Features

Michael Klein Lending Freedom Financial Funds

In Spite of Higher Capital Costs, Successful Deals Can Still be Achieved with Diligence and Solid Underwriting

by Sarah Daniels February 7, 2023

Prospective investors can finance acquisitions even when equity is scarce, explains Michael Klein, CEO and founding principal of Freedom Financial Funds. “The scarcity of equity is an old phenomenon; it’s a relatively new phenomenon that made equity plentiful. For most of history, it was hard work to find equity. However, even in a tight market, if there’s a compelling case for a project to result in success and there are multiple ways of protecting the equity and the debt, that deal will get done.” This is the outlook Klein brings to the 2023 MBA Commercial/Multifamily Finance Convention & Expo. Klein’s company, Freedom Financial Funds, LLC is a private REIT based in Los Angeles and operating in the western United States. The REIT specializes in providing capital to real estate professionals adding value to projects. Debt, Equity and Protecting Value Klein explains that with any type of financing, whether it be debt or equity, it is key to have a compelling story and facts to indicate that the borrower is going to provide a fair amount of value. “Protecting the investor from potential downside risks is an essential part of financing,” explains Klein. This sort of forethought requires thorough due diligence …

February 7, 2023

Features Heartland Feature Archive

How to Defend Against Tax Jurisdictions’ Attacks on Market Value

by Kristin Harlow February 3, 2023

By Steven Schneider, Honigman LLP While taxpayers typically pay property taxes based upon their property’s market value, assessors frequently misapply evidence or even redefine market value to rake in excessive taxes. The recently resolved Michigan Tax Tribunal case of Menard Inc. vs. City of Escanaba illustrates several of these efforts to collect excessive taxes and suggests arguments a property owner can use to challenge them. What is market value? Market value is the price that willing, knowledgeable buyers and sellers in an arm’s-length transaction would agree the property is worth. Market value differs from insurance value or replacement value because it reflects what a typical buyer would pay for a property as it is. Market value also differs from value to the owner, which reflects how a particular property contributes to the owner’s business operation. Appraisers typically determine market value using one or more of three valuation techniques. The sales comparison approach adjusts sales of similar property to indicate the likely selling price of the subject property. The income approach values property by considering the present value of the income it would likely earn if rented, whether or not it actually is rented. The cost approach values property by considering …

February 3, 2023

Content Partner Features Midwest Northeast Southeast Texas Walker & Dunlop Western

Consumers’ Financial Resilience Offers Bright Spot Amid Recession Fears

by Sarah Daniels February 2, 2023

By Willy Walker, CEO of Walker & Dunlop Fed’s Recent Mistakes In a recent Walker Webcast, “Most Insightful Hour in CRE with Dr. Peter Linneman” part of our ongoing webinar series, renowned economist Dr. Linneman and I discussed his views on monetary policy, inflation and what the economic and commercial real estate landscape looks like for 2023. Throughout the past year, the Federal Reserve has been raising the federal funds rate faster than we have ever seen. This, of course, has led to a drastic increase in the cost of borrowing, the likes of which haven’t been seen in decades. In just one year, the effective federal funds rate has increased from 0.08 percent in February 2022, all the way to a target range of 4.5 to 4.75 percent in February 2023. This has led many to believe that the Fed has considerably overshot where rates should be since the market wasn’t given ample time to react to each rate hike. This rapid increase in interest rates has reduced lending activity in terms of new loans, leading to a sharp decline in demand for real estate, as well as major price corrections. Additionally, the rapid rise in borrowing costs has …

February 2, 2023

Affordable Housing Development Features Multifamily Southeast Feature Archive

City Leaders, Private Sector Need to Safeguard Affordability for Legacy Residents

by Jeff Shaw January 31, 2023

— By Dennis Richards Jr., Atlanta BeltLine Inc. — Rapid development of Class A apartments across major U.S. cities has left many community leaders struggling to create affordable housing for its citizens. Atlanta is no exception. City leaders recognize the demand for new housing supply, but they know that once new developments are delivered to areas in and around formerly underserved and underinvested neighborhoods, long-time residents are at greater risk of displacement due to rising rents or rising tax assessments. As we look to the future, it’s imperative that development projects advance equitably. Here in Atlanta, Mayor Andre Dickens pledged about $59 million from the city and in May assembled the Affordable Housing Strike Force, a task force comprised of leaders from government and nonprofit sectors. The group’s goal is to build and preserve 20,000 affordable housing units while also preventing the displacement of city residents. According to the city of Atlanta, 1,739 affordable units have been built and 3,940 are under construction since the mayor issued this mandate. Executing the Vision The Atlanta BeltLine Inc. (ABI) is the agency responsible for developing the Atlanta BeltLine, a 22-mile, multiuse trail that runs through the core of the city. This project includes programming …

January 31, 2023

Bohler Content Partner Data Centers Development Features Midwest Northeast Texas Western

Data Center Developers Consider Unconventional Sites, Streamlining Strategies to Meet Immense Demand

by Sarah Daniels January 31, 2023

Data center development is simultaneously growing by leaps and bounds as well as suffering from its own success. The easy-to-develop sites have been snapped up and demand for additional data and cloud services continues to grow, forcing developers to look beyond the obvious locations for sites. This can entail running into less-than-obvious delays in the development process. Data centers reliably store and transmit the deluge of information that makes modern life possible. The factors driving the need for data centers — enterprise demand for cloud services, dependence on 5G cell networks, artificial intelligence technology, edge computing capabilities, social media use and streaming needs — will continue to grow exponentially in the coming years. According to a September 2022 report by advisory company Arizton, approximately 2,825 megawatts of power capacity will be added to the data center market in the next five years. The same report forecasts the U.S. data center construction market will reach $25 billion by 2027, up from $20 billion in 2021. Data centers are utility-intensive property types, and the sites that can support their formidable power, communication and water needs often require high-level considerations right from the start. How can the development process for such projects be streamlined …

January 31, 2023

Features Office

Work-from-Home Trend Leads to Property Tax Turmoil in Office Sector

by Jeff Shaw January 26, 2023

The ‘work from home’ revolution has devastated office building values. By Jason Penighetti Of all the property types, office buildings may wrestle with the pandemic’s damaging consequences the longest. The fallout from COVID-19 will clearly have a lasting economic impact. During the government-mandated shutdowns, businesses — including brick-and-mortar retail stores, restaurants, movie theaters and gyms — suffered tremendous losses. With everyone except first responders and essential workers stuck at home, office occupancy rates plummeted as business districts, commercial developments, roads and public gathering places emptied. Many companies could not survive the shutdowns and were forced to lay off employees or permanently close their doors. During the throes of the pandemic, companies that remained in business were compelled to adapt and learn how to effectively put their employees to work from home. Virtual meetings eventually became commonplace and routine. Then as the pandemic waned, companies began to demand that employees return to the office. While some workers ventured back to the workplace, many expressed a desire to continue to work from home. This widespread sentiment has persisted. In fact, nearly 40 percent of workers would rather quit their jobs than return to the office full-time, and more than half would take …

January 26, 2023

Features Healthcare

Key Trends That Will Reshape Healthcare Design in 2023

by Taylor Williams January 24, 2023

By Julie Frazier, AIA, principal, Perkins & Will The past few years have shown that hospitals need to be more flexible and resilient to prepare for any situation, in addition to being calm, healing places for patients. As the healthcare industry continues to evolve, architects and designers are becoming increasingly responsible for responding to the ever-changing needs of the industry and rethinking how hospitals are designed. In 2023, key trends that will reshape healthcare include the prioritization of patient and caregiver wellness, sustainability-driven design and improvements in adaptability and resilience. Fostering Patient, Caregiver Wellness A hospital consists of many moving parts, and every department plays an important role in keeping the facility running efficiently to provide quality care. Implementing thoughtful design practices that improve mood and reduce stress can lead to better care, faster recovery and shorter stays for patients. Utilizing a restorative design approach can transform a clinical space from an institutional-like setting to a healing environment. Elements such as natural daylight, softer lighting, Zen spaces and gardens will continue to rise in popularity as healthcare professionals and operators introduce more wellness-based design strategies to enhance the clinical experience. One of the main goals in patient wellness is to …

January 24, 2023

Features Multifamily Seniors Housing

Seniors Housing Occupancy Rises 90 Basis Points in Sixth Consecutive Quarterly Increase

by Jeff Shaw January 20, 2023

ANNAPOLIS, Md. — The national occupancy rate for private-pay seniors housing increased 90 basis points from 82.1 percent in the third quarter of 2022 to 83 percent in the fourth quarter of 2022, according to data from NIC MAP Vision. The occupancy rate has increased 520 basis points from a pandemic low of 77.8 percent in the second quarter of 2021. NIC MAP Vision is a product of the National Investment Center for Seniors Housing & Care (NIC), an Annapolis-based nonprofit firm that tracks industry data gathered from 31 primary metropolitan markets. Private-pay seniors housing comprises independent living, assisted living and memory care. The seniors housing occupancy rate increased for the sixth consecutive quarter due to continued strong demand that outpaced inventory growth. Because new inventory has been added during the pandemic, however, the occupancy rate has not yet reached pre-pandemic levels, according to NIC. On the inventory side, about 3,300 units were added within the 31 NIC MAP Primary Markets during this quarter, while more than 8,600 units were absorbed on a net basis. This robust demand led to a new record high total number of occupied units: within the NIC MAP Primary Markets, the total number of occupied …

January 20, 2023

Development Features Retail

Mall Redevelopment Projects Have Unique Property Tax Implications

by Jeff Shaw January 18, 2023

Legal covenants often cause excessive property taxation for mall owners that are looking to redevelop. By Morris Ellison The repurposing of malls and anchor stores is a popular topic in community development circles, but legal restrictions make redevelopment extremely difficult. Often locked into their original use by covenants, malls and anchor stores are often grossly overvalued for property tax purposes. In pursuing a redevelopment, taxpayers should ensure the properties are fairly assessed and taxed. Debilitating obsolescence It is difficult to overstate the plight of malls and department store anchors. Gone are the halcyon days when the mall was everyone’s shopping destination. There is even a website, www.deadmalls.com, devoted to failed malls. Credit ratings of most anchor store operators have fallen below investment grade. Commentators usually blame the retail apocalypse on e-commerce and shifting consumer spending habits. COVID-19 exacerbated these trends and mall foot traffic has been slow to recover. Some chains, including Neiman Marcus and JCPenney, have filed bankruptcy. E-commerce volume surged in 2020 and 2021 before tapering in 2022. To date, e-commerce and brick-and-mortar sales have not yet reached an equilibrium. One in five American malls have fully closed and remain “zombies” without a redevelopment plan, estimates Green Street …

January 18, 2023

Acquisitions Content Partner Features Midwest NAI Northeast Southeast Texas Western

Despite Stormy Credit Conditions, Multifamily Sector Still in Demand Among Investors

by Sarah Daniels January 17, 2023

The mere flipping of the calendar to mark a new year has done nothing to inject certainty into the next 12 months. The higher cost of credit that muted commercial real estate investment sales in the second half of 2022 and the attitude of some sellers who refuse to recognize the new pricing reality remain in place in the new year. Many eyes are on the Federal Reserve, hoping for a respite in interest rate hikes after the central bank raised the effective benchmark federal funds rate some 400 basis points to 4.33 percent in less than a year, according to the Federal Reserve Bank of New York. Some investors are even hoping for a rate cut. Neither of those is likely, at least in the short term, observes Arthur Milston, a senior managing director of NAI Global in New York City. While inflation has cooled to an annual rate of 6.5 percent from a high of 9.1 percent in June, that’s still far off from the roughly 2 percent annual target that the Fed desires, he adds. That should translate into continued tightening, Milston says, although the question is, how long will the central bank keep raising rates, and …

January 17, 2023

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