Archive for the ‘Distressed Properties’ Category

Billion-dollar investor says mortgages will be negotiated before foreclosed or sold off

August 19th, 2010 No Comments
Billion-dollar investor says mortgages will be negotiated before foreclosed or sold off.
A client of ours has recently bought large portfolios of loans from failed banks.  Including some of the well-publicized FDIC auctions of leftover commercial real estate loans from now-closed banks.  In talking to this client last week, he believes we are seeing a divide in commercial real estate financing markets on existing debts.
The first pool of loans are the ones similar to the FDIC sales, which come from private banks, which are generally smaller in nature on local commercial real estate projects and properties.  Clearly, banks that failed have a change in ownership and are forced to make some changes to their loan portfolios, but the few we’ve seen that the FDIC has actually sold off so far are the exception.  Most banks today have been able to hold their loans and have their former mortgage originators now monitor those loans on a monthly basis to assess their cash flow potential.  With this knowledge of the up-to-date operations of each individual property, these private banks are often expending loans and softening terms.  Foreclosure is an expensive legal process and takes the loan into a different category with bank regulators.
The second type of loans are the commercial mortgage backed security loans, which as we had discussed before are pooled together and sold off as bonds in many pieces.  Our client has been active in buying a few of these pieces that on the surface seem to be riskier portions of the loan, but in all instances so far, the loan terms have been renegotiated and/or extended as opposed to foreclosed upon, even for these high-regulated CMBS loans.
Many in the industry today call it “Extend and Pretend.”  If the underlying economics are on the upswing or do continue to improve, then operating results, including the payment of pricinpal and interest, will be able to increase on these loans.  The lenders today obviously feel it is more productive for them to continue to work with the existing in-place borrower than to draw a line in the sand, pick up the company to foreclosure process, let it essentially disintegrate in condition, and thirdly command a significantly lower value at a distressed sale.
Mark D. Bratton
Vice President
Colliers Monroe Friedlander
220 S. King Street 18th Floor
Honolulu HI 96813
Tel 808.523.9708
email mark@colliershawaii.com
www.markbratton.com
www.colliershawaii.com

A client of ours has recently purchased large portfolios of loans from failed banks.  Including some of the well-publicized FDIC auctions of leftover commercial real estate loans from now-closed banks.  In talking to this client last week, he believes we are seeing a divide in commercial real estate financing markets on existing debts.

The first pool of loans are the ones similar to the FDIC sales, which come from private banks, which are generally smaller in nature on local commercial real estate projects and properties.  Clearly, banks that failed have a new ownership and are forced to make some changes to their loan portfolios, but the few we’ve seen that the FDIC has actually sold off so far are the exception.  Most banks today have been able to hold their loans and have their former mortgage originators now monitoring those loans on a monthly basis to assess their cash flow potential.  With this knowledge of the up-to-date operations of each individual property, these private banks are often extending Tenant loans and softening terms.  Foreclosure is an expensive legal process and takes the loan into a different category with bank regulators.

The second type of loans are the commercial mortgage backed security loans, which as we had discussed before are pooled together and sold off as bonds in many pieces.  Our client has been active in buying a few of these pieces that on the surface seem to be riskier portions of the loan, but in all instances so far, the loan terms have been renegotiated and/or extended as opposed to foreclosed upon.

Many in the industry today call it “Extend and Pretend.”  If the underlying economics are on the upswing or do continue to improve, then operating results, including the payment of pricinpal and interest, will be able to increase on these loans.  The lenders today obviously feel it is more productive for them to continue to work with the existing in-place borrower than to draw a line in the sand, and force the company to go through the foreclosure process, let the property essentially disintegrate in condition, and command a significantly lower value at a distressed sale.

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Posted in Articles, Distressed Properties, Foreclosures Tags: , ,

Hawaii Condos – Moana Vista Project

May 24th, 2010 No Comments
The Moana Vista was a partially constructed and failed condo project. This development was up to approximately the 20th Floor when constuction was halted. Reportedly, the developer had $65 Million dollars invetsed.  Oliver McMillan, a high rise developer, purchased the project for $36 million and is poised to restart constcution.
Hawaii has a high percentage of multi-family properties that are eventually converted to condominiums.
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Posted in Distressed Properties, Hawaii Economy, News Tags: , ,

Real Estate Investment Funds – Must Spend it Now or Lose it

May 10th, 2010 No Comments

Wall Street Journal – Fund Returns to the Fray

The attached article is a good summary of what’s happening across the country today in commercial real estate investments in the public sector.  As predicted in our annual Certified Commercial Investment Member Forum in January, these funds that have raised billions of dollars are having a hard time spending them and attracting the returns that they promised.  A number of these funds were placed 2-3 years ago and will expire this year if not spent on buying commercial and investment real estate.

In Hawaii, we have had less distress than most U.S. mainland cities because there has not been overbuilding.  We have not seen many of these funds looking to invest in Hawaii, as they are focused on larger markets and markets with greater distress and foreclosures. The distressed commercial real estate market across the country, although pronounced, has not hit massive numbers of properties.  Greater supply was thought to continue to drive prices lower.

This article deals with the fact that some investment managers are being pushed to invest in properties at the moment that could end making marginal investments.  The other alternative is to return the money to investors and not obtain the management fees as originally planned.

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Posted in Articles, Distressed Properties, Hawaii Economy Tags: , ,

Distressed Property in Hawaii sells just before confimration sale

May 4th, 2010 No Comments

A large parcel of industrial property sold in the first quarter of 2010 despite the uncertainty around the ownership of the property.  The land area is approximately 59 acres, and the property sold for $12.5MM.  The property had been in foreclosure and reportedly, the note had been sold at a small discount off the face value.  An investor came in just prior to the confirmation hearing and paid the price to pay off the mortgage.  The property is unimproved, and was recently rezoned for industrial use.  Most likely, plans include one to ten acre industrial lots with common areas and streets being put in by the new developer.

There was a lot of interest in this property, and we can see why, with a price tag of $4.86 per square foot for the raw, unimproved industrial land, there seems to be a profit for someone.  At this price, it should allow for a developer to hold the property for a couple of years, make improvements, and sell the individual lots at a retail price as the market strengthens.

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Posted in Articles, Distressed Properties, Foreclosures, Hawaii Industrial Properties, Investments, Recent Investment Sales Tags: , , , ,

2010- The Year of Transition for Hawaii Commercial Real Estate

February 24th, 2010 No Comments

With the release of the Investment Market Report from Colliers Hawaii, both the Honolulu Star Bulletin and the Honolulu Advertiser have posted articles with a brief summary and overview of the Report.

A year of transition: They believe multifamily and retail sectors will recover this year,  industrial by the beginning of the next year, office won’t see an improvement until 2011 and it could be as late as 2012 before problems in the hotel sector abate.

Hawaii Hotels: There are currently four Hawaii hotels for sale, and 11 that are distressed or in foreclosure, including the Ilikai, the former W Honolulu Diamond Head, Maui Prince, Fairmont Orchid, ResortQuest Kauai and the Hilton Kauai.

Commercial property sales: Sales have been consistently falling since the market’s peak in 2005, at $4.3 Billion.  Last year, it slowed to almost a trickle at $627 million.

To view the full articles, please visit:

Honolulu Advertiser – Commercial property sales fall 20%

Honolulu Star Bulletin – Isle’s real estate is still in distress

If you would like to receive a copy of the various market reports as they become available, please send an email with your contact information here.

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Posted in Distressed Properties, Foreclosures, Hawaii Economy, Hawaii Hotels, News

Moana Vista deal averts foreclosure sale

October 23rd, 2009 2 Comments

A San Diego-based developer has salvaged a deal to buy the partially built Moana Vista condominium tower in Kaka’ako, and expects to resume construction early next year.

The firm, OliverMcMillan, has signed a contract to buy the property from original developer KC Rainbow II LLC after paying off a $29.5 million lien filed against the property by general contractor Hawaiian Dredging Construction Co.

The deal calls off a foreclosure sale that had been initiated by Hawaiian Dredging and postponed until Friday.

OliverMcMillan said it expects to receive title to the property at 1009 Kapi’olani Blvd., makai of McKinley High School, by Nov. 2, and resume marketing and sales after making some changes to the 46-story tower designed for 492 units.

“We believe in Hawai’i, and see this project as a great opportunity, which is why we are investing substantial capital in the state,” company CEO Morgan Dene Oliver said in a statement.

OliverMcMillan is a 30-year-old private firm that has developed a variety of residential and commercial real estate projects.

The company said it has $2 billion worth of projects in its development pipeline, including a $700 million urban redevelopment plan in Houston, residential lofts in San Diego and a mixed-use project involving a historic winery in Ontario, Calif.

The firm didn’t disclose the total acquisition price for Moana Vista, which it values at $300 million.

If completed as expected, the acquisition would result in a relatively quick revival of a project that had a strong start three years ago but was derailed by unexpected downturns in the global financial market and the local housing market.

Moana Vista was begun by high-tech entrepreneur and University of Hawai’i graduate Fred Chan, who led KC Rainbow and successfully developed the nearby twin-tower condo Moana Pacific.

In May 2006, 466 people entered a lottery to buy 192 Moana Vista units reserved for owner-occupants. Investors reserved nearly all remaining units available for purchase, and construction funded by Chan began several months later.

But after the local real estate market and economy deteriorated sharply last fall, close to two-thirds of buyers canceled their nonbinding reservations. That prevented KC Rainbow from drawing on a $100 million construction loan late last year after roughly $65 million had been invested in the project, mostly by Chan.

Hawaiian Dredging halted work in November, and filed a foreclosure lawsuit in April after applying a $29.5 million lien to the property.

OliverMcMillan in July had a tentative deal to buy the project, but a sale fell through and a foreclosure auction was scheduled for Sept. 25. More negotiations between OliverMcMillan and KC Rainbow led to the auction being rescheduled for Oct. 2.

OliverMcMillan said it plans to rename the project and make some upgrades where it can. The tower is about 40 percent complete, with the structure rising up to the 26th floor.

KC Rainbow canceled about 175 remaining reservations and refunded deposits. OliverMcMillan plans to resume sales and marketing in early November, and will be contacting people who previously reserved units in the building.

As part of an affordable housing agreement with the state, 124 units are reserved for residents earning no more than 140 percent of Honolulu’s median income.

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Posted in Articles, Distressed Properties
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