E-Newsletter - January 19, 2012

Sacramento Association of REALTORS Commercial Banner
January 19, 2012

The more difficulties one has to encounter, within and without, the more significant and the higher in inspiration his life will be. -- Horace Bushnell

In This Issue
Sponsorship Opportunity
Education
Regional Events
Webinars & Podcasts
Legislation
Mentoring Program
Sac Hotels See Improved Occupancy
NAR Commercial Member Profile
City Approves Deal for I- Interchange
Most Stressed Sectors in Corporate America
Mall Occupancy Firms Up
Improving CRE Predicted
Storage REITS Enjoy a Boom
SBA Loans Aid Firms
Growth Predicted for CA Exports
City Wants To Extend Developer Approvals
State, Federal Government Expand Solar Projects
Green Liability Is Gray
What's Ahead for Hotels in 2012?
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ATTENTION AFFILIATE MEMBERS! COMMERCIAL SPONSORSHIP OPPORTUNITY AVAILABLE NOW

Website

The Sacramento Association of REALTORS® Commercial Division is pleased to offer affiliate companies the opportunity for special exposure to the commercial real estate community in the greater Sacramento-area region. Only four such opportunities are available! Have your logo and link displayed on the official SAR Commercial Division website as soon as today.

SAR features a commercial-specific website which highlights SAR services and investment tools to commercial practitioners and regional investors. Saccommercial.org includes:

  • Regional investment data and information
  • Roster of commercial practitioners by area of specialty
  • Regional calendar of commercial events and educational opportunities at SAR
  • Information regarding commercial real estate forms
  • Highlights of Sacramento-area investing
  • Membership forms and documentation
  • Links to affiliated organizations and sites
  • Commercial Real Estate Glossary and more

Space is limited to four organizations to have their logos with a link placed on the front page of our website. The cost is just $400.

Additionally, these companies will be featured in an edition of the SAR Commercial Report e-blast during the year plus the company logos will be displayed at all SAR education events for 12 months.

If you are interested in reaching Commercial practitioners in such an easy, prominent and affordable manner, please complete this form and fax it back to the SAR Commercial Division at (916) 922-4103 or call Janet Whitney at (916) 546-8451. This is a once-a-year opportunity and first come, first served! Reserve your avenue to reach commercial real estate brokers, practitioners and investors today!

EDUCATION

INVESTMENT TECHNIQUES WITH THE HP10B/10BII CALCULATOR

Wednesday, February 29 -- 9:00 a.m. - 4:30 p.m.

Speaker: Jim Little, MBA, CCIM, GRI

Cost: $49 for SAR Members and REALTORS®/$59 All others

Exciting new development for this class! New applications are now available for the iPhone and Android that will turn your favorite device into your investment must-have! In A Day Development has produced the HP10Bii app specifically for you (download here for only $5.99) and you can use these versions of the calculator for this ever-popular course.

This class is perfect for learning new and necessary aspects of this wonderful machine, those working through the CCIM curriculum or considering it, or for new commercial practitioners. Jim leads you through this class and not a question should go unanswered. He also provides you with one of the most comprehensive outlines in the industry which will lead you with ease through the computations the very next day.

  • Calculate "Cap" Rates, GRMS, Equity Yield Rates, Cash-on-Cash, Debt Coverage
  • Compound/discount cash flows and analyze investments
  • Speedily complete Cash Flow Analysis and Alternative Cash Sales Worksheet forms
  • Calculate Internal Rate of Return (IRR)

Don't delay in registering. This class is only offered every year or so. The maximum participants is 30 which provides for a full hands-on experience. Don't miss it! Registration Form and information

Save the Date

10 TRAPS FOR THE UNWARY IN COMMERCIAL LEASES

Wednesday, March 7

Speakers: Jon Goetz and Amara Harrell from Kronick Moskovitz Tiedemann & Girard

REGIONAL EVENTS

Grubb and Ellis Economic Forecast -- Invitation Only

Thursday, January 26 -- 4:00 to 6:00 pm

Sheraton Grand Sacramento

CREW Awards Program and Luncheon

Thursday, February 9 -- 11:30 a.m. to 1:30 p.m.

Del Paso Country Club, Sacramento

Registration Information

Sacramento Investment Forum

Tuesday, February 14 from 7:30 - 9:00 a.m.
Sacramento DoubleTree Hotel, RG Grins Restaurant

Contact Ashlee Guthrie at (916)418-6000


NAIOP -- "Don't Get Caught By The Rain" Seminar
Thursday, February 16 -- 7:00 - 9:00 a.m.
BSK Associates Office in Rancho Cordova

Sacramento Real Estate Exchange
Friday, February 17
China Buffet in Citrus Heights
Call Ben Couch at (916)989-4652 for additional information

ACRE Broker Of the Year Awards and Banquet
Thursday, March 22 -- Cocktails at 5:00 p.m. and program beginning at 7:00 p.m.
Hyatt Regency Sacramento
Registration Information Coming Soon

WEBINARS AND PODCASTS & NEWSLETTERS

Commercial Connections on Co-Working Spaces -- Co-working Space, a site where independent professionals and freelancers, or anyone with workplace flexibility and mobility can come to work is discussed in this newsletter article. Article

Where Should You Invest Now?
The last few months have seen increased political and economic volatility and raised new concerns about the recovery of commercial real estate. After accelerating in the first half of the year, transaction volume has now slowed. In the face of this, how should investors looking to buy commercial real estate deploy their capital? Webinar Archive


Behind the Curtain: How Private Equity is Approaching Real Estate
After an encouraging first six months in 2011, things slowed in the second half of the year as economic concerns mounted and buyers had second thoughts about escalating commercial real estate values in the face of lackluster fundamentals. This is all on top of a backdrop of uncertainty created by the unfolding debt crisis in Europe, questions about the U.S. government's deficit reduction plans and increasing political rancor on both sides of the aisle. Webinar Archive

CALIFORNIA LEGISLATION

HAZARDOUS MATERIAL LAWSUIT BILL DEFEATED --

AB 1207 failed passage in the Assembly Judiciary Committee on a bipartisan vote. This bill would remove the statute of limitations and thereby expanded the statute of limitations on personal or real property lawsuits when there was an allegation of exposure to a hazardous material, even if it was in relation to remediation activities. In doing so, AB 1207 would have unnecessarily exposed a large number of companies to liability and uncertainty.


A broad coalition of business groups successfully argued that the bill was unnecessary because injured plaintiffs in California currently have a wealth of legal options to use to seek redress and federal and state law provide an extensive and interwoven framework to hold companies responsible and mitigate actions that result in pollution or hazardous waste. (CBPA)


PREVENTING WORKER ILLNESS FROM INDOOR PESTICIDE EXPOSURE --
In data collected by the California Department of Public Health (CDPH), nearly one out of five people who reported work-related pesticide illnesses were exposed to pesticides in indoor air. Because workers and customers can become ill from pesticide use indoors, the California Business Properties Association feels that steps should be taken to eliminate or reduce human exposures. Visit here for a fact sheet on how building managers can manage pests in the office safely. (CBPA)

MENTORING PROGRAM AVAILABLE VIA TELEPHONE

Are you new to commercial real estate or have questions about a specific commercial real estate transaction? Free assistance is available for SAR Members. We have a long-time industry expert available by telephone for questions and help. Consultations are for up to 30 minutes and a variety of topics can be addressed including sales and leasing, acquisitions, business ownership, management, disposition of real property and more. Contact Tony Vicari at (916)437-1211 or e-mail him at This email address is being protected from spambots. You need JavaScript enabled to view it. to make an appointment. Flier

SACRAMENTO HOTELS SEE IMPROVED OCCUPANCY

Bellby Mark Anderson


Sacramento area hotels were on track in November to post slightly better performance numbers for 2011 compared with 2010, according to the latest research by PKF Consulting USA in San Francisco.


For the first 11 months of 2011, Sacramento major hotels were slightly ahead of the same period in 2010. Through November, the average daily rate was $91.70, up 1 percent from $90.82 the year-earlier period.


Occupancy through the first 11 months was 65 percent, up from 63.2 percent in the first 11 months of 2010. The average rate at major hotels in the Sacramento market was $88.88 in the month of November, down 0.8 percent from $89.60 in November the previous year. The average occupancy locally was 60.5 percent in November, up from 60.1 percent the year earlier. (Sacramento Business Journal)

CURRENT COMMERCIAL MEMBER PROFILE

The 2011 NAR Commercial Member Profile describes the business characteristics, activity and demographic characteristics of commercial members, and defines the property information needs of this segment. This NAR eProduct is available for purchase at the NAR Store. NAR Member Profile

CITY APPROVES PUBLIC-PRIVATE DEAL FOR 1-5 INTERCHANGE

by Michael Shaw


Last week, the Sacramento City Council approved a public-private deal that will build a $95 million interchange at Interstate 5 to open development for a large shopping center and eventually housing.


The city of Sacramento negotiated the deal with M&H Realty Partners, the owner of 800 acres of undeveloped land situated south of Meadowview Road known as Delta Shores, which is the last large tract of undeveloped land in the city.


The developer and the city are splitting the cost of the freeway interchange and a more than two-mile extension of Cosumnes River Boulevard to the interstate. M&H has committed $52 million to the road project. Sacramento's Community Development Department staff noted that such a major commitment from a developer in an uncertain economy is unheard of and Councilwoman Bonnie Pannell described the project as a "phoenix rising from the ashes."


The Delta Shores development has been dormant since the real estate downturn in 2006. The new interchange is the first step in the developer's plan for 5,200 homes and 1.3 million square feet of retail. The city would pay $43 million by temporarily diverting some funds from an I-5 improvement project at Richards Boulevard. Anticipated funds not needed for the Delta Shores interchange would be transferred back to Richards Boulevard at a later time. (Sacramento Business Journal)

REPORTS IDENTIFY MOST STRESSED SECTORS IN CORPORATE AMERICA

by Mark Heschmeyer


New reports issued this past week shine a spotlight on corporate segments experiencing continued stress, providing commercial real estate owners with an idea of where they can expect soft demand through 2012. In Standard & Poor's opinion, companies in media and entertainment, consumer products and health care are among the most troubled in the U.S.


And according to Challenger, Gray & Christmas, job cuts were dominated by the government and financial sectors in 2011, and those sectors are likely to continue to struggle in 2012.


Despite positive manufacturing numbers from around the world, sluggish consumer demand and high unemployment continue to weigh on the media and entertainment, consumer products and health care sectors, S&P reported.


These sectors had the highest levels of risk among S&P's lists of distressed companies, weakest links (companies rated 'B-' or lower with negative outlooks or ratings on CreditWatch with negative implications) and potential bond downgrades (investment-grade or speculative-grade companies with negative outlooks or ratings).


S&P identified 126 companies in these three sectors that meet at least one of the above criteria. (CoStar) Most Stressed Sectors

FOR MALLS, OCCUPANCY FIRMS UP

Empty Aisles

by Kris Hudson


U.S. malls and shopping centers experienced a slight improvement in occupancy during the fourth quarter, a relief for landlords that have been battling lackluster demand from retailers for most of the downturn.


But data service Reis Inc. cautioned that any recovery remains precarious and the outlook for this year is mixed, given the clouds hovering over the economy. While some retailers are expanding-such as Forever 21 Inc., Dick's Sporting Goods Inc. and Dollar General Corp. -- landlords can expect more headaches from high-profile store closures by companies such as Sears Holdings Corp. and Gap Inc.
"It's too soon to pronounce a turnaround at this point," said Victor Calanog, Chief Economist at Reis, which is based in New York.

The fourth quarter typically is the strongest for retail landlords as well as their tenants. Still, the fourth quarter of last year was one of the strongest since the recession hit, in terms of rising rents and occupancies.


Malls in the top 80 U.S. markets posted an average vacancy rate of 9.2% in the quarter, down from the 11-year high of 9.4% in the third quarter, according to Reis, which began tracking mall data in 2000. Mall vacancies had been climbing steadily for most of the downturn since 2007, when the vacancy rate fell as low as 5.5%.


Demand for space at neighborhood and community shopping centers also strengthened in the quarter, with stores occupying an additional 3.1 million square feet in the top 80 markets. Because of new construction, vacancy in this category remained at 11%, where it has been for three quarters, a level last seen in 1991. (Wall Street Journal) Malls and community shopping

WHITE PAPER PREDICTS IMPROVING COMMERCIA REAL ESTATE MARKETS

A new white paper issued by San Francisco-based Forward Management LLC predicts that commercial real estate markets have already entered an up cycle and are poised for "slow, steady improvement" over the next five to seven years.

According to the white paper titled, "Inflection Point: The Start of a New Cycle in Real Estate," recovery will play out in uneven waves across U.S. and international markets. Knowledge-based "gateway" cities and technology corridors are already recovering as job growth fuels demand across commercial property sectors. As vacancies drop and rents rise in those areas, demand will likely spill over into suburban job centers and secondary markets, the paper suggests.

"Many investors see commercial real estate as tarred with the same brush as the residential market, but the dynamics of the two sectors are quite different," says Joel Beam, one of the three Forward real estate portfolio managers who authored the paper. "Commercial real estate didn't have the same kind of massive, debt-fueled bubble that brought down the residential sector, and commercial property prices and rents recovered fairly quickly after the financial crisis."

The white paper forecasts that commercial property will experience a favorable supply-and-demand balance, especially in the multifamily and lodging sectors. It also noted the continued profitability of many real estate companies during the recession, while investors continue to see commercial properties as a sturdy source of future revenue. (Mortgage Orb) White Paper

STORAGE REITS ENJOY A BOOM

by A.D. Pruitt


One of real estate's least-exciting businesses -- warehouses that allow people to store their unused sofas, lamps and other household goods -- have become a hit with investors.

The widely watched reality-TV show, "Storage Wars," which follows investors as they bid on repossessed storage lockers in search of hidden treasure, put self-storage on the pop-culture map.

But the storage companies themselves have turned out to be winners, too, as their stock prices surge. Last year, the stocks of real-estate investment trusts in the self-storage business posted a total return of 35.4%, the strongest gain of any REIT sector for the second consecutive year. Those results greatly outpaced the 8% return for all REITs, as measured by the Dow Jones All REIT Equity Index.

Profits in storage "far exceeded where most thought they would come in," said Michael Knott, an analyst at Green Street Advisors. "Almost every situation in life can create demand for self-storage, like moving, divorce and getting married, [that is] irrespective of where the economy may be."

While most self-storage companies performed well, analysts said that Extra Space, based in Salt Lake City, benefited more than others because customers are drawn to its newer facilities located in densely populated markets. That allowed the company to increase occupancy 3.4% in the third quarter to 89.1%, the company's highest-rate ever for a third quarter. Extra Space asking rents jumped 3% in the third quarter compared to the same period a year earlier and discounts dropped 9%. (CoStar)

SBA LOANS AID FIRMS SEEKING GOOD REAL ESTATE DEALS

by Mark Anderson


Small Business Administration officials say their long-term real-estate loans can help businesses exploit low prices and interest rates to save money and build equity. But few Sacramento-area companies are taking advantage - so far.


With the economy improving, a growing number of companies want to buy their buildings using so-called 504 loans, said Jim O'Neal, Director of the Sacramento SBA District. "The firms that have been successful and have survived, they are looking around and with these low interest rates, they can cut their costs and build themselves a tangible asset," he said. (Sacramento Business Journal)

CALIFORNIA EXPORTS PREDICTED TO CONTINUE GROWTH, SLOWLY

by Kelly Johnson


For export activity in November, California again received good news. November marked the 25th straight month in which California's merchandise export trade increased on a year-over-year basis, according to data released Friday.


Beacon Economics LLC, an independent economic research and consulting firm, said in a news release that the Golden State's export trade will continue to grow this year, but cautioned that the pace of growth will likely slow.


As it does every month, Beacon analyzes foreign trade data released by the U.S. Commerce Department. The federal government released the latest data on Thursday. Last year, even after adjusting for inflation, "will easily turn out to be the best year ever for California's export trade," Jock O'Connell, Beacon's local International Trade Adviser, said in the release.


For the first 11 months of last year, California's merchandise export trade totaled $145.81 billion. The high water mark previously was in 2008, when the state's exports reached $141.26 billion after 11 months, in 2011 dollars. (Sacramento Business Journal) Growth Predicted for Exports

CITY WANTS TO EXTEND DEVELOPER APPROVALS -- PROJECTS WILL HAVE 3 MORE YEARS TO START

Michael Shaw


Sacramento wants to give a three-year reprieve to property developers and possibly hundreds of their projects throughout the city that have approvals set to expire.


The move would allow projects to remain "shovel ready" without developers having to pay new fees, which can run into the hundreds of thousands of dollars for large proposals. City leaders made the same decision three years ago with the hope that the worst of the real estate downturn would be over by 2012. Now, they're hoping a third extension won't be needed in 2015. (Sacramento Business Journal)

STATE, FEDERAL GOVERNMENT EXPAND SOLAR PROJECTS PROGRAM

by Melanie Turner


California Gov. Jerry Brown and U.S. Interior Secretary Ken Salazar announced the expansion of an existing federal-state partnership that has, over the past two years, paved the way for more than a dozen utility-scale solar energy projects and more than 130 renewable power projects in California.


Launched in 2009, the agreement works to expedite review and processing of proposed projects. Last week's agreement aims to further advance the state's goals for renewable energy and create additional clean-energy jobs.


The governor and secretary signed the agreement in Elk Grove at one of Recurrent Energy's four Sacramento-area solar projects. Together, the projects are expected to generate 160 million kilowatt-hours of electricity in one year, or the equivalent of the electricity consumption of 12,000 American homes.


Recurrent Energy's Sacramento-area projects generated more than 220 jobs during construction, according to the governor's office. If all utility-scale projects in the pipeline in California were built today, the state would have enough renewable power to meet the state's 2020 goal of 33 percent.


"As part of this new agreement, which will expand our partnership on renewable energy, Interior and California will identify needed transmission projects to track, troubleshoot and shepherd," Salazar said in a news release. "What's happening in California is nothing short of a revolution - clean energy is creating jobs, powering our economies, and making believers out of skeptics." (Sacramento Business Journal) Solar Projects to Expand

LIABILITY IS A GRAY AREA FOR GREEN BUILDING

by Susan Piperato


When sustainability standards for commercial buildings were introduced in the mid-1990s, contractors were often expected to provide guarantees that the property would receive certification for the U.S. Green Building Council's (USGBC) LEED (Leadership in Energy and Environmental Design) or Energy Star. But since professionals and owners lacked experience in meeting green standards, if a building ended up not qualifying for certification, it wasn't always easy to see who was at fault.


Sustainable buildings are becoming more commonplace-the USGBC certified its 10,000th project in mid-2011, and is currently certifying an additional 1.6 million feet each day around the world-so both owners and contractors understand the certification process for new green construction much better than they did even just a few years ago.


It's easier to find language that holds contractors accountable for following, say, LEED-compliant practices, without making them liable for factors beyond their control, says Dan Probst, Chairman of energy and sustainability services for Jones Lang LaSalle. He also finds owners and contractors more realistic in their expectations. "Certain credits are easy to get and some are not possible or not cost-effective," he says. "Then there are a few that are possible or probable, but not certain. So we might not be certain of the outcome, but we know exactly where the uncertainty factor is."


However, when it comes to certain aspects of green building-like implementing innovations, selecting green products, retrofitting existing buildings and overall energy performance-uncertainty remains, and therefore liability continues to be a difficult issue, say industry experts. (NREIOnline) Liability is Gray for Green

WHAT'S AHEAD FOR HOTELS IN 2012?

by Ed Watkins


2011 may not have been the hotel industry's best year, but it sure could have been a lot worse. According to a recent industry forecast, lodging demand, rate and RevPAR all improved in 2011, and this should be another year of gains. But what else is ahead for 2012 and beyond for the industry?


The biggest event in the U.S. this year will be the presidential election and while the campaigns will certainly be a boon to business for a few hotels, many owners and operators are more anxiously awaiting the outcome to see in which direction the nation and economy will be heading in the next four years. Many business owners and executives say uncertainty is keeping them from expanding their businesses and hiring more employees. Eleven months from now that curtain of uncertainty should be lifted, and perhaps the economy can kick back into high gear. If so, the lodging industry will be a prime beneficiary of an improved business climate.


The industry rumor mill has been buzzing in the past year or so on the possibilities of hotel company mergers, acquisitions or public company filings. This should be the year something will happen: Hilton or La Quinta going public, or Choice pulling the trigger on the acquisition of an upscale brand, or Motel 6 getting sold or Red Roof buying or selling. (Hotel Online) What's Ahead for Hotels?

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