Archives for April 2020

April 2020 CCIM Deal Making Session Properties

April 22, 2020 by CARNM

Thanks to all of the brokers, sponsors, and guests who attended the April 2020 CCIM NM Deal Making Session and to those who shared their properties.
Click here to view source PDF.
Click here to view the Thank Yous.

	Name	Property, City	Type	Price
1.	Dave Hill, CCIM Cole Flanagan, CPA	605 Lomas Blvd NW Albuquerque	Office	$1,850,000
2.	Dave Hill, CCIM DJ Brigman	8212 Louisiana Blvd NE Albuquerque	Office	$515,000
3.	Dave Hill, CCIM DJ Brigman	333 Savage Ave Raton	Office	$395,000
4.	Shelly Branscom, CCIM	142 Truman St NE Albuquerque	Office	$599,000
5.	Tai Bixby, CCIM	200 W. DeVargas St Santa Fe	Office	$950,000
6.	Tai Bixby, CCIM	1 Calle Miedico \| Unit 1 Santa Fe	Office	$630,000
7.	Tim House	NWC Church St & Quail Tr Edgewood	Land	$3,084,000
8.	Jim Hakeem John Algermissen	301 & 303 Old Coors Dr SW Albuquerque	Industrial	$490,000
9.	Larry Harvey Shelly Branscom, CCiM	101 Hospital Lp NE \| Unit 211 Albuquerque	Office	$207,000
10.	Chris Anderson Keith Meyer, CCIM, SIOR	2701-2755 Sunshine West Plaza Albuquerque	Land	$5 – $12 PSF

11.	Chris Anderson	Bloomfield Hwy & S. Dustin Rd Farmington	Land	$385,000
12.	Janis E. Fensterer Shelly Branscom, CCIM Alex Pulliam	SEQ Unser & Montaño NW Albuquerque	Land	$165,000 – $245,000
13.	Austin Tidwell Daniel Kearney	9307 Central Ave NE Albuquerque	Industrial	$825,000
14.	Keith Meyer, CCIM, SIOR Jim Wible, CCIM John Algermissen	NWC Northern & Loma Colorado Rio Rancho	Land	$2.50 – $15 PSF
15.	Todd Strickland	SWC Unser & McMahon NW Albuquerque	Land	See Advisor
16.	Todd Strickland	NEC Turing & Fritts Crossing Albuquerque	Land	$871,200
17.	Brett Hills	101 Herdner Rd Taos	Retail	$1,785,000

Guidance for Rent Relief Requests and Other Commercial Real Estate Tenant/Landlord Issues

April 21, 2020 by CARNM

The COVID-19 pandemic continues to disrupt public health and economic activities across the globe. While the full effects of the virus remain to be seen, commercial real estate professionals need to be prepared for what could be a challenging time.
Relationships between tenants and landlords will be disrupted as millions of people shelter in place, thousands of businesses close their doors, and the U.S. economy faces its biggest challenge since the 2007-2009 Great Recession.
With contributions from CCIM Institute Instructors Cynthia Shelton, CCIM, and Mark Cypert, CCIM, as well as Capital Rivers Commercial, we’ve gathered some resources to help you navigate potential issues among tenants, landlords, and lenders.

Watch CCIM Institute’s recent webinar on Navigating Rent Relief Requests and Other CRE Tenant/Landlord Issues featuring CCIM Instructors Cynthia Shelton, CCIM, and Mark Cypert, CCIM, along with Victoria Goldson, partner at Bryan Cave Leighton Paisner. The panel discusses rent relief requests and other tenant/landlord issues that are beginning to emerge in retail, office, and other commercial real estate sectors.

How Landlords Can Respond

As retail outlets across the country close, it is only a matter of time before tenants approach landlords about negotiating rents. When a business closes suddenly, even if it’s temporarily, the tenant cannot produce rent, meaning a landlord may have difficulty paying a mortgage (if there is one). There are no winners in this situation. Here are some viable alternatives to mitigate this issue:

Rent Reduction. The landlord can reduce the tenant’s rent for a portion or all of the term left on the lease. The usual forms of rent reduction are to reduce the base rent, operating expenses, or both. In regard to retail, it is possible to convert base rent to percentage rent.
Rent Deferral. In this case, the landlord can defer a portion of the tenant’s rent but would require them to repay the rent deferred at a later time, either in a lump sum or by increasing subsequent payments. A variation of rent deferral could be to cap or set a base year to operating expenses for a short or extended period of time.
Rent Abatement. If a tenant is significantly past due on rent payments, a landlord may agree to forgive a certain amount of the past due rent if the tenant remains current thereafter.
Loan Conversion. Rather than abating past due rent, a landlord may agree to convert the past due rent into a loan payable over time. The tenant would, however, continue to pay the current rent. The loan is then evidenced by a promissory note that is cross-defaulted with the lease.
Application of Deposit. If the landlord holds a deposit, this amount could be credited against the tenant’s current obligations.
Subletting. Bringing in a new tenant (for part of or all of the rented space) could reduce or eliminate the rent obligations while replacing revenue for the landlord.

How Tenants Can Respond

Review your lease to see if your rent is simply base rent or it includes pass-through expenses. How much are these expenses and are they set to increase?
When does your lease end? What renewal options are available?
What constitutes a default of the lease? What tools are available to the landlord in such a case (penalties, eviction, interest, etc.)?
Does your landlord hold a security deposit? If so, how much is it?
Review operating covenants and co-tenancy.
Speak to your insurance agent to see what coverages are maintained by each party. Know your options to file a claim under existing insurance.
Does the lease include force majeure, excusing a party’s performance due to outside circumstances?
Explore governmental relief programs, which may be popping up quickly, for tax relief, access to loans, relaxed restrictions/regulations, etc.
Consider consulting a lawyer to know your options in limiting your financial obligations.
Based on our current financial position, understand what concessions you would need from your landlord in both best- and worst-case scenarios related to COVID-19.
Contact your landlord and specifically outline how your business is being impacted by the COVID-19 pandemic. Arrange a meeting and be prepared with data to have an open conversation to identify a solution or combination of solutions.
For additional tenant resources, please visit Capital Rivers Commercial’s Community Resources and Assistance Amidst COVID-19 page.

Examining Challenges Faced by Different Market Sectors

Retail: Retail will see a bifurcated reaction to this economic downturn. Storefronts selling consumer staples – like Walmart, CVS, and grocery stores-will thrive, while dine-in restaurants, for example, could remain closed for the foreseeable future.
Hospitality: Unsurprisingly, hospitality has been decimated by the national response to the pandemic. CCIM Institute Chief Economist K.C. Conway recommends those in the sector ask themselves some basic questions. “For those that own hospitality assets and invest in that space, you need to step back and reflect on what brought you to that property type. Why? Where were you going into this particular period? The market had near record revenues per available room, average daily occupancy, and rental rates. … Whether I’m a hospitality REIT, hotel owner, or I’ve got properties, I want to negotiate with my lenders for some debt restructuring.”
Office: The office leasing market is likely to suffer in the short-term due to COVID-19 as layoffs diminish tenants’ overall need for space and, in many cases, set aside expansion plans they may have had. In addition, tenants who remain in the market for additional space will have a difficult time touring properties. Office workers’ pushback against the open office environment is likely to accelerate, as illness is more easily transmitted in an open environment. Many employers already had recognized that in a competition to attract and retain top talent, squeezing workers into increasingly tight spaces was not a sustainable strategy. Now, an emphasis on social distancing and good health practices – continuing in some fashion even after the crisis has passed – may help reverse the densification trend, with less shared space and fewer workers per leased square foot.
Multifamily: Similarly, the multifamily sector could see significant upheavals as unemployment rises. Business that are closed employ people who now will struggle to pay rent. It’s a similar situation to retail, only in this case the tenant is an individual or family who lost its source of income. Tellingly, Freddie Mac announced a nationwide relief plan for current multifamily borrowers and residents.
Industrial: Industrial, meanwhile, is in a two-pronged situation similar to the retail sector. Grocery and medical items, for instance, are flying off the shelves, so properties in this supply chain are humming along. But other industrial sectors could be in store for tough times, depending on what areas of the national economy slow or stop.

A Lender’s Perspective

Loan Relief and Commercial Real Estate’s Response to the COVID-19 Pandemic
Loan relief is another pressing issue. Commercial Investment Real Estate magazine put together a loan relief checklist and a brief Q&A detailing one portfolio manager’s view on the situation as a whole.
VIEW ARTICLE

A Legal Perspective

For a legal perspective on commercial leases and the COVID-19 crisis, check out “U.S. COVID-19: Commercial Leases – Rent Obligations in the United States” from Bryan Cave Leighton Paisner LLP. Please note: This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action. CCIM Institute’s sharing of select resources does not constitute a promotion of that organization or company.
For more resources, visit CCIM Institute’s Coronavirus (COVID-19) Resources and Guidance page.

New Research Finds Green Buildings Can Increase Health Outcomes

April 20, 2020 by CARNM

“Green buildings save lives because they rely less on energy for every square foot of the building.”

A recent study from Harvard University’s T.H. Chan School of Public Health found that people in cities with slightly higher levels of particulate matter (PM2.5) had higher death rates from COVID-19.
“We have research showing that air pollution, which in many parts of the world is coming from burning fossil fuels, is causing people to die from COVID 19,” says Dr. Aaron Bernstein, USGBC board chair and also the co-director of Harvard’s Center for Climate, Health and the Global Environment (Harvard C-CHANGE). “For people who are living in places with worse overall air quality, it [pollution] has set up their lungs to fall apart when they got sick.”
But what does that mean for commercial real estate?
“Green buildings save lives because they rely less on energy for every square foot of the building,” Bernstein says. “They’re responsible for a lower share of air pollution.”
Additionally, standards like LEED incentivize buildings accessible to public transit. That reduces the need for cars, which burn fossil fuels.
“Green buildings have real value to help,” Bernstein says.
While Bernstein says the location of green buildings near transit can reduce greenhouse gases and their need for less energy, airflow inside of buildings can also impact health. “We adults spend most of our time in buildings,” Bernstein says. “So whether your building is giving you better air or not matters to your health. Ventilation is critical, and indoor air quality is critical. Many of the volatile organic compounds that come out of building materials are bad.”
Bernstein says green building standards are designed to improve the indoor environment. “If you have LEED-certified a building, you’re going to be incentivized to make sure that you have finishes with limited off-gassing,” he says. “You’re going to potentially have air filtration systems that reduce air pollutants and the spread of pathogens in your buildings.”
The connection between pollution and COVID-19 doesn’t surprise Rachel Gutter, president of the International WELL Building Institute (IWBI). IWBI has always tried to stress the triple bottom line of people, planet and prosperity.
“I’m finally starting to see some coverage about the interconnectedness of this experience [COVID-19] to other accelerating and precipitating events that we’ve been encountering over the last several years,” she says. “I think everyone, most especially environmentalists, have been slow to draw a very important connection between this pandemic and climate change.”
Gutter thinks it’s important for business leaders and public health officials to see the connection between pollution and health outcomes.
“We don’t need anyone to embrace a commitment to health and wellbeing from an altruistic stance,” Gutter says. “This situation underscores that better than ever. It’s going to redefine the way that we think about safety in the same way that 911 did.”
Source: “New Research Finds Green Buildings Can Increase Health Outcomes”

How Investors Should Start Strategizing for the Future

April 20, 2020 by CARNM

It is important for investors to think about long-term trends when making investment decisions today.

No doubt, the pandemic will catalyze changes for the commercial real estate market, and that is where investors should start when thinking about future investment strategy. Mike Sebastian of Appfolio expects the pandemic will accelerate the ecommerce online shopping trend, creating more demand for warehouse and distribution facilities. Retail, on the other hand, has become a question mark with the prospect of long-term social distancing standards that could become part of our culture.
“Pre-COVID-19, e-commerce sales were already making history; last year, e-commerce sales surpassed ten percent of total retail sales for the first time. Today, every retailer is asking themselves how the global pandemic will have an impact on their retail businesses,” Sebastian, industry principal of investment management at Appfolio, tells GlobeSt.com. “Right now, as investors are making decisions in the wake of a pandemic, the most important takeaway is to focus on the future; e-commerce was already rapidly growing and the need for industrial space was already present. This pandemic only has expedited those needs.”
Investors—particularly those already active in this space—are already looking acutely at how real estate around shopping and consumer spending will change following the pandemic. The answer has led many to industrial. “Many investors are thinking about the increased need for domestic manufacturing and industrial space; warehouses, shipping centers and logistics centers as we may see an increased demand for these property types,” says Sebastian. “We may see an increased investment in last-mile warehouse space to accommodate the increased need for goods and same-day delivery that retailers will require to house the supply they need to meet future demand.”
Investors aren’t the only group seeing demand shifting into the digital world. Brick-and-mortar retailers have also started to look for ways to move sales online. “Social distancing and stay-at-home mandates have resulted in a dramatic decline of foot traffic to brick-and-mortar shops, for shops that are still open, that is,” says Sebastian. “Naturally, amid COVID-19 restrictions and guidance, consumers have now pivoted to shopping online for many necessities, which will likely push many traditionally brick-and-mortar business models to shift to e-commerce models or grow their current e-commerce side of the business. With that additional growth will likely come the need for increased industrial warehouse space to accommodate the increase in e-commerce demand.”
While Sebastian expects the ecommerce trend to accelerate, he doesn’t expect retail to go away. Instead, experiential retail trends will likely accelerate, as well. “We also cannot forget that experience shopping was on the rise, pre-COVID-19, and will likely be again after this pandemic because consumers will be itching for entertainment and dining experiences,” says Sebastian. “It’s important for investors to be able to think long-term and future cast when making decisions. Experience shopping could make a strong comeback, so it’s another property type that deserves attention from investors right now.”
Source: “How Investors Should Start Strategizing for the Future“