Business Report, 225 relocating to Cardinal Hill

Louisiana Business Inc., which publishes Business Report, 225 magazine 10/12 and Daily Report, plans to leave its downtown office at the end of the year and move into Cardinal Hill, an office building currently under construction on Jefferson Highway. Louisiana Business will take up about 12,000 square feet on the top floor of the three-story development, which also will be occupied by Evans-Graves Engineers, and temporarily sublease 3,000 square feet. The office building will be finished by the end of the year and the move should take place in early 2009. Louisiana Business CEO Rolfe McCollister says the move will not impact the magazines' support of downtown redevelopment or sponsorship of events such as Live After Five and Sundays in the Park. "It was a very tough decision we had to make regarding our needs for the future,” McCollister says. “One we made with the head, not the heart." McCollister says relocating to Cardinal Hill and owning part of the building instead of paying rent is the best long-term decision for the 26-year-old company. Louisiana Business has been in the City Plaza building on North Boulevard since the end of 2001. "We have loved being in downtown in City Plaza and have the greatest landlord in Mike Wampold," McCollister says.--Timothy Boone

Community banks keep development rolling

Local real estate insiders are heaping praise on community banks for stepping up to provide financing for a number of projects after bigger national lenders tightened their standards in the wake of the subprime mortgage meltdown. "We have a niche and we know who we are lending to," says Dennis Shill, president and chief lending officer for Business First Bank. "We're dealing with people who have banked with us over the years and we know they have liquidity."

Dave Petro, president of the Independent Community Bankers of America's Mortgage subsidiary, says his members report a 16% increase in the dollar volumes of loans. ICBA Mortgage is made up of more than 1,000 community banks, with assets ranging from $100 million to $10 billion. "We've got a good solid growing business and we're still closing loans," he says.

That increase is impressive in light of a recent report from the federal office of Thrift Supervision showing the value of all mortgage loans nationally dropped by 21% in the first quarter when compared to 2007. Petro says the growth is due to good, stable practices.

"When the real estate boom was happening three to five years ago, we were not offering low money loans," he says. At that time, big banks were "doing anything to put people in a house." Now the market has taken a hit up, bigger lenders are getting stricter about who they loan money to, while community banks can "make loans on things that make sense," he says.--Timothy Boone

Builders Association going green for workshop

The Capital Region Builders Association will hold a workshop on green building for building professionals June 11-12 at its offices on Kentshire Court. The workshop will be led by Michael Strong of Brothers Strong and GreenHaus Builders of Houston. Registration is $365 for CRBA members and $465 for nonmembers. For a registration form or more details, click here.

Poll: Readers split on effects of gas prices

The majority of Real Estate Weekly readers say the rising gas prices will have an effect on the local housing market, but they're pretty evenly spilt on if the impact is being felt now or will happen soon. Thirty-nine percent of the people who responded to an online survey say the effects of the fuel costs are happening now. Thirty-nine percent also say the local housing market will soon feel the effects if gas prices climb above $4 a gallon. Nineteen percent don't think the prices will affect the housing market, and 3% are unsure. More than 150 people participated in the survey.

This week's question: Which of these retail centers is the best place to open a new store?

Tom Cook: The art of the deal

Ty Gose with NAI/Latter & Blum Realtors has put together a complicated deal for Louisiana Office Supply.

In October, Gose brokered the deal to sell the 130,000-square foot Kornmeyer’s Building on Florida Boulevard to LOSCO for $4.7 million. LOSCO then subdivided the rear warehouse area, containing about 45,000 square feet, and offered it for sale. The rear warehouse portion has now been sold to Westport Linen for $2.25 million, or about $50 per square foot. Westport Linen was represented by Robert Pettit at NAI/Latter & Blum Realtors.

Gose also recently brokered the sale of the office supply company's old location at 5550 Florida Blvd. The 33,500-square-foot building sold for $1.65 million, or about $50 per square foot.

So, Louisiana Office Supply ended up purchasing the Kornmeyer's building for $4.7 million, selling their original location for $1.65 million and selling the warehouse portion of the furniture building for $2.25 million. That leaves Louisiana Office Supply in the remaining 95,000 square feet for $800,000 or about $8.50 per square foot. Louisiana Office Supply did renovations to the existing building to accommodate their operation even though Kornmeyer's had renovated the space less than 3 years prior to the sale. But $8.50 per square foot for the portion of the Kornmeyer's building that served as showroom and office space is an excellent deal.

"This was a very complicated transaction to put together and included a reverse exchange and having to argue extensively with appraisers, but was well worth it for my clients to get what I think is an excellent deal,” Gose says.

(Appraiser Tom Cook owns Cook Moore and Associates. Reach him at 293-7006 or TCook@cookmoore.com.)

Brian Andrews: Putting the "lie" in LIBOR

LIBOR, or the London Interbank Offered Rate, is one of the two primary floating rate indexes used by lenders, the other being the Prime Rate. We have heard a lot about the Prime Rate recently and how it has come down steadily in a lockstep manner each time the Federal Reserve reduced the Target Rate. Most of us do not know where LIBOR comes from, so when it was reported in The Wall Street Journal that LIBOR might have been recently manipulated, it may be difficult to understand the issues.

LIBOR is the rate of interest at which banks borrow from each other in the London interbank market, with the British Bankers' Association (BBA) handling the process. According to its website, the BBA "maintains a reference panel of at least eight contributor banks" and "surveys the panel's market activity and publishes their market quotes on-screen." Then the British bean counters take over. "The top quartile and bottom quartile market quotes are disregarded and the middle two quartiles are averaged: the resulting 'spot fixing' is the BBA LIBOR rate." So in a nutshell, the BBA picks a bunch of banks (currently it is a 16-bank panel) and asks them to report the rates charged to others banks on interbank loans, then they average the rates and we wind up with LIBOR.

This process has gone on for years and works fine, as long as the banks tell the truth about the rates they are charging. But that truth-in-reporting assumption has been called into question.

In April The Wall Street Journal started questioning the accuracy of LIBOR, comparing the way LIBOR was moving in comparison to other economic factors and noting some inconsistencies. More recent articles claim that five of the sixteen bank panelists have been lowballing the rates so they wouldn't look desperate for cash. According to the Journal, "that has led Libor, which is supposed to reflect the average rate at which banks lend to each other, to act as if the banking system was doing better than it was at critical junctures in the financial crisis."

The BBA is examining its procedures again and is considering rotating some of the 16 bank members off of the panel. A report of its findings and recommendations is due any day now and LIBOR rates have increased to where they should have been all along.

So what does this mean to us in South Louisiana? The good news is that borrowers who had loans tied to LIBOR might have been getting lower rates than they otherwise would have. It is possible, however, that some borrowers who recently closed LIBOR-based loans might have higher spreads than they otherwise should have. Talk to your bankers to find out more.

(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)

Real estate recap: Investors buy Summer Grove; police substation, art gallery could be coming to Third Street; Perkins property sold for seafood market; store owner pays $1 million for site

Florida Boulevard apartments sell for $4 million: An investor has purchased the 80-unit Summer Grove apartment complex on Florida Boulevard for $4 million. New Jersey-based Viking Global Ventures purchased the apartments near South Sherwood Forest Boulevard. Ruston Properties, which owned Summer Grove, will continue to manage the apartments. Ruston had planned to convert Summer Grove into condominiums, but problems in the subprime lending market put that on hold. More downtown development: City officials are negotiating with the state to take over retail space in the Third Street Parking Garage. The plans are to build out the garage, turning part of it into a downtown police substation and the rest into a gallery for the Arts Council of Greater Baton Rouge. Derek Gordon, CEO of the Arts Council, says the substation would take up about 600 to 700 square feet, with the gallery occupying the remaining 1,300 square feet. Second location for LA Boilers: A 1.73-acre tract on Perkins Road near the Associated Grocers offices has been sold for $400,000. LA Boilers and Seafood Market bought the property in a deal that closed Thursday. LA Boilers, which has a location on O'Neal Lane, plans to build its second market, says Randy Herring of Sealy & Falgoust, who represented the buyers. Mark Hebert of Kurz & Hebert Commercial Real Estate represented the sellers, the Anselmo Childrens' Trust. Simpson's proprietor buys 2-acre Nicholson site: Chet Simpson has purchased a 2-acre site at Nicholson Drive and Gardere Lane for $1 million. Simpson, who owns Mid City Mart on Florida Boulevard and Dutchtown Tiger Mart on La. Highway 73, says he plans to build a convenience store on the site in the next three months.