Seattle Bubble

News & discussion about real estate & the housing bubble in the Seattle area.

Seattle Bubble - News & discussion about real estate & the housing bubble in the Seattle area.

Entries Tagged as 'commercial'

Washington is #1… For Troubled Banks

By The Tim on November 11th, 2009 at 6:00 AM · 19 Comments

With the news in September that Seattle is #1 for delinquent construction loans, it probably comes as not much of a surprise that Washington State also happens to rank #1 in the nation for troubled banks, according to Calculated Risk’s unofficial problem bank list.

State Percent
Washington 26.3%
Utah 25.0%
Arizona 21.3%
Nevada 20.0%
Oregon 19.5%
Georgia 19.2%
California 17.8%
Florida 16.3%
Michigan 13.2%
Maryland 10.8%
Colorado 10.6%

This week we looked over the numbers to determine which states have the most stress in their banking sector. For the ranking, we added together the number of institutions that are on the Unofficial Problem Bank List and failures since 2008 and divided by the number of institutions headquartered in the state and failures since 2008. Interestingly, Georgia is not the top ranked state. Here is the top 10 list; actually top 11 as Maryland and Colorado are in a virtual tie. Please note that we only ranked states with at least 15 institutions headquartered within their borders, as we did not want the ranking influenced by a small banking market.

Washington State leads the way with more than 26 percent of its banking industry either under formal enforcement action or having failed. No wonder the esteemed governor wrote a letter to the state’s congressional delegation complaining about bank regulators (see Wall Street Journal article).

Here’s a map of Washington’s 23 troubled banks, according to Calculated Risk’s unofficial list, as well as Washington’s three recently-failed banks (via the FDIC), and WaMu, which the FDIC lists as a Nevada bank.


View Washington’s Troubled Banks in a larger map

Hat tip: Puget Sound Business Journal

→ 19 CommentsCategories: News
Tags: , , , , ,

KUOW Seeking Stories from Commercial Real Estate Investors

By The Tim on October 20th, 2009 at 6:00 AM · 12 Comments

I received the following request from a KUOW reporter that I thought was worth forwarding on to the general reading audience:

Another of our reporters is working on a story on commercial real estate investment. I recognize that your blog follows residential real estate more closely, but I know many of the people reading it are doing so for investment purposes.

I would be thrilled if you would once again publish our question form.

I do have something to offer as some sort of a way to square things: our reporter Phyllis Fletcher did a 10-minute feature piece the other day on the fallout when people are evicted in order to make way for new development that never happens.

For those that do not remember, back in June I posted a similar request, which resulted in an interesting story about downtown office space.

This month’s questionnaire concerns commercial real estate investment decisions.

Just a few years ago an investment in commercial real estate looked like a sure thing. Now it’s a different story. What decisions are you making now because of the market downturn?

If you’ve got any recent experience in commercial real estate investment, head over to the KUOW question form and drop them a line. When the story is posted (presumably in a few weeks), I’ll be sure to post an update.

→ 12 CommentsCategories: News
Tags: , , , ,

Seattle is #1… In Delinquent Construction Loans

By The Tim on September 11th, 2009 at 6:00 AM · 55 Comments

I posted about this earlier this week on the official Seattle Bubble Twitter account, but I thought it would be worth a post of its own. Via The New York Times: Construction Loans Falter, a Bad Omen for Banks

Even as the economy may be starting to recover, banks across the country are confronting a worsening outlook for their construction loans, an area that boomed for much of the decade.

Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.
…
Foresight’s estimates of the proportion of problem construction loans in the 20 largest metropolitan areas has one surprise: the one with the largest proportion of troubled loans is Seattle, where the recession has started to pinch.

According to the graphic attached to the story, over 30% of construction loans in Seattle are currently in delinquency. Yikes.

In related news, the Mastro bankruptcy is progressing, with the situation becoming seemingly more complicated with each update.

And, speaking of the commercial real estate market, Russell Investments just purchased the 42-story former WaMu Center for close to two thirds off what it cost to build just three years ago. Yowza.

It’s certainly an interesting time in the real estate and financing scene here in Seattle. How far we have come from just a year or two ago when everyone seemed to think that Seattle was bulletproof.

→ 55 CommentsCategories: News
Tags: , , ,

Major Local Commercial Real Estate Developer Struggling

By The Tim on July 10th, 2009 at 10:44 AM · 8 Comments

Speaking of developers having financial trouble, the Puget Sound Business Journal has a story up today about a major local commercial developer on the rocks: Developer Mike Mastro’s troubles mount.

A longtime, prominent Seattle developer is facing a mounting string of legal actions as he struggles to pay off millions of dollars in loans at dozens of banks across the Pacific Northwest.

Michael Mastro Sr., for years among the most successful commercial developers in the Puget Sound region, is quickly becoming a source of concern at banks — both because of their direct exposure and because of what his troubles say about the potential pain still ahead in the commercial real estate market, according to people familiar with the matter.

Mastro, and his company, Mastro Properties, owe about $500 million to more than 25 banks in Washington and Oregon, including local banks, such as HomeStreet Bank, and national lenders such as Wells Fargo and Bank of America, according to a Mastro company associate and other people familiar with the matter.

Mastro values his assets at more than $600 million — more than enough to cover his debts — and he expects to recover. But court documents and people familiar with the matter indicate he presently appears to lack the cash flow to make loan payments.

It’s interesting to contrast today’s market with what we were seeing just three short years ago…

Spec development, as in constructing an office building without pre-lease commitments on the gamble that it will attract tenants upon completion, is the new buzzword among real estate developers in downtown Bellevue.

Developers of at least four different office tower projects proposed for the city’s central business district are scrambling to be next in line after Lincoln Square developer Kemper Freeman Jr. to begin construction.
…
With no new office buildings set to be ready for occupancy on the Eastside until at least the summer of 2007, available office space in downtown Bellevue will likely become even more difficult to find as the local economy continues to improve.

Incidentally, one of the specific projects mentioned in the 2006 article about Bellevue office space was in the news today as well.

2006: More downtown Bellevue builders gambling on spec development

The proposed 15-story, 311,000-square-foot Summit 108 Building (the project’s working title) would replace the much smaller six-story Summit Ridge building, which was built in 1971.

Canadian developer Bentall Capital is prepared to begin construction of the new Summit 108 Building as early as this coming June, said Gary Carpenter, the executive vice president who heads Bentall’s U.S. operations.

The new building could be ready for occupancy as soon as March 2008, he said.

“At the present time, we believe we will be going spec” with the project, Carpenter said.

“Any additional office building other than your own is a concern,” as a developer, Carpenter said. “Fortunately, the (Bellevue office) market has the strength to absorb it.” even if it must compete for tenants with several other new buildings, he said.

2009: Stalled Bellevue tower site won’t be eyesore

Developer Bentall Capital is halting work on Summit III, a 15-story office building in downtown Bellevue, and says construction may not resume for two or three years.

But the developer vows the site won’t become another unsightly hole in the ground. It might even be attractive.

Between now and mid-September, Bentall plans to finish all the tower’s street-level surroundings according to plan — sidewalks, street trees, a plaza, fountains, flagpoles, benches, a sculpture.

Only the footprint of the tower itself will be fenced off, said Gary Carpenter, executive vice president, and that fence won’t be chain-link but an architect-designed, 10-foot wall.

How quickly things can change.

(Kirsten Grind & Jeanne Lang Jones, Puget Sound Business Journal, 07.10.2009)
(Eric Pryne, Seattle Times, 07.10.2009)

→ 8 CommentsCategories: News
Tags: , ,

Two Recent KUOW Pieces of Note

By The Tim on June 22nd, 2009 at 1:02 PM · 32 Comments

Thanks to everyone who responded to the call earlier this month from KUOW for help on their story about the soft market.

Here’s the resulting piece: It’s a Tenants Market for Downtown Seattle Office Space

There may be signs of recovery in the region’s housing market, but not so for the region’s office market. A recent survey from Price Waterhouse Coopers says commercial property values in Seattle are expected to decline up to 15 percent this year, that’s more than the national average. The survey predicts the market will remain in recession for two more years.
…
[Large downtown Seattle landlord UNICO's Chief Financial Officer John] Lamb says it’s going to be a while before the market begins to stabilize. He says vacancy rates will continue to rise, and don’t be surprised if some commercial office buildings in Seattle end up facing foreclosure.

Also, last Friday’s “weekday” discussed the residential market, with : Short Sales, Foreclosures and First Time Home Buyers

Friday’s program had the same guests that were on the program in early May that we mentioned here: real estate agent / appraiser Richard Hagar, Urban League housing director Linda Taylor, as well as new guest certified financial counselor Andrea Misiano.

They discuss foreclosure / refinancing rescue scams, including some good advice for first-time buyers—take the emotion out of the home-buying process. I haven’t been able to listen to the entire program, but apparently there was also some questionable advice mixed in this time, including the claim that (according to a Seattle Bubble reader) “it’s better to get the low interest rate than the “one-time” lower house price.” In any case it’s overall worth a listen when you can make the time.

Kudos to KUOW for continuing to give the local real estate market some decent, thoughtful coverage that goes beyond the usual “ra-ra” pro-industry pieces that have been all-too-common in most news sources.

→ 32 CommentsCategories: News
Tags: , , , , , , ,

Weekend Roundup: Fence-Sitters, Incentives, Office Vacancies

By The Tim on January 12th, 2009 at 5:55 AM · 47 Comments

Here are some stories from the last few days that didn’t make the cut for their own posts.

Aubrey Cohen, Seattle P-I: Home buyers getting off the fence

“There’s still a lot of people who have jobs and a lot of people who’ve moved into the market area and have been sitting, waiting to have the opportunity to buy,” said Bill Riss, chief executive of Coldwell Banker Bain real estate.

Riss and other area real estate professionals argue the time to buy is now, and say they are starting to hear from more buyers.

“It’s not often you have a market where the rates are down and the prices are down at the same time,” said Deborah Arends, an agent with RE/Max Northwest Realtors.

Henry Samonte, an agent with John L. Scott Real Estate, said he saw a big uptick in calls from buyers and visitors to his listings last weekend.

“It seems that people are coming out of the woodwork,” he said.

Later in the article there’s also a great quote from a recent east coast transplant giving the classic renting is “putting your life on hold” canard. People, listen. It’s a roof over your head. No need to get so dramatic.

Yoshiaki Nohara, Everett Herald: Home sellers get creative with incentives

Perfetto Espresso wants to sell coffee, tea — and a house.

A display below the espresso stand’s menu features a two-bedroom, one-bathroom house. It’s up for sale for $279,000 in Shoreline. The house is minutes from the coffee shop in Mountlake Terrace near I-5.

The deal comes with an incentive.

“Free Coffee for 1 Year! Up to $10 per day for anyone who finds a buyer for our house,” part of the display reads.
…
Malchow said he and his wife, Amy, bought the 700-square-foot house in 2002 for about $169,000. The couple with three children moved into a bigger, four-bedroom house in Shoreline in 2006. They started renting out the first house.

The first house’s value climbed to about $315,000 at its peak in 2006, and it has been losing value since the housing bubble burst, Malchow said. The problem is that the Malchows get about $1,200 per month from renters while their mortgage costs them about $2,000 per month. They pay the difference out of their pocket.

According to my (admittedly rough) calculations, they’re still about $50k overpriced. Good luck to them, but the real incentive for buyers in today’s market is an attractively priced property, period.

Eric Pryne, Seattle Times: Downtown office markets may soon see vacancy rates in the teens

Here’s some solace for the region’s office market as landlords face a bleak 2009: In downtown Bellevue, and perhaps downtown Seattle, this downturn probably won’t be as deep as the one that followed the dot-com bust, several industry prognosticators say.

Vacancy rates in the two downtowns will climb well into the teens this year as companies downsize and new office buildings — some still lacking even a single signed tenant — come on line, according to new reports from brokerages Cushman & Wakefield and Grubb & Ellis.

The current guess is that things won’t be as bad as 2001-2003. Of course, six months to a year ago, the guess was that things wouldn’t drop here at all, so you may want to take the predictions of these local economists with a grain of salt.

(Aubrey Cohen, Seattle P-I, 01.11.2009)
(Yoshiaki Nohara, Everett Herald, 01.11.2009)
(Eric Pryne, Seattle Times, 01.08.2009)

→ 47 CommentsCategories: News
Tags: , , , , , , ,