February 2008 Shopping Center Association Vol 22. No 2

In this Issue

No. Branch Mktplace - SNAPSHOT 1

Credit Crisis --- HOT SPOTS / COLD SNAPS 2 lucy ------RISING STAR 3

Colianni / Moen ---- MEMBER PROFILES 5

MSCA Board ------COMMITTEE PROFILE 5 Mpls Momentum -- PROGRAM RECAP 6 Connection

Feature Guest Author: Dan McElroy, MN Dept of Employment & Economic Development Trends Look Promising for State Economy

s commissioner of the On the other hand, the economy is continuing to grow. Minnesota Department of DEED’s employment data shows some important sectors are AEmployment and Economic performing well, including medical-device manufacturing, Development (DEED), I’ve visited insurance carrier operations, business services, tourism and with businesses throughout the some retail segments including general merchandise and state and reviewed some timely department stores. The national economy continues to data on Minnesota’s economy. grow. The Federal Reserve has lowered interest rates, Although there are short-term encouraging lending and boosting investor confidence. economic soft spots, businesses Minnesota manufacturers reported a relatively strong 2007, and the economic data suggest according to DEED’s recent Manufacturing Business that the Minnesota economy Conditions Survey. Significant employment and profit growth remains strong and vibrant. elude the industry, but increases in orders, productivity and 2007 Economic Review production levels appear to offset some of those effects. The big economic story of 2007 State manufacturers are also continuing to benefit from nationally and in Minnesota was increasing exports. Minnesota’s third quarter 2007 exports the loss of momentum in the housing market and the reached a record high with growth of nearly 12 percent resulting credit crunch. These changes contributed to from the third quarter of 2006. employment losses in the construction and finance industries and have trickled over to many sectors, including retail. Snapshot

Location: NWQ I-35 & Highway 95, North Branch North Branch Month/Year Opened: Under construction – store openings in October 2008 Marketplace Owner: North Branch Marketplace LLC Managing Agent: Steve Johnson, Solomon Real Estate Group Architect & Construction Contractor: Amcon Construction Site Planner/Engineer: Westwood Professional Services GLA and Tenants: 186,000 sf including a Shopko, unnamed Grocer, 21,000 multi-tenant retail space, Holiday Gas, Arby’s and three outlot pads Market Area Served: North Branch & surrounding communities Construction Style: Concrete block, brick, glass and EIFS store fronts with awnings Additional Facts/Narrative: North Branch Marketplace is a 43- acre retail center with excellent visibility and easy access off I-35. The unique mix of a general merchandiser, grocer, convenience stores, and highway-related services offer retail opportunities to the City and Highway corridor traffic. The synergies of this retail center coupled with the existing Outlet Mall to the south provides a much-needed and unique shopping venue to the region.

msca-online.com 1 MSCA Connection Feb 08 Trends Look Promising - continued While 2007 may not be remembered as a Minnesota manufacturers are optimistic high-flying year, there certainly were some that growth will be solid in 2008, according 2008 Sponsors positive conditions as the calendar turned to DEED’s recent Manufacturing Business American Engineering Testing, Inc. to 2008. Conditions Survey. Orders, production levels Aspen Waste Systems, Inc. and productivity are expected to expand Barna, Guzy & Steffen, Ltd. Outlook for 2008 and produce mild employment growth. Bremer Bank, N.A. Brookfield Properties The housing sector was a stimulus to the Prospects for the Retail Industry CB Richard Ellis economy during the recession earlier this CSM Corporation Cambridge Commercial Realty decade, but the housing sector is likely to While some retail industries are Capital Growth Madison Marquette continue to be a drag on the economy in experiencing short-term soft spots, the long- Chesapeake Companies 2008. While many economists expect slower term outlook for retail businesses in Chuck & Don's Pet Food Outlet economic growth to continue in 2008, they Minnesota remains promising. Recently, the Colliers Turley Martin Tucker The Collyard Group L.L.C. generally agree that housing will not drag combination of falling house prices, Commercial Partners Title, LLC the economy into recession. The housing tightening credit standards, higher energy Cuningham Group Architecture, P.A. downturn continues to be offset by a solid prices and a weaker job market have Cushman & Wakefield of Minnesota, Inc. Dick's Sanitation, Inc. economic foundation. taken a toll on U.S. consumer confidence. Doran Companies Slower consumer spending will affect the Several factors point to the ability of the Dougherty Funding LLC economy through softer retail sales, and Emmes Realty Services LLC economy to continue with positive growth. thus weaker demand for goods. Exeter Realty Company For example: Faegre & Benson LLP In the longer term, Minnesota’s population Fendler Patterson Construction, Inc. Strong corporate bottom lines should Fredrikson & Byron, P.A. and household growth will lead the nation’s support healthy levels of business General Growth Properties, Inc. heartland and rival many western/southern Gray Plant Mooty investment. New orders and shipments states. The state will add more than 500,000 Great Clips, Inc. for capital goods will be the key to Griffin Companies residents and 200,000 households through understanding the industry’s health H.J. Development, Inc. 2015 with large gains in Dakota, Scott, over the next few months. Hempel Wright and Sherburne counties. Inland Real Estate Corporation Slower economic growth in the U.S. Itasca Funding Group, Inc. should dampen inflation pressures, Population gains are good news for the JE Dunn Construction giving the Fed room to cut rates further. retail market, although the demographic Jones Lang LaSalle/ KKE Architects, Inc. Growth momentum will remain strong in shifts accompanying the growth will Kraus-Anderson Companies most developing countries in Asia, Latin influence retail trends. The largest increases LandAmerica America and Europe. will be in people ages 55 to 69, with Landform Larkin Hoffman Daly & Lindgren Ltd. The decrease in the value of the U.S. increases also for those younger than 14 Let There Be Lights! dollar relative to other currencies and those 25 to 34. Likewise, the number of M & I Bank makes U.S. exports more competitive. empty-nesters and one-person households McComb Group, Ltd. As a result, Minnesota businesses should will increase. The ability of retailers to adapt McCombs Frank Roos Associates Messerli & Kramer P.A. continue their long-term trend of strong to changing demographics and consumer Midwest Maintenance & Mechanical, Inc. export growth. preferences will be vital. /St. Paul Business Journal NAI Welsh NorthMarq Capital, Inc. Olsson Associates Oppidan, Inc. Hot Spots / Cold Snaps by Ross Dahlin, Itasca Funding Group, Inc. Opus Northwest LLC Park Midwest Commercial Real Estate Paster Enterprises RJ Marco Construction Inc. Have We Bottomed Out? RLK Incorporated RSM McGladrey, Inc. The Credit Crisis and Commercial Real Estate Lending RSP Architects Reliance Development Company, LLP mericans will not look back fondly on First a brief background of the recent CMBS Robert Muir Company the country’s economic (commercial mortgage backed securities) Ryan Companies US, Inc. performance in 2007. The word market, which accounted for 54% of Shea, Inc. A Shingobee 1 “subprime” has become so common, commercial loans in 2006. They were the Solomon Real Estate Group Inc. college students use it as an adjective to fastest growing segment of the commercial Stewart Title Guaranty Company describe their poor exam performance. (I debt market because of their high LTV Stonehenge USA TCF Bank hope the word does not apply to this (loan-to-value), low rates, and other article!) As the residential mortgage crisis borrower-friendly terms. Similar to home U.S. Bank unfolded early last year, commercial loans, CMBS loans are packaged by banks United Properties lenders were comfortable that the crisis was and sold to outside investors. When the The Velmeir Companies Venture Mortgage Corporation contained. The fundamentals of rating agencies saw what was happening Weis Builders, Inc. commercial real estate remain sound; on the residential side, they began to Wells Fargo Bank, N.A. occupancy is good and mortgage defaults question the underwriting standards of the Westwood Professional Services, Inc. are at historic lows. Why then would the commercial paper investors were buying. Winthrop & Weinstine, P.A. residential credit crisis affect commercial Potentially risky terms including high- real estate lending? continued on page 7

msca-online.com MSCA Connection Feb 08 2 rising star by Andy McDermott, Shea, Inc. Featured Sponsors lucy Activewear Barna, Guzy & Steffen, Ltd. To provide our clients with Portland, OR-based lucy Activewear, Inc. reaches 300 doors. They have seen 60% high quality legal services at opened its first Minnesota store at the growth, double digit comp stores sales and reasonable rates, while Galleria in Edina in March 2007. The store significant operating margin improvements. building strong relationships targets affluent women who lead active It was also recently announced that and confidence as we’ve lifestyles and features a wide Galleria’s lucy is one of the best done since 1938. range of activewear, designed to performing stores in the nation. Brookfield Properties fit and flatter a woman’s body. The company’s exclusive lucy To be a leader in the North American commercial real At the time of the opening, The label, described by the company estate industry. Minneapolis/St. Paul Business as a line that is ideal for active, Journal quoted CEO Mike on-the-go women who are Chesapeake Companies Edwards as saying that looking for the perfect To create exceptional value Minnesota is a strong combination of fashion for our clients built on a market for the company. and function, accounts for foundation of honesty, He said that he views over 80 percent of last integrity and mutual trust. We lucy plans to Minneapolis as “a very year’s sales. The versatile develop enduring open relationships with shared educated, very active collection is ideal for goals, personal pride and market that is totally right” approximately 20 everyday performance unwavering ethical for the lucy concept. lucy new stores per such as travel, getting in leadership. has had a strong shape or simply leading a Minnesota customer base year until it busy and active lifestyle, Cuningham Group Architecture, P.A. for many years with its reaches 300 doors and it fits active women online sales at lucy.com. sizes zero to 18. Cuningham Group Architecture, P.A. seeks to Since the opening of the Last May, at the ICSC create memorable 2,100 sf space at Galleria, Spring Convention in Las architecture that enriches our lucy has been scouting Vegas, lucy was awarded clients and communities. We do this by collaborating with other sites in upscale Twin Cities the “2007 Hot Retailer Award”, along with clients to realize their visions communities, and in October 2007, opened J.Crew, The Little Gym International, Inc., through the design of the built their second location at The Plaza at Uniqlo, Ulta and Winestyles. These were environment. Rosedale. The company hopes to open deemed the “hottest and most wanted” more locations in Minnesota within the next retail concepts shopping centers are Dick’s Sanitation, Inc. few years. The company currently has 61 seeking as To provide innovative solid stores nationwide with just over a third in tenants. waste solutions to businesses California. lucy is growing at a record pace Web Sites both large and small and lucy.com with 19 new locations opened in 2007, developing creative nrf.com alternatives to problem waste adding Minneapolis, Santa Barbara, streams. Danville, Marlton (NJ), Las Vegas, Monterey, retailstore.blogspot.com Detroit, West Hartford (CT), Greenwich (CT), Fendler Patterson Ardmore (PA) and Boston as new markets. retailcontrarian.com Construction, Inc. In addition, lucy plans to open labelscar.com A “true” design build general approximately 20 new stores per year until it contractor providing exceptional retail based on quality, service and accountability. Opus Foundation donates $25,000 to The Caring Tree Great Clips, Inc. This is the latest example of Opus’ leadership in philanthropic giving. Committed to Working together to build the most profitable and enduring achieving long-term impacts, Opus prioritizes its support of organizations that address brand. early childhood education, youth development, workforce and employment training and community revitalization. Hempel We develop collaborative Thank you to Opus Foundation. relationships both internally Pictured left to right: and with firms who share our innovation, determination and Karla Keller Torp, MSCA/The Caring Tree, exceedingly high expectations. Executive Director, Hans Rasmussen, Opus Our efforts will result in a Northwest LLC & Caring Tree Vice President, distinctive, thriving portfolio of Bruce Carlson, United Properties & MSCA real estate developments. President, Mike Sims, United Properties & Caring Tree President msca-online.com 3 MSCA Connection Feb 08 Events Press Releases

Mar 5 Business Day at the Capitol @ Crowne Plaza St. Paul MN MARKETPLACE

Mar 12 Monthly Program: Press releases are printed based upon availability of space and relevance to the local market. Shopping Center/Mall Focus Best Buy will open a store at the in the former Sports Apr 2 Monthly Program (afternoon): Authority location on the third floor in the west wing. Retail Focus Development May 7 Monthly Program: LA Fitness announced they will be taking the former Mervyn’s Retail Focus space at Midway Marketplace in St. Paul. They also have locations in Apple Valley, Edina, Brooklyn Park, and Roseville, along with several other locations under development. For program place and times and more info, please go to O’Reilly Auto Parts signed an 8,100 sf lease at Champlin www.msca-online.com Plaza in Champlin. O’Reilly now has 1,830 stores across the United States. Jimmy John’s signed a 1,600 sf lease in a new free- 2008 Leadership standing building at Market Street Station in Chanhassen. Little Caesars Pizza signed a 1,450 sf lease at Rosemount OFFICERS President Village in Rosemount. Bruce Carlson, United Properties 1st Vice President Buffalo Wild Wings, Inc. has agreed to purchase leases Cindy MacDonald, Kraus-Anderson Companies 2nd Vice President and other assets of up to eight Don Pablo’s Mexican Restaurant Stephen Eggert, Target Corporation locations from Avado Brands, Inc. The sale will include Treasurer Peter Austin, NAI Welsh Minnesota locations, although they have not been disclosed at Secretary this time. Peter Berrie, Faegre & Benson LLP is relocating from the Young Quinlan DIRECTORS Crate and Barrel Jack Amdal, KKE Architects, Inc. building in downtown Minneapolis to the Galleria in Edina. The Eric Bjelland, United Properties store will feature additional furniture. Target Commercial Deb Carlson, Cushman & Wakefield of Minnesota, Inc. Peter Dugan, CB Richard Ellis Interiors store will backfill the Crate and Barrel space in the John Gelderman, Opus Northwest LLC Young Quinlan building. J.B. Hudson Jewelers is set to open Nancy Litwin, General Growth Properties Tom Madsen, Benson-Orth Associates, Inc. in February in 9,000 sf of space on the first floor on the Young Immediate Past President (as director): Quinlan building as well. Jay Scott, Solomon Real Estate Group COMMITTEE CHAIRS Seasonal Concepts, with roots dating back to 1962 Program when it began as Flowertown, has changed ownership. The Paula Mueller, Northtown Mall/Glimcher Properties Jeff Wurst, Chesapeake Companies company was purchased by Mark Austin Smith and Greg Daniel Membership in November 2007. They will continue to keep open the Mark Norman, Park Midwest Commercial Real Estate Jeff Horstman, Paster Enterprises Woodbury, Minnetonka and Bloomington locations. Newsletter Deb Carlson, Cushman & Wakefield of Minnesota, Inc. Nate’s Clothing, located in downtown Minneapolis, plans to Andy McDermott, Shea, Inc. Awards move to the suburbs sometime in 2008 after the sale of its building is Dan Parks, Westwood Professional Services, Inc. finalized. Steve Johnson, Solomon Real Estate Group Legislative The sale of the Macy’s Distribution Center at 701 Industrial Howard Paster, Paster Enterprises Rob Stolpestad, Exeter Realty Company Blvd NE, Minneapolis, has closed effective December 26, 2007. Retail Report Jen Helm, United Properties Flame - Cooking With Fire, a brand new restaurant concept is Drew Johnson, United Properties Technology slated to open May 2008 at The Plaza at Rosedale Center. Flame creates a Sean Cullen, McCombs Frank Roos Associates distinctive experience centered on the theme of fire, where the food and its Jim Mayland, Colliers Golf preparation, as well as the environment, will consist of various elements of fire. Brad Kaplan, United Properties Paul Sevenich, Kraus-Anderson Companies Sponsorship Ned Rukavina, United Properties Technology Tip Stephen Eggert, Target Corporation Community Enhancement Nikki Aden, Target Corporation When doing research, or just taking a stroll down MSCA memory lane, you’ll Jennie Zafft, Cousins Properties, Inc. find a full history of presentations, newsletters and publications at

STAFF msca-online.com. For past presentations, click on Meetings and then Executive Director Presentations. Past newsletters are available for members only. You can find Karla Keller Torp them by logging in under Members, click on Publications and then (P) 952-888-3490 (C) 952-292-2414 [email protected] Newsletters. Past legislative studies are available for downloading by clicking Associate Director on Resources, then Publications. Past Retail Reports are available for Stacey Bonine (P) 952-888-3491 (C) 952-292-2416 purchase at the same location. If you have any questions please call [email protected] Sean Cullen at (763) 476-6010. (F) 952-888-0000

MSCA Connection Feb 08 4 msca-online.com Member Profiles

Jennifer Colianni Cushman & Wakefield of Minnesota, Inc. Primary Career Focus: Retail Leasing and Tenant Representation Hometown(s): Lakeville, MN – Resides in Hudson, WI Education: BA Business Administration, University of Wisconsin – Stout Family: Husband, Nick & Chocolate Lab, Ava Hobbies: Reading, outdoor activities – biking, wakeboarding/waterskiing, horseback riding Very First Job: Assistant at a car dealership in Lakeville Dream Job: Own racehorses Secret Talent: Can make a mean chocolate chip cookie! Favorite Food: Manicotti MSCA Involvement: Newsletter Committee Ashley Moen Hempel Primary Career Focus: Office and Retail Brokerage Hometown(s): Ivanhoe, MN Education: Bachelor of Science – Commercial Real Estate, St. Cloud State University Hobbies: Long walks, swimming, watching sports, shopping Very First Job: Lifeguard and swimming lesson instructor at the Ivanhoe pool Dream Job: Baywatch... just kidding, but no, seriously. Secret Talent: If you consider wiggling your ears a talent, it’s mine! Favorite Food: Meat

New Members Member News

Jenni Faulkner Kennedy Joins Pfeffer Pfeffer Company, Inc. is pleased to announce James Kennedy City of Burnsville has joined their Sales Team as Sales Associate. Brian North Venture Mortgage Committee Chat by Bruce Carlson, MSCA President Leslie Nordby American Engineering Testing, Inc. On behalf of MSCA, I would like to welcome our new Board Members. 2008 marks the 20th Matt Swenson year of MSCA. The strength and success of this organization is no accident. Our growth is a Landform result of enthusiastic involvement and quality leadership of our members. I would like to James Kennedy thank and recognize this year’s MSCA leadership members. Pfeffer Companies In addition to the ten committees, MSCA is headed by our dedicated and experienced Brent Nasset staff of Executive Director, Karla Keller Torp and Associate Director, Stacey Bonine, along Kimley-Horn & Associates with an active group of Officers and Board of Directors. Peter Lavanger MSCA welcomes new officers: Stephen Eggert, Target Regis Corporation More New Corporation, 2nd Vice President; Peter Austin, NAI Welsh, Treasurer and Peter Berrie, Faegre & Benson as Secretary. Eric Jones Members They join Cindy MacDonald, Kraus-Anderson as 1st Vice ED Development/SUPERCUTS President. MSCA Directors serve a two-year term. Luke Soiseth Jack Appert Mod & Company, LLC Kraus-Anderson Companies New Directors for 2008 are: Jack Amdal, KKE Architects; Michael Gross Eric Bjelland, United Properties; Peter Dugan, CB Richard Molly Murnane Midwest Management, Inc. Ellis; John Gelderman, Opus Northwest and Nancy Litwin, Cushman & Wakefield of Minnesota, Inc. General Growth Properties. They join existing Directors Deb Kyle Jones Kari L. Thomas Carlson, Cushman Wakefield and Tom Madsen, Benson- The Velmeir Companies Leonard, Street & Deinard Orth Associates. Each year the MSCA strives to have an Bonnie Padilla array of industry disciplines in the Officer and Director John Brickley Wipfli, LLP positions. If you are interested in serving as leadership, The Velmeir Companies please contact Karla Keller Torp, a Board Member, or me. Scott McIntyre Sherry Weber Reliable Property Services In Remembrance of Maurie Wagner Kraus-Anderson Companies It is with great sadness that we announce that MSCA Alan Leirness Nathan Stanley member Maurie Wagner passed away on January 15th Colliers Turley Martin Tucker Olsson Associates of an apparent heart attack. Please keep his wife, Bonnie and the Wagner family in your thoughts and prayers.

msca-online.com 5 MSCA Connection Feb 08 Program Recap by Christopher Naumann, KKE Architects Inc. January The Momentum of Mpls Professional Showcase The January 9th program, moderated by Liz Picking, of Brookfield Properties, featured three panelists with various views of downtown Minneapolis. The panelists Mike Christenson, Olsson of the City of Minneapolis, Ann Wimmer, of the Downtown Council, and James Stanton, of Associates the Shamrock Companies provided views of downtown retail opportunity from the perspective of city, recruiter, and developer. Olsson Associates offers a Mike Christenson, of the City of full range of engineering Minneapolis, began the presentation with a design and planning brief synopsis of the current Minneapolis services to commercial marketplace. Minneapolis’ downtown core and retail clients serves over 160,000 downtown workers daily throughout Minnesota and attracts over 18.3 million visitors annually. and the greater Midwest There are 22,650 residents that live within a region. Their services one-mile radius of 9th Street and Nicollet. include land January presenters: left to right development, survey, According to Christenson, Minneapolis was Mike D. Christenson, City of Minneapolis rated by Marketwatch magazine as being the Ann Wimmer, Minneapolis Downtown Council municipal, transportation/ best city to conduct business in 2007, and one Liz Picking (moderator), Brookfield Properties Corporation traffic, environmental, of the top 10 destinations for tourism. James M. Stanton, Shamrock Companies urban planning, LEED Minneapolis will benefit from significant events in the next year, including the Republican design, landscape National Convention, which is projected to draw over 55,000 visitors and international architecture, water media. According to Christenson, most negative views of downtown Minneapolis are myths. resources, water/ Crime is down 3.5% in the core, and there are indeed opportunities for activity, wastewater, public development and retail (even big box). Christenson also mentioned the construction of the involvement and new Twins ballpark and the links to light rail, the Northstar commuter line, and further construction services. development of Hennepin Avenue, all of which will bolster retailing efforts. Olsson’s commitment to quality, innovation and Ann Wimmer, of the Downtown Council, presented the report of a national retailing service translates into consultant, who recently delivered an analysis of Minneapolis downtown retail. According successful projects and to the findings, retailing in Minneapolis isn’t necessarily flourishing, but it isn’t waning either. strong, continuing There are many successful retailing examples in the core, but several challenges face relationships with their retailers downtown. Among them is the competitive nature of the skyway system. clients. Consumers and retailers face competition for street level storefronts by a vibrant skyway level. The consultant also advised improvements to access to parking, and access for cars to travel along . Wimmer went on to point out that unique activities of downtown should convey unique retailing experiences as well. A new focus on the theater district on Hennepin should bring with it restaurants and shops that cater to an entertainment/theater crowd. According to Wimmer, the Minneapolis core should be able to absorb an additional 200,000 sf of retail through 2011. With a trade area of 2.5 million residents within a 30 minute drive of downtown Minneapolis, Wimmer is very bullish about the retailing potential of the core. James Stanton, of Shamrock Development, ended the presentation with a brief and Powerpoint-studded finale. Stanton, mentioning the recent success of Shamrock’s CORRECTION condominium development in the downtown area, said that the market, even in its current state, could still absorb up to 700 units annually Please note that the for the next several years. The trick to selling, member referral gift ...Building Quality according to Stanton, is knowing what the certificate of $50 to market demands, and working to deliver Blue Steakhouse ...Providing V alue projects that make sense economically, rather that was given out at the than pursuing public funding or subsidy. Stanton January program was www.bauerdesignbuild.com went on to mention the ongoing difficulty of actually donated on • CONSTRUCTION vertical mixed-use development, but also the behalf of Hempel. Hempel • DESIGN/BUILD need to create balanced development with is a developer of office, hotel and retail properties. • FEASIBILITY STUDIES mixed-use and higher densities. Stanton sees a strong market in the future for upscale senior Based in Maple Grove, the • DEVELOPMENT ASSISTANCE housing and the services that cater to the empty firm has over 1.4 million sf in nester crowd who are relocating to the the Twin Cities area 2376 Copeland Rd Maple Plain MN downtown area. and is looking to expand its portfolio of retail property 763-972-0000 over the next year.

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Hot Spots/Cold Snaps - continued leverage lending, interest-only payments, and lending on under today’s numbers, it is probably not a deal worth future income assumptions became increasingly common in pursuing.”2 2005 and 2006. These lax standards could likely lead to an Commercial real estate lending survived the residential upsurge in defaults and investors began to demand more mortgage crisis, but it may still take a while for everyone to stringent underwriting and higher yields. CMBS (conduit) adjust to the new reality. “Although the short-term effects lenders had no choice but to raise rates and offer fewer may be painful, 2007’s correction should prove positive for “perks” on their loan terms. CBMS financing and commercial real estate in the long A commercial credit crisis was avoided but many run.”1 Going forward, the biggest challenge will be keeping transactions came to a halt with the new reality in lending. property fundamentals strong. Hopefully, a recession can be Buyers and sellers could no longer come to terms because avoided with export growth offsetting the downturn in financing expectations did not materialize. Traditional housing and consumer spending. If the economy sours and sources of debt including life insurance companies and occupancy and rent become issues, it could prove to be balance-sheet commercial banks saw a huge influx of much more serious to the industry than the recent credit potential business as they became competitive again. A life crisis. company executive recalls a morning last August when a 1 Smith, Dan & Rhodes, Todd. “CMBS Hits a Wall.” Mortgage dozen loan packages were piled on his desk that would Banking Jan. 2008: 58. have normally only been sent to the conduits. Borrowers either accepted the lower proceeds or are waiting for the 2 Lynn, Scott R. “Reflections on the Market Correction.” CMBS market to come back. Mortgage Banking Jan. 2008: 82. However, a more conservative lending environment may be here to stay. CMBS interest rates have risen to ±6.5% but are still great by historical standards. Although life companies Correction > The MSCA Golf may offer slightly better rates; conduits still hold the advantage for dollars and many other loan terms. There is Event will be an equal playing field among all lenders today. In addition, held June 16 at capitalization rates are rising as real estate values adjust. Many agree that commercial real estate values were Majestic Oaks. inflated prior to the summer of 2007, with aggressive lending practices a primary cause. “If a real estate deal won’t work

msca-online.com 7 MSCA Connection Feb 08 FIRST-CLASS MAIL U.S. POSTAGE PAID MINNEAPOLIS, MN PERMIT NO. 27334

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