RESIDENTIAL
“Idiots lending to idiots.”
That’s how economist Peter Linneman bluntly summarized the roots of the subprime mortgage mess at a recent speech looking at the global economy in 2008.
Linneman is the chief economist for brokerage NAI Capital Commercial, whose Newport Beach office sponsored the Jan. 16 event in Costa Mesa. Linneman’s had some hands-on experience with the subprime industry, serving on the board of a lender earlier this decade.
Along with too-eager lenders who failed to do enough due diligence, the change in the make-up of subprime borrowers over the past eight years are the biggest reasons for the recent meltdown, he said.
At the beginning of the decade, most subprime borrowers,which then made up about 7% of the mortgage market,were those whose incomes were cash-heavy, like waiters and small-business owners.
By 2007, subprime mortgages made up close to a quarter of all mortgage loans with speculators by far the biggest users of the loans. That’s one reason Linneman is not in favor of a government bailout.
“It undermines a central tenet of capitalism,that idiots lose money,” he said.
Most economists are leaning toward a national recession occurring this year, but Linneman struck a more positive tone during his speech. He said that he doesn’t expect a recession to happen, especially with elections coming up. Nervous politicians will spend money in a short-term attempt to fix the economy, likely at the expense of longer-term consequences, he said.
Two days after Linneman’s speech, President Bush announced plans for about $145 billion worth of tax breaks, to give the economy a “shot in the arm.”
Santa Ana Complex Trades
Siena & Trento Townhomes, a 50-unit apartment complex in Santa Ana, sold for $8.6 million or about $171,000 per unit.
The buyer of the property, located at 1001 S. Lyon St., was Los Angeles-based Kadoya Trust. The seller was P & L; Trust, a locally based firm.
Jonathan Giannola of Sperry Van Ness in Irvine represented the seller, while Brett O’Keefe of Re/Max Commercial represented the buyer. According to Giannola, the property sold at a 5.5% capitalization rate and was on the market about three weeks prior to entering escrow.
Costa Mesa-based Trico Realty Inc. has made its second big Inland Empire deal in recent months.
The company just bought a 9.1-acre plot of industrial-zoned land in Redlands, for $5.1 million. The seller was a private investor.
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Trico Realty plans to develop a for-lease industrial business park, according to Clyde Stauff, senior vice president of Colliers International’s Irvine office.
It’ll be the second project for Trico Realty in the Inland Empire. It’s also building Trico Business Center, a 62,620-square-foot office project in Rancho Cucamonga.
Stauff, along with Michael McCrary and Trevor Velko of Colliers’ Ontario office, represented both the buyer and the seller in the latest deal.
Toy Maker Renewal
Playmates Toys Inc., a Costa Mesa-based designer and manufacturer of toys and actions figures, just renewed its lease for its corporate headquarters, at Maguire Properties Inc.’s 611 Anton Blvd.
The five-year lease is for 16,544 square feet, and is an expansion of about 1,200 square feet. The company, the U.S. arm of Hong Kong’s Playmates Holdings Ltd., counts about 50 workers locally.
Playmates Holdings makes about $170 million in yearly sales, most by way of its Costa Mesa operations.
Playmates buys the rights to make toys, including brands such as the Teenage Mutant Ninja Turtles and Strawberry Shortcake. The toys are designed in Costa Mesa, and then go to Hong Kong, where they’re engineered for production. Toys are then made by contract manufacturers in China.
Gary McArdell, Tom Taylor and Greg May of Grubb & Ellis Co.’s Newport Beach office represented Playmates in the transaction. John Bendetti of Maguire Partners represented the landlord.
Building Block Event
The Building Block Foundation Fund, a philanthropy started up by commercial real estate companies in the area, is holding its annual “Building on Success” event Feb. 7 at the Doubletree Hotel in Santa Ana.
The guest speaker at the event is H. Delano Roosevelt, grandson of President Franklin Delano Roosevelt and chief executive of Roosevelt Consulting Inc. Tickets are $125 per person.
The Building Block Foundation Fund, started in 2004, raises money for at-risk youth in Orange County.
