Pappas Realty Co... "Commercial Real Estate...Exclusively" in Northeast Ohio since 1957

Friday, March 30, 2007

Regional action plan unveiled ~ Story by Jay Miller

The long-awaited economic development agenda for the region was rolled out this morning for more than 200 of the region’s civic leaders, including Lt. Gov. Lee Fisher, Akron Mayor Don Plusquellic and Cleveland Mayor Frank Jackson. The action plan, called “Advance Northeast Ohio,” has been nearly two years in the making.

It embraces a number of efforts already under way and calls for a series of regionwide actions to improve the economy of Northeast Ohio. Goals include greater cooperation among regional governments and improved programs to train the work force of the future.Rob Briggs, chairman of the Fund for Our Economic Future, the coalition of philanthropic organizations behind the action plan, said he hoped the plan would turn the “quiet crisis” of the regional economy into a “noisy renaissance.”The action plan is the end product of 18 months of community dialogue through the $3 million Voices & Choices program that the fund mounted and financed.

It includes more than 30 separate programs — some already under way — that are designed to bolster different aspects of the region’s economy by improving the way government operates, the way students and adults are prepared for the work force and by reaching out to better grow and attract new businesses.Mr. Fisher lauded the program in a news conference after the morning program. He said the Strickland administration intends to carry this action plan model to other regions of the state and to work to get the state’s regions to work better together.

Is The Media Too Invested in Real Estate To Be Unbiased?

Article from "The Real Estate Bloggers" ~

March 29th, 2007 · 1 Comment

Scanning the internet this morning after being awoken (way too early, I may add) by my soon to be 7 year old with a stomach ache, I ran across this article on how to deal with a real estate slump. Besides the gloom and doom that articles of this sort trumpet, there was an interesting point that the wirter made.

The feel that the media is so invested in the real estate market from so many angles that they are unable to report the bad news on real estate and trumpet the positives whenever they appear. While I have never been one to defend the media, in other publications I write for I tend to rip them severely on the bias they carry in politics, I wonder if there is any truth to this.
Is the media so invested in real estate that they will gloss over bad news and hype good news? Is there a bias that can needs a filter when reading business stories.

In the blogosphere there are definately 2 camps, the bubble bloggers and the real estate business bloggers. I try to straddle both sides of the arguments with some success. I see there are weaknesses in the marketplace but I do not feel that they will drive the economy or housing prices off the cliff. At the same time, I do treat the professional journalists with some deference that they are unbiased in most of their reporting on the real estate markets.
Am I wrong to do so?

There’s no question that commercial and residential real estate makes up a huge part of the U.S. economy. But because so many people are now feeding at the real estate trough, it’s tough to find unbiased comments about the market - especially when almost everyone has a vested interest in a continually rising real estate market.Just about every word on the housing market that is printed or spoken in the media is put through that biased filter. That means even the smallest victory is celebrated when it may not actually be good news for the real estate market.

There are some new wrinkles in the real estate market that make the housing bubble “different this time.” While we (and other countries) have witnessed normal housing boom and bust cycles over the years, there are two huge mitigating factors that accompany this one:
1. Not Learning From 1929: Failing to take a lesson from the 1929 stock market crash, regulators have allowed lenders to extend unprecedented leverage to real estate buyers. We have seen what may be only the tip of the iceberg with the problems in the sub-prime lending market.
2. Public Company Pressure: Because there are a large number of homebuilders listed on the stock market, these companies have keep chalking up consistently good results - both for the good of the market, as well as their shareholders. And when they can’t (like now), their shares get crushed.
In the past two weeks alone, Lennar was the second company to put up earnings that were way down - some 70-80%, and to cap it off, then guide lower for the rest of the year. Result? Lennar dropped from a close of $45.58 last Friday to an intraday low of $42.64 today, before closing at $44.50. via Money Week

Thursday, March 29, 2007

King "Lebron" James New Castle in Akron

The King's castle: theater, bowling alley, casino

March 27, 2007

AKRON, Ohio -- LeBron James' 35,440-square-foot house under construction in nearby Bath Township is shaping up as a castle fit for a king -- with a theater, bowling alley, casino and barber shop.

The house in a suburban location 20 miles south of Cleveland is due to be finished next year. It is being built on 5.6 acres of land purchased, along with an 11-bedroom house, in 2003 for $2.1 million.

The Cleveland Cavaliers All-Star and Akron native, whose stated goal is to be the world's first billionaire athlete, razed the house to clear the way for the new one.
A first-floor master suite, which includes a two-story walk-in closet, will be about 40 feet wide and 56 feet long -- bigger than half the houses in Bath Township.

The house has a dining hall, roughly 27 feet by 27 feet, a "great room" at 34 feet by 37 feet and a bigger, two-story "grand room," according to the Akron Beacon Journal, which reported on the blueprints.

The "family foyer" off the six-car garage near the elevator will be dwarfed by a "grand foyer" inside the front entrance with a sweeping, divided staircase leading to four second-story bedrooms. An outer wall will feature a limestone sculpture -- a bas-relief of LeBron's head, wearing his trademark headband.

The property is an oddly shaped tract wedged among lots that average 2.3 acres and houses that average 3,209 square feet. His property is 300 feet wide at the street and 677 feet deep.
The house already has begun to draw the curious.

"People who come to photograph it are disrespectful," said Tom Bader, one of nine immediate next-door neighbors. "They park their car in the middle of the street -- with their doors open! And you're sitting behind them! All I wanna do is go home after a hard day's work."
Sometimes Bader must wait to turn into his driveway because gawkers have driven up, hoping for a better view of James' place.

"As far as LeBron the man goes, I think he's an outstanding individual," said Bader, a graduate of James' alma mater, St. Vincent-St. Mary High School in Akron.

"He's great for Cleveland. I'm proud to have him. I have no issues with LeBron James at all. The problem is the baggage that he unintentionally carries with him."

Bader has discouraged his children's dream that James might have them over to shoot hoops.
"I said, `Honey, I don't think that's going to happen. Besides that, don't ever, ever invite LeBron over to our house to play ball because he's going to twist his ankle and I will have my house eternally egged.'"

While waiting for the home to be finished, James splits his time between a huge apartment in downtown Cleveland and a relatively modest four-bedroom house in Medina County west of Akron. He paid $580,000 for the house in 2005.
On the Net:

Friday, March 23, 2007

Foreclosuretown ~ Article found in Crain's

Blog entry: March 23, 2007, 11:25 am Author: SCOTT SUTTELL

Cleveland has become the go-to city for national media outlets providing detailed coverage of the spreading economic fallout of mortgage foreclosures.
The Chicago Tribune took its crack at the subject with a long feature on Tuesday.
Today it’s The New York Times’ turn.

The nation’s paper of record visits town and notes that Shaker Heights and several other Cleveland suburbs “are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.”

In Shaker Heights, “officials are installing alarms, fixing broken windows and mowing lawns at the vacant houses in hopes of preventing a snowball effect, in which surrounding property values suffer and worried neighbors move away,” according to The Times. “The officials are also working with financially troubled homeowners to renegotiate debts or, when eviction is unavoidable, to find apartments.”“It’s a tragedy and it’s just beginning,” Mayor Judith H. Rawson of Shaker Heights, a mostly affluent suburb, said of the evictions and vacancies, a problem fueled by a rapid increase in high-interest, subprime loans.

“All those shaky loans are out there, and the foreclosures are coming,” Ms. Rawson said. “Managing the damage to our communities will take years.” Euclid Mayor Bill Cervenik tells The Times that the city has installed alarm systems in some vacant houses to keep out thieves, drug users and squatters.“The city has hired three new building inspectors, bringing the total to nine, to deal with troubled properties and is getting a $1 million loan from the county to cover the costs of rehabilitation, demolition and lawn care at the foreclosed houses,” the paper notes. (When the properties are sold, such direct maintenance costs will be recovered through tax assessments.)

In a report for Shaker Heights, Mark Duda and William C. Apgar of Harvard University “found that expensive refinancing deals had been aggressively ‘push-marketed’ in the city’s less affluent west and south sides, bordering Cleveland. They said that ‘the rising number of foreclosures threatens to undermine the stability’ of those areas,” according to The Times. “The moral outrage,” Ms. Rawson told the paper, “is that subprime lenders have targeted our seniors and African-Americans, people who saved all their lives to get a step up.”

Billionaire opens mansions to homeless

By AUDREY McAVOY, Associated Press Writer Fri Mar 23, 7:32 AM ET

HONOLULU - Dorie-Ann Kahale and her five daughters moved from a homeless shelter to a mansion Thursday, courtesy of a Japanese real estate mogul who is handing over eight of his multimillion-dollar homes to low-income Native Hawaiian families.

For Full Story - Click on link above....

Monday, March 19, 2007

Duke sells buildings in eastern suburbs

By STAN BULLARD6:00 am, March 19, 2007

A partnership formed by the King Group in Beachwood and an investor group in New York has acquired nine office buildings in the eastern suburbs from Duke Realty Corp. That’s the word from Jon Burger, a vice president in Duke’s Independence office, who declined to disclose the sale price. Indianapolis-based Duke sold the office buildings as part of its plan to exit Northeast Ohio and redeploy the proceeds to areas with more growth potential.

Pt 2 of article... Over the years we have read and respected many articles from Mr. Bullard, so here he is.

Meet Stan Bullard
Stan Bullard6:00 am, March 1, 2007

Few people know Northeast Ohio’s real estate industry like Stan Bullard.Mr. Bullard joined Crain’s reporting staff in 1986 and is the newspaper’s senior reporter. He reports on Northeast Ohio’s commercial and resident real estate, as well as architecture, construction and development trends. While at Crain’s, Mr. Bullard has won more than a dozen journalism awards. He also is a board member and past president of the Cleveland chapter of the Society of Professional Journalists.Mr. Bullard, a Cleveland native, is a Kent State University graduate. He now resides in Westlake.To send him a news tip or story idea, call him at (216) 771-5228 or send him an e-mail.

Friday, March 16, 2007

Gambling on Cleveland - by Stan Bullard

Making a daring redevelopment play in downtown Cleveland, Manhattan-based Sovereign Properties Ltd. led an investor group last November to buy the 1717 East Ninth Street office building and parking garage. Sovereign paid $12 million for the 320,000 sq. ft., 21-story building that enjoys a prime location in the Finance District. There was only one catch: The building stood 89% vacant.

The sale price of $37 per sq. ft. “is a very long dollar for an essentially empty building in this market. It raised eyebrows,” says Chris Smythe, president of Smythe Property Advisors, a Cleveland real estate consulting and investment group. The seller was a subsidiary of Regency Savings FSB of Chicago. The prior owner, Sterling EOB of Chicago, had given up on the city's office market and handed the keys back to the lender in 2004.

The fate of 1717 East Ninth reflects the fortunes of Cleveland on multiple levels. Sovereign is part of a wave of entrepreneurial and institutional investors drawn to the city and region by bargain-basement prices and modest improvement in vacancies and rents. Although 1717 East Ninth is a rare redevelopment in downtown Cleveland, the purchase by Sovereign shows how dramatic the turnaround has been. Five years ago Cleveland brokerage firms commonly said that the city had a black eye in the national investment market thanks to no population growth, weak job growth, little rent growth and scarce development opportunities.

Duke Realty Corp., the Indianapolis-based real estate investment trust, looks at the market differently. The REIT is voting with its feet and exiting the city's suburbs after 10 years in the market and has said it wants to redeploy its capital to areas with stronger development climates such as Savannah, Ga. and Phoenix, Ariz.

Meanwhile, other investors have decided to gamble on Cleveland. Besides Sovereign, several national players, many of institutional quality, have taken new positions in downtown Cleveland, where all three of the city's trophy skyscrapers changed hands over the last two years.
In November last year, Behringer Harvard Real Estate Investments of Dallas made the most recent purchase, paying $64 million for Fifth Third Center, a 500,000 sq. ft. office tower built in 1991.

The pinnacle of Cleveland commercial real estate is Key Center, which includes Key Tower, the tallest office building between New York and Chicago, and the attached Cleveland Marriott Downtown. With a tenant roster boasting the headquarters of KeyCorp and white-shoe law firm Squire Sanders & Dempsey, the 1992-vintage Key Tower drew Wells Real Estate Funds of Atlanta as a new 50% owner in 2005.

Joel Williamson, vice president and asset manager for Key Center at Wells, says his company bought into Key Tower because it is a high-quality asset that was available for less than replacement cost.


Duke sells nine office buildings

By STAN BULLARD1:16 pm, March 16, 2007

A partnership formed by the King Group in Beachwood and a New York City investor group named Gotham Partners this morning acquired nine office buildings in the eastern suburbs from Duke Realty Corp.

That’s the word from Jon Burger, a vice president in Duke’s Independence office, who declined to disclose the sale price on the transaction. Indianapolis-based Duke sold the office buildings as part of its plan to exit Northeast Ohio and redeploy the proceeds to areas with more real estate growth potential.

All told, the portfolio is nearly 900,000 square feet of rental office space in top-tier buildings in four eastern suburbs. Rumors in the real estate market previously put the sale price in the $140 million range.

Wednesday, March 14, 2007

New building planned for downtown Akron

By STAN BULLARD2:45 pm, March 14, 2007

A plan for a new downtown office building costing upwards of $10 million was announced today — in downtown Akron.Signet Enterprises, an Akron-based venture capital and real estate development company, and Akron Mayor Don Plusquellic announced this morning that they have reached a memorandum of understanding for Signet to build a 50,000- to 100,000-square-foot building atop a 1,000-car parking deck on South Main Street.

Under the agreement, the city would lease the site for the new building to the developer.The city has agreed to buy Signet’s Carnegie Building in downtown Akron if the developer doesn’t sell it by the time Signet moves its offices into the new building, the mayor’s office said in a news release.Several tenants have moved to the suburbs the past few years from the Carnegie Building, and the mayor said he’s “very pleased” Signet is staying downtown.

Anthony Manna, Signet chairman, said he appreciated the city’s efforts to retain his company. To be called “The Signet Building,” the three- to five-story structure is scheduled to be finished in fall 2008 if construction begins this fall.

Tuesday, March 13, 2007

Late mortgage payments reach high

By JEANNINE AVERSA, AP Economics Writer 42 minutes ago

WASHINGTON - Late mortgage payments shot up to a 3 1/2-year high in the final quarter of last year and new foreclosures surged to a record high as borrowers with tarnished credit histories had trouble keeping up with their monthly payments.

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported that the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.

That marked a sharp rise from the third-quarter's delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.
The association's survey covers 43.5 million loans.

The latest snapshot of the mortgage market comes amid mounting concern on Wall Street about troubles facing subprime lenders who make loans to people with poor credit.

The percentage of mortgages that started the foreclosure process in the final quarter of last year rose to 0.54 percent, a record high. The previous high, 0.50 percent, occurred in the second quarter of 2002 as the economy was recovering from the blows of the 2001 recession.
Delinquency and foreclosure rates were considerably higher for higher-risk "subprime" borrowers, especially those with adjustable-rate mortgages.

Lenders to subprime borrowers — people with blemished credit histories — have been battered. Rising interest rates and weak home prices have made it increasingly difficult for these borrowers — especially those with adjustable-rate mortgages — to keep up with their mortgage payments.

Delinquencies and foreclosures in the subprime mortgage market are spiking.
The late-payment rate for all subprime loans jumped to 13.33 percent in the fourth quarter, up from 12.56 percent in the prior period and the highest in four years. The delinquency rate for subprime borrowers with adjustable-rate mortgages was even higher — 14.44 percent, also the highest in four years.

The rate of all subprime loans starting the foreclosure process at the end of last year was 2 percent, the highest in three years. The percentage of subprime adjustable-rate mortgages entering foreclosure was 2.70 percent.

Doug Duncan, the mortgage association's chief economist, suggested that borrowers having difficulties making payments contact their lenders as soon as possible to work together on the problem. "It is in everyone's interest to keep the homeowner in their home paying their bills on time," he said.
Concerns about risky mortgages are making investors jittery. Those fears also contributed to a worldwide stock meltdown on Feb. 27, where the Dow Jones industrials suffered a 416-point plunge.
Worried about defaults on high-risk mortgages, federal bank regulators earlier this month called on lenders to use caution in making subprime loans and strictly evaluate borrowers' ability to repay them.

New Century Financial Corp., which was the nation's second-largest subprime mortgage maker, is scrambling to stay afloat after all its bank lenders cut off funding or informed the company of their intent to do so because of its failure to make payments. The Irvine, Calif.-based company already has stopped accepting all new loan applications.
On the Net:
Mortgage Bankers Association:

Monday, March 12, 2007

Stocks to watch bad home loans, CPI <---- Click Here for Link to Full Story

By Ellis Mnyandu Sun Mar 11, 12:46 PM ET

NEW YORK (Reuters) - Troubles in the subprime mortgage sector could put Wall Street on edge this week just as investors look for key economic data, including the
Consumer Price Index' to shore up the market's nascent recovery after its recent plunge.

Fanning concerns about the sector that lends to home buyers with poor credit is this last week's precipitous slide in the stock of New Century Financial Corp. amid fears that the lender could file for bankruptcy protection.

Thursday, March 08, 2007

Never a dull moment in N.Y.

Crain's editors Scott Suttell and Jeff Stacklin surf the web to find out what people are saying about Cleveland and its business community — and offer their read on the news.

Blog entry: March 08, 2007, 2:59 pm Author: JEFF STACKLIN

Looks like Forest City Ratner Cos., the Cleveland-based developer’s New York-based sister company, may have hit another snag in its plans for the Atlantic Yards project in Brooklyn: It’s doesn’t control all 22 acres the project is slated for.
According to this article posted today on The New York Times’ web site, “a judge in Brooklyn terminated Forest City Ratner’s long-term lease on two properties covering nearly an acre of land within the site, after finding that a tenant had sold the lease to Forest City without the owner’s permission.”
Ownership of the property has reverted back to its owner, Henry Weinstein, who, according to the article, is one of more than a dozen property owners challenging the state’s use of eminent domain to convey properties to the developer.The article continues that Mr. Weinstein said that Forest City must have known that it did not have the right to take over the leases without his blessing.

“If you’re buying a lease from somebody and you have thousand-dollar-an-hour, 800-pound gorilla lawyers retained to protect your interest,” he said, “I tend to think that they read the lease and realized that they knew that what they were doing was illegal.”

Forest City Ratner plans to build a new arena for the New Jersey Nets, as well as apartments, condos and offices in the mixed-use development. Everything is interesting in New York.

Friday, March 02, 2007

HUD rejects $1.3B NYC real estate deal

By DEVLIN BARRETT, Associated Press Writer Fri Mar 2, 11:52 AM ET

WASHINGTON - The federal government said Friday it had rejected a developer's $1.3 billion deal to buy the nation's largest federally subsidized rental housing complex, Brooklyn's Starrett City.

The real estate developer said it would try to find a new way to buy the property. In a letter sent to Clipper Equity LLC, Jackson said the prospective buyer had not provided sufficient information to demonstrate its financial and managerial capabilities for preserving Starrett City as affordable housing on a long-term basis.

Clipper Equity said in a statement prior to the announcement that it looked "forward to the opportunity of correcting certain underlying misinformation and to providing the secretary with the appropriate assurances he seeks."
The proposed sale of Starrett City would be one of the richest real estate deals in New York City history — and has been one of the most criticized.

The would-be deal came amid a historic residential real estate boom in New York City and follows last year's $5.4 billion sale of Stuyvesant Town and Peter Cooper Village in Manhattan. Some residents there now face rent increases of more than 30 percent.

With about 6,000 apartments, Starrett City has about half as many as Stuyvesant Town and Peter Cooper Village. The Brooklyn complex has its own shopping center, schools, churches, synagogues, power plant and armed security force. Some tenants pay as little as $200 a month in rent.

HUD lawyers met Thursday with deputies of New York Attorney General Andrew Cuomo to discuss government worries about the purchase of Starrett City.
HUD notified Clipper Equity on Thursday that the agency would not approve the sale because of a lack of certain information the agency believes is critical and because certain details of the transaction, such as the sale price, lead them to believe the complex may not remain affordable housing.

The notification from the U.S. government also indicated the sale could be approved if Clipper Equity can provide more information about its credit standing and answer some of the challenges posed by critics, according to the two people familiar with the notice.
New York Sen. Charles Schumer (news, bio, voting record), who had vowed to block the deal, said he was happy to hear of Jackson's decision.

"HUD is doing the right thing. Now we can get back to the drawing board to craft a deal that preserves middle-class housing and supports the tenants," Schumer, D-N.Y., said in a statement.
However, Cuomo said he did not believe there was any way Clipper Equity could revive its purchase.

"The information we gave HUD precludes this purchaser," said Cuomo, a former HUD secretary during the Clinton administration. He added that HUD's denial was "exactly the right decision."
The Starrett City sale has come under attack from many different levels of government in recent weeks.

Mayor Michael Bloomberg has called the sale problematic, members of Congress have demanded hearings and Jackson had already publicly threatened to block it.
Cuomo raised concerns about a partner in Clipper Equity, David Bistricer, who already owns 71 other buildings with 8,792 outstanding violations.
Since 1998, Bistricer has been under permanent injunction from offering or selling cooperative buildings and apartments — a statewide ban Cuomo said he intends to enforce.