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德勤2011年商业地产年度报告(英文原版)

Commercial Real Estate 2011 A year of gain or pain

Commercial Real Estate 2011: A year of gain or a year of pain?

Deloitte, in collaboration with Bloomberg Television, recently hosted its second-annual Distressed Debt & Assets Symposium (DDAS). The May

10 event brought together top executives and industry specialists from the U.S. capital markets for presentations and informed discussions on the state of distress in the U.S. commercial real estate markets. The symposium also provided an opportunity for attendees to share insights and explore new ideas.

This article includes content from the DDAS panel discussion “Capital Markets vs. Commercial Real Estate (CRE) Fundamentals — Are we back to our old tricks?” Panel moderator was Constantine Korologos, Managing Director, Deloitte Financial Advisory Services LLP. Panelists included Alex DeFelice, Director BlackRock, Inc.; Jeffrey Fastov, Managing Director, Credit Suisse; Scott Hileman, Director, Deloitte Financial Advisory Services LLP; Tad Philipp, Director, CRE Research, Moody’s Investors Service; and Randy Reiff, Managing Director & Head of Commercial Mortgage Finance/CMBS, Macquarie Group. The article also includes commentary from a recent Dbrief webcast hosted by Deloitte subject matter specialists, including Guy Langford, National Leader of Deloitte’s Distressed Debt & Asset Services group and Principal for Deloitte & Touche LLP; Steven Bandolik, Director of Real Estate Services for Deloitte Financial Advisory Services LLP; and Sabeth Siddique, Director of the

Risk & Regulatory practice for Deloitte & Touche LLP.

As the U.S. economy continues to emerge from the recent economic downturn, commercial real estate (CRE) lenders, debtors, and investors are scrutinizing a number of factors that could influence their decisions in 2011. Among these are:

?Changing fundamentals for lending institutions, such as the impact of continued low interest rates, more rigorous underwriting standards and loan terms, substantial loan maturities, and other economic factors;

?The amount of distressed debt remaining to be worked through, particularly in

lower-quality assets;

?The potential impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) on commercial real estate; and

?Ongoing questions with respect to the strength of property fundamentals, potential for overheating in the transaction markets, and sufficiency of liquidity to support ongoing restructurings and refinancings.

“The story of real estate in 2011 is decidedly a tale of two markets,” says Guy Langford, a principal with Deloitte & Touche LLP and National Leader of the Distressed Debt and Asset Services practice. “While people are no longer talking about commercial real estate as the ‘other shoe to drop,’ there certainly are some elements within the market right now that are cause for concern.” “Capital Markets vs. CRE Fundamentals — Are we back to our old tricks?”

Panel highlights ?With over 25 securitization programs in the market, competition is heating up, potentially resulting in loan structure deterioration ? Significant demand exists for new issue CMBS debt although B-piece buyers are flexing their muscles when it comes to loans included or excluded in deals ?Balance sheet loans on transitional assets, especially to strong sponsors, continue to represent good opportunities

?CRE remains a very bifurcated market with core properties in gateway cities grabbing the most attention

? Property valuations are still tough to gauge; the indexes which track valuation movements in the marketplace are highly dependent on the type of properties being included in the sample (e.g., if distressed sales are included in the sample) ?Underwriting on new deals is still based on “in place” cash flow but some lender protections are starting to melt away due to the competitive market for new loans ? Concerns remain about the refinance risk of CMBS loans originated in 2005-2007 at the peak of the market and maturing in 2015-2017

CRE lending trends

When looking at trends that could influence CRE lending for 2011, it is helpful to consider a number of factors including leading economic indicators, changing lending standards, and ongoing CRE debt maturities.

Leading economic indicators: Two economic factors are paramount for CRE market recovery: gross domestic product (GDP) growth and employment growth.

U.S. GDP has reflected modest improvement for six consecutive quarters (Figure 1), beginning in the third quarter of 2009. This followed four negative quarters. Going forward, analysts expect growth to continue above 2.5 percent, which is the average GDP rate for the past 15 years. “Job growth is a key driver for the apartment, office, retail, and industrial real estate segments,” says Langford. “Until unemployment decreases from its uncommonly high level, growth in the CRE market likely will be hampered.”

Panelist Randy Reiff agrees: “Employment is one of the key drivers to real estate valuations, so unemployment is a lagging indicator. You have to think about that metric when you underwrite going forward.”

Figure 1:

Changing lending standards: According to the Federal Reserve, the percentage of banks reporting tighter lending standards peaked at 87 percent in the fourth quarter of 2008. That

percentage has declined steadily since then — to zero in the first quarter of 2011 — a hopeful sign for owners of distressed properties and CRE in general.

“Lenders probably will have a greater willingness to ‘lend and extend’ [in distressed debt situations] if there isn’t a need for additional capital to keep the enterprise going,” observes panelist Alex DeFelice.

Ongoing CRE debt maturities: The market for CRE debt maturities is facing a glut of potential refinancings. More than $1.7 trillion worth of CRE debt — held by banks, commercial mortgage-backed securities (CMBS), life insurance companies, and other lenders — will come due between 2011 and 2015. An estimated 60 percent of these loans are “under water;” that is, the underlying collateral has declined in value since they were originated.

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Approximately $350 million in CMBS will mature between 2015 and 2017. “A lot of those maturities are from 10-year loans that were done in 2005, 2006 and 2007 at the peak of the market,” says panel moderator Constantine “Tino” Korologos. “Many of those were very aggressively underwritten CRE deals, with high valuations. So that is a challenge that the industry is going to have to deal with in the future.”

“About two-thirds of the loans maturing in the next couple of years have debt yields greater than 10,” adds panelist Tad Philipp. “When you look at 2016 and 2017, only about a third of them have debt yields greater than 10. However, the good news is that it’s five or six years out so there are opportunities for fundamentals to improve and, by and large, the fundamental picture is fairly positive: Construction is down to a crawl in almost every sector; absorption is beginning to take away some of the vacant space. I think that will be a bit of a mitigant but that is still a lot of leverage to deal with when you only have a third of the loans that, if they were available today, would be financeable.”

According to panelist Jeffrey Fastov, “We haven’t gotten into the later stages of life of the peak years so there is a lot yet to come; we will have to see how it gets resolved. But it does seem like the world is spinning again.” “I think we may have a couple of years’ worth of non-performing, sub-performing loan pools yet to go and maybe the banks are in a position where they can start to liquidate them,” explains panel member Philipp.

Looking ahead to the balance of 2011, the pipeline for CMBS transactions is encouraging, with

several multi-billion-dollar deals having been over-subscribed. Estimates for new issuance for totals in 2011 range from $35 billion to $50 billion, compared with less than $15 billion in 2010 (Figure 2). These projections reflect more comfort among investors that the real estate markets are stabilizing and that improvement is occurring.

“Most of the liquidity in CMBS right now is not for transitional and higher-leveraged or special situations,” explains Fastov. “There’s less capital available for these assets, so you can structure deals on a much better risk return profile. For people that have funding to attack that opportunity, it’s a great time to be doing it.”

Figure 2:

Source: Commercial Mortgage Alert, January, 2010

CMBS issuance forecasted to be between $35 and $45 billion in 2011.

The lending market: The CRE lending situation remains challenging for smaller banks that continue to carry considerable distressed debt, according to panelist Scott Hileman. “I think a lot of the distressed debt is still sitting at smaller regional and community banks because these are the guys who couldn’t make the loans on the assets that got securitized,” he explains. “Their deals involved lower-quality assets — the land, acquisition and development loans — and that’s where a lot of the ‘junk’ is still sitting and has to be worked through before these banks can start lending again.”

Along with banks and securitized products, life insurance companies have played a key role in the CRE lending market. Traditionally, insurance companies have been conservative, institutional-quality lenders. Consequently, they have experienced much lower delinquency rates.

“There is lots of competition for quality assets in the CRE lending market,” says Korologos. “As a result, insurance companies may find it challenging during the rest of 2011 to lend on the property types and to the borrowers that they want to finance.”

Among all lenders, the ratio of CRE debt-to-GDP is expected to decline gradually over the next four years, due to growth in the economy and deleveraging efforts by the industry, even as the absolute volume of commercial mortgages will likely begin to rise again in 2012.

The impact of regulation on CRE

Dodd-Frank is introducing many new regulations in the banking industry, including two that are likely to impact all stakeholders involved in CRE:

?The Volcker Rule, which prohibits banks from engaging in proprietary trading for their own account and limits their investment in hedge funds and private equity.

?The Risk-Retention Requirement, which mandates CMBS issuers to retain at least five percent of the credit risk in securitized assets.

Among the anticipated impacts to market participants:

Borrowers: Borrowers with low credit ratings will likely find it more challenging to obtain bank loans.

Originators and securitizers: Securitization costs are likely to rise due to higher regulatory capital charges and loan screening efforts. “Lending may decline due to lower capital availability for mortgage loans, and there is likely to be constraints on loan portfolio diversification, as originators will need to retain mortgages,” says Sabeth Siddique, a director with Deloitte & Touche, who previously served as assistant director of banking supervision and regulation with the Federal Reserve.

Investors: Investors are likely to receive lower yields as strict underwriting norms will likely reduce the average risk of securities with a higher proportion of securities rated as AAA. Also, securitizers are likely to pass along at least some of the increased costs.

Credit rating agencies: Investors are likely to rely less on credit ratings and more on the fundamental income growth of the underlying collateral as an indicator of risk associated

with investments.

Regulators: There are likely to be constraints on the Federal Reserve’s powers to increase mortgage lending; also, a rise in liquidity may not necessarily enable banks to lend more due to tighter capital requirements.

Dodd-Frank comprises more than 600 pages of rules and regulations, with several recurring themes. The law addresses interconnectivity in the market, requires more disclosure by participants, asks financial institutions to understand their liquidity needs, and mandates sufficient levels of capital.

“Ultimately, Dodd-Frank will translate into more restrictive governance for CRE borrowers, particularly in the community banking sector, and much greater CMBS disclosure,” says Siddique. “Regulators want to make sure that lenders are originating credit responsibly, even though they might sell those exposures into the market.”

The future of Fannie Mae and Freddie Mac

Three proposals being discussed could change the nature and roles of Fannie Mae and Freddie Mac, two government-sponsored entities (GSEs) important to U.S. real estate markets.

The first proposal would essentially privatize the two GSEs. Fannie Mae and Freddie Mac would be smaller and likely have less of an impact on the financial system. However, the reduction in size would likely result in lower credit availability and potentially higher mortgage costs.

The second proposal would allow the federal government to help stabilize the market during crisis periods, but the government would be challenged to scale-up in time if a crisis were to

develop quickly.

The third proposal would position the federal government as reinsurer. “This option would have the lowest increase in mortgage costs, provide for the highest liquidity, and afford the most competitive playing field for smaller lenders,” says Siddique. “However, it would also create the highest taxpayer risk exposure to private mortgage losses.”

Whether any of these or other proposals gain traction in 2011 remains to be seen; however, change is likely to occur in the future structure and roles of the two GSEs.

Trends in CRE fundamentals

As real estate lenders, debtors, and investors look ahead to 2011, certain trends in CRE fundamentals will come into play as they make business decisions.

Capitalization rates: U.S. commercial property prices have increased by nearly one-third from their lows in mid-2009, as capitalization rates declined across property types due to improved fundamentals and increased transaction activity.

Capitalization rates across property types peaked between 2009 and 2010 (Figure 3). Multi-family capitalization rates were the first to peak, in the third quarter of 2009, followed by office and industrial in the fourth quarter of 2009 and retail in the first quarter of 2010.

“While cap rates declined across all property types in 2010 (Figure 4), high-quality office, CDB [central business district] properties with stable net operating income experienced a much sharper decline in cap rates than other suburban office markets,” says Steven Bandolik, a director with the Real Estate Services practice of Deloitte Financial Advisory Services and a senior advisor to the Distressed Debt and Asset Services practice.

Capitalization rate recompression in primary markets will likely continue in 2011 as buyers compete for high-quality properties in primary markets. Moreover, capitalization rates in secondary markets are expected to decline as a result of investors looking to buy property in these markets in search of higher yields.

Figure 3:

Commercial Property Values Continue to Rebound

Source: Green Street Advisors CPPI, February 2010.

Green Street Advisors’Commercial Property Price Index

August 2007 = 100

100.0

61.7

79.5

Index

100.0

61.781.9

Commercial property prices in the U.S. are up 32.7 percent from their lows in mid-2009, as cap rates declined across

property types due to improved fundamentals and increased transaction activity.

Figure 4:

Source: RCA, February 2011

Cap Rates

Transaction volume: CRE transaction volume in 2010 rose 120 percent to $120 billion, up from $55 billion in 2009, but remains well below the 2007 peak of $514.1 billion. Gains were higher for high-quality core assets, especially in the office sector, where sales volume rose to $40.3 billion in 2010 from $16 billion in 2009. Hotel properties accounted for 11.1 percent of the total CRE

transaction volume in 2010 and increased by 425.0 percent year-over-year in 2010 to $13.3 billion. Private investors continue to account for the largest share of the total. The recent growth, however, has been driven by public investors including REITs and foreign investors.

“While this improvement in transaction volume is a positive development, it has yet to be sustained long enough to confirm that 2009 was the bottom for this cycle,” says Bandolik. Distressed sales: Sales of real-estate owned, restructured, and other distressed properties have emerged as a CRE transaction driver. In 2010,

distressed sales as a percentage of total U.S. CRE sales increased 18 percent, up from 10 percent in 2009.

“About 25 percent of all trades in the commercial mortgage/commercial real estate space right now are distressed,” says panelist Philipp. “And it’s about 35 percent in residential.”

Distressed sales are expected to increase further in 2011. Overleveraged properties with weak fundamentals face high risk of foreclosure and could eventually be acquired by cash-rich investors. Recent transaction activity in the U.S. commercial real estate market has been bifurcated due to investors’ flight to quality. “The competition has been high for quality

Class A trophy properties, especially those with stable rent rolls in top-tier cities,” says Bandolik.

Caution remains a watchword for distressed sales because it is difficult to value assets right now. Remarks panelist Hileman, “You have to be very careful whenever you’re acquiring assets to make sure that you are comfortable with the valuation and that the valuation going forward is going to hold.”

Adds panelist DeFelice: “The value of an asset is highly predicated on the cost of your borrowing, and the cost of borrowing today is really low. So we are seeing valuations creep up quite a bit.”

Rent: Even though markets have come back and rents are strong in major cities — especially for multi-family properties (Figure 5) — there is still a lot of backing down to a lower cash flow, cautions panelist Jeffrey Fastov. To retain tenants, owners, and operators of commercial property have been reducing rents and offering concessions for more than two years, but elevated vacancies are expected to make further rent reductions necessary before a gradual improvement can begin. The

reversal of rent growth has been most extreme in the office segment. The decline for retail has not been as severe and multi-family and industrial are generally expected to adjust to more favorable rental terms.

Figure 5:

YoY rent growth for the first time since

4Q08.

Forecast

Symposium survey results Attendees at the Distressed Debt and Assets Symposium were surveyed about current CRE market issues. Among respondents’ observations: ? The market is

stabilizing but yet to demonstrate real sustainable growth ? The best option for banks dealing with troubled or maturing debt with significant collateral valuation issues is to restructure and extend the existing debt ? The most common factor impacting the CRE market and having the greatest influence on

decisions at present is tepid economic recovery and job growth

? The most common factor having the greatest impact on the availability of debt capital going forward is the re-emergence of the CMBS market ? The new proposed CMBS risk retention rules (where issuers have to retain five percent of the credit risk on new issuance) will have a negative impact on CMBS issued

going forward ? Most respondents chose "Increased Compliance Costs" as the likely

consequences of the Dodd-Frank Act; interestingly, a much smaller population thought the Dodd-Frank Act would "Increase Investor Confidence"

Mixed prospects

Absent a strong boost from the economy, the performance of commercial real estate fundamentals has remained weak. While trends vary among property types, some key industry metrics indicate that sharp declines experienced during the height of the downturn have stabilized.

Until the U.S. economy regains its footing — and until employment picks up for good — the market for CRE properties will likely offer mixed prospects for lenders, debtors, and investors. And while the amount of distressed debt remains a concern, the combination of “extend and pretend” and availability of fresh capital has helped to temper the situation somewhat.

“The worst of the worst is still out there, but people are less afraid to make smart restructuring decisions now because they have some breathing room and some capital,” says panelist Reiff. “There’s a cautious continued tone that we can ease our way out of it.”

Recounts panelist Phillip: “2004 was the last normal year before we started the hockey stick of credit deteriorations. I was hoping that we’d have a four- or five-year honeymoon but it seems like it’s going to be shorter than that. It’s totally normal that the first couple of deals after a major downturn would be conservative and they were. And now debt yields are starting to shrink and some of the other indices like reserves and interest-only loans are beginning to erode a bit…there appears to be a little bit of slippage. But again, 2004 was a pretty solid year and that’s where we are now. The real question is ‘Where do we go from here?’”

For further information about this subject, please contact:

Guy Langford

Principal

Deloitte & Touche LLP

+1 212 436 3020

glangford@https://www.wendangku.net/doc/7f1224578.html,

Constantine “Tino” Korologos

Managing Director

Deloitte Financial Advisory Services LLP

+1 212 436 4820

ckorologos@https://www.wendangku.net/doc/7f1224578.html,

Sabeth Siddique

Director

Deloitte & Touche LLP

+1 202 378 5289

ssiddique@https://www.wendangku.net/doc/7f1224578.html,

Steven Bandolik

Director

Deloitte Financial Advisory Services LLP

+1 312 486 9766

sbandolik@https://www.wendangku.net/doc/7f1224578.html,

Scott Hileman

Director

Deloitte Financial Advisory Services LLP

+212 436-2571

shileman@https://www.wendangku.net/doc/7f1224578.html,