North Carolina Commercial MLS | CMLS

North Carolina commercial real estate Related News May 24, 2011

FNBN Reports a Whopping Q1 Loss

FNB United Corp. (Nasdaq:FNBN), an Asheboro, North Carolina the holding company for CommunityONE Bank, N.A., reported on May 23rd a total loss of $44.7 Million or $3.91 per diluted share for Q1 2011 following a $20.2 million provision to the allowance for loan losses and OREO costs and write downs of $16.2 million, compared to a net loss of $4.4 million, or $0.38 per diluted share, for the first quarter of 2010.

"We continue to make great strides in addressing the asset quality issues that have persisted over the past couple of years. Non-performing assets have declined from record levels at December 31, 2010 of $393 million to $365 million at March 31, 2011, and delinquent performing loans decreased from $24.7 million to $16.1 million during this same period," said R. Larry Campbell, Interim President and CEO.

Another Market Insight by NCCMLS

The Las Vegas ICSC  2011 conference brought some positive sentiment towards the commercial real estate retail Market.

ICSC Chairman, recently succeeded by  Kimco Realty Corporation (NYSE:KIM) CEO David Henry, and President of Taubman Centers, Inc. (NYSE:TCO), William Taubman, on Monday said the retail industry had “weathered the storm, and provided the momentum that opened the clouds of the Great Recession… I believe that the regional shopping center, with jobs, services, consumer choices and public revenue that it provides, is a powerful force for societal good around the world.”

However, shopping centers regional or neighborhood are only as strong as their tenants.  Most retailers attending the convention stated that 2012 would be a definite comeback from the 2008-09 drop. 

David Henry, CEO of privately held 7-Eleven, Inc. said the company is planning 800 stores in the next 24 months.  Firehouse Subs associates claimed to be adding 100 new locations by the end of the year. James Dewey from Greensboro North Carolina’s Fresh Market Inc (NASDAQ:TFM) said the company sees a potential of 500 more stores.  Yogurtland Director of real estate, Cesar Shih, said the franchise will grow from 138 stores to 202 by December.  CEO Anthony Leone of Energy Kitchen is planning 1,000 locations in 10 years. All retailers planned more openings in 2012 than 2011.

Other Related Publicly Traded Companies:

Kite Realty Group Trust (NYSE:KRG)

General Growth Properties, Inc (NYSE:GGP)

Simon Property Group, Inc (NYSE:SPG)

RAIT Financial Trust (NYSE:RAS)

Equity Residential (NYSE:EQR)

Aviv REIT, Inc. (NYSE:AVI)

Nationwide Health Properties Inc. (NYSE:NHP)

ProLogis (NYSE:PLD)

CoreSite Realty Corp (NYSE:COR)

Regency Centers Corporation (NYSE:REG)

Vestin Realty Mortgage II, Inc. (NASDAQ:VRTB)

Resource Capital Corp. (NYSE:RSO)

Colony Financial, Inc. (NYSE:CLNY)

Inland real estate Corporation (NYSE:IRC)

Cousins Properties Inc (NYSE:CUZ)

Digital Realty Trust, Inc. (NYSE:DLR)

Developers Diversified Realty Corp. (NYSE:DDR)

Howard Hughes Corp (NYSE:HHC)

Boston Properties, Inc. (NYSE:BXP) 

Thomas Properties Group, Inc. (NASDAQ:TPGI)

American Realty Investors, Inc. (NYSE:ARL)

The Macerich Company (NYSE:MAC) 

North Carolina commercial real estate Related News May 24, 2011

North Carolina’s Bank of America pushes NC Developers towards Foreclosure

A $58 Million Dollar Mixed Use building in Chapel Hill, North Carolina, known to some as the greenest condo building in America, is hitting some financial “snags.”  According to Reuters, the 217,000 square-foot building known as Greenbridge is $1.6 Million Dollars over budget and is currently financed by Bank of America Corporation (NYSE: BAC).

When the building broke ground in 2008 Ken Lewis, former Bank of America president cited the building as an example of the bank’s commitment to “green building.”  However, Bank of America’s one size fits all lending policies could be pushing Greenbridge to Foreclosure.

In August 2010 with 37 units sold and 15 under contract Bank of America refused to pay contractors for cost overruns.  The North Carolina based lending institution said they had already raised the mortgage once and the borrowers failed to pay a $1.6 Million dollar equity deposit required by the terms of the increase.  

Related Publicly Traded Companies:

Bank of America Corporation (NYSE:BAC)

Another Market Update by NCCMLS

The Movie Too Big To Fail premiered May23rd on HBO, a testament to the apocalypse of the financial legacy of the United States.   The crash of Bear Sterns,  bankruptcy of Lehman Brothers, destruction of hope to achieve the American Dream for many.

But the post financial apocalypse of the US doesn’t need a movie to be reminded of the disaster.  Even the cities seen following the after math as the most likely to succeed are facing challenges today of a weak financial industry and ever recovering consumer, and never stabilizing real estate market.

Raleigh is no exception.   While Charlotte was perceived to see the worst of the Banking Sector, Raleigh faced high vacancies as Wachovia fell to the hands of Wells Fargo & Company (NYSE:WFC).  But for Raleigh, the fallout continues as RBC Bank (USA), whose name has graced the market on the RBC Center, home of the Hurricanes, and Raleigh’s Highwoods Properties, Inc. (NYSE:HIW) RBC Tower in downtown Raleigh, is on the auction block as its US division has failed to produce income with a high mortgage default rate of nearly 7%.

But Wachovia and RBC aren’t the only big losers for Raleigh.  Progress Energy, Inc. (NYSE:PGN) whose Q1 income dropped by $184 Million is currently working out a merger with Duke Energy Corporation (NYSE:DUK), forming one of the largest monopoly’s in the United States and will be headquartered in Charlotte, effectively adding to Raleigh’s office vacancy woes.

But office isn’t the only fallout in the Triangle.  The Kroger Co. (NYSE:KR) who has posted modest earnings plans to close yet another Raleigh location in Wakefield Commons shopping center.   The announcement came just 1 week after debt struggling Centro Properties (PINK:CEOPF) of Australia (who still owns another 23 Properties in North Carolina) sold the center to Westdale real estate Investments of Dallas, TX.  However, Westdale claims to have acquired the property as a distressed asset at a significant discount and dismissed concerns over losing the tenant.

Glenwood Avenue pre financial crisis was Raleigh predominate high-end retail and office location, once drawing significant rates simply for a Glenwood address.  Although Crabtree Valley Mall has continued to thrive, the recent Foreclosure of the non-existent Crabtree Tower, illustrates just how weak the Glenwood corridor remains.   Crabtree Tower, once a Sheraton Hotel, currently stands as a vacant slab occupied by no more than overgrown weeds and shrubs.

But not all news is bad news for Raleigh.  In Q1 2011 office vacancies dropped to 12.3% according to CoStar Group, Inc. (NASDAQ:CSGP):

Class-A projects reported a vacancy rate of 14.8% at the end of the first quarter 2011, 15.3% at the end of the fourth quarter 2010, 15.7% at the end of the third quarter 2010, and 16.3% at the end of the second quarter 2010.

Class-B projects reported a vacancy rate of 12.4% at the end of the first quarter 2011, 12.4% at the end of the fourth quarter 2010, 12.7% at the end of the third quarter 2010, and 12.9% at the end of the second quarter 2010.

Class-C projects reported a vacancy rate of 6.5% at the end of the first quarter 2011, 6.5% at the end of fourth quarter 2010, 6.3% at the end of the third quarter 2010, and 6.8% at the end of the second quarter 2010.

Once known for having the highest vacancy rates in the Country, the RTP market is now one of the healthiest as industrial and warehouse properties continue to see occupancy improvements with a Q1 vacancy rate of 10.1%.   The RTP corridor accounts for approximately 50% of the Raleigh/Durham industrial market with nearly 18 Million Square Feet of industrial space.

Duke Realty Corporation (NYSE:DRE) owns 2 Million Square Feet of warehouse/industrial space in the Raleigh/Durham market and reached a milestone this year achieving 100% occupancy.

A Market Update provided by NCCMLS.

According to Moody’s commercial real estate prices continued their decent in March falling 4.2%.  However, the report shed a positive light on the overall commercial real estate market.

So what's the good news?

While prices dropped, according to Moody’s commercial real estate activity including overall sales volume and leasing activity continued to rise, a pattern we’ve seen since late last summer.  In fact market activity on the leasing side of commercial real estate was the hottest it has been in 4 years last December through February before taking a short breather.

Moody’s also claimed that a majority of reduced property values are coming from distressed assets being fired off by banks at ultralow prices.   In fact according to Moody’s over 33% of property sales in March where distressed asset sales.

Finally, while the residential market has well over a 36 to 72 month supply of distressed sales.  Moody’s reported only a 12 to 24 month supply of distressed commercial real estate sales.   Suggesting the commercial real estate market has a much smaller inventory of distressed assets.

industrial Properties performed the worst, followed by office properties, multi-family properties, and finally retail properties.

The index “continues to bounce along the bottom as a large share of distressed transactions preclude a meaningful recovery of overall market prices,” Tad Philipp, Moody’s director of commercial real estate research, said in the statement. “Indeed, the post-peak low in price has been reached in the same period as a post-peak high in distressed transactions has been recorded.”

Trophy Properties have continued to actually outperform.  Properties in the 10 Million Dollar or higher range have actually increased 23% in value since the July 2009 low.

According to Costar, who tracks more transactions below 2.5 Million, May outperformed March by 2.2%.    Costar’s report shows that 3 out of 4 properties purchased between 2005 and 2007 that were sold in Q1 2011 sold at a lower price than they were acquired.

Forbes contributor Chris Macke points out that the “Extend Pretend” methodology, where property owners who’s loans were supposed to mature, but unable to refinance or sell from decreased property values, and current on their payments were given an extension period so their properties could hopefully regain value.  However, those properties have simply been pushed out and concentrated with other loan maturities further out increasing the supply of distressed assets on the market.

Institutional grade transactions in Q1 decreased 24% from 91 sales in Q4 2010 to only 70 transactions in Q1 2011.   Transaction sizes also decreased 22% from an average transaction of 45.6 Million to 35.7 Million.

Related Publicly Traded Companies:

Kite Realty Group Trust (NYSE:KRG)

General Growth Properties, Inc (NYSE:GGP)

Simon Property Group, Inc (NYSE:SPG)

RAIT Financial Trust (NYSE:RAS)

Equity Residential (NYSE:EQR)

Aviv REIT, Inc. (NYSE:AVI)

Nationwide Health Properties Inc. (NYSE:NHP)

ProLogis (NYSE:PLD)

CoreSite Realty Corp (NYSE:COR)

Regency Centers Corporation (NYSE:REG)

Vestin Realty Mortgage II, Inc. (NASDAQ:VRTB)

Resource Capital Corp. (NYSE:RSO)

Colony Financial, Inc. (NYSE:CLNY)

Inland real estate Corporation (NYSE:IRC)

Cousins Properties Inc (NYSE:CUZ)

Digital Realty Trust, Inc. (NYSE:DLR)

Developers Diversified Realty Corp. (NYSE:DDR)

Howard Hughes Corp (NYSE:HHC)

Boston Properties, Inc. (NYSE:BXP)

Thomas Properties Group, Inc. (NASDAQ:TPGI)

American Realty Investors, Inc. (NYSE:ARL)

The Macerich Company (NYSE:MAC)