NBS Financial Services

Seattle Commercial Real Estate Market Poised for Strong 2012

2012-01-11T11:40:00.000-08:00

Overall, Seattle's commercial real estate market performed well during the Fourth Quarter, and we expect to see a positive year in 2012. The fact that Seattle is home to major companies like Boeing, Microsoft, Google and Amazon.com, which are consistently growing and taking more commercial space, attracts interest from investors and lenders alike.

Click here to read our January 2012 Market Watch for an overview of how Seattle's various property types performed during Fourth Quarter.

Life Companies Stepping Up Commercial Lending

2011-11-11T11:10:00.001-08:00

Life insurance companies are stepping up their allocations for commercial mortgages as banks have cut back on lending. That’s according to The New York Times, which highlighted this trend in an October article. According to the article, life insurance companies funded $15.7 billion worth of commercial mortgages during Second Quarter, the highest quarterly volume since 1965, when the American Council of Life Insurers began tracking this data.

The article highlights the advantages life insurers have in providing funding. They generally underwrite conservatively, meaning lending only to more credit-worthy borrowers and on quality, well-located properties. They keep loans on their balance sheets, in contrast to investment banks, which issue bonds against the loans.

Life companies also generally offer lower rates than banks on a non-recourse basis, and their portfolios tend to do well because of their conservative lending and active management. For instance, Fitch Ratings said that at the end of 2010, 99.6% of life insurance company mortgages were in good standing.

NBS Financial has cultivated relationships with life companies since our company was founded in 1932, and today we have relationships with more than 50 life insurance lenders. These lasting relationships allow us access to billions of dollars to fund all commercial property types. We also offer in-house loan servicing, and take great pride in the quality and performance of our $1.65 billion loan servicing portfolio.

In addition to representing life insurance company lenders, NBS Financial Services has represented banks, conduits (CMBS), pension funds and private equity. With access to various lending sources, NBS Financial has the ability to finance the entire capital stack.

Though today’s interest rates are historically low, the commercial mortgage market can change rapidly. Call your NBS Financial Finance Offi cer today to find out more about financing your commercial property.

Griggs Selected to Serve on MBA Board

2011-10-31T11:44:00.000-07:00

NBS Financial Services President Ken Griggs has accepted a nomination to serve on the Mortgage Bankers Association (MBA) Commercial Real Estate/Multifamily Finance Board of Governors (COMBOG).

COMBOG is comprised of MBA member executives from around the nation representing all aspects of the commercial/multifamily real estate finance industry. COMBOG leads the strategic development of MBA's commercial/multifamily policy, and initiatives as well as best practices and standards. It represents the diverse interests of MBA's member companies through standing councils, which are led by industry leaders and supported by expert staff, and special work groups and task forces.

Griggs has served as a finance officer with NBS Financial since 1993. He has originated over $1 billion in finance transactions for a wide variety of property types throughout the Northwest and around the country. He has been recognized as NBS Financial’s Top Producer many times, and became the company’s President in June.

Espy Joins NBS Financial as Manager of Loan Servicing

2011-10-12T16:47:00.000-07:00

Jan Espy, a longtime property manager in Portland, has joined NBS Financial Services as Manager of Loan Administration.

In this position, Espy oversees loan closings, payment collection, escrow and financial analysis, property inspections, assumptions and acquisitions, payoffs, maturities, lease analysis, insurance requirements, investor reporting and customer service, while supervising the loan administration staff.

Espy has extensive experience in the commercial real estate industry, and has managed more than 6 million square feet of retail, office and industrial properties in the Portland metro area during her career. She has expertise in budget preparation, monthly financial reporting, construction and service contract supervision, capital and tenant improvements, tenant and owner relations, monthly and quarterly investment reporting, and working closely with institutional investors. Prior to joining NBS Financial, she was a Senior Property Manager at Portland’s Kidder Matthews office.

Espy earned a BA in sociology from Washington State University, and studied accounting and business administration at Portland State University. She is a Real Property Administrator (RPA) and licensed Oregon real estate broker.

Patterson to Receive NAIOP Developing Leaders Award

2011-09-08T16:06:00.000-07:00

Andrew Patterson, an Associate Finance Officer with NBS Financial Services, is a 2011 recipient of the NAIOP Developing Leaders Award, which honors young commercial real estate professionals from around the country for their valued contribution and commitment to the industry.

The Developing Leaders Award, which honors up-and-coming professionals who have distinguished themselves in their profession and show great promise as future leaders of the commercial real estate industry, will be presented on Oct. 19 at Development ’11, NAIOP’s annual meeting in Scottsdale, Arizona.

Patterson has been with NBS Financial since 2007. He facilitates the underwriting process on multi-million dollar loans for office, retail, industrial and multifamily properties. Patterson serves as the Washington chapter NAIOP Developing Leaders Committee Co-Chair, and has been a member of the NAIOP Washington chapter for nearly 5 years.

Siemer Joins NBS Financial's PDX Office

2011-08-10T09:52:00.000-07:00

Justin Siemer has joined NBS Financial Services as an Associate Finance Officer. In this position, Siemer works closely with other members of the loan origination team to secure capital to satisfy clients’ needs through exclusive relationships with life companies, conduits, REITs and pension funds.

Siemer has extensive experience in commercial mortgage underwriting. He previously spent seven years at KeyBank Real Estate Capital. Most recently, he was a Senior Commercial Mortgage Analyst in Phoenix, where he was the lead analyst for an average of 25 loan originations exceeding $288 million annually. Prior to that, he underwrote loans on all types of commercial properties for KeyBank’s life insurance company and pension fund office.

Siemer earned a BS in finance and banking and an MBA with a management emphasis from the University of Missouri. He also studied abroad at the CIMBA campus in Asolo, Italy, where his focus was leadership and innovation management.

Leadership Transition at NBS

2011-06-27T14:26:00.000-07:00

NBS Financial Services is ushering in a new era in its leadership, including its first female CEO.

Jan Robertson is now CEO of NBS Companies (the umbrella company that includes NBS Financial and three other divisions), while J. Clayton Hering (previously President) is Chairman of the Board. Ken Griggs is now President of NBS Financial.

Robertson’s career path has been unique. She joined NBS in 1981 in an administrative position, and quickly rose into management, becoming a partner in 1993. She has served as CFO since 2005. Robertson is involved in many industry organizations, including IREM and NAIOP. She is also a strong supporter of arts in education, holding leadership positions in organizations such as Young Audiences and the Regional Arts & Culture Council.

“Jan is simply the best person to run this company,” Hering said. “As CFO she’s had to make tough decisions, which she has ably done, while always keeping the well-being of our employees and clients first and foremost.”

As Chairman of the Board, a newly created position, Hering continue to be involved in areas like strategic planning, mentoring, business development and community involvement, but his role in day-to-day operations, like administrative functions, will be reduced.

Ken Griggs, NBS Financial's new President, is an experienced mortgage banker and managing partner. He has been with NBS Financial since 1993, and has frequently been a company Top Producer. Blake Hering, Jr. is now Principal, Director of Portland Production, and Mike Wood is Principal, Director of Seattle Production.

“The partners who are stepping into new roles have an incredible breadth and depth of experience,” Hering said. “This new leadership structure will spread out responsibility among them, which is a win-win for both the company and our clients.”

Henderson Arranges $20.2M for Tacoma's Pacific Plaza

2011-05-19T14:43:00.000-07:00

Finance Officer Jeff Henderson has originated $20.2 million in permanent financing for Pacific Plaza, a LEED-Platinum office and retail project in Tacoma, Washington. Pacific Plaza has been recognized for its excellence in sustainability, and won the 2010 NAIOP Sustainable Development Award, a national award for a building renovation.

The transaction provided its share of challenges, according to Henderson. The property is in a secondary market, and is a condominium with partial owner/user space, with a master lease on the ground floor consisting of a grocery store that has yet to take occupancy in an unproven market.

“This deal was among the most challenging CMBS single-asset transactions to date in the new lending world,” Henderson said.

Because of the breadth and depth of NBS Financial’s capital resource relationships across the country, Henderson was able to find the right lender for the deal.

“We had to show the lender why the increased market vacancy, due to the departure of Russell Investments, should not be a detriment in underwriting this deal,” Henderson said. “At the end of the day, this is an outstanding asset with stable income, and we helped the lender recognize that.”

As the capital markets continue to go after the best of asset class, lenders are starting to look in secondary markets for opportunities.

“There is actually a lot of money out there,” Henderson said, “and if we understand every aspect of the deal, how to mitigate risk, and add up all the components of value, we are better suited to help lenders get comfortable with the deal and help the borrower get the most dollars they can.”

Pacific Plaza, originally constructed as a parking garage, was redeveloped for office/retail use in a partnership between the City of Tacoma and Pacific Plaza Development, LLC. The renovation was completed in 2009, and sustainable features include a green roof, a rainwater collection system and an efficient heating and cooling system.

April Market Watch: Seattle Multifamily Market Poised for Growth in 2011

2011-04-18T13:27:00.000-07:00

The Seattle metro area has one of the strongest multifamily markets in the nation, and a number of recent reports have focused on the market’s strength.

The Seattle apartment market has rebounded from the deepest recession in recent memory more quickly than many expected. At the height of the recession in fall 2009, vacancy rose to 7.2%, according to Dupre + Scott Apartment Advisors’ March 2011 Apartment Vacancy Report. Today, vacancy has fallen to 4.6%, and the company expects it to continue to decrease in the coming year. The market is showing other signs of stabilization: landlords are offering fewer concessions, and rents have begun to rise, though they haven’t yet gotten back to peak levels.

The Dupre + Scott report theorizes that persistent weakness in the single-family housing market is discouraging many from purchasing a house or condominium, which is one reason the apartment market is thriving. They expect that during 2011, apartment vacancy will continue to fall, rents will continue to rise, and concessions will essentially disappear.

Apartment Insights’ First Quarter Report provides similar predictions about the strengthening apartment market in 2011. It expects just 1,866 units to come online in 2011 and only about 2,000 in 2012. So development will ramp up during 2011, and many more units will deliver in 2013 and after.

The Seattle metro area placed fifth on Multifamily Executive’s list of the Hottest Multifamily Markets for 2011, or those where they expect the most development to occur. 3,692 multifamily permits were issued in Seattle in 2010, an impressive 57% increase over 2009.

NBS Financial Services not only arranges financing for multifamily properties, but can also secure financing for any type of commercial property, including office, industrial, retail, self-storage and hotel. In the past few years Fannie Mae & Freddie Mac have been most competitive on multifamily financing. More recently, life insurance company lenders’ spreads have compressed to be competitive with Fannie and Freddie rates. NBS Financial Services has lending relationships with life insurance companies, Fannie Mae, Freddie Mac, FHA, banks, credit unions, structured finance and specialized providers of mezzanine bridge and equity capital. With low interest rates and strong market fundamentals, now is a good time to refinance any commercial building.

Wood Arranges $4.2M for Wallingford Mixed-Use Property

2011-04-08T14:18:00.000-07:00

NBS Financial Services Executive Vice President Mike Wood has arranged a $4.2 million loan for a mixed-use property that was formerly a school in the Wallingford neighborhood in Seattle. The lender was Symetra Financial, one of NBS Financial’s correspondent life insurance companies.

One challenge to obtaining financing was that Wallingford Center sits on land that is leased from the Seattle School District, and some lenders avoid lending on buildings with ground leases. However, the property’s desirable location in the densely populated Wallingford area, as well as its solid occupancy, made a strong case. The loan was 60 percent loan to value with an 8-year term.

“While the unsubordinated ground lease made the loan request more challenging, the lender was ultimately able to get comfortable with the real estate and the operator, which resulted in the borrower receiving very competitive loan terms,” Wood said.

The 42,177 sf Wallingford Center, which is listed on the National Register of Historic Places, was constructed in 1904 as Interlake Elementary School and served as a school until the 1970s, when it closed. The building then sat vacant for a number of years. The current owners purchased the building in 1984 and renovated it, with two floors of retail and 24 studio apartments on the top floor. The retail portion is more than 90 percent leased, and tenants include Trophy Cupcakes, Tweedy and Popp ACE Hardware, The Exploration Academy and 4 Your Eyes Only Optical.

NBS Financial Secures $6.9M from Life Insurance Company for Sacramento Office Building

2011-04-04T08:43:00.000-07:00

NBS Financial Services Executive Vice President Ken Griggs and Finance Officer Paddy Ryan, in our Portland office, have arranged a $6.9 million loan for an office building in the Sacramento area.

The loan for the Cobblerock Office Building, a Class A, multi-tenant building in Rancho Cordova, a suburb of Sacramento, was funded by Symetra Financial, a life insurance company based in Bellevue, Washington. NBS Financial is consistently one of Symetra’s top producers nationally, and services its loans.

One unique aspect of the loan was that the property was only 82 percent occupied. In addition, two tenants occupied 79 percent of the building, with short-term lease expirations. The risk was mitigated with partial recourse, a strong submarket and tenant investment in their own tenant improvements, Griggs said.

With continuing uncertainty in the employment market and overall economy, lenders are cautious about office deals, especially in the Sacramento market, where office vacancy is estimated at between 20 and 25 percent.

“A conservative loan request with a strong borrower went a long way,” Griggs said.

Happy Anniversary, Norris, Beggs & Simpson!

2011-04-01T11:50:00.000-07:00

Today marks the 79th anniversary of Norris, Beggs & Simpson's founding. The company was founded April 1, 1932, in the midst of the Great Depression, in Portland, Oregon. Starting out primarily as property managers, the company has grown into the full service operation it is today. For our 75th anniversary in 2007, we compiled some company history, which can be found here.

NBS Financial's Todd Harding Promoted to Senior Vice President

2011-02-23T11:26:00.000-08:00

NBS Financial's Todd Harding has been promoted to Senior Vice President. The advanced title was awarded at NBS' annual awards banquet in January.

Todd began his mortgage banking career in 1986. He joined his family's firm, Harding Fletcher Company, and began underwriting real estate mortgages and becoming knowledgeable about construction components of commercial transactions through the tutelage of Portland’s brightest mortgage banking professionals. In 1990, Todd was named Vice President of Harding Fletcher Company in charge of all mortgage production for its Portland office. Todd came to NBS Financial in 1995 when the company acquired Harding Fletcher.

Todd was NBS Financial's 2008 Finance Officer of the Year, which recognizes the company's top producer. He arranges financing for office, industrial, retail and multi-family projects. He graduated from Linfield College and Portland State University.

NBS Financial's Ryan Promoted to Finance Officer

2011-02-07T16:11:00.000-08:00

NBS Financial Services’ Paddy Ryan has been promoted to Finance Officer.

Ryan joined NBS Financial in 2006, and he and Executive Vice President Ken Griggs teamed up to provide financing for office, retail, industrial and multifamily properties through NBS Financial’s correspondent life insurance companies and other sources of funding. The team’s largest loan during 2010 was securing $16 million for Granite Park Regional, a single-tenant office building in Sacramento.

Ryan is a 2010 and 2011 member of the Oregon Mortgage Lenders Association (OMLA) Commercial Committee. His extensive sales and marketing career experience includes working as brands and marketing manager for Tesoro Refining and Marketing Company. He graduated from Menlo College in Atherton, California.

Hering, Jr. Named NBS Financial Finance Officer of the Year for 2010

2011-01-24T13:35:00.000-08:00

Blake Hering, Jr. was named NBS Financial Services' 2010 Finance Officer of the Year at an awards banquet Jan. 22.

Blake has originated loans valued at more than $1.1 billion during his 11 years with NBS. In 2010, he arranged 10 loans valued at $64 million. He secured $14 million for the CH2M Hill Center (aka Parkside Center) in Portland. He also arranged $13 million for the Lodges at Lake Salish, a 200-unit luxury apartment property in Fairview, Oregon, and $7 million for the Alder Creek Apartments in Vancouver, Washington.

Blake is an executive vice president and partner in Norris, Beggs & Simpson Companies. He sits on the Advisory Committee for Nationwide Life Insurance Company, and is a board member of the Oregon Sports Hall of Fame. He is also active as a coach and board volunteer for youth lacrosse in Beaverton.

NBS Financial had a solid 2010: Our finance officers originated a total of 42 loans valued at just under $200 million, and our loan servicing department serviced $1.6 billion in loans.

NBS Financial Arranges $16M Loan for Sacramento Single-Tenant Office Building

2011-01-20T15:11:00.000-08:00

NBS Financial Services' Ken Griggs and Paddy Ryan have arranged a $16 million loan for Granite Park Regional, a 149,000 sf office building in Sacramento, California.

Arranging financing for single-tenant buildings can be challenging, especially for a building as large as Granite Park Regional, as lenders see the risk of the building becoming completely vacant. The tenant is the County of Sacramento, which further complicated the transaction as its credit was recently downgraded due to the many challenges in California.

But Griggs and Ryan structured the deal creatively to satisfy lender ING Investment Management, one of NBS Financial’s correspondent life insurance companies. The loan is a 12-year loan with the rate fixed for the entire term at under 5 percent.

Being able to adequately structure a loan of this size for a challenging building suggests that the market is looking up, Griggs said. ING, like many lenders, temporarily stopped lending during the height of the recession, but has reentered the market and has set aggressive funding targets for 2011. The loan will be serviced by NBS Financial on ING’s behalf.

Positive Signs for PDX CRE During Fourth Quarter

2011-01-14T15:17:00.000-08:00

NAI Norris, Beggs & Simpson has released its Fourth Quarter 2010 quarterly reports for office, industrial, retail and multifamily commercial real estate, as well as its economic report.

Office vacancy in Central City decreased to 11.78%, with a few significant leases. Suburban office vacancy fell slightly to 23.88%, with 121,056 sf absorbed. One of the larger leases of the quarter was ACS taking 30,656 sf at Triangle Pointe for a new call center. Vancouver office vacancy rose slightly to 18.7%.

Industrial vacancy fell slightly to 15.01%, with 108,375 sf absorbed. As one recent study showed, the industrial sector is a bright spot in Oregon’s economy, and the Port of Vancouver has recently seen heightened activity with BHP Billiton’s 60-acre lease.

Retail vacancy was stable at 6.4%, with 81,081 sf absorbed. The area’s first H&M opened in November at Pioneer Place, and H&M also leased nearly 20,000 sf at Washington Square. Ross Dress for Less and Dick’s Sporting Goods also signed significant leases during Fourth Quarter.

The Fourth Quarter ended with a flurry of multifamily investment sales. The $79 million sale of Ladd Tower and $70 million sale of the Palladia Apartments were just two of the significant sales of the quarter. Apartment vacancy also fell to 3.09%.

Full reports can be accessed here.

NBS One of Oregon's Most Admired Companies

2010-12-10T11:36:00.001-08:00

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

2010-12-06T10:06:00.001-08:00

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

2010-11-29T15:01:00.000-08:00

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

2010-11-10T10:07:00.000-08:00

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.

2010-10-27T09:45:00.000-07:00

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

2010-10-15T10:20:00.000-07:00

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

2010-09-17T09:32:00.001-07:00

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

2010-08-04T11:44:00.000-07:00

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

2010-07-15T10:58:00.000-07:00

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

2010-07-15T10:31:00.001-07:00

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

2010-07-14T10:28:00.000-07:00

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

2010-07-13T14:23:00.001-07:00

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

2010-06-30T08:15:00.000-07:00

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

2010-06-21T08:00:00.000-07:00

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)?

2010-06-15T09:13:00.000-07:00

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

2010-05-26T15:56:00.000-07:00

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

2010-05-14T13:52:00.000-07:00

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

2010-05-12T14:39:00.000-07:00

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

2010-05-06T15:10:00.000-07:00

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

2010-05-03T11:36:00.001-07:00

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

2010-04-30T16:31:00.001-07:00

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

2010-04-29T14:11:00.001-07:00

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

2010-04-26T14:07:00.000-07:00

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

2010-04-16T08:24:00.000-07:00

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

2010-04-01T10:03:00.000-07:00

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

2010-03-11T16:15:00.000-08:00

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

2010-03-08T09:02:00.000-08:00

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

2010-03-05T14:55:00.000-08:00

Clayton Hering, President of NBS Financial Services, was named Co-Humanitarian of the Year by the Commercial Associa t ion 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

2010-03-04T11:49:00.000-08:00

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

2010-02-24T09:30:00.000-08:00

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

2010-02-17T11:30:00.000-08:00

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

2010-02-03T08:31:00.001-08:00

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

2010-01-25T10:33:00.001-08:00

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

2010-01-20T10:56:00.000-08:00

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

2010-01-05T17:31:00.001-08:00

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.

Seattle and Portland in Emerging Trends in Real Estate 2010 Report

2009-12-04T10:19:00.000-08:00

Seattle was ranked No. 8 and Portland No. 16 on a list of the top U.S. markets for commercial real estate investment in the recently released Emerging Trends in Real Estate 2010.

Though being classified as one of the top 10 investment markets in the country is good news for Seattle, the city had been ranked No. 1 in the 2009 report. The challenging office market, including the closure of Washington Mutual, played a significant role in Seattle dropping seven places. The report sites multifamily, however, as a bright spot for the city; though vacancy has risen and rents are down slightly, this property type remains fairly stable. You can find an article by The Seattle Times on the report here.

Portland's ranking at No. 16 is good news for a smaller metro area, and the report says, "Portland plays second fiddle to Seattle, growth controls keep the market in reasonable supply-demand balance and help foster a 24-hour, urban environment." The Oregonian's coverage can be found here.

The extensive report, prepared by The Urban Land Institute and PricewaterhouseCoopers, represents the survey responses of more than 900 industry experts in a variety of sectors. It predicts that 2010 will be a tough year for the commercial property market around the nation.

NBS Financial's Wood Arranges $6M for Renton Commerce Center

2009-11-19T11:43:00.000-08:00

NBS Financial Services Executive Vice President Mike Wood has arranged $6 million in financing for Renton Commerce Center, a 114,307 sf flex/industrial building in Renton, Washington, southeast of Seattle. Woodmen of the World was the lender.

Renton Commerce Center was built in 2002 and is fully leased. Tenants include Occupational Health Service, Valley Medical Hospital and CompuVest Corp.

“The conservative loan request, strength of the borrower and Class A quality of the building all contributed to having strong interest from numerous lenders, which allowed us to provide the borrower the most competitive terms available in the market,” Wood said.

Woodmen of the World offered the most attractive overall terms, and the loan funded 46 days from signed application to funding.

NBS Financial Arranges $10.2M in Forward Rate Lock Financing for Apartments in Davis, CA

2009-11-12T10:11:00.001-08:00

NBS Financial Services Executive Vice President Ken Griggs and Associate Finance Officer Paddy Ryan have secured $10.2 million in financing for the Saratoga West Apartments, a 98-unit complex in Davis, California. Fannie Mae was the lender.

Griggs and Ryan were able to lock in an attractive 5.83% rate in advance, which was very attractive to the borrower because it removed the risk of fluctuating interest rates in an uncertain economic environment.

“We were able to lock in the rate ten months early, which gave the borrower some peace of mind,” Griggs said.

The loan is interest-only for two years, which was another benefit for the borrower, Griggs said.

The Saratoga West Apartments are close to the University of California – Davis campus, and virtually all of the residents are students, which can make some lenders nervous, Griggs said. Even so, they were still able to achieve a 75% loan-to-value ratio.

NBS Financial has offices in Portland, Oregon, and Seattle, Washington, and arranges financing for properties throughout the country.

NBS Financial President Hering Honored With Award from Portland Business Alliance

2009-11-09T09:40:00.001-08:00

J. Clayton Hering, President of Norris, Beggs & Simpson Companies, was honored with the 2009 William S. Naito Outstanding Service Award at the Portland Business Alliance’s Leadership Evening at the Portland Art Museum on Nov. 4.

The award recognizes exceptional leadership and service to the business community, and has been awarded to a member of the PBA since 1985. In the 1990s, it was renamed to honor the late Bill Naito, whose work exemplified the values the Alliance recognizes – community service, philanthropy and leadership. Past recipients include Fred Stickel, publisher of The Oregonian, the late Bob Gerding, cofounder of Gerding/Edlen Development Company, and Peggy Fowler, CEO of Portland General Electric.

Hering is active in a number of community organizations, and is a strong proponent of the arts. He is on the Portland Business Alliance Board of Directors, and is the Vice Chair of the Oregon Symphony Board of Directors. He is on the OHSU Foundation Board of Trustees, and has been involved with Young Audiences of Oregon/SW Washington and many other organizations.

Hering, a graduate of Dartmouth College, served in the United States Marine Corps for three years, including service in Vietnam where he attained the rank of Captain. He joined Norris, Beggs & Simpson Companies in 1972, was promoted to partner and regional manager in 1976 and became president in 1989. He oversees the company’s finance division, capital asset group and office and retail brokerage operations.

Henderson Joins NBS Financial as Finance Officer

2009-11-02T13:07:00.000-08:00

Jeff Henderson has joined NBS Financial Services as a Finance Officer. He will work in the Seattle office and originate loans for commercial properties around the Pacific Northwest.

Henderson has a wealth of experience in real estate along the West Coast. Most recently, Henderson owned his own company, which acquired and repositioned residential projects, and served as a consultant for numerous commercial real estate organizations working on commercial development and asset management projects. From 2002 to 2005 he served as Acquisitions Analyst and Assistant Due Diligence Manager at Harsch Investment Properties, where he developed cash flow projects on over $1 billion worth of commercial property, including retail, office and industrial.

Henderson was the Chairman of the Urban Land Institute’s Young Leaders Group of Oregon/SW Washington from 2007 to 2008, and was a board member and program chair in previous years. He graduated summa cum laude with a BS in business administration with an emphasis in finance from Oregon State University.

Third Quarter Reports for Portland Market Released

2009-10-13T10:55:00.000-07:00

NBS Financial has released its Third Quarter 2009 quarterly reports for office, industrial, retail and multifamily commercial real estate, as well as its economic report.

Office vacancy in Central City rose slightly from the previous quarter to 11.12%, with -272,692 sf absorbed. Two Class B buildings in Northwest were major contributors to this rise in vacancy and negative absorption. Vacancy in the suburban office markets rose about a percentage point to 20.59%, and Vancouver office vacancy rose to 18.42%.

Industrial vacancy increased to 14.94%, with -531,805 sf absorbed. One positive sign for the industrial market this quarter was Daimler Trucks North America’s decision to keep its Swan Island plant open. The plant had previously been scheduled to close in June 2010.

Vacancy in the retail market rose to 8.0%, with 365,818 sf newly available. The closure of all Joe’s Sports & Outdoors stores helped contribute to the increased vacancy, but Dick’s Sporting Goods leased a few previous Joe’s locations in the metro area.

Multifamily vacancy decreased slightly to 4.64%, which can partly be attributed to more tenants being active during the summer months; some landlords offered rent concessions and other incentives to attract tenants. Multifamily rental rates rose slightly.

A PDF of all of the reports can be found here.

October Market Watch: Commercial Real Estate Loans and Economic Recovery

2009-10-08T13:11:00.000-07:00

In recent weeks, many media outlets have reported that the worst is over and the US economy has bottomed out. Unemployment rates are still rising, currently at 9.7%, but at a declining rate. The S&P rose by 15% in the second quarter and by an estimated 12% in the third quarter. The Dow is inching toward 10,000 again after bottoming out near 6,500 in early March. Household net-worth has grown 3.9% from the first quarter 2009, the first such increase in 24 months. These are all good signs that the worst may be over on a national economic scale, but how does this translate to the commercial real estate market and commercial real estate loans?

Commercial real estate, especially in Seattle, will lag the trend. Many industry professionals see the next 18 months as the bottom for commercial real estate. Properties are just beginning to feel the effects of the unemployment increase. The market is offering leasing concessions as leases roll while companies decide how to improve their bottom line. Many of the outstanding loans that were originated 5-10 years ago are performing now, but will be stressed when they need to be refinanced in the next 24-48 months. Lenders will continue to tighten underwriting as property values decrease due to cap rate inflation and lower rents. LTV ratios for new loans are significantly less than in recent years, and market fundamentals are causing a decrease in NOI at most properties. These factors are stressing lenders’ real estate portfolios. There will be an estimated $1.4 trillion of loan maturities from CMBS, Life Insurance Companies, and banks over the next 5 years, the same amount maturing over the last 15 years.

Today’s commercial real estate loan will be more conservative; it will have a higher underwritten cap rate, increased underwritten vacancy, “market rent” adjustments, and a lower loan-to-value. Most investors are still sitting on capital, waiting to invest. Despite all this, for quality, well-performing assets, there is money ready, willing and available. Expectations are that there will be increasingly more capital available in 2010 as lenders compete to earn yield on cash. Rates are still near all-time record lows and owners are encouraged to lock in an attractive interest rate for a long term to avoid having to go out to the market in the next 12-48 months.

Issues Affecting Commercial Mortgage Rates:
· Falling treasury rates and compressing spreads provide attractive interest rates to borrowers seeking conservative commercial loans
· CMBS delinquency nearing 6.5%, more than 6 times the amount 12 months ago
· Unemployment, increasing vacancies, and declining rental rates impacting property net operating income.

NBS Financial's Wally Harding Authors Column on RE Business Online

2009-10-02T15:43:00.000-07:00

NBS Financial's Wally Harding, a Senior Vice President with more than 40 years of experience in the commercial mortgage banking business, writes about the commercial real estate finance market in a column on RE Business Online. Harding speculates on whether we've reached bottom, and what we can expect in the months to come.

NBS Financial's Wood Secures $1.6M for Woodinville Industrial Building

2009-09-22T11:04:00.000-07:00

NBS Financial's Mike Wood has arranged $1.6 million in financing for Underwood Gartland 12, a 38,878 sf warehouse/distribution building in Woodinville, Washington. Earlier this summer, Wood provided $2.6 million in financing for Underwood Gartland 216, a building in the same development.

Symetra Life Insurance Company was the lender. This loan was a refinance of a maturing loan, and had a 62 percent loan-to-value ratio. Underwood Gartland 12 is a fully leased single-tenant building that was built in 1999.

“While the single tenant nature of the deal made some lenders uncomfortable, several lenders quoted the deal because of the existing equity in the property, strength of the borrowers and Class A nature of the improvements,” Wood said. “Symetra ultimately had the most competitive overall loan program.”

NBS Financial was Symetra’s top correspondent nationwide in 2008.

NBS Financial Arranges $15.1M in Refinancing For Wieden + Kennedy Headquarters Building

2009-09-15T09:25:00.000-07:00

NBS Financial Services Executive Vice President Ken Griggs and Associate Finance Officer Paddy Ryan have secured $15.1 million in refinancing for the Wieden + Kennedy Headquarters Building in Portland’s Pearl District.

John Hancock Life Insurance Company, out of Boston, is the lender. NBS Financial is John Hancock’s oldest correspondent in the United States. John Hancock’s ability to structure the loan to meet the individual needs of the borrower was key to winning the business, Griggs said.

The strength of the tenant was integral to this transaction, according to Griggs, as lenders are careful to lend on single-tenant deals. Wieden + Kennedy is a creative advertising agency known worldwide for its work with major clients like Coca Cola, Nike and ESPN. It has six offices in addition to the Portland office, including in London and Tokyo.

The quality of the building and its location, at 224 NW 13th Ave. in the Pearl, also had major appeal. The Wieden + Kennedy Headquarters Building was built in the early 1900s to store dry goods and was later used as a cold storage warehouse. Wieden + Kennedy was seeking a new and larger space in the 1990s, and commissioned Gerding Edlen Development and Allied Works Architecture’s Brad Cloepfil for a more than $35 million renovation of the five-story building.

The renovation was finished in 2000, and has garnered awards and national attention for its design and energy efficiency. Wieden + Kennedy occupies the majority of the building’s 160,000 sf of office space. The building also includes about 30,000 sf ofground floor retail space, with tenants like popular restaurant Bluehour, retailer Design Within Reach, and urgent care clinic ZoomCare.

September Market Watch: National Economy and Commercial Real Estate Loans

2009-09-10T13:17:00.000-07:00

As the summer comes to a close and the recent stock market rally subsides, borrowers are left wondering what the future will bring for commercial real estate loans. At the end of August there were several treasury issuances that were well received by the market as more than $16 billion of new notes issued were digested easily. In late August, Fed Chairman Ben Bernanke said that “prospects for a return to economic growth in the near term appear good."

The end of summer brought a jump in existing home sales, improvement in consumer sentiment, and increased consumer spending, in part due to the successful cash for clunkers program. Even with the issuance of new treasuries, the 10-year treasury rate fell for the month of August with help from the positive economic news. The 10-year treasury was down almost 50 basis points for the month. A combination of lower treasury rates and contracting lender spreads means attractive interest rates on quality, performing commercial real estate debt.

As the economic news improves, we are seeing lenders becoming more active in the commercial real estate lending market. A few months ago, it seemed that there were very few players in the market, mainly life insurance companies with very conservative loans or banks lending to repeat borrowers in an effort to control deposits. Several life insurance companies and banks that have been inactive over the past year are beginning to come back into the market.

While still underwriting conservative cap rates and trending performance, lenders are becoming more competitive to win quality deals. A typical commercial real estate loan in today’s market is less than a 70% loan to value, greater than a 1.25x debt service coverage ratio and has an interest rate from 6.0% to 7.50% based on term, loan to value, asset type, and location.

August 2009 Treasury Highlights:
August 10-year treasury high: 3.85% on August 9
August 10-year treasury low: 3.39% on August 31

Issues Affecting Commercial Mortgage Rates:
· 10-year treasury declined almost 40 basis points during the month
· $16 billion of new treasury supply released in the last two weeks of August was well received by the market and treasury rates actually moved lower
· Federal Reserve continuing Treasury repurchase program to help stabilize the price as the new issuances continue

August Market Watch: Update on Seattle CRE

2009-08-10T13:07:00.000-07:00

Second quarter 2009 market reports show that Seattle’s commercial real estate market is not immune to the struggling economy, but compared to the rest of the country, we are performing quite well. Here’s an update on the apartment, industrial, office and retail property types in the Seattle/Puget Sound region:

Apartment: Seattle's strongest property type has seen an increase in vacancy rates with only a small rent decrease, although many owners have begun to offer leasing concessions. The vacancy rate increased to 6.6% from 4.8% last fall, but strong submarkets like Capitol Hill and U-District remain at well under 5%. The average rental rate in the region was $988, down less than 1% from six months ago. The average rental concession was $733 (on a 12-month lease) with about half of the buildings offering a concession.

Industrial: The strongest performing property type after apartments, overall Seattle area industrial vacancy was 7.0%, with overall average blended rental rates of $0.63 psf/month. The 7.0% vacancy rate represents a 90 basis point increase from the previous quarter. Flex buildings averaged 9.6% vacancy, while warehouse buildings were 6.7% vacant. The $0.63 psf/month rental rate represents a 0.7% increase from the previous quarter. Cap rates have increased about 150 basis points from a year ago. The strongest submarkets included the Southend (Auburn & Kent Valley) and close-in Seattle with vacancy rates under 5%.

Office: Office buildings have seen the most stress in 2009, resulting in an overall vacancy rate of 11.2%, according to CoStar. Class C office space has seen the smallest increase in vacancy rate while class A & B vacancy rates have increased between 150 and 200 basis points. The average rental rate was $27.03 psf/yr, a 3.3% decrease from the first quarter 2009. Cap rates have increased by about 90 basis points, averaging 7.46, although few sales have taken place in the last 12 months.

Retail: Retail vacancy has increased 50 basis points from first quarter to 6.1% and rental rates ended the quarter averaging $20.60 psf/year. Since second quarter 2008, retail vacancy has increased steadily from 4.5% to the current 6.1%. As the economy challenges retailers, we expect to see an increase in vacancy rates through 2010. The average rental rate is down over 4% since 1st quarter and over 9% in the last year. Cap rates have increased almost 150 basis points in the past year. Similar to office properties, transaction volume is significantly lower than the previous four quarters.

*Vacancy and rental rates taken from CoStar and the Dupree & Scott local market reports.

NBS Financial #7 on List of Top Commercial Lenders

2009-08-04T14:19:00.000-07:00

NBS Financial Services placed #7 on the Portland Business Journal's list of the Top Commercial Lenders for the Portland metro area, ranked by dollar volume of commercial loans in 2008. NBS Financial's Portland office closed 37 loans worth a total of $242 million during 2008. The company moved up two spots after being ranked #9 on the previous year's list.

Second Quarter 2009 Reports for Portland Metro Area Show Recession's Impact

2009-07-31T14:07:00.000-07:00

Second Quarter 2009 quarterly reports for office, industrial, retail and multifamily commercial real estate in Portland, Oregon, as well as the general economy, are up on our Web site.

While central city office vacancy remained stable from the previous quarter at 10.33%, with 47,803 sf absorbed, vacancy in the suburban markets increased nearly two percentage points to 19.06%, with -183,415 sf absorbed. Vancouver office vacancy also rose, to 17.71%.

Industrial vacancy rose to 13.87%, with -515,518 sf absorbed. Industrial sales have slowed considerably, but SEH purchased the Hewlett-Packard campus in Vancouver for $55 million in late June.

Vacancy in the retail market rose to 7.1%, and the negative absorption of 240,321 sf occurred in some larger spaces, such as Joe’s Sports & Outdoors vacating 55,120 sf at Gresham Town Fair. Construction has slowed, but work continues on the Cascade Station Target, expected to deliver this November.

Multifamily vacancy rose slightly to 5.03%, as the poor economy has caused renters to double up or move in with family. Rental rates remained flat, and landlords are increasingly using incentives to attract potential tenants.

The full reports can be found here.

NBS Financial’s Wood Arranges $2.6M for Woodinville Industrial Building

2009-07-30T15:33:00.000-07:00

NBS Financial Services Executive Vice President Mike Wood has arranged $2.6 million in financing for Underwood Gartland 216, a 71,750 sf warehouse/distribution building in Woodinville, Washington.

Symetra Life Insurance Company was the lender, and Underwood Gartland 216 LLC the borrower. This loan was a refinance of a maturing loan, and had a 5-year term, 25-year amortization, and a 43% loan-to-value ratio. Underwood Gartland 216 was built in 1999.

In these challenging financial markets, lenders are looking to lend on the strongest and most stabilized projects. So the fact that Underwood Gartland 216 was only 65 percent leased at the time of the loan provided a bit of a challenge, but not an insurmountable one, said Wood, of NBS Financial’s Seattle office.

“The borrower had enough income and cash-flow to qualify for the loan, and the lender recognized the quality of the real estate,” Wood said.

NBS Financial was Symetra’s top correspondent nationwide in 2008.

July 2009 Market Watch

2009-07-20T14:38:00.000-07:00

Economic Outlook:
The FOMC met at the end of June and had some interesting insight into the future of the US economy. According to the Department of Commerce, US real GDP will begin to stabilize in the second half of ‘09 after contracting about 6% in each of the two previous quarters. This is an indication that economic growth might begin in 2010. A few reasons for the positive outlook include a slowing of speculative investment in the oil and housing markets, improved credit flows expected to unlock pent-up demand, slowing of businesses liquidation of inventory and other self-correcting actions, and bold changes in global monetary and fiscal policy.

Lending Environment:
In late June, the Mortgage Bankers Association released its First Quarter report showing a dramatic drop in loan origination from ‘08 to ‘09. Overall, originations are down about 70% from First Quarter ‘08. There was a 96% decrease for CMBS originations, 80% for banks, 60% for life insurance companies, and 25% decrease for GSEs (Fannie & Freddie). Even with the large decrease in originations, life insurance companies and GSEs are still very active in today’s market.

Refinancing Challenges:
The first two quarters of ‘09 have also brought some new challenges to light for many borrowers. Many loans that were originated in the past five to ten years are underwater or showing sings of stress due to lower rental rates, increasing vacancies, and higher underwriting capitalization rates. Many borrowers are realizing that they will need to bring equity to the table when refinancing an aggressive loan that was made less than ten years ago. It is prudent now more than ever to think through financing options well in advance of a loan maturity. Many proactive owners are already refinancing debt that expires three to five years out as current interest rates are historically low and there is a general uncertainty about inflation and the future of interest rates.

Commercial RE Loans:
There are commercial real estate lenders active in today’s market. Life insurance companies typically have an allocation each year for commercial real estate loans that they need to make in order to match debt to the different insurance products they sell. Life insurance companies alone originated about $2.62 billion in commercial real estate mortgages in First Quarter ‘09. With the recent spike in treasuries over the past two months, we have seen commercial mortgage rates rise slightly but they are still at all-time lows. It is always best to discuss financing needs early and often, so you aren’t surprised when it's time to obtain financing for an acquisition or to refinance an existing loan.

June 2009 Treasury Highlights:
• June 10 Year Treasury High: 3.95% on June 10th
• June 10 Year Treasury Low: 3.48% on June 29th

Issues Affecting Commercial Mortgage Rates:
• Steepened yield signaling an economic recovery may begin toward the end of 2009 and into 2010
• US Treasury rates remain volatile as the issuance of treasuries by the US government is offset by the treasury repurchase program
• Federal Reserve voted to hold the Fed funds rate target at 0-0.25%

May 2009 Market Watch

2009-06-08T15:13:00.000-07:00

The month of May continued a steady increase in the 10-year Treasury yield. Since January 1, we have seen an increase of over 150 basis points, closing the month of May at nearly 3.75%. The 10-year Treasury note climbed over 50 basis points in the month of May alone. We have seen lenders adjust their pricing slightly upward as a result of the increase in Treasury rates, but overall, interest rates are still at or near historic lows. For well located and performing commercial real estate, we have the ability to deliver extremely attractive financing options even in today’s challenging market conditions.

NBS Financial prides itself on our correspondent relationships with Life Insurance Company lenders and a select group of local and national bank relationships as well as our DUS (Fannie, Freddie, & HUD) relationships. We have the ability to finance the entire capital stack, from a 1st mortgage to a mezzanine loan. Our sources of money have both confidence in our market and our people to find the best investments for their money. Call one of our Loan Officers today to discuss your next commercial real estate transaction.

May 2009 Treasury Highlights:
• May 10 - Year Treasury High: 3.72% on May 27
• May 10 - Year Treasury Low: 3.09% on May 14

Issues Affecting Commercial Mortgage Rates:
• $145 Billion of US Treasuries auctioned in the last 2 weeks of May, forcing Treasury yields upward of 50 basis points for the month
• FMOC released meeting minutes stating some signs of stabilizing in the economy but "significant downside risks to the economic outlook"
• A steepened yield curve resulting from LIBOR falling and long-term Treasury rates increasing, many expect this should provide a stimulus to the economy
• Fed continues to purchase Treasuries to try and curb inflation that is expected to affect long-term rates as the economy rebounds

Guenther Arranges $4.755 Million for Bozeman Manufactured Housing Community

2009-06-04T15:44:00.000-07:00

NBS Financial Services Finance Officer Erich Guenther has arranged a $4.755 million loan with a low interest rate and attractive terms for King Arthur Estates, a 210-pad manufactured housing community in Bozeman, Montana.

The deal was funded through Fannie Mae. Guenther, of the company’s Seattle office, negotiated a 10-year fixed interest rate at 5.6%, with 65% loan-to-value and 1.50 debt service. The borrower was also able to pull out some equity.

As the credit markets have deteriorated over the past months, Fannie Mae requires extensive pre-review and due diligence for all manufactured housing properties. Guenther was able to negotiate with Fannie Mae on several fronts, to meet and exceed the borrower’s expectations for the loan proceeds and pricing. The proceeds were used to pay off the expiring mortgage on King Arthur Estates, an existing mortgage on another property, as well as financing fees for the transaction.

TALF Update

2009-06-03T15:28:00.000-07:00

The Term Asset-Backed Securities Loan Facility, or TALF, began in an effort to jump start the economy by increasing lending on many different types of assets. So far, the $1 trillion fund has been used to lend money to investors who buy consumer debt. Recently, the Fed announced that they will allow the use of TALF funds for the purchase of commercial real estate debt. "This program is critical to restoring the flow of credit to owners of commercial real estate and preventing a damaging chain of events in this market," Treasury Secretary Timothy Giethner recently stated.

Two objectives of the program are to create a market for originated but unsold CMBS and to thaw the market for new CMBS issuance. As many banks and financial institutions begin to sell pools of loans off their books, the TALF program allows banks to originate new debt, confident there will be a market to sell the loans after they originate it. The overlying principal is conservative lending. TALF funds can only be used to buy the AAA, or highest rated tranches of CMBS pools. Many CMBS loans originated in the last 24-48 months were underwritten too aggressively as Standard & Poors expects to cut the ratings of many pools that were securitized between 2005 and 2007, making them ineligible for TALF funds.

With an influx of capital returning to purchase commercial real estate debt, some large banks and financial institutions have begun originating loans that will attract TALF buyers. As time passes and liquidity in the CMBS market increases, look for more and more banks to start originating debt that can be pooled and sold as CMBS, greatly increasing liquidity in the marketplace. Although it will take time, this liquidity in the CMBS market will relieve pressure for many lenders with commercial real estate loans on their balance sheet.

NBS Financial's Portland Office on MBA List

2009-05-18T15:07:00.000-07:00

NBS Financial Services' Portland office was ranked second on the Mortgage Bankers Association list of the top commercial real estate/multifamily finance firms in the Portland metro area, based on total origination for the year ending Dec. 31, 2008. The Portland office arranged 37 loans worth $242 million in 2008, with an average loan size of $6.5 million.

Market Watch: May 2009

2009-05-06T12:04:00.000-07:00

Lending activity tightens in April; Seattle a bright spot for commercial real estate lending

As spring begins a fresh start for Mother Nature, we see the commercial real estate market continuing to deteriorate. Many lenders are tightening their underwriting standards and continuing the trend to lend conservatively, to proven borrowers, on well located and performing commercial real estate properties. Lenders are underwriting higher cap rates, or the ratio of net operating income to market value, cutting a property’s value and impacting loan amounts. Loan-to-value ratios today are commonly in the 60%-65% range, rather than the 75%-80% range of 24 months ago. Because many lenders have less money to lend than in previous periods, they are becoming more and more selective. Most deals that have any issues regarding vacancy, trending performance, or lease rollover are immediately getting kicked out. We continue to see loans that come due and refinancing is next to impossible due to perceived risks from the lender and an overleveraged existing loan.

The 10 year US Treasury, a benchmark for commercial real estate lending, climbed more than 45 basis points in April. As the government continues to increase the supply of treasuries in the market, we have seen this rate climb almost 90 basis points since the beginning of the year. Various sources report that the "target" for the 10 Year Treasury rate is about 3.0% to keep credit flowing through the economy. The Fed continues to purchase treasuries to keep rates low and combat inflation, but seems to be losing the battle given the recent rise in treasuries.

Though the capital markets have been challenging, we are still signing up and closing loans for well located and moderately leveraged deals all over the Northwest. Our correspondent Life Insurance Company 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 for the right deal. Now is the time to talk with an NBS Finance Officer to secure financing for your apartment, office, retail, or industrial property.

April 2009 Treasury Highlights:
• April 10 Year Treasury High: 3.12% on April 30th
• April 10 Year Treasury Low: 2.66% on April 1st

1st Quarter ‘09 Local Market Vacancy by Property Type:
• Apartment: King Co. - 6.8%, Pierce Co. - 6.0%, Snohomish Co. - 6.8%
• Industrial: Seattle - 2.28%, So. King Co. - 4.21%, Snohomish Co. - 8.56%
• Retail: Seattle - 3.4%, Eastside - 4.9%, Southend - 6.1%
• Office: Seattle - 11.9%, Eastside - 14.1%

NBS Financial’s Wood Secures $2.725M for Fife Industrial Building

2009-05-04T09:13:00.000-07:00

NBS Financial Services Executive Vice President Michael Wood has secured $2.725 million in financing for Fife Landing East – Building B in Fife, Washington.

The 84,740 sf building, in the Kent Valley industrial area in Pierce County, is fully occupied by a single tenant on a short-term lease, which can make it difficult to secure a loan, Wood said. But the overall stability of the industrial market, the quality of the building, and NBS Financial’s correspondent relationship with the lender, Symetra Life Insurance Company, made the loan possible.

“Even in these challenging financial markets, our correspondent life insurance company lenders still have capital available for deals like this, where you have institutional quality real estate, a strong real estate market and experienced sponsors with true equity in the property,” Wood said.

NBS Financial was Symetra’s top correspondent nationwide in 2008, and has a long-term working relationship with the company. Wood provided the original loan for Fife Landing East – Building B when it was built in 2001.

Griggs, Ryan Secure $1.8M for Salem Health & Rehab Center

2009-04-29T09:27:00.000-07:00

NBS Financial Services' Ken Griggs and Paddy Ryan have secured $1.8 million in financing for the Evergreen Windsor Health & Rehabilitation Center in Salem, OR. The 20,720 sf senior living facility has 100 beds, is 20,720 sf and provides both short- and long-term care.

Griggs is an Executive Vice President and Ryan is an Associate Finance Officer in NBS Financial's Portland office. View their profiles here.

Hering, Jr. Garners $25M in Funding for Three Apartment Complexes

2009-04-13T13:44:00.000-07:00

NBS Financial Services Executive Vice President Blake Hering, Jr. has secured $25 million in financing for three apartment communities in the Portland metropolitan area since the beginning of the year.

Lender State Farm Life Insurance Company provided $10.5 million for the 235-unit Squire’s Court Apartments in Clackamas, $10 million for the 240-unit Riverwood Heights Apartments in Tigard, and $4.5 million for the 124-unit Cedar Square Apartments in Cedar Hills.

State Farm is one of several active sources for NBS Financial Services.

“In a glacially slow-moving commercial debt market, this is a positive sign that some lenders have remained active and competitive for high quality assets with well-positioned ownership,” Hering, Jr. said.

Market Watch: April 2009

2009-04-06T16:05:00.000-07:00

During late March, the supply of US Treasuries dramatically increased as $98 billion in five and seven year term notes were issued.

Shortly after the supply increase, the Fed began buying up treasuries in an attempt to control interest rates from skyrocketing. In recent days, approximately $15 billion has already been spent at treasury auctions for 3, 7, and 10 year notes. Showing some positive feedback, treasury rates trended downward toward the end of the month. In this historic low-rate environment, the Fed’s purchase of treasury notes is a key component to keeping inflation under control.

A toxic asset purchase plan was introduced in March to aid financial institutions with getting non-performing assets off their books to stave off future "mark to market" write-downs. According to the plan, the Treasury could spend up to $1 trillion removing these "toxic assets" from the company’s balance sheet. Government money would be coupled with private investment, sharing in the risk/reward as these loans mature. The market found comfort in the Fed’s plan as the Dow finished the month up almost 20% from recent lows.

In addition, there have been conversations regarding the modification of "mark to market" accounting rules. This could counteract the Fed’s asset purchase plan by making it more attractive for bankers to hold onto non-performing loans, however, it may also relieve financial institutions from taking future write-downs on their already heavily discounted portfolios.

Commercial mortgage rates have come in slightly for the month, thanks to sharp treasury declines, as US treasuries are used as a ‘benchmark’ for commercial mortgage pricing. Lenders continue to be conservative but are active in today’s market. We are currently closing 5, 7, & 10-year fixed-rate loans with correspondent life insurance company lenders as well as other sources including Fannie Mae & Freddie Mac.

March 2009 Treasury Highlights:
• March 10 Year Treasury High: 3.02% on March 1st
• March 10 Year Treasury Low: 2.54% on March 18th
• March 10 Year Treasury Month-End: 2.66%

Issues Affecting Commercial Mortgage Rates:
• Steep declines in US Treasury Rates even as Government increases supply
• Swap spreads holding steady after Treasury decline, keeping Interest Rates near all time lows
• Fannie Mae & Freddie Mac extremely competitive on Multi-Family financing with Rates for a 10 Year Fixed Rate Loan well under 6%
• Local banks feeling pressure as Fed’s issue "stress tests" on their real estate portfolios
• Stringent underwriting has Lenders trending rent and expense projections based on the economic outlook insuring against future portfolio defaults

NBS Releases First Quarter Reports for Portland Metropolitan Area

2009-04-06T15:59:00.000-07:00

NBS has released First Quarter 2009 market reports. These reports cover the office, industrial, retail and multifamily product types, as well as a general overview of the economy. They can be found on our Web site here.

NBS Financial Secures $3.7M for Edmonds Apartments

2009-03-04T11:08:00.000-08:00

Fairway Apartments - Edmonds, Washington

$3,700,000 loan
38-unit apartment community
Unique loan feature: No prepayment penalty
70% loan-to-value - 1.20 debt service coverage ratio
Financed by Erich Guenther of NBS Financial's Seattle office

February News Recap

2009-03-04T10:40:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

Economic News Recap:

After 3.6 million jobs lost since December 2007, Bloomberg reports that unemployment will likely increase to almost 8.5% in 2009, contracting to 7.9% in 2010 as the economy begins to rebound. Orders for durable goods also fell 5.2% in January as sales of new homes reached record lows. As the economic news is grim, there was an issuance of agency CMBS in the last few days of February. This issuance, one of few in recent months, signals government agencies trying to revive the CMBS market which could free up lending capacity for banks as unsold CMBS paper sits on their books. Although it’s only a start, the ability to sell CMBS paper will result in increased liquidity for lenders.

Obama Administration’s Budget Released:

The budget President Obama released in the last few days of February discusses details of the economic policy that is being proposed to congress. The budget outlines plans for $750 billion in additional aid for the financial industry and an overhaul of the health-care system, tax policy and defense spending. With a government spending increase of 32% compared to the 2008 budget, Obama says, “While we must add to our deficits in the short term to provide immediate relief to families and get our economy moving, it is only by restoring fiscal discipline over the long run that we can produce sustained growth and shared prosperity.”

Interest Rate Outlook:

Long term rates are steadily increasing as the volatility in the market continues. Ten year US Treasury rates are up almost 25 basis points in the past two weeks as the government has increased the supply of Treasuries to the market. As the Obama administration releases its budget, a substantially expanding national deficit will inevitably raise long term interest rates. Now is the time to review financing options on your commercial real estate property to position it properly in this challenging economy.

February 2009 Treasury Highlights:
• February 10 Year Treasury High: 3.02% on 2-28-2009
• February 10 Year Treasury Low: 2.65% on 2-17-2009

Issues Affecting Commercial Mortgage Rates:
• 10-Year Treasury increase of 35 basis points in February 2009
• Market turmoil prolongs lender’s hesitation to lend on commercial real estate
• Amid a credit crunch and a slowing economy, interest rates remain at near historic lows
• Life Insurance lenders have money to lend and are active in the market

Rates Still Low and Seattle a Bright Spot for Commercial RE Lending

2009-02-06T13:38:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

The 10 Year US Treasury, a benchmark for commercial lending rates, is still at historically low rates even after a 50 basis point increase since late December. During a recent Federal Open Market Committee meeting, leaders voted to keep the federal funds target at "exceptionally low levels for some time," though many analysts fear inflationary pressure will result in long term rates trending up in 2009 and 2010. The expectation of an ever-expanding Treasury supply is also putting upward pressure on long term rates, despite the Fed’s best intentions. If you have a loan coming due in the next 18 months, it might be prudent to look at refinancing early.

According to a recent Marcus & Millichap report, Seattle is the #5 apartment investment market in the country. Despite the local housing market slowing and several major local companies announcing layoffs, the "Seattle apartment market will continue to attract investors." The report also predicted an "above-average rent growth forecast" of 2.7%. Renter demand is expected to increase due in part to multi-million square foot office leasing commitments in the Bellevue and South Lake Union submarkets from technology companies like Amazon and Microsoft.

Our Life Companies are actively quoting and closing commercial real estate loans in the Seattle area. Many of these lenders are focused on making loans in the first half of 2009 because of growing concern in the credit markets and the overall economy. At NBS Financial Services, we are continuing to close commercial real estate loans all over the greater Puget Sound area.

January 2009 Treasury Highlights:
• 10 Year Treasury 45 Day Low: 2.05% on 12-30-2008
• January 10 Year Treasury High: 2.85% on 1-31-2008
• January 10 Year Treasury Low: 2.20% on 1-14-2008

Issues Affecting Commercial Mortgage Rates:
• Life Companies have money and are active in the market
• Market flooded with US Treasuries causing benchmark rate to increase
• Cap Rates trending upward, in the Seattle area by 50 to 100 basis points
• Fannie Mae & Freddie Mac tightening underwriting criteria, raising rates on short term lending
• Future Treasury volatility predicted as we move through the financial crisis

Looking Ahead to 2009 . . .

2009-01-06T08:28:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

2008 was a challenging year for the commercial real estate market, but NBS Financial Services overcame market conditions to secure more than $300 million in commercial real estate loans. NBS originated 75% of its loans with life insurance companies, with the remaining 25% coming from other sources.

Life companies still have money to lend and will be the dominant lenders in 2009. Commercial real estate is a solid investment for these companies that need to match debt with insurance policies, and each year they have new allocations for CRE investments. After years of doing business and developing relationships with so many of these companies, NBS Financial has access to billions of dollars of capital in 2009.

Some economic factors bode well for commercial lending in 2009. Treasury rates, a benchmark for commercial real estate loan pricing, are at historic lows, making the first and second quarters of 2009 attractive for commercial real estate financing. For qualified properties, 10-year fixed rate loans are currently about 6.0%, the lowest these rates have been in years.

2008 Treasury Highlights:
• 10 Year Treasury High (year): 4.27% on 6.16.2008
• 10 Year Treasury Low (year): 2.06% on 12.30.2008

Issues Affecting Commercial Mortgage Rates:
• 10 Year Treasury at historic lows
• Life Companies still have money and are active in the market
• Lenders trending towards lower loan to value and higher debt service coverage ratios as they under-write more conseratively
• Cap Rates trending upward
• Life Companies will be the dominant lending source for commercial real estate in 2009

November News Recap

2008-12-01T10:55:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

Fed to Purchase Mortgages with $800 billion – The Federal Reserve Bank will purchase as much as $600 billion in Fannie Mae & Freddie Mac debt and will set up a program to lend $200 billion for consumer and small business loans. “This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.

AIG Re-Capitalization & Citigroup Rescue – The original $85 billion bailout plan for AIG has undergone a massive overhaul as the US government buys $40 billion in preferred AIG shares using TARP. The goal is to effectively cancel credit default swap agreements, secured by real estate assets, sold by AIG to thousands of banks and institutions, in an effort to stave off losses on the banks swap investments and mortgage backed securities. In a similar situation, Citigroup will receive $20 billion in fresh capital and a government guarantee for losses on about $300 billion in “toxic assets”.

November Rate Volatility – The volatility in the market impacted the benchmarks for commercial real estate lending severely in the month of November. The 10 year US Treasury dropped almost 100 basis points during the month, to the lowest level in recent decades. 30-day LIBOR continued its two month decline of over 300 basis points as regulators cut inter-bank lending rates worldwide. Overall the impact on “all in” commercial mortgage rates has been almost negligible. As these benchmark rates have dropped, many lenders have adjusted their spread, resulting in similar “all in” rates to past months.

Another Victim of Economic Dip: Commercial Real Estate Finance

2008-11-21T13:15:00.000-08:00

Ken Griggs - Associate Vice President, Portland

In recent months, the economy has been at the forefront of Americans’ minds. Stock market volatility, the residential sub-prime mortgage crisis, job losses, and lowered consumer spending have all received considerable attention.

Commercial real estate finance has also been seriously affected. Numbers are down and the nature of commercial lending has changed significantly, with stricter standards and stronger underwriting. Yet Portland remains one of the more stable markets.

This year, commercial real estate mortgage bankers that are doing well have seen production volume fall 30 percent; other brokerages that relied heavily on Wall Street conduit loans have seen even steeper declines. The industry is shrinking, and it will continue to do so for the next 12-18 months.

Less money is available for lending now than at any point in the past decade. Many lenders were crippled or wiped out by the meltdown on Wall Street, leaving fewer lenders in the market. The types of lenders have also changed, and today the most active lenders are life insurance companies and banks. Both of these sources are down too, though, and this trend is expected to continue well into 2009, if not 2010.

Life insurance companies are making fewer mortgage investments for a variety of reasons, including weaker product sales, better investment alternatives and general market uncertainty. When they can get a spread close to 500 basis points over a corresponding treasury, it doesn’t make a whole lot of sense to make a mortgage for less.

Banks are facing severe liquidity issues, and have drastically slowed their lending activity. Those with heavy exposure to sub-prime lending have been hit especially hard. They face higher reserve requirements and subsequently have less money to lend. Construction loans that have been routinely taken out on time are now having difficulty getting refinanced, further burdening banks’ liquidity and their ability to lend.

That’s not to say that lending has come to a standstill. Capital is still out there; it’s just harder to get and it looks different.

Lenders today are much more particular about who they lend to and how they structure the loan. Underwriting is more conservative and isn’t based on predictions of future performance. In the past it would not have been uncommon to see a loan with a 30-year amortization and periods of interest-only. Today it would be rare to find these values. Loan-to-value ratios have decreased from 80 percent to 65 percent as a norm, and debt service coverage is the key today.

Lenders are also bringing back recourse loans, which haven’t been common in the past decade and require borrowers to personally guarantee that they will pay back the loan. This can be a risky proposition, but some borrowers take this chance because they have confidence in the performance of their real estate or have few other alternatives.

Acquisition of commercial properties has slowed significantly, but investment is still occurring in all property types. Multifamily remains a preferred property type for lenders. In the aftermath of the residential sub-prime mortgage crisis, many potential home buyers are renting rather than buying, so vacancy remains low and the multifamily market continues to be fairly stable. As a result of the economic climate, much of the borrowing activity today is in refinancing.

Structured financing, such as mezzanine and bridge loans, has also become more prevalent. For instance, an investor may be seeking a loan of $5 million for a project, but a bank may grant only $4 million. In the meantime, the investor can acquire a $1 million structured loan, typically called the mezzanine piece.

Unfortunately, 2009 looks to be a rough year. The Urban Land Institute’s recently released “Emerging Trends in Real Estate 2009” predicts that the market will bottom out in 2009, which is not good news for areas that have been suffering for quite some time. Since Portland is generally affected by national trends later, it’s hard to predict how the rest of the downturn will unfold. So all parties are cautious and taking their time in making major financial decisions.

But professionals in Portland and the Pacific Northwest are hopeful for the area’s prospects in coming months and years. Though Portland just missed the top 10 in the ULI’s ranking of investment markets in the United States, it scored fairly high. Seattle ranked No. 1.

Portland’s fundamentals remain stronger than those in many cities. People are attracted to the area’s quality of life. Diversified employment and a growing green energy sector are providing new jobs and opportunities, and the area has not seen the vast foreclosures that have plagued other parts of the nation. These qualities make Portland attractive to lenders, so they’re investing in this community even in difficult times.

Coming months will likely bring additional challenges in commercial real estate financing, but lending is happening and the long-term outlook for the Portland market is good.

Seattle Market Overview

2008-11-11T11:20:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

As the commercial real estate financing market is constantly changing, it is important to follow market trends. Vacancy rates, lease rates, and space absorption are just a few factors that can affect the value of the commercial real estate asset. Please find a summary of the recent market trends for each property type below:

Office Market

Overall vacancy rate in Seattle rose 160 basis points to 10.0%
3^rd quarter had negative absorption of 365,006 square feet
Weighted average lease rates increased 3.3% to $38.50 psf
Concern over WaMu’s potential to increase vacancy in the CBD
2.5 million square feet of speculative office under construction

Industrial Market

Seattle area's vacancy rate decreased by 50 basis points to 4.1%
Aerospace manufacturing increased 4,470 jobs YTD 2008
645,000 square foot IKEA Distribution Facility completed in Puyallup
1.2 million square feet of industrial space currently under construction
Port activity down 10% in Seattle & 1.7% in Tacoma YTD 2008

Multifamily Market

Market vacancy moved up 70 basis points to 4.8%, excluding new construction
Average rent $966, representing an 8% compound annual increase
16% of properties offering rent concessions compared to 10% one year ago
2000 new units in 2008, with a projected 6,400 new units in 2009
Rents forecasted to climb 2.7% by next March

Retail Market

King County retail vacancy climbed 50 basis points to 4.4%
Net absorption of 929,154 square feet in the 3^rd quarter
Average rental rates decrease marginally to $22.63 psf
3.7 million square feet of retail space currently under construction
Taxable retail sales up over 3% in Seattle

*All market information taken from local market reports by CoStar, GVA, and C&W

Apartment Rental Rate Hikes Expected in 2009

2008-11-07T10:34:00.000-08:00

Andrew Patterson - Associate Finance Officer, Seattle

A recent article in the Puget Sound Business Journal highlights a third quarter apartment market report from Marcus & Millichap with predictions of Seattle area apartment rents rising among the highest in the nation in 2009, by almost 6%. The article notes the Puget Sound area’s solid real estate fundamentals coupled with a long-term population growth outlook as key drivers to the region’s booming apartment market. The report projects that the area will add about 3,500 new units in 2009, representing a 66% increase over the previous 5-year average. As the median home price in King County softened to $392,000 in October, the average family income is still short of what is needed to afford a monthly mortgage payment, making apartment rental a viable option.

Although apartment sales have slowed by almost 30% in 2008, financing is still available at attractive rates and loan proceeds. Apartments continue to be the "property of choice" for the active lenders.

Seattle Commercial Real Estate Market Ranks No. 1

2008-11-05T15:39:00.001-08:00

Andrew Patterson - Associate Finance Officer, Seattle

The Commercial Real Estate market in Seattle was ranked the #1 investment market in the US by the ULI and PWC in their “Emerging Trends in Real Estate 2009”. The report is an assessment of commercial real estate assets in individual markets based on the views of more than 700 real estate experts, including developers, lenders, brokers, and consultants.

The report highlights strengths in “global pathway cities” such as Seattle, San Francisco, Washington D.C, New York, and Los Angeles. These cities all ranked in the top 5 for the 2009 investment outlook. Seattle benefits as a home to “brainpower industries” such as Microsoft, Amazon, Boeing, and Starbucks. Although, “sub-10 percent downtown office vacancies will rise”, the apartment market is strong throughout the region with low vacancy rates and solid rent growth forecasted for 2009. Low vacancy rates in the region’s retail markets protect against consumer slowdown, and the survey ranks Seattle among the strongest buys for industrial investment property

Quote from our President, J. Clayton Hering: “With an experienced mortgage banking team, a stable of quality and active lender relationships, and strong real estate fundamentals in all product types, we view the Puget Sound market as a growth market for mortgage financing in 2009 in spite of the constricted supply of capital."

Pacific Northwest: Bright Spot in Current Lending Landscape

2008-10-03T10:14:00.000-07:00

The often-rainy Pacific Northwest turns out to be a bright spot in the current national economy. With the “best bones” of anywhere in the US, Portland and Seattle were two of only three metro areas nationally to show year-over-year home price appreciation in the latest data from Standard & Poor’s/Case-Shiller home price index. The Northwest is well above the national average in home price appreciation, has a low unsold inventory of homes, and stands at roughly half the national average for rates of foreclosure. In-migration continues to support housing demand, population is up, quality of life is unmatched, and the growth boundaries make metro areas positive pressure cookers. The Northwest’s historically weak spot, employment, is holding. Even smaller markets such as Boise and Spokane have good job growth and limited overbuilding. While the bad paper works its way through and Wall Street stabilizes, in the PNW cash is king and cranes are in the air.

Boomtown to the North
In Seattle, a booming local economy has attracted more and more branch offices of national corporations – more than supply can support. New construction won’t be available for occupancy until 2009 and until then, lease rates will climb. Current $50/sf rates may reach $65 by late 2008 – close to double year-ago rates. Local experts are calling 2008 “The Year of the Landlord.” Loan-to-value ratios will no doubt come down, but capital is still available for both stabilized and value-add deals.

Multifamily Hotter than Ever
Perception of a slowing condo market is a reality, and attention has shifted to multifamily development where favorable lending conditions and competitive underwriting make it the king of commercial product types for the moment. Though multifamily product as a whole still sees a net loss to condo conversions in the entire region over the past five years, the lagging pace of new construction helps to keep vacancy low and rents strong.

In Portland, skyrocketing rent growth over the past 10 months has not yet hit a ceiling. Seattle apartment vacancies are at their lowest level since 2000, and Portland’s were 3.3% in Fourth Quarter 2007. The tightening of finance availability for single family homes puts a whole new subset of individuals and families in search of an apartment.

Hot topics for 2008 are mixed-use urban villages on one-time industrial sites, urban infill projects and live-work developments such as Milepost 5 in Portland and others like it in Seattle, Spokane and Boise.

Flight to Quality Borrowers
Without question, 2008 will see a tightening of underwriting standards for commercial real estate. Cap rates may edge up late in the year but for now, will stay in a compressed state. A best guess is that the conduit lenders will be hard to find during the first half of the year. As “on book” portfolios begin to find favor, they will reappear. Until then, lending opportunities will be dominated by life insurance companies, who will pick and choose valued offerings. Good projects with quality borrowers will find dollars to meet their financing needs.