Story first appeared on CNNMoney.
A deal to help victims of improper foreclosures has been slow going, in large part because of infighting among state attorneys general over giving banks a free pass from future lawsuits.
The talks are between the attorneys general and federal agencies on one side, and the five largest mortgage servicers, which comprise nearly 60% of the market: Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).
Attorneys general in states with stronger fraud enforcement laws, such as New York, Delaware and Massachusetts, don't want to give up the right to go after banks in future fraud lawsuits. And a few other state attorneys general have balked at the draft versions they consider too tough on the banks, according to sources familiar with the talks. A Novi Foreclosure Lawyer wants to see his clients get immediate results.
The infighting came to a head Tuesday, when Iowa Attorney General Tom Miller -- who had been leading the talks on behalf of the states --- booted New York Attorney General Eric Schneiderman from an executive team, accusing Schneiderman of working to actively undermine a deal with the states.
At the heart of the talks are wholesale changes in the policies and practices of mortgage servicing that could help consumers, especially those behind on payments. But the banks, while willing to commit to some massive changes, are pushing for immunity from future lawsuits. A Northville Foreclosure Lawyer want to see the infighting stop and concentration put back on the consumer instead of the bank.
Also at stake is a reported $20 billion pot of money, to be collected from the banks, which states could use to modify mortgages and counsel underwater homeowners, according to sources familiar with the talks.
Schneiderman has been tough on the banks. Earlier this month, his office filed a motion to oppose a proposed $8.5 billion settlement between investors and Bank of America and the Bank of New York over bad mortgage-backed securities. Schneiderman called that deal unfair and inadequate in court records.
Number of troubled mortgages on the rise again
He has his own broad investigation into banks that sold mortgages to investors, zeroing in on some of the same banks involved in the settlement talks. Schneiderman's probe targets the practice of assigning and bundling mortgages into securities, a Riverview Foreclosure Lawyer has said.
And he has said over the past several months that any deal with banks on foreclosure practices shouldn't prevent individual states from their own investigations into the mortgage-servicing industry.
If New York pulls out entirely, it could dampen down any final settlement award. But New York could still back the deal.
The government probe of mortgage servicers followed reports that the institutions were using shoddy documentation to improperly foreclose on homeowners. That news prompted several servicers to halt foreclosures for a short period of time.
The attorneys general launched the probe in October to review improper documentation and mortgage modifications. A Garden City Foreclosure Lawyer was happy to see this step taking place.
Federal government agencies involved include the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury, the Federal Trade Commission as well as the new Consumer Financial Protection Bureau.
18 August 2011
STANDARD AND POOR UNDER INVESTIGATION
Story first appeared in the New York Times.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said S.& P. has received several requests from different government agencies over the last few years, and that they continue to cooperate with these requests. He added that they do not prevent such agencies from speaking with current or former employees and that S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.
The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.
Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.
Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.
A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.
Richard Sylla, a professor at New York University’s Stern School of Business who has studied the history of ratings firms, said he thinks it would have a major impact if there was a successful fraud case that would suggest there would be momentum for legislation that would force them to change their business model.
In particular, Professor Sylla said that the ratings agencies could be forced to stop making their money off the entities they rate and instead charge investors who use the ratings. The current business model, critics say, is riddled with conflicts of interest, since ratings agencies might make their grades more positive to please their customers.
Before the financial crisis, banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with them. These banks paid upward of $100,000 for ratings on mortgage bond deals, according to the Financial Crisis Inquiry Commission, and several hundreds of thousands of dollars for the more complex structures known as collateralized debt obligations.
Ratings experts also said that a successful case could hamper the agencies’ ability to argue that they were not liable for ratings that turned out to be wrong.
Lawrence J. White, another professor at New York University’s Stern School of Business, who has testified alongside ratings executives before Congress, said their story is that they should be protected by full First Amendment protections, and that would be harder to make in the public arena, in Congress and in the courts. Also, if they mixed business and the ratings, it would certainly make their story harder to tell.
The ratings agencies lost a bit of ground on their First Amendment protections in the recent financial reform bill, which put the ratings firms on the same legal liability level as accounting firms, Professor White said. But that has yet to be tested in court.
People with knowledge of the Justice Department investigation of S.& P. said investigators had made references to several individuals, though it was unclear if anyone would be named in any potential case. Investigators have been asking about a remark supposedly made by David Tesher about mortgage security ratings, two people said. The investigators have asked witnesses if they heard Mr. Tesher say: “Don’t kill the golden goose,” in reference to mortgage securities.
S.& P. declined to provide a comment for Mr. Tesher.
Several of the people who oversaw S.& P.’s mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential mortgage bond ratings. Investigators have told witnesses that they are looking for former employees and that has proved difficult because so many crucial people still work at the company.
One former executive who has been mentioned in investigators’ interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said S.& P. has received several requests from different government agencies over the last few years, and that they continue to cooperate with these requests. He added that they do not prevent such agencies from speaking with current or former employees and that S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought relatively few cases against large financial concerns for their roles in the housing blowup, and it has closed investigations into Washington Mutual and Countrywide, among others, without taking action.
The cases that have been brought are mainly civil matters. In the spring, the Justice Department filed a civil suit against Deutsche Bank and one of its units, which the government said had misrepresented the quality of mortgage loans to obtain government insurance on them. Another common thread — in that case and several others — is that no bank executives were named.
Despite the public scrutiny and outcry over the ratings agencies’ failures in the financial crisis, many investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.
Companies and some countries — but not the United States — pay the agencies to receive a rating, the financial market’s version of a seal of approval. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp for investing decisions — which bolstered the agencies’ power.
A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system. The financial reform overhaul known as Dodd-Frank sought to decrease the emphasis on ratings in the way banks and mutual funds invest their assets. But bank regulators have been slow to spell out how that would work. A government case that showed problems beyond ineptitude might spur greater reforms, financial historians said.
Richard Sylla, a professor at New York University’s Stern School of Business who has studied the history of ratings firms, said he thinks it would have a major impact if there was a successful fraud case that would suggest there would be momentum for legislation that would force them to change their business model.
In particular, Professor Sylla said that the ratings agencies could be forced to stop making their money off the entities they rate and instead charge investors who use the ratings. The current business model, critics say, is riddled with conflicts of interest, since ratings agencies might make their grades more positive to please their customers.
Before the financial crisis, banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with them. These banks paid upward of $100,000 for ratings on mortgage bond deals, according to the Financial Crisis Inquiry Commission, and several hundreds of thousands of dollars for the more complex structures known as collateralized debt obligations.
Ratings experts also said that a successful case could hamper the agencies’ ability to argue that they were not liable for ratings that turned out to be wrong.
Lawrence J. White, another professor at New York University’s Stern School of Business, who has testified alongside ratings executives before Congress, said their story is that they should be protected by full First Amendment protections, and that would be harder to make in the public arena, in Congress and in the courts. Also, if they mixed business and the ratings, it would certainly make their story harder to tell.
The ratings agencies lost a bit of ground on their First Amendment protections in the recent financial reform bill, which put the ratings firms on the same legal liability level as accounting firms, Professor White said. But that has yet to be tested in court.
People with knowledge of the Justice Department investigation of S.& P. said investigators had made references to several individuals, though it was unclear if anyone would be named in any potential case. Investigators have been asking about a remark supposedly made by David Tesher about mortgage security ratings, two people said. The investigators have asked witnesses if they heard Mr. Tesher say: “Don’t kill the golden goose,” in reference to mortgage securities.
S.& P. declined to provide a comment for Mr. Tesher.
Several of the people who oversaw S.& P.’s mortgage-related ratings went on to different jobs at McGraw-Hill, including Joanne Rose, the former head of structured finance; Vickie Tillman, the former head of ratings; and Susan Barnes, former head of residential mortgage bond ratings. Investigators have told witnesses that they are looking for former employees and that has proved difficult because so many crucial people still work at the company.
One former executive who has been mentioned in investigators’ interviews is Richard Gugliada, who helped oversee ratings of collateralized debt obligations. Calls to his home were not returned.
05 August 2011
Roxanne Pulitzer’s $19.9 Million Home
Story first appeared on WSJ.com
In the 1980s, Roxanne Pulitzer's bitter divorce from an heir to the Pulitzer publishing fortune made her the subject of headline-grabbing accusations ranging from cocaine use to occult rituals, all set in the wealthy enclave of Palm Beach, Fla.
Three decades and a few husbands later, Ms. Pulitzer, 60, appears to enjoy a quieter life today, though she said she does enjoy sleeping in late and drinking wine in the afternoon. She and her fifth husband, Tim Boberg, have focused lots of energy, and money, on their 23,000-square-foot, seven-bedroom home, set on 3½ acres overlooking the San Miguel Mountains. Decorated in a style that's best described as log-mountain-lodge-meets-Palm Beach, the house has a bowling alley, an indoor shooting range, a putting green, an indoor lap pool and a waterfall. There's also a replica of a labyrinth in Chartres, France, 45 feet in diameter.
After adding nearly every amenity they could think of, Ms. Pulitzer and Mr. Boberg, a 64-year-old retired co-founder of a large management consulting firm, said they've run out of house projects. So they've decided to sell, putting their house on the market earlier this year for $19.9 million, making it one of the most expensive listings in this remote mountain community. Not far away, comedian Jerry Seinfeld recently listed his 14,200-square-foot, 11-bedroom home on 26 acres for $18.3 million.
The home, originally 8,800 square feet, is now 23,000 square feet.
Matthew Hintermeister, the listing broker with Peaks Real Estate Sotheby's International Realty, said although the price-per-square foot for their place is similar to other listings in the area, he's only had a few showings so far (potential buyers must prove they have nearly $20 million in liquid assets to see the house). The couple said they're realistic about market. The buyer "would have to be somebody who loves a labyrinth," Ms. Pulitzer said.
Ms. Pulitzer, who received minimal alimony and lost custody of her sons after her divorce battle in the 1980s, later wrote a tell-all book about it. She's since written three novels based in Palm Beach, and is currently working on her fifth book. In 1999 she and Mr. Boberg met in Palm Beach, where they have an apartment. They bought their Telluride home in 2001 for $5.5 million and in 2006, were married on the back deck of house. It's the third marriage for Mr. Boberg and Ms. Pulitzer's fifth. When they bought it in 2001, the house was 8,800 square feet. But a couple of years later Ms. Pulitzer told her husband she wanted a bowling alley for her birthday. In the end, the couple expanded the house by an additional 13,600 square feet and added more amenities, spending more than $8.5 million.
To avoid adding a narrow, oblong shape to the house, the couple decided to widen the addition by also placing a shooting range and a 70-foot-long lap pool on either side of the bowling alley.
The bowling alley has an AMF regulation electronic scoring system. The shooting range is made of 1-foot-thick, steel-reinforced concrete and has a switch-operated wind machine that sucks the lead particles out. The indoor swimming pool is flanked by two giant sculptures of Buddha heads as well as a fireplace and cushioned lounge chairs.
Directly upstairs, the couple built a 4,000-square-foot master suite decorated much like the rest of the house. While there are vaulted ceilings with log beams and a large stone fireplace, the furnishings, created by the couple's designer in Palm Beach, include comparatively delicate-looking couches and chairs upholstered in pale pink and green fabrics. The bathroom walls are in pink fabric brocade.
Outside the couple's bedroom is a giant teak sculpture of a rhinoceros, part of Mr. Boberg's large collection, much of which is displayed around the house. Ms. Pulitzer's passion is gardening, and in addition to her outdoor gardens there's also a glass solarium just off the swimming pool, complete with misters and grow lights. There are a few remnants from her years of infamy, including a framed photo of Ms. Pulitzer when she posed for Playboy and framed notes from the late Hunter S. Thompson, who she said she become friends with after he wrote about her divorce trial for Rolling Stone magazine.
Mr. Boberg said he's already looking forward to possibly building a new house in the area when this place sells, though Ms. Pulitzer is more reluctant to let the home go.
In the 1980s, Roxanne Pulitzer's bitter divorce from an heir to the Pulitzer publishing fortune made her the subject of headline-grabbing accusations ranging from cocaine use to occult rituals, all set in the wealthy enclave of Palm Beach, Fla.
Three decades and a few husbands later, Ms. Pulitzer, 60, appears to enjoy a quieter life today, though she said she does enjoy sleeping in late and drinking wine in the afternoon. She and her fifth husband, Tim Boberg, have focused lots of energy, and money, on their 23,000-square-foot, seven-bedroom home, set on 3½ acres overlooking the San Miguel Mountains. Decorated in a style that's best described as log-mountain-lodge-meets-Palm Beach, the house has a bowling alley, an indoor shooting range, a putting green, an indoor lap pool and a waterfall. There's also a replica of a labyrinth in Chartres, France, 45 feet in diameter.
After adding nearly every amenity they could think of, Ms. Pulitzer and Mr. Boberg, a 64-year-old retired co-founder of a large management consulting firm, said they've run out of house projects. So they've decided to sell, putting their house on the market earlier this year for $19.9 million, making it one of the most expensive listings in this remote mountain community. Not far away, comedian Jerry Seinfeld recently listed his 14,200-square-foot, 11-bedroom home on 26 acres for $18.3 million.
The home, originally 8,800 square feet, is now 23,000 square feet.
Matthew Hintermeister, the listing broker with Peaks Real Estate Sotheby's International Realty, said although the price-per-square foot for their place is similar to other listings in the area, he's only had a few showings so far (potential buyers must prove they have nearly $20 million in liquid assets to see the house). The couple said they're realistic about market. The buyer "would have to be somebody who loves a labyrinth," Ms. Pulitzer said.
Ms. Pulitzer, who received minimal alimony and lost custody of her sons after her divorce battle in the 1980s, later wrote a tell-all book about it. She's since written three novels based in Palm Beach, and is currently working on her fifth book. In 1999 she and Mr. Boberg met in Palm Beach, where they have an apartment. They bought their Telluride home in 2001 for $5.5 million and in 2006, were married on the back deck of house. It's the third marriage for Mr. Boberg and Ms. Pulitzer's fifth. When they bought it in 2001, the house was 8,800 square feet. But a couple of years later Ms. Pulitzer told her husband she wanted a bowling alley for her birthday. In the end, the couple expanded the house by an additional 13,600 square feet and added more amenities, spending more than $8.5 million.
To avoid adding a narrow, oblong shape to the house, the couple decided to widen the addition by also placing a shooting range and a 70-foot-long lap pool on either side of the bowling alley.
The bowling alley has an AMF regulation electronic scoring system. The shooting range is made of 1-foot-thick, steel-reinforced concrete and has a switch-operated wind machine that sucks the lead particles out. The indoor swimming pool is flanked by two giant sculptures of Buddha heads as well as a fireplace and cushioned lounge chairs.
Directly upstairs, the couple built a 4,000-square-foot master suite decorated much like the rest of the house. While there are vaulted ceilings with log beams and a large stone fireplace, the furnishings, created by the couple's designer in Palm Beach, include comparatively delicate-looking couches and chairs upholstered in pale pink and green fabrics. The bathroom walls are in pink fabric brocade.
Outside the couple's bedroom is a giant teak sculpture of a rhinoceros, part of Mr. Boberg's large collection, much of which is displayed around the house. Ms. Pulitzer's passion is gardening, and in addition to her outdoor gardens there's also a glass solarium just off the swimming pool, complete with misters and grow lights. There are a few remnants from her years of infamy, including a framed photo of Ms. Pulitzer when she posed for Playboy and framed notes from the late Hunter S. Thompson, who she said she become friends with after he wrote about her divorce trial for Rolling Stone magazine.
Mr. Boberg said he's already looking forward to possibly building a new house in the area when this place sells, though Ms. Pulitzer is more reluctant to let the home go.
04 August 2011
ORANGE COUNTY SEEING RECOVERY
Story first appeared in Bloomberg News.
Investors are bidding up prices for top-tier office buildings in Orange County, California, even as vacancies stand at almost 20 percent after the collapse of the subprime-mortgage industry that once made the region its home.
Prices paid for offices in the area climbed 63 percent to $111 a square foot in the second quarter from recession lows of $68 in 2009. An 11-story building near John Wayne Airport is on the market at $225 a square foot, up 80 percent from the $125 it fetched two years ago.
The gains come in a region where vacancies more than doubled with the
2007 collapse of subprime lenders including New Century Financial Corp. and Ameriquest Mortgage Co., both of which were based in Orange County. Second-quarter asking rents were down 31 percent from the 2007 peak, and office vacancies stood at 19.2 percent. That compares with a 17.2 percent rate nationwide.
Capitalization rates, a measure of investment yield, for Orange County office buildings dropped to an average of 6.9 percent in the second quarter from 7.7 percent in all of last year and 7.9 percent in 2009.‘Premium Price’
Orange County, home to the Disneyland and Knott’s Berry Farm amusement parks, has been attractive to office buyers because of the region’s excellent infrastructure, school system and weather.
The region was a major U.S. hub for mortgage lending. The financial-market crisis had a major impact on these firms and employment. It spelled the end of Orange County.
Joblessness in the county soared to a high of 10 percent in January 2010 from 3.1 percent in December 2006, during the property boom, according to California’s Employment Development Department. In May, the latest month for which figures are available, the rate was 8.5 percent. Office vacancies rose to a high of 21.8 percent in the second quarter of last year from a low of 8.6 percent in mid-2006, Cushman said.
Office transactions of more than $5 million climbed 55 percent to $1.09 billion last year from $701.8 million in 2009. That compares with about $6.33 billion in the 2007 peak.
Volume so far in 2011 totals $260.6 million.
Emmes Group of Cos., based in New York, in June 2009 paid $160 million, or $302 per square foot, for the 20-story 3161 Michelson Ave. in Irvine, which was 38 percent vacant at the time. The price included a parking garage.
The building was developed as the headquarters for New Century, the largest independent mortgage lender to subprime borrowers before it collapsed in 2007 as defaults by homeowners with poor credit soared. The company never occupied the space.
The property used to belong to MPG Office Trust Inc., the Los Angeles- based landlord formerly known as Maguire Properties. MPG has been disposing of buildings to reduce debt after paying $2.88 billion for all the real estate in downtown Los Angeles and Orange County that Blackstone Group LP purchased in its acquisition of Sam Zell’s Equity Office Properties Trust.
Vacancies at 3161 Michelson have dropped to about 24 percent. Tenants include Hyundai Capital, Jacobs Engineering Group Inc. and real estate services provider Eastdil Secured LLC.
Irvine Co. said in December that it bought Pacific Arts Plaza in Costa Mesa, an 827,000-square-foot (77,000-square meter) property with four office buildings and four restaurants, for an undisclosed amount.
They commented that because they think they will see positive returns in the future, they are comfortable with prices that have more modest initial yields on investments as they believe the recovery will outperform what most people anticipate.
Ocean West Capital Partners, founded early last year, completed the purchase of a 16-story building at 2600 Michelson for about $70 million, or $228 a square foot, this month. The property, previously owned by MPG and 50 percent vacant, had been under receivership for a year and a half.
Ocean West bought the building in a joint venture with New York-based Dune Real Estate Partners.
Their view is they get to step in to reposition the building and to reintroduce it to the market. They expected horizon for returns is around five years. They are already seeing some leasing activity since they acquired the building.
While occupancies are starting to rise in Orange County, rents remain depressed. The average monthly asking rent at Class A, or the highest - quality, office buildings was $2.15 a square foot in the second quarter, down 5.7 percent from a year earlier. That compares with a record $3.13 in the third quarter of 2007.
Epicor Software Corp. in February signed a 10-year lease for about 68,000 square feet at a Class A building near John Wayne Airport -- a centrally located area with a high concentration of top-tier properties -- for $1.72 a square foot, which includes such services as heat and water. In May, Access Insurance Holdings Inc. agreed to a five-year lease for 31,000 square feet at a Class A building in Orange at the same rate, the brokerage said.
Those actively buying, mostly local investors who understand the market, are counting on a recovery in a region where new construction was nonexistent in the first quarter. While Orange County will come back, some office buyers may have to wait 10 years for returns.
A broader recovery in Orange County is dependent upon a decline in unemployment, which would help boost office demand and rents.
What’s striking is how quickly the appetite has returned to such a ferocious level after such a low point. In 2005, 2006 and 2007, it moved so quickly. In the last 12 months, it’s moved as quickly in terms of expectations.
Investors are bidding up prices for top-tier office buildings in Orange County, California, even as vacancies stand at almost 20 percent after the collapse of the subprime-mortgage industry that once made the region its home.
Prices paid for offices in the area climbed 63 percent to $111 a square foot in the second quarter from recession lows of $68 in 2009. An 11-story building near John Wayne Airport is on the market at $225 a square foot, up 80 percent from the $125 it fetched two years ago.
The gains come in a region where vacancies more than doubled with the
2007 collapse of subprime lenders including New Century Financial Corp. and Ameriquest Mortgage Co., both of which were based in Orange County. Second-quarter asking rents were down 31 percent from the 2007 peak, and office vacancies stood at 19.2 percent. That compares with a 17.2 percent rate nationwide.
Capitalization rates, a measure of investment yield, for Orange County office buildings dropped to an average of 6.9 percent in the second quarter from 7.7 percent in all of last year and 7.9 percent in 2009.‘Premium Price’
Orange County, home to the Disneyland and Knott’s Berry Farm amusement parks, has been attractive to office buyers because of the region’s excellent infrastructure, school system and weather.
The region was a major U.S. hub for mortgage lending. The financial-market crisis had a major impact on these firms and employment. It spelled the end of Orange County.
Joblessness in the county soared to a high of 10 percent in January 2010 from 3.1 percent in December 2006, during the property boom, according to California’s Employment Development Department. In May, the latest month for which figures are available, the rate was 8.5 percent. Office vacancies rose to a high of 21.8 percent in the second quarter of last year from a low of 8.6 percent in mid-2006, Cushman said.
Office transactions of more than $5 million climbed 55 percent to $1.09 billion last year from $701.8 million in 2009. That compares with about $6.33 billion in the 2007 peak.
Volume so far in 2011 totals $260.6 million.
Emmes Group of Cos., based in New York, in June 2009 paid $160 million, or $302 per square foot, for the 20-story 3161 Michelson Ave. in Irvine, which was 38 percent vacant at the time. The price included a parking garage.
The building was developed as the headquarters for New Century, the largest independent mortgage lender to subprime borrowers before it collapsed in 2007 as defaults by homeowners with poor credit soared. The company never occupied the space.
The property used to belong to MPG Office Trust Inc., the Los Angeles- based landlord formerly known as Maguire Properties. MPG has been disposing of buildings to reduce debt after paying $2.88 billion for all the real estate in downtown Los Angeles and Orange County that Blackstone Group LP purchased in its acquisition of Sam Zell’s Equity Office Properties Trust.
Vacancies at 3161 Michelson have dropped to about 24 percent. Tenants include Hyundai Capital, Jacobs Engineering Group Inc. and real estate services provider Eastdil Secured LLC.
Irvine Co. said in December that it bought Pacific Arts Plaza in Costa Mesa, an 827,000-square-foot (77,000-square meter) property with four office buildings and four restaurants, for an undisclosed amount.
They commented that because they think they will see positive returns in the future, they are comfortable with prices that have more modest initial yields on investments as they believe the recovery will outperform what most people anticipate.
Ocean West Capital Partners, founded early last year, completed the purchase of a 16-story building at 2600 Michelson for about $70 million, or $228 a square foot, this month. The property, previously owned by MPG and 50 percent vacant, had been under receivership for a year and a half.
Ocean West bought the building in a joint venture with New York-based Dune Real Estate Partners.
Their view is they get to step in to reposition the building and to reintroduce it to the market. They expected horizon for returns is around five years. They are already seeing some leasing activity since they acquired the building.
While occupancies are starting to rise in Orange County, rents remain depressed. The average monthly asking rent at Class A, or the highest - quality, office buildings was $2.15 a square foot in the second quarter, down 5.7 percent from a year earlier. That compares with a record $3.13 in the third quarter of 2007.
Epicor Software Corp. in February signed a 10-year lease for about 68,000 square feet at a Class A building near John Wayne Airport -- a centrally located area with a high concentration of top-tier properties -- for $1.72 a square foot, which includes such services as heat and water. In May, Access Insurance Holdings Inc. agreed to a five-year lease for 31,000 square feet at a Class A building in Orange at the same rate, the brokerage said.
Those actively buying, mostly local investors who understand the market, are counting on a recovery in a region where new construction was nonexistent in the first quarter. While Orange County will come back, some office buyers may have to wait 10 years for returns.
A broader recovery in Orange County is dependent upon a decline in unemployment, which would help boost office demand and rents.
What’s striking is how quickly the appetite has returned to such a ferocious level after such a low point. In 2005, 2006 and 2007, it moved so quickly. In the last 12 months, it’s moved as quickly in terms of expectations.
RENTALS GO UP AS HOUSING GOES DOWN
This story first appeared in USA TODAY.
Empty housing has been on the rise since the recession and real estate bust, but occupancy is starting to pick up in some places — largely because of soaring rental demand.
Neighborhoods from Tacoma, Wash., to New York's Bronx borough and parts of Albuquerque are showing an uptick in occupied housing.
There are quite a lot of variations in how metropolitan areas, for example Raleigh Homes are weathering the current economic conditions. Justin Hollander, an urban planning professor, led the research.
Hollander studied data on mail delivery to residences in nearly 30,000 ZIP codes in the contiguous 48 states during the housing boom and collapse. When a unit is vacant, the Postal Service scratches the address off its delivery list.
Occupied housing has declined in about a third of ZIP codes since 2009. From 2000 to 2006, before the recession hit, there were 26% fewer postal areas that experienced an increase in vacant homes.
Widespread decline
Percentage of ZIP codes that registered a net decline in housing occupancy from February 2009 through February 2011:
Suburban areas, where most new residential development was concentrated during the real estate boom, were hit hard: The number of ZIP codes in the suburbs that suffered drops in occupancy grew the most in the latter half of the decade.
Across the southern United States, from Atlanta to Fort Myers (Fla.) to Phoenix, massive new housing developments are largely unoccupied, while older housing is abandoned due to foreclosure.
But the nobody-home phenomenon haunting more and more neighborhoods across the USA is reversing in some cities:
•Tacoma, Wash. The merger of Fort Lewis and McChord Air Force Base last year has created one of the largest military facilities in the world.
The community now numbers almost 34,000 active-duty military personnel and 5,100 reservists, 49,500 family members, more than 29,000 military retirees and 15,000-plus civil service personnel and contractors all of whom need housing.
A real estate consultant in Tacoma and the suburb of Lakewood said their rental market is very strong compared to Cary homes. So strong that rental occupancy is at 98%, she says.
A condominium project in downtown Tacoma has been converted into a 50-unit rental and is filled, mostly with military.
In the last several months, 30,000 military contractors and others have needed temporary off-base housing.
The city has not been immune to housing market woes, however. Prices have fallen 30%.
•The Bronx. Astronomical housing prices in Manhattan have pushed residents — many of them Dominican immigrants — into the adjacent borough.
Many are priced out as Manhattan continues to gentrify. In South Bronx and West Bronx, there's a pent-up demand for rentals.
In 2002, as the housing market soared, the demand for home ownership was so high that older single-family homes on big lots on the east and north sides were torn down and three or four new ones built in their place. Housing units multiplied so much that there was a limit development through zoning changes.
Many of these row houses that went up came without parking or adequate parking. Some units had nine cars per household.
Hollander's analysis shows some Bronx ZIP codes have added more than 1,000 occupied units since 2006.
•New Orleans. Hurrican Katrina devastated the city in 2005 and housing occupancy plummeted in almost every ZIP code from 2006 to 2009. In 70117, home of the decimated Lower Ninth Ward, the number of occupied homes dropped by more than 9,500 during that time.
There are signs of recovery: 1,799 more occupied units in that ZIP from 2009 to 2011. In 70122, where the Gentilly Terrace and St. Bernard Area neighborhoods are, there were almost 3,500 more occupied housing units in 2011 than in 2009.
•Albuquerque. Janice McCrary, executive vice president of the Greater Albuquerque Association of Realtors, does not mince words saying new-home building is probably dead in Albuquerque.
Yet one ZIP code (87114) on the city's far west side has added more than 3,800 occupied units since 2006. Others, in older, more established neighborhoods, have added more than 700. Apex homes are also seeing an increase of owners.
Empty housing has been on the rise since the recession and real estate bust, but occupancy is starting to pick up in some places — largely because of soaring rental demand.
Neighborhoods from Tacoma, Wash., to New York's Bronx borough and parts of Albuquerque are showing an uptick in occupied housing.
There are quite a lot of variations in how metropolitan areas, for example Raleigh Homes are weathering the current economic conditions. Justin Hollander, an urban planning professor, led the research.
Hollander studied data on mail delivery to residences in nearly 30,000 ZIP codes in the contiguous 48 states during the housing boom and collapse. When a unit is vacant, the Postal Service scratches the address off its delivery list.
Occupied housing has declined in about a third of ZIP codes since 2009. From 2000 to 2006, before the recession hit, there were 26% fewer postal areas that experienced an increase in vacant homes.
Widespread decline
Percentage of ZIP codes that registered a net decline in housing occupancy from February 2009 through February 2011:
Suburban areas, where most new residential development was concentrated during the real estate boom, were hit hard: The number of ZIP codes in the suburbs that suffered drops in occupancy grew the most in the latter half of the decade.
Across the southern United States, from Atlanta to Fort Myers (Fla.) to Phoenix, massive new housing developments are largely unoccupied, while older housing is abandoned due to foreclosure.
But the nobody-home phenomenon haunting more and more neighborhoods across the USA is reversing in some cities:
•Tacoma, Wash. The merger of Fort Lewis and McChord Air Force Base last year has created one of the largest military facilities in the world.
The community now numbers almost 34,000 active-duty military personnel and 5,100 reservists, 49,500 family members, more than 29,000 military retirees and 15,000-plus civil service personnel and contractors all of whom need housing.
A real estate consultant in Tacoma and the suburb of Lakewood said their rental market is very strong compared to Cary homes. So strong that rental occupancy is at 98%, she says.
A condominium project in downtown Tacoma has been converted into a 50-unit rental and is filled, mostly with military.
In the last several months, 30,000 military contractors and others have needed temporary off-base housing.
The city has not been immune to housing market woes, however. Prices have fallen 30%.
•The Bronx. Astronomical housing prices in Manhattan have pushed residents — many of them Dominican immigrants — into the adjacent borough.
Many are priced out as Manhattan continues to gentrify. In South Bronx and West Bronx, there's a pent-up demand for rentals.
In 2002, as the housing market soared, the demand for home ownership was so high that older single-family homes on big lots on the east and north sides were torn down and three or four new ones built in their place. Housing units multiplied so much that there was a limit development through zoning changes.
Many of these row houses that went up came without parking or adequate parking. Some units had nine cars per household.
Hollander's analysis shows some Bronx ZIP codes have added more than 1,000 occupied units since 2006.
•New Orleans. Hurrican Katrina devastated the city in 2005 and housing occupancy plummeted in almost every ZIP code from 2006 to 2009. In 70117, home of the decimated Lower Ninth Ward, the number of occupied homes dropped by more than 9,500 during that time.
There are signs of recovery: 1,799 more occupied units in that ZIP from 2009 to 2011. In 70122, where the Gentilly Terrace and St. Bernard Area neighborhoods are, there were almost 3,500 more occupied housing units in 2011 than in 2009.
•Albuquerque. Janice McCrary, executive vice president of the Greater Albuquerque Association of Realtors, does not mince words saying new-home building is probably dead in Albuquerque.
Yet one ZIP code (87114) on the city's far west side has added more than 3,800 occupied units since 2006. Others, in older, more established neighborhoods, have added more than 700. Apex homes are also seeing an increase of owners.
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