Star News

There continues to be a disconnect between what buyers are willing to pay for real estate assets and what sellers are willing to accept for the disposition of their properties. With Class A institutional quality assets, all-cash buyers are capable of paying higher prices for assets and still obtaining positive leverage by avoiding the higher cost debt. B and C quality assets display the largest cap rate disparity between the bid and ask. This disparity is a result of the capital markets discounting lower quality properties and as a result, the mortgage constants range from 7.25% to 7.75%. This higher cost of debt has pushed cap rates out anywhere from 50 to 150 basis points higher depending upon the property type, quality, and geographic location. The tertiary markets will provide buyers with higher cap rates on B and C quality assets; due not only to the fact that debt is scarce but it is also more costly on such assets versus those properties in major metropolitan locations or of institutional quality.

Pension fund advisors and insurance companies polled have seen capitalization rates rise 50 to 75 basis points on A-quality assets ranging from office, industrial, retail, and apartments. There is a flood of lesser quality product currently marketed for sale. It is the opinion of many sellers that the existing low capital gains tax will be phased out at the end of 2009; and sellers intend to ‘cash in’ and pay the existing lower tax rate upon the sale of their property rather than source 1031 exchanges. Frustration continues to run high with both buyers and sellers, both of whom have an abundance of equity to invest but continue to have difficulty identifying transactions that make good economic sense. We will keep you posted…

Penstar is working with a portfolio lender who is offering fixed rate, non-recourse debt financing for apartment, office, industrial, retail, hospitality, mobile home parks, and mini storage properties nationwide. Call dates range between 7 and 30 years with 25 or 30 year amortization. This lender will originate loans from $10 million to Ŭ300 million on stabilized B, B+, and A quality properties. Their spreads are 225 basis points over the corresponding treasury for apartments and 250 over for commercial properties. Prepayment is structured on yield maintenance or negotiated step-down. To discuss, please contact Gerald Price at (818) 883-9629 or Price@PenstarAdivisors.com

Helpful Humor

We at Penstar understand the challenges of the commercial real estate business. The best antidote for those challenging transactions is to take a moment to have a hearty laugh. Helpful humor is our way of infusing laughter into your work week. The anecdotes may not all be real estate themed but we hope you will enjoy them just the same.

As the editors of StarNews, we have been commended as well as teased for the Helpful Humor column of our newsletter. We would like to invite you as our loyal readers to join us in our ongoing search for the most comical material. Please forward your humorous stories, jokes, or anecdotes to Steven Hamermesh at Hamer@PenstarAdvisors.com. Entries that are brief, concise, and entertaining will be considered for publishing and viewing by our newsletter’s 15,000 readers throughout the real estate industry. We ask that readers exercise appropriate judgment in content when submitting entries. The provider of the chosen entry will have their name and company printed along with their joke unless anonymity is requested.

““George Carlin Quotes”

“Procrastination is the art of keeping up with yesterday.”
“If all the world is a stage, where is the audience sitting?”
“Have you ever noticed that anybody driving slower than you is an idiot and anyone going faster than you is a maniac?”
“When cheese gets its picture taken, what does it say?”
“Before they invented drawing boards, what did they go back to?”
“Why do croutons come in air tight packages? Isn’t it just stale bread to begin with?”
“When someone asks you ‘a penny for your thoughts,’ and you give them your 2 cents, what happens to the other penny?”