“Real estate can be purchased at a reduced rate right now,” he said. “And there are not that many people lined up to buy yet.” — Jan Wilking with CRG Utah

Below is a great article that I felt worth repeating here on Logan Utah’s Leading Commercial Real Estate Site.

Thanks to ParkRecord.com for a great Utah real estate article

Commercial real estate in a slow burn

The commercial real estate industry is in the midst of a perfect storm, says Zions Bank vice president of real estate Michael Morris. He expects 2010 to be more of the same, but is optimistic farther out.

The monthly report from the federal Congressional Oversight Panel (COP) charged with overseeing Troubled Asset Relief Program (TARP) spending was released Feb. 11 and makes many of the same arguments but says the “storm” could reverse economic recovery.

At the heart of the issue are commercial loans that are coming due over the next four years that will need, but won’t receive, refinancing.

“We’re in the midst of the ‘deleveraging of America,’” Morris told attendees at the annual CCIM | NAIOP Utah Commercial Real Estate Symposium Tuesday at the downtown Hilton in Salt Lake City.

The value of commercial real estate is down 43 percent nationally. The total debt load is $3.5 trillion.

Morris said commercial real estate value has lost $1.6 trillion. The COP reported that pension funds hold 68 percent of commercial real estate equity.

Nationwide, 150 banks have closed and that number may double or triple, he added. The COP estimates 37 percent of banks are at risk especially community banks.

The financial product “Commercial Mortgage-Backed Securities” may not be seen again for a generation, Morris said.

Commercial real estate markets often lag behind residential markets and there’s a nine-month oversupply of homes on the Utah market, and a five-to-six-year supply of developed vacant lots, he said.

There’s just too much inventory in both kinds of real estate to expect a recovery on residential real estate this year, and commercial will follow, he explained.

Morris called the market crisis a “slow burn.” That means recovery will be slow as well.

Jan Wilking with CRG Utah attended the symposium and said that Morris’s comments should not be perceived as pessimistic because he envisions a light at the end of the tunnel. Last year’s conference was plagued with fear and uncertainty. This year, people were confident the bottom is in sight.

Wilking also said the “slow burn” analogy is typical of the messages being distributed by industry professionals.

Right now he’s working with distressed properties and said assistance from the government could do a lot to help people hold onto property and banks stay in business.

There are a lot of people who took out mortgages between 2005 and 2007 at the “high water mark.” Commercial real estate loans come due after three to seven years not the 30 years homeowners get. People who bought commercial property at the height of the boom are not only underwater, but are due on their loans.

“Commercial real estate is not in a good state,” he said.

Even in Park City a lot of people owe more than their property is worth. The first half of 2010 will likely see increased vacancies and decreased rent.

“It’s going to remain a tenant’s market in the near term,” he added.

He cited The Yarrow and The Claimjumper buildings as perfect examples of the crisis banks are in.

“That’s something you’re going to be seeing in the future,” Wilking said. “Everything that could go wrong has gone wrong easy money caused this decline in value.”

Even people who made conservative business decisions are in trouble, he said.

The perfect storm can be broken down as follows, he said: First there are many investors who likely won’t get their money back when loans come due in the near future.

Unlike most residential loans in which there’s a single lender and a single borrower, a several parties might own a piece of a commercial mortgage and they’re prioritized. If the debt of the party first in line equals 75 percent of the value of the property, and the property loses 25 percent of its value, there will be no money left to pay the other creditors.

The amount of distressed real estate will continue to increase, Wilking explained. Yet the number of transactions is down.

Lastly, as vacancies go up and stable tenants renegotiate leases to lower rent, the values of properties continue to decline. Wilking said presentations at the symposium suggest that’s already happening in Utah.

But like Morris, Wilking believes there’s a silver lining. He considers himself an optimist and one person’s misfortune is another’s opportunity.

“Real estate can be purchased at a reduced rate right now,” he said. “And there are not that many people lined up to buy yet.”

The most important thing to remember is that the bottom could be close, so much of the fear and uncertainty is decreasing, he explained.

None of that optimism can be found in the COP’s report, titled, “Commercial Real Estate Losses and the Risk to Financial Stability.”

According to a government-issued press release found at cop.senate.gov, the panel is “deeply concerned that a wave of commercial real estate loan losses over the next four years could jeopardize the stability of many banks and prolong an already painful recession.”

When the short-term commercial loans come due, they’re usually refinanced. But refinancing will probably not be available for loans coming due between 2011 and 2014, it explained.

“Even borrowers who own profitable properties may be unable to refinance their loans as they face tightened underwriting standards, increased demands for additional investment by borrowers, and restricted credit,” the release reads.

The panel estimates 2,988 community banks almost 38 percent are at risk.

“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American,” the panel said.

“When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities. Because community banks play a critical role in financing the small businesses that could help the American economy create new jobs, their widespread failure could disrupt local communities, undermine the economic recovery and extend an already painful recession,” the press release concluded.

Park City’s Frontier Community Bank is not at risk, says CFO Haddon Libby. Its focus has been on individuals and homes, so it has few commercial mortgages on the books less than 20 percent. The majority is in residential mortgages and the bank has conservative loan to value ratio, so its portfolios perform well.

As recently reported on every major news network in the area, The Church of Jesus Christ of Latter Day Saints has made a significant purchase of 13 acres just north of the Grand American Hotel in downtown Salt Lake City. Many of the reports I’ve seen on TV or read online, are showing that the estimated cost of such a purchase to be near $25M. Why would the LDS church make such a purchase in an economy that doesn’t show any real signs of recovery. My opinion is simply because they’re smart.

Reports are that the LDS church doesn’t have any immediate plans to develop the land, which is another reason many are scratching their heads trying to figure out the reasoning behind the recent purchase. Here’s the reason I think they are smart.

I think they are taking an opportunity to obtain the land while the price is right. If they decide to wait until the economy is recovering, or has recovered, who knows how much more than the estimated $25M they would pay. They now have a commercial site, for a fair price, that can one day make them a ton of money. Is that their main objective for the purchase? Who knows. It doesn’t matter really. What matters is that those investors and business owners who are looking to plan for the future realize that now is the time to buy commercial real estate, especially here in Utah, where the economy has proven to be substantially more stable than the rest of the country. It could be the difference of making money, to making a lot of money.

This site is specifically focused around Northern Utah Commercial Real Estate, and there are just as many opportunities for great commercial purchases. Last year, a very smart investor finished building the Spring Hill Suites Marriott along the Logan River on Main St. Many in the Logan area were scratching their head and saying why build such a significant Hotel in such a bad economy. Well, like the LDS church, they’re smart. They were able to obtain prime commercial real estate in Logan Utah, for a price that was right, and will now sit back and watch the economy recover and their bank accounts grow.

Folks, now is the time to buy not only commercial real estate in Northern Utah, but residential real estate as well.  This site provides you the opportunity to find both.  We also have the real estate agents who know this area, have the experience, and are honestly out to do what’s best for our clients.  Give us a call, shoot us an email, or simply use our free real estate search to find the property that’s right for you.  Follow the examples listed above and make a smart investment when the time is right, (Now).

As recently reported on every major news network in the area, The Church of Jesus Christ of Latter Day Saints has made a significant purchase of 13 acres just north of the Grand American Hotel in downtown Salt Lake City. Many of the reports I’ve seen on TV or read online, are showing that the estimated cost of such a purchase to be near $25M. Why would the LDS church make such a purchase in an economy that doesn’t show any real signs of recovery. My opinion is simply because they’re smart.

Reports are that the LDS church doesn’t have any immediate plans to develop the land, which is another reason many are scratching their heads trying to figure out the reasoning behind the recent purchase. Here’s the reason I think they are smart.

I think they are taking an opportunity to obtain the land while the price is right. If they decide to wait until the economy is recovering, or has recovered, who knows how much more than the estimated $25M they would pay. They now have a commercial site, for a fair price, that can one day make them a ton of money. Is that their main objective for the purchase? Who knows. It doesn’t matter really. What matters is that those investors and business owners who are looking to plan for the future realize that now is the time to buy commercial real estate, especially here in Utah, where the economy has proven to be substantially more stable than the rest of the country. It could be the difference of making money, to making a lot of money.

This site is specifically focused around Northern Utah Commercial Real Estate, and there are just as many opportunities for great commercial purchases. Last year, a very smart investor finished building the Spring Hill Suites Marriott along the Logan River on Main St. Many in the Logan area were scratching their head and saying why build such a significant Hotel in such a bad economy. Well, like the LDS church, they’re smart. They were able to obtain prime commercial real estate in Logan Utah, for a price that was right, and will now sit back and watch the economy recover and their bank accounts grow.

Folks, now is the time to buy not only commercial real estate in Northern Utah, but residential real estate as well.  This site provides you the opportunity to find both.  We also have the real estate agents who know this area, have the experience, and are honestly out to do what’s best for our clients.  Give us a call, shoot us an email, or simply use our free real estate search to find the property that’s right for you.  Follow the examples listed above and make a smart investment when the time is right, (Now).

Wal-Mart came to the south end of Cache Valley, and with it brought additional motivation for commercial real estate in the area around Providence, and South Logan. If you are someone who needs a place for your business, and that business would benefit from walk in clientele, then being around the worlds number 1 retailer just might be beneficial to you.

It just so happens that there are available commercial spaces for many types of businesses around the new Wal-Mart. These spaces aren’t all listed online, so one of the only ways to find out about these properties is to contact us so that we can get you the information you need to get your foot in the door before these spaces are gone.

We will have one of our commercial specialist handle all of your commercial real estate needs with professionalism, honesty and integrity. You will feel confident that you got the space you need, at the price you want, allowing you to be as profitable as you possibly can. With our connections to the inside world of Logan Commercial Real Estate, we are confident we can find the right property for you.