Lessons Learned Part IV – Networking, Honesty, and Teaming

Posted: March 8, 2017 by Paul Cohen, Regional Director

LESSONS LEARNED IV – BROKER ADVICE ON NETWORKING, HONESTY, AND TEAMING

And the advice keeps on coming.  This post we cover topics from the importance of networking, honesty, and teaming.  I look forward to receiving more advice.  Checkout the past three posts: 

Lessons Learned Part I – Ten Takeaways from 25 years in CRE 

Lessons Learned Part II – Broker Advice From Around the Country

Lessons Learned Part III – More Broker Advice From Around the Country


More CRE Lessons Learned - Carolyn Niemczyk
Carolyn Niemczyk, CFM
Keyes Commercial, Port St Lucie, FL

Be willing to go the extra mile:  The majority of my clients stay with me thru purchase after purchase and lease after lease. I can get the a/c fixed on a Sunday or a locksmith there Friday night to avoid any overtime charges. Maintain good relationships with all service providers.


More CRE Lessons Learned - Alan Bolduc Avison YoungAlan Bolduc CCIM, SIORSenior Vice President
Avison Young, Charleston, SC

Networking 101.  Find a group, association or organization where you will find the people you want to meet and get to know as possible clients or can refer you to potential clients… BUT, you need to be the only one in the room that does what you do!  And go often.  No one knows when you aren’t there, only when you are!


More CRE Lessons Learned - GG Galloway - CBCG.G. Galloway – Associate/Partner
Coldwell Banker Commercial Benchmark, Ormond Beach, FL

  1. Never be afraid to ask a dumb question…… it may save you or your client a lot of money.
  2. Being in the business for 30 years, one would think you have about heard everything there is too hear…. wrong…… stay actively involved in your trade associations as well as continuing your continued education.  Give back to your communities by being actively involved not just in your professional and trade associations but equally involved in community activities and nonprofits. Reach out and become mentors to others, and help and share some of the success, failures, pitfalls, and sidesteps that we ALL have enjoyed throughout ones career.
  3. Teaming is the way to go.  A team will accomplish so much more than an individual that thinks they have to have it all. There is no “I” in TEAM, a team has multiple fronts, hands, ears, and eyes. Best of all a Team can be at multiple locations at the same time as well as completing multiple tasks outside an office as well as multiple tasks within an office.
  4. Don’t bull shit your way out of a question that you don’t have the answer for…. We are professionals….. and when a question arises that you have no real answer for….. let the person know you don’t know; however, I will find out the answer to your question and report back to you with my findings.
  5. Live by the sunset rule….. if it was important enough for someone to call you today….. call that person back by sunset the day of  or at least before you leave your office if it is after sunset…even if you leave a message to an answering machine….. let ALL know your call is very important to and the success of my business……thank you for the consideration.
  6. Email, LinkedIn, Facebook, Twitter, texting……………. how about just an old fashioned hand written thank you note or card……… Thanks for your business or thanks for your time today.
  7. Business cards are not dinosaurs…. pass out two when you give one out…… one to the customer and ask them to give one to a friend or customer of theirs who may need your services.

More CRE Lessons Learned - Aaron LigonAaron Ligon – Managing Principal
LCRE Partners, Charlotte, NC

  • Be clear, and tell the truth.  Brokers often try to solve problems before presenting a difficult situation to a client.  Or in an effort to be helpful, they’ll obsess about how to present a situation or set of circumstances in the most positive way possible. Simply be clear, and tell the truth.  Do it quickly.  State the problem, outline the circumstances, and suggest solutions, or at least some potential action steps to navigate toward a solution. Most problems get worse when you delay discussion.
  • Simple is best.  In a world of deep analytics and tons of data, sometimes simple is best.  Delving into cap rates, levered yields, after-tax IRR’s, and complex waterfall structures can leave your head spinning.  When analyzing a potential acquisition for yourself or a client, don’t forget to also make the simplest possible analysis.  How does the purchase price of the asset compare to other trades on a cost per square foot basis? Is this purchase below or above the cost of reproduction?  Irrespective of a tenant/lease, what is the real rental rate for the property?  Is the underlying land likely to appreciate?  Answering those and other basic questions will often provide clarity around an otherwise complex transaction.
  • Be a value-add for your clients:  Adding value in the real estate service business requires one or more of three basic contributions: 1) Information, 2) Resources, and/or 3) Hard work.  The most successful real estate brokers and investors leverage all three.  If you don’t have financial resources to invest, you should be well-informed and working hard for your clients.  If you’re not offering intelligence, financial resources, or diligent work, you’re not adding value, and you won’t fool them for long.

 

Paul Cohen

Paul Cohen, Regional DirectorPaul Cohen is a Regional Director with CREXi based in the firm’s Miami office and focused on business development in the southeast. Prior to joining CREXi, Cohen was a Managing Director specializing in investment sales and equity raises at Cohen Financial, a national debt and equity advisor. Prior to Cohen Financial, Paul owned and operated his own independent real estate firm following a 12-year tenure at CBRE where Cohen was a Senior Vice President and led the Private Client Group in Miami-Dade County with a specialty in office and industrial investment sales.  Email Paul

Profile of a Legend – Gerald Hines

Posted: February 10, 2017 by Eli Randel, Director of Business Development

TEN HINES DEVELOPMENTS WE LOVE (OR WILL LOVE)

Gerald Hines, the famed developer and investor, developed some of the nation’s most iconic buildings, set new industry standards for building quality, and would ultimately build what’s been affectionately called a “complex empire” in reference to the complexity of his developments and his net worth of an estimated $1.3B

Born in Gary Indiana and eventually receiving a degree from Purdue University in Mechanical Engineering, Hines would begin his real estate career in Houston around 1957 as a side business to his engineering career. He mostly built warehouses and small office buildings until he received a big break in 1967 when Shell Oil Company hired him to build their headquarters in Downtown Houston.

Like most developers in the late 60s Hines began by borrowing money to develop and then keeping profits once his development was sold. It was considered foolish at the time to use your own capital to build. Hines would buck that trend and risk his entire net worth of $5MM to build the Houston Galleria Mall. Eventually Hines would use a development model similar to what we see today by raising outside equity while retaining about 10-20% and earning fees and a promoted interest for successful deals.

In later years Hines would focus on and excel at building “high-class” developments which offered strong profit margins, insulation from a struggling economy, and would allow him to focus on iconic design around the world. Known for their architectural complexity and innovation, a Hines developed building is usually unlike most others in their market. Today Hines (the company) is run by Gerald’s son Jeff who continues the legacy of bold developments, innovative design, and a unique relationship with their tenants.


TEN AMAZING HINES DEVELOPMENTS

THE LIPSTICK BUILDING – NYC

SALESFORCE TOWER – SF

DIAGONAL MAR CENTRE – BARCELONA

ONE MUSEUM PLACE – SHANGHAI

EMBASSY HOUSE – BEIJING

PARK AVENUE DALIAN – DALIAN

DUCAT PLACE – MOSCOW

DEL BOSQUE – MEXICO CITY

RIVER POINT – CHICAGO

53W53 – NYC

 

Investor Profile – Interview with Tricera Capital Founder Scott Sherman

Posted: January 24, 2017 by Eli Randel, Director of Business Development

INVESTOR PROFILE – INTERVIEW WITH TRICERA CAPITAL FOUNDER SCOTT SHERMAN

For seven years Scott Sherman represented ubiquitous New York City retail investor, Thor Equities, most recently as Vice President of Investments. During his tenure, Scott executed over $2B in urban retail acquisitions in markets including Miami, London, Washington DC, Nashville, Austin, and Charleston. Few people in recent years have been involved in closing as many high-profile, high-street retail acquisitions as Scott.

Now Sherman, with business partner Ben Mandell and the support of several capital partners, has formed Tricera Capital to acquire and take a more entrepreneurial approach to deals both big and small. Tricera will focus on both entrepreneurial and institutional sized retail, office, and mixed-use investments with a primary focus on the southeast, Texas, and select northeast markets. Tricera generally looks for transitional deals in transitional sub-markets within stable cities.

Scott and his team at Tricera are dedicated to protecting brokers, underwriting deals quickly, and providing quick feedback about their interest level. Please send Scott deals you think may qualify within their acquisition criteria which can be found here: Tricera Investment Criteria.

In the meantime, I caught up with Scott to ask about the new venture and more.

ER: You’ve had the opportunity to work on some iconic properties. What was your most memorable deal or the first one that comes to mind?  

SS: The first deal that comes to mind was actually my first deal at Thor. We acquired the Burlington Arcade in London. I had never done anything overseas and it was a great learning experience for me. Plus, I had the opportunity to work on a unique and iconic property in the heart of London. We bought it for 104M Pounds and fully renovated the interior and upgraded the tenant. Thor recently took it to market for 400M Pounds…

ER: What was the last great book you read (or first that comes to mind)?

SS: Two books I highly recommend to everyone are “Never Eat Alone” by Keith Ferrazzii and “How to Win Friends and Influence People” by Dale Carnegie. These two books I would recommend to anyone as they apply to building relationships and how you deal with people, which impacts all professionals across industries on a daily basis.

ER: Do you have any career regrets or opportunities you missed that still bother you? 

SS: There are several deals I have chased over the years that I missed. You need to move on and look for the next one….letting misses bother you will only slow you down. I’d rather not do a deal than force it and do a bad deal.

ER: What advice would you give a high-school version of yourself?

SS: Enjoy your high school and college years….you will never get those back. 2) Figure out what interests you and focus on finding a career path that gets you there. If you do something you enjoy then you will be a much happier person.

ER: Would you encourage your children to follow your career path?  

SS: Yes, my son is two so we have some time, but I would love to see him follow in my footsteps.

ER: If forced to choose one or the other for your son, would you want him to be all brains or all guts?

SS: That’s a tough one…I think the best is a combination of both. In our industry, I think you need more guts than brains. I always say Real Estate is the one area in business that requires more street smarts than book smarts. If you have both then you are going to go far.

ER: Having now left a well-capitalized institutional investor, to become a business owner and entrepreneur, what keeps you up at night?

SS: Very different type of stress these days. I call it good stress….the stress of building a business with my partner Ben, having employees that you are now responsible for and having to provide for my family.

ER: What can you do now as an entrepreneur that you couldn’t as part of an institutional firm? 

SS: Everything. I like the ability to look at any opportunity that I find interesting. At an institutional shop, you are always answering to someone and are typically put in a box in terms of deal type, size, returns, etc.

ER: If asked to host the president for dinner, what would you cook (politics aside)?

SS: Trump looks like a good eater but also has expensive taste. I think the best is to bring in Joe’s Stone Crabs….quintessential Miami and always a crowd pleaser. Also doesn’t require me to cook and that key lime pie never lets me down.

ER: Having traveled to many markets to look at deals, what’s your favorite food city? 

SS: That’s a tough one as I try to eat my way through every city – finding the best operators, coffee shops and new concepts. I’d have to say Nashville and Austin both have incredible food scenes and seem to be getting better. There has been a trend of emerging chefs going to cities like this to get their start because costs are much lower than starting in a city like NYC or Miami.

ER: What small city do you think is poised for a growth spurt?

SS: We have a few on our radar. I’m intrigued by Tampa, Charleston, Cleveland and Orlando.

ER: What do you think is being done wrong (or could be done better) by your peers?

SS: Technology is changing our business and the world so fast. I think the speed at which people adapt and incorporate the new resources into our business could be better. People are resistant to change or slow to adapt.

ER: What do you wish brokers would do differently when presenting you deals? 

SS: Some brokers (not all) need to manage sellers’ expectations better. I get frustrated by brokers who tell owners they can get unrealistic prices. What ends up happening is the seller now has an unrealistic price in their head and it’s impossible to make a deal. No one wins here.

ER: If money was not an issue, what non-business career would you pursue?

SS: I love to travel. The Points Guy seems to have it good….would love to do something like that.

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Why Now?

Posted: January 18, 2017 by Eli Randel, Director of Business Development

WHY NOW?

When recently discussing our company mission with a well-known investor he asked one wise and Buddha-like question in its simplicity: “why now?”

While I had immediate business answers which I’ve shared below, I continue to ponder the question. The entrepreneur always says “why not now” and presses forward, however today is only a droplet of water in a waterfall of time. Why should anything special happen NOW and not tomorrow? Why hasn’t it already happened?

I haven’t found the answer to the deeper question, but now is the time to continue to grow CREXi, an online CRE platform connecting brokers with buyers and simplifying the often slow and clunky real estate transaction process using cutting edge technology. Here’s why (now):

  • There is a large demographic and generational sea-change occurring in CRE. Brokers, buyers and investors who are accustomed to and demand technology in their everyday-lives are replacing their predecessors. We are witnessing unprecedented industry wide tech-adoption. The demand for the tools exists, but many of the tools have not yet been created;
  • Most of the marketplaces that do exist are ill-suited to handle the changing demands of the market. Many were designed in the 90s or 2000s and have only slowly evolved. Complacent with their early success, many have not kept up with most technological advances and in many ways are people-heavy real estate firms more than tech firms. Most current platforms are satisfying today’s demand with yesterday’s product;
  • Incumbent fee models are widely disliked and perceived at best as necessary-evils. Much like the taxi industry, the service should be better and the costs should be lower. We believe tech and resulting transparency should empower buyers and lower their costs. Sellers should also benefit as buyers can now use their buying power to pay them and not transaction fees. Sellers also benefit from increased liquidity (“liquidity equals value” – Sam Zell);
  • Users want to help design and control their process in conjunction with market forces. Netflix and Amazon users want to promote content with their ratings and feedback. Wikipedia users create and regulate content. Uber does not tell drivers where they should drive, the market does. Brokers want to design and manage their own process and react to market forces with data and assistance from the service provider, but limited interference and friction;
  • The market cycle and overall economy is changing and change will fuel evolution. Value and demand shifts will bring demand for new tools with wider reach as market conditions will likely make deals harder to execute. Conduits connecting brokers with out-of-market buyers are needed. Assuming some distress emerges, lenders and servicers will continue to be early adopters and use online marketplaces to promote transparency and liquidity. Our platform is designed in-part with this in mind (lenders being the only non-brokers we will engage with).

NOW is the time to connect with CREXi and find out how we can help you do more deals, and reduce your professional expenses either as a buyer or broker while speeding up your transaction cycle and making your work-flow more efficient.

Eli Randel

Eli Randel, CREXi Director of Business Development

Eli Randel is Director of Business Development based in CREXi’s Miami office. Eli spearheads CREXi’s growth and sales throughout the east coast as well as overseeing the national sales team. Prior to joining CREXi, Eli was director of dispositions for Blackstone’s Invitation Homes. Eli has also held management positions and production roles with Cohen Financial, Auction.com, LNR and CBRE where he began his career spending three years in Investment Sales before leaving to obtain his Master in Business Administration from the University of Florida.

CREXi’s Top Ten Sam Zell Quotes

Though sometimes gruff, foul-mouthed, contrarian, and a political instigator, Sam Zell is known for his prowess in timing market-cycles, is credited with having helped create the modern CRE industry, and has been dubbed “the Grave Dancer” for his ability to “dance on the skeletons of other people’s mistakes” and profit off of distressed deals. At the LA Tribune, a newspaper he owned, a memo was sent following his profanity laden visit: “the fundamental rules of decorum and decency apply… Sam is a force of a nature; the rest of us are bound by the normal conventions of society.”

Zell’s career essentially began when he managed a 15-unit apartment building at University of Michigan in exchange for free rent. His ability to work with and attract tenants, would win him the management of 4,000 units by the time he graduated Law School in 1966. Zell and his best friend and business partner , Robert Lurie, owned about 150 of those units. In 1969 they would form Equity Group Investments. Lurie would eventually pass in 1990 but is still listed on the company’s team page with Zell’s tribute: “Bob was a business partner, a brother and a best friend. There have been many times over the years that I’ve wished I could talk to him. I’d want to show him what we’ve created here. I know he’d be proud.”

Like him or not, in many ways Zell embodies the American real estate entrepreneur and the greatness of the industry. Born in Chicago to two polish immigrants, Zell utilized his hard work-ethic, street smarts (and book smarts), entrepreneurial spirit, and toughness to build a real estate empire and an estimated net worth of nearly $5B. 

Our Ten Favorite Sam Zell Quotes: 

10) The definition of a true partner is someone who shares your level of risk.

9)  I think it was Confucius who said that ‘money talks and bulls*t walks.’ 

8)  (on hiring) I look for people who in no way, shape, or form can be intimidated. My greatest fear is somebody telling me what they think I might want to hear.  

7)  When it’s all said and done, the petroleum of the real estate industry has always been capital.  

6)  A tie cuts off the blood supply to the brain.

5)  Sentimentality about an investment leads to lack of discipline.

4)  Whatever goals you set, you need to constantly readjust them so that at no time do you reach your goals before your time is up. 

3)  (on whether opportunities are disappearing) The world always looks nigh on impossible from the perspective of a desk. But once you get out into the world and if you have what I would call the entrepreneurial characteristics, I just think this country still provides a very unique opportunity.

2)  Liquidity = value.

1)  Every day you’re not selling an asset that’s in your portfolio, you’re choosing to buy it.

Short & Sweet With No Fluff

Posted: January 4, 2017 by Eli Randel, Director of Business Development

SHORT & SWEET WITH NO FLUFF

No, that is not my order at Starbuck’s or my match.com header, this week’s blog is meant to be short, sweet, and sans any company fluff about why you should visit us at CREXi.com (although you should).

Having grown up and spent my whole career in the commercial real estate industry, I wanted to share some concise thoughts on why I love the industry and asset class:

  1. Low individual barriers to entry. Real estate investing requires no formal education or licensing requirements and while some areas of the business can be incredibly sophisticated, many concepts are very simplistic and intuitive. The result is a colorful and entrepreneurial culture full of unique personalities and personal stories.
  1. Diverse skill sets. Within one day you can exercise your finance chops and underwrite a complicated deal, exercise your marketing muscle and promote your newest project, or put your salesman hat on to win a new tenant. There are a broad set of skills which drive the industry;
  1. Instinct and intuition. While there are many sophisticated nuances, many of the concepts in CRE are intuitive. We all live somewhere. We all shop somewhere. These are not foreign concepts. Recognize that there aren’t enough apartments for rent in your area? Buy or develop an apartment building to capitalize.
  1. Control. Some of us don’t like the idea that unless we are an activist investor we can’t control the value of our equities investments (stocks). Further, the value is at the mercy of someone else’s control. What if the CEO gets caught in a scandal or retires sooner than thought? Most CRE professionals can still directly (attempt to) add-value to their investment or business.
  1. Real estate is a hard asset. Some people (myself included) don’t have the wiring to blindly trust an investment that can only be seen as numbers on a computer screen. Real estate is a real tangible asset you can drive by and touch.
  1. They aren’t making any more of it. I hesitated to include this as I believe this idea can sometimes be a trap. This notion does not mean values always rise and I think it’s underestimated how much untouched land there is. Additionally, technology has blurred the lines of physical and virtual space. However, the fact remains, the population continues to grow while land availability continues to decrease.
  1. Use of debt. Real estate is financeable whereas financing bonds or equities investments is a tricky business. Debt allows investors to lever returns, do more with less, and creates other industry opportunities (lender, servicer, appraiser).
  1. Other people’s money. The use of other people’s money (OPM) is an important component of the industry. Friends and family or institutional capital investors are always looking for avenues where they can find returns and are willing to pay fees and promoted interests to those who can access those investments. This allows investors to further lever returns and/or play in a greater arena than they otherwise could.
  1. It’s fun. For the restless like myself, it’s an industry that often revolves around meetings, looking at properties, driving, or getting a drink with other professionals. It’s a people industry that often puts you on the move as opposed to chained to your desk.

Tell me what I missed or share your thoughts @ eli@crexi.com or 305.331.2881.

Eli Randel

Eli Randel, CREXi Director of Business Development

Eli Randel is Director of Business Development based in CREXi’s Miami office. Eli spearheads CREXi’s growth and sales throughout the east coast as well as overseeing the national sales team. Prior to joining CREXi, Eli was director of dispositions for Blackstone’s Invitation Homes. Eli has also held management positions and production roles with Cohen Financial, Auction.com, LNR and CBRE where he began his career spending three years in Investment Sales before leaving to obtain his Master in Business Administration from the University of Florida.

Forget Hillary, Where Did Your 30,000 Emails Go?

Posted: December 28, 2016 by Paul Cohen, Regional Director

FORGET HILLARY, WHERE DID YOUR 30,000 EMAILS GO?

I recently met a long-time broker-friend for lunch. In typical broker-friend style, he texted me five minutes before we were due to meet telling me he was finishing up a project and asked if I would come to his office first. I did. He was hunched over a workstation with who I assumed was his marketing assistant at the computer’s controls. As I approached, he greeted me with “BaBoom! 30,000 emails. Let’s get lunch.” Turns out that my broker buddy had just hired a new marketing whizz who had revamped his marketing platform. They both looked very excited.

“That’s great,” I told him, “So, what’s your delivery rate been?”

Blank stare.

“How many unique page views are you generating?”

Blank stare.

“OK,” I said now feeling a little like a bully “how many offers have you gotten?”

“We got one last week on the downtown development site!”

Turns out he wasn’t clear whether the offer came from his email campaign or a call off a sign, but 30,000 emails must have generated some of the deal activity he was experiencing. Right?

I explained to my friend and his whizz that technology was available that takes the guess work out of email campaigns. You can analyze exactly how many emails were delivered, viewed, resulted in downloaded OMs, and who performed these activities all on CREXi.com for free.

“Why are you paying a service without these capabilities over $200 a month when you can use CREXI for free?” I asked.

“Free is good but we don’t have time to learn a new mail program. Time is money, Pauly-boy,” was his reply. I logged into his CREXI account (of course, he had a CREXI account) and in three clicks created him an email marketing campaign. The campaign was customizable and directed buyers to his listing page where they could quickly execute his NDA, access his sleek offering memorandum, and open a due diligence vault with all the property information (he was still paying a firm $100/month just for a DD vault).

He was impressed. Then he noticed on his dashboard that each listing had a number of page views, Executed CA’s, Downloaded OM’s. He swore he had never seen that page before (He had because I had given him the demo). Then he looked at the Downtown Development site and clicked on the leads tab. The buyer who had submitted the offer had downloaded the OM over two weeks ago. I suggested that he should probably check his other listings. He agreed but after lunch and he was buying!

Paul Cohen

Paul Cohen, Regional Director

Paul Cohen is a Regional Director with CREXi based in the firm’s Miami office and focused on business development in the southeast. Prior to joining CREXi, Cohen was a Managing Director specializing in investment sales and equity raises at Cohen Financial, a national debt and equity advisor. Prior to Cohen Financial, Paul owned and operated his own independent real estate firm following a 12-year tenure at CBRE where Cohen was a Senior Vice President and led the Private Client Group in Miami-Dade County with a specialty in office and industrial investment sales.  

How Long Should It Take To Receive An OM?

Posted: December 21, 2016 by Paul Cohen, Regional Director

HOW LONG SHOULD IT TAKE TO RECEIVE AN OFFERING MEMORANDUM?

Back in 2002, I was at a conference for a select group of CBRE brokers who were invited to be part of a new division called the Private Client Group. It was an exciting time. Led by a maverick named Glen Esnard, we had one mandate: to design and build a platform within the CBRE network to work with the thousands of private real estate owners across the country. Previously, the company had a more institutional focus, but now recognized the opportunity to service a wider entrepreneurial client-base.

One of our first breakout sessions was led by a forward thinker named Jim Crupi; a consultant to many Fortune 500 companies and a former Army Ranger commander. I was pumped. His first question to us was: “how long should it take to get an offering memorandum?”.  I looked around the room, thought about how long it typically took; figured he was looking for a short answer and suggested one I thought was low but not crazy: “less than 24 hours.” Many of my colleagues could tell by his reaction that he was looking for a shorter time and offered their newly revised responses with the lowest being “one hour.” Of course, an hour was doable but in my experience, was not the norm. By the time a buyer gets a broker on the phone, the broker e-mails an NDA, the NDA is received, printed, executed, and then faxed (yes faxed) back, the executed NDA is then received by the broker and finally the offering memorandum is sent, at least a day if not several has usually elapsed. Crupi then challenged us to a group exercise. Our task was to pass a tennis ball around a circle of 20 people in the shortest time possible. Now we were a very competitive bunch so after three attempts we got it down to under 5 seconds. Crupi commended us but encouraged us to do it quicker. After some brainstorming, strong teamwork, and logistical coordination we finally touched the ball simultaneously. That was Crupi’s point: “Don’t accept the norm but challenge yourself to find new ways to do it better.” He invited us to do the same with Offering Memorandums. My mind was blown. What if we improve on and change the norm in other areas of the business?

Fast forward to 2016, I find myself with the same level of excitement as I did in the early days of the PCG: a member of a band of free thinkers with the goal of disrupting traditional norms. Providing tools to brokers to make them more effective with client reporting, email marketing, due diligence vaults, offer submission, and analytics. Oh, and you can download an OM instantaneously. Check out www.crexi.com and take the OM Challenge.

Paul Cohen – Guest Contributor

Paul Cohen, Regional DirectorPaul Cohen is a Regional Director with CREXi based in the firm’s Miami office and focused on business development in the southeast. Prior to joining CREXi, Cohen was a Managing Director specializing in investment sales and equity raises at Cohen Financial, a national debt and equity advisor. Prior to Cohen Financial, Paul owned and operated his own independent real estate firm following a 12-year tenure at CBRE where Cohen was a Senior Vice President and led the Private Client Group in Miami-Dade County with a specialty in office and industrial investment sales.

 

Data-Less 2017 Market Outlooks (Analysis Without Paralysis) Part 2

Posted: December 14, 2016 by Eli Randel

DATA-LESS 2017 MARKET OUTLOOKS (ANALYSIS WITHOUT PARALYSIS) Part 2

Read Part 1 Data-Less 2017 Market Outlooks

Despite the moving market pieces and political volatility which could affect the US capital markets, I muted the noise and “what-if” scenarios, spoke to several trusted advisors, and put my thumb in the air to paint a picture of what I think the 2017 CRE capital markets will look like:

Following a flurry of sometimes fruitless activity (lots of squeezing, minimal juice) in Q4 to close investment sales and refinance debt before year end, I expect a brief pause and “holding of the breath” entering 2017 as Trump takes office and investors shake off their added holiday weight. Eventually, the ambitious deployment targets and billions of dollars in unplaced capital will resume the deal chase and direct or LP equity will be plentiful albeit more risk averse. Despite the domestic perception of political risk, foreign economies still view the US as a safe-haven for capital and will continue to gravitate towards the US CRE market to escape their own struggling economies, political risks, and low (and even negative) interest rate environments. Large supplies of domestic and foreign capital competing for deals coupled with strong growth assumptions will mostly offset softening values resulting from upward pressure on cap rates caused by rising interest rates and costs of capital.

The debt markets will become tricky to navigate as interest rates rise and a new regulatory environment mostly for banks and conduits emerges (although Trump has discussed reversing many of the new regulations), but good deals with good sponsors will have no shortages of financing options from debt-funds, conduits, agencies, life companies, and banks. Ultimately lenders will be eager to get to work and to begin deploying their aggressive 2017 targets with balance sheet products from banks and debt-funds continuing to find an opportunity for larger market share. Borrowers will learn to settle for lower leverage or more creative capital structures as rising costs of capital will make debt harder to service and while younger investors will be unsettled by rising costs of debt, more seasoned investors will remember a time when interest rates were well into the teens and will conclude that rates are still relatively low and opportunistic for borrowers.

The last two quarters of the “Wall of Maturities” resulting from the many 10 year loans originated in 2005-2007 will pass mostly as a continued non-event as most maturing loans have successfully paid-off following a sale or recapitalization. Despite some value softening, most asset values remain above their 2007 value or at least above their unpaid loan balances. However, some market softening and the new financing environment may cause a handful of notable maturity defaults, but competition for any deals that emerge will pull returns below opportunistic levels. Distress investors will mostly continue to wait on the sidelines into extra innings. Assets that do default will take a year or two to make it to investors (unless sold as notes) and competition for the deals will push pricing above opportunistic levels.

Transaction velocity will be about even or slightly below 2016 as buyers may increase their yield requirements and sellers are slow to (or choose not to) adjust their expectations and the bid-ask gap – always existent but easier to bridge in a bull market – widens for many deals. However, as repeatedly stated, competition to place capital may offset and shake-off what would seem like a rationale cooling. Pent up capital supply, investors with long time horizons, expiring equity funds, and baby-boomer retirees rightsizing their income, will contribute to transactional movement and deals will still get done at a good pace.

Overall I believe 2017 will mostly mirror 2016 with some signs of softening and plateauing seen in certain product types and markets. I believe a tale of two bifurcated markets may emerge where good product in good markets will remain sought after and yields will remain low and asset values high. In most respects, basic value-add, low-risk profile deals, and core assets will feel similar in pricing to 2016 as institutional capital remains mostly bullish on long-term fundamentals and will look to keep the lights on by continuing to place capital. However, secondary and tertiary markets may initially slow in deal velocity in 2017 as private capital can be less cerebral to value changes (largely because capital is proprietary and not OPM) and sellers will have a hard time dropping their value expectations while buyers have a harder time navigating debt markets causing the bid-ask gap to widen and deals to become harder to execute. However, I think as the year progresses and sellers slightly loosen their expectations while entrepreneurial capital floods secondary markets chasing greater yields than core markets offer, volume in secondary and tertiary markets for sub-institutional product will increase – especially if job creation as promised by the incoming president occurs and infrastructure investment creates new occupiers and tenants armed with government contracts.

To find deals that fit your criteria, please visit www.crexi.com where you will find an aggregated marketplace of over 6,500 commercial real estate investments (and rapidly growing). One-click NDAs, due diligence vaults, and a user-friendly email marketing portal ensures you can immediately begin underwriting deals.

Eli Randel

Eli Randel, CREXi Business Development ManagerEli Randel is Director of Business Development based in CREXi’s Miami office. Eli spearheads CREXi’s growth and sales throughout the east coast as well as overseeing the national sales team. Prior to joining CREXi, Eli was director of dispositions for Blackstone’s Invitation Homes. Eli has also held management positions and production roles with Cohen Financial, Auction.com, LNR and CBRE where he began his career spending three years in Investment Sales before leaving to obtain his Master in Business Administration from the University of Florida.

Data-Less 2017 Market Outlooks (Analysis Without Paralysis) Part 1

Posted: December 7, 2016 by Eli Randel with Guest Contributor Paul Cohen

DATA-LESS 2017 MARKET OUTLOOKS (ANALYSIS WITHOUT PARALYSIS) 

The computer can’t tell you the emotional story. It can give you the exact mathematical design, but what’s missing is the eyebrows. – Frank Zappa

As a tech company and a marketplace that has seen approximately 7,000 deals come through our doors since our inception in October 2015, we are data driven and pattern focused. However, for our market predictions we walked away from our computers to drive our neighborhoods, speak with our clients, visit stores to get a feel for the holiday retail pulse, and approach our forward-looking predictions instinctively to avoid analytical-paralysis or failures to read the stories between the lines. CRE data and surveys can often organize the “what” but sometimes fail to explain the “why” (or input). Our goal for our 2017 predictions was to focus on the “why” with the expectation that we (or anyone else) will not get the predictions perfect but that the value sometimes resides in the thought-journey and not solely the destination.

Industrial Outlook Paul Cohen – Southeast Regional Director

For many, industrial real estate is the most boring asset type. Buildings usually lack structural sophistication, are often “dirty”, reside in less traveled outskirts, and yields as of late are compressed to once unthinkable lows and lacking in the return premiums that used to often exist. Despite the lack of sex-appeal, it’s possible industrial real estate is currently the most stable asset type and poised for long-term prosperity.

During the last three or four-years land values have increased significantly in most major port and shipping markets and often the highest-and-best-use (or only use that will “pencil-out”) has been residential even in once industrial submarkets (Doral, FL for instance). Housing brings new residents and demographics which creates the need for warehousing particularly in our new economy where firms like Amazon and FedEx have made speed and logistics a priority and therefore need distribution proximity to population clusters. Rising land costs have done two things simultaneously: 1) because land doesn’t pencil-out well for industrial development there has been little new supply; 2) increased residential demographics has increased demand for industrial space.

A reason I particularly like Industrial real estate and find it a safe investment is it remains semi-immune to technological advances which may threaten other asset types. Modern technology advances and trends like automation, e-commerce, and telecommuting do not generally hurt industrial occupancy or demand but could actually fuel it. Whereas telecommuting trends can contribute to office space demands, and e-commerce has contributed to the decrease of brick-and-mortar retail demand, manufacturing and distribution continues to need distribution hubs across the country to quickly and efficiently produce and distribute products. And while automation has created less need for proximity to skilled workers and may change floor plans, the need to be near population clusters for quick distribution will limit major sprawl from cities.

Future segment potential impactors and risks include: oil prices – which are currently low and affect manufacturing and transportation costs, the political landscape and resulting impact on trade, new manufacturing technology, and the housing market. Politically, the incoming administration’s oft-discussed views on trade could result in decreased imports which could slow activity at port markets. However, penalties for companies moving overseas to exploit cheaper labor (known as “offshoring”) could keep companies and occupiers in the US and potentially increase domestic manufacturing and exporting. Additionally, a professed government plan for mass infrastructure investment will certainly require industrial storage and manufacturing to support those construction efforts. Next level technology like 3-D printers could eventually change how products are manufactured and delivered but I think we have time to see how that unfolds and impacts to industrial will initially be limited. Last, the housing market should be watched as a cooling in the housing market can affect the industrial market in two ways: 1) a decrease in residential development will likely decrease land and construction costs and open the door for industrial developers to deliver more supply; and 2) occupiers tied to the housing industry (like tile and furniture producers) will suffer if the housing market cools. In 2007 while leading the industrial investment sale team in Miami for CBRE, we saw occupiers struggle, vacancies increase, and rents soften.

Ultimately, while pricing has risen and yields have dropped as low as 4% for core product in top markets, I predict industrial real estate to be a very safe asset type with great fundamentals and macro-trends favoring its long-term health. Deal velocity or transaction volume, which is currently down about 25% from 2015, will remain below historical norms as some investors can’t stomach the compressed yields resulting from competition for deals and strong growth assumptions, but patient capital will continue to acquire assets and will benefit in the long-term when they do. While rents in some markets have reached once unimaginable highs and will someday soon flirt with $20/SF levels, lower transportation and labor costs resulting from cheap oil and automation have helped manufacturers offset increased occupancy costs. As land becomes more scarce and development of industrial space less practical, we think occupancies will stay high and rent growth will fuel long-term IRRs despite currently high asset values.

At www.CREXi.com we currently have 786 industrial properties (and growing rapidly) being offered by the best brokers in the business. We encourage you to visit and learn more or reach out to me anytime @ paul@crexi.com or 786.877.0544.

Recommended Reading:

LA Times – Warehouse Robots

USA Today – Offshoring

Eli Randel

Eli Randel is Director of Business Development based in CREXi’s Miami office. Eli spearheads CREXi’s growth and sales throughout the east coast as well as overseeing the national sales team. Prior to joining CREXi, Eli was director of dispositions for Blackstone’s Invitation Homes. Eli has also held management positions and production roles with Cohen Financial, Auction.com, LNR and CBRE where he began his career spending three years in Investment Sales before leaving to obtain his Master in Business Administration from the University of Florida.

Paul Cohen – Guest Contributor

Paul Cohen is the Southeast Regional Director of Business Development and is based in CREXi’s Miami office.   Paul is primarily focused on expanding CREXi’s footprint in the southeast markets. Prior to joining CREXi, Paul was a Managing Director at Cohen Financial, his privately held real estate firm that specialized in investment sales and equity raises, and previously held a Senior Vice President position at CBRE.