January 2011

According to data compiled by John F. Meade, Barnstable County Register of Deeds, 348 deeds  with stated sales values above $50,000 were recorded at the Barnstable Registry of Deeds in January 2011. The stated consideration in the 348 deeds totaled $147,109,151 and the median sale price was $301,500. Mortgages recorded with values above $50,000 in January 2011 totaled 1,552 and represented $430,515,068 of total placements.  The median mortgage amount for all property types was $215,317.

In January 2010, 343 deeds were recorded at the Barnstable Registry of Deeds (with stated sales values above $50,000) and totaled $131,457,159 in county-wide real estate sales. Based on the same criteria, the median sale price of property in Barnstable County in January 2010 was $294,000. A total of 1,097 mortgages in excess of $50,000 were recorded in January 2010. The aggregate mortgage value was $347,207,485 and the median mortgage for all property types was $235,000.

As depicted in the following charts, commercial real estate transaction volume in Barnstable County, MA  increased modestly in 2010 with arms-length transactions outpacing the 2009 level.

In 2009 and 2010 in particular, conveyances involving distressed commercial properties of all forms continued on an upward trend. In 2010, nearly 27% of all transactions were distress conveyances involving commercial real estate assets in virtually every sector and Cape Cod sub region.

Note: Not all properties are conveyed to third parties through the auction process, a factor which has become more apparent in recent quarters.  Typically auctioned properties which are ultimately acquired by the mortgagee such as a bank, private lender or other lien holder at auction are held until they are eventually re-conveyed out of a REO portfolio or privately. A similar scenario may result in the case of a deed in lieu of foreclosure. Consequently, in calculating the transaction volume which is generally based on recorded conveyances, in some cases the data may reflect more than one conveyance for the same asset due the changing status.

In terms of completed transactions, 2009 was the worst on record since the mid 1990s. In addition to an unusually high number of listings, distress sales were the only game in town as five bed and breakfast/inn properties (with four units or more) conveyed in 2009 either as a bank-owned REO property, by a stakeholder opting for quick sale at a liquidation price, or by foreclosure deed.

Making matters worse, not one B&B/inn transaction transpired in 2009 which was not shrouded by some form of distress. The significance of this occurrence is amplified by the fact that as recent as 2005, nineteen B&B/inn transactions were concluded with only one sale of a distress nature. As the number of conveyances continued to trend downward for the next three years, in 2009 the B&B/inn market clearly showed little hospitality. When viewed from a broader horizon since 1995, 2009 proved to be not only clinically anemic but a true market rarity.

Year-to-date transaction figures, however, show 2010 has been much more welcoming. As someone who also follows Cape Cod’s B&B/inn market marketplace closely, few can appreciate the developing trend better than Carol Edmondson. Since 2003 Carol has been specializing in B&B and Inn sales. She and her husband Tom own South Dennis-based Cape Cod Village Realty, a boutique real estate brokerage specializing in B&Bs and inns. In addition to their brokerage activities where they have handled over 15 transactions, The Edmondson’s previously owned and operated a historic 12-room inn in Brewster, MA, selling it in 2003.

According to Edmondson, the clear uptick in B&B/inn transactions is an overdue and extremely welcome event. “We are on track to have our best year ever and that’s a good thing for everyone,” she said.

As for the recent increase in transactions, which Edmondson says primarily involve B&B/inn properties listed for sale in 2008 and 2009, for buyers the time to act is now.

“As buyers sat back, listened to the media, and waited for price levels to bottom out, a certain level of pent up demand developed. What we are seeing this year is that pent up demand being brought to the marketplace and solid deals are getting done.”

Sold In May 2010 - The former Moses Nickerson House, Chatham, MA

Regarding the types of B&B/inn buyers making it to the closing table Edmondson had this to share.

“The buyers I have been working with in the past year have mainly been individuals working in the corporate sector. And many with successful careers. But as we have seen in past market cycles, for the most part these buyers are attracted to B&B/inn ownership as a way of opting out of corporate life and placing their careers and finances in their own hands.”

In her experience both as an owner and broker, for many owning a B&B/inn is a good way to achieve that goal. The seasoned B&B/inn broker added that consistent with past cycles and given the current dour employment picture, the number of out of work and under employed buyers seeking assistance will likely increase, especially as market conditions become more favorable.

Notwithstanding the increased level of B&B/inn transactions, in the current market where the rules have changed and nothing is the same, completing transactions has gotten much tougher. The most challenging hurdle is the length of time required to complete a transaction. The significantly higher level of scrutiny and information required by commercial lenders is seen as the leading factor for the time lag.

“Today’s commercial lending environment is very different from what it was in 2007 and 2008,” said Edmondson. “By and large, banks are taking less risk than ever. Often that means requiring equity contributions of 25-30%.”

She advises all parties she works with that a 60 to 90 day end to end transaction period is increasingly more the exception than the norm as banking regulations and SBA rules become more complex and strict.

To be sure, the current deal environment is not limited to the Cape Cod marketplace. Through her longstanding affiliation with the Professional Association of Innkeepers International (PAII) since 1990, where she currently serves on the Advisory Board, Mrs. Edmondson can attest that the same scenario is playing out across the nation.

In light of this new paradigm, B&B/inn buyers and sellers should be well prepared to successfully navigate through the process. For B&B/inn buyers, this eight-year inn broker suggests being sufficiently capitalized in terms of down payment and working capital. Having a legal, financial and brokerage team knowledgeable of the process to support the transaction every step of the way, is an equally critical element.

For would be B&B/inn Seller’s still reeling from 2009, Edmondson also offers this expert advice:

• Prepare yourself for a longer than expected closing date.
• Be sure to have all property, financial and operating documents up to date, readily available, and in a professional business-like form.
• In the current lending environment, strongly consider offering qualified buyers some level of owner-financing.
• Understand that quite often today’s B&B/inn buyers are savvy business people, educated on the process and are considering opportunities in more than one State or region. Competition for ready, willing and able buyers is high.
• If you want top dollar be sure that all deferred property maintenance is addressed and that your property is staged to show its value.

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According to the Environmental Notification Form (ENF) filed in July 2010 as part of a required MEPA filing, the proposed Wal-Mart development includes approximately 176,500 square feet total building area. The southern portion of the property is slated to include a single, one story building comprising a 158,000 square foot General Retail and Grocery Store (Wal-Mart).

A four acre out parcel is reserved for future development in the northern portion of the site. The out parcel is conceptually planned for a total of 18,500 square feet of space to be alocated among four buildings and include automotive retail, restaurant, retail, and bank uses.

As proposed, the development will be accessible from Tobey Road and offer approximately 766 parking spaces. The project cost is indicated to be $20 million with an estimated completion date in October 2012.

As part of this retail proposal, Wal-Mart is expected to vacate its existing building in East Wareham. This element has heightened concern over the increasing level of retail flight and the future viability of the East Wareham business district. Recently Staples, Payless and TJ Maxx vacated stores formerly in East Wareham and relocated to Wareham Crossing in West Wareham. A CVS, Stop & Shop Supermarket, and The Home Depot are currently the major retailers in the East Wareham business district. The shuttered 20,300 square foot former Staples in East Wareham is currently offered for lease.

Wareham Crossing is a 675,000 square foot open-air shopping destination offers over 35 stores and restaurants. The modern retail center opened in 2007 and is home to leading retailers including, Target, Lowe’s, L.L.Bean Outlet, Best Buy, Borders, Staples, Old Navy, and Yankee Candle, and LongHorn Steakhouse and Red Robin restaurants.

Correspendence indicated that the Applicant decided not to proceed with the project at this time after evaluating the proposal in light of Cape Cod Commission requirements, the estimated length of review process, and uncertainty regarding both the review and potential mitigation.

As previously reported, the proposal included the construction of a 10-pump facility with five gas islands covered with a canopy. In addition to a 60 square foot kiosk, (1) 10,000 gallon and (1) 30,000 gallon underground storage tanks were also specified.

Reportedly, the Boston office of Eastdil Secured LLC, a wholly owned subsidiary of Wells Fargo Bank has been retained to market the New England Portfolio. Based on the published reports, the firms directly involved have declined comment and offering details are unclear.

However, according to a source close to the mega offering who was contacted in connection with this report, only a partial interest in the portfolio held by an unidentified joint venture partner, is what is actually being marketed at this time.

The 725,000 square foot Cape Cod Mall is one of fourteen mall properties which were jointly acquired in 1999 by Simon Property Group, Inc., JP Morgan Investment Management’s Strategic  Property Fund and TIAA from New England Development Co. in two transaction phases. In the first, the Cape Cod Mall (which was undergoing a major expansion) and nine additional mall properties were acquired. A short time later, the investment group purchased four more malls from New England Development Co..

In the blockbuster $1.7 billion deal, the fourteen malls collectively known as the New England Portfolio totaled 10.6 million square feet. The portfolio includes ten properties in Massachusetts, two in New Hampshire and one in each Connecticut and Virginia.

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