Archives for November 2020

Why Investors Are Doubling Down on Self-Storage

November 23, 2020 by CARNM

The self-storage market is among the handful of asset classes to shine during the pandemic, reinforcing interest from investors.

Thanks to a pandemic push, the self-storage market is taking off. Self-storage properties are among a handful of asset classes to shine during the pandemic, and the activity is reinforcing investor interest. Buchanan Street Partners has tracked the market activity and launched a self-storage investment platform with plans to buy $350 million to $500 million over the next five years. The recent market activity has underscored the firm’s outlook and investment plans.
“As we expected, self-storage has continued to perform very well during the pandemic, further reinforcing our investment strategy,” Timothy Ballard, president and CEO at Buchanan Street Partners, tells GlobeSt.com. “The pandemic reaffirmed the belief of self-storage being a recession resistant sector.”
The demand is driven by heightened consumer interest in storage facilities, which have led to strong occupancies. “With consumer demand at an all-time high, the sector appears to have proven that it is a need among consumers,” says Feerooz Yacoobi, VP at Buchanan Street Partners. “That’s why in terms of occupancies, we’re seeing same store pools among the REIT operators at an all-time high, in the mid-95% range. We think this sector will continue to weather the storm.”
In light of the current market, the firm is focusing on stability, however, in its acquisition strategy. “We like cash-flowing stable deals, especially in today’s economic environment. Everyone is searching for yield so they are attractive. One of the areas that we expect to see significant opportunity is in newly developed, class-A facilities that have not yet reached stabilization,” says Ballard.
While the demand supports the investment thesis, there is also opportunity to place capital in this market. “Many of these self-storage facilities are coming available as developers, merchant builders or shorter-term capital are looking to sell early and realize gains, or they’re struggling with short-term oversupply that is causing them to miss pro forma projections,” says Yacoobi.
These problems are actually not due to slowing demand during the pandemic but rather overbuilding issues in the last two years. “We’ve seen overbuilding as a lot of new product was delivered in 2018 and 2019. That has negatively impacted market rates, but rents are now starting to pick back up in certain trade areas,” says Yacoobi. “As noted, we think those are interesting opportunities to come in and acquire class A newly built product. Our patient capital doesn’t need immediate cash flow, which enables us to invest in institutional-quality assets in strong locations.”
Source: “Why Investors Are Doubling Down on Self-Storage“

November 2020 LIN Properties

November 19, 2020 by CARNM

At the October 2020 Virtual LIN Meeting held on November 18, 2020, 9 excellent properties were presented.
Thank you for presenting properties and attending the meeting!
View the November 2020 LIN properties here.
View the November 2020 Thank Yous here.

How to Be Code Compliant

November 19, 2020 by CARNM

Barbara Betts still vividly remembers having to defend herself from a complaint filed by a fellow REALTOR® in front of a board of her peers. Though Betts reports that she was ultimately exonerated, she vowed from that point on to learn everything she could about the National Association of REALTORS®’ Code of Ethics and risk management in order to prevent a similar situation from happening again.
In the virtual 2020 REALTORS® Conference & Expo session, “How to Stay out of Trouble: Risk Management and Code of Ethics,” presented by Betts on Wednesday, she offered tips and best practices real estate professionals can incorporate into their business practices immediately. Betts covered managing the risk of potential litigation, reducing liability, and minimizing exposure to possible ethics complaints.
REALTORS® know that when they joined NAR, that they also agreed to operate within the association’s Code of Ethics, which asks members to hold themselves to a higher standard. Betts, however, who is the broker-owner of The Betts Group in Long Beach, Calif., said it’s not uncommon for newer members to not fully understand what complying with the code requires from them. Betts offered a high-level overview of some of the most common Code of Ethics violations that can trip up even the most well-intentioned REALTORS®.

Article 1: REALTORS® owe a fiduciary duty to their clients and honesty to all parties.

Common problem areas:

Overpricing a listing—this can be considered misleading the lister.
Not presenting all offers up until the closing.
Disclosing confidential information about the seller, such as a bankruptcy filing or other financial troubles.

Article 3: Cooperation with other brokers.

Common problem areas:

Misrepresenting access to show a home. For example, you list a date the property is available, and then show it earlier yourself.
Providing access to a home on terms other than those established by the listing broker, such as giving clients access codes to use themselves without you present.
Refusing to cooperate with another broker on the basis of the broker’s race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.

Article 12: Honesty in real estate communications.

Common problem areas:

Not making it clear in your advertising material who your broker is, especially if it’s not you.
Not keeping your website information accurate and up to date.
Using copyrighted images without permission in your communications, including social media posts.

Fair Housing

Fair housing is covered by Article 10 of the Code of Ethics, and Betts highlighted two important topics related to this issue: steering and “love letters.” Betts warned engaging in either one of these practices can lead to a lawsuit—even if there was no intent to violate fair housing laws. Steering, she said, can be as simple as offering different opinions to two different clients. For example, if you tell one client a neighborhood is safe, and you tell another client not to buy there because of the crime rate—and you do so because of race—that would be considered steering.
“You have to give the same advice to everyone,” Betts said.
Love letters—personal offer letters from a buyer to a seller—can be problematic for the same reason, Betts noted. Love letters, she explained, are written by a potential buyer to express their reasons for wanting to purchase the home. Such letters are often well-intentioned, Betts said, but they can easily violate fair housing laws. For example, a buyer writing that she and her husband and children would love to spend Christmas in the house has just revealed her family status and her religion to the seller—which could potentially influence the seller’s decision in a discriminatory fashion.
“Your seller and you could be sued without intending to make a mistake,” Betts said. “I advise my sellers not to read or accept love letters.”

Risk Management

Betts also included her top seven tips for risk management—practices all real estate professionals can put into place to help make sure they are covered in the event that a complaint or lawsuit is filed against them. These practices, she said, will help ensure that you have the information you need on hand and that nothing pertinent, such as text messages, goes missing:

Document everything—Betts uses Slack.
Following conversations, summarize important information in email and send to the buyer or seller to make sure that there is a record of what you communicated to them.
Give clients choices when it comes to home warranty add-ons and inspector choices—don’t make the decision for them.
Email transaction milestones and reminders to clients.
Explain all contracts before sending for signature.
Save all text messages and communications with clients and other agents.
Ask clients questions constantly, such as, “Do you understand?” or, “Do you have any questions?”

Betts said she loves clients who ask a lot of questions and advised real estate agents to work on getting silent clients to open up and reveal what they don’t understand about the process.
“Typically,” she said, “they won’t sue if they understand.”
Source: “How to Be Code Compliant“

CRE Industry Now Waits for Senate Outcome

November 17, 2020 by CARNM

The future majority of the US Senate, which will be determined by run-off elections in Georgia, will ultimately determine some hot button topics for CRE.

Now that the Presidential results are…final?—CRE attention has turned to the Senate, where the majority for the next cycle will be determined by run-off elections in Georgia. George Smith Partners’ hosted a virtual conversation with Jay Rollins, co-founder at JCR Capital, and discussed the implications of the election for the commercial real estate industry. According to Rollins, the future hangs on the outcome of the two run-off races in Georgia.
“The base case assumption of a Biden Presidency and a Republic Senate for the commercial real estate industry could be the best outcome that we could have hoped for. If the Senate is controlled by Republicans, it could give Biden a lot of cover, and this could be a good thing for Biden because there will be a lot less pressure from the far left to get things done,” Rollins said in the conversation, which was hosted by George Smith Partners’ principal and co-founder Bryan Shaffer. “With a one-seat advantage, Mitch McConnell will control what goes to the floor.”
The industry has a few major concerns that could swing with the Senate majority and a Democratic White House, like taxes and 1031 exchanges. If the Senate remains a Republican majority, those issues will not likely make it to the floor. “A lot of the things that people in our industry were scared of, like massive tax increases, changes in the 1031 exchanges depreciation, are all going to be really hard to do. So, I think that we are in a fine spot,” said Rollins. “I think that people are going to respond in the same way that they responded in the stock market. The rhetoric is going to be tamped down, we will continue to have Powell with low rates and we are going to have a stimulus package. I think this is really good news for our industry.”
Rollins also opined on what the election has signified for the political ideology of the country—and what that could mean for future policy that could impact the CRE industry. “There was a movement in this election to redefine the democratic party as democratic socialist and that the country wanted to go more to the left. That was the narrative, and that narrative was rejected,” he said. “It was rejected by how close this election was in terms of raw numbers and by the fact that the Republicans picked up five seats in the House. The democrats need to know that the country doesn’t want to move that far left. They are going to have to get back to bread and butter issues.”
Rollins also argued that the election outcome could mean a longer-term trend for the democratic party. “While the headlines have been on this election, I think the story behind the story is that the country is not going as far left as just a month ago,” he said. “For that reason, the democrats in power are not going to go along with radical ideas because they want to keep their job, and the people have spoken that they don’t want radical ideas.”
Source: “CRE Industry Now Waits for Senate Outcome”