CB Richard Ellis | Page 1 2010 Real Estate Forecast - Capitalization Rate Trends Michael J. Moynagh, MAI, Managing Director CBRE Valuation and Advisory Services CFA Society of Minnesota American Society of Appraisers - Twin Cities Chapter July 22, 2010
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2010 Real Estate Forecast - Capitalization Rate Trends
2010 Real Estate Forecast - Capitalization Rate Trends. Michael J. Moynagh, MAI, Managing Director CBRE Valuation and Advisory Services CFA Society of Minnesota American Society of Appraisers - Twin Cities Chapter July 22, 2010. Outline. 2010 Real Estate Forecast Minneapolis Office - PowerPoint PPT Presentation
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CB Richard Ellis | Page 1
2010 Real Estate Forecast - Capitalization Rate Trends
Michael J. Moynagh, MAI, Managing Director
CBRE Valuation and Advisory Services
CFA Society of Minnesota
American Society of Appraisers - Twin Cities Chapter
July 22, 2010
CB Richard Ellis | Page 2
Outline
2010 Real Estate Forecast Minneapolis Office St. Paul Office Suburban Office Industrial Retail Land Hospitality National Capitalization Rate Trends
Twin Cities - ADR Percent Change Year End % Changes Source: STR Report-Twin Cities Market
2009 Forecast % Change Source: CBRE/Torto Wheaton Research
CB Richard Ellis | Page 30
2002
2003
2004
2005
2006
2007
2008
2009
2010
P-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
-2.7
0.4
7.8 8.4 8.05.6
-1.9
-19.0
1.0
Twin Cities - RevPAR Percent Change Year End % Changes Source: STR Report-Twin Cities Market
2009 Forecast % Change Source: CBRE/Torto Wheaton Research
CB Richard Ellis | Page 31
Twin Cities - Lodging Forecast
New supply (hotels u/c) diminishing. Questionable when/if planned supply will come to
fruition. Indicators appear to be signaling a turn around in the
hotel market. Expected continued improvements in 2010 and 2011.
CB Richard Ellis | Page 32
Who’s Selling?
40% Life/Pension, increase from previous year 25% equity/opportunity funds, increase from
previous year 25% Individuals, same level as previous year Life/Pension selling Office REIT selling Multi-Housing Individuals selling Retail Life/Pension & Individuals selling Industrial
CB Richard Ellis | Page 33
Who’s Bidding? All buyer types similar to last year Equity/Opportunity Funds buying Office Individuals buying Multi-Housing Individuals buying Retail Equity/Opportunity Funds buying Investment
War StoriesLand Subdivisions-Out state MN52 subdivisions, small communities, no appraisals, loans based on napkin valuation by lender, 300 lot development in community of 250 people?Large Retail CenterSold for $100M in 06, will close next week at $35M with original developer buying, Anchor Co-tenancy, % Co-tenancy, Sales kick out clause (reduce rent or leave)
CB Richard Ellis | Page 37
War Stories Suburban Office Bldg, sold in 2006 for $25M, now at $15M, 40% loss! Suburban new construction condos completed 18 months ago, not one condo sold! Twin Cities redevelopment hotel, projected $189 ADR and 70% occupancy, actual ADR of $120 and 50% occupancy! Suburban office complex with $18.5M mortgage from 2006 is currently at a value of $9-$10M! Borrower is attempting to rework loan! Good luck!