Just Listed brings you the latest news and information from the Twin Cities-area commercial and residential real estate market and beyond from veteran reporters Jim Buchta and Kristen Leigh Painter.

Case-Shiller: Home price gains in the Twin Cities slowing

Posted by: Jim Buchta under Buying Updated: November 25, 2014 - 10:29 AM

House prices in the Twin Cities and beyond are rising, but not as quickly as they did  earlier in the recovery. That's according to the September S&P/Case-Shiller U.S. National Home Price Index, which shows that a 10-city composite gained 4.8 percent year-over-year, down from 5.5 percent in August. The 20-city composite gained 4.9 percent year-over-year, compared to 5.6% in August.

In the Twin Cities metro, prices during September increased 0.1 percent from the previous month and 3.1 percent from last year. That's slightly behind a the 4.8 percent annual gain for the National Home Price Index, which covers all nine U.S. census divisions. 

Though price gains are moderating, the report noted several statistics that bode well for a continued recovery. Housing starts held above one million at annual rates because of gains in single-family homes, sales of existing house are rising, builders’ sentiment has improved and mortgage default rates are at pre-crisis levels. This following chart shows house prices in the Twin Cities house prices through September.

Report: commercial real estate moved from hot to "on fire" in third quarter

Posted by: Kristen Leigh Painter under Debt, Buying Updated: November 25, 2014 - 9:58 AM

The U.S. commercial real estate market moved from hot to “on fire” in the third quarter this year, according to a new Real Estate Research Corp. report that draws several parallels between current market trends and those of pre-recession 2007.

An increase in “undisciplined off-shore” capital is pressuring the commercial real estate prices in the United States to escalate, particularly in secondary and tertiary cities. Additionally, the RERC report – titled “Prices Pressure Values” – juxtaposes the increase in available capital with the loosening of underwriting standards, i.e. a commercial bank’s own rules governing debt and lending.  

While the report’s authors offer up cautionary data, they also soften the information by pointing out several regulatory standards and market conditions that are in sharp contrast to those of 2007.

“As the commercial real estate market shifts from being hot to being on fire, there is increasing concern over the prices investors are pay­ing, as well as the risks that lenders are taking on,” wrote Constantine Korologos, managing director of Situs, the parent company to RERC. “It is normal to be apprehensive, but investors should be careful not to confuse where we were seven years ago with where we are today.”

Korologos appears to be spurring his readers toward continued investment by outlining the differences between the present environment and the mistakes of our recent past that led to the meltdown:

  • “At the beginning of November 2014, commercial mortgage-backed securities (CMBS) issuance year-to-date was approximately $79 bil­lion. That is an increase of 10.6 percent, or $7.6 billion, compared to the same period last year. With nearly 2 months to go yet before the end of the year, the com­bination of deals priced and still in the pipeline makes it increasingly likely that CMBS issuance will reach close to $100 billion in 2014. And while reaching that would be a substantial increase in issuance over 2013, it pales in comparison to the peak of over $230 billion of CMBS issued in 2007.
  • There is an absence of an aggressive mar­ket for collateralized debt obligations (CDOs). The CDO market was a multi-billion dollar market, and for a few years prior to the Great Reces­sion, it was a financing mechanism for the most junior CMBS bonds. Extremely complex CDO structures were created... Real estate CDO issuance peaked in 2006 at $40 billion; it was $3.4 billion in 2013. Sec­ondly, the subprime residential market, which exacerbated the crisis in 2007, is currently very minimal and should have little effect in today’s environment.
  • The financial market has also been systemically altered through the Dodd Frank Act as well as Basel III. These laws increased the mini­mum capital requirements as measured by common equity, which also must take into account risk-weighted assets for large bank hold­ing companies. The bank holding companies must also have capital conservation and counter-cyclical buffers, and requirements have been set up to mitigate risks via minimum liquidity ratios and lever­age ratios.”

In the end, Korologos says rising liquidity and competition are positive signs, but reminds investors to keep their eyes open and remember market basics: supply and demand, and vacancy, rental, yield, interest and cap rates

Redecorate without leaving your computer

Posted by: Jim Buchta under Architecture Updated: November 24, 2014 - 12:08 PM

If you read my story in the Sunday paper about Justin Spoelstra and the software application he developed that enables home builders and their customers to try out more than 30,000 custom paint colors, flooring choices and other decorating options, here's a look at how that software was used to offer a customer four variations on a model home built by Creek Hill Custom Homes. The company, by the way, is called Preferred Interactive.

Trio of suburban apartment buildings fetch $78 million

Posted by: Jim Buchta under Buying Updated: November 21, 2014 - 2:58 PM

Plymouth Square at 37th

A Kirkland, Washington investor has doubled its holdings in the Twin Cities metro. Weidner Investment Services paid a Chicago, IL based real estate venture more than $78 million for three suburban Twin Cities apartment properties with a total of 606 units. Abe Appert, Keith Collins and Laura Hanneman of CBRE’s Multifamily Group Minneapolis office represented the seller.

Weidner has acquired six apartment complexes in the Twin Cities metro during the last 13 months, bringing its total holdings to 1,236 units, with an additional 138 unit project currently under construction. The company already owns more 40,000 apartments in the US and Canada.

The most recent deal includes Greens at Edinburgh in Brooklyn Park, Plymouth Square at 37th in Plymouth, and Town Centre at Lexington in Eagan. Those buildings have packed with amenites, including underground heated parking, swimming pool(s), community rooms and fitness centers.  The deal follows the sale of several just completed apartment buildings in downtown Minneapolis, including the Nic on Fifth and Velo.Town Centre at Lexington in Eagan

New housing for Old Home building in St. Paul

Posted by: Jim Buchta under Architecture Updated: November 21, 2014 - 2:10 PM

An Art Deco building with a stone carving of a young girl and boy—Mistress Polly Plump and Master Henry Husky - that once housed the Minnesota Milk Co. and Old Home Foods is being converted into 60 income-restricted apartments that will be known as Western U Plaza. 

The $16.9 million project is being co-developed by Sand Companies and the Aurora St. Anthony Neighborhood Development Corporation (ASANDC) with help from the U.S. Bancorp Community Development Corporation (USBCDC), the community development subsidiary of U.S. Bank, which invested equity raised from federal historic and low-income housing tax credits. The deal includes $10.5 million in tax credit financing.

The 101-year-old building, which is at 370 W. University Ave. next to the Western Avenue Light Rail Station is in the Summit University neighborhood, will become 18 apartments. A new three-story building next door will have 42 units, including studio, 1-, 2- and 3-bedroom apartments. Seven of the apartments will be rented to formerly homeless individuals, who will receive support services such as employment assistance and health care, and the rest will be leased to people who earn less than 60 percent of the area median income. Monthly rents will range from $619 to $1,018.

“Western U Plaza will help fill a need for high-quality, affordable housing that also gives residents easy access to the new Western Avenue Station to reach jobs and services by light rail,” Vihar Sheth, senior vice president of USBCDC, said in a statement. “We hope Western U Plaza will give a little additional push to the redevelopment that is already underway in the Summit University neighborhood.”

Construction will be complete in September 2015. The building is listed on the National Register of Historic Places, was built in 1903 and updated in 1932.

Rochester to seek construction firm for Mayo Civic Center Expansion

Posted by: Kristen Leigh Painter under Architecture Updated: November 20, 2014 - 5:24 PM

Mayo Civic Center Expansion Rendering

The City of Rochester is seeking a construction firm to build its $79-million Mayo Civic Center expansion.

This is just latest development in a recent flurry of infrastructure investment to the city's downtown area. Rochester plans to issue a request for proposals Friday, with hopes of beginning construction during the first quarter next year. 

The civic center will comprise more than 200,000-square-feet of event space, nearly doubling the size, once the planned expansion is complete.

A Grand Ballroom, 14 breakout rooms, renovation to the existing Presentation Hall and a widening of the Rochester Civic Theater are some of the additions. 

“The new space is specifically designed to meet the needs of today’s meetings and conventions, and to bring larger events to Rochester,” said Brad Jones, director of the Rochester Convention & Visitors Bureau, in a news release. 

Meanwhile, 85 miles west, Mankato Civic Center is also undergoing a $30-million expansion.


 

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