Archives for May 2018

Is Industrial Rising To The Top Of The CRE Food Chain?

May 15, 2018 by CARNM

Real Capital Markets, which just reached a $1 trillion milestone, is seeing a surge in the volume of its industrial deals.

Real Capital Markets is seeing a surge in its industrial deal volumes, thanks to what has become known as the Amazon effect. The brokerage firm recently hit a $1 trillion milestone in deal values, and gave us a look at how their business has change since the firm’s inception in the early 1990s. While multifamily has been a consistent driver, industrial deals have been the biggest change, ramping up in the last several years to become a significant piece of the pie. The firm isn’t alone. Industrial has become a major asset class throughout Southern California with some experts calling it the new darling of commercial real estate.
“We have seen the most change in industrial, and that is really due to the Amazon effect,” Tina Lichens, COO of Real Capital Markets, tells GlobeSt.com. “On the flip side, retail is not looking as good. What is interesting is that we are seeing demand for high-end retail with a lifestyle centers that are walkable, outdoor space. There is still demand for that, and it is interesting what developers have done with that.”
Of course, as industrial has risen to the top, retail activity has slowed—for some properties. While there is a lot of talk about the end of brick-and-mortar retail, in reality, the market is evolving, and investors are adapting to those changes. “We see it being a little evolutionary,” she explains. “If your typical retail buyer buys malls, those buyers will explore into secondary and tertiary markets or maybe they are getting into industrial. Some buyers are more aggressive and strategic about a change in asset classes or asset subclasses. We see most people being evolutionary in their change, taking small steps in asset classes or asset subclasses.”
Despite these shake-ups, multifamily has remained the firm’s bread-and-butter asset class over time. In fact, it was the asset class the firm was originally founded on. “Multifamily has been the steadiest asset class through time, and it has really been the least risky asset class for buyers of all types,” says Lichens. “You see cap rates being so low with multifamily right now, but that has never really gone away. You have certain markets that expand and contract based on local markets, but that market is pretty steady.”
The firm’s $1 trillion milestone was impressive, but even more impressive is the fact that half of that number was completed in the last five years. That is because it isn’t only industrial deal volumes that are growing, but deal volumes in general. Lichens says that there has never been more interest in real estate investment. “As we have started seeing things ramp up after the crash, we have seen continued allocations in real estate,” she explains. “We have seen pension funds allocations have continued to grow when historically they used to be very low in terms of their overall portfolio.”
By: Kelsi Maree Borland (GlobeSt)
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Tax Wins for Commercial Real Estate

May 14, 2018 by CARNM

NAR Senior Policy Representative for Federal Taxation Evan Liddiard and NAR Senior Policy Representative for Commercial Erin Stackley walk through six big wins for commercial members contained in The Tax Cuts and Jobs Act enacted last year.

By: NAR
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SIOR and The Industrial Asset Management Council (IAMC) Release Whitepaper Exploring Massive Changes in the Distribution Industry.

May 11, 2018 by CARNM

As part of DesignFlex2030, initiated by the Industrial Asset Management Council (IAMC) and the Society of Industrial and Office Realtors (SIOR), with funding from the SIOR Foundation, a top-notch team of architects and engineers set out to explore and understand the massive changes in the distribution industry already underway. They aimed to design an industrial distribution network that has the flexibility to accommodate future change and the increasingly customer-centric direction in which businesses are going. The idea is grounded in reality but draws on an imaginative forecasting of the state of society, looking out 25–50 years. This paper details their work. Read more
By: SIOR
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Reducing Vacancies In Multifamily Rentals

May 11, 2018 by CARNM

“With vacancies, whether it’s a 500-unit complex or just one small one, it’s the same issue,” Tenant Alert founder Jeff Cronrod tells GlobeSt.com. “You’re losing money as a landlord.”

Jeff Cronrod founded the American Apartment Owners Association, which has 92,000 members.

He also started Application Research, Inc., which does both employment and tenant background screenings. ARI’s division TenantAlert has 11,000 clients. Some of its New York customers include Corcoran, FirstService Residential, Shinda Management Corp., Manhattan Skyline and TF Cornerstone.

AAOA is primarily for small cap owners, and TenantAlert also serves individuals renting out property as well as large corporate clients. With more than 25 years in the business, Cronrod has learned property owners face similar situations—albeit on differing scales.

“With vacancies, whether it’s a 500-unit complex or just one small one, it’s the same issue,” Cronrod tells GlobeSt.com. “You’re losing money as a landlord.”

The US Census recorded nationwide over 38 million renter-occupied households in 2016. That year saw a 6.2% eviction filing rate and a 2.34% eviction rate, according to the evictionlab.orgdatabase built at Princeton University. Evictions are a sociologically complicated, traumatizing and unfortunate problem, which all parties when possible should work to avoid. At the initial signing of a lease, it’s important to find tenants who barring unforeseen circumstances will have the ability to keep up with the rent.

“You want to fill the vacancy but you don’t want to evict the person later,” he emphasizes.

Cronrod described situations where landlords have told managers to get the place rented because with taxes, mortgages and other expenses, unrented units were hemorrhaging money. However, managers so motivated to rent the apartments can turn a blind eye to due diligence. “But with a bad tenant, the property owner has a bigger mess than he had before,” he says.

Managers and brokers of multifamily units often hire background screening companies. TenantAlert uses an API (Application Programming Interface) which allows applicant information that the agent collects such as the tenant’s name, address and personal identification number to interact with the data TenantAlert gathers. This can vary depending on how deeply the client requests the search, looking into credit reports, criminal backgrounds, sex offender databases, terrorist databases, public records on evictions and other information. The agent in real time receives data to help determine application approval or denial.

Cronrod acknowledges a line exists between comprehensive background searches and invasion of privacy. The prospective tenant must agree to allow the broker, property manager or landlord to pull this information. “We are FCRA (Fair Credit Reporting Act) compliant and so we are very careful to do it right,” he says.

TenantAlert also offers lease guarantees, which can cover up to $10,000 of losses or damage to an apartment. “It essentially is a corporate co-signer that covers the tenant for a small annual fee and also landlord losses up to the contract amount due to eviction. It also includes damages, lost rents and legal fees,” explains Cronrod.

He points out that real estate is not just an investment but a relationship business. With large complexes or mom and pop operations, it’s more than just getting back a credit score and turning over the keys. An ideal tenant could have a low credit score, for example, having had a medical emergency and being delinquent on healthcare bills but is current with all other bills, says Cronrod. He also provides his and his assistant’s personal mobile phone numbers to all major clients, so they can access him or get a response 24/7.

By: Betsy Kim (GlobeSt)
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