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Archives for April 2018

Investors Welcome Surge of Corporate Sale-Leasebacks

April 4, 2018 by CARNM

Corporations are taking advantage of what remains a “pretty hot market” for sale-leaseback transactions.
Corporations that are pushing owned real estate off their books are fueling a surge in sale-leaseback activity. According to Real Capital Analytics (RCA), a New York City-based research firm, corporate sales of single-tenant assets valued at $2.5 million or higher jumped 32.5 percent in 2017 to total $12.4 billion.
“While both public and private companies have been utilizing sale-leasebacks as a capital allocation tool for years, there has been an uptick in recent activity with a strong 2017 that’s carried into 2018,” says Scott Merkle, a senior director at the Stan Johnson Co., a net lease brokerage, in New York City. Activity is being driven by a variety of factors, ranging from changes in corporate strategy as it relates to owning real estate to an incredibly attractive cap rate environment, he adds.
“In comparison to last year, we’re starting out much stronger than we were last year by far,” agrees Guy Ponticiello, managing director of the corporate capital markets team with real estate services firm CBRE. CBRE has been awarded almost $1 billion in sale-leaseback assignments in the first quarter, including a large portfolio transaction the firm is currently marketing for BMO Harris Bank.
Buyers remain aggressive
Corporations are taking advantage of what remains a “pretty hot market” for sale-leaseback transactions, adds Ponticiello. Sale-leaseback properties are perceived as annuity, bond-like investments due to the long-term triple net leases.
In addition, pricing is still aggressive even as interest rates have started to move higher. “On the deals that we are doing right now I’m seeing some of the lowest cap rates on the credit and the product that I have seen in a long time,” says Ponticiello. Industrial properties are seeing some of the lowest cap rates due to the investor demand for that property type, while buyers are also more aggressive in buying healthcare assets.
Pricing does vary widely based on tenant credit. However, there is demand up and down the credit spectrum. “Where we’re seeing some caution is related to specific pockets, such as big-box retailand suburban office,” says Merkle. However, by-and-large, the sale-leaseback acquisition environment remains strong, with a broad-based set of investors pursuing opportunities.
The recent rise in 10-year Treasuries could spark more demand for sub-investment grade tenants as buyers seek yield, while the field of buyers for lower cap rate deals will likely see their investment spreads thinning with higher debt costs to finance new acquisitions, notes Merkle.
The buyer pool has changed quite a bit over the last three years. Net lease funds backed by institutional capital continue to be very active buyers, while REIT buying has slowed. According to CBRE, REITs bought one-third of all sale-leasebacks in 2013, whereas data from 2016 shows that buying activity dropped to 12 percent. There has been a noticeable drop-off for REIT activity due to the in stock prices and higher cost of capital, notes Ponticiello. The flip side of that is that foreign investors have stepped up and became more active buyers of corporate single-tenant assets. “That has helped to pick up some of the slack from the REITs,” he says.
Motivated sellers
Corporations are motivated to “monetize” assets for a variety of reasons. Certainly, sellers can use that capital to finance operations and expansion, as well as add value for shareholders, notes Byron Carlock, U.S. real estate practice leader for PwC. “The biggest story is that users are rethinking the way that they need and use space,” he says.
Sale-leaseback conversations are being prompted by a convergence of several trends, such as the emphasis on workplace design and offering employees a cool place to work. Another driver involves new lease accounting rules that require companies to put leases on their balance sheets as debt. That change is forcing users to ask more pointed questions about whether or not they need all of that space, as well as what their bigger occupier strategy is as it relates to their business, he adds.
According to a new report from PwC on “Unlocking Shareholder Value: Real Estate Monetization Strategies,” sale-leasebacks are one of the options that real estate-heavy companies are considering to fund core operations and expansion plans along with realizing value for shareholders. Other options include non-recourse financing or REIT conversions.
In addition, some corporations are giving sale-leasebacks more thought now with a view that the window of opportunity may soon be closing as interest rates move higher. Given rising rates, one would expect more upward pressure on cap rates. That has yet to happen, in part because there is still a lot of capital looking for a home, says Ponticiello. “But I do think we need to keep a watchful eye on interest rates ahead as rates will play a role on how deals get priced,” he says.
By: Beth Mattson-Teig  (National RE Investors)
Click here to view source article.

Filed Under: All News

Self Storage Continues To Gain Traction In 2018

April 4, 2018 by CARNM

The outlook for the sector remains upbeat and well positioned for positive performance, but what makes this niche so attractive?

 

The self storage sector has continuously experienced solid growth since the end of the recession in 2009. In fact, according to a report by Marcus & Millichap, in 2017, the nationwide vacancy rate for self storage remained at a historic low of approximately 10.2%.
The outlook for the self storage sector in 2018 remains upbeat and well positioned for positive performance. What makes this niche so attractive? Below are the three main drivers of demand for the year ahead:
POSITIVE ECONOMIC LANDSCAPE
The United States continues to lead the world with exuberant consumerism, creating a high demand for the self storage sector. Rising incomes also broaden the sector’s tenant cohort. Economic signals point to individuals earning higher salaries that drive increased spending. This elevated consumer confidence, coupled with accelerated wage growth, work to boost consumption as well as overall demand for self storage.
Furthermore, the current economy’s health has led to an appreciable increase in new household formation, which bolsters an underlying need for storage units. Millennials are finally gaining spending power, moving out of their parents’ homes, and forming their own households. This rise in moving activity has fueled greater demand for self storage.
In addition to the uptick of millennial households, baby boomers are downsizing. According to the U.S. Census Bureau, approximately 10,000 baby boomers will reach the age of 65 every day for the next 15 years. As these individuals transition out of large, expensive homes, they will seek additional space to keep their belongings as they simplify their living arrangements.
Both millennials and baby boomers are significant factors in the increased demand for self storage units and help to position the sector for a continued positive trajectory for the foreseeable future.
INCREASED DEMAND FOR MULTIFAMILY
The demand for multifamily units currently remains exceptionally strong. In fact, a recent report by CBRE showed 230,400 multifamily units were absorbed for the 12-month period ending Q3 2017. In addition, 261,800 multifamily units were completed in 2017, causing new deliveries to remain at peak levels.
The burgeoning demand for multifamily has created a symbiotic surge in demand for self storage units. Since apartments offer minimal storage space, residents of multifamily communities flock to self storage facilities for a place to store their belongings.
In 2018, the strength of the multifamily market will continue to stimulate the self-storage sector.
ECONOMIC RESILIANCY
Fluctuations in the self storage sector are less cyclical than those experienced in other commercial real estate asset classes. Whether the economy is weak or strong, the need for extra space exists. Individuals typically downsize during a recession, moving from large, expensive homes to smaller, more affordable residences that often lack adequate storage. Conversely, when the economy is strong, individuals have more disposable income and increase their purchases of tangible items that require additional storage.
According to an article by Colliers International, approximately 12 percent of the population is moving in any given year. This statistic alone demonstrates a healthy market for storage space. With this steady flow of moving activity, there is a constant demand for storage units as a small percentage of the population will always require self storage, regardless of the economic climate.
The self storage industry’s proven track record positions the sector for long-term success and deems it a favorable sector for investors. However, there are possible headwinds to self storage investing due to expected development deliveries and the potential for rising interest rates. Given these short-term headwinds, SmartStop believes it’s important to focus on strong operating brands that leverage technology to generate leads, maintaining a low-leverage position, and keeping an eye out for buying opportunities that may result from potential sector oppositions.
By: Michael Schwartz (GlobeSt)
Click here to view source article.

Filed Under: All News

Raytheon Says Microwave Weapon Proved Its Worth

April 4, 2018 by CARNM

The U.S. military recently tested a new, high-powered microwave weapon built by Raytheon in New Mexico to down swarms of incoming drones and missiles.

Raytheon successfully demonstrated the system in December during an Army exercise at Fort Sill, Ok., where the ground-based weapon shot down 33 unmanned aerial vehicles with high-power electromagnetic waves, simultaneously knocking out groups of two-to-three drones at a time, said Raytheon New Mexico site director Susan Kelly.

“At one point in the final demonstration scenario, there were eight drones coming at us from different directions in groups of two and three and we took them all out,” Kelly said. “We showed the system is now ready and available as a counter-swarm weapon to down multiple drones at once.”

The prospect of incoming swarms of UAVs is a rapidly-emerging battlefield threat, and the U.S. military is considering laser and microwave weapons as a way to counter them, Kelly said. In the Fort Sill experiment, Raytheon also demonstrated its high energy laser to destroy 12 more UAVs in flight, plus six stationary mortar projectiles.

It will take more time for such weapons, known as directed energy systems, to actually be deployed in war zones, but the military is developing the tactics, techniques and procedures for those weapons, said Sen. Martin Heinrich, D-NM.

As a member of the Senate Armed Services Committee, Heinrich has spearheaded bipartisan efforts to get the Pentagon to move directed energy systems into final test-and-demonstration phases. The federal spending bill signed last month by President Donald Trump earmarks $158 million for directed energy development, including about $70 million for work by the Air Force Research Laboratory at Kirtland Air Force Base in Albuquerque. AFRL worked last year with Raytheon under a $2 million contract to get that company’s microwave system ready for the Fort Sill demonstration.

Two laser systems have been deployed to date — one on the USS Ponce in the Persian Gulf and one on a Stryker armored vehicle in Europe — but no microwave weapons are yet being used.

“We’re at a turning point where we’re truly moving from the idea phase to the implementation phase,” Heinrich told the Journal this week. “It’s a moment of inflection now as the Pentagon conducts all the managerial work to figure out how these weapons will actually be used in war-fighting environments.”

That’s a huge step forward, given the military’s cautious approach in the past to directed energy weapons, Heinrich said.

Many systems were either partly or fully developed in New Mexico, including Raytheon’s ground-based anti-swarm weapon.

Raytheon and Boeing also worked together on the military’s Counter-electronics High-Powered Microwave Advanced Missile Project, or CHAMP, which places a microwave weapon in a cruise missile to destroy electronics, computers and other systems as it flies over buildings and installations. Raytheon upgraded two CHAMP missiles under a $5 million contract last year for the AFRL and Navy to adapt for delivery on B-52 bombers.

Such work has grown Raytheon’s Albuquerque workforce to about 190 employees, with 50 more hires expected in coming months, Kelly said. The company has also expanded its facilities at the Sandia Science and Technology Park, adding a 72,000-square-foot building to its existing 103,000-square-foot space.

If the military opts to acquire Raytheon’s anti-swarm microwave system, it would likely be built in Albuquerque, although that depends on how many are ordered.

“It depends on the quantity and timeline to do it,” Kelly said. “If the order is for one, for sure we’d do it here, but if it’s thousands, we’d have to think about it.”

Microwave systems like the anti-swarm weapon offer rapid, low-cost, unlimited firepower that relies on a diesel generator.

“Missile and bullet rounds can be expensive and take time to reload, but this doesn’t have those issues,” Kelly said. “It’s an unlimited magazine that just uses energy. As long as the generator is operating, you can keep on firing.”

Today’s easy access to inexpensive drones that can be cheaply and rapidly modified with explosives makes such next-generation directed energy weapons critical, said Raytheon spokesman John Patterson.

“As threats advance and become more challenging, we’re being called open to innovate new speed-of-light solutions,” Patterson said. “That’s what this system offers. It game-changing technology.”

By: Kevin Robinson-Avila (ABQ Journal)
Click here to view source article.

Filed Under: All News

Report: NM Could Nearly Triple Solar Jobs

April 3, 2018 by CARNM

With the right strategies, New Mexico could become a bustling hub for developing and building novel, cutting-edge solar technologies, according to a new study by the California-based American Jobs Project.

The report, released Tuesday in partnership with the University of New Mexico’s Bureau of Business and Economic Research, says the state could nearly triple its solar-related jobs from about 2,500 now to 6,800 over the next 12 years through a comprehensive, cluster-development approach that helps propel homegrown research, development and commercialization of advanced solar technology.

That means focusing on the innovative science and engineering breakthroughs already emerging from New Mexico’s national labs and universities to develop next-generation photovoltaics that could eventually turn windows, buildings and even everyday fabrics into electric generators.

The market for that type of innovation is growing exponentially, and New Mexico is well-poised to become a key player as the solar industry moves beyond traditional PV cells and panels, said American Jobs Project director Kate Ringness, who co-authored the report on New Mexico.

“Our research shows that the state can continue to capitalize on this opportunity by becoming a hub for advanced solar technologies,” Ringness said. “This report offers a practical roadmap for expanding advanced solar manufacturing in New Mexico to create good-paying manufacturing jobs in a sector that’s growing worldwide.”

Many local startups are already working to market next-generation technologies conceived in New Mexico’s labs and universities. Albuquerque-based mPower Technology Inc., for example, is using microscale solar cells created by Sandia National Laboratories to make lightweight, flexible PV sheets for use in everyday products and structures. Ubiquitous Quantum Dots is using technology from Los Alamos National Laboratory to create an electric-generating coating for windows that can channel photons from sunlight to PV cells attached to window frames.

The report offers recommendations to help transfer more technology from lab to market, including creating an advanced solar center of excellence to push innovation and support entrepreneurship; starting a technology maturation loan fund, launching collaborative efforts to seek foundation grants for programs and companies and increasing opportunities for youths to train for jobs in solar-related companies.

Perhaps most important, the report calls for a cluster development strategy based on collaboration among the labs, universities, government institutions and businesses.

BBER Director Jeffrey Mitchell called that a forward-looking strategy.

“New Mexico has missed the economic development boat in the past with outdated strategies to recruit business,” Mitchell said. “This is looking ahead at how to get in on the ground floor of something not yet developed.”

It could also help diversify the local economy and broaden the state’s manufacturing base, Mitchell said. Today, New Mexico ranks 49th in the nation in manufacturing, which accounts for 3.2 percent of total employment.

Filed Under: All News

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