Sunvalley Shopping Center, in what will likely be a boost for East Bay retail, will add some major new retailers this year and next, including a Forever 21 mega-store at the Concord mall.

The new retailers are XXI — the mega-store for the Forever 21 brand — A’GACI and Jessica McClintock. All these stores cater to young women.

via Sunvalley mall bags 2 new retailers for young women – ContraCostaTimes.com.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Sunvalley mall bags 2 new retailers for young women – ContraCostaTimes.com

Twenty-five Bay Area projects will receive funding totaling $189.85 million. By county, $47.6 million went to Alameda, $7.2 million to Contra Costa, $450,000 to Marin, $64.4 million to San Francisco, $21.8 million to Santa Clara, $1.4 million to Solano and $47 million to Sonoma.

The $7.2 million allocated to Contra Costa County will be split between Valley Vista Senior Housing in San Ramon and Lillie Mae Jones Plaza in Richmond. Both of these projects appear to be in the construction and development phase.

This is a post from Peter Maclennan's blog Peter Pays Paul.

$190 Million Awarded to Bay Area Affordable Housing

The Mercury News reported yesterday on a proposal by the Bay Area Air Quality Management District that could require some housing developers to go study air quality as part of their entitlement process. According to the article, developments within 1,000 feet of major transportation corridors seem to be those affected.

The Bay Area Air Quality Management District is the group in charge of regulating the pollution of the air in the San Francisco Bay Area. They are responsible for “Spare the Air” days that prevent private home owners from burning wood, wood pellets or manufactured fire logs on Spare the Air days.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Want to Develop in the Bay Area – Study Air Quality

Real estate investors are still interested in purchasing prime real estate in a great location.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Walnut Creek Chili’s Property Sold

The Wilder Project in Orinda, CA is facing legal challenges according to Orinda project stumbles over another legal hurdle – ContraCostaTimes.com.

The lender for a luxury residential subdivision in Orinda’s scenic Gateway Valley has sued the site’s developer, seeking to foreclose on the project, which in February staggered into default on its $180 million mortgage.

The 1,600-acre Wilder project has a murky outlook now that the loan default, the lawsuit and a court’s decision to place Wilder into receivership have coalesced to create a number of fresh financial and legal obstacles for the development, which was first proposed two decades ago.

Merrill Lynch Mortgage Lending Inc. sued OG Property Owner LLC, the developer of the Wilder project, on April 7, Contra Costa County court records show.

OG Property planned to build 245 homes, an arts and garden center, five sports fields, a fitness and pool center, a city corporation yard, and preserve 1,400 acres of open space. The homes were pegged for sale at $3 million to $5 million each.

The Contra Costa Times is reporting that the project has been in the works for over 20 years and has faced many similar obstacles.

To make matters worse,

A dozen contractors, however, have filed liens against the property, claiming that the developer has not paid them for their work. The combined money owed to contractors, court records show, is $17 million.

It appears that a major investor is looking to buy out Merrill Lynch’s note. Barring this the project is likely to be tied up in court for some time.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Wilder Project in Orinda Faces Legal Hurdles

Lenders filed a record number of mortgage default notices against California homeowners during the first three months of this year, according to the research firm MDA DataQuick.

The company blamed the recession and of lenders playing catch-up after a temporary lull in foreclosure activity. A total of 135,431 default notices were sent out during the January-to-March period, an all time high in the  company’s database which goes back to 1992. That was up 80.0 percent from 75,230 for the prior quarter and up 19.0 percent from 113,809 in first quarter 2008, according.

According to the DQNews.com article Golden State Mortgage Defaults Jump to Record High:

The median origination month for last quarter’s defaulted loans was July 2006. That’s only four months later than the median origination month for defaulted loans a year ago, in first quarter 2008. That suggests a period where underwriting criteria were particularly lax.

Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far. Of the 3 million in 2006, 8.5 percent have so far resulted in default. A particularly toxic period appears to have been August through November 2006 which had more than a 9 percent default rate. Of the 2.1 million loans made in 2007, it’s 4.6 percent – a percentage that’s likely to rise significantly during the rest of this year.

The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6 percent). Of the major lenders, IndyMac has a default rate on those loans of 18.9 percent, World Savings 8.0 percent, Countrywide 7.7 percent, Washington Mutual 6.3 percent and Wells Fargo 3.4 percent. Less than 1 percent of the home loans originated in late 2006 by Citibank and Bank of America have since gone into default.

The DQNews.com article also reported:

Foreclosure resales have emerged as a significant market factor, accounting for 58.1 percent of all California resale activity last quarter. A year ago it was 33.1 percent. Foreclosure resales varied significantly by area, from 13.0 percent in San Francisco County to 80.8 percent in Merced County.

Real estate values have not settled in California. This new “wave” of foreclosure notices is going to cause uncertainty in the markets for a while. This combined with the “shadow inventory” of as many as 80,000 homes reported by SFGate.com will keep prices depressed and may drive them lower.

This is a post from Peter Maclennan's blog Peter Pays Paul.

California’s Foreclosures Soar

According to the report there are currently 19,600 office buildings with vacancy ranging from 60-100% of the office space. According to the chart compiled by CoStar San Francisco has 125 buildings in this category and the Oakland/East Bay has 208 buildings.

The article also reports few if any sales of these distressed assets.

The reasons for the dearth of deals appear to come down to three primary factors: the pricing disconnect that exists due to rapidly declining market fundamentals, tightened credit conditions, and a lack of appetite for risk on the part of [both] lenders and investors.

A Matter of Perspective

The answer CoStar provides is exactly correct and comes down to a matter of perspective.

Sellers tend to be optimistic about the future value of assets and buyers tend to be pessimistic or at least realistic. Sellers foresee rental rates rising and demand picking up for commercial office properties. This perspective motivates sellers to hang on to the property until a buyer who recognizes the “true value” of their property or they are forced to sell through foreclosure.

Buyers realize that though the seller may expect rents to increase, there is no guarantee that this will actually happen. Buyers want to pay a price based on actual rents, if not decreased rental rates due to the over abundance of office space. Buyers with this perspective will hold out until they can buy a property that meets their criteria.

Leverage Has Left the Building

A lot of the value attributed to office buildings in the past five years was a product of the ability of buyers to leverage the properties to such a degree that even a slight increase in rents or occupancy gave a nice bump to their rates of return.

With 80-90% loan to value leverage, unavailable buyers need to have a greater upside in relation to the purchase price to get a compensating return commensurate to the risk they are taking on.

A Staring Match

It has become a staring match of sorts. Neither side wants to show weakness and neither side is ready to admit defeat.

Until one side concedes defeat, the staring will continue and properties will remain unsold.

Who will blink first? Will it be they buyers or the sellers?

This is a post from Peter Maclennan's blog Peter Pays Paul.

Opportunities for Distressed Office Buildings

I know that in many parts of the country it can be overcast for weeks not days, but in California a few days of clouds is a big deal.

When the clouds are ominous, the lightning is flashing, the rain is beating down, and the wind is howling forgetting about the sun’s warmth, light, and energy is easy to do.

Stormy Financial Times

At the current time we are living in stormy financial times. The stock market is tumbling, companies are filing bankruptcy, unemployment is rising, and fear is on everyone’s minds.

It is easy to forget in times like this that “this too will pass.” The sunny times will return eventually.

Change Is Difficult

The financial system as we know it is undergoing a cataclysmic change.

Personal finance is undergoing a huge change as well. We are changing from a consuming society, to one that saves.

Change is difficult. It takes discipline. We will hit bumps, plateaus, and  valleys.

On the bright side, adversity breeds character. What will it produce in the generation that experiences this?

The Lens of History Gives Perspective

As I read about the economy and some of the foolish policies proposed to solve this problem, it has been easy for me to have a doom and gloom mentality and attitude.

However, looking at history has provided me with a measure of hope. (Not as much hope as this.)

The Great Depression

My grandparents were born, raised, and survived The Great Depression. Do a search for companies started during a recession.

People were resourceful. They found ways to make it. They lived on less. Worked harder and still found ways to save a little money.

The Dark Ages

From my recollection of the era known as The Dark Ages, the life of the common people was none too pleasant. No running water, indoor plumbing was reserved for the richest of the rich if at all, and personal hygiene was yet to be invented.

Many of the peasants in Europe were serfs and had no ownership rights to the property on which they lived. They were at the whim and mercy of their lord. They worked hard on the land, but the landowner received a portion of all they produced.

Yet, for all this hardship modern Europe still exists. It is not a vast wasteland with few inhabitants.

History provides example after of example of  human ability to creatively adapt to situations and to survive.

The Sun Will Rise …

The current financial turmoil is not permanent. At some point in the future the financial sun will rise again.

A state of normalcy and predictability will again settle on the markets. Industries will begin to grow. That growth will create jobs and wealth.

The storm raging around us is beyond our control. Focusing on the storm raging around us will distract us from the items that need to be accomplished today.

We can control our actions to today. Besides “Each day has enough trouble of its own.”

Photo Credit: phatman

This is a post from Peter Maclennan's blog Peter Pays Paul.

The Sun Will Rise Again

Concord approves plan for weapons station – ContraCostaTimes.com.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Concord approves plan for weapons station

The economic recession has put Pittsburg’s plans to annex neighboring Bay Point on hold and has delayed development of Bay Point’s 50-acre business park. “Currently, Bay Point annexation is extremely low priority for us given the other more important economic issues we are all facing,” said Pittsburg City Manager Marc Grisham.

Economy stalls Pittsburg plans for biz park – San Francisco Business Times:.

This is a post from Peter Maclennan's blog Peter Pays Paul.

Economy stalls Pittsburg plans for biz park – San Francisco Business Times