Hotel Ownership More Often Going to Mezz Lenders
ATLANTA—A lot of lenders today are becoming, sometimes reluctantly, owners of troubled commercial real estate assets. And
this trend is not limited to lenders on the
first mortgage; mezzanine lenders today
are also taking control of loan collateral
with more frequency than in the past as
they try to salvage their investments.
While this is happening in all sectors
of commercial real estate, it is a more
frequent occurrence in the hotel sector
than perhaps any other, says Michael
Seton, a New York City-based executive
vice president at Carter, based here. As
an asset class, hotels have seen values fall
more than 50%, on average, from the
height of the boom, whereas office properties have fallen about 25% during this
cycle, he says.
“A hotel is an operating building, so it is
capital intensive,” says Seton. The leases
are overnight, he adds, so the hotel sector
is adjusting much sooner in the cycle than
other kinds of properties.
“With hotels not performing as
expected when they were approved for
financing, a lender has a choice to either
let the property go into foreclosure or
auction it off for pennies on the dollar,”
says David Schwartz, managing principal
of the Management Consortium in
JACKSON, MS—Parkway Properties Inc. had
a few changes to its executive roster this
month. Former SVP, senior asset manager and fund manager Richard G.
Hickson now serves as EVP and chief
financial officer, operating out of the
firm’s Atlanta office. Mandy M. Pope,
who’s been Parkway’s EVP, interim CFO
and chief accounting officer since
February, will continue in the latter two
roles while taking on additional responsibilities with investor relations and corporate governance.
For more executive moves, please visit
Downtown Miami Market Defies Conventional Wisdom
Conventional wisdom has held that the condo supply produced
in Miami’s Downtown/Brickell area during the recent building
boom would take years—perhaps more than a decade—to be
absorbed. For many, the idea that the 23,000 condos built between
2003 and 2008 would ever be filled in a city that lacked a vibrant
urban core was outlandish.
But analysts failed to predict that affordable condominiums, the result of oversupply, coupled with the convenience of residing in Florida’s largest
would result in new
demand for downtown living in Miami.
Today, nearly 75% of the residences built
during the boom are occupied by full-time
residents and condo inventory is diminish-
ing at a rate of more than 350 closings per month, according to a
recent study by the Miami Downtown Development Authority.
Population growth is impacting the commercial real estate
market in Miami’s Downtown/Brickell corridor: the area’s retail
vacancy rate of 5% is among the nation’s lowest, thanks primarily
to business owners flooding the area to serve new residents.
The visionaries who set out to bring a newfound sense of community to urban Miami through public and private investment
are now seeing their vision materialize. The larger question facing
By Tere Blanca
Miami’s Downtown/Brickell real estate economy is what impact
residential occupancy will have on its office market, where nearly
two million square feet of new class A space is projected to come
on line over the next two years, beginning with 1450 Brickell, a
582,817-square-foot tower that was delivered in February 2010.
Just as skeptics doubted the residential market’s ability to absorb
oversupply, there is reason to believe that Miami’s office market
will beat forecasts as well. For years, South Florida has been viewed
as a strategic locale for corporations’ regional or Latin American
headquarters. Going forward, factors including the vibrancy of
Miami’s urban core, the absence of state income tax, multicultural
diversity and a strong transportation infrastructure that includes
Miami International Airport and the Port of Miami will help
ensure the region is part of the conversation when US and multinational companies consider relocating their offices.
With more residential units filling up each day and 800,000
square feet of office leasing activity underway in Miami’s Central
Business and Brickell Financial Districts, there is reason to be optimistic about the city.
The views expressed in this column are those of the author and not
necessarily REAL ESTATE FORUM.
Tere Blanca is president and CEO of Blanca Commercial Real Estate in
Miami. She may be contacted at firstname.lastname@example.org.