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HARTFORD COUNTY COMMERCIAL REAL ESTATE MARKET NOVEMBER 2009 Veterans Day Presented by: Andrews & Galvin Appraisal Services, LLC 16 Spring Lane, Farmington,

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Presentation on theme: "HARTFORD COUNTY COMMERCIAL REAL ESTATE MARKET NOVEMBER 2009 Veterans Day Presented by: Andrews & Galvin Appraisal Services, LLC 16 Spring Lane, Farmington,"— Presentation transcript:

1 HARTFORD COUNTY COMMERCIAL REAL ESTATE MARKET NOVEMBER 2009 Veterans Day Presented by: Andrews & Galvin Appraisal Services, LLC 16 Spring Lane, Farmington, CT

2 REAL ESTATE MARKET PRESENTATION OVEVIEW Hartford County – Fall 2009  What Just Happened – Where are we Now?  Market Real Estate Segments  Review of Trends

3 Hartford County Map

4 Last Years Theme - What Segment of the Coaster Do You Operate In?

5 IM STICKING WITH THE COASTERS Reality Is All Hartford Market Segments Are Heading in the Same Direction Fall 2009

6 For Some It Seem More Like This !

7 So Where Are We Now?

8 Last Year Question - Feeling the Trend? This Year – There is No Question We are Feeling It!

9 Total Number of Sales Tracked by Conn-comps November 1989 to 2009

10 Results of Phone Surveys  Last Year – Uncertainty over Financial Markets and Some Over President Elect  Changes in Financial Markets We Understand - Liquidity  Since Presidential Elect – External Changes Causing Uncertainty Most Do Not Understand – Automotive, Unemployment, Housing, Health Care, War …  Too Many Changes Too Fast  Consequently – Hartford Commercial Real Estate Market is Nearly On Hold – lack of liquidity - Resulting in Large Disconnect Between Market Participants

11 So What Are the Uncertainties? Stimulus Package-Residual Impact of Clunkers  Automobile Market Here in Hartford – More Vacant Space  Obsolete Space – Vacant Auto dealerships -  Less Used Car Inventory–low end?  Les Cars to Repair – Less Demand for Automotive Garages  Less Demand For Auto Parts – Increase in Vacant Retail Space  Starting to See Foreclosures in This market segment  Defense – Middle East  UTC – Renewed Headquarters Lease in Gold Building – but closing some operations  Several Manufactures Pulling Back Work from Smaller Job Shops

12 Housing Stimulus  The $8,000 Credit –  Did it Just Shift Remaining Demand Up?  Did it Increase home furnishing, appliance, etc. spending ?  Did it Consume Remaining Supply  Will the $6,500 cause many to sell and then rent – retired focusing on future expenses?  New $8,000 credit to have same impact on housing prices as it did on automotive pricing – at least locally – Just Shift Prices Up?  Did Help New Residential Projects Total Single-Family Sales Simsbury, Glastonbury, Farmington, Avon ,6931,3951,4271,152751

13 Health Care Reform  Creates Uncertainty in the Hartford Real Estate Market  Will it Change Future Demand for Office Space by Insurance Users?  Employment Base – Location Quotient – Will it Change?  What About B and C Office Near Hospitals and Suburbs?  Retail Base – Will it Decline?  Municipalities–Tax Base Change?  Medical Space Demands Change?  Hospitals Repositioning

14  So – Market is Nearly Stagnant – definitely Slowed Down  Lets Look at some Sales Activity Starting with Industrial, Office, Apartments & Retail  Review of Lender Survey & Positive Trends

15 Typical Industrial Sales Activity Old Windsor Rd, Bloomfield, CT 2,520 SF, Built 1991, 0.34 acres -- Private Sale / Owner Occupied -- 70% 6.98% Fixed 10 yrs Sold June 2009 for $250,000 or $99.21/SF Rent Payment - $1,500 Monthly Debt Service – Less than Rent (Previous sale 2005 for $243,000) Total Industrial Sales 2009: 34 (-60%) Average Price / SF: $37.03 (-5.6% avg) Average Size / Sale: 26,468 SF Trends: Users Consolidating Back Total Industrial Sales 2008: 87 Average Price / SF: $39.23 Average Size / Sale: 15,873 SF

16 Industrial Survey Results  CBRE – Market Overview 3rd Qtr 2009  Overall Vacancy Rate 12.55% 1st Qtr – Jumped 13.9% 3 rd Qtr  -- (8% in the West / 17% in the North)  Industrial Rental Rates $4.22 to $5.16 with $4.81/SF NNN  -- (Down 4% or $0.20/SF on Average – Tenants have Control)  Absorption – Negative 946,951 SF YTD  -- (However - 300,000 SF New Constriction-Tire Rack in Windsor)  Cushman & Wakefield – Market Beat 2 nd Qtr 2009  Overall Vacancy Rate 12.1%, up from 10.2% (1,395 Buildings Surveyed)  Absorption – negative 1,230,681 +/- SF  Rental Rates - $4.37/SF to $4.70/SF, NNN – declining  Jump in Vacancy due to a Couple of Large Users Closing – 3,000 jobs in Enfield lost

17 Apartment Trends Year No of Sale Avg Sale Price $ 17, $ 19, $ 22, $ 26, $ 32, $ 38, $ 48, $ 54, $ 56, $ 55, $ 35,537.00

18 Apartment Trends  Marcus & Millichap 3rd Qtr 2009  2007: 3,263 Units Sold For $240,789,000 or $73,794/Unit  2008: 1,500 Units Sold For $128,196,000 or $85,464/Unit (perception unemployment would increase demand for rental units as single-families were foreclosed)  2009: 1,226 Units Sold For $87,630,375 or $71,477/Unit  Total Decline: 3% To date  Reporting 2.9% decline in asking rents and 1.3% increase in vacancy

19 Recent Apartment Sales Hartford Small Apartments  Vacancy 15% to 30%  Rents Declining – Tenants Consolidating  Short Sales Common  Capitalization Rates Increasing from Below 10% up to 12% and higher pending occupancy and condition – Job Loss having an impact Sale & Re-Sales  24 Unit Apartment Property  Sold March 2007 For $50,833/Unit  Resold October 2009 for $45,000/Unit  11.5% Decline Over 30 Month Period  Equates to 0.38% per Month

20 Hartford County Office Market One Large Office Building Sale 2009 The Exchange – 270 Farmington Av Farmington – Sold Sept 2009 $14,250,000 or $56.92/SF 260,000 SF on 15 Acres 80% Occupancy / 10.53% OAR (Previously Sold Dec 1997 for $42.83/SF - 2.7% Increase in Value Per Year) Typical Office Building Sale 1 Old Mill Lane, Simsbury Sold Jan 09 $542,000 - $149.12/SF – Owner Occupied 3,856 SF on 0.67 Acres Vacancy: 19.6% - Avg Rent $19.14/SF Leasing Activity: Several Large Leases Absorption: – Neg. 9,978 per CBRE - Neg. 88,975 SF - Cushman & Wakefield

21 Hartford County Retail Market  Few Large Retail Sales  Queen St, Southington  Sold August 2009 for $16,500,000  171,989 SF built 1969 on 17.6 Acres  97% Occupied / 10.45% OAR  All Cash Deal – Bob’s Discount, Fashion Bug, Outback, Ruby Tuesday, Radio Shack, TJ Maxx, Bed, Bath & Beyond, Golden Nails, plus others  Couple Smaller Retail Sales  7 Mill Pond Drive, Granby sold June 2009  $2,000,000 or $181.52/SF – Built 2004  11,018 SF Building on 1.89 Acres  Previous sale May 2005 for $170.45/SF  2009 OER: 9.75%  2005 OER: 8.25%

22 What Are Lenders Doing? Hartford County Market – Fall 2009  Tighter Terms Becoming Accepted As Norm  Loan-To-Value Ratios 65% - 75%- Only One Stated 80%  Results in Higher Debt Service Coverage Ratios – 1.25x and up – preferably 1.3x 1.35x – Some over 1.4x  Points – ½ to a 1.5 points or more  Rates – Spreads all increased and tied to FHLBB 5 yr mostly – 5 year fixed – fewer pre-payment clauses  Securing Triangle between Lenders-Appraisers-Ordering Function  Recourse is now the Norm  Overall Cash Analysis on Borrower – Slowing Approval Process  Why – less competition – Lack of Non-regulated Funding  Conduit Market – Restructuring – CMBS?  Small Markets – Short Sales – Work it out  Unlike Early 1990’s – There are Fewer Banks to Take Property Back  Regulations – OK to have Performing Loans With LTV of 100% +

23 What is Different Between and  Regulators Perspective – Letting Lenders Create Work Out situations Instead of Foreclosing - (May be the one Factor the Downturn is Short- lived on Commercial Side)  Fewer Banks – Less Speculative Lending  Businesses are More Global Oriented due to Internet – Communications – Acceptance  Low Inventory of Property – Less Speculative Building  Back to More Sensible Investor Expectations – (more weight on return over longer holding period as opposed to increasing rents and then a quick resale)

24 Thank you …& Think Positive Andrews & Galvin Appraisal Services, LLC 16 Spring Lane, Farmington, CT


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