John B. Levy & Co. Weblog

The 2010 Market Outlook from John B. Levy & Company Explains How Commercial Real Estate Investors Can Get Their Share of Stimulus Pie

(Richmond, VA – January 18, 2010) – Following a year that saw the near meltdown of the banking system and the sweeping impact of a global recession, 2010 could shape up to be a better year for investors, though perhaps not as robust as some would wish. According to “Ordering Your Slice of the Stimulus Pie,” the latest podcast produced by John B. Levy & Company (available online at www.jblevyco.com), the new year has ushered in an uptick in market activity for commercial real estate investors, putting some in a position to secure stimulus bailout dollars.

 

“2009 started out with what I’d call the Armageddon trade,” says John Levy, founder of John B. Levy & Company, “with people predicting the collapse of not just individual banks, but the entire banking system. That mood has changed, and 2010 feels a lot better. The second half of the year promises to be better than the first. However, that doesn’t mean we’re through with the bank failure business,” Levy adds. “I see problems in areas from Arizona to Florida and California to Michigan, and the reasons can vary from cars to condos.”

 

Undergirding Levy’s muted optimism is what he sees as the rebirth of the market for commercial mortgage-backed securities (CMBS). While Levy believes the government definitely needed to step in last year with its TALF program, he predicts that improvements in the CMBS market will occur because of activity in third-party and public markets, not because of assistance from the government.

 

“The rebirth of the CMBS market is absolutely going to happen this year,” Levy says. “Last year, we had three CMBS deals, and that was three more than anyone predicted. The CMBS market in 2010 won’t resemble the one we knew and loved in 2007, but we will see a rebirth with reasonable and rational underwriting. I even think we’ll see the first multi-borrower CMBS deal this year.”

 

Levy is decidedly guarded about whether commercial real estate values will rebound in 2010. While some investors are optimistic about a resurgence in property values in 2010, Levy doesn’t share their sentiment. Rather, he believes the road to recovery for commercial real estate values will be protracted.  

 

“Consider commercial real estate from the perspective of NASDAQ,” Levy explains. “As you recall, that index hit 5,000 in 2000. Here we are ten years later, and NASDAQ is still under 3,000. So will there be a resurgence in commercial real estate values? Yes, most likely in 2011. But returning to the levels we saw in 2007 will take time.”

 

In light of the huge bank bailouts we saw in 2009, there is one question on the minds of real estate developers and investors: “How can I get a piece of the stimulus pie?”

 

“When it comes to getting a slice of stimulus pie, some developers and investors have a place at the table,” Levy says.  “Some don’t. If you own or invest in apartments, you’re in luck. When you get a real estate loan on your multifamily apartment from Freddie Mac or Fannie Mae, rates are one-half to one percent less than if you borrow from an insurance company. So if you happen to invest in multifamily housing, you get a direct bailout. That’s enough to make anyone’s 2010 look promising.”

 

 

Firm Background

John B. Levy & Company, Inc. is a real estate investment-banking firm headquartered in Richmond, Virginia.  Since John Levy founded the company in 1995, the firm has structured over $3.5 billion in financing for developers and owners of commercial and multi-family projects nationwide, often investing its own proprietary funds into transactions with its clients. 

 

Mr. Levy is an expert on commercial real estate financing and the effects of interest rates on commercial real estate markets.  He is the originator and author of the Barron’s/John B. Levy & Company National Mortgage Survey, which Barron’s published for 23 years, and co-creator of The Giliberto-Levy Commercial Mortgage Performance Index (sm), the first and pre-eminent index to measure and analyze the performance of investments in the commercial mortgage industry.  Additionally, he is a member of the Board of Directors of Anthracite Capital Inc. (NYSE: AHR), a New York Stock Exchange REIT managed by BlackRock, Inc. and a former director of Value Property Trust. 

 

A seasoned speaker, Mr. Levy has presented nationwide to major real estate associations and key industry groups, including the Mortgage Bankers Association and the Urban Land Institute.  He has also appeared on Bloomberg and CNBC.  Most recently, Mr. Levy appeared as a guest commentator on FoxBusiness.com and FoxNews.com.

 

For more information about John B. Levy & Company, please visit the firm’s website at www.jblevyco.com or call Andrew Little at 804-644-2000, extension 260.  You can also follow us on Twitter at www.twitter.com/jblevyco and become a fan on Facebook.

This entry was posted on Wednesday, January 27th, 2010 at 5:31 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.