Market Updates This Week

Republicans Make Compromise Deal on GOP Tax Bill
Wednesday, December 13

House and Senate Republicans have reached a preliminary deal on the GOP tax bill (also known as the Tax Cuts and Jobs Act) on Wednesday. The new bill will reduce the corporate tax rate from 35% to 21% starting in 2018. Both House and Senate provisions had proposed a 20% corporate tax rate, but it...

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Rental Apartment Vacancy Rates Low in Top 6 US Cities
Thursday, December 14

Apartment rental vacancy rates reside low in the top six U.S. markets: San Francisco, New York, Boston, Los Angeles, Washington D.C. and Seattle.Despite the inundation of new construction and development that these markets have seen in the recent years, vacancy rates are still very low overall. O...

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FCC Votes to Repeal Net Neutrality
Thursday, December 14

With no regard for the objections from Congress, advocacy groups, technical experts and the American people in general, the Federal Communications Commission (FCC) voted to eliminate the Open Internet Order established in 2015 and the net neutrality protections currently in place. What was passed...

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Co-Founder of Bitcoin.com Cashes out his Bitcoins for Bitcoin Cash
Tuesday, December 19

Emil Oldenburg, the chief technology officer and co-founder of Bitcoin.com, recently traded in all his Bitcoins (BTC) to cash in on Bitcoin Cash (BCH), a spinoff cryptocurrency of the original Bitcoin. He reported in an interview with Swedish website Breakit that investing in Bitcoin now could be...

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Freddie Mac & Fannie Mae Work to Support Underserved Markets
Wednesday, December 20

Monday, the government-sponsored enterprises (GSEs) Freddie Mac, the Federal Home Loan Mortgage Corporation, and Fannie Mae, the Federal National Mortgage Association, announced their Underserved Markets Plans for 2018-2020 under the Duty to Service provisions required by the Housing and Economic...

Real Estate Industry Exempt from Trump Tax Plan

The tax code is currently in the process of being rewritten by Congress and it seems that real estate will be the only industry that will not be limited. Some industries, such as car dealers, oil and gas pipeline managers, cruise lines, private equity and craft beer and wine producers, did well through tax cuts, but not as well as real estate. House and Senate Republicans both offered large reduced rates towards family-owned firms, partnerships and corporate giants across the board, but commercial real estate was left untouched.

Tax deference on exchanges of similar kinds of property affected most industries. New limits on deductions for interest payments were introduced for most businesses. (For example: pharmaceutical companies and domestic manufacturers no longer have some industry-specific breaks, such as the tax credit for “orphan drugs”, in exchange for lower rates.) But crickets chirp when real estate is brought up; no tax deference on 1031 exchanges proposed; no limits on interest deductions.

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Sun Communities Hits a New 52-Week High!

Sun Communities, Inc., the self-administered and self-managed real estate investment trust with a market cap of $7.45 billion, is a fully integrated real estate company, which, together with its affiliates and predecessors, has been in the business of acquiring, operating, developing, and expanding manufactured housing (MH) and recreational vehicle (RV) communities. As of December 31, 2016, the Real Estate Investment Trust (REIT) owned and operated or had an interest in a portfolio of properties located throughout the United States and Ontario, Canada, including 226 MH communities, 87 RV communities, and 28 properties containing both MH and RV sites.

Two days ago, on November 26, Sun Communities’ stock reached a new 52-week high! The 26^th had the company’s share price at $93.89, still with a $96.71 target (or 3.0% growth). Should the $96.71 price target be reached, the company will be worth another $223.50 million on top of the current $7.45 billion. This is the time that positive momentum is shown and when buyers usually come in, making the 52-week high event a remarkable benchmark for every stock; however, fundamental investors are known to usually stay away and are careful shorting or selling stocks.

This morning (Nov 28) had the stock price starting at $93.51, then dropping as low as $92.34, and climbing back up to about $93.00 and again dropping to $92.68 where it’s currently at and projecting to rise again.

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4 Things to Know About the Current State of Debt Financing

Nearly 10 years ago, the Great Recession occurred. This caused the debt financing landscape for commercial real estate to evolve, leading to banks becoming more cautious in their commercial lending. But, banks are still originating loans and financing options are still available. Here are 4 things you need to know about debt financing:

1.)      Banks lending for U.S. commercial real estate has surpassed pre-recession levels, according to a study conducted by the Federal Reserve Bank of Richmond. This boost can be attributed to low interest rates, foreign investors appetite for U.S. property, and a strong renter demand to led to an apartment building boom.

2.)      CMBS (commercial mortgage-backed security) loans have skyrocketed, amounting to $66.6B last quarter which is a major improvement from the $49.9B issued during the same time period last year. In August alone, lenders issued 335 loans totaling $10.65B, which is a huge spike compared to zero loans issued in January.

3.)      Alternative lenders are stepping in and filling a void left by big banks. The country’s top five nonbank lenders – Blackstone Group, Mesa West Capital, Starwood Capital Group, TPG Capital and Mack Real Estate Credit Strategies – together funded $20B in bridge loans in 2016.

4.)      Traditional banks lenders and alternative lenders are becoming increasingly competitive. There are two primary buckets of capital in the commercial lending game – price leaders and proceeds leaders. Price leaders are the traditional lenders, giving borrowers a lower rate, but only about a 60% loan-to-value ratio. Proceeds leaders, or debt funds and alternative lenders, give higher rates than traditional lenders but compete with a higher LTV ration, which is usually about 60%. The market is divided as traditional lenders and debt funds are trying to find their niche.

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Phoenix’s Transit-Oriented Job Base is Growing

Although still trailing other big U.S. cities, Phoenix’s transit-oriented job base has grown 7.5% from 2015 to 2016. Phoenix ranks sixth out of 50 U.S. regions studied by the University of Minnesota for growth of workers linked to transit systems. Proximity to transit systems is becoming a major priority for large employers such as Amazon, as it solicits bids for its $5 billion second headquarters. In a traditionally sprawling Maricopa County, transit has helped draw jobs and commercial real estate development to downtown Tempe and Phoenix.

                  New York, San Francisco, Chicago and Washington rank at the top for jobs near transit systems, but the Phoenix region is adding to its transit options with hopes to catch up to these major cities. Mesa is extending its light rail down Main Street, Phoenix has approved a south line for Metro down Central Avenue to Baseline Road and South Mountain, and Tempe and Valley Metro are developing a new street car line downtown Tempe. With Phoenix’s economy and job growth steadily thriving, these new transit additions will only improve that growth in the near future.

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New Fannie Mae Program in NH Makes Buying Mobile Homes Easier, Less Expensive

A new Fannie Program, in which New Hampshire is the sole participant, provides for smaller down payments, lower interest rates and 30-year loan options for manufactured homes located in approved resident-owned communities. So far, Fannie Mae has approved eight resident-owned communities for participation with plans to add more. In New Hampshire, 123 of 450 mobile home parks are resident-owned, and the Fannie Mae program will only boost the number of potential buyers.

                  With lower interest rates, low and middle income borrowers will have the opportunity to afford better manufactured homes, or have more disposable income, which levels the playing field with single-family residences. The program was approved only for New Hampshire because majority of the mobile home parks in the state are resident-owned. Some park managers, like Adam Gidley of Salem Manufactured Homes, are asking the question: “Why do resident-owned communities get a benefit that other communities don’t?” According to Ignatius MacLellan, resident-owned communities offer a better chance that Fannie Mae would get its money back if it needs to foreclose on a property. With interest rates going from 8-12% down to 4-5% with the Fannie Mae program, it’s currently a “sellers market” right now in New Hampshire according to Gidley.

Read the full article here.