National market report

<i>Commercial and residential real estate news briefs from the most active U.S. markets</i>

Atlanta

The economic downturn has been particularly challenging for local property owner Inman Park Properties, the Atlanta Journal-Constitution reported. Over the past several months, many of the company’s properties, including the Clermont Hotel and the Hilan Theatre, have gone into foreclosure or onto the market. The company’s headquarters is also in foreclosure. Business owners in East Atlanta, where Inman Park Properties is a significant property owner, said they were worried that banks would hang on to foreclosed Inman buildings until the market improves, leaving vacant stores dotting the neighborhood.

Boston

Nearly one quarter of the 7,747 applications for mortgage origination licenses in Massachusetts were rejected or withdrawn this year because they failed to meet the state’s new licensing requirements for mortgage professionals, the Boston Globe reported. The regulations, instituted in 2008 as a result of the subprime crisis, prevent felons, those convicted of fraud-related misdemeanors and individuals with records of financial mismanagement from obtaining licenses. Most of those who were rejected had already been working as mortgage brokers or loan officers in the state. Another 1,323 applications were withdrawn or terminated after being red-flagged by officials.

Boston Mayor Thomas Menino has been urging brokers and retailers to fill vacant storefronts on Newbury Street and in the Fenway area. Menino took brokers and retailers on his second annual Retail Opportunities Tour, a bus tour to 20 vacant storefronts, to encourage them to sign leases, the Boston Globe reported. Tenants who sign leases in the next six months will receive advertising space on two outdoor displays in downtown Boston. At least one tour attendee, Nicki Doggart, said she planned to lease one of the spaces shown. She expects to open a chocolatier at 141B Newbury Street.

Chicago

Two-flats, or buildings in which the owner rents out one floor to help pay the mortgage, are making a comeback in Chicago thanks to the recession. Many speculative buyers purchased two-flats in the late 1990s, and they were some of the first properties to fall into foreclosure when the market crashed, the Chicago Tribune reported. Today, two-flats are on the market for the same prices they fetched in 2000 or 2001, and financing is feasible because the properties qualify for Federal Housing Administration loans. Those loans allow a property owner to apply the property’s projected rental income to his or her income to qualify for a higher loan.

Chicago’s Alderman Brendan Reilly in early July introduced a City Council ordinance to stop illegal hotels, or the practice by high-rise condo owners of renting out their units to short-term visitors, the Chicago Sun-Times reported. The ordinance would require condo owners to get approval from their associations for hotels, obtain a $500 vacation rental license, good for two years, and get at least $1 million in liability insurance. Rental fees would have to include the city’s 3.5 percent hotel tax, and the ordinance would require owners to keep guest registration records.

Las Vegas

Tower Realty and Development has put a plot of land in downtown Las Vegas back on the market because it was unable to move a historic house off of the site, the Las Vegas Review-Journal reported. Tower Realty and Development had planned to build a 52,500-square-foot building on the South Seventh Street site, but moving the 1931 house that occupied the space proved to be too expensive, said Wayne Tew, CEO and president of landowner Clark County Credit Union. The house belonged to Charles “Pop” Squires, one of Las Vegas’ founders, who purchased the land in 1905.

Los Angeles

Real estate investor Fred Sands, founder of Vintage Capital and former owner of Fred Sands Realtors, which he sold to Coldwell Banker, was expected to purchase the SouthBay Pavilion Shopping Center in Carson in early July. The sale price was $50 million, half the $100 million asking price when the center went on the market in 2005, the Los Angeles Times reported. Owner Hopkins Real Estate Group paid $34.4 million for it in 2003 and then spent $30 million on renovations. Sands said he planned to add a 16-screen theater, up to six restaurants and, perhaps, a hotel to the mall.

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Los Angeles had $4.5 billion in troubled commercial properties as of the end of June, according to a report from Real Capital Analytics. The Los Angeles Times reported that 263 properties were in default, foreclosure or bankruptcy, a 133 percent increase from the 113 properties in default at the beginning of this year. The high unemployment rate and a decrease in consumer spending are factors in the commercial market’s troubles, a local real estate consultant said. Compared to the 5,315 troubled commercial properties RCA recorded for the rest of the country, Los Angeles’ market is doing relatively well.

Philadelphia

All 40 of the units at Philadelphia’s luxury Murano condominium that were put up for auction in late June were sold, the Philadelphia Inquirer reported. The units in the 43-story tower at 21st and Market streets sold in under two hours. The winning bids ranged from $335,000 for a one-bedroom unit to $796,000 for a two-bedroom unit. Accelerated Marketing Partners auctioned the units for developer Thomas Properties Group. Local real estate experts said they were surprised that all of the units sold, but took it as an encouraging sign for the market, since inventory needs to be sold off before the market can bottom out.

Phoenix
An Arcadia house designed by Frank Lloyd Wright sold for $2.8 million in an all cash deal, the Arizona Republic reported. The architect built the 2,250-square-foot, spiral-shaped home 60 years ago for his son David. JT Morning Glory Enterprises, a limited partnership, bought the home and plans to restore it to its original condition. The property has a guesthouse, a pool, a ramp to the second floor and a rooftop deck with views of Camelback Mountain. The home was originally put on the market in August for $3.99 million.

San Francisco

Keck Seng Investments, a Hong Kong investment company, was expected to close on the purchase of the W Hotel in San Francisco at the end of July, the San Francisco Chronicle reported. The company was expected to pay $90 million for the property, owned by Starwood Hotels & Resorts Worldwide. Starwood, which opened the hotel in 1999 and will continue to operate it after the sale, said it wanted to sell the property to reduce company debt. Hotel occupancy rates in the San Francisco area have fallen 12.6 percent since last year, and room rates have declined 11.7 percent, according to hotel advisory firm PKF Capital.

Seattle
Closed sales of single-family homes in King County increased 4 percent in June of this year compared to June 2008, the Northwest Multiple Listing Service said in early July. It was the first year-over-year increase in two years, according to the Seattle Times, and the highest number of sales seen in a month since October 2007. One local broker said that many of the recent buyers were “trickle-up buyers,” or those who may have sold their previous properties to first-time home purchasers. Pending home sales were also up in June by almost 25 percent year-over-year.

Washington, D.C.

The city’s notable Watergate Hotel could end up in foreclosure unless developer Monument Realty and lender PB Capital decide on new terms, the Washington Post reported. The owners of the hotel, which has been closed for five years, defaulted on a $70 million loan. Lehman Brothers had been a partner and equity investor in the property. The property’s landmark status — it is part of the complex where a 1972 burglary that led to President Richard Nixon’s resignation took place — may save it, said Kurt Sachs, a PB Capital senior managing director.

Compiled by Sara Polsky