Property sales in the fourth quarter of 2009 gave no evidence that commercial real estate owners should expect a positive return on investment, says Ed Kearney, managing partner of Kearney Commercial Real Estate, Inc./Sperry Van Ness. Given how much commercial properties have fallen in value in the past two years, it was no surprise that there were few big sales – or profits – during those months.
An exclusive analysis of public records by the commercial real estate brokerage shows that there were were only seven sales of developed commercial property of $5 million or more during the fourth quarter of 2009. The smallest was for $6.86 million.
“The real problem is that only one of them produced a profit,” said Ed Kearney. “And most of them were money-losers for their owners.”
The most notable deal was Bank of America's sales of a failed condominium conversion. The bank's predecessor has loaned $25 million against the property in August 2005 and foreclosed when the investment went bust along with the housing market. The bank transferred title on the unsold units to a new owner for $6.86 million, about one-fourth of the loan amount.
The biggest deal of the fourth quarter in Palm Beach County was a deed in lieu of foreclosure which involved commercial space in Arvida Park of Commerce. It changed hands for $41.75 million, down slightly from its sale for $43.34 million three years earlier.
“Commercial properties are being battered by falling vacancy rates and downward pressure on rents,” said Ed Kearney of Kearney Commercial Real Estate. “It's all but impossible for sellers to argue that their property is worth more in this environment.”
Despite a weak market, one developer in Boca Raton did well. It constructed warehouse space in Boca Raton on land it bought for $2 million in March 2006 and sold the developed property for $18.8 million to investors. Others were not as fortunate; two owners sold their commercial properties for the same prices they paid almost a decade earlier.
“While these deals may discourage some potential sellers from entering the market, they should encourage investors to jump in,” Ed Kearney said. “The secret is having a broker who has studied the market. He can identify which property owners are ready to sell and the prices they are willing to accept.”
About Edward Kearney and Sperry Van Ness
Edward Kearney is managing director of Kearney Commercial Realty Inc./Sperry Van Ness with an extensive background in various aspects of commercial real estate including investment analysis, landlord and tenant representation, and property tax abatement. SVN is a leading national brokerage firm that markets commercial real estate properties to an investment and brokerage community of more than 100,000. Kearney welcomes investors, brokers, and others with an interest in the Florida commercial real estate market to contact him today by calling 561-616-6262, or visiting http://www.svnpalmbeach.com for more information about the services he provides.
For more information about Edward Kearney and Kearney Commercial Realty Inc./Sperry Van Ness, please visit http://www.svnpalmbeach.com.
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