Archives for November 2020

Safety and Trust are Focuses for Flex Hotel Space

November 25, 2020 by CARNM

Kasa transforms vacant and underutilized real estate into trustworthy and flexible accommodations, and has entered into management agreements with owners in 35 markets across 15 states.

SAN FRANCISCO—Of the $50 million in funding that Kasa Living Inc. has raised, $30 million in new Series B funding was led by Ribbit Capital and $20 million in Series A funding was led by FirstMark Capital less than a year ago. Participating investors also include RET Ventures, Zigg Capital, Allegion Ventures and BoxGroup.
Kasa’s technology transforms vacant and underutilized real estate into flexible traveler accommodations. As of late, the company has entered into management agreements with multifamily and hotel property owners in 35 markets across 15 states, enabling its partners to unlock new streams of income and realize full property potential.
“We see a generational opportunity to innovate in a beleaguered travel sector. Kasa aspires to build a global accommodations brand beloved by guests, indispensable to property partners and desired by neighbors,” said Roman Pedan, founder and CEO of Kasa. “This raise allows us to grow our technology team significantly to power a flexible and distributed hospitality offering that delivers on our mission.”
The hospitality industry could potentially lose $75 billion in the next 12 months as nearly half of US hotels are on the brink of permanent closure. The historic Martinique New York filed for Chapter 11 and the Omni Berkshire Place Hotel has closed after a nearly 95-year run. In addition, the 1,600-room Palmer House Hilton Hotel in Chicago was sued by lenders for falling into delinquency.
For the better part of a year, Kasa has grown rapidly despite these industry headwinds. Kasa has maintained occupancy rates of approximately 75% (more than double the hospitality industry average), expanded units under management by 50% and launched in five new cities. This increase in market share, together with monthly revenues climbing 50% since December, characterized a boost in Kasa’s valuation in connection with its most recent round.
“Our growing unit count signifies a need for flexibility in the world in uncertain times and the future is also uncertain,” Pedan tells GlobeSt.com. “We partner with large institutional multifamily owners to better manage vacancies in properties, whether it is for days, months or longer. There is a concern about long-term leases in cities with rising vacancies such as New York City and San Francisco, and we offer the ability to generate income in an otherwise scary moment.”
Kasa plans to accelerate investment in proprietary technology, building on its existing suite of products and systems that has enabled the company to manage units across various property sizes and locations. Despite historic hospitality industry lows, Kasa has maintained guest experiences at an affordable price points. Now, Kasa will redouble its efforts to streamline operations and minimize onsite overhead through features that focus on community safety, guest support and the travel experience at all touchpoints.
“What Kasa customers see is just the tip of the iceberg. The enormous operational complexity behind the scenes is tackled by Kasa’s technology platform, allowing them to seamlessly host a large, diverse and growing network of distributed accommodation units efficiently,” said Nick Shalek, general partner at Ribbit Capital. “In defining a new software-driven way to deliver high-quality hospitality, we see Kasa doing to hotels what Amazon Web Services did to on-premise servers.”
In addition to creating a seamless experience for guests, Kasa also provides an end-to-end solution for its property partners.
“We selected Kasa as our short-term rental provider of choice after an exhaustive search,” said Lela Cirjakovic, executive vice president of operations at Waterton, a national multifamily owner and operator. “Kasa stood out for its relentless focus on the community and partnership. Their innovative process and technology help us provide a better neighbor and guest experience, and ultimately a more harmonious community.”
Pedan says guests can book through Expedia, Airbnb or Kasa.com. Kasa performs a background check, requires photo ID and a selfie photo, and offers contactless check-in and lower density occupancy.
“Safety and trust are focuses,” he tells GlobeSt.com. “There are decibel meters and THC/nicotine sensors in every room.”
Source: “Safety and Trust are Focuses for Flex Hotel Space“

New Multifamily Continues to Capture Investor Confidence

November 25, 2020 by CARNM

Multifamily market sentiments have risen from recent lows but lenders rank its performance higher than most other forms of commercial real estate despite persistent headwinds and ongoing uncertainty.

Confidence in new multifamily housing increased in the third quarter, according to results from the National Association of Home Builders’ Multifamily Market Survey. The survey produces two separate indices: the Multifamily Production Index/MPI and the Multifamily Vacancy Index/MVI.
Historically, the MPI and MVI have performed well as leading indicators of US Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance. However, the pandemic and subsequent economic downturn have added obstacles at least for the near future, says Barry Kahn, president of Hettig-Kahn Holdings in Houston and chairman of NAHB’s Multifamily Council.
“Sentiment regarding the multifamily housing market has risen from recent lows, but there are persistent headwinds and ongoing uncertainty,” he says. “Nevertheless, lenders see multifamily performing better than most other forms of commercial real estate.”
MPI increased 11 points to 48 compared to the previous quarter, and MVI decreased 18 points to 44, with smaller numbers indicating fewer vacancies.
The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. The index and all of its components are scaled so that a number below 50 indicates that more respondents report conditions are getting worse than report conditions are improving.
The MPI is a weighted average of three key elements of the multifamily housing market: construction of low-rent units that are supported by low-income tax credits or other government subsidy programs, market-rate rental units that are built to be rented at the price the market will hold and for-sale units, i.e. condominiums, all of which posted increases in the third quarter. The component measuring low-rent units rose four points to 46, the component measuring market rate rental units jumped 19 points to 53 and the component measuring for-sale units posted an 11-point gain to 46.
The MVI measures the multifamily housing industry’s perception of vacancies in existing apartments. It is a weighted average of current occupancy indexes for class-A, -B and -C multifamily units, and can vary from 0 to 100. That is, a number under 50 indicates more property managers believe vacancies are decreasing rather than increasing. With a reading of 44, the MVI improved from previous quarter’s index high of 62.
“The third quarter survey results and NAHB’s forecast suggest a rising share of multifamily construction in less dense areas of the nation in need of rental housing,” said NAHB chief economist Robert Dietz. “However, material availability is a near-term concern, with the potential for rising regulatory risk in 2021.”
Overall, a multitude of multifamily investors continue to be bullish on the long-term fundamentals of this asset class. The housing shortage and affordability issues are among the reasons to have a positive outlook, says CGI Strategies.
Following that positive trajectory, CGI plans to acquire $500 million in multifamily product in the next 12 months, and it has a longer-term goal of increasing its assets under management to $1 billion to $5 billion in the next five years.
Source: “New Multifamily Continues to Capture Investor Confidence“

Creating Safe Retail Environments

November 25, 2020 by CARNM

When customers come into stores, they need to see that retailers are taking steps to protect them.

Even though COVID is raging, there has been encouraging vaccine news over the last couple of weeks. Eventually, things should return to normal.
Even when that happens, Birmingham, Ala.-based Bayer Properties’ Executive Vice President of Operations Doug Schneider says that the pandemic will show companies they have to plan for the ability to react to a potential coronavirus type situation in the future.
“If this happens again, you need to make sure that you have the right tools so that you can react accordingly,” Schneider says.
Bayer is already well-positioned because it has a strong foothold in outdoor lifestyle centers. “The outdoor environment has been advantageous for us,” Schneider says. “I think any development we do in the future would be all outdoor because that gives you more flexibility in terms of how you handle these types of situations [where people can’t or don’t want to be indoors].”
When customers feel like they need social distance from other people, having outdoor space is a tremendous advantage.
“The great thing about an outdoor center is there is plenty of room to social distance,” Schneider says. says. “You have choices about what stores you go in. If I go into a mall, I don’t have as many choices in terms of social distancing because it’s an enclosed location. “
Outdoor lifestyle centers also can host events centered around fitness, yoga and walking. “Getting consumers outside, where they have the ability to social distance, has been an advantage and something that we’ve tried to leverage with our customers,” Schneider says. “We’ve had restaurants expand into the parking lot if we can give them more space to spread out. That can help drive sales and make customers feel more comfortable.”
When customers do come into stores, Schneider says they need to see that retailers are taking steps to protect them.
“It’s important that a retailer demonstrates that they are taking a customer’s safety into consideration, and they are doing whatever they can to make sure that that continues to be a case,” Schneider says.
While retailers can add UV light to disinfect the air or MERV filters, customers can’t see these improvements. Still, those are important upgrades.
“You need to demonstrate visually to that shopper that they’re entering into a safe environment, and they should feel safe in shopping, even in grocery stores,” he says. “Some stores have employees wiping down the grocery carts where customers can see it.”
When customers do visit retailers, their shopping habits are changing. Schneider says customers are buying more in one trip instead of making multiple visits.
“Customers are being more direct in terms of what they’re purchasing, and they are purchasing more on every trip,” Schneider says. “So the retail sales decline is less than the traffic decline because people are actually making a higher number of transactions on each visit. Customers are planning their trips better.”
Source: “Creating Safe Retail Environments“

The Market for Distressed Assets Is Only Beginning

November 25, 2020 by CARNM

Peter Ballance at Stroock & Stroock & Lavan says investors are seeing opportunities to acquire properties for pennies on the dollar.

Opportunistic investors are already actively seeking distressed opportunities, but after eight months in the pandemic, many more distressed deals are likely to hit the market next year. This new wave of COVID-19 cases and new stay-at-home orders are only putting more pressure on businesses and solidifying what will become a thriving investment industry. Ready and well-positioned investors will be able to buy assets for pennies on the dollar, according to Peter Ballance at Stroock & Stroock & Lavan.
“In the short term, as the pandemic drags out and new protective orders are issued by state governments, many offices, restaurants, hotels, stores and other commercial spaces where people spend their time and/or money will remain either closed, or mostly empty,” Ballance, a partner at the firm, tells Globest.com. “As a result, many commercial properties are facing a combination of tenant defaults, no new demand for space and no readily available capital. For property owners that are unable to identify solutions to keep their assets afloat, defaults under their real estate financing are inevitable.”
These are opportunities stemming from the impact of stay-at-home orders and reduced activity, but permanent changes will also create distressed asset opportunities further into the future. “A longer-term change to the market will likely result from the pandemic driven acceptance of the work-from-home model,” says Ballance. “It has become clear that almost anyone who gets their job done with a computer and a phone can work anywhere, not just an office in a commercial building.”
Office owners aren’t alone. Retail owners will also have to adjust to long-term changes. “Digital retailers like Amazon have revolutionized shopping habits to the detriment of brick and mortar stores,” says Ballance. “As companies downsize their office requirements and retailers close up shop or move to an on-line model, the resulting decline in demand for office and retail properties will fall short of the pre-pandemic underwriting of the real estate loans secured by those properties, and again, loan defaults are inevitable.”
Lenders will have to respond to these changes as more owners face challenges with rent collections. “With an overstocked inventory of distressed loan assets and an uncertain road to recovery, a number of lenders are going to be looking to sell these loans,” says Ballance. “For cash-flush investors that are looking for a real estate bargain, this could presents a great opportunity.”
Source: “The Market for Distressed Assets Is Only Beginning“