Commercial real estate market stays strong

Last year many businesses, restaurants and retail stores opened their doors for the first time. In January, the city of Springfield issued 192 building permits, the same number as last year and a slight increase from December 2005.

Also in 2005, more than $26.5 million was spent on new construction of multifamily dwellings that include apartment complexes, condominiums, and duplexes, according to city statistics. This amount is slightly up from 2004.

“Apartments have been very attractive to investment buyers. Equally as attractive are office buildings and retail centers,” said Ken Schwab, commercial real estate agent for Wilhoit Properties.

In November, California investors Dan Baker and Steve James purchased Woodland Park Apartments and Sunset Place from Springfield developer Sam Coryell Sr., in a $7.5 million deal brokered by Schwab. Using the proceeds of that sale, Coryell purchased Abbey Apartments from Don Bracy of Debco Management via a 1031 tax-deferred exchange, which helped Coryell avoid capital gains taxes on the sale.

“Commercial activity is driven by rooftops or density of population. As Springfield grows, so will commercial activity, from shopping centers to building of multifamily developments,” Schwab added.

Whether investors choose to go the real estate investment route via new construction or the acquisition of an existing building, the local lending market offers several options.

LaDon Mortgage, located at 1442 E. Bradford Parkway, has introduced a program for buyers of multifamily apartment complexes and retail and professional shopping centers.

“We’ve given our clientele a 15-year fixed interest rate with a 30-year amortization. The 30-year amortization will shrink the payment and the 15-year fixed (rate) will allow them to do projections for the next 15 years,” said Darren Hoelcher, marketing coordinator for LaDon Mortgage. “Ultimately (with this loan), the first year should be the worst year for profit.”

Those loans are based on rent rolls on the existing buildings, good credit, assets and past experience. The fees usually run one-quarter to one-half of a point; the building is used as collateral, and the loans are assumable.

At Empire Bank, investors have several different commercial loan options including variable rate, fixed-rate or balloon loans. Balloon loans are those for which monthly payments are not intended to repay the entire loan. The final payment is a large lump sum of any remaining principal.

Each loan is based on the goals and the needs of the investor.

“Our commercial loans are customized to the borrower and the property. We don’t have a 30-year investment product that we put every multifamily investment borrower into,” said Marita Thomas, vice president and manager of Empire’s real estate department.

Guaranty Bank offers individual investors purchasing a condo, rental house, duplex, or a four-plex, in-house amortizing term loans of 20 to 25 years with a 15-percent to 20-percent down payment. Another option is a secondary market loan. Secondary market loans are usually long-term fixed loans with 20- to 25-year amortization. Guaranty Bank also offers variable-rate and balloon loans.

“Most everything we do is a three- to five-year balloon (loan), something that we can keep in-house, and that’s on larger projects, too,” said Shelley Evans, senior vice president with Guaranty Bank. [[In-content Ad]]