach their $50-$100 million deal threshold. In Manhattan, an institution can buy a stake of an office building and it’s a big enough investment. Most Brooklyn deals are still far too small to be worth it without several properties selling at once.
For an institutional investor, “If you want a stake in the Brooklyn market, you’re going to have to be comfortable with these smaller properties,” Hess said. “You’ll see five, six or seven portfolios trade that are four or five large buildings or 10-plus smaller buildings that will be in the $50-$100 million range.”
read more: Forbes
Real Estate Down Under
Millions of Australians have profited from the mantra that house prices only ever go up. But is that shibboleth about to be demolished?
Certainly, most of the experts the ABC has spoken to are not expecting the kind of double-digit price growth in 2017 that Sydney and Melbourne have experienced for much of the past five years.
NAB’s latest quarterly residential property survey — based on interviews with around 250 industry participants — is tipping average capital city house price growth of 3.4 per cent, with units expected to lose 0.8 per cent in value this year.
The bank’s chief economist Alan Oster said its housing price forecasts were revised upwards, from +0.4 and -1.6 per cent for houses and units respectively.
“Solid market sentiment in the NAB survey and a surprisingly strong price response to lower interest rates in 2016 has prompted us to revise up our 2017 forecasts, given NAB’s expectation for more rate cuts this year,” he noted in the report.
read more: ABC Net
All About YOU
The vast majority of commercial real estate professionals — 80 percent — are male, and most don’t rank among the super rich, with 24 percent of commercial real estate agents reporting that they earned less than $100,000 in gross commission income each year and 16 percent from $101,000 to $150,000 each year.
Those are two of the statistical nuggets unearthed in this year’s DNA of CRE survey compiled by online brokerage theBrokerList and Buildout, a company that produces marketing software for CRE brokerages. This is the second year that these two companies have partnered on the survey.
Some things haven’t changed much since the first survey last year. There’s the fact that commercial real estate remains a male-dominated industry. It’s also an industry led by older brokers. The survey found that 27 percent of CRE pros were from the ages of 50 to 59, while 20 percent were 60 to 69. Only 6 percent of CRE pros were from the ages of 21 to 29, while 20 percent were 30 to 39.
What roles do CRE pros assume today? The survey found that 34 percent of them spend the most time representing sellers in investment sales, while 22 percent spend the majority of their time representing landlords in leasing deals. An additional 21 percent said they spend the most time representing tenants in lease transactions, while 12 percent spent the greatest chunk of their time representing buyers in investment sales.
The south, as it did last year, remains the top source of business for commercial agents. A total of 32 percent of respondents said that most of their business came from the south, while 29 percent said that the west provided most of their business. Just 21 percent of respondents said that the Midwest provided most of their business.
When it comes to income, the greatest percentage of agents said that their gross commission income was under $100,000, with 24 percent of agents reporting this level of income. A total of 16 percent of agents said that their gross commission income came in at $150,001 to $200,000, while 15 percent said it was $200,001 to $300,000. A total of 10 percent said that their gross commission income was $500,000 to $1 million, while just 5 percent reported earning commission income of $1 million to $2 million.
read more: ReJournals
Have a prosperous day and a great weekend!
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