Daily Report

January 10, 2012

Fed begins controversial push to revive housing market

The Federal Reserve has launched a potentially controversial push to revive the battered U.S. housing market, calling on other government officials to act after largely exhausting its own tools to support the fragile economic recovery, Reuters reports. After the Fed slashed interest rates to near zero more than three years ago and amassed $2.3 trillion in bonds to spur growth, the U.S. economy showed some momentum toward the end of 2011. But many analysts are doubtful the recovery will achieve take-off velocity in 2012, and housing is one of the biggest drags. U.S. house prices have fallen 33% from their 2006 peak, resulting in an estimated $7 trillion in household wealth losses, the Fed said last week as it took the unusual step of making an array of recommendations on housing policy to Congress. Fed officials are trying to use the central bank's influence to overcome political resistance to expanding the government's role in housing, which has been an important driver for the U.S. economy as it emerged from past recessions. That resistance is likely to be strong as this election year progresses, and could produce a backlash against the Fed and the Obama administration. The Fed's push also runs counter to Chairman Ben Bernanke's vow when he took office in 2006 to keep the central bank's focus on monetary policy issues after his predecessor, Alan Greenspan, had drawn fire for wading into political debates over taxes and spending. Read the full story here.

This week's poll question: Do you think the Federal Reserve is overstepping its boundaries in trying to push others in government to approve initiatives intended to revive the U.S. housing industry?

Former Blockbuster on College purchased, eyes new life

Verizon Wireless and Gameware Inc. have each signed a lease to open in the former Blockbuster at 3131 College Dr., says new owner and Dallas-based developer Walter Salek, and a deal is in the works with Panda Express that would see the 5,500-square-foot building expanded. Salek purchased the building last December, declining to say for how much; but Beau Box Commercial Real Estate agent Austin Earhart, who helped facilitate the deal, says the sale price was roughly $1.2 million. Earhart says Verizon Wireless has been working to open a store in the area for some time. For Gameware Inc., the new location will be just a block from its current store in the College Creek shopping center at 3151 College Dr. "They're supposed to complete the build-out on February 7, and I'm hoping to be in there by the 14th or 15th," says Gameware Inc. owner Steve Bernhard, adding that the new location offers increased visibility and better access. The video game retailer will occupy about 1,700 square feet. Salek says Verizon Wireless should be open by March. If and when the deal with Panda Express is finalized, Salek says, the building will be expanded by 2,200 square feet to accommodate the restaurant. He stresses the deal is still tentative, but says the addition could be complete by the end of the year. —Steve Sanoski

DeAngelo expands restaurant offerings in Capital Region

Restaurateur Louis DeAngelo has opened his seventh Louis DeAngelo's Casual Italian Dining restaurant in the Baton Rouge area, as well as a new restaurant concept and wine bar in the II City Plaza office building downtown. DeAngelo's latest namesake restaurant is located in Central, at 9952 Sullivan Road. He describes his new restaurant concept—Zolia—as "a little bit more of an upscale Italian bistro" with a "completely different" menu than what customers are used to seeing at DeAngelo's pizzerias. Zolia is about 2,400 square feet in size, with access to the portico between City Plaza and II City Plaza. It's serving breakfast, lunch and dinner, with hours from 6:30 a.m. to 8 p.m., Monday through Friday. DeAngelo partnered with II City Plaza developer Mike Wampold on the restaurant, and says he had the concept on the drawing board for about five years. "I really wanted to do something creative and different, at a restaurant serving breakfast, lunch and dinner," DeAngelo says. "II City Plaza made the most sense for the location, because the concept really appeals to more of a business crowd, as opposed to the families we serve at our traditional restaurants." DeAngelo opened the Central restaurant the week before Christmas, and Zolia the week between Christmas and Jan. 1. Check out the Zolia website here for more information and a full menu. —Steve Sanoski

Cook: Warehouse manufacturing facility sells

Bank Assets has sold a manufacturing facility at 39015 La. 74 in Gonzales to Sholar Rentals for $850,000, or about $29.50 per square foot. Larry Dietz, CCIM with Saurage Rotenberg Commercial Real Estate, brokered the transaction, which closed Dec. 30, representing both the buyer and seller. Sholar Rentals already owned a building next door, and purchased the facility for expansion of its industrial manufacturing operation. The 28,800-square-foot building is made up of approximately 10% office space and 90% warehouse space, and is situated on 2.8 acres. The building has a 20-foot eave height with multiple cranes and crane ways.

—The Lion's Way of Hammond apartment project at 15043 Woodstone Dr. changed owners on Dec. 28. The seller was Lionsway, represented by Robert Day; and the purchaser is Property Asset Holdings, represented by Daniel Laborde of Hammond. The 144-unit complex sold for $5,450,000. The property consists of 64 one-bedroom, one-bath units, and 80 two-bedroom, 1.5-bath townhouse units. The total leasable space is roughly 125,000 square feet, and the price per unit breaks out to approximately $37,850. David Treppendahl of NAI/Latter & Blum handled the deal for Lionsway, while Brent Garrett of Beau Box Commercial Real Estate represented Property Asset Holdings.

(Appraiser Tom Cook owns Cook Moore and Associates. Reach him at 293-7006 or [email protected].)

Andrews: Sears closings will impact local loans

It was not just the retail world that was shaken by the recent announcement that Sears Holdings would close 100 to 120 stores. Holders of long-term loans secured by Kmart and Sears leases were also left unnerved by the announcement since, according to industry watchdog TreppWire, "Sears and Kmart both have a sizable presence among CMBS collateral." And while there have been no store closings announced in southern Louisiana as of the date of this writing (the closest is a Sears in Jackson, Miss.), the impact will still be felt in our area. Commercial real estate lenders like diversification of risk, and it makes them nervous if a significant amount of a loan's repayment source comes from a single tenant. The risk is mitigated if the tenant has a strong credit rating and a positive outlook, and I have closed numerous retail loans with strong anchor tenants (though to be honest, not recently). The challenge in underwriting comes up with weaker anchor tenants or longer-term loans that are subjected to the risk of changes in a currently strong retail tenant's fortunes. I expect that the lenders in our area will be aware of the Sears situation in at least an anecdotal sense and approach all retail transactions with concentrations of tenant credit in a cautious manner even when a Sears or Kmart is not involved. This will translate into shorter amortizations, shorter maturities and lower loan-to-value ratios for all such transactions.

(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Real Estate Services, and he can be reached at [email protected].)

Real estate recap: Area home prices continue slide in November … B.R. foreclosure rate rose in October … Realtors' Leading Edge Conference on the horizon

Down, down, down: Outpacing a national trend that saw the average U.S. home price drop by 1.4% in November, Baton Rouge home prices fell by 5.3% on the month compared to prices a year ago, says the November Home Price Index released Monday by CoreLogic. The figures include distressed sales. Excluding short sales and real estate–owned transactions, however, prices fell by 0.6% in both the United States and Baton Rouge. Prices in Baton Rouge have been steadily falling in recent months. Including distressed sales, Baton Rouge saw prices decline 2.7% in August, 3.4% in September and 3.8% in October, compared to the same months in 2010.

Up, down, up: The foreclosure rate in Baton Rouge was 2.4% in October—an increase of 0.04% compared to the same month a year ago—according to data released today by CoreLogic. Louisiana posted a 0.13% decrease in its foreclosure rate on the month, but its rate remained slightly higher than Baton Rouge's, at 2.49%. The national foreclosure rate stood at 3.51% in October, an increase of 0.22% from the year previous. The foreclosure rate in Baton Rouge saw small up-and-down swings over much of 2011. Read the full story here.

The down low: Louisiana Realtors' Leading Edge Conference will be held at the Hilton Baton Rouge Capitol Center on Wednesday and Thursday, Jan. 18 and 19. The conference is designed especially for volunteer leaders, team and committee members at the association's local and state levels, and includes leadership development programs, orientation for new leaders and information on a wide range of critical real estate issues. There's also a pub crawl. For a complete schedule and registration information, click here.

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