February 25th, 2010 |  Articles, NewsBeing active in the brokerage of student housing in Tallahassee, FL as well around the SE part of the country, I was fascinated by an article written by Jessica Ruderman, a senior analyst with Real Capital Analytics that appeared in Student Housing Business this past month. Jessica categorically stated, “student housing will remain a safe haven for investors. With more people returning to school during the downturn, many universities short of meeting housing needs, and state governments cutting back on construction budgets, this niche should prevail, especially as public REITs ramp up investment and smaller private players participate. In addition, the relatively small nature of the niche and low volume will together keep prices less volatile than those for the broader apartment sector.”
I couldn’t agree with Jessica more, nor do I see the distressed asset arena playing a role in the activity in the student housing market in the next 24 months. Yes, velocity is low, but by and large the student housing market is holding its own mirroring price dips in other product types. For the article in its entirety including graphs from Real Capital Analytics click here.
February 18th, 2010 | ArticlesOne of the most important parts of the commercial real estate life-cycle is the acquisition phase. I believe most reasonable people would admit that the best way to have a successful outcome to any real estate venture is to get off on the right foot to begin with. While it’s certainly possible to “rescue” a troubled project, the best way to safeguard against a troubled scenario is to minimize future risk through the implementation of a sound acquisition plan. In the text that follows, I’ll offer some thoughts about some of the most common acquisition mistakes and how to avoid them.
Put simply, bad acquisitions are not healthy for financial sustainability. I’ve had the displeasure of watching lenders, investors, tenants and owners all suffer through the devastation and turmoil created by a bad acquisition. Whether it was due to lack of planning, leasing the wrong space, lending or investing in the wrong asset class or in the wrong market, getting whipsawed by buying into changing market conditions, paying too much for a property, or missing a critical window of opportunity, a bad acquisition usually spells trouble down the road. The sad part about what I’ve just described is that in most cases, these bad acquisitions could have been easily avoided by filtering them through a well conceived acquisition model.
Before I go any further, I want to dispel the myth that bad acquisitions only happen to inexperienced buyers—this is simply not true. Experience, while certainly a good hedge against a bad acquisition, won’t save you in all instances. Over the years, I’ve observed some very bright industry veterans end up on the wrong side of a bad deal. Don’t believe me? Go ask the smartest real estate investor you know to tell you about the worst acquisition they ever made—I’ll guarantee that if they’re being honest, they’ll have a painfully entertaining story to tell you.
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February 1st, 2010 | Articles, News
Francis Rentz, CCIM, Managing Co-Director and Senior Advisor of Sperry Van Ness | Southland Commercial, was a featured guest speaker at the recent ICSC North Florida Idea Exchange that was held at the Ponte Vedra Inn & Club in Jacksonville, Florida. Rentz is an expert in the region and shared his insight and knowledge on the state of the real estate industry from Tallahassee to Pensacola, throughout the Panhandle of Florida. Discussion topics included key economic drivers in the region as well as signs of a recovery in these markets and an outlook on what key areas will be hot spots to watch for the future.
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January 18th, 2010 | ArticlesIf you have, bought, sold, traded or even remotely been around real estate, you know the phrase “Location, Location, Location”. While this old adage couldn’t be more true when it comes to identifying great real estate, I am often asked the question “how do I identify opportunities in this marketplace?”.
For investors looking to profit from the real estate downturn, The key to the real estate business is, and always will be, timing, timing, timing.
I suspect there are several readers that may or may not admit to past days of buying a stock of a particular company (one that you didn’t know too well) based on the comment of another—sort of a “go with the herd” mentality. Now maybe that worked and maybe it didn’t, but I am seeing a similar circumstance occurring now in the real estate marketplace.
Instead of buying though, So many people are shying away from real estate, because of what they hear, or read about the tremendous uncertainty in the marketplace, and I understand. But there are some individuals and groups, that are, by my analysis, running towards the “light” and rather than away. They are making sound decisions to purchase real estate at fantastic prices. They are more diligent in their review of the properties, they are purchasing “closer to home” in markets they know well because they live or work there. They know that money in real estate is really made when you BUY not when you SELL. And most importantly, these savvy investors know above all else, while Location is important in real estate, to take advantage of the best deals, Timing is being becoming as critical.
So, I encourage you to not be afraid, be informed. Get help from your trusted commercial real estate advisor and talk with him/her often. Do your due diligence and get out there! Deals are starting to surface for those that can react quickly and move fast.
January 6th, 2010 | NewsIn this issue:
- Top Markets to Watch —An exclusive market sector report compiled by Sperry Van Ness.
- Survival of the Fittest —The sooner the property market reaches a stage of acceptance, the better.
- Bargaining at the Office —Excess office space has created a climate of bargaining in the market.
- After Capitalism —Will capitalism adapt to its most recent shock and what new world order awaits us?
- My Forecast —The five National Directors of Sperry Van Ness take us through developments in their sectors.
- Innovation in Turbulent Times —How to develop your creative edge and embrace innovation as a strategy to succeed.
- Jack and Suzy Welch on Winning —Internationally acclaimed motivational speakers offer solid advice on the dynamics of teamwork.
- The latest Industry news and much more…
Download Now
January 5th, 2010 | Articles Process—even the word itself has come to hold a negative connotation for many. With the plethora of conflicting information that has been written about process management and process engineering, combined with the nightmares we have all experienced as a result of bad process, many executives fear the pain associated with flawed process more than they value the benefits created by good process. So, what does process have to do with commercial real estate? Just about everything if you’re a real professional interested in creating a sustainable business and virtually nothing if you’re just another real estate cowboy or deal-junkie.
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January 5th, 2010 | Articles Arriving at a decision on the best strategy for how to successfully navigate the commercial real estate market during these challenging economic times is vexing to many an investor. Do I, or don’t I? That is the conundrum facing most commercial real estate investors in today’s market. Do I, or don’t I liquidate my portfolio (or at least my non-performing assets)? Do I, or don’t I stand on the sidelines and wait-out these turbulent times? Do I, or don’t I get aggressive and take advantage of the decline in property values and the spike in acquisition cap rates? In the text that follows, I’ll put forth counsel based not upon the emotions of the times, but rather the forthcoming advice is based upon my years of experience in successfully advising clients in both advancing and declining commercial real estate markets.
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January 3rd, 2010 | News The reality is that commercial real estate properties and portfolios that are actively managed not only perform better on an operating basis, but in most cases, they yield more on disposition as well. That said, my question is this: Why is it that so many commercial real estate principals still attempt to manage their own portfolio? While the answers clearly vary on a case-by-case basis, the most common reason usually boils down to the perception that money can be saved by not paying third party management fees. Indeed, the age old dispute between “do it yourself” and “do it for you” business models is alive and well in the commercial real estate industry. In the text that follows I’ll make the case for professional management as a value added service that is accretive to overall property returns.
Let’s begin our discussion with discussing the difference between property management and asset management. It was not too long ago that there were very distinct differences between these two disciplines. Property managers were deemed to be tactical in nature, focusing on day-to-day operating issues such as routine maintenance, minimizing vacancy, collection of rent/lease payments, and first tier communication with tenants. Asset Managers on the other hand were strategic in nature focusing on adding value to the property by making positioning decisions that would increase net operating income (NOI) and valuation. While these distinctions still exist among some firms, the increased sophistication of professional management firms over the past few years have caused the lines to be blurred to the extent that many firms now provide both disciplines in an integrated service offering.
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January 3rd, 2010 | Articles Valuing a property or portfolio even in the best of market conditions is a subjective exercise. This subjective exercise is only further complicated by nature of the fact that we clearly don’t have the luxury of a robust commercial real estate market on our side. So my question is this: Have commercial real estate values hit the bottom, will they continue to fall, or are they already starting to recover? In many cases the answer to the aforementioned questions can vary based on the quality of the asset, the property’s asset class, the type and quality of the tenant mix, the property’s location, supply and demand drivers such as new construction starts, absorption and vacancy rates, capital and credit availability, and any number of other factors which make planning difficult at best.
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January 3rd, 2010 | Articles As I speak with clients, co-workers, and industry pundits, the one thing we all agree upon is that the economy is bad, and that we haven’t found the bottom yet—especially where commercial real estate is concerned. While opinions may vary as to exactly where the market is headed, and the timing surrounding any major shifts in direction, everyone reading this paper understands one thing; the markets are fluid, evolving, and ever changing. Therefore the conundrum that those in the practice of professional commercial real estate are faced with is how to best position their portfolio to minimize the risks associated with market uncertainty, while at the same time maximizing current and future returns.
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