Monday, March 14, 2011 | 3 a.m.
International investors are swooping into Las Vegas and purchasing distressed commercial real estate, many times blowing away much lower offers from domestic buyers.
Real estate brokers, consultants and developers talked about the latest trends within the commercial foreclosure market at an International Council of Shopping Centers event. I spoke with them afterward.
Rick Myers, president of Thomas & Mack Development Group and a consultant for Nevada State Bank, said since mid-2009 the bank has sold 85 distressed properties worth $120 million.
About 85 percent were vacant land and many deals ranged from $700,000 to $1.5 million with some exceeding $10 million, Myers said. And about 85 percent of the deals were with offshore investors.
“It’s so different from what were used to,” Myers said. “How do you qualify someone from China?”
Two-thirds of the foreign buyers are from the Middle East and one-third from Asia, Myers said. In many cases, it’s people coming together to do a deal with all cash, he said.
The international buyers have a different perspective and time frame. They’re looking at the long term rather than what kind of return they can get on their investment in two to five years, Myers said.
Myers recalled a discussion with a broker who talked about making an offer on a building worth $250,000.
“I wrote back, and said I agree with every one of your assumptions. I wouldn’t pay more than $250,000 for this, but I got an offer for $1.4 million right now. We sold it for $1.4 million.”
Myers said judgment can’t be passed on those foreign buyers if they’re overpaying. That will be determined in the next 10 to 20 years because they’re using such a long-term criteria, he said.
Myers said the deals aren’t driving up market prices because many investors won’t be influenced by what the international investors are paying.
The deals lately have shifted away from land to larger commercial projects such as shopping centers worth more than $10 million, he said. There has also been some office deals.
“The general feel is that land is starting to slow down and some of the other properties are coming on board,” Myers said.
That doesn’t mean there won’t be more land deals because some highly valued parcels are in default and banks haven’t decided how to proceed, Myers said.
Charles Moore, a senior vice president with CB Richard Ellis, said the deals are picking up again after averaging 25 to 30 before the downturn. After a few in 2009, Moore said his firm did 21 in 2010.
“The pipeline is full. A lot of them were small deals ranging from $500,000 to $3 million.”
Many involved the Federal Deposit Insurance Corp. and deal with shopping centers, office complexes and industrial properties, Moore said.
“Investor demand has picked up, and we are getting multiple offers,” Moore said. “Most recently, we had 28 offers on an industrial complex. That’s positive. Investors are coming from all over the world. The feeling is that the market has gotten to the bottom, and they don’t want to miss the train.”
Moore said one center sold for $150 a square foot even though it had 100 percent vacancy. Others are being marketed at $100 to $120 a square foot, and they’re getting that. Office properties are as high as $70 to $90 per square foot, he said.
With a large number of delinquencies, it’s going to take another four years or longer to work through distressed inventory, Moore said. The distressed market is in the fifth or sixth inning, but it’s a doubleheader, he said.
Myers said the game is in the fourth inning, and it’s going to go a full nine innings. He said people shouldn’t get frustrated about what’s happening, but simply deal with it.
Some want prices to reset even more, but some lenders can’t do that, he said.
“This is a rip tide, and you just have to go with it,” Myers said.
In other news
• Coldwell Banker Premier Realty has named former Greater Las Vegas Association of Realtors President Devin Reiss as a branch manager of its Green Valley office. Reiss was managing broker and owner of the Las Vegas-based Realty 500 Reiss Corp. for more than 15 years.
• Fogo de Chao, an internationally recognized Brazilian steakhouse, has signed a long-term lease to open at the Hughes Center later this year. It takes over the space that previously housed Cozymel’s, a Mexican restaurant. It opened its first restaurant in the U.S. in 1997. Las Vegas will be its 17th in the nation. It has six locations in Brazil with a seventh expected to open later this year.