Investing In Apartment Buildings With No Upfront Fees Winston Rowe and Associates

WINSTON ROWE & ASSOCIATES

Winston Rowe & Associates, a no upfront fee commercial real estate advisory and finance firm has some of the most competitive rates and terms for apartment building financing nationwide.

Apartment Purchase Investments:

Many investors turn to Winston Rowe & Associates because they have innovative solutions for opportunistic apartment building purchases that can include a short term interest only bridge loan to stabilize or improve the property with a conventional long term loan.

• Loan amounts start at $250,000 through $100,000,000.
• Loan to value up to 80% and 75% for bridge loans.

Refinancing Your Apartment Building Investment:

What separates Winston Rowe & Associates from the others, they offer some of the most aggressive terms available in the apartment building market when it comes to refinancing or getting that needed cash out for improvements to grow your apartment building investment.

• Interest rates starting at 3.70% (as of 11/2012) fixed.
• Loan amounts start at $250,000 through $100,000,000.

Apartment Building Construction Financing:

Obtaining a construction loan for a multifamily or apartment building project can be challenging in today’s banking climate. Winston Rowe & Associates has national construction loan solutions for all major and emerging markets.

• Up to 75% loan to cost.
• All loans include take out financing starting at 3.70% (as of 11/2012).

Why Use Winston Rowe & Associates:

Savvy apartment building investors have been turning to Winston Rowe & Associates because of their private banking approach, Midwestern values and deep understanding of the apartment and multifamily vertical markets.

Winston Rowe & Associates has no upfront fee apartment building loan programs in the following states.

Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Wisconsin, Wyoming

Office Building Loans Nationwide No Upfront Fees

WINSTON ROWE & ASSOCIATES

Winston Rowe & Associates specialize in office building and office complex loans over $500,000 with no limit.

They work with a variety of lenders nationwide who offer office building financing with competitive loan rates and terms.

No Upfront or Advance Fees Office Building Financing from $500,000.

Up to 80% LTV

Office Building Financing for Purchases, Refinancing, Cash Outs.

Competitive Office Building Loan Rates and Terms

Nationwide Commercial Investors that need a company that specializes in navigating the complex requirements unique to financing commercial office properties can turn to Winston Rowe & Associates  extensive experience in providing the best financing solutions anywhere in the United States.

With Winston Rowe & Associates you can expect efficiency, flexibility and professionalism as they work to get you to the closing table fast, without upfront fees.

Winston Rowe & Associates success is measured by our clients’ success, and their mission is to be your source for the most appropriate and advantageous financing solution that helps you achieve your goals.

National Apartment Building Financing Zero Advance Fees

WINSTON ROWE & ASSOCIATES

Winston Rowe & Associates provides financing for apartment properties nationwide. Their loan amounts on apartments can range from $500,000 with no upper limit. Fixed rates and interest only programs are available with debt coverage ratios for starting at 1.10 and up.

To speak with an apartment finance specialist, prospective clients can contact Winston Rowe & Associates at 248-246-2243 or visit them on line at http://www.winstonrowe.com

Winston Rowe & Associates are experts in multi-family and apartment building lending.  Historically, multi-family and apartment mortgage loans have constituted the largest portion of Winston Rowe & Associates total business volume.  Whether you are looking to finance a small apartment building, a complex with hundreds of units, or a co-operative looking for an underlying mortgage, they can help you find the optimal financing solution to meet your individual needs.

Winston Rowe & Associates Apartment Building Finance Programs:

No upfront or advance fees
Close in 30 days with a complete submission
Rates start as low as 3.42% (as of 4/5/12)
Streamlined application process
Financing up to 80% LTV
Terms and amortizations up to 30 years
Long term fixed rates
Loans for purchase and refinance, including cash-out
Private money bridge loans available for a fast 2 week closing

At Winston Rowe & Associates they focus on building long-term relationships, delivering exceptional and individualized customer service, and positioning loan products that best achieve our customers’ goals. Their professional staff is dedicated to streamlining the loan process and providing unsurpassed lines of communication.

Winston Rowe & Associates has no upfront free commercial loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,   Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

120 Trillion: The True Size of Our National Debt – Really?

WINSTON ROWE & ASSOCIATES

The Congressional Budget Office released a new report this week showing that the federal government’s publicly held debt would top 101% of GDP by 2021, more than the value of everything produced in this country over the course of a year. Think of it like owing more on your credit cards than your entire family income. By 2035, the publicly held debt, CBO says, could top an almost unfathomable 190% of GDP.

And that was the good news.

The federal government actually has three different types of debt. Debt held by the public, which generated the headlines in the CBO report, is the type of government bonds that you — or the Chinese government — might own. Economists worry a lot about this type of debt because the government has to borrow the money from private credit markets.

The government borrowing competes with investment in the nongovernmental sector, leaving less money available for private investment in such things as factories and equipment, research and development, housing, and so on. Growing levels of publicly held debt can drive up interest rates in the long-run, and may already be choking off interbank lending.

But that’s not the only type of government debt. For example, there is “intragovernmental” debt, which is essentially debt that the federal government owes to itself, such as debt it owes to the so-called Social Security Trust Fund. If publicly held debt is like the money you borrowed from a bank, intragovernmental debt is like the money you swiped from your kid’s piggy bank. It may not be on your credit report, but you still have to pay it back.

Today, intragovernmental debt exceeds $4.6 trillion. The good news here is that intragovernmental debt is not projected to grow much in the future.

The bad news is that that is because both Social Security and Medicare are already running deficits — there’s nothing left to steal.

As if that’s not enough, there is also a third category of government debt: “implicit debt.” This represents the unfunded obligations of programs such as Social Security and Medicare — the amount that those programs owe in benefits in excess of the amount of taxes that they expect to take in. Think of it as bills you know are going to come in next month but haven’t been delivered yet.

According to the annual report of the Social Security system’s trustees, that program’s unfunded liabilities now exceed $18 trillion. Medicare is in even worse shape. The most recent estimate of its finances, also released this week, warns that Medicare owes $36.8 trillion more in benefits that it is expected to be able to pay for. And that is the optimistic outlook: It assumes that all the projected savings from President Obama’s health care reform actually happen as promised, something that even Medicare’s own actuaries are deeply skeptical of. If those savings don’t materialize, Medicare’s debt could actually top $90 trillion!

Add it all up, and total US debt actually exceeds 900% of GDP. That’s somewhere in excess of $120 trillion. We are beginning to talk real money here.

The CBO also contains bad news for those who believe that we can fix this problem simply by cutting “fraud, waste and abuse.” As CBO points out, the projected growth in the debt “is attributable entirely to increases in spending on several large mandatory programs: Social Security, Medicare, Medicaid, and (to a lesser extent) insurance subsidies that will be provided through [Obamacare].” There is simply no way to deal with our debt problems without reforming those entitlement programs.

Finally, the CBO report makes it clear that we have a debt problem because spending is too high, not because taxes are too low. In fact, even though taxes are currently at a near historic low as a proportion of the economy, that is largely a result of the recession. If the economy returns to normal growth rates (a big “if”), federal revenues will not only rise, but will actually be higher than the postwar average percentage of GDP by the end of the decade. In fact, this will happen even if the Bush tax cuts are extended and the Alternative Minimum Tax AMT continues to be patched.

GOP lawmakers who left negotiations with Obama this week over his unwillingness to pledge no new taxes understand this. The problem is the money going out, not coming in.

We face a simple choice: Cut spending or face fiscal catastrophe. The question is: Is Washington listening?

Michael D. Tanner is a senior fellow at the Cato Institute.

Reprint…

http://www.nypost.com/p/news/opinion/opedcolumnists/trillion_the_shocking_true_size_tOxcrobUBUup9IEW3vQAhJ

Republicans rip Obama for campaign-style approach to fiscal talks

WINSTON ROWE & ASSOCIATES WEBISTE

Frustrated Republican leaders took a swipe Tuesday at President Obama, reminding him “the election is over” as he opts for a campaign-style strategy to sell his tax-hike proposal to middle-class America and small business owners – rather than deal face-to-face with Republican lawmakers on Capitol Hill.

The president met last week with House Speaker John Boehner at the White House and spoke with him over the weekend. But as members of Congress return this week to Washington, Obama is instead hosting a series of events aimed at selling his plan while pressuring Republicans to extend tax cuts only to families earning $250,000 or less annually, which amounts to a tax hike on high-income families.

“The target of the president’s rallies should be the congressional Democrats who want to raise tax rates on small businesses rather than cut spending,” Boehner spokesman Mike Steel said Tuesday.

The president has invited small-business owners from across the country to meet Tuesday at the White House to discuss the impact of his tax policies on small businesses.

Among the 15 invited are Nikhil Arora, co-founder of Back to the Roots, west Oakland; David Bolotsky, chief executive officer of Uncommon Goods, New York; and Mandy Cabot, co-founder of Dansko, West Grove, Pa.

Senate Minority Leader Mitch McConnell signaled the president’s shift Monday when he said: “The election is over” and it’s time for the president to present a plan that “goes beyond the talking points of the campaign trail.”

Steel and other Republicans argue they are fulfilling their half of the bargain in the fiscal talks by agreeing to change the tax code to generate revenue to reduce the multitrillion-dollar deficit.

However, Democrats have to keep their end by presenting a plan to cut federal spending through such entitlement programs as Medicare and Social Security, they say.

Should the sides fail to strike a deal by January 1, a mix of tax increases and federal spending cuts equaling roughly $500 billion just in 2013 will take effect, which some economists say could plunge the U.S. economy back into a recession.

The president, who wants to extend tax breaks only for households earning more than $250,000 annually, is also meeting Wednesday with chief executive officers and middle-class taxpayers. On Friday, he is hosting a rally in the Philadelphia area where he is scheduled to lay out his plan to keep the country from going off the so-called “fiscal cliff.”

Meanwhile, Republicans will make their own appeal to Americas.

Boehner’s office said Tuesday that House Republicans will take their own message to small businesses across the country. Members in the coming days and weeks will hold events and visit local small businesses to emphasize “the threat to jobs posed by congressional Democrats’ small business tax hike.”

Seniors Housing Investors Work to Grow Portfolios as Occupancies and Rents Continue to Rise

WINSTRON ROWE & ASSOCIATES

The 2012 sales volume of seniors housing properties will fall well short of matching the near record level of activity that was reached last year. But, that decline in transaction volume is by no means indicative of waning investor interest.

Exclusive results of a fourth quarter survey conducted jointly by NREI and Fort Lauderdale, Fla.–based Senior Housing Investment Advisors Inc. (SHIA) show that seniors housing pros remain optimistic about improving fundamentals and continued activity across all segments of the industry, including acquisitions, construction and financing. Just more than three-fourths of investors (76 percent) expect construction on new projects to increase during the next six months, while 65 percent of respondents expect that investment activity will grow. In addition, more than half of respondents (58 percent) anticipate that financing will be more available during the next six months

“The fundamentals and performance in this sector are compelling. Capital continues to aggressively seek out opportunities, and that will continue in 2013,” says Mel Gamzon, president of SHIA, a national real estate advisory firm that specializes in seniors housing transactions.

In considering the outlook for seniors housing, respondents believe the industry is in a slow recovery phase. Most expect new construction, available financing and acquisitions volume to increase somewhat in the next six months. The outlook has been generally consistent from respondents compared with two previous surveys.

Real estate transaction activity in the past year has been consistent, but not as robust as 2011. During the first three quarters of 2012, sales volume of seniors housing and nursing care facilities topped $5.2 billion, which is a fraction of the roughly $27.4 billion that occurred in all of 2011, according to New York–based real estate research firm Real Capital Analytics.

Sales velocity dipped in 2012 primarily because there have been fewer large portfolio transactions this year after a big year for portfolio deals in 2011 when REITs in particular were active buyers. Portfolio sales alone accounted for about $11.5 billion in investment volume in 2011, according to RCA. “2011 was so massive because of the REIT acquisitions. It was very difficult to keep pace with that level of transaction volume,” says Gamzon. “What we now have is a more normalized market dynamic for real estate transactions in this industry.”

The seniors housing sector continues to shed the lingering effects of the slow economic recovery and the slumping single-family housing market. The majority of respondents (88 percent) said that the state of the U.S. economy has had a negative effect on seniors housing occupancies in the past year, while 66 percent also believe the state of the U.S. housing market has produced a negative effect on occupancies.

That being said, occupancy levels continue to trend higher as the sector recovers. Overall, the average occupancy rate for seniors housing properties in the third quarter of 2012 was 88.8 percent, which is an increase of 0.8 percent from a year earlier, according to NIC MAP, a data analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC). The seniors housing average occupancy rate has risen consistently during the past 10 quarters and is 1.8 percent above its cyclical low of 87 percent in the first quarter of 2010. Year-over-year rental rates also grew at a rate of 2.2 percent, according to NIC.

Survey respondents are reporting even stronger performance with occupancy levels that average 91 percent. Among those respondents who own and/or operate seniors housing properties, the majority (54 percent) own fewer than 600 units.

Respondents also are optimistic that occupancies will continue to rise. About half of respondents (53 percent) expect occupancy levels within their seniors housing properties to increase over the next six months [Figure 2]. Those that do predict a further increase in the coming six months expect occupancies to rise an average of 74 basis points.

Just more than half of respondents expect that occupancy will increase at seniors housing properties in the next six months. That sentiment is slightly more optimistic than the first quarter, when only 43 percent of respondents expected a rise.

“The fundamentals, the demographics and the lack of new supply are all creating opportunities for us to invest in a sector that we view as having very favorable growth over the next several years,” says David Hegarty, president and COO at Newton, Mass.–based Senior Housing Properties Trust. The firm expects to close on about $230 million in seniors housing aquisitions.

REITs dominate buying

REITs such as Chicago-based Ventas Inc. have been exhibiting a voracious appetite for seniors housing properties. The REIT is currently the largest owner of seniors housing properties in the United States. Year-to-date through October, Ventas has invested roughly $1.7 billion in acquisitions primarily in seniors housing properties and medical office buildings. Although that is a fraction of the more than $11 billion the firm invested in 2011, it still represents a significant outlay for the firm.

“We have been very strategic and focused about diversifying our business,” says Lori Wittman, vice president of capital markets at Ventas. The REIT has been rapidly growing its portfolio of both seniors housing and medical office properties with an emphasis on increasing its private pay business and improving its balance sheet. For example, Ventas announced in April that it would acquire 16 private pay seniors living communities totaling 1,274 units from Sunrise Senior Living Inc.

When looking at the various sectors, respondents said that the greatest growth in demand will take place in the independent living/assisted living segment followed by memory care. In contrast, no respondents expect the skilled nursing sector to grow in the next six months.

“Of late, we have bought mostly independent living,” agrees Hegarty. “Independent living was the sector that was impacted the most by the downturn in the economy. So, as things started to improve, they are rebounding the most,” he adds.

 

Although both independent living properties and assisted living properties are averaging occupancies of 88.8 percent in the third quarter, the average occupancy rate for independent living is now 2.0 percentage points above its cyclical low, while occupancy in assisted living is 1.7 percentage points above its respective cyclical low, according to NIC.

Competition among the REITs to capture portfolios with top quality assets is putting some pressure on pricing. However, cap rates in the broader seniors housing industry have remained relatively stable over the past year.

Financing gap improves

Although access to capital is continuing to improve, the market remains bifurcated. REITS have good liquidity and access to capital in the public markets, as well as open lines of credit. At the same time, other buyers can get financing, but it is not as easily accessible as it is for the public players.

This is an issue because deals require a significant equity commitment, which can be a deterrent even to institutional buyers. Smaller private buyers typically have to rely on obtaining financing through Fannie Mae, Freddie Mac or HUD, which can take time and also has its restrictions. For example, Fannie and Freddie won’t allow a second loan to be put on the same property. That rules out a lot of potential bidders. “I think people are trying to figure out ways to play in this space, but just because of all of those factors involved, it limits the number of real bidders out there,” Hegarty says.

That being said, banks are selectively providing financing. Capital markets have been bolstered by solid fundamentals within the seniors housing market. As a result, investors have access to multiple sources of capital. When asked what types of debt financing respondents are considering for acquisitions and new construction, more than half of respondents, 55 percent, said they are considering local/regional banks for debt financing. Respondents also are exploring a variety of options with top picks including national banks (40 percent); HUD (39 percent); and Fannie Mae and Freddie Mac (31 percent).

Another bright spot in the financing sector is a booming refi business. The ability to refinance through the GSEs and HUD at extremely low interest rates is driving a significant level of lending activity. For example, Cleveland-based KeyBank has placed $1.4 billion in the seniors housing market year-to-date through September, either in direct lending or through participation in providing financing through syndicated deals and agency financing with the GSEs and HUD. About one-third of KeyBank’s total volume, $500 million, has involved property refinancing through the GSEs.

HUD, Fannie and Freddie are offering fixed-rate loans at 3.5 percent and lower for terms that range from five to up to 35 years in the case of HUD. “It is very attractive for owner-operators to lock in to those long-term rates. So you see a lot of folks capitalizing on this low rate environment,” says Michael Lugli, executive vice president and national manager of the KeyBank Real Estate Capital Healthcare team.

 

 

Spikes in renovation

Renovation and repositioning of older properties is expected to gain traction in the coming year. Competition among newer class-A properties is forcing some buyers to look at viable options among class-B and even class-C properties. Owners also are looking for ways to boost yields by renovating under-performing seniors facilities or enhancing program services.

As the costs to develop new seniors housing facilities increase, 64 percent expect that the acquisition, renovation and repositioning of older projects will become increasingly attractive to investors and operations. Twenty-one percent of respondents did not expect renovation to become any more attractive, while 15 percent of respondents said they were unsure

SHIA is currently marketing a portfolio in the western United States that offers significant upside for a buyer that is willing to convert the existing independent living facilities to assisted living and partial memory care. “Investors are chomping at the bit to acquire those types of assets that can be acquired based on current operating performance,” says Gamzon.

Development is beginning to return, albeit on a very selective basis. More than half of respondents (61 percent) have new construction ventures planned in the next six months, which is up from the 51 percent that were reportedly planning new seniors housing properties in the first quarter survey. The largest percentage of respondents (41 percent) is planning independent living/assisted living projects. A variety of other projects are in the works, including memory care (30 percent); age restricted communities (13 percent); skilled nursing (9 percent); and CCRC at 9 percent.

“There is demand for new properties, and you are starting to see an increase in construction as banks are more willing to look at doing that financing,” says Lugli. As the market has recovered and occupancies have improved, owners also are more confident and more willing to commit their own equity to projects, he adds.

For those seeking construction financing, experience remains a key component. An overwhelming majority of respondents (88 percent) rated having an experienced management team as a high priority (rated four or five on a five-point scale), while 86 percent also rates having an established track record as a developer as an important factor when seeking construction financing.

Respondents believe that acquiring, renovating and repositioning older properties will be increasingly attractive to investors and operators.

Whether it is renovation or new construction respondents do expect the industry to focus on providing more affordable options. “There is very little targeting what the lower middle class can afford,” says Hegarty. “I think there is an opportunity out there for people who can build properties that can attract that niche.” Half of respondents expect the industry to focus more attention on investor opportunities in the affordability marketplace, while 26 percent did not think that was the case and 24 percent were not sure.

What’s ahead for 2013?

Although investment sales in the broader market declined in 2012, there is still an abundant supply of for-sale properties on the market. “We have unbelievably strong fundamentals between demographics and policy shifts and a consolidating industry—all things that are really a strong base of growth for the future of the industry,” says Ventas’ Wittman.

Demand for seniors housing properties remains high, which will encourage some owners that have been on the fence to put their properties on the market. Both U.S. and foreign investors are continuing to focus on seniors housing properties as a viable need-based real estate investment platform. In addition, investors are seriously looking at not just core assets but value-add opportunities where repositioning of existing facilities programmatically will represent a major trend for the business over the coming six months.

Ultimately, seniors housing tends to be a more defensive, needs-based real estate sector that will continue to perform well amid slower economic growth. “The overall improvement of the economy will enhance this business,” says Gamzon. “If there is a dip in the economy, this sector is not recession proof, but it is recession resistant. We have seen this over the past five years as compared to other real estate sectors.”

Twinkies likely to survive sale of Hostess

DETROIT (AP) – Twinkie lovers, relax.

WINSTON ROWE & ASSOCIATES WEBISTE

The tasty cream-filled golden spongecakes are likely to survive, even though their maker will be sold in bankruptcy court.

Hostess Brands Inc., baker of Wonder Bread as well as Twinkies, Ding Dongs and Ho Ho’s, will be in a New York bankruptcy courtroom Monday to start the process of selling itself.

The company, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, it’s asking the court for permission to sell assets and go out of business.

But with high brand recognition and $2.5 billion in annual revenue, other companies are interested in bidding for at least pieces of Hostess.

US industrial production drops 0.4 percent

WINSTON ROWE & ASSOCIATES

WASHINGTON (AP) — Americans cut back on spending at retail businesses in October, an indication that some remain cautious about the economic outlook. Superstorm Sandy also depressed car sales and slowed business in the Northeast at the end of the month.

The Commerce Department said Wednesday that sales dropped 0.3 percent after three months of gains. Auto sales fell 1.5 percent, the most in more than a year.

Excluding the volatile categories of autos, gas and building materials, sales fell 0.1 percent. That followed a 0.9 percent gain in September for that category. Online and catalog purchases fell 1.8 percent, the most in a year. Electronics and clothing stores also posted lower sales.

The government said Sandy “had both positive and negative effects” on sales. Some stores and restaurants closed and lost business. Others reported sales increases ahead of the storm as people bought supplies.

Most economists said they thought the storm overall held back sales. Still, they noted that consumers showed signs of cutting back on spending before the weather disrupted business.

“Looking past (Sandy’s) impact, U.S. consumers appeared to dial it back a notch,” said Robert Kavcic, an economist at BMO Capital Markets. “There was relatively broad-based weakness in this report.”

Paul Dales, senior U.S. economist at Capital Economics, said November will be a crucial test of the consumer. He noted that many could be starting to worry about tax cuts that will expire at the end of the year if Congress and the White House fail to reach a budget deal before then.

“A bounce-back would point to a temporary Sandy-induced softening, while another soft month would suggest that the threat of a sharp fall in after-tax incomes in the new year is worrying households,” Dales said.

In September, retail sales jumped 1.3 percent. Spending rose in nearly all categories. The buying spree helped lift economic growth in the July-September quarter and reflected growing consumer confidence. Consumer spending drives nearly 70 percent of economic activity.

The October decline in retail sales may be temporary, economists said. Kavic noted that auto sales may pick up in November as Americans replace cars damaged by the hurricane.

Superstorm Sandy hit the East Coast on Oct. 29 and disrupted businesses from North Carolina to Maine. The storm also lowered auto sales last month by about 30,000, according to TrueCar.com. Overall, car sales dipped to an annual pace of 14.3 million in October, down from a 14.9 million pace in September.

The storm cut retail spending in the Northeast by about 20 percent last week, according to MasterCard Advisors’ SpendingPulse, a retail data service. That figure excludes auto sales.

The Northeast accounts for about 24 percent of retail sales nationwide, the MasterCard Advisors’ report said. It typically generates $18.7 billion in sales for the week ended Saturday. But sales that week fell to about $15 billion.

The storm also cut power to roughly 8 million homes and businesses. Some are still without power. That may have had an impact on online sales.

Retail sales are likely to rebound this month, analysts said, because Americans are spending more on repairs and making up for lost shopping trips.

The Commerce Department’s retail sales report is closely watched because it is the government’s first look at consumer spending each month.

Hiring has picked up in recent months, which has boosted consumer confidence. Employers added 171,000 jobs in October and job gains in August and September were higher than first estimated. The unemployment rose to 7.9 percent from 7.8 percent as more of those out of work began searching for jobs.

A survey by the University of Michigan last week found that consumer sentiment improved for the fourth straight month to its highest level in five years….

US industrial production drops 0.4 percent

WINSTON ROWE & ASSOCITES

WASHINGTON (AP) — Superstorm Sandy depressed U.S. industrial output in October, the latest indication that the storm could temporarily slow the economy. Still, production of machinery and equipment declined sharply, reflecting a more cautious outlook among businesses.

The Federal Reserve said Friday that industrial production fell 0.4 percent last month, after a 0.2 percent gain in September. Excluding the storm’s impact, output at the nation’s factories, mines and utilities would have risen about 0.6 percent.

Factory output, the most important component, fell 0.9 percent. It would have been unchanged without the storm, the Fed said. Utility output dipped 0.1 percent, while mining, which includes oil and gas production, rose 1.5 percent.

Manufacturing has weakened since spring, in part because companies have scaled back purchases of long-lasting goods that signal investment plans. That trend appeared to continue in October: Machinery production fell 1.9 percent, while production of electrical equipment, appliances and components declined 1.4 percent.

Many businesses are worried about tax increases and federal spending cuts — known as the “fiscal cliff” — that will take effect in January unless Congress reaches a budget deal before then. Most economists predict the economy will suffer a recession in the first half of 2013 if lawmakers and President Barack Obama can’t avoid the fiscal cliff.

Superstorm Sandy has also hurt the economy, although most economists expect the storm’s impact to fade in the coming weeks.

The storm hit the Northeast on Oct. 29 and disrupted businesses from North Carolina to Maine. Two regional manufacturing surveys released Thursday also showed Sandy depressed manufacturing activity this month in the Philadelphia region and New York.

Sandy dampened retail sales in October and pushed applications for unemployment benefits last week to the highest level in 18 months, according to government reports released this week.

Still, consumers may have also cut back on retail spending last month because of anxiety over the fiscal cliff. Consumer spending drives roughly 70 percent of economic activity.

Many economists say the economy is growing in the current October-December quarter at a weak annual rate below 2 percent.

There have been hopeful signs that the job market is improving. Employers added 171,000 jobs in October and hiring in August and September was stronger than first estimated. The economy has gained an average of 173,000 jobs a month since July. That’s up from an average of 67,000 a month in April through June.

The economy appears to have grown faster over the summer than first thought, based on a handful of positive September reports on inventory growth and trade released this month. Many economists now predict growth at an annual rate of roughly 3 percent in the July-September quarter, up from the initial estimate of 2 percent reported last month.

The government releases its second estimate for third-quarter growth on Nov. 29

China’s economy recovering but torrid growth over

WINSTON ROWE & ASSOCIATES WEBSITE

BEIJING (AP) — Zhang Hanzhong, who supplies locks for auto manufacturers, is part of a swath of China’s economy that is lagging in a two-speed recovery.

Business for retailers, hotels, photo studios and other service industries is picking up as China limps out of its deepest slump since the 2008 global crisis. But exporters and manufacturers who drove its boom over the past decade are struggling.

Zhang’s sales are down 20 percent with no rebound in sight, while labor costs are up.

“The second half of the year is even harder than the first half,” said Zhang, who employs 60 people at his factory in Meizhou in Guangdong province near Hong Kong.

China is recovering but the days of double-digit growth are gone. Faced with falling returns from a three-decade-old growth model fueled by exports and investment, Beijing is trying to rebalance the economy by promoting consumer spending, service industries and technology. It is a strategy that promises smaller but more sustainable gains. That could have global repercussions by dampening voracious demand for iron ore, industrial equipment and other imports that drove growth for suppliers from Australia to Africa to Germany.

“The world has to get used to the idea that China will grow at a 7 or 8 percent pace, and growth will be far less investment-intensive over the next decade,” said Mark Williams of Capital Economics. “So the projections for Chinese demand for commodities, capital goods, construction equipment and so on have to be revised down.'”

The Communist Party has committed in broad strokes to growth based on consumer spending and innovation in its five-year development plan that runs through 2015. A report in February by the World Bank and a Chinese Cabinet think tank said that to achieve that, the government will need to make politically daunting changes including curbing the dominance of state companies.

New leaders including General Secretary Xi Jinping who took power last week are under pressure to deliver on the party plans to overhaul the economy. But how far they will go to rein in politically favored state companies and other vested interests is unclear.

Growth slowed to a three-year low of 7.4 percent in the three months ending in September. That prompted concern the new leaders might feel compelled to boost spending on building bridges and other public works, setting back efforts to reduce reliance on investment. But retail sales and other indicators are improving, easing pressure for abrupt changes.

“The issue is how well they work together and whether they are able to overcome vested interests,” said Williams. “We really won’t know that until they’ve been in office for a little while.”

This year’s growth is explosive by Western standards but well below the 14.1 percent that China racked up in 2007 on its way to passing Japan as the second-largest economy in 2009.

Forecasters expected a Chinese recovery early this year. As the slump deepened, the International Monetary Fund and others cut growth forecasts for the year to below 8 percent — the weakest since the 1990s. Even after a recovery, they see it rising to only about 8.5 percent by 2014.

Beijing has yet to take many of the steps analysts say are required to achieve its goals, including pumping money into health and other social programs to free up household budgets for consumer spending. But the impact in some industries is clear.

A monthly survey by HSBC Corp. of Chinese service companies has shown activity expanding steadily for two years, while a parallel survey of manufacturers has shown activity contracting this year.

Already, retail spending is rising faster than overall growth as wages climb. In October, retail sales were up 14.5 percent over a year earlier.

In Huzhou, a city south of Shanghai in Zhejiang province, business is strong for entrepreneur’s Li Yong bedding factory. It employs 10 people and doesn’t bother to export because demand from Chinese customers is strong. Costs for labor, rent and materials up but so are sales.

“Our profits are up 10 percent this year from last year,” Li said.

Li buys all his materials in China, highlighting another trend that could blunt the payoff for its trading partners. As local companies develop the ability to deliver more sophisticated goods and services, they are serving Chinese consumers from domestic resources, limiting demand for imported materials and technology.

“I will think about using imported materials in the future, but for now, both the customers and I cannot afford it,” Li said.

China’s slowdown was due largely to government controls imposed to cool an overheated economy and inflation following its quick, stimulus-fueled rebound from the 2008 crisis.

At the same time, steelmakers and other heavy industry was under pressure from a government campaign to cut pollution and energy use by closing older facilities. Construction, a major source of jobs, was battered by a clampdown on land sales and building cool surging housing prices and stop speculation-driven investment.

Easing building curbs would be a quick way to generate jobs, but communist leaders resisted pleas from developers even as growth drifted lower, worried about setting back their rebalancing plans. Instead, the government is pushing companies to construct more low-cost housing, which the general public needs but that produces less profit and requires less imported steel for girders and copper for wiring.

Weaker manufacturing and construction activity already have cut China’s demand for foreign goods. Imports of steel products fell 39.9 percent in October from a year earlier. Copper imports were off 12.2 percent and those of raw wood were down 11.1 percent.

Government pressure to raise wages has put more money in consumers’ pockets but is squeezing companies, especially in labor-intensive industries that employ millions of people making shoes, toys and other low-tech goods.

Chen Shuhai’s 5-year-old wig factory is the sort of labor-intensive business that is being pushed out of China by higher costs.

Rent on his factory in Yiwu, a southern city famous for exporting buttons and other low-tech goods, doubled from 2009 to 2011. Monthly wages are up 10 percent this year to about 3,500 yuan ($550) for each of his 80 employees.

Chen said neighboring companies that exported to debt-crippled Europe have closed. Others are moving to Vietnam, India and other lower-wage markets.

“There is not much room left in China for the wig industry,” Chen said. “I don’t know what will happen to my factory.”

Longer-term, the government’s effort to create a consumer-driven economy might turn China into a market for tourism, insurance, health care and other service companies.

“The issue is whether it can do this smoothly, in which case growth can remain strong,” said Williams. If it works, “over the next 10 years, it will be another group of economies that are able to ride China’s coattails.”

Political Unrest & The US National Economy

Winston Rowe & Associates Website

On more than one occasion in recent months I’ve had conversations with real estate investors or lenders that have drifted into politics. “What do you think of the Tea Party?” “What do you make of Occupy Wall Street?” “What’s your impression of Congress?”

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And then, usually what comes next is a comment along the lines of, “I’ve never seen anything like this before.”

The rise of the Tea Party and Occupy movements—neither of which have leaders and both of which include members with diverse, if not conflicting concerns—would be amusing if the stakes weren’t so high.

But the issue is that there are major problems that need to be addressed—regulatory reform, tax reform, deficit reduction—many of which will affect the economy more broadly and commercial real estate specifically.

And with the gap between the two parties, the uncertain outcome of the 2012 election and the rise in populist anger, nobody seems to know how any of it is going to shake out.

The net result of this is a high level of political uncertainty. Couple that with a still shaky economic recovery marked by anemic job creation, questions about capital markets and convulsions in Europe stemming from sovereign debt crises, and the picture isn’t exactly pretty.

The first half of 2011 was playing out nicely. Investment activity was up. Risk tolerance by lenders and investors was increasing. And the CMBS market was recovering nicely. But even then there were creeping questions. For instance, fundamentals were not reviving as quickly as expected—leading some to believe that the investment market was getting ahead of itself.

So we had a few reality check moments as the summer progressed, starting with the debt ceiling debate. Perhaps most significant was a step back in the reemergence of the CMBS sector, which is now ending the year with things having slowed down some.

Simultaneously, the industry did seem to start to take note that the jobs market remains pretty awful and that, overall, fundamentals still have a long way to go before they’re really healthy.

Investment activity has since slowed in the second half of the year. We’re still on pace to exceed the volume posted in 2010, but it’s not looking like 2011 will be the robust year it seemed to start out to be. Deals are taking place, but not as many as we expected. And the whole context in which deals are taking place has changed.

Enter politics

And now we have a big political mess to wrestle with.

From my perspective, the importance of the questions being posed by the political uncertainty is precisely that it could have some massive implications for commercial real estate investment.

The first issue is the potential change in the way carried interest is taxed, which would affect thousands (if not tens of thousands) of real estate partnerships.

Also at issue is the fact that huge sections of the Dodd-Frank Act have yet to be written. The broad strokes are there. But the details have not been filled in.

So, for example, there’s a notion that securitizers will be required to retain a slice of what they originate. But the form this will take hasn’t been determined. In the worst case scenario, if it’s too restrictive, there is a risk that no one will want to be in the securitization business at all. And given the level of commercial real estate debt that will continue to need to be refinanced in the coming years, that would be a disaster.

And, of course, there’s the ever-present question of what to do with Fannie Mae and Freddie Mac. The two behemoths still need to be reformed. There has not been a whole lot of movement with that. But whatever happens with these agancies will have implications for the multifamily sector.

In additon, there is the question of deficit reduction. The emergence of the Occupy movement—and its targeting of Wall Street and the nation’s wealthiest 1 percent—may introduce new pressure on raising revenues as a way to deal with the deficit rather than dealing with the issue largely through spending cuts. And there very well could be pressure for other kinds of taxes, besides carried interest reform, that would affect commercial real estate firms and individual investors.

Ultimately, there are now a great many questions stemming from the political climate that promise to affect the commercial real estate industry. And, unfortunately, there is no sign that any of this is going to become any clearer in the near future.

Political Unrest & The US National Economy

Winston Rowe & Associates Website

The revelation this summer that the London Inter Bank Overnight Rate (LIBOR) has been the subject of manipulation sent shockwaves around the globe. If that rate—one of the cornerstones of the banking system—is being gamed, is there anything that we can trust?

GGP Refinances $1.2B in Property-Level LoansMultifamily Fundamentals Do Not Face a CliffVornado Partnership Refinances 1290 Avenue of the Americas with $950M LoanSeavest Healthcare Sells 14 Medical Office Buildings to Duke Realty for $332MRREEF Sells its Interest in Burbank Office BuildingMore Latest News

For the commercial real estate industry, LIBOR comes into play primarily for two kinds of loans: construction financing and short-term floating-rate bridge loans. Both products are priced at a spread to LIBOR.

But it’s impossible to say who has benefited and who was burned by the manipulation of LIBOR. For now, all we know is that Barclays has admitted to gaming the rate. Other banks are still being investigated. But Barclays reported higher LIBOR rates prior to the 2008 financial crisis and then lower ones after. That means borrowers, depending on when they got their loans, may have been either hurt or helped. The same is true for smaller banks that used LIBOR as the base on which they originated loans.

Still, a major disruption to or discontinuation of LIBOR would directly affect those areas of finance that govern real estate lending as well as contribute additional uncertainty to capital markets that still haven’t fully recovered from 2008.

The worst case scenario is LIBOR being dumped entirely. That would require loans based on LIBOR to use an alternative index. Such a change would affect existing and future loans. Most loans are structured with language that would allow the replacement of LIBOR with an alternative index. But there is little agreement as to what would be the obvious replacement for LIBOR.

Fortunately, this scenario seems unlikely.

Since the initial shock, the lending business has returned to normal. Borrowers are still receiving loans based on LIBOR. And there has been little disruption to the volume of construction and bridge loans being originated.

There has been some talk of making the way LIBOR is determined more transparent. This would certainly be welcome and leave the system less prone to manipulation. And it would not require moving to some other index off which to price floating rate debt.

So for now, the situation serves mostly as a warning to the sector rather than a true disruption.

Still, there are some causes for concern. For one thing, it is just the latest in a series of shocks to the finance system that continue to shake confidence in capital markets. Despite many improvements since the 2008 financial crisis, the system is still functioning at just a portion of the capacity it once had. And incidents like this just delay the recovery even further.

Secondly, the incident increases the potential for regulatory changes that would create further disruptions. So far, only Barclay’s has admitted to manipulating LIBOR. But investigations continue into other banks as do discussions of potential settlements with both U.S. and European oversight bodies. As details come out, the pressure for regulation could rise.

For example, in Britain there is real discussion of re-instituting rules mandating the separation of commercial banks and investment banks.

That conversation has not leapt across the Atlantic to enter the United States yet. But such a change—reinstituting something akin to the Depression-era Glass Steagall Act that was repealed in the late 1990s—would be a massive change to the financial system that could have loads of unintended consequences.

Thus, more than anything, what the LIBOR scandal should trigger is some caution for the sector. And it should have borrowers and investors contemplating the dangers of big changes to the financial sector if the scandal continues to blossom.

For now, it’s business as usual. But contingency planning would be an excellent idea.

London Inter Bank Overnight Rate (LIBOR)

Winston Rowe & Associates Website

The revelation this summer that the London Inter Bank Overnight Rate (LIBOR) has been the subject of manipulation sent shockwaves around the globe. If that rate—one of the cornerstones of the banking system—is being gamed, is there anything that we can trust?

GGP Refinances $1.2B in Property-Level LoansMultifamily Fundamentals Do Not Face a CliffVornado Partnership Refinances 1290 Avenue of the Americas with $950M LoanSeavest Healthcare Sells 14 Medical Office Buildings to Duke Realty for $332MRREEF Sells its Interest in Burbank Office BuildingMore Latest News

For the commercial real estate industry, LIBOR comes into play primarily for two kinds of loans: construction financing and short-term floating-rate bridge loans. Both products are priced at a spread to LIBOR.

But it’s impossible to say who has benefited and who was burned by the manipulation of LIBOR. For now, all we know is that Barclays has admitted to gaming the rate. Other banks are still being investigated. But Barclays reported higher LIBOR rates prior to the 2008 financial crisis and then lower ones after. That means borrowers, depending on when they got their loans, may have been either hurt or helped. The same is true for smaller banks that used LIBOR as the base on which they originated loans.

Still, a major disruption to or discontinuation of LIBOR would directly affect those areas of finance that govern real estate lending as well as contribute additional uncertainty to capital markets that still haven’t fully recovered from 2008.

The worst case scenario is LIBOR being dumped entirely. That would require loans based on LIBOR to use an alternative index. Such a change would affect existing and future loans. Most loans are structured with language that would allow the replacement of LIBOR with an alternative index. But there is little agreement as to what would be the obvious replacement for LIBOR.

Fortunately, this scenario seems unlikely.

Since the initial shock, the lending business has returned to normal. Borrowers are still receiving loans based on LIBOR. And there has been little disruption to the volume of construction and bridge loans being originated.

There has been some talk of making the way LIBOR is determined more transparent. This would certainly be welcome and leave the system less prone to manipulation. And it would not require moving to some other index off which to price floating rate debt.

So for now, the situation serves mostly as a warning to the sector rather than a true disruption.

Still, there are some causes for concern. For one thing, it is just the latest in a series of shocks to the finance system that continue to shake confidence in capital markets. Despite many improvements since the 2008 financial crisis, the system is still functioning at just a portion of the capacity it once had. And incidents like this just delay the recovery even further.

Secondly, the incident increases the potential for regulatory changes that would create further disruptions. So far, only Barclay’s has admitted to manipulating LIBOR. But investigations continue into other banks as do discussions of potential settlements with both U.S. and European oversight bodies. As details come out, the pressure for regulation could rise.

For example, in Britain there is real discussion of re-instituting rules mandating the separation of commercial banks and investment banks.

That conversation has not leapt across the Atlantic to enter the United States yet. But such a change—reinstituting something akin to the Depression-era Glass Steagall Act that was repealed in the late 1990s—would be a massive change to the financial system that could have loads of unintended consequences.

Thus, more than anything, what the LIBOR scandal should trigger is some caution for the sector. And it should have borrowers and investors contemplating the dangers of big changes to the financial sector if the scandal continues to blossom.

For now, it’s business as usual. But contingency planning would be an excellent idea.

Oil & Gas Financing Winston Rowe & Associates

Winston Rowe & Assocaites Web Site

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When you need to move quickly, they are prepared to move at the same quick pace, in weeks not months. Winston Rowe & Associates works with both public and private domestic independent producers, pipeline and gathering companies, and other energy-related businesses.

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Winston Rowe & Associates is a leading financial advisory firm focused on delivering financial products and services to the global energy and infrastructure markets. They specialize in the sale and financing of oil and gas companies, projects and assets.

THE EMPLOYMENT SITUATION — OCTOBER 2012

Total nonfarm payroll employment increased by 171,000 in October, and the unemployment

rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics

reported today. Employment rose in professional and business services, health care,

and retail trade.

 urricane Sandy                                |

  |                                                                               |

  |Hurricane Sandy had no discernable effect on the employment and unemployment   |

  |data for October. Household survey data collection was completed before the    |

  |storm, and establishment survey data collection rates were within normal ranges|

  |nationally and for the affected areas. For information on how unusually severe |

  |weather can affect the employment and hours estimates, see the Frequently Asked|

  |Questions section of this release.                                             |

  |                                                                               |

  |_______________________________________________________________________________|

 

 

Household Survey Data

 

Both the unemployment rate (7.9 percent) and the number of unemployed persons (12.3

million) were essentially unchanged in October, following declines in September.

(See table A-1.)

 

Among the major worker groups, the unemployment rate for blacks increased to 14.3

percent in October, while the rates for adult men (7.3 percent), adult women (7.2

percent), teenagers (23.7 percent), whites (7.0 percent), and Hispanics (10.0 percent)

showed little or no change. The jobless rate for Asians was 4.9 percent in October

(not seasonally adjusted), down from 7.3 percent a year earlier. (See tables A-1,

A-2, and A-3.)

 

In October, the number of long-term unemployed (those jobless for 27 weeks or more)

was little changed at 5.0 million. These individuals accounted for 40.6 percent of

the unemployed. (See table A-12.)

 

The civilian labor force rose by 578,000 to 155.6 million in October, and the labor

force participation rate edged up to 63.8 percent. Total employment rose by 410,000

over the month. The employment-population ratio was essentially unchanged at 58.8

percent, following an increase of 0.4 percentage point in September. (See table A-1.)

 

The number of persons employed part time for economic reasons (sometimes referred to

as involuntary part-time workers) fell by 269,000 to 8.3 million in October, partially

offsetting an increase of 582,000 in September. These individuals were working part

time because their hours had been cut back or because they were unable to find a

full-time job. (See table A-8.)

 

In October, 2.4 million persons were marginally attached to the labor force, little

different from a year earlier. (These data are not seasonally adjusted.) These

individuals were not in the labor force, wanted and were available for work, and had

looked for a job sometime in the prior 12 months. They were not counted as unemployed

because they had not searched for work in the 4 weeks preceding the survey. (See

table A-16.)

 

Among the marginally attached, there were 813,000 discouraged workers in October, a

decline of 154,000 from a year earlier. (These data are not seasonally adjusted.)

Discouraged workers are persons not currently looking for work because they believe

no jobs are available for them. The remaining 1.6 million persons marginally attached

to the labor force in October had not searched for work in the 4 weeks preceding

the survey for reasons such as school attendance or family responsibilities. (See

table A-16.)

 

Establishment Survey Data

 

Total nonfarm payroll employment increased by 171,000 in October. Employment growth

has averaged 157,000 per month thus far in 2012, about the same as the average monthly

gain of 153,000 in 2011. In October, employment rose in professional and business

services, health care, and retail trade. (See table B-1.)

 

Professional and business services added 51,000 jobs in October, with gains in

services to buildings and dwellings (+13,000) and in computer systems design (+7,000).

Temporary help employment changed little in October and has shown little net change

over the past 3 months. Employment in professional and business services has grown by

1.6 million since its most recent low point in September 2009.

 

Health care added 31,000 jobs in October. Job gains continued in ambulatory health

care services (+25,000) and hospitals (+6,000). Over the past year, employment in

health care has risen by 296,000.

 

Retail trade added 36,000 jobs in October, with gains in motor vehicles and parts dealers

(+7,000), and in furniture and home furnishings stores (+4,000). Retail trade has added

82,000 jobs over the past 3 months, with most of the gain occurring in motor vehicles

and parts dealers, clothing and accessories stores, and miscellaneous store retailers.

 

Employment in leisure and hospitality continued to trend up (+28,000) over the month.

This industry has added 811,000 jobs since a recent low point in January 2010, with

most of the gain occurring in food services.

 

Employment in construction edged up in October. The gain was concentrated in specialty

trade contractors (+17,000).

 

Manufacturing employment changed little in October. On net, manufacturing employment

has shown little change since April.

 

Mining lost 9,000 jobs in October, with most of the decline occurring in support

activities for mining. Since May of this year, employment in mining has decreased

by 17,000.

 

Employment in other major industries, including wholesale trade, transportation and

warehousing, information, financial activities, and government, showed little change

over the month.

 

In October, the average workweek for all employees on private nonfarm payrolls was

34.4 hours for the fourth consecutive month. The manufacturing workweek edged down by

0.1 hour to 40.5 hours, and factory overtime was unchanged at 3.2 hours. The average

workweek for production and nonsupervisory employees on private nonfarm payrolls edged

down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7.)

 

In October, average hourly earnings for all employees on private nonfarm payrolls edged

down by 1 cent to $23.58. Over the past 12 months, average hourly earnings have risen

by 1.6 percent. In October, average hourly earnings of private-sector production and

nonsupervisory employees edged down by 1 cent to $19.79. (See tables B-3 and B-8.)

 

The change in total nonfarm payroll employment for August was revised from +142,000 to

+192,000, and the change for September was revised from +114,000 to +148,000.

Sandy’s cost to economy: Up to $50 billion

NEW YORK (CNNMoney) — The estimated loss to the nation’s economy from Superstorm Sandy has climbed to as much as $50 billion, making it one of the nation’s most costly disasters.

 

Eqecat, which does loss estimates from catastrophes for the insurance industry, puts the total losses at between $30 billion and $50 billion. Its initial estimated loss earlier in the week was only $10 billion to $20 billion.

 

Eqecat said the higher estimate is due primarily to the large electric and utility losses, coupled with the transit and road closures that shut many businesses longer than expected. It also said further information about damage is raising the estimate.

 

It now believes the insured portion of the loss could reach in the $10 billion to $20 billion range, up from its earlier estimate of a $5 billion to $10 billion in insured losses.

 

Moody’s Analytics, a economic research firm, puts storm losses at $49.9 billion. About $30 billion of the loss comes from the physical storm damage, split fairly evenly between households, businesses, and public infrastructure such as rail lines, roads and water and sewage systems. The rest of the Moody’s estimate comes from lost business activity.

 

Mark Zandi, chief economist for Moody’s Analytics, said if he had to guess, he would estimate that the loss estimate is more likely to rise as the full extent of damage and the actual cost of repairs becomes better known.

 

“The property damages are typically revised up, and economic damages are revised down because businesses find a way to make the business back,” he said. “But a lot of estimates come from estimates about when power is restored. If that takes longer than estimated, it could be more costly.”

 

About 60% of the lost business output is likely to come from New Jersey, dwarfing the 15% from New York City and 14% from Philadelphia. The remaining lost output is from the Washington, D.C., area.

 

Moody’s estimates Sandy will be the third most costly U.S. natural disaster, trailing only the $157 billion total economic loss from 2005’s Hurricane Katrina and the $54.5 billion loss from 1992’s Hurricane Andrew when those losses are adjusted for inflation.

 

This is the second most costly hit to the affected area, trailing only the Sept. 11 terrorist attack. That caused $99 billion in damages nationwide, with most concentrated in New York. It is much greater than last year’s Hurricane Irene, which followed a similar track and caused about $12.6 billion in total economic losses.

 

The greatest amount of lost business in Moody’s estimate is $7 billion from financial services. Zandi said the two-day shutdown in the nation’s stock exchanges was particularly costly in terms of lost commissions and fees, since traders are not going to trade a share of stock twice just to make up for not being able to trade it during the shutdown. “That’s hard to get back,” he said.

 

Business and professional services, which include everything from high-priced legal and accounting services to messenger services, is the second biggest source of lost business, with an estimated $4.6 billon loss.

 

Zandi said the lost business estimates do not take into account the cost of the extra time residents of the area are having to spend dealing with the problems caused by the storm, such as long commutes, waiting in long lines for gasoline or even lost productivity at work due to increased fatigue.

 

“There’s so many ways it weighs on the economy that can’t be measured,” he said.

 

Despite the size of the loss, Zandi said the drag on the economy will be temporary, with rebuilding and recovery activity quickly making up for much of the economic damage from the storm. He believes any minor slowdown in the nation’s gross domestic product in the fourth quarter due to Sandy will be recouped early in 2013.

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