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Pledging Commercial Real Estate as Pension Contributions?

admin — Fri, 17 Jul 2009 21:47:54 +0000

From CalPERS’ lawsuit against credit agencies, we go to another more interesting lawsuit. The WSJ reports that Delphi retirees are suing over a plan to end pensions:

A group of retirees of Delphi Corp. (DPHIQ) filed suit Thursday, saying it needs an independent administrator to help stop the bankrupt auto supplier from terminating its pension plan for salaried employees and transferring the obligation to the Pension Benefit Guaranty Corp.

In a federal lawsuit filed in Michigan, the Delphi Salaried Retiree Association asked the court to replace its current trustees, who are Delphi executives, and appoint a new plan administrator “loyal only to us.”

The suit also seeks an immediate injunction prohibiting the current plan administrator from negotiating a termination with the PBGC until this suit is concluded.

“We have serious concerns about whether Delphi executives can protect our pension rights while at the same time serving Delphi’s shareholders and creditors,” the retiree group said.

The group said it was not notified before Delphi announced its PBGC plan June 1.

Separately, the association filed an objection in the Delphi bankruptcy case to a provision stating the pension plan, by agreement, shall be terminated and transferred to the PBGC.

On Monday, General Motors Co. moved closer to buying its former parts unit Delphi when a bankruptcy judge said GM could move forward with a plan that will allow the auto maker to team up with a private-equity firm to buy Delphi and take it out of bankruptcy.

The deal, approved by Judge Robert Gerber of the U.S. Bankruptcy Court in Manhattan, is designed to ensure GM a steady supply of parts and allow Delphi to exit bankruptcy after nearly four years in Chapter 11.

But another New York bankruptcy judge, who is overseeing Delphi’s bankruptcy case, also needs to sign off on the agreement. That hearing is scheduled for next week.

Meanwhile, Delphi’s lenders said Thursday that they will bid for the auto-parts supplier this week and try to defeat the sale to GM and the private-equity firm.

One condition of the GM agreement is Delphi will not be on the hook for unfunded pensions for its hourly workers, an amount that totals about $3.2 billion. GM, Delphi and the government’s pension watchdog are negotiating an agreement by which GM would assume some or all of those pension costs, court document show.

Delphi, which was spun off from GM in 1999 and filed for bankruptcy in 2005, has seen its value plunge amid falling auto sales and has struggled for more than a year to pull together the financing it needs to exit bankruptcy.

Delphi officials were not immediately available for comment.

It is worth watching developments out of this Delphi lawsuit very carefully. I have to agree with the Delphi Salaried Retiree Association that they need to find a new plan administrator “loyal to them”, but they are going to have a tough battle proving this in court.

In another interesting development, CoStar Group reports about a deal where commercial real estate was pledged in lieu of cash for pension contributions:

YRC Worldwide Inc., the financially troubled Overland Park, KS, trucking company, completed a pension contribution deferral agreement with the Teamsters Union to defer the payment of $94 million of contributions due last month.

In exchange, YRC has pledged real property so that the union has first priority security interest in the property. The real estate is located throughout the United States and Mexico.

YRC Inc., USF Holland Inc., USF Reddaway Inc. and New Penn Motor Express, Inc., made the deal with the Central States, Southeast and Southwest Areas Pension Fund with Wilmington Trust Co., as agent. The Central States Pension Fund is the largest of the Company’s International Brotherhood of Teamsters (“IBT”) multiemployer defined benefit pension funds, representing approximately 58% of the company’s pension funding obligations.

The initial agreement covered $83 million in pension contributions. Since the initial agreement, seven additional union funds have joined as participants in the same agreement for a deferral of an additional $11 million.

If YRC were to default on cash contributions, the union funds would have the right to foreclosure on the pledged properties.

Unions better be careful accepting pledges of commercial real estate in lieu of cash as pension contributions. Forbes recently interviewed the world’s best real estate investor, Tom Barrack of Colony Capital, who said he expects a refinancing crunch over the next few years to cause misery:

I quote the following from Mr. Barrack (but read the entire article):

“It’s bad and it’s getting worse at the moment. The $700 billion commercial mortgage-backed securities (CMBS) market still has no new money for buyers or refinancing. About a third of that is due at the end of 2010 and 2011 and the majority between 2010 and 2012. So you have $750 billion in refinancing needed over the next 24 months and you don’t have one lender.”

On that cheerful note, I am off to the southern part of Rethymno, Crete to enjoy a weekend of tranquility and reading my books. I am seriously wondering whether or not to return to Montreal where I hear the weather has been miserable this summer.

http://pensionpulse.blogspot.com/2009/07/commercial-real-estate-as-pension.html

reviewed by Moishe Alexander, CFC canadian funding corp CEO

Real Estate Market Will Start to Rise

admin — Wed, 15 Jul 2009 18:34:26 +0000

2008 will be known best known for it’s rough real estate property foreclosures and price drops. There has not been a real estate market crash. The 1980’s crash has been referred to many times in the same breath as the recent disaster.

Things are looking up for the market and by the end of ‘09 we should see properties start rising again. Property owners will love hearing this as some weren’t sure it would ever happen. Once the market hits rock bottom, it will start gaining steam and you will see pricing start to rise.

Knowing how the crash originally crashed is the only way you will be able to comprehend how there will ever be a rise again. Different components can easily be fingered as the market down fall. In 2000 the housing market starting a price rise that would last until 2006, in this time most communities would see their property price double.

As prices were rising at amazing rates, potential buyers acknowledged that they weren’t making enough money to purchase a home. There started to be a lot of houses on the market but no suitable buyers, this meant values had to come down in order for people to be interested in them.

Most people have seen all the news about how sub-prime mortgages played a big role in the crash of the market. Although this wasn’t a direct factor in the Kamloops real estate market, we were still affected, along with other cities in Canada.

Loans were being applied for by potential purchasers that knew they couldn’t handle the payments. Loans were still being approved for these buyers with little to no down payments and extended years on their mortgage terms.

Mortgage payments could not be met due to insufficient funds, so loan company’s pressed the home owners. People were beginning to lose there houses to foreclosure. The more foreclosures happen the more houses starting coming on the market. Prices would fall because there were not enough buyers for all of the houses. It was no longer a sellers market.

Faulty loans was a monster of a problem in America, but as we know, whatever happens usually affects us too. Their markets are now close to their ultimate low point. This is solid news for us because that means we will start seeing a rise.

The majority of large cities are already seeing a rise in real estate prices, meaning that a rise in the little communities shouldn’t be far behind. Also now that with the down trend in real estate pricing, you will see more people can afford to buy again. You will start to see how this will affect us in a positive way. It had to happen sooner or later.

http://www.real-estate-news-articles.com/real-estate-market-will-start-to-rise/

reviewed by Moishe Alexander, CFC moishe alexander CEO

The June Housing Statistics Are In

admin — Thu, 09 Jul 2009 16:00:04 +0000

As many of you have probably heard by now, this June was the best on record in terms of house sales as reported by The Toronto Real Estate Board.

The total number of houses sold rose by an amazing 27% in June while the average sale price rose 2%. Keep in mind that these statistics include all of the GTA from the Hamilton/Wentworth townline in the west to the Durham/Northumberland townline in the east and from Lake Ontario north into Lake Simcoe. Of course not all areas experienced the same amount of growth, however, Durham Region (on the most part) is in line with these increases. To see a 3 year comparable market evaluation for South Pickering, North Pickering, Ajax, Whitby, Oshawa and Courtice/Bowmanville click on Durham Region.

The other statistic to take notice of is the number of homes for sale this year as compared with last year. While sales have increased 27% this June, the number of new listings has decreased by 17% and the number of active listings has decreased by 30%. What does this mean for sellers and buyers? There is a lot less inventory to choose from and a lot more people who are looking to buy. This would explain the rise in the number of multiple offers we have been seeing over the past several weeks as well as the increase in prices.

Who knows where all of this will end up in the next several months. There is still some speculation in the economic circles that the “worst is yet to come” and yet others have changed their predictions to an earlier anticipated recovery.

http://getmovingwithkaren.blogspot.com/2009/07/june-housing-statistics-are-in.html

reviewed by Moishe ALexander, CFC canadian funding corp CEO

Don’t Sell the Minivan By Mistake!

admin — Wed, 08 Jul 2009 20:30:25 +0000

By Brian Madigan LL.B.

Ordinarily, one would think that chattels are not included in an agreement of purchase and sale concerning real estate. And, most of the time they would be right.

However, this is not the case when we are talking about the sale of a business. Under the Real Estate and Business Brokers Act the term “real estate” is defined to include real property, leasehold and business whether with or without premises, fixtures, stock-in-trade, goods or chattels in connection with the operation of the business.

Bob operated a small electrical contracting company. After 25 years in the business, he felt that it was time to retire. In addition to the 10 trucks all clearly marked “Bob’s Electric”, he had recently purchased a minivan. Bob used this vehicle to get to work. He acquired it right at the end of the year so that he could maximize the depreciation. Bob listed the business and negotiated an excellent price.

You might imagine his surprise when it came to the day of closing and his lawyer had prepared a Transfer of the minivan for him to sign. Bob said it was not part of the deal. There was nothing about the minivan in the agreement of purchase and sale. This was true!

His lawyer reviewed the agreement and said that the definition of “real estate” when it concerned the sale of a business included chattels. Since the minivan had been acquired and used in connection with the business, no matter how remote this connection might be, the minivan was deemed to be part of the deal. The obligation rested upon Bob to clearly exclude it, if that was his intention. It did not have to be written into the agreement to become part of the deal. Silence meant the minivan was part of the deal.

So, on closing the purchaser received an assignment of the lease, the stock-in-trade, the fixtures, the 10 trucks, and to his surprise, Bob’s brand new minivan that he drove to work.

In addition, there is one more little problem here worth mentioning. Bob was attracted to the minivan because of the zero percent financing spread out over five years. You guessed it! The agreement of purchase and sale conveyed the title to the assets “free and clear of all encumbrances”. So, out of the funds due on closing, Bob had to pay off the loan on the minivan in order that the purchaser would get clear title.

This little glitch arises in many business transactions, but most of the time neither the buyer nor the seller are aware, and no one asks about the minivan that the owner uses to get to work. There was some good news however. Bob had been thinking about buying a Mercedes.

http://ontariorealestatesource.blogspot.com/2009/07/dont-sell-minivan-by-mistake.html

reviewed by Moishe Alexander, canadian funding corp CEO

Tinkering With Cognition

admin — Fri, 03 Jul 2009 23:47:44 +0000

Any time I step into a lawyer’s office, I feel guilty.

I do not know whether it has anything at all to do with my profession, or if it is the series of books that lawyers are so fond to prominently display behind their desks. Those old, conspicuous textbooks with ominous titles written in gold Gothic characters on yellowish or greenish hardbound covers, barely readable, much less understandable. I noticed that no matter whether the law office is located in Canada or in the United States, those textbooks look exactly alike. I still have to see a single lawyer actually reading one of them, however, so my personal theory is that those books are hollow inside and used to conceal who knows whatever arcane secret items or, perhaps, just unsavory culinary recipes. In real estate too we are fast approaching the time when our shelves are going to be filled with all sorts of books. Yellow, red and blue, with manuals covering all sorts of topics from Ethics in Real Estate to How to Write a Contract And Not Go To Jail. I have been tinkering with the idea of writing a manual myself – just a small pocketbook entitled “Top 10 Successful Strategies To Defuse Sellers Armed With Pitchforks”, which I figure would be an instant hit with many of us.

With the ever-advancing technology of our times fields of expertise that are crowd-oriented, such as the legal and real estate professions, are poised to experience dramatic changes in the forthcoming years. As it relates specifically to real estate, to be sure, technology has had already a great impact but innovation is not over yet and it is not confined merely to the use of sophisticated hardware. There is on the horizon a new conceptualization of professionalism, an absolutely novel way to haess individual resources for the common good of all. It is called ‘collective intelligence’, a techno-jargon concept that will revolutionize the way we – the professionals – think, act and interact among ourselves as well as with the communities we serve. Collective intelligence tinkers with the way cognition and information processing are structured and relayed to consumers, especially when they involve knowledge, expertise and leaing. It also delves into methods of gathering and sharing information and resources that bind different groups, or associations, or disciplines. Real estate is, of course, intertwined with banking, law, economics, marketing and urban sciences and collective intelligence links and bind together different networks or resources to coordinate a more efficient and comprehensive response to ever- sophisticated demands.

Real estate professionals are called more and more to field questions that go over and beyond the mere act of selling. In fact, it can be said that selling in real estate already represents the last stage when the professional is finally compensated. But before that there is an array of issues that must be confronted and answered, ranging from understanding regional economics such as, for instance, local job environments and trades to proficiency in specific areas such as cultural orientation and demographic diversity to acquaintance with well-defined facets of disciplines the likes of architectural styles, land-assembly and development, and contract law. This radicalization of the real estate business to come is in response to the evolution of choices of market participants. Although singular consumers do not have more power over market events than before, they certainly have improved their chances of getting what they want because they have a greater variety of choices. We are, in essence, entering an era where the professional leas and stores information gathered from a group or organization and is ready to deliver it to a consumer, or another group or organization, on demand for the purpose of enhancing choices through expertise.

Sharing information is of paramount importance in real estate, since there is not a ‘national’ market per se. Real estate is made of a compilation of local economies, each abiding to a set or sets of local inputs and variables. What is happening in Toronto does not directly affect what is happening in Vancouver. And yet, there is a common thread shared in the needs of individual expressions of market participants, no matter where they are located. The Realtor, as an integral part of his function and purpose, is going to be required to contribute to the building of a consensus decision-making process that involves meeting everyone’s needs and which is intended to promote and enhance the decision-making process of each individual consumer, whether a person, a group of persons or an organization.

http://realestatesold.blogspot.com/2009/07/tinkering-with-cognition.html

viewed by Moishe Alexander, CFC CEO

Canadian home resale prices rise to record in May

admin — Wed, 17 Jun 2009 15:13:23 +0000

This is the latest article regarding the health of the Canadian real estate industry for the month of May. Published today on the msn finance page. Certainly worth a read as it shows the Real Estate market in a very positive light. As I noted in my post yesterday Canmore real estate is starting to move again with increased activity driving the sales.

REUTERS

June 15, 2009

TORONTO (Reuters) – Resale prices for Canadian homes rose to their highest average on record in May, while sales activity climbed for a fourth straight month as consumer confidence strengthened, according to an industry report released on Monday.

But rebounding sales in some of the most expensive markets skewed the national average, the Canadian Real Estate Association said in the report.

The average home price last month rose 0.4 percent to C$319,757 ($282,971), topping the previous record set a year ago. It was the first year-over-year increase since May last year.

The average price has recovered 16.4 percent from the low reached in January, CREA said.

Home sales rose 8 percent to 37,649 units in May from April, the fourth consecutive monthly increase on a seasonally adjusted basis. Nationally, 49,521 units changed hands in May, down 0.8 percent from a year ago.

“New records were posted in only 15 percent of local markets in May, none of which are among the most active or expensive,” CREA said.

“The strong rebound in sales activity, not price, in Canada’s most expensive markets is driving up average prices nationally and in some provinces, just as a sharp decline in activity in these markets pushed average prices lower in late 2008.”

Of the 25 major markets that CREA tracks, 14 reported rises in unit sales year-over-year, with five markets, mostly in the western provinces of Alberta and British Columbia, posting double-digit increases.

Prices rose in 14 markets, led by a 17.3 percent increase in Newfoundland and Labrador and a 12.1 percent climb in Saint John, New Brunswick.

($1=$1.13 Canadian)

http://soldbyrichard.wordpress.com/2009/06/15/real-estate-news/

reviewed by Moishe Alexander, CFC CEO

RIDING THE … REAL ESTATE ROLLER COASTER

admin — Tue, 16 Jun 2009 16:51:35 +0000

Heather Harding and her husband, film editor Graham Withers, have been on the real estate sidelines looking for a home for the past 18 months. The Toronto couple, renters, started their search when the market was at the top and every home they looked at was “just too expensive.”

But now that prices are finally falling and affordability is increasing, there is another major stumbling block in their search: Job security.

“There just seems to be so much uncertainty. Prices in the range we have been looking at haven’t changed all that much, either,” said Mr. Withers.

“We keep waiting for the big housing crash,” said Ms. Harding.

They look to the situation in the United States and see prices dropping by as much as a third in many markets, but that hasn’t happened here. The Canadian Real Estate Association said prices across the country in the first four months of 2009 were down 6.7% compared with a year ago.

That’s the real-estate rub: Sales have stalled as vendors refuse to lower prices while buyers sit on the sidelines waiting for a deal after more than a decade of rising prices.

To be sure, the deals have finally begun to materialize, although not from plummeting prices. Rather, record-low interest rates, whether consumers are borrowing long-term or short, are a key factor in the new real-estate affordability.

Consider a $300,000 mortgage. At the 3.75% rate some mortgage brokers claim they can get for a five-year closed mortgage, the monthly payment is $1,537.67, based on a 25-year amortization. A couple of years ago, when the rate was closer to 5.75%, the same mortgage would cost 22% more, or $1,875.07 a month.

Cheap money has created a classic economic battle. In one corner stands the real estate industry, trying to lure buyers with rates so low it is now cheaper to own than to rent. In the other is the skittish consumer who is too focused on job concerns to care about interest rates.

For the first time this decade, the Royal Bank of Canada’s Affordability Index, which measures the percentage of household income needed to carry a home, is declining.

“We’ve seen affordability improve across the board, but especially in some centres where it had deteriorated over the past few years,” said Robert Hogue, senior economist with RBC.

Financial Post — Peter J Thompson

reviewed by Moishe Alexander, CFC CEO

Luxury Homes Sales Rebound: Moishe Alexander inform

admin — Tue, 16 Jun 2009 16:44:32 +0000

May 2009 strongest month on record for luxury home sales, says RE/MAX

Sales of luxury properties in the Greater Toronto Area posted their strongest performance on record in May 2009, according to RE/MAX Ontario-Atlantic Canada.

Two hundred and seventy-three high-end homes changed hands in May 2009, up six per cent from 258 reported during the same period one year earlier, and the highest number of sales over $1 million in a one-month period in the history of the Toronto Real Estate Board. The previous record was set in May of 2007 at 266 sales.

“Confidence is slowly returning to the marketplace,” says Michael Polzler, Executive Vice President, Regional Director, RE/MAX Ontario-Atlantic Canada. “Traditional market indicators are in place – the stock market has made tremendous gains in recent months, crude values have risen significantly, and the Canadian dollar has gained almost 10 points in the past month. Combine these influences with pent-up demand and growing economic stability and you have the ingredients for solid sales in the top-end of the market.”

Further evidence of a rebound is the recent sale of a Bridle Path home priced at over $13 million, the first sale over the $10 million price point in more than a year. The 18,000 sq. ft. gated estate, situated on more than two acres, was listed by Barry Cohen, Broker, RE/MAX Realtron, and featured a spectacular backyard with a negative edge waterfall pool, fountains, hot tub, and tennis court.

Demand for homes priced in excess of $1 million has increased steadily since the beginning of the year, says Polzler, mimicking the overall real estate market. Seven hundred homes have changed hands year-to-date, compared to 944 in January to May of 2008. Given current momentum, however, it’s likely that activity will continue at a healthy pace for the remainder of the year – with sales at year-end at least on par or ahead of 2008 levels.

RE/MAX is Canada’s leading real estate organization with over 17,600 sales associates situated throughout its more than 677 independently-owned and operated offices across the country. The RE/MAX franchise network, now in its 36th year, is a global real estate system operating in more than 70 countries. Over 6,700 independently-owned offices engage nearly 100,000 member sales associates who lead the industry in professional designations, experience and production while providing real estate services in residential, commercial, referral, and asset management. For more information, visit: www.remax.ca

David Pylyp Specific review of the W08 neighbourhood revealed 11 sales between 1.0 and 1.5MM in the last 30 day period (eom May 09)

http://eleganthomesinwesttoronto.blogspot.com/2009/06/luxury-homes-sales-rebound.html

Residential Home Values Toronto, Ontario – June 2009

admin — Tue, 16 Jun 2009 16:39:46 +0000

Home values Toronto monthly report : June 2009

Residential home values and monthly trends for Toronto Metro Area, Ontario Canada

Home Values TORONTO,
Residential For Sale – June 2009

<=> May
– 4br $700.000,00 +25%▲
– loft $440.000,00 +13%▲
– single family $420.000,00 =
– 3br $420.000,00 =
– 1br $390.000,00 =
– 2br $380.000,00 =
– duplex $370.000,00 -18%▼
– studio $340.000,00 =

Home Values TORONTO,
Residential For Rent – 06/2009

<=> May
– loft $1.400,00 =
– duplex $1.300,00 =
– 3br $1.300,00 =
– 2br $1.300,00 =
– 4br $1.200,00 -25%▼
– studio $1.000,00 =
– 1br $940,00 =

Brouth by Moishe Alexander, CFC CEO

Report from Moishe Alexander: Toronto Real Estate Average Prices

admin — Mon, 15 Jun 2009 18:51:02 +0000

With the Toronto Real Estate starting to grow month over month we are seeing more and more comparisons to average prices.

True, the month over month statistics show an increase in resales from January 2009. This is good because we sense at the very least a direction of the entire Real Estate Market both for the City of Toronto and the GTA as well.

It gives homebuyers and home buyers a sense of direction and this can definitly help in the purchase or selling of a home. Even different neighbourhoods will hold up their value even in a down Real Estate Market.

We like to follow Toronto Condos in certain Central Districts to do just that, find a direction the resales are taking not only in price but sales as well. We picked the bigger districts with the most sales top give a rounder view of the “averages”. A smaller Central District with just a few resale Condos in Toronto would give a different picture than another Central District with 700 sales.

http://torontocondos.wordpress.com/2009/06/15/toronto-real-estate-average-prices/