Features

10 Ways to Screw Up a Retail Investment Sale

by Amy Works January 9, 2019

By Philip D. Voorhees, Vice Chairman, CBRE During more than 730 retail investment transactions in the Western U.S. totaling more than $11 billion, we’ve identified some sure-fire ways to make an already tough retail investment sale transaction even more challenging. Our pain is your gain. In the cases below, we’re giving you the test after the lessons! 1. Move Slowly, and Lack Urgency. Nothing kills a retail investment sale transaction like a lack of urgency. All too often, sellers fail to have a Purchase and Sale Agreement (PSA) ready when an agreement is reached on the Letter of Intent (LOI), subsequently squandering a week or two while their attorney completes the draft PSA. It can also be difficult to circle the partners to obtain consensus on the next action step if you don’t have a “point” person designated as the lead for a partnership. Sellers will oftentimes mirror slow PSA comment turnaround times from a buyer, assuming the stance that, “if the buyer is slow, we’ll take our time, too.” This makes no sense: Eyes on the prize, sellers! Solutions: • Approve template LOI/counter proposal and PSA drafts early in the marketing process. • Put legal counsel on standby when …

January 9, 2019

Content Partner Features

E-Commerce Logistics Impact Industrial Property Loans

by Amy Works January 8, 2019

The evolution of retail logistics is cultivating a new industrial landscape. “With the explosion in popularity of e-commerce, logistics models have shifted from hub-and-spoke organization to a product-to-consumer model,” says Casey Martin, commercial real estate commercial loan underwriter with Chicago-based Alliant Credit Union. The traditional hub-and-spoke distribution model features a central warehouse supporting a few large distribution centers, allowing product to move within a day’s drive from facility to facility to storefronts. Product-to-consumer models seek to satisfy purchasers that expect one- or two-day shipping, which has become the norm with many online retailers. This expectation is driving retailers to seek non-traditional properties that are close to high-demand consumers to serve as distribution facilities. The old real estate adage “location, location, location” takes on new meaning with each evolution of the retail industry. Retailers are utilizing smaller in-fill industrial properties in land-constrained markets in an effort to meet consumers’ increasing demands for faster delivery, notes Martin. He adds that older facilities or properties with atypical warehousing clear heights are of interest to smaller retailers who want their products to be closer to consumers. Retailers Compete on Delivery Guarantees The Federal Reserve Economic Data shows that the inventories-to-sales ratio of total business …

January 8, 2019

Features Self-Storage

Self-Storage Development Boom Causes Rental Rates to Dip, Says Yardi Matrix

by John Nelson January 3, 2019

SANTA BARBARA, CALIF. — Rental rates are on the decline for the U.S. self-storage market as owners look to increase absorption of their new supply, according to a December self-storage report from research firm Yardi Matrix. Overall asking rents for 10-by-10-foot, non-climate-controlled units declined by 4.1 percent year-over-year in November, while rents for climate-controlled units of similar sizes dropped by 2.2 percent. The report cites that there may be some seasonality behind the rental rate decline, but new self-storage completions are the main culprit for the downward pressure. Units under construction and in the planning stages currently account for 9.7 percent of the existing national inventory, a 10-basis-point increase over November, reflecting construction starts in high-demand markets. Development activity is most pronounced in Portland and Nashville, where projects in the pipeline account for 29.7 percent and 23.7 percent of inventory, respectively. In New York City, planned and under-construction projects represent 16.1 percent of existing inventory. That said, the market’s inventory per person of around 3 net square feet is still only half the national average of 6 net square feet per person, according to Yardi Matrix. Only three of the major markets tracked (Las Vegas, San Diego and Inland Empire) …

January 3, 2019

Affordable Housing Development Features Multifamily

As Affordable Housing Demand Grows, Developers Struggle to Keep Up

by Jeff Shaw December 20, 2018

A shortage of more than 7.2 million affordable housing units exists nationwide for households with incomes at or below the poverty level, defined as 30 percent of area median income, according to the National Low Income Housing Coalition. But finding affordable housing is not just an issue for impoverished people. Typically, renters who earn up to 60 percent of area median income are also eligible to live in affordable housing properties. Clearly, affordable housing developers are in demand. The challenge they face is figuring out how to make their projects financially feasible amid rising construction costs and an intense regulatory process. After all, these are low-income producing properties. “In the affordable world, we know there’s a need, but how can we finance it?” asks Charlton Hamer, senior vice president of The Habitat Company’s Affordable Group in Chicago. “It takes all sorts of initiatives, policies and incentives to help fill the gap and help finance these developments.” For David Cooper, managing director of Columbus, Ohio-based Woda Cooper Cos. Inc., which exclusively develops and owns affordable housing units, the most immediate solution to today’s affordable housing crisis is more financial resources. Nearly all the new affordable housing built in the United States is …

December 20, 2018

Features Seniors Housing

Skilled Nursing Occupancy Increases Slightly, May Be First Sign of Recovery

by Jeff Shaw December 18, 2018

ANNAPOLIS, Md. — The skilled nursing occupancy rate saw a slight uptick in the third quarter of 2018, increasing 14 basis points to 82.2 percent, according to data from the National Investment Center for Seniors Housing & Care (NIC). Despite the increase, occupancy is still a full percentage point below year-earlier rates and has been on a sharp slide for the last three to four years. NIC is an Annapolis-based nonprofit data firm serving the seniors housing industry. The skilled nursing occupancy data is gleaned from 1,449 reporting facilities in 47 states. NIC experts expressed surprise at the increase, given that occupancy typically declines or stays flat between the second and third quarter of a year. The increase may be the first signs of recovery on the horizon. “The 83 to 87 age cohort over the last couple years was decreasing as far as growth rate. Starting 2018 that cohort is now growing,” says Bill Kauffman, senior principal at NIC. “From a seasonality perspective we generally do not see an increase from the second quarter to the third quarter. That’s notable. We won’t call it a new trend yet — we want to see more data over the next year, …

December 18, 2018

Content Partner Features Lument Multifamily RED Capital Group Texas

RED: Texas Multifamily Performance Moderates in 2018, While Economy Booms

by Jaime Lackey December 14, 2018

With a preference for low taxes and business-friendly regulation, Texas is America’s proving ground for free market economic theories — a crucible in which the benefits of economic liberty are tested. While the long-term impact of the Lone Star State’s experiment remains an open question, it is hard to gainsay its impressive accomplishments to date. Texas recorded the fastest GDP growth among the 50 states (6.0 percent) in second quarter 2018, and the third-fastest compound annual GDP growth rate since the Great Recession (3.1 percent). By way of population growth, Texas ranked second among states since 2010, trailing only Utah. In terms of the 20- to 34-year-old “renter cohort” Texas was the leader, posting a robust 2.1 percent annual rate growth rate. Powerful economic and population growth go hand in hand with multifamily performance. Indeed, the five Texas markets that we model econometrically — Austin, Dallas, Fort Worth, Houston and San Antonio — posted stronger fundamentals in the current decade than the balance of our RED 50 large market peer group in nearly every category. The “Texas 5” occupancy increased by an average of 564 basis points over the period (Reis), nearly three times as much as the non-Texas component. …

December 14, 2018

Conference Coverage Features Georgia Multifamily Southeast

Lower Returns is a Fact of Life for Multifamily Stakeholders, Say InterFace Speakers

by John Nelson December 13, 2018

There is no shortage of capital available to seasoned multifamily developers and investors because the property sector’s underlying real estate fundamentals remain so strong. That was one of the key takeaways of the ninth annual InterFace Multifamily Southeast, a real estate conference hosted by InterFace Conference Group and Southeast Real Estate Business. The event drew more than 400 multifamily professionals to The Whitley hotel in Atlanta on Nov. 27. Speakers during the development panel said that multifamily real estate has plenty options on both the debt and equity sides, but underwriting financing for new construction can still be a strenuous process because they aren’t seeing as high of returns as years past. “Our return thresholds are lower, that’s a fact,” said Chad DuBeau, senior managing director of Mill Creek Residential Trust. “Construction costs are high and land prices are high. The cost of capital is very reasonable, but when you put all those factors together, underwriting is just difficult.” Panel moderator Ron Cameron, senior vice president and principal of Colliers International, asked his fellow panelists a pointed question about the state of the industry. If the multifamily cycle were a game of golf, what hole is the sector currently on? …

December 13, 2018

Features

Will Fed Hit Pause Button on Rate Hikes In Wake of November Jobs Report?

by Taylor Williams December 12, 2018

The U.S. economy added 155,000 jobs in November, according to the Bureau of Labor Statistics (BLS), falling well short of the consensus forecast of 195,000 jobs. Still, November marked the 98th consecutive month of employment gains. Meanwhile, the unemployment rate held steady at 3.7 percent, while year-over-year wage growth registered 3.1 percent, one of the highest rates of the cycle. Given the recent volatility in the stock market, the shrinking spread between the two- and 10-year Treasury yields and the adverse impacts of tariffs on U.S. manufacturing, the latest jobs report raises an interesting question: Will the Federal Open Market Committee (FOMC), the branch of the Federal Reserve Board that shapes monetary policy, decide to increase the fed funds rate another quarter percentage point to 2.5 percent at its next meeting on Dec. 18-19? Rebusinessonline.com spoke with three economists on what the jobs data means for America’s short-term fiscal policy, as well as expectations for retail and manufacturing output and job growth during the holiday season. This month’s featured participants are Michael Hicks, director of the center for business and economic research at Ball State University; K.C. Conway, chief economist at CCIM; and Itziar Aguirre, senior research analyst at CBRE. …

December 12, 2018

Content Partner Features

Relationship Advice from a Commercial Real Estate Lender

by Amy Works December 11, 2018

To underwrite and successfully close a loan, a lender must have an intimate understanding of the principals involved, the collateral and the marketplace specific to the property. Principals play a key role in ensuring an efficient vetting process by providing accurate and in-depth information during the initial financial request — before the due diligence research delves into further detail. Providing lenders with a clear and concise case for a financial package is an easy first step to securing a loan. The more details provided, the better, according to David De Bauche, manager of Commercial Credit Lending Administration at Alliant Credit Union. Ideal Borrower? There is rarely a model borrower or financial package, De Bauche says. Each package and borrower has its own strengths and weaknesses, and it’s up to the lender to decide if the separate pieces join together to create a successful financial package. “What is considered a green-light package with one lender may carry too many risks for another lender,” he says. “At Alliant, we’re open to considering most financial proposals. If we’re presented with a clear, concise proposal with details upfront — it catches our eye.” Borrowers that are transparent with lenders about potential weaknesses — past …

December 11, 2018

Conference Coverage Features Industrial Western

Effects of E-Commerce Ripple Across Salt Lake City Industrial Market, Concludes InterFace Panel

by Alex Tostado December 10, 2018

SALT LAKE CITY — E-commerce has emerged both as a major driver and hindrance to manufacturing growth in Salt Lake City, where increasing costs of technology are limiting the speed at which industrial users deliver goods to consumers. The rise of online shopping has been predicated on rapid delivery of product, but achieving an expedient pace of distribution requires greater investment in automated technology that can package and ship goods faster than human laborers. But e-commerce is not cheap to execute. According to Wick Udy, managing director in the Salt Lake City office of brokerage giant JLL, the cost of delivering an item purchased online generally accounts for about 25 to 30 percent of the total purchase price. “We’re starting to see a lot of these companies re-evaluate their network,” said Udy. “They’re going closer to the consumer, and that’s helping with logistics costs. E-commerce and certainly manufacturing are really what’s driving our market here.” Udy made his remarks during InterFace Industrial Real Estate in Salt Lake City on Nov. 29. The half-day conference at Little America Hotel and was followed by InterFace Multifamily Real Estate later that same day. All totaled, the two events drew 306 professionals from across …

December 10, 2018

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