Credit Crunch and Surplus is Affecting Ag Industry

iStock_000017068698Large.jpgIt seems that a crop surplus has led to a 14-year low in agricultural industry profits according to Bloomberg. The amount of debt that farms have taken on is said to be the highest in the last 30 years.

The banks don’t want to give out anymore loans unless they are secured by land. This has caused an influx of interest in the USDA program which was originally designed to be a last ditch effort, not a standard. Enter in the statistically consistent problem with any government programs. You said it. Yes. This one is almost broke as well. 

The lessors of land will find it to be a difficult year most likely. Will lease rates fall? Still remains to be seen. According to the USDA, the forecasts do not look good in the profit column for 2016. The National Farmers Union is petitioning Congress for a credit solution asap so that they can continue production.

Recently there has been a surprising increase in prices and it is the agricultural industries hope that the rally continues. 

(Data courtesy of Bloomberg, National Real Estate Investor 2016)

Advertisements

Granite Run Mall Plans a Facelift in the Near Future

granite run mallThe Delaware County 58 acre property known as the Granite Run Mall is experiencing some drastic changes as of late. The 39 year old JCPenney store announced its closing plans in January. This was one of 40 closings scheduled across the US. Under-performance is said to be the root cause of this array of retail cessations. This “old school” mall is not finished yet. BET Investments, the current owner based in Horsham, PA has big plans for a re-do. It is said that there is a heavily funded plan to convert the antiquated building into an opulent mixed-use town center. (This does seem to be trending, doesn’t it?) This lifestyle center concept is encountering extensive popularity. This adaptation by the retail development industry is a conspicuous sign that the way consumer mentality and preference is drastically changing. Formerly a convenience to be savored by mainly 55+ active adult communities, the mixed use lifestyle centers are drawing in the young professionals and families alike. Boutique-type shopping in lieu of the big box and mega-department stores, open courtyards rather that jam-packed push and shove hallways and let’s not forget open air walkability to give that Fit Bit a workout. This projects a new lifestyle that we American consumers have embraced, one that incorporates all the luxuries of residential living spaces with shopping, entertainment, outdoor activities, fitness and multiple dining options, all within a walking distance. Many of these lifestyle centers also solve a ever-present, pressing problem that many cities and urban areas experience. The parking issue is being resolved by parking garages strategically placed within the lifestyle centers, creating added value and convenience. The face of retail is ever-changing they say. However, the popularity of this particular development concept may provide sustainability for this new look of retail.

Through the Looking Glass (Part 3) – Commercial Real Estate in 2015

Possibilities Road Sign with blue sky and cloudAs we dove into 2015’s waters, investment capital stats were already at in influx. The US has traditionally been a favorite depository for said capital. With US Treasury Rates on a decline due to demand and  the US Stock Exchange experiencing new elevations, commercial real estate is an attractive invitation for both foreign and domestic investors. The evidence of this is the growth of overall commercial property transactions in the US by foreign investors has now arrived at a level that we haven’t seen since 2006/2007. Firms aim a close eye at interest rates and market stability as they compare these current statistics with historical data. The timing for interest increases is concerning for most, and whether long term and short term rates will increase in a united or disjointed manner. A majority of soothsayers, (correction: forecasters), hold the belief that the Federal Reserve will raise  rates Summer of 2015. Out of the estimated $5 trillion plus capital invested in the United States, over $3 trillion is debt-driven. Commercial real estate loans are steadily gaining as per the Feds, with private equities and REIT’s in the lead. There is speculation that we will see a “re-do” of 2006 where large sums will be reinvested into #cre in 2015 if all goes according to pattern. Is your brokerage positioned for these potential opportunities? Are you as an investor positioned to take advantage of this stimulative climate and seize the day?

Through the Looking Glass (Part 2) – Commercial Real Estate in 2015

Do you see what I see?

Gorilla_gorilla_gorilla_01There is a gargantuan player in this game of whom some of us may be unaware. Recall the “Defined Contribution Real Estate Council”?  It was originally created to assist sponsors/participants get better results via institutional quality properties. According to the Urban Land Institute, 2014 was monumental for US retirement assets achieving the 23 trillion mark. A good portion of those funds were in defined contribution or IRA funds.

As of first quarter 2014, it was reported that there were $6.6 trillion dollars in IRA funds and 6 trillion in defined contribution 401k’s. Our industry is being propositioned to produce improved selections for real estate investing. Institutional allocations can potentially mean billions of investment capital. Because liquidity is imperative to retirees, REIT’s may outshine direct investing options.

Resources:

Urban Land Institute & PWC, “Emerging Trends in Real Estate – US and Canada 2015″

Through the Looking Glass (Part 1) – Commercial Real Estate in 2015

MirrorMirrorWell it is that time again when the economists, financiers, commercial real estate execs and genies make their predictions for the New Year. As predicted by the Delloitte Center for Financial Services, rents and vacancies showed improvement, development pressed pause, REIT’s and foreign investment led the charge in activity, the standards for CRE lending were allayed and leasing was partially determined by tenant’s use of technology. The majority of sources remain positive regarding 2015’s outcome.

We have good news on the unemployment sector. The majority of the US saw a downturn in unemployment. That evidence includes those that vacated the workforce. For 2014, here are the stats:

States where unemployment experienced an annual increase:

  • Alaska
  • Louisiana
  • North Dakota
  • Vermont
  • W Virginia
  • Wyoming

States that experienced no change:

  • DC
  • Iowa
  • Oregon
  • Virginia

While Puerto Rico’s unemployment decreased, they still hold the highest unemployment rate at 14 percent.  The average in the nation in December was 5.69 according to NCSL data.

Alice_through_the_looking_glassThe prevailing inclinations as we gaze “through the looking glass” are:

  • Enduring returns of REIT’s
  • Expanded funding sources on a global scale
  • GDP growth trend
  • Investment transactions rise
  • Construction Industry gradual recovery
  • Technology advances
  • Industrial property development growth
  • Suburban markets making a comeback

queensThe potential perils and pitfalls foreseen in wonderland, pardon me, CRE-land include currently delayed, yet inevitable Treasury rate escalations, federal regulatory ambivalence, the predicted plunge in US labor force growth two years from now, aging infrastructure and vacillating energy prices.

In Through the Looking Glass (Part 2) we will further explore the nuts and bolts of the industry findings…stay tuned.

Resources:

Deloitte Center for Financial Services, Deloitte Development LLC, 2014 “2015 Commercial Real Estate Outlook”

Urban Land Institute & PWC, “Emerging Trends in Real Estate – US and Canada 2015”

National Conference of State Legislatures, http://www.ncsl.org/research/labor-and-employment/2014-state-unemployment-rates.aspx, December 19, 2014