Success still possible

 Despite a downturn in the economy, being successful in the real estate industry in Utah is still plausible, according to panelists at the “Word on the Street” breakfast meeting sponsored by the Utah chapters of Commercial Investment Real Estate (CCIM), Commercial Real Estate Development Association (NAIOP) and Institute of Real Estate Management (IREM). The panel of developers and investors shared their market perspective and outlook for the remainder of 2009 on Thursday at the Grand America Hotel.

 

“There is always money for good deals,” panelist Bryan Wrigley of Lotus Equities said. “I think there is tremendous opportunity right now.”

 

With construction costs down, Rick Woodbury of Woodbury Corp. would agree. Woodbury, who was also on the panel, said that there is, like always, an opportunity for success in real estate.

 

And there are those, according to James Merrill of First Realty Investment Trust Inc., who are willing to face what Bruce Bingham of Hamilton Partners called “the fear” and take a chance in the real estate industry.

 

Those who do take advantage of that opportunity will be seen as “real estate geniuses” in five to 10 years, Wrigley said. However, developers will have to weather the economic storm currently facing the state and the nation before coming out on top.

 

Panelists agreed Utah was coming out of the recession, suggesting that the economy was reaching the bottom of the downturn. But the men on the panel weren’t ready to jump to any conclusions on how long it would take for the state to fully recover.

 

“I can try to sound real smart about where we are at, but I don’t know,” Wrigley said.

 

Woodbury said an increase in hotel occupancy levels is a good indicator that the economy is recovering, but that has yet to happen.

 

Merrill said he thought the economy would feel some more pain this year, stabilize in 2010, and then start to pick up in 2011.

 

“We’ll wait and see and see where it’s going,” Merrill said before adding his own prediction: “I think that it will be really slow this year through the end of the year than start to pick up.”

 

Until things start to recover, panelists suggested that developers will need to continue dealing with the changes in underwriting.

 

Bruce insisted there are lenders who are willing to finance projects. But, he cautioned, underwriting guidelines have been tightened and a low loan to value is required as well as good credit before a bank is willing to take a chance on a new development.

 

Obtaining financing for a “bigger deal” was easier just a few years ago, Rick said. But times have changed that. Currently it is “very, very” hard to obtain a loan for more than $10 million, he said. Developers are much more likely to get financing for something between $3 and $6 million, he said.

 

 Developers who do obtain financing are able to move forward on the development and marketing of their projects, Bingham said, citing his company’s development of an office building at 222 S. Main in Salt Lake City as an example. Bingham said 20 percent of the 459,000-square-foot-building has been leased. In addition, Hamilton Partners is looking at at least two large deals in downtown Salt Lake and possibly three or four smaller deals, he said.

 

“We see activity increasing and we are encouraged,” Bingham said. “At least people talking is a very important step.”

 

Panelists also discussed the issues they face in leasing, saying they are losing some tenants while others are asking for amendments in their contracts.

 

“This is a very common request,” Woodbury said. “They know you are in a weak position.”

 

Woodbury Corp. has made adjustments on a case-by-case basis, Woodbury said. But most tenant offers have been “too far out there to even consider.”

 

Bingham said Hamilton partners is also trying to avoid deals on leasing. “It’s not anything we do enthusiastically,” he said.

 

Overall, after the hour-and-a-half meeting, the panelists seemed to agree that the real estate industry in Utah would stabilize, that financing could be obtained and that leasing rates would improve.

 

“I still believe in the American system. I still believe in real estate,” Rick Woodbury said. “I don’t think we were as over-built as people say. … We just have to find those niches and have little staying power. I think we should be positive. It’s a great industry. It’s a great place to be.”