Archives for March 2017

ALBUQUERQUE, N.M. — Albuquerque city councilors listened to public comment late into the night Monday on the proposed rewrite of the city’s comprehensive plan, which, if adopted, will govern Albuquerque development for years to come.

The plan, also known as the ABC-Z project, was the hot-button issue during Monday evening’s City Council meeting, with more than 50 people signing up to speak on the measure. City officials have said that the two-year rewrite is aimed at bringing clarity and predictability to development regulations.
Speakers appeared to be evenly divided between those who urged the council to adopt the comprehensive plan immediately and those who urged it to postpone action for 12 to 18 months to allow for more public input, particularly from communities of color.
The council voted to continue the discussion at its March 20 meeting.
Sherman McCorkle, representing the Greater Albuquerque Chamber of Commerce, was among those advocating for the comprehensive plan to be approved immediately.
“You have an intelligent and pragmatic comprehensive plan,” McCorkle said. “It adds important goals, policies and actions in regards to community identity and heritage conservation that has been lacking. It encourages public-private partnerships … It speaks to the diversification of our local economy.”
McCorkle said the comprehensive plan is needed to boost Albuquerque’s economy.
Kurt Browning, chief development officer for Titan Development, also supports the plan. He said the city has a wonderful planning staff but said they are hampered by conflicting ordinances.
Among other things, the plan strives to improve protection for the city’s established neighborhoods and respond to long-standing water and traffic challenges by promoting more sustainable development, according to the city’s website.
“The (proposed) comprehensive plan will bring clarity and predictability,” Browning said. “That’s all we want. We’ll follow the rules, but this needs to be streamlined in the immediate future. Please don’t defer it.”
But many others argued that the plan wasn’t ready for final action.
Jerry Worrall, representing the Westside Coalition, a group of 21 neighborhood associations, said the public hasn’t had enough time to digest the thick planning documents.
“We don’t want to lose our community identity,” said resident Cynthia Borrego. “We don’t want to become a bland community.”
Robert Nelson, with the Historic Neighborhood Alliance, asked the council to defer action on the comprehensive plan for 14 to 16 months to allow more input from Hispanic and other communities of color that, he contended, had been underrepresented during the initial process.
But Michaela Renz Whitmore, an employee in the city’s planning department and one of the staffers who worked on the comprehensive plan rewrite, said the city went to great lengths to expand its outreach efforts to minorities when it realized they were underrepresented at the initial meetings. A city spokeswoman said about 100 meetings were held on the comprehensive plan, with 1,943 people taking part in those meetings.
By: Martin Salazar (Albuquerque Journal)
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Disappointed that your local Sears , Kmart or Macy’s store is one of more than 200 that’s about to go dark? Take heart in knowing that for retailers, these decisions aren’t easy.

When major chains evaluate which of their locations they’ll shutter, it isn’t as simple as looking at each shop’s sales and profitability. While those factors no doubt play a role — especially for financially strapped companies like Sears — several other considerations come into play.

They include the ripple effects a wave of closures could have on the brand’s reputation; how much in online sales the company could lose by exiting a market; and whether it has neighboring stores that could help it preserve some of those revenues.

The math gets even more complicated for retailers that own a large chunk of their real estate — namely, department stores. For those struggling companies, which are losing share to off-price competitors and the internet, it is sometimes more lucrative to sell off a store that is profitable.

“It’s a complicated algorithm that doesn’t just stop at, ‘Are we making money at this store or not?'” Jim Sullivan, president of the advisory and consulting group at Green Street Advisors, told CNBC. “For each retailer, how that algorithm is shaped is different.”

Looking at the performance of individual locations is a good place to start, especially for retailers with a slew of underperforming stores. Sears, for example, said the 150 Sears and Kmart locations it plans to close are not profitable . While they rang in $1.2 billion in revenue over the past 12 months, they also generated an adjusted loss of $60 million.

The strategy is a bit different at Macy’s, which is still profitable. That chain said the 68 locations it marked for closure were either “unproductive” or, due to competition and changing consumer demographics, were “no longer robust shopping destinations.”

But because online sales typically fall in markets where retailers close a store, the company also had to analyze markets where it had overlapping locations. That way, it would have a better chance of picking up lost sales. This is a strategy that retailers across the industry are employing.

Lack of a physical presence makes it difficult for consumers to return unwanted items ordered online and can cause them to shop at a competing store. It also reduces brand awareness.

An analysis by CoStar, a commercial real estate research firm, found that two-thirds of the Macy’s stores set to close were in quality “A” or “B” malls. However, 60 percent of them were within 10 miles of another Macy’s. One example is in the Boston area, where Macy’s is closing its Westgate Mall location. Its South Shore Plaza shop, some nine miles away, will stay open.

“It seems that in most cases, Macy’s is closing the store at the weaker mall and keeping open the store at the more dominant center [in the same market],” Suzanne Mulvee, CoStar’s director of research and a real estate strategist, told CNBC.

Mulvee noted that there are another 44 pairs of Macy’s stores within 10 miles of each other, which could be the source of additional future closures. Meanwhile, 11 percent of the chain’s remaining stores are in “C” malls, which puts them at risk as well, she said.

“What we’re likely going to feel over the next six to 12 months is … even more pullback in secondary and tertiary markets,” said Naveen Jaggi, president of JLL’s retail brokerage.

For both Sears and Macy’s, which own a portion of their real estate, offloading valuable properties can also be a way to make money off their vast physical footprints. Since the end of the third quarter, Macy’s sold its flagships in San Francisco and Portland, Oregon, for a total of $95 million in cash.

These types of strategies will be a crucial part of legacy retailers’ real estate strategies moving forward. They’re also a marked change from when these companies were building their brands, and relied on store expansion to increase their sales.
“The management teams at most retailers came up through the operational ranks, and they were not trained to think of real estate as a financial asset,” Green Street’s Sullivan said.

One of the biggest hurdles struggling retailers face when deciding which stores to shutter is the mismatch they face with property owners. While they want to keep their stores open at the highest-quality properties, those landlords know they could make more money by replacing them with a more popular retailer or an entertainment option.

“Everybody loves somebody that doesn’t love them back,” said Garrick Brown, Cushman & Wakefield’s vice president of retail research for the Americas.

For instance, a property owner that did a deal with Sears a few decades ago could be getting less than 50 cents a square foot annually in rent, Brown explained. If they divided that space into smaller tenants, they could potentially bring in retailers who would pay $40 to $50 a square foot, he said.

An extreme example of this is General Growth Properties , which paid Sears north of $200 million to buy back space at the Ala Moana Center in Honolulu. GGP then redeveloped and expanded this space into a luxury wing that includes a Bloomingdale’s.

CBL & Associates , which owns a large quantity of malls with traditional anchor store tenants, has also redeveloped space vacated by Sears, J.C. Penney and Macy’s over the years. One example is CoolSprings Galleria, near Nashville, Tennessee. As part of one of its projects, which cost roughly $50 million, it replaced a Sears with The Cheesecake Factory and brought in new tenants like H&M and Ulta .

The return on that redevelopment was about 8 percent, and sales increases at the mall have been in the double digits since it opened roughly a year ago, CEO Stephen Lebovitz said.

“It’s a win-win because they’re closing a store that’s not very productive, and we’re replacing it with someone that’s going to be more successful,” Lebovitz said.

Macy’s is exiting four of CBL’s malls in this round of closures. At one of those properties, the real estate investment trust is finalizing negotiations with a new anchor store to replace Macy’s. CBL will purchase the remaining three stores, currently owned by Macy’s, for $5 million.

Not all of these stories will have a happy ending. For the properties that stand to lose both a Sears and Macy’s, these mass closures could be detrimental to their future — especially if they don’t have the cash to redevelop the space, Brown said. They can also trigger co-tenancy clauses that allow smaller tenants to exit their leases, or get rent concessions.

Many struggling centers in the U.S. are owned by small property owners, after the large REITs sold them off in a flight to quality centers. According to real estate research firm Green Street Advisors, there are more than 320 malls with quality grades of Cs or Ds that are at risk of closing or becoming irrelevant retail destinations.

One mall that was on both Sears’ and Macy’s latest closures list is the Shenango Valley Mall, in Hermitage, Pennsylvania. The general manager of that property did not immediately respond to CNBC’s request for comment as for what it will do to fill the space.

The saturated U.S. retail industry has been in a state of consolidation over the past few years, as companies attempt to reverse the aftermath of overexpansion. This growth spurt intensified right before the recession, when retailers and property owners were in a rush to do deals.

But as online and discount shopping grab a larger chunk of consumer spending — and certain markets no longer serve as many shoppers — retailers have realized that they don’t need as many physical locations.

That realization comes as many of their 10-year leases are coming up for renewal, threatening a wave of store closures in a tight time frame. They also put at risk the industry’s record occupancy rate, which Green Street says sits near 95 percent.

“I expect the closures to be worse, and I expect the malls to be hit more than any other shopping center type,” Cushman & Wakefield’s Brown said.

His firm keeps a list of the major store closures announced each year. Until 2016, the highest number it had tracked was in 2010, when about 3,000 closings were announced. That number grew to 4,000 last year, and Brown predicts it will balloon to 5,000 this year.

“There’s no way around [it],” Brown said, referring to what he considers an inevitable drop in the occupancy rate this year.

While many argue that turnover and other changes have always been a part of the retail industry, “the pace at which it’s changing is more rapid than has ever been the case,” Green Street’s Sullivan said.

By: Krystina Gustafson (Yahoo Finance)

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Thanks to all of the brokers, sponsors, and guests who attended the March 2017 CCIM NM Deal Making Session & Forum and to those who shared the March 2017 CCIM NM Properties.

Over 10 million dollars of commercial real estate properties available for sale were presented from all over New Mexico.
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1.	Steve Kraemer, CCIM	4216 Balloon Park Rd NW	Office	$1,181,600
2.	Anne Apicella	410 Central Ave SW	Office/Retail	$2,120,000
3.	Stephen Caruso	2917 & 2921 Carlisle Blvd NE	Office	$750,000
4.	Steve Kraemer, CCIM	2814 Isleta Blvd SW	Mixed Use	$225,000
5.	Ron Hensley & Steve Etkind	2013-2017 Ridgecrest Dr SE	Industrial	$749,000
6.	Cheryl Bonner	3876 Masthead St NE	Office	$489,123
7.	Anne Apicella	1400 Jackie Rd SE, Rio Rancho	Office	$145,875
8.	Anne Apicella	7001 Prosect Pl NE	Office	$1,429,543
9.	Richard Hanna, CCIM	451 Pioneer Place, Las Cruces	Industrial	$2,190,000
10.	Stephen Caruso	8423 Central Ave	Mixed Use	$299,000
11.	Jim Hakeem	3416 Vista Alameda NE	Industrial	$895,000
12.	Jim Wible, CCIM & Keith Meyer, CCIM	3641 12th St NW	Retail/Land	$450,000

As environmentally friendly features become a mainstay of commercial property, learn what it takes to excel at selling and leasing green space.

Mel Harris will talk to anyone about being green. And, even deep in the heart of Texas, people are listening. “We’re starting to see more of the mindset changes,” says Harris, CEO and founder of Elements Realty Group LLC in Fort Worth, Texas. He notes shifts are happening in his clients’ and partners’ perceptions of energy bills, the cars they drive, and their personal wellness. “People are thinking differently today.”
In spreading the green gospel, Harris, GREEN, GRI, has specific strategies for specific groups. With builders, it’s all about the bottom line. For investors, he details when they’re likely to see a return on their money (he says green buildings may offer profits more quickly than conventional properties, thanks to higher rents and lower utility costs). Business owners looking for space want reliable stats about how much daylight and fresh air a building will provide them, their customers, and their employees. And with brokers and others in the real estate community, he loves sharing his personal experiences, from the green upgrades in his own home to the special financing options used by some of his own clients when purchasing environmentally friendly property.
Even as green building and energy-efficiency issues are pushed aside as policy priorities in the Trump administration, momentum for state, local, and grassroots initiatives remains strong. “Cities are very aggressive on their climate action plans,” says Cathy Higgins, research director for the New Buildings Institute, a Portland, Ore.–based nonprofit focused on high energy performance for commercial buildings. She adds that more than 20 percent of the buildings in NBI’s latest study are private-sector projects, something she predicts will grow as a share over time. “They’re not being driven by policies. They’re being driven by self-interest.”
Knowledge and ability in marketing green buildings is moving from a niche skill to a necessity among commercial real estate pros as more and more states incentivize or even mandate green construction and tenants continue to seek energy-saving building updates. Meantime, new marketing practices are sure to emerge as green building industry standard-bearers, like the U.S. Green Building Council, reimagine their data offerings through evolving technologies that improve engagement and accountability in green certification processes.
Becoming familiar with state guidelines pertaining to green buildings in your market—and what’s on the horizon—is essential to developing professional credibility. While New York, Washington, Massachusetts, and others are making strides in environmental requirements for commercial space, California, unsurprisingly, leads the pack, Higgins notes. California’s stated goal is that all new construction will be net zero—meaning buildings produce as much as or more than the energy they consume—in less than two decades. And California real estate pros take heed: Half of the state’s existing commercial building stock will be expected to meet the net-zero requirement by 2030 (with a 2020 goal for residential). “It’s going to be law in California. [Real estate pros] don’t want to be chasing the train; they want to be on the train,” Higgins says. And it’s not just regulatory pressure for green buildings that will grow in the coming years, but demand in the marketplace. “With this next generation of ‘thought workers,’ there’s an expectation of a green, clean environment.”
As a result, Higgins says demand for green commercial space is already expanding beyond California, Class A properties, and big cities. Soon this demand will affect smaller markets, more modest developments, and building Classes B and C. These considerations can help inform your marketing approach when working with prospective investors, tenants, and the community.

To LEED or Not to LEED

A common way to promote a property as green is to highlight third-party verification of its environmental friendliness. With some 89,000 projects and 14 billion square feet of LEED-certified space around the world, the U.S. Green Building Council’s flagship Leadership in Energy and Environmental Design is among the best-recognized green building programs. LEED is available to structures from single-family homes to the largest commercial complexes and can be pursued at any stage of property development or usage. USGBC looks at a wide range of factors—building materials, energy and water usage, indoor environmental quality, and sustainability—to award properties the points that will determine the overall LEED rating: Certified, Silver, Gold, or Platinum.
While LEED is the standard with the most name recognition, some 70 programs worldwide offer green building certification. Mahesh Ramanujam, CEO of the USGBC, has worked with outside organizations and countries to help develop other third-party verification systems. LEED heads up the pack, he says, because it’s a holistic rating system from which most of the other standards derive. “Everybody copies from LEED,” he says.
But LEED isn’t just an award. Alexia Crowley, CCIM, a senior associate at Colliers International in Las Vegas, says it can function as a guide for how to best tackle a big project. She cites the example of 302 E. Carson in downtown Las Vegas. When it was purchased in 2006, the 1960s-era building was filled with asbestos and nearly vacant, and the new owners were tempted to level it. Instead, they used the goal of achieving LEED Gold as a road map, highlighting the key renovations that needed to be made. That commitment and the subsequent follow-through was what attracted such high-level tenants as HUD and Zappos. “That’s a great example of what LEED certification can do,” says Crowley.
LEED’s future preeminence, however, is far from a sure thing. Other certification options are already enticing building owners. Canada’s Green Globes program is gaining traction in the United States because it’s been shown in several studies to have similar criteria to LEED but costs less and has less stringent requirements. Officials from the International WELL Building Institute have worked closely with the USGBC and others to create a standard that is focused more on altruistic capitalism and social responsibility, two values that are particularly important to that next generation of thought workers. Both the percentage and the total square footage of LEED-certified space were down slightly for the first time in CBRE’s third annual National Green Building Adoption Index, which charts the growth of Energy Star– and LEED-certified space for the 30 largest U.S. office markets. Observers say the negligible changes are not a signal of waning interest in eco-friendly buildings but rather an indicator that owners may either be seeking alternative certification processes or forgoing formal audits altogether.
Higgins says she’s seen reduced interest in LEED in her research at NBI, but she attributes that to growing confidence among builders and developers’ knowledge of the underlying tenets of LEED certification. If they can incorporate energy savings and green features such as natural lighting, the actual certification process may be seen as secondary. Harris adds that certification doesn’t necessarily signal a long-term commitment to green values from builders and property owners: “Are they stepping up and having to perform at today’s level, when they made LEED Silver five years ago?”
So how should a real estate pro navigate these concerns? Ramanujam says a newly launched USGBC platform, known as ARC, will address accountability concerns in a simple, user-friendly way. The system allows property owners and managers to submit performance data for their buildings to the USGBC every year to easily become recertified or even change the building’s status based on new data. “LEED has sometimes restricted people in the past,” he says. “With ARC, all buildings can be green.”
ARC, which debuted last December, also offers marketing tools. Real estate professionals can compare the performance of their listings with other high-performing properties in the area, or with other buildings in the same property type across the country. “We give you the opportunity to benchmark yourself locally, regionally, and globally,” Ramanujam says.

The Power of Knowledge

The most straightforward way to market a green building is by promoting lower energy costs. Smart thermostats and data from utility companies make it easier to track usage data. Like homeowners, commercial tenants now regularly consider these costs, as many are involved in triple-net leases or other agreements with owners that require them to contribute to such bills.
Highlighting other advantages of using sustainable materials is also a smart idea. In a world of rising building costs and increasingly frequent natural disasters, Harris reminds investor clients that many green materials are likely to be more resilient and cost-effective than conventional ones. “If I have a client with a parking lot who uses cheap topping to resurface, the same thing has to be redone every three to four years,” he says. Having done his research. Harris can share his knowledge of a sustainable product that has already proven itself to last 10 years, saving the client several thousands of dollars.
Harris views such due diligence as part of his value proposition as an adviser. Commercial clients should be thinking about their needs at least five years ahead, and real estate pros can help them think through critical questions. What will their expansion needs likely to be? Will they be able to raise rents enough to cover tax and facility cost increases? Will the building still be up to environmental code? “That asset is a living asset. You build the mindset of resilience around that,” he says.
Real estate pros who market existing structures should also research a building’s remodeling history so they can highlight resilient materials and processes that have been added. Higgins says any time a building owner needs to replace outdated systems, the best choice is “not to catch up on it in a big renovation, but doing it incrementally.” Brokers who understand how upgrades have brought listings closer to the health and environmental standards that govern new construction can use this in their marketing to differentiate existing buildings as more competitive.
Green office buildings looking to attract tenants might want to take some cues from coworking spaces by offering large, open atriums, flexible conference rooms, and inviting communal eating quarters. Crowley uses such considerations in her marketing of green buildings. “I always talk about location and the amenities,” she says, whether that’s how the building is oriented to take advantage of natural light or the bike parking out front.
REALTOR® organizations at the local, state, and national level are continuously working to balance private property rights and the free flow of business with their support for environmentally conscious policies. Whether real estate pros are lobbying a city council for green building incentives or marketing a green property to a skeptical buyer, Harris says success often depends on a single driving concept: simplicity. A major misconception about building green into a real estate marketing plan is that it requires a huge investment of time, money, and energy: “It doesn’t have to be complex. It doesn’t have to be overly expensive if you look at the opportunities that are there and you look at [building] resilience as a big-picture concept.”
Crowley agrees, noting that while commercial real estate clients don’t necessarily have to invest more money to go green, they do have to have foresight: “It doesn’t cost more to do a green build-out or new building, but you have to plan ahead.”
By: Meg White (REALTORMag)
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