REPOST: Brookfield Financial bets on U.S. real estate

This Finance & Commerce article discusses the growing interest of foreign investors on US real estate.

Investors are showing increased interest in U.S. real estate, especially in areas like New York’s trendy Meatpacking District (pictured). According to Brookfield Financial Corp., three buildings in the district sold recently to a U.S. investor for $105 million. (Bloomberg News file photo) | Image Source: finance-commerce.com

Brookfield Financial Corp. received 179 expressions of interest for a property sale it advised on in New York’s trendy Meatpacking District this year. More than half were from abroad, said President Brydon Cruise.

Interest in the three-building storefront and apartment complex is just one sign of the insatiable foreign demand for U.S. office and retail property as the country rebounds from the financial crisis, according to Cruise, head of the Toronto-based investment-banking unit of Brookfield Asset Management Inc. “In the U.S., people were terrified for years — that’s changed,” Cruise, 49, said in an interview at Bloomberg’s Toronto office last week. “Now there’s a massive amount of foreign interest in the U.S. and we’re trying to grab it. The recovery’s real.” Brookfield Financial, which advises buyers and sellers of so-called real assets including energy grids, commercial and residential towers, and highways, is aiming to double its revenue for 2014 over last year to C$100 million ($92 million). The firm, which counts Royal Bank of Canada and Eastdil Secured LLC, a Wells Fargo & Co. subsidiary, among its competitors, plans to capture foreign investors piling into large U.S. cities as the currency and investor comfort strengthens.

Cruise relocated to New York from Toronto last month and announced the appointment of Dan McNulty, former president of Rockwood Real Estate Advisors LLC, as partner in the city last week. Brookfield Financial also opened an office in Houston last month and is considering opening offices in South Korea and Dubai. With 160 employees, the company is expanding and looking to open more offices in the U.S. and the other seven countries it operates in — Canada, Brazil, Australia, India, Germany, and Hong Kong.

Rents rising

New investment in offices in major U.S. cities last year rose to $52.2 billion, 29 percent more than the prior year, and the most since 2007 when commercial properties netted $107.8 billion, according to data compiled by New York-based industry researcher Real Capital Analytics Inc. New investment in commercial real estate, including apartment buildings, office properties and strip malls, has more than quadrupled in value since 2009, the data show. The figures are based on reports of properties and portfolios valued at $2.5 million and above. The buildings in the Meatpacking District, where Google Inc. has its largest global sales office, sold to a U.S. investor for $105 million, Cruise said. He declined to name the company that won the bid, citing confidentiality.

Mobile capital

Driving the recovery is a global search for returns as bond yields slide anew, said Cruise. About $15 trillion in institutional money globally will move from bonds and equities into real assets, including office buildings and infrastructure, by 2020, according to Brookfield data. A strengthening greenback has also been a draw. The U.S. currency has gained 11.5 percent this year against a basket of 10 global currencies that Bloomberg tracks.

“There’s more money than assets,” Cruise said. “Everything I’ve known for 26 years from a value perspective has completely changed.” Real estate and infrastructure is “well valued” in so-called gateway cities, he said, such as New York, London, and Hong Kong. “It’s crazy — you can’t get into those markets.”

Symbiotic relationship

Brookfield Financial and Brookfield Asset Management, which oversees $175 billion in assets, benefit from operating under one umbrella, said Mark Rothschild, an analyst at Canaccord Genuity Corp.

“BAM does a lot of deals so having the expertise inside the company to analyze different deals and understand the market is of value,” he said from Toronto. Brookfield Asset Management has returned 164 percent, including dividends, over the past five years, compared with 60 percent for the S&P/TSX Composite index, Canada’s benchmark equity gauge.

Ten percent of Brookfield Financial’s advisory work leads to deals for the parent company, Brookfield Asset Management, according to Cruise. Brookfield Financial has advised on at least 600 transactions worth $50 billion, including helping Dallas-based private equity firm Lone Star Funds sell C$1 billion of 295 German retail and office buildings to Dundee International REIT in 2011, Cruise said. Toronto-based Dundee listed on the Toronto stock exchange to fund the transaction. The firm, now called Dream Global Real Estate Investment Trust, has rallied 15 percent this year, the best performer on the Standard & Poor’s/TSX Capped REIT Index.

Germany, Asia

Brookfield offices in South Korea and Dubai would focus on drawing foreign investors to deals in Europe and North America, Cruise said. He was in the Asian country in November, meeting with pension funds and private equity firms as an investor from the country wanted to buy a German client’s office buildings.

“A lot of new foreign capital guys have just started going cross-border,” Cruise said. “If you go to Asia — mainland China, Korea, Japan — they don’t go cross-border all that often, but it’s really enhancing right now. What they always need on their first deal is strong on-the-ground local support.” Brookfield also works with clients on private-public partnerships and recently won the mandate to advise on the A$1 billion ($920 million) Perth Stadium in that would be their largest so-called P3 deal. The project will yield about A$9 million in fees, Cruise said. Cruise also says he has his eye on Spain and Portugal, though his priority right now is building out the U.S. “I am completely convinced it’s the future of Brookfield Financial,” he said.

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REPOST: Why middle class can't afford rents

According to this CNN.com article, rents are becoming unaffordable for middle-class families in numerous cities. Why is that so? Read it from here:

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Editor's note: Robert Hickey is a senior research associate at the Center for Housing Policy, the research division of the National Housing Conference, a nonprofit that provides ideas and solutions for America's housing challenges. The opinions expressed in this commentary are solely those of the author.

(CNN) -- A decent, safe and affordable home is something all Americans need to thrive. While the lowest-income households continue to lack access to affordable rental homes, increasingly, middle-income households are also shut out.

A new analysis by Zillow finds that the typical renter can no longer afford the median rent in 90 cities across the United States. Many Americans are severely cost-burdened: 4 million working renter households pay more than half of pre-tax income on rent.

Rents are consuming large shares of income. In Boston, for example, the median rent hit $2,458 in March, up 24% from three years ago. A household would need to earn at least $96,000 annually to afford this, based on the standard definition of affordability, in which one should pay no more than 30% of income for housing. Consider that in Boston an elementary school teacher makes approximately $58,000 per year and a registered nurse $73,000, and you get the picture that the middle class is getting squeezed. Similar median rents are now the reality in Los Angeles ($2,383) and Washington ($2,453). The housing recovery is a few years old, and home prices have started to rebound. But why isn't the rental market fixing itself?

Demand for rental homes has skyrocketed

We are seeing a major demographic convergence on the rental market. Demand is fueled by an exploding population of 20- to 30-year-old millennials looking to rent their first homes, baby-boomer retirees choosing to downsize to apartments, former homeowners exiting foreclosure, and would-be homeowners who can't access mortgages in the tightened credit market. Everyone is eyeing the same locations: cities, transit-friendly suburbs, and town centers that are walkable and close to jobs.

We're not building enough housing in desirable places

The pace of new residential construction has been insufficient to make up for the years when it was at a virtual standstill. We're simply not building enough rental housing -- affordable or otherwise -- in the places people want to live.

For example, in San Francisco, one of the fastest growing job markets in the country, there has been an average of about 1,500 units built annually, a level far below what is needed by the growing workforce. Last year alone, the city added 47,000 jobs. Most new housing is high-end

In many cities, demand is so great that there are easily enough high-income renters to support prices well out of reach for the middle class, not to mention lower-wage employees and seniors. And we can expect the imbalance between supply and demand to keep rents high for well beyond the short term. Moderately priced housing, even if it is profitable, is not as profitable as luxury housing, so the market alone will not build it. How to fix the problem?

Local governments have preciously few housing resources these days. What they have is rightly targeted at those with the greatest housing needs: our lowest income households. But here are two ideas that would help make more housing affordable for the middle class. Solution 1: Link growth with affordability

We need to loosen zoning restrictions to allow more rental housing to be built where it's needed most. There is room and adequate infrastructure to support sensible growth in many of our cities, transit-served suburbs and small town centers, where we should be relaxing height limits, reducing parking requirements, and permitting more modest-sized apartments and micro-units.

But given the huge demand and limited immediate availability of land, we cannot just build more housing and solve the problem, at least not in the short term. Consider Washington's recent experience. Median rents increased by 18% between 2010 and 2013 even as the city added more than 11,000 housing units. We need to keep growing, but we also need to make sure that more of what we build is affordable. When developers are allowed to build to heights or density greater than that ordinarily permitted by law, they should be required to share a portion of that new value by including some affordable housing for low- and middle-income renters.

This is how places like Fairfax County and Arlington County, Virginia are building out their transit station areas and streetcar corridors. Developers and residents are both on board, because it's a win-win deal. Developers profit from the enormous new potential unlocked by the zoning changes, while communities benefit from the addition of mid- and lower-priced homes that meet local needs and are close to transit. Hundreds of cities and counties nationwide have adopted similar "inclusionary housing" policies.

Solution 2: Help more qualified home buyers

We need to open a release valve on the rental market by letting more qualified, middle-income households buy a home. The National Housing Conference has assembled a broad coalition to advocate replacing the temporary patchwork we have now with a reliable system to help people buy a home. Housing finance reform based on sound principles would help homeowners and ease pressure on the rental market. These housing solutions are doable, capable of winning bipartisan support and urgently needed.


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REPOST: 5 Tips for Refinancing a Mortgage With Bad Credit

This article shares tips on how your refinance your mortgage despite having not-so-good credit standing.

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Refinancing your mortgage can save you hundreds of dollars a month and potentially tens of thousands of dollars over the life of a standard 30-year home loan.

If you’re nervously watching interest rates rise, and are thinking about refinancing your home, you may have been sitting on the sidelines because you’re worried about your credit. While refinancing a mortgage is no doubt tougher to accomplish when your credit is so-so, or even bad, you can nevertheless get a refi done. Here are five tips to help you refinance your home loan, even if you have blemishes on your credit report.

Tip #1: Don’t Expect Ultra Low Interest Rates

You’ve no doubt seen mortgage advertisements online, in newspapers, or on radio and TV offering homeowners rock-bottom interest rates – sometimes as low as 3% to 4%%.

Well, good luck actually getting a loan at those very low rates, despite all those ads.

According to BankRate.com, as of July 29, the average 30-year fixed rate mortgage was 4.38%. So if you were hoping for record low interest rates in the sub-4% range, those days have passed.

Rates have been rising in recent weeks – especially after the Federal Reserve Bank announced in July that it would stop buying back bonds, a move that had been keeping interest rates artificially low.

There’s another reason, though, that some people shouldn’t be fooled into thinking they’ll get those “teaser” rates that lenders often advertise: It’s that the very best, low interest rate mortgages are reserved for pristine borrowers.

So if your credit is shaky, you can refinance – but just not at the cheapest loan rates available in the marketplace.

Tip #2: You typically need to have equity in your property

In the current environment, most lenders will generally not refinance your existing mortgage if your home is underwater and you owe more on the property than it’s worth.

Even if you’re not underwater, some banks won’t even want to refinance your current mortgage if you only have a little bit of equity in your house.

The reason banks shy away from refinancing properties with little equity is because the new home loan is made based on the current market value of your property.

Without much equity, your loan is seen as “riskier” – and that reduces many lenders’ willingness to issue you a new mortgage.

Also, the more conservative the bank, the greater the amount of equity they will want you to have. For example: very conservative lenders may want you to have 25% to 30% equity in your home for a refi. In other words, they want your loan-to-value or LTV ratio to be 70% to 75%.

If your credit is shaky, you can refinance… just not at the cheapest loan rates available in the marketplace.

In dollar terms, a 75% loan-to-value mortgage means that a lender is willing to lend $300,000 on a property worth $400,000.

Middle-of-the-road lenders will do mortgages with an 80% to 90% loan-to-value.

And aggressive lenders will offer mortgages with a 95% or higher loan-to-value.

Tip #3: Consider Government Insured Loans

All isn’t lost, though, if you don’t have sufficient equity in your home. You can get around that problem, and still get a refinance done.

That’s because lenders doing conventional mortgages are the ones that insist on lots of equity in your property. But that’s not the case for banks offering government-backed loans such as FHA loans, that are insured by agencies like the Department of Housing and Urban Development (HUD).

To refinance a mortgage with an FHA loan, you can have a tiny amount of equity and still get a new mortgage with a LTV limit of 97.75%. So let’s say your property is worth $250,000. With an FHA loan, you can refinance and get a loan up to $244,375, or 97.75% of your home’s value.

Tip #4: Seek an FHA Streamline Refinance

Additionally, if you already have an FHA loan, it’s worth seeking an FHA streamline refinance, which is a special mortgage product reserved only for current FHA borrowers.

For those loan applicants who might not be ideal borrowers on paper, for one reason or another, the FHA streamline refinance has a lot going for it.

For starters, an FHA streamline refinance does not require an appraisal. So right off the bat, you can still qualify for this loan even if you have no equity or your home is underwater.

Even better, from a borrower’s perspective, is that the FHA streamline refinance is easier to qualify for because the loan does not make you verify job, income or credit.

Tip #5: Make the rest of your application attractive

Bad credit alone doesn’t have to prevent you from getting a home loan refinanced. But if the rest of your loan packet is questionable, then you could be in trouble.

So try to offset any bad credit, by making the rest of your mortgage application as pristine as possible – especially if you’re seeking a conventional loan.

Gather all your job paperwork (such as W-2 statements and paystubs) and be able to document your income. Also, if you’ve been gainfully employed for a long period, stress the length of time you’ve been on your job. If you have a raise coming up later this year, or early in 2014, get a letter from your boss to this effect, if possible. That will further show job stability to a lender.

Finally, provide bank records that demonstrate proof of savings. Having cash reserves in the bank can also make your overall loan application more attractive to a lender.

In the end, if you package your application properly, and position yourself in the best possible light, you’ll discover that you can get a refinance done – even if you have bad credit or average credit.

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REPOST: Bond investing basics

Do you want invest in bonds? Here are some basic tips that you should keep in mind:

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1. Bonds are fancy IOUs

Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money for a certain period of time to the issuer, be it General Electric or Uncle Sam. In return, bond holders get back the loan amount plus interest payments.

2. Stocks do not always outperform bonds.

It is only in the post-World War II era that stocks so widely outpaced bonds in the total-return derby. Stock and bond returns were about even from about 1870 to 1940. And, of course, bonds were well in front in 2000, 2001 and 2002 before stocks once again took charge in 2003 and 2004. By 2008, however, the bond market had far outpaced the stock market once again, and did so again in 2011.

3. You can lose money in bonds.

Bonds are not turbo-charged CDs. Though their life span and interest payments are fixed -- thus the term "fixed-income" investments -- their returns are not.

4. Bond prices move in the opposite direction of interest rates.

When interest rates fall, bond prices rise, and vice versa. If you hold a bond to maturity, price fluctuations don't matter. You will get back the original face value of the bond, along with all the interest you expect.

5. A bond and a bond mutual fund are totally different animals.

With a bond, you always get your interest and principal at maturity, assuming the issuer doesn't go belly up. With a bond fund, your return is uncertain because the fund's value fluctuates.

6. Don't invest all your retirement money in bonds.

Inflation erodes the value of bonds' fixed interest payments. Stock returns, by contrast, stand a better chance of outpacing inflation. Despite the drubbing stocks sometimes take, young and middle-aged people should put a large chunk of their money in stocks. Even retirees should own some stocks, given that people are living longer than they used to.

7. Consider tax-free bonds.

Tax-exempt municipal bonds yield less than taxable bonds, but they can still be the better choice for taxable accounts. That's because tax-frees sometimes net you more income than you'd get from taxable bonds after taxes, provided you're in the 28% federal tax bracket or higher.

8. Pay attention to total return, not just yield.

Returns are a slippery matter in the bond world. A broker may sell you a bond that is paying a "coupon" - or interest rate - of 6%. If interest rates rise, however, and the price of the bond falls by, say, 2%, its total return for the first year - 6% in income less a 2% capital loss - would be only 4%

9. If you want capital gains, go long.

When interest rates are high, gamblers who want to bet that they'll head lower should buy long-term bonds or bond funds, especially "zeros." Reason: when rates fall, longer-term bonds gain more in price than shorter-term bonds. So you win big - scoring a large potential capital gain in addition to whatever interest the bond may be paying. If rates rise, on the other hand, you lose big, too.

10. If you want steady income, stick with short to medium terms.

Investors looking for income should invest in a laddered portfolio of short- and intermediate-term bonds. For more on laddered portfolios, see our "Sizing up risks."

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REPOST: Goals for setting priorities

What are the things that you should bear in mind when budgeting? Set the proper financial priorities by reading these tips from CNN.com:

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1. Narrow your objectives.

You probably won't be able to achieve every financial goal you've ever dreamed of. So identify your goals clearly and why they matter to you, and decide which are most important. By concentrating your efforts, you have a better chance of achieving what matters most.

2. Focus first on the goals that matter.

To accomplish primary goals, you will often need to put desirable but less important ones on the back burner.

3. Be prepared for conflicts.

Even worthy goals often conflict with one another. When faced with such a conflict, you should ask yourself questions like: Will one of the conflicting goals benefit more people than the other? Which goal will cause the greater harm if it is deferred?

4. Put time on your side.

The most important ally you have in reaching your goals is time. Money stashed in interest-earning savings accounts or invested in stocks and bonds grows and compounds. The more time you have, the more chance you have of success. Your age is a big factor - younger people (who have more time to build their nest egg) can invest differently than older ones. Generally, younger people can take greater risks than older people, given their longer investment horizon.

5. Choose carefully.

In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Some of the items that wind up on such lists include building an emergency fund, getting out of debt and paying kids' tuitions. Once you have your list together, you need to rank the items in order of importance (if you have trouble doing so, use the CNNMoney.com Prioritizer for help).

6. Include family members.

If you have a spouse or significant other, make sure that person is part of the goal-setting process. Children, too, should have some say in goals that affect them.

7. Start now.

The longer you wait to identify and begin working toward your goals, the more difficulty you'll have reaching them. And the longer you wait, the longer you postpone the advantage of compounding your money.

8. Sweat the big stuff.

Once you have prioritized your list of goals, keep your spending on course. Whenever you make a large payment for anything, ask yourself: "Is this taking me nearer to my primary goals - or leading me further away from them?" If a big expense doesn't get you closer to your goals, try to defer or reduce it. If taking a grand cruise steals money from your kids' college fund, maybe you should settle for a weekend getaway.

9. Don't sweat the small stuff.

Although this lesson encourages you to focus on big-ticket, long-range plans, most of life is lived in the here-and-now and most of what you spend will continue to be for daily expenses - including many that are simply for fun. That's OK - so long as your long-range needs are taken into consideration.

10. Be prepared for change.

Your needs and desires will change as you age, so you should probably reexamine your priorities at least every five years.

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REPOST: The Mystery Of Real Estate Agent Compensation

Richard Green shares the ins and outs of the real estate agent compensation in this Forbes.com article.

Real Estate agents are valuable–if they weren’t, we wouldn’t have them. The three times in my life I have sold a house, I thought the agent earned his/her commission.

But the commission structure –the agent gets a fixed percentage of the sale price of the house–makes no sense. (Steven Levitt pointed this out some time ago). There is a price at which anyone could sell a house without an agent–let’s call it 80 percent of market value (it may be more or less). So for the first 80 percent of the sales price of a house, the agent is adding no value.

But now let’s say it takes real effort to sell a house for more than 80 percent of market value. This means for every dollar the seller receives above 80 percent, the agent is producing more value than the typical commission percentage they currently receive.

This produces a perverse set of incentives. Agents have reason to sell the house quickly, but not at the highest possible price, because they don’t get rewarded for their effort. A compensation structure that would align everyone’s interest would be more like a consignment structure–one where the agent would get no compensation for any sale of less than an agreed to amount, but would get a large fraction of any proceeds above the agreed to amount. This would likely produce higher prices for the seller and higher compensation for the agent.

I understand that agents face upfront costs to marketing a house–it would be reasonable for them to charge a fee to recover those costs, regardless of outcomes. But we don’t observe that either.

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Gold prices fall again near 2013 record lows

Gold prices have taken another beating as they fell close to the lowest levels.

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The precious metal is currently valued at $1,245 per ounce, near the lowest it traded for $1,211 an ounce in June. Its current value is down by 25 percent from prices earlier this year.

“Gold has been under pressure since the European Central Bank announced a surprise interest rate cut earlier this month,” according to Carlos Sanchez, an analyst at CPM Group.

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The move immediately created an impact of increasing the value of the dollar against the euro, making the dollar-denominated gold less attractive to buyers. The price of gold further fell after the Federal Reserve released the minutes of its October meeting.

In the report, speculations were rife that the central bank could taper off on its bond-buying program, known as quantitative easing, as early as December of this year. This means that support for gold prices could be held back or cut altogether.

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Sanchez believes, though, that while prices are near its record lows, the smart trader sees the opportunity of a mid- to long-term investment. He also believes that “the economy is not yet strong enough for the Fed to begin tapering next month.”

Gold prices have been taking a massive hit for some time as traders reinvested their money in the stock markets in exchange for higher returns.

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