REAL ESTATE: Some debt maturity clocks will ring in 2013

The commercial property markets appear to be coming back, but professionals in the industry warn there are still hazards to watch out for this year.

One of them is the maturation of equity notes, some of which are coming due right about at the fifth anniversary of the start of the recession. According to Breakwater Equity Partners, a San Diego-based real estate consultant, there could be some stress signals this year on that.

The company’s statement pointed out that 10-year loans taken out in 2003 are maturing, along with shorter-term notes taken out just before property values began declining. While more than half of distressed property issues have been resolved, there could be a lot of maturity defaults this year.

Office properties will make up the largest share of this distress. Some markets, Breakwater said, have worked through only a little more than a third of the properties in distress, and many landlords are still not realizing a significant return on their investments because of the high vacancy rates.

Also, Breakwater is suggesting the owners of some smaller, out-of-the-way office buildings should reconsider some of the rents they’re asking, to remain competitive.

ONTARIO APARTMENTS SOLD

Archstone Terracina, an Ontario apartment community and one of the city’s largest, has been sold for $95 million, according to a statement. The South Archibald Avenue complex, with 736 units, detached garages and four swimming pools, was built in 1988.

Archstone sold the complex to MG Properties, which was able to take advantage of low interest rates to make the deal, according to a statement.

DESERT PHARMACY SELLS

A Yucca Valley Rite Aid location has been sold for about $5.7 million. The free-standing store is located at 57701 Twenty Nine Palms Highway, in the Warren Vista Center.

The seller was GL Yucca Valley. An individual, Timothy Hopkins, was the buyer.

NAIOP NAMES 2013 OFFICERS

Kim Snyder, southwest regional president for industrial property developer Prologis, was elected to serve as president of NAIOP-IE, the Inland Southern California’s largest commercial real estate support group. Snyder steps in for John Magness of Hillwood Investment Properties, whose term is up.

Other top officers for this year include Stephen Batchellor of Panattoni Development Co. as treasurer and president-elect, Milo Lipson of Cushman & Wakefield as secretary and Gary Edwards of Western Realco as corporate representative.

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Hungary’s commercial real estate market – skinier and skinier

When the property market struggles, the marketing spin has a tendency to rise exponentially. Take this recent example about the sale of a “big format unit”:

“Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm, has secured 200 sq m premium retail space for Skiny, the well-known, originally Austrian underwear retailer, at Market Central Ferihegy on behalf of the owner AIG/Lincoln.”

Er, 200 sq m? That is 0.45 per cent of the space in Market Central Ferihegy, a 44,000 sqm complex described as “one of the most successful” in Hungary.*

It has long been clear that the economic crisis has hit Hungarian commercial property badly. Just how badly is clear from the latest data.

In 2012, developers delivered just three new office buildings in Budapest, with a combined floor area of 23,000 sq m, according to the Budapest Research Forum (BRF), which compiles data supplied by Hungary’s principal real estate agencies.

As the BRF admits, that represents a 74 per cent drop on 2011, when the new build was 86,000 sq m – but compared to the good times of 2008-9, it is a tiny, one might say skiny, fraction: in 2009, the sector delivered a record 300,000 sq m of spanking new office space, says Eanna Maksay, of the agency DTZ in Budapest. That was before the boom expired

Chris Bennett, director of Europa Emerging Europe Fund and long-time regional property guru, cautions not to read too much in the plummeting figures.

“The very low volume of new build in 2012, 13 and 14 is due to the considerable overhang of space built in previous years,” he says. Yet he admits that subsequent take up has been “relatively low” and that there is a “lack of finance for almost anything.”

“Demand is, to put it mildly, muted, and mainly from existing tenants who are nearing the end of a lease and taking the opportunity to reduce costs,” he says.

A few cowboy developers, seeking fast bucks in the 1990s, were not quite as smart as they thought and have also contributed to the poor overall picture.

“It is fair to say that the overall vacancy figure for Budapest is pretty dire, but if one looks at where the vacancy actually is it is not so bad. There are some buildings in very unpopular locations, or which are very poorly specified, which make the total worse than it might be,” Bennett says.

Other factors, such as the demise of Malev, the Hungarian airline, have reduced the attractions of Budapest as a regional hub.

The good news – at least for those capable of founding or expanding businesses – is that rents remain low, though given the continuing imposition of special sectoral taxes, few new rentals will be from the banking, utilities or telecom sectors. Certainly commercial property in Hungary is performing badly on a regional comparison, Bennett says.

“Poland, in particular, is doing much better, partly because it is a much bigger economy. Capital values and the investment market generally continue strong there and are not too bad in Czech, either, [but] there is no market to speak of in Hungary.” And with the economy in recession, Bennett, one of those rare real estate professionals who publicly warned of the central European property bubble long before it burst, says he sees little hope of any quick turnaround in the industry.

“I see no reason why this should change, at least before the next election. And even after that the office market will quite probably remain difficult.”

* Beyondbrics did ask Cushman & Wakefield, the exclusive retail leasing agent of Market Central Ferihegy, for the current occupancy rate of the retail park, but received no reply by publication time.

For the original post visit: http://blogs.ft.com/beyond-brics/2013/01/21/hungarys-commercial-real-estate-market-skinier-and-skinier/#axzz2IgRgFUMK