Features

Brent Auberry, Esq. This is not your mother's shopping experience. In the never-ceasing cycle of trying to stay hip and cool (or perhaps just relevant), mall owners in recent years have shifted away from the traditional, inward-facing enclosed mall to today’s outward-facing lifestyle center. This change in design for new shopping centers brings with it a potential change in valuation techniques for older malls. Assessors often apply a modified reproduction cost to malls, basing value on the cost of recreating the property’s identical shape, size, design and layout. A more relevant value is replacement cost, or the cost to replace the asset with a modern shopping center with the same utility. In other words, in certain circumstances assessors should assess large enclosed malls as if they were the less costly, more efficient lifestyle centers that could be developed on the same site. The difference might result in property tax savings for the owner. Lifestyle centers typically range between 150,000 and 500,000 square feet of leasable retail area and include at least 50,000 square feet devoted to upscale national chain stores, according to the International Council of Shopping Centers. Many rely on multiplex theaters or other entertainment components rather than traditional …

Cushman & Wakefield NEW YORK — Positive momentum continued in U.S. industrial markets through the first quarter of 2013 as e-commerce maintained its influence on reshaping industrial distribution strategies and facilities across the U.S., according to Cushman & Wakefield Inc. The overall vacancy rate fell to 8.2 percent in the first quarter, down 80 basis points from a year ago and to the lowest point since the third quarter of 2008. Lakeland, Fla. (4.2 percent), greater Los Angeles (4.4 percent) and Orange County, Calif. (4.7 percent) recorded the lowest vacancy rates in the nation (see chart). Only five out of 37 markets tracked by Cushman & Wakefield reported an increase in vacancies on a year-over-year basis. Warehouse vacancy has now declined for 12 consecutive quarters after peaking in the first quarter of 2010. Consequently, rental rates are now trending up. The U.S. direct weighted average triple-net rental rate today is $5.73, up from $5.59 one year ago and $5.68 at year-end 2012. “Expansion of e-commerce is fueling demand for big-box distribution centers in major distribution hubs, and has triggered an increase in both build-to-suit and speculative development,” says Cushman & Wakefield’s John Morris, leader of industrial services for the Americas. …

Richard P. Rizzuto When life hands you lemons, make lemonade. For those of us involved in the retail real estate sector, that second part should probably be changed to “open a lemonade stand.” The well-known saying echoes the importance of resilience and adaptability in the business world because more often it’s not the strongest who survive, but the ones who are the most responsive to change who can tread the waters. The brick-and-mortar retail model that has worked for years is continuing to evolve and there’s a strong sense of caution in the air. Lenders are willing, but only if retailers extra-qualified. Gone are the days when companies were growing at a rapid pace. For example, a company like Quick Chek, which previously might look to open 40 stores in a year, is now being far more selective and opening only eight in prime locations. Not because they can’t open more, but because they see the value in “less is more” — the quality over quantity mindset. Retailers who are doing well and expanding are ones such as Dollar General, Walmart, Super Target, and Walgreen’s, who have realized that the consumer mindset has shifted with value now being of prime …

Loan delinquency rates are declining, but there are still ample opportunities for investors to purchase distressed commercial properties. Before forking over money for those troubled assets, however, investors should make sure they have suitable real estate experience. Those were some of the observations and tips provided by a panel of experts in distressed real estate on a recent broadcast of the “Commercial Real Estate Show” hosted by Michael Bull, founder and managing broker of Atlanta-based Bull Realty. The show provided an enlightening look at the issues surrounding the acquisition of troubled commercial properties. Topics included CMBS delinquency rates, selling notes and due diligence. Delinquencies Dropping The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) fell to 9.42 percent in February, its lowest level in a year, according to Tom Fink, a senior vice president with the analytics firm Trepp LLC based in New York City. “It’s come down significantly, and we expect to see that number continue to decline,” he said. Investors who acquire those commercial properties still experiencing distress should have plenty of real estate experience, Fink cautioned. “If you’re looking at a distressed property, you’re looking at something that from a real estate …

Lynn Peisner AUSTIN, TEXAS — InterFace Student Housing 2013 wrapped up last Friday at the Hilton Austin after several informative sessions, networking events and the sold-out Innovator Awards dinner and ceremony. The awards herald excellence in development, marketing, financing and other categories. Two projects each won three awards for the first time: The Retreat San Marcos in Texas, developed by Landmark Properties with financing and eventual purchase by American Campus Communities, won awards for most creative financing, best architecture in a property of 200 beds or more, and best new development of a property with more than 200 beds. The last two categories were the most popular this year, garnering more than 30 entries combined. The architect for the Retreat San Marcos was Niles Bolton Associates. Cardinal Group Management swept the leasing and marketing category of the third annual Innovator Awards held in Austin, Texas on April 11. Cardinal Group Management (CGM) swept the marketing and leasing categories, taking home three innovator awards for Auraria Student Lofts in Denver. CGM won for best social media campaign, best mobile marketing campaign and best marketing and lease-up program. Accepting for CGM was Tealios, the community’s mascot (reminiscent of the Blue Man Group) …

Lynn Peisner AUSTIN, TEXAS — The fifth annual InterFace Student Housing Conference is underway in Austin, with a gathering of more than 900 developers, investors, managers and numerous others associated with this popular sector of commercial real estate. The conference began Wednesday with a golf outing that went off in spite of rain. Wednesday’s events included several informal roundtable discussions about leasing, tax assessment, architecture and other topics and a lively cocktail reception in the exhibit hall. Thursday's full schedule of panels and events began with CEOs from student housing's three public REITs weighing in on trends and the industry's momentum after 2012, which was a stellar year of positive activity and large portfolio acquisitions. CEOs, from left, Bill Bayless of ACC, Ted Rollins of Campus Crest and Randy Churchey of EdR sit on the first general session panel at InterFace Student Housing. Peter Katz, senior vice president of investments for Institutional Property Advisors, moderated the panel. The CEOs discussed potential roadblocks ahead that include rising construction costs, over-supply, and a too-heavy focus on courting students with high-income guarantors. Additionally, online degrees have many wondering how those “virtual” students might affect the rising enrollment trends everyone associates with purpose-built student …

Matt Valley The U.S. labor market has hit a “pothole,” according to Robert Bach, national director of market analytics for brokerage firm Newmark Grubb Knight Frank, raising new questions about the pace of recovery in the near term. Employers added 88,000 net new payroll jobs in March, well below expectations for around 200,000 and below the four-month average of 221,000 from November through February. “[The report] from the Labor Department indicates the recovery will continue, but not at the accelerated pace that some indicators earlier in the year had suggested,” wrote Bach in a research note Friday shortly after the Bureau of Labor Statistics released the nonfarm payroll employment figures for March. The unemployment rate slipped from 7.7 percent in February to 7.6 percent in March, its lowest reading since December 2008. However, the unemployment rate declined for the “wrong reason,” points out Bach, as the labor force fell by 496,000. The labor force participation rate sank to 63.3 percent, its lowest level since May 1979, as many discouraged job seekers ended their searches and baby boomers retired. The decline in job creation last month was not totally unexpected, pointed out the veteran economist. The ISM manufacturing and nonmanufacturing indices, …

Matt Valley NEW YORK — The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) inched higher by eight basis points in March to 9.5 percent after reaching the lowest level in a year the prior month, according to Trepp LLC. Overall, the rate has fallen 84 basis points since hitting its all-time peak of 10.34 percent at the end of July 2012. Loan resolutions continued to drop in March, falling from just under $1 billion in February to almost $850 million. There was $2.8 billion in newly delinquent loans reported in March, up slightly from the previous month. There is currently $52.1 billion in U.S. CMBS loans 30 or more days delinquent, excluding loans that are past their balloon date but current on interest payments. There are about 3,300 loans totaling $64.8 billion currently in special servicing. “A close examination of the data reveals that the weakening experienced in March is not nearly as worrisome as it seems,” said Manus Clancy, senior managing direction of Trepp. “The jump in the rate was caused primarily by a reversal of status of a number of floating-rate hotel loans.” Among the five major property types, hotel loans led …