SOURCE: Reuters

California-based IndyMac, which specialized in a type of mortgage that often required minimal documents from borrowers, became the fifth U.S. bank to fail this year as a housing bust and credit crunch strain financial institutions. Adam Compton, co-head of global financial stock research at RCM in San Francisco said "IndyMac is a company that was pretty much 100 percent invested in mortgage assets, and we're in a bad mortgage market, and it had no capital. It's not complicated".

The Office of Thrift Supervision (OTS), who is IndyMac's primary regulator, said that they do not expect significant market impact from the IndyMac closure because the firm is not a systemic institution and is without numerous counterparties.

Daniel Alpert who is an investment banker at Westwood Capital in New York predicts that "IndyMac's takeover by the FDIC is one of many to come". A former FDIC official, Ann Graham said that it isn't unprecedented for the FDIC to start running a bank after it fails. This allows the FDIC to shop around before selling the institution rather than hurrying a sale. They are allowed to operate the institution for up to two years.

Read full report »

SOURCE: The Earth Times

The National Multi Housing Council (NMHC)/National Apartment Association (NAA) feel there is a silver lining to the housing difficulties that are being seen nationwide. This comes in the form of a positive change in our energy consumption with more families enjoying apartment living.

In a statement regarding the housing stimulus bill that has just passed the Senate, a noteworthy comment was made. Not only are apartments and more compact development increasingly desirable, they are increasingly necessary in reducing our nation's carbon footprint and creating more sustainable communities. Apartments are an inherently 'green' housing choice because they use resources more efficiently, help preserve greenspace and are often transit-oriented.

More and more people are finding that their American Dream is to live within an area that includes shops and entertainment, and that which encompasses the lifestyle they desire. Apartment living is proving to provide that flexibility as people choose to live near their employment as well.

Read full report »

SOURCE: The New York Times

Due to the heavy loses that both Fannie Mae and Freddie Mac have been experiencing their shares have been dropping rapidly causing their borrowing costs to rise. The Bush administration is considering a government takeover that will place them in a conservatorship if things continue to worsen for the two mortgage giants.

The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing (and commercial lending) market.

It is felt that if the difficulties that Fannie and Freddie are experiencing aren't resolved, economies worldwide could be damaged. This is in part because the securities of both Fannie and Freddie are held by many financial institutions, central banks, and investors overseas.

Read full report »

SOURCE: bizjournals

Jeffrey S. Sweeney, Grubb & Ellis president and management partner feels that the commercial real estate industry is close to the bottom of this cycle and he doesn't feel there will be a significant drop from the levels seen currently. In a statement released Friday, Sweeney stated "Now is when the strong developers, the strong brokerage firms will survive and in some cases thrive".

Sweeney noted that by anticipating the recent decline and taking action by controlling costs and expenses they have remained profitable. He foresees that beginning October, the pace of loans on development and existing commercial properties will pick up.

He also feels that the retail sector will take longer to recover than office and industrial as consumer confidence has declined. In addition, the rising fuel costs will leave a lasting impact on retail activity.

Read full report »

SOURCE: Wall Street Journal Online

Retail property vacancies have risen to multiyear highs as retailers have been closing stores and reducing their expansion plans. The faltering economy has taken a heavy toll on malls and shopping centers in the second quarter, but it didn't hurt the rental-apartment market as much as expected.

Apartment-complex vacancies have stayed at the same levels and rents have been rising by more than was expected. Landlords are continuing to benefit from the housing slowdown which has created more renters. The slowdown has also kept existing renters from purchasing a home as the mortgage market has tightened.

Rent growth itself was stronger than anticipated with an increase in rents by 1.1% in the second quarter. The vacancy rate has remained at 5.9%. It is felt that due to greater rent growth caused by the economic slowdown and weaker wage growth, landlords have more power than would normally be seen in this cycle.

WSJ Subscriber only report »

SOURCE: The Wall Street Journal

The massive market for debt tied to commercial real estate is beginning to thaw as investors flush with cash are starting to buy up billions of dollars in mortgages and securities that had been stuck on the books of banks. Investors are beginning to buy mortgages and securities which are discounted from 5 - 20%. Even though there are discounts to be had, the banks aren't selling off at fire-sale prices.

One of the reasons that banks aren't in too big a hurry to dump these types of inventory is because the default rate on commercial real estate is remaining low by historical standards. In the past four weeks, banks have gone to market with four CMBS issues, with a total balance of $4.9 billion... That is a dramatic improvement from early this year.

Lenders are beginning to sell debt both as whole loans as well as CMBSs. Buyers are investing more frequently due to the growing trading volume of CMBSs in the secondary market. This is reducing the spread between these securities and the U.S. Treasury's.

WSJ Subscriber only report »

SOURCE: Forbes

Financial troubles have turned net-leases into a high-yield way to get into commercial real estate. Net leases involve a building owner or a multiple building owner that sells off the buildings as a way to raise cash. They then lease back the building as tenants which makes for a steady and well-protected income stream for 20 to 30 years.

"Now's a good time to be a buyer," says Michael Houge, a principal at Upland Real Estate Group in Minneapolis. "I have twice as much retail property for sale as six months ago, with higher-quality tenants, better locations and more aggressive sellers."

Buying specialized real estate investment trusts (REITs) that own buildings rather than mortgages is another way to get into commercial real estate. Net-lease REITs do much better than equity based REITs.

Most sale-leasebacks involve deals with values greater than $20 million and this is too expensive for most individuals. They can still participate by piggybacking since REITs and other institutional net-lease buyers often sell off some of their properties to turn a profit or balance holdings geographically. Nationwide there are 11,000 single-tenant retail outlets with 60% of them priced below $2 million.

Read full report »