NBS One of Oregon's Most Admired Companies

For the sixth consecutive year, Norris, Beggs & Simpson Companies was recognized as one of Oregon's Most Admired Companies, based on a survey of Oregon CEOs conducted by the Portland Business Journal. NBS ranked third out of the top ten Most Admired Commercial Real Estate Companies. President J. Clayton Hering accepted the award at a luncheon held at the downtown Hilton yesterday. About 1,800 CEOs and top-level managers in Oregon and Southwest Washington were surveyed to determine the Most Admired Companies.

Hering Featured in Oregon Business

Norris, Beggs & Simpson Companies President J. Clayton Hering was profiled in the December issue of Oregon Business magazine. Click here to read the article. Clayton has been with NBS since 1972, and became president of the company in 1993. He is very active in civic organizations and the arts, serving on the board of the Oregon Symphony and on the Young Audiences Advisory Board, among others.

Wood Arranges $23.2M for Seattle Ground Lease

NBS Financial Services Executive Vice President Mike Wood has arranged a $23.2 million loan for a 616,894 sf ground lease in Seattle. John Hancock was the lender.

A ground lease means a tenant leases a piece of land from its owner, usually for a long term, and the tenant is responsible for any improvements. A ground lease isn’t a common way to structure an investment, Wood said, especially not a ground lease of this size, and this loan basically finances the payments to the ground lease owner.

NBS Financial's Wally Harding to Speak at IREM Forecast Breakfast

NBS Financial's Wally Harding will be a guest speaker at the Institute of Real Estate Management (IREM) Oregon-Columbia River Chapter 23rd Annual Forecast Breakfast Dec. 2 at the Portland Ballroom at the Oregon Convention Center. Harding will be forecasting the market for commercial real estate finance in 2011. A number of other guest speakers will forecast the office, multi-family, industrial and retail markets.

Serving real estate professionals who manage all property types, the local IREM chapter has been an integral force in the greater Portland area since the 1960s. The organization is dedicated to delivering leading-edge networking and educational offerings for every stage of real estate professionals' careers and providing lifelong professional development opportunities.

As part of the Institute of Real Estate Management (IREM®) – a global organization that serves over 18,000 members and 500 corporate members worldwide – the Portland-area chapter can connect professionals with new contacts and business opportunities all over the globe.

NBS Financial Arranges $14.3M Construction/Perm Loan for Grandview Place Apartments in Vancouver, Wash.

NBS Financial Services' Blake Hering, Jr. and Jim Campbell have arranged a $14.3 million construction/permanent loan for Vancouver’s 154-unit Grandview Place Apartments. The lender was one of NBS Financial’s correspondent life insurance companies.

Grandview Place was developed by Courtesy Construction and Development and is located off of 192nd Avenue adjacent to a scenic wetland area. The project is now 97 percent leased at the rents originally projected two years ago.

“Achieving the budgeted rents in the current economic climate is an impressive testament to market acceptance of this high-quality project,” Hering, Jr. said.

Units range from an 854 sf one-bedroom, one-bath apartment to a three-bedroom, 2½-bath townhome with a two-car direct access garage. Grandview Place also features a beautifully appointed clubhouse with fitness center, pool and spa.

A construction/perm loan offers a developer a construction loan that then converts to a permanent loan after the property is completed and stabilized. Borrowers like construction/perm loans because the process is more streamlined than getting construction and permanent loans through different lenders, and because they may be able to lock in a low interest rate up-front and save on loan costs.

This is a unique transaction for NBS Financial, Hering, Jr. said. The company has arranged construction/perm loans for other property types, but this is its first for an apartment property. The majority of loans it arranges are permanent loans.

Some Positive Signs for Portland CRE During Third Quarter

This week we released our Third Quarter 2010 quarterly reports for the Portland metro area. There's no doubt that we're still seeing the impact of the recession, but the multifamily and central city office markets showed signs of improvement.

Office vacancy in Central City decreased to 12.13% with 282,442 sf absorbed, thanks to large leases at First & Main and the Meier & Frank Depot Building. Suburban vacancy remained stable at 24.06% with about 4,000 sf absorbed, the first positive absorption in the suburban office market since Third Quarter 2008.

Industrial vacancy was stable at 15.22%, with about 10,000 sf absorbed. A few large transactions occurred, including PFX Pet Supply leasing 70,000 sf at Columbia Corporate Park I in North/Northeast.

Retail vacancy decreased to 6.5%, and a few projects broke ground, including the 215,000 sf Progress Ridge Town Square between Tigard and Beaverton. Retail sales were up in August and September with the help of a strong back to school shopping season.

Multifamily was a bright spot during Third Quarter. Vacancy fell to 3.65%, the lowest it has been since Second Quarter 2008. The multifamily investment market also showed increased activity, especially for properties developed as condominiums and converted to apartments.

A PDF of all the reports can be found here.

Harding Arranges $8M in Refinancing for Spokane Multifamily Property

NBS Financial Services Senior Vice President Wallace E. Harding has arranged an $8 million refinance loan for North Star Lodge in Spokane, Wash.

North Star Lodge is a Class A, garden-style apartment community of 114 units. The 19-building complex with an additional clubhouse/leasing center is situated on 9.66 acres of land. The property was 94 percent leased at closing.

The loan was structured with a 10-year term (no interest only) with 9.5-year yield maintenance and a 30-year amortization. The loan was underwritten to a 79 percent loan-to-value with a 1.26x debt-service coverage ratio.

Commercial Loan Originations Up Year-Over-Year for Second Quarter

Some good news from the Mortgage Bankers Association (MBA) this week. According to the MBA's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second quarter 2010 commercial/multifamily mortgage loan originations were one percent higher year-over-year, and 35 percent higher than during the previous quarter.

The one percent increase in commercial/multifamily lending activity during the second quarter was driven by loans for office and industrial properties, and there was a 148 percent increase in loans for life insurance companies. The 35 percent quarter-over-quarter increase was helped by loans for industrial and health care properties.

“Borrowing remains light as few commercial property owners are selling or refinancing their properties unless they have to,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Life insurers, CMBS conduits and others are back in the market and lending, and rates are at extremely attractive levels. However, low volumes of property sales, depressed property values, stressed cash flows and modest loan maturities are all keeping borrowing to a minimum."

Some Positive Signs in Second Quarter for Portland Multifamily Market

Overview

Multifamily vacancy decreased to 4.11% during Second Quarter. Downtown Portland units continued to be leased up at a healthy rate, as vacancy for both new and seasoned units fell around 2 percentage points. Last quarter, this report began tracking a number of recent central city deliveries, and two new properties, the Matisse in South Waterfront (272 units) and the Broadstone Enso in the Pearl (152 units), will be added to the report when they are stabilized in 2011. Rental rates increased by $10 overall, or a cent per square foot, and as expected, downtown units led these increases.

Market Trends

It’s a good sign that vacancy is down and rents are increasing, and landlords are offering fewer concessions (except for new downtown properties), which indicates a healthier market. If new units continue to be absorbed at the current rate and the economy shows signs of solid recovery, we should see stabilization in 2011. But owners and managers remain guarded in their optimism, questioning whether recovery will occur without significant job creation, which we haven’t yet seen.

Despite the uptick in occupancy and some other positive indicators, the multifamily investment market remains sluggish. According to CoStar’s sales comparables, just two transactions over $3 million occurred during Second Quarter, one being the $38.75 million sale of the 188-unit Tupelo Alley in North Portland, which was a solid institutional sale. Investors remain uncertain about the region’s economic outlook, and worry that the Portland Metro Area doesn’t have one particular economic driver or growth engine, which may lead to a flat recovery. Companies are hunkered down, waiting to see significant improvement before investing, and the volatility on Wall Street in May didn’t help. Potential owners are also deterred by the increased costs of utilities and fees associated with owning and developing.

The deals being done in Portland and around the Pacific Northwest are at lower cap rates; this doesn’t necessarily indicate recovery, but of finding the ideal buyer on the transaction. Few aggressive buyers are currently active, though, and there’s little leverage to do deals. Financing remains challenging, with a limited number of lenders. Fannie Mae and Freddie Mac are the two most active lenders, and a number of other sources, like Chase and some life insurance companies, are becoming more active in pursuing deals.

The full report can be found here.

Retail Vacancy Flat in Second Quarter, Some Large Leases Signed

Overview

Retail vacancy was unchanged at 8.0% during the Second Quarter, with negative 20,547 sf of absorption. Vacancy in Central City decreased nearly a percentage point to 10.9%. Vacancy in Southeast/East Clackamas increased more than a percentage point to 6.5%, with more than 20,000 sf of negative absorption each at Clackamas Town Center and Hilltop Mall. However, there was considerable leasing activity in big-box stores that are not tracked in our report. For instance, Salvation Army leased about 40,000 sf at the former Linens ‘n Things on SE 82nd, and Dick’s leased the nearly 50,000 sf former Joe’s Sports, Outdoors & More at Johnson Creek Crossing in Clackamas.

Vancouver vacancy rose by half a percentage point to 11.0%, with 46,688 sf of negative absorption. At Columbia Square – Vancouver, 20,000 sf became available. This is a portion of the former Joe’s Sports, Outdoor & More space, which is partially occupied by Chuck’s Produce (expected to open in August).

Noteworthy News

Closely watched indicators of the health of the retail market were mixed during the Second Quarter. Retail sales grew by a seasonally adjusted rate of 0.6% in April, but fell by 1.2% in May. The Conference Board’s Consumer Confidence Index also dropped by almost 10 points to 52.9 in June. Economists didn’t expect such a significant decrease, as the index had been rising since February.

Portland continues to attract large tenants of all kinds. In recent months, Ultimate Electronics, which was acquired by Hollywood Video founder and former CEO Mark Wattles, leased the 40,000 sf former Levitz Furniture building in Beaverton. Two new clothing stores are also in the works: H&M confirmed its Pioneer Place store will open this fall, and Saks Fifth Avenue Off Fifth will open at Bridgeport Village September 2. Nordstrom Rack also leased 48,344 sf at Cascade Plaza Shopping Center.

Signs of life were present in the Portland retail investment market during the Second Quarter. Retail Opportunity Investments, Corp., purchased Vancouver Market Center in Vancouver for $11.19 million, and is under contract to purchase a portfolio of four other centers in the Portland Metro Area from Gramor Development for about $90 million.

Though retail development has slowed, with our report tracking just under 30,000 sf of space under construction in the metro area, some activity and future planning is occurring. Big Al’s, the popular bowling center in Clark County, has a second 66,000 sf location under construction at Progress Ridge in Beaverton. It is expected to open in August, and developers hope the site will also be the future home of New Seasons and Cinetopia.

The full report is available here.

Portland Industrial Vacancy Increases Slighlty in Second Quarter

Overview

Industrial vacancy rose less than a percentage point to 15.24% during Second Quarter, with negative 354,330 sf absorbed. Southeast saw a significant increase in vacancy, to 14.35%, as United Stationers Supply Co. vacated 40,608 sf at Commerce Park – McLoughlin and relocated to 195,510 sf at Rivergate Corporate Center III in the North/Northeast submarket. Vancouver vacancy also increased about four percentage points to 15.44%, and Columbia Business Center had more than 450,000 sf available. Significant leases of the quarter included Consolidated Molding & Millworks leasing 48,000 sf and Stanton Furniture leasing 92,960 sf at 115th Commerce Park in Southwest I-5.

Flex vacancy increased slightly to 18.23%, with negative 23,633 sf absorbed, down considerably from First Quarter’s negative 166,559 sf of absorption. Vacancy in the North/Northeast submarket fell about 5% to 12.09%, and Columbia Gorge Corporate Center saw considerable activity, with Multnomah County leasing 18,150 sf and Pac/West leasing 11,950 sf.

Market Trends

Greenlight Greater Portland, a privately funded economic development group, released a report in June suggesting that manufacturing will be a major factor in Portland’s economic recovery. It predicted that the manufacturing sector could grow by 14% in the next five years.

Renewable energy companies, particularly solar power companies, continue to be active players in the Portland industrial market. Solexant Corp. is expected to receive a $25 million state loan to build a factory in the metro area to develop ultra-thin-film solar cells. The plant would initially employ 100, and could rise to the same capacity as SolarWorld in Hillsboro, which will employ 1,000 by this fall when its expansion is completed. ReVolt Technology, a battery maker, also won a $5 million U.S. government grant that will help it build a Portland plant to develop a battery for plug-in vehicles.

In other major transactions, Farwest Steel will acquire more than 20 acres from the Port of Vancouver for about $5 million. The company will build a $20 to $30 million steel processing and distribution facility that will create 125 new jobs and employ about 200 overall.

The full report is available here.

Portland-Area Office Vacancy Increases During Second Quarter

Central City office vacancy increased to 12.73% during the Second Quarter, with negative 242,145 sf absorbed. About 40,000 sf of this negative absorption was from multiple tenants leaving the historic Stevens Building. The Church of Scientology of Portland purchased it in 2008 and planned to inhabit the whole building, but it was found to be unsuitable for the organization and is for sale. This quarter the Church of Scientology bought downtown’s historic Sherlock Building for $6.4 million to serve as its new home. In a highly-anticipated decision, the Portland Development Commission opted to remain at its current location in Old Town (but in 10,000 fewer sf), rather than move to the stalled Park Avenue West, its other primary option. It is uncertain when construction will restart at Park Avenue West, as the project lacks financing. Active tenants downtown include alternative energy groups, who seek environmentally friendly buildings. Many tenants are also seeking moderatelypriced Class A buildings with quality buildouts.

Suburban office vacancy rose about two percentage points to 23.92%, with negative absorption of 179,725 sf. This is the 7th consecutive quarter of negative absorption for the suburbs. Kruse Way saw the most significant increase in vacancy, from just under 23% last quarter to 29.36% during Second Quarter. Kruse Woods V had nearly 100,000 sf of negative absorption, as Northwest Evaluation Association vacated about 108,000 sf to move to the former Port of Portland building in Central City. However, Black & Veatch filled some of the space at Kruse Woods V, leasing about 25,000 sf. Vacancy in I-5 South rose significantly to 28.10%, but some large leases occurred, including State Farm’s lease of nearly 24,000 sf at Fanno Creek Building B. Brokers are seeing a flight to quality in the suburban submarkets, with healthy activity in nicer buildings.

Vancouver vacancy rose slightly to 18.55%, with negative 11,634 sf absorbed. The most significant deal was the $18.5 million sale of The Columbian Building to the City of Vancouver for its new city hall. The 118,000 sf building, previously listed at $41.5 million, was turned over to Bank of America early this year after the Columbian Publishing Co. filed for bankruptcy.

The full report is available here.

Henderson Arranges $4.6M for Snohomish Self Storage

NBS Financial Services' Jeff Henderson has arranged $4.6 million in financing for Snohomish Self Storage in Snohomish, Washington, about 30 miles northeast of Seattle.

Snohomish Self Storage has 707 storage units and 281 RV/parking spaces. It was built in 1999 and sits on about 8.5 acres.

The borrower originally tried to gain financing through two local banks, but was unsuccessful. After contacting Henderson, he utilized NBS Financial’s Strategic Alliance Mortgage (SAM) network to find lenders interested in financing the property. NBS Financial is a member of SAM, whose goal is to combine local expertise, while leveraging a national platform with 20 other select mortgage banking firms across the country, to provide a broad reach of capital from local, national and international sources.

Arranging financing for self storage is considerably different than for other commercial property.

“Many lenders look at self storage as more of a business than real estate, which may be a deterrent to lending,” Henderson said. “Having so many RV and parking spaces was also a challenge. We had to dig deep to find the right match for the borrower.”

June Market Watch: State of the Commercial Real Estate Market

A recent quarterly survey by Real Estate Roundtable suggests the commercial real estate market is beginning to stabilize. The group surveyed more than one hundred senior real estate executives for its quarterly report. 82 percent believe market conditions today are better than they were a year ago and seventeen percent characterized conditions as “much better.”

Roundtable CEO Jeffrey DeBoer said, “Clearly, the sense of gloom that prevailed a year ago has eased, property values no longer seem to be in a free-fall and market participants are feeling more confident.” The survey also noted that financing can be challenging for some properties, as defaults are still rising. Transaction volume is down 80 to 90 percent and values are down nearly 50 percent in some markets. “What’s needed now is robust job creation, more equity and restoration of secondary market financing so that banks can clear their balance sheets of toxic assets and begin lending again to credit-worthy borrowers," DeBoer said.

In mid-May, Marielle Jan de Buer (CMBS) and Thierry Perrein (REITs) hosted roundtable discussions in New York and Boston about the current state of commercial real estate lending. Below are some highlights:
• The tone in the debt markets has changed dramatically in the past two quarters; liquidity is flowing back into the market.
• There has been an increased appetite for commercial real estate loans in general.
• Sponsors are refinancing (instead of extending) and recapitalizing while acquisitions are heating up.
• Competition among lenders is increasing-spreads are coming in.
• Life insurance companies and banks are fi lling the void left by CMBS.
• Life insurance companies have targeted $32 billion of origination in 2010 (up from $18 billion in 2009).
• The overall resurgence in the capital markets coupled with the lack of available product has led to greatly improved pricing and leverage.

As the economy and the commercial real estate markets continue to improve, NBS Financial Services is consistently quoting and closing loans for well located, cash-flowing real estate at the 65-75 percent loan to value levels. Our lenders have money to lend and see the Pacific Northwest as one of the strongest markets in the country to invest in. Rates are still near historic lows. Call us today to secure financing for your apartment, office, retail, or industrial property.

Issues Affecting Commercial Mortgage Rates:
• Lukewarm treasury auctions throughout the month as European economic crisis looms.
• The recent move in Treasury rates caused swap spreads to widen as rates fell across the yield curve.
• Loan sales market is booming, $2.6 billion of loans on the market for sale through the end of June.
• Increase in loan demand last 60 days (balance sheet and CMBS execution).

What is Strategic Alliance Mortgage (SAM)?

NBS Financial Services is a member of Strategic Alliance Mortgage (SAM), a unique network comprised of 23 individually owned commercial real estate investment banking/mortgage banking firms located throughout the United States.

The goal of SAM is to combine local entrepreneurial expertise with a nationwide network to deliver the very best capital markets execution and alternatives to its clients.

Formed in 1998, SAM has grown to become a viable new business model for the commercial mortgage banking industry. SAM members are at the cutting edge of technology, utilizing a web-based system to communicate, share ideas and catalogue capital market participants, information and trends. SAM is unique in that it puts a local owner/expert in the middle of each transaction armed with national capital markets expertise that is second to none.

SAM STATISTICS
Production: $67 billion since 2003
Servicing: $31 billion
Producers: 146 commercial originators

A Few Articles of Interest

Seattle keeps on raking in the national recognition. Kiplinger recently ranked Seattle No. 2 on its "10 best cities for the next decade" list. It looked for cities that are innovative and have lots of out-of-the-box thinking. The article looks at Seattle's strong industries, like aerospace, life sciences (health), and clean tech.

Also, the CoStar Group had an article on commercial real estate lending and the recent Mortgage Bankers Association (MBA) quarterly survey. Commercial/multifamily loan origination reportedly increased 12% year-over-year for First Quarter, but was about a quarter lower than Fourth Quarter 2009. It appears that lending is loosening for office and retail properties, and there was a 131% increase in loans for life insurance companies.

Policom Says Seattle Metro Area has Nation's Strongest Economy

This week Policom Corp., an independent economics research firm based in Palm City, Florida, that specializes in analyzing local and state economies, released its annual economic strength ranking, which indicated that the Seattle metropolitan area has the strongest local economy in the nation.

"The rankings do not reflect the latest 'hotspot' or boom town, but the areas which have the best economic foundation," Policom President William Fruth said. "While most communities have slowed or declined during this recession, the strongest areas have been able to weather the storm."

The study measures 23 different economic factors over a twenty-year period to create the rankings. The formulas determine how an economy has behaved over an extended period of time. Data stretching from 1989 to 2008 was used for this study. Metropolitan areas must have a city of at least 50,000 people and typically encompass more than one county.

The Top 10 out of 366 metropolitan areas are:
1. Seattle-Tacoma-Bellevue
2. Washington, D.C.-Arlington,VA-Alexandria, WV
3. Denver-Aurora-Broomfield, CO
4. Houston-Sugar Land-Baytown, TX
5. Sacramento-Arden-Arcade-Roseville, CA
6. Salt Lake City, UT
7. Des Moines-West Des Moines, IA
8. San Diego-Carlsbad-San Marcos, CA
9. Madison, WI
10. Dallas-Fort Worth-Arlington, TX

Harding Arranges $1.2M in Financing for Lake Oswego Flex Building

NBS Financial Services Vice President Todd Harding has arranged $1.2 million in fixed-rate financing for Meridian Business Park Building D, a 19,450 sf flex building in Lake Oswego, Oregon. The borrower was a Portland-based family, and StanCorp Mortgage Investors was the lender.

Harding had some challenges to overcome on this transaction, as Building D’s single tenant had a year and a half left on its lease when Harding began working on the refinance, and the owner wasn’t sure if the tenant would renew.

But Building D’s many strengths outweighed this factor. Building D was built in 2003 and the tenant had put considerable work into improving the building’s production area. Plus, the 7-building, 200,000+ sf Meridian Business Park is completely occupied, which spoke to the lender about the quality of the borrower, who manages the property, and its ability to attract and retain tenants.

Much of the activity in commercial real estate finance today is in the multifamily market, but flex is a popular product type locally, Harding said.

“The majority of companies in the Portland area have fewer than 25 employees, so flex has always worked well here,” Harding said.

May Market Watch

During the month of April, the 10-year US treasury, the benchmark for commercial real estate lending, was extremely unstable. Throughout the month the 10-year treasury fluctuated by more than 30 basis points. A recent Wall Street Journal article noted that Morgan Stanley and Goldman Sachs, two of the best economic forecasting teams of the last few years, couldn’t differ more about where treasuries will go next. Morgan Stanley believes the 10-year will rise to 5.50% by the end of this year while Goldman Sachs believes it will fall to 3.25%. This 225 basis point difference represents a huge threat for corporate, consumer, and government borrowing costs. Goldman’s forecast would put rates near 5%, a generational low, while Morgan Stanley’s forecast would put rates past 7%, the highest in a decade.

Morgan Stanley’s head of interest rate strategy Jim Caron reasons that the market can’t endure the $2.4 billion worth of government debt that will be issued this year. He says, “We’ve never seen this much supply in the history of the bond market.”

Goldman’s view is that government borrowing is simply replacing private credit demand, which will return. “Ultimately, we don’t find supply to be of such great predictive power regarding what happens to interest rates,” says Goldman’s economist Jan Hatzius.

Regardless of future interest rate volatility, more and more lenders are allocating funds for commercial real estate loans this year. Life insurance companies are becoming more aggressive to win deals as conduit lenders are re-entering the market and banks are making loans for strong borrowers willing to transfer deposits. Interest rates are near all time lows and most owners and investors are taking advantage of low rates now, rather than risk going out to the market in the next 12-24 months.

Portland Multifamily Vacancy Down in First Quarter; New Properties Added to Report

Multifamily vacancy decreased more than half a percentage point to 4.82%. Downtown, however, saw a significant increase in vacancy. This increase resulted in the addition of new product; we added ten properties totaling more than 2,100 units to the report this quarter.

Our report tracks buildings of 100 units and above in the metro area; we consider smaller buildings in some submarkets if they lack many 100+ unit properties. This quarter we added the majority of downtown units that have come to market in the past 24 months, excluding three properties that are under construction or have very recently delivered: the Broadstone Enso, the Matisse, and Indigo 12 West.

With the additions to the report, downtown vacancy rose 5 percentage points to 10.15% and vacancy in new units came in at over 15%. The new units have impacted existing and historic downtown apartments by pushing down effective rents on existing units and creating a more competitive environment. Concessions like free rent and parking are thus being offered on new and seasoned units, and marketing has become considerably more aggressive. If the economy continues to recover, the downtown market could begin to stabilize by the end of 2010.

Market Trends
Apartment managers and investors report seeing a significant uptick in tenant traffic in the latter part of the quarter. This is a good sign but doesn’t necessarily indicate a recovery, which is contingent on two to three quarters of increased tenant traffic, a reduction in vacancy and increasing rental rates. The suburban markets have seen good absorption of new product, since there has definitely not been an oversupply, and submarkets like the Sunset Corridor, East County and the close-in eastside are truly tightening up.

The multifamily market is heavily dependent on the state of the local and national economy, and especially on the fragile job market. Considerable improvement in the job market should be reflected in quarter-over-quarter improvement in occupancy and rental rates. The bright spots locally are that companies like FedEx, Boeing, and Genentech continue to invest in the area. And despite challenges, Portland continues to grow. U-Haul pegged Portland’s growth rate at 10.16% (No. 3 in the country) for 2009, meaning the number of families renting U-Hauls to move to Portland was 10.16% higher than the number of families renting trucks to leave.

Portland Retail Vacancy Rises During Fourth Quarter, But Some Positive Signs

The Portland area’s overall retail vacancy rose about half a percentage point to 8.0%, with negative 293,920 sf of absorption. Central City saw the greatest increase of 1.5% for a total vacancy of 11.7%, the highest of any submarket. Nearly 15,000 sf is currently available at One Main Place, and Pioneer Place has about 50,000 sf available. Vacancy also rose nearly a percentage point in the Southeast/East Clackamas and Eastside submarkets. Vancouver vacancy stayed steady at 10.5%, though 59,573 sf was absorbed at Columbia Square. The 93,000 sf Bowyer Marketplace WinCo store, at the corner of NE 119th Street and 117th Avenue, delivered this quarter.

Construction remains slow, with 24,499 sf under construction throughout the Metro area. 17,000 sf of this is a freestanding building at 13233 SE McLoughlin in the Southeast/East Clackamas submarket.

Noteworthy News
The national retail market is showing signs of a slow recovery. Consumer spending rose for the fifth straight month in February, by 0.3%, according to the Commerce Department. And the International Council of Shopping Centers (ICSC) expects retailers to close fewer stores in 2010 than in 2009. But many retailers continue to face challenges, and Saks Fifth Avenue announced that it would close its two downtown Portland stores. It is rumored that Swedish retailer H&M will take over the 23,000 sf men’s store, and Saks will vacate the 60,000 sf main store by the end of July. Area officials are working to find a quality tenant for this space. In one bit of good news, Saks may open an Off Fifth store, which offers discounted designer clothing and accessories, at Bridgeport Village.

Though restaurants have been challenged during the recession, Portland’s restaurant scene has remained solid. Affordable, casual restaurants have generally fared better during the recession than their higher-priced counterparts, so many are focusing on this market. For instance, Foster Burger opened late last year in Southeast, and Little Big Burger is expected to open in Northwest this spring. Some of Portland’s popular food carts are even opening storefronts – Korean taco truck Koi Fusion, has opened a restaurant on NW Lovejoy. Some higher-end restaurants are also in the works – Lucier is expected to reopen in South Waterfront, and a group from San Francisco plans on opening a restaurant in the former Bay 13 space in the Pearl.

Specialty grocery stores have continued to do relatively well. The Whole Foods Market on NE 43rd and NE Sandy in Hollywood opened in January, and work has begun on the New Seasons Market on SE 40th and Hawthorne, which has long been delayed but is expected to open this fall.

Featured Deal: John’s Incredible Pizza Lease
John’s Incredible Pizza, a family entertainment restaurant with ten locations in California, is opening its 11th location in Portland. John’s leased 46,212 sf at the former Circuit City at Washington Green Shopping Center, 9180 SW Hall Boulevard, Tigard. John’s features a pizza, salad, soup, pasta and dessert buffet, as well as themed dining rooms and carnival-style rides and video and ticket-dispensing games. It’s expected to open in First Quarter 2011. NAI NBS Real Estate Broker J.J. Unger and NAI Capital Senior Vice President Irwin Hyman of Encino, California, represented the tenant.

PDX Industrial Market Looking Up in First Quarter

Industrial vacancy decreased slightly to 14.56%, with 118,458 sf absorbed. Vacancy in North/Northeast remained stable at 17.58%. Some large leases were signed in this submarket, including Owens Corning leasing 123,120 sf at Bybee Lake Logistics Center – Phase II. Ferrotec USA and Archive Systems also signed leases at Birtcher Center @ Townsend Way totaling 81,850 sf. Vacancy in Vancouver decreased about 1.5 percentage points, as 82,800 sf was leased up at Hart Industrial Center, bringing that property to 100% occupancy, and 40,267 sf was leased at Westside Business Center.

Flex vacancy rose nearly two percentage points to 18.01%, with 166,559 sf of newly available space coming back on the market. Much of this space can be accounted for by Intel, which vacated more than 100,000 sf at the Amberglen Business Center in moving back to its headquarters, pushing Southwest Sunset’s vacancy up more than two percentage points to 19.71%. Some positive absorption did occur, though. BiAmp Systems leased 50,963 sf at Nimbus Corporate Center in the Southwest 217 submarket, whose vacancy stayed fairly flat at 17.76%.

Market Trends
The industrial market showed continued signs of a slow but steady recovery during First Quarter. Vacancy in the Portland metro area, though still high, appears to have stopped rising, and construction and new deliveries have been so limited of late that the market isn’t burdened by oversupply. National economic indicators were looking up. Factory orders rose 1.7% in January, the largest increase in four months, with heightened demand for commercial aircraft, and industrial production rose 0.1% in February.

Manufacturers continue to invest in the Portland metro area. LaCrosse Footwear is moving production of Danner boots to a new 59,000 sf factory about a mile from its Northeast Portland headquarters, a facility twice the size of its current plant, which it is replacing. Production is expected to begin there in Third Quarter 2010. Boeing is also investing up to $120 million in upgrading its operation in Gresham, which will add 152 jobs in the next three years. It will build a new 60,000 sf facility on its 87-acre campus where it will treat metals used in making commercial aircraft.

First Quarter 2010 Office Market Report: Central City Vacancy Stable, While Suburban Rises a Percentage Point

Central City office vacancy remained stable this quarter at 11.99% (see vacancy comparison chart at right), with 54,312 sf absorbed. Some significant sales and leases occurred, especially in the Central Business District. The General Services Administration (GSA) signed four leases totaling more than 250,000 sf at First & Main, which delivered this quarter, and Alpha Broadcasting leased more than 25,000 sf at Pacwest Center. In one of the largest sales in recent months, KBS REIT II purchased One Main Place for $57 million, or about $180 per sf. American Pacific International Capital Inc. also purchased the office portion of the KOIN Center, reportedly for between $53 million and $60 million. Vacancy in Northwest fell more than a percentage point to 15.69%, as two tenants leased space at Machine Works, including the GSA in 19,431 sf.

Suburban office vacancy rose about a percentage point to 21.93%, with negative 142,240 sf absorbed. The Barbur Boulevard, Beaverton-Hillsdale/Sylvan and North/Northeast submarkets all saw vacancy rise at least two percentage points. Though vacancy in the Kruse Way submarket stayed relatively stable, this area saw some movement, including M & T Bank relocating from Kruse Woods I to about 20,000 sf in 4949 Meadows. A few submarkets had positive absorption, such as I-5 South, where vacancy decreased slightly and Pinnacle Mortgage Bankers leased 16,000 sf at Durham Office Center. Though a number of suburban buildings are totally empty, one will soon be fully occupied. The Oregon Institute of Technology is planning to purchase the 131,000 sf former headquarters of InFocus in Wilsonville, and consolidate its four Portland-area locations there. InFocus moved out of the building last fall to a smaller office in Tigard.

Vancouver vacancy fell nearly half a percentage point to 18.10%, with 42,644 sf absorbed. Vacancy in Class C space fell five percentage points to 14.57%, as 29,000 sf was leased up at the Former Red Lion Headquarters. Class A and B space also saw some significant absorption; Doug Williams and Associates and Richard James and Associates both signed leases at the Thurston 500 Building, totaling 12,583 sf.

April 2010 Market Watch: Maturing Commercial Mortgages

Some recent press has focused on the challenges of maturing commercial real estate mortgages in today’s market. About $1.5 trillion in commercial and multifamily mortgages held by lenders is currently outstanding. With deterioration in underwriting fundamentals, many loans will be difficult to refinance as they mature.

Based on a recent Mortgage Banker’s Association survey, $183.9 billion of the $1.45 trillion of outstanding commercial and multifamily mortgages will mature in 2010. GSEs (Fannie, Freddie, FHA, Ginnie Mae) will see 2% of their outstanding mortgages mature, life insurance companies will see 7% of their outstanding balance come due this year and CMBS will see 12% of their balances mature. It is important for owners and investors to know how their lender will look at loans as they mature.

Since GSEs operate as both portfolio lenders and security issuers, they have considerable discretion in dealing with maturing loans in their portfolio. For loans they have securitized, GSEs are restricted in what they can do and in some cases have to buy back a loan in order to work through maturity-related issues.

Because CMBS mortgages are held in a trust, servicers have limits on how they can deal with maturities. Servicers have some ability in extending or modifying fixed-rate mortgages, and less flexibility for floating-rate mortgages. A servicer’s job is to maximize net recovery on a present value basis. When loans are flagged as troubled, a master servicer will be assigned who generally has more flexibility in providing forbearance, extension or modification.

As portfolio lenders, life insurance companies have considerable flexibility in how they deal with maturing mortgages. Financial institutions and life insurance companies have to take reserve against loans that require extensions or loans that are classified as non-performing.

NBS Celebrates 78th Anniversary Today

Today marks Norris, Beggs & Simpson's 78th anniversary. Here's a brief look at NBS' history.

NBS was founded in 1932 in Portland, Oregon, by A.D. Norris and George Beggs, and later joined by David B. Simpson. The company had a small office in the Wilcox Building, which still stands today at the corner of SW 6th Avenue and Washington Street in downtown Portland.

With the country mired in depression, few areas of the economy were left unscathed. Though the real estate industry suffered, Norris, Beggs & Simpson quickly became profitable by specializing in property management and acquiring many prominent families of the Pacific Northwest as clients.

New England Mutual Life Insurance Company of Boston played a key role in the early growth of Norris, Beggs & Simpson, by enlisting the company to manage a series of foreclosed properties in Portland and appointing the company as its mortgage loan correspondent in the area. Commercial and industrial brokerage services were also added to expand the company’s reach, and an emphasis was placed on involvement with major financial institutions.

NBS expanded into a full-service commercial real estate operation, and opened its Vancouver office in 1985 and Bellevue (now Seattle) office in 1988.

NBS Financial, one of four companies under the Norris, Beggs & Simpson Companies umbrella, joined Strategic Alliance Mortgage (SAM), a 20-member firm of privately held mortgage banking and commercial real estate investment companies located strategically throughout the United States, in 1997.

In 2009, the company arranged $175 million in financing for transactions ranging in size from $650,000 to $23,840,000, and our servicing portfolio is $1.7 billion strong.

NBS Financial's Wood Secures $3.75M for Park at Auburn Apartments

NBS Financial Services Executive Vice President Mike Wood has secured $3.75 million in refinancing for the Park at Auburn Apartments, an 83-unit apartment complex in Auburn, Washington, that was built in 1981.

The funds are from Fannie Mae through NBS Financial’s correspondent relationship with Walker & Dunlop, one of the largest non-bank commercial real estate lenders in the country. This relationship allows NBS Financial access to Fannie Mae and Freddie Mac financing, which is the most competitive financing for multifamily properties in the market today, according to Wood.

Wood said that the refinance allowed the borrower to pay off two existing loans on the property that had above market interest rates, lock in a ten-year term at an interest rate below 6 percent, and pull out significant excess proceeds, which will allow the borrower to purchase other multifamily properties.

NBS Financial's Harding Arranges $4.05M for Beaverton Apartment Complex

NBS Financial Services Vice President Todd B. Harding has arranged $4.05 million in acquisition financing through Fannie Mae for the Hallwood Apartments in Beaverton.

The 76-unit Hallwood Apartments were built in 1986, and are garden-style, two-story wood-frame apartments. The financing provided more than 75 percent of acquisition costs for the local borrower on a non-recourse basis. NBS Financial has arranged two other Fannie Mae transactions for this borrower in the past two years.

NBS Financial has arranged financing for a number of apartment complexes in the last two months, and Harding attributes this to multifamily being the preferred product type in the market. Fannie Mae and Freddie Mac provide the best loan amounts and interest rates for multifamily properties, he said. The Hallwood Apartments loan, for instance, accounted for nearly 80 percent of acquisition costs, while life companies generally provide closer to 60 or 70 percent of acquisition.

NBS Financial President Hering Receives CAR Award

Clayton Hering, President of NBS Financial Services, was named Co-Humanitarian of the Year by the Commercial Association of Realtors (CAR) Oregon/SW Washington at its awards dinner last night at the Governor Hotel in Portland. Dietra Stivahtis of Fidelity National Title Company was the other honoree.

Hering is active in a number of charitable organizations, including the Oregon Symphony. He is currently the Board of Directors Vice Chair and has been involved with the Oregon Symphony for more than twenty years. He's also active in groups like Business for Culture and the Arts and Young Audiences of Oregon/SW Washington.

CAR offers education, provides government advocacy and creates opportunities for commercial real estate professionals to connect and grow their business.

NBS Companies and Stratton Launch NBS Multifamily Management

Norris, Beggs & Simpson Companies, NBS Financial's parent company, and Susan Bowlsby Stratton, a successful apartment management executive, have joined forces to found NBS Multifamily Management, a company dedicated to managing apartment communities of 100 units or more around the West Coast.

Why start a new venture in this economic climate? NBS Companies President J. Clayton Hering said he expects that as the job market grows, the demand for housing will increase, with a short supply of single-family and multifamily housing due to the significant reduction in construction over the last several years. With single-family lenders requiring greater equity and better credit, fewer people will be able to buy houses and will thus reenter the apartment market.

“With increased market activity the necessity for professional, value-added multifamily management will rise, and NBS Multifamily Management will provide a quality of service to enable multifamily owners to be competitive,” Hering said.

NBS Multifamily Management expects to hire more than 100 people in the area to run and maintain the apartment communities it will manage.

Stratton, who has more than 20 years of multifamily management experience up and down the West Coast, will serve as President of the new company. Stratton spent 13 years at Harsch Investment Properties, most recently as Senior Vice President of Operations, where she was responsible for the company’s multifamily division and managed up to 5,500 units. A native Oregonian, she will receive her Executive MBA from Pepperdine University in March.

“I am so pleased to be joining NBS,” Stratton said. “My years of experience combined with NBS’ very successful property management track record will allow us to shine in the multifamily management industry.”

Cassandra Haavisto will serve as NBS Multifamily Management’s Regional Manager for the Puget Sound area. Haavisto’s industry experience spans 20 years; she has managed more than 13,000 units during her career and worked for major companies like Harsch Investment Properties and Trammell Crow.

NBS Financial's Mike Wood Featured in Dupre + Scott Apartment Article

Mike Wood of our Seattle office was featured in this article from Dupre + Scott Apartment Advisors, a company that provides research and information about the Puget Sound-area rental and investment markets. The article gives experts' opinions on an apartment investor's question about whether their lender will have a problem with the fact that their property's DSCRs and LTVs are no longer what they were when they took out the loans pre-recession. In order to access the full article, you have to sign up for a free account.

Hering, Jr. Arranges $14M for Portland Office Building

NBS Financial's Blake Hering, Jr. recently arranged $14 million for the CH2M Hill Center, a 221,037 sf office building in downtown Portland.

CH2M Hill Center's main tenant is CH2M Hill, an environmental and engineering consulting services company, which occupies more than 60 percent of the building. While it can be challenging to gain financing for a largely single-tenant building, the strength of the tenant and the building's occupancy were compelling. Other tenants include Stewart Title, Lifewise Healthplan of Oregon, and Ucentris.

Griggs Named NBS Financial's 2009 Finance Officer of the Year

2009 marks the tenth year Ken Griggs has been named Finance Officer of the Year, the top producer for NBS Financial. Griggs, a partner in the company, participated in 14 loans totaling $60 million in 2009; the projects spanned five states. His largest transaction was securing $15.1 million in refinancing for Portland’s Wieden+Kennedy Building. He is active in a number of industry groups, including the State Farm and Woodmen of the World Advisory Councils, and received the 2009 Oregon Mortgage Lenders Association Distinguished Service Award.

Portland Industrial, Retail Vacancy Decreased During Fourth Quarter, Reports Show

Norris, Beggs & Simpson has released its Fourth Quarter 2009 quarterly reports for office, industrial, retail and multifamily commercial real estate, as well as its economic report.

Office vacancy increased slightly to 11.81% in Central City and 20.95% in the suburban areas. The Northwest submarket saw some activity – the 87,976 sf redevelopment Soho 321 delivered, and a few leases were signed at Machine Works. Vancouver vacancy was flat at 18.56%, with positive absorption of 22,488 sf.

Industrial vacancy decreased to 14.85%, with 55,308 sf absorbed. This was the first positive absorption since Third Quarter of 2008. A number of sizeable leases were signed in North/Northeast, including MOR Furniture for Less leasing 156,000 sf at Kelley Point Distribution, and Rose City Printing & Packaging leasing 62,000 sf at Sandy Boulevard Business Park. Flex vacancy rose slightly to 16.16%.

The retail market saw some improvement this quarter as vacancy decreased more than half a percentage point to 7.4%, with 349,919 sf absorbed. The 140,000 sf Cascade Station Target delivered, and better than expected holiday retail sales results were encouraging.

Multifamily vacancy rose nearly a percentage point to 5.43%; a seasonal uptick in vacancy is to be expected, but this rise was more significant. Rents were largely flat. While multifamily permitting and construction is down, opportunities exist for developers to acquire buildable land at substantially lower prices. Yet barriers to development include lack of capital and uncertainty of future rental rates.

Click here for full reports.

NBS Financial's Wood Arranges $18.9M for Amberglen Office Properties

NBS Financial Services Executive Vice President Mike Wood, of the company’s Seattle office, has arranged $18.9 million in financing for the acquisition of a seven-building portfolio at Amberglen Business Center in Beaverton, Oregon.

Wood represented the lender, Symetra Life Insurance Company. Rob Meister, a Vice President at Grandbridge Real Estate Capital in Milwaukee, Wisconsin, represented the buyer.

Arranging loans for multi-asset portfolios is especially challenging, Wood said. Overall, the Amberglen portfolio comprised seven buildings that measure more than 350,000 sf. The loan had a very short closing period, from signed application on Nov. 4 to funding Dec. 11. It had other unique aspects, including a 70% loan to purchase price, and some flexibility with regard to prepayment penalty and release provisions.

“While the short closing timeline presented a challenge, Symetra and NBS were able to meet the borrower’s funding date, due in part to having a very motivated borrower as well as a motivated lender,” Wood said. “The lender was also able to see the inherent value in the portfolio, which got them comfortable with lending at that 70% loan to purchase price, whereas most loans these days are at a 65% LTV or below.”

NBS Companies Named one of Top Donors to Arts and Culture

Norris, Beggs & Simpson Companies has been named one of the top donors to arts and culture in Oregon by Business for Culture & The Arts (BCA). BCA‘s mission is to engage every business in the arts - to build audiences, encourage volunteerism, strengthen board capacity, recognize and stimulate community leadership and create arts advocates. NBS Companies ranked seventh on the list of medium-sized companies (100 to 499 employees).

NBS Companies donated nearly $20,000 to the arts in 2009. Recipients included the Oregon Symphony, Young Audiences, and the Portland Art Museum. Many of NBS’ partners also serve on the boards of arts organizations.