Commercial Foreclosures Pick up Speed; Cash-Strapped Landlords let Evictions Lag; Rent Control Idea Straight from the Loony Bin

Here is a pair of interesting articles from the Arizona Republic regarding an increase in commercial foreclosures and a slowing number of evictions in apartment complexes.

Please consider Commercial foreclosures pick up speed

Mesa Financial Plaza, the 17-story office tower that lights up the night sky with a neon-blue silhouette, has been noticed for trustee sale.

The $40.6 million default is just one of many that are starting to drop in the Valley. The number of defaults for loans of more than $20 million is increasing rapidly for all product types, including office, industrial, retail and large apartment complexes.

Chris Toci, executive director of the capital markets group at Cushman & Wakefield of Arizona Inc., said Phoenix is at the front end of a major crash.

Cash-strapped landlords let evictions lag

One might that that evictions would be rising due to lack of payment but that's not the case in the Phoenix area as Cash-strapped landlords let evictions lag

Fewer tenants are being evicted from apartments across the Valley, but the decline is more about the dismal state of landlord finances than tenants paying their rent on time.

In the latest fallout from the recession and housing crisis, growing numbers of apartment-complex owners are in serious financial trouble or foreclosure.

Lawyers, a tenant advocate and a commercial real-estate broker point to a variety of factors. Overbuilding in recent years saturated the market with apartments just as homebuilders
and investors added hundreds of single-family dwellings to the rental mix.

Many owners bought large complexes at the market's peak and then saw values plummet. Forced to cut rents to keep units occupied, they have been left without enough income to pay debts and keep up maintenance. People leaving the state have only added to high vacancy rates.

And although the recession has left many renters unable to pay each month, apartment owners don't have the money or inclination to boot them.

Andrew Hull, a Phoenix attorney who represents landlords and property managers, said his eviction caseload has declined about 20 percent this year.

For some of his clients, vacancy rates have skyrocketed, and half of the units in their large complexes are empty. Those in bankruptcy don't have the money to hire attorneys for evictions, Hull said.

Landlords are taking a hit as a result of the overbuilding. They are struggling to find good tenants; they cannot raise rent to cover expenses, and they are struggling with what to do about late pays and defaults by renters.

Idea Straight from the Loony Bin

Here's one straight from the California loony bin. The L.A. Times reports councilman calls for one-year moratorium on rent hikes.

Los Angeles City Councilman Richard Alarcon called Wednesday for the passage of a one-year moratorium on rent increases for more than 600,000 apartments across the city, saying the economic downturn has hurt families living in those buildings.

Appearing with a room full of renters’ rights advocates, Alarcon said his proposal would block landlords from imposing the 3% rent increase that would be allowed on July 1 under the city’s rent stabilization ordinance. That ordinance applies to an estimated 630,000 apartment units built before 1978.

One business group, the Valley Industry and Commerce Assn., immediately denounced Alarcon’s call for a rent moratorium.

"Los Angeles already places an unreasonable number of regulations on business owners,” said Edgar Khalatian, chairman of the group’s land use committee. “This is yet another unfair burden on property owners who are struggling to avoid foreclosure proceedings.”

This is an open and shut case. Landlords should be free to charge what they want, and if tenants do not like it they can look elsewhere. Competition, not government bureaucracy, will find the right equilibrium.

Los Angeles City Councilman Richard Alarcon is a complete fool, unless of course he is pandering to voters, perpetually buying votes to get re-elected.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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