Tuesday, May 31, 2011

Report: Apartment Owners To See 'Outstanding' Returns Through 2012

Once again another illustration of the strength of the apartment residents -- especially in booming markets -- are likely to find their wallets lightened by the rising rental rate.

Which is why we are not seeing much relaxation in MUH prices, except in cases of badly managed properties or situations where a Seller got into the property at far too high a price, paying far too high a note to the lender, with the result being a severely distressed property that residents are leaving because of continuing deferred maintenance (that the seller cannot afford).

Ron Johnsey, president of Axiometrics, which conducted the study, says some markets, though still experiencing solid increases in effective rents, "have slowed down a bit, but overall the trend is onward and upward."

Did I mention I LOVE multifamily? Especially campus MUH.....

Monday, May 30, 2011

Freedom Never Cries

Happy Memorial Day.......  Remember.

Sunday, May 29, 2011

Memorial Day Much More Important Than Picnics And Brats

This weekend is one that marks the beginning of summer, a time where families and friends will gather and enjoy picnics, parades, brats, perhaps swimming. A weekend to share fun with good friends and loved onees.

But lest we forget the meaning and roots of Memorial Day. Originally known as Decoration Day, it is a time to honor those who have served our nation's military, and are no longer with us. Whether they fell in battle, making the ultimate sacrifice, or survived those many conflicts that kept this nation free, made a life, raised a family, and succumbed in some other fashion.

It is a time of solemn remembrance.

Yesterday morning I witnessed a 90-minute, moving scene in Powell, Ohio, a suburb of Columbus. There, in  a solemn ceremony, large American flags on pvc poles were marched four-at-a-time in the capable hands of a Boy Scout Honor Guard, and affixed on metal rods in the ground. With the "planting" of each flagpole, a name was read by the Boy Scout leading the cermony. The young man in full Class A BSA uniform organized the ceremony as part of his Eagle Scout project.

He ready 239 names.

The 239? Ohioans who have worn our nation's uniform, and who were killed in action in Iraq and Afganistan.since the Global War On Terror began shortly after the murderous attacks on our nation on September 11, 2001.

A very small turnout for the cermony, its meaning, however, is thought-provoking. And a stark reminder of those who have gone before us in the fight for freedom. The display, at the Greater Powell Veterans Memorial in Village Green Park, can be visited 24 hours a day. Local Boy Scout Troop 428 is watching over the flags, which are lit at night.

The Ohio Flags of Honor Memorial is a traveling tribute started by Gino and Lisa Zimmer of Columbus, whose son, Army Spc. Nicholaus Zimmer, was killed in Iraq. They formed a nonprofit organization and tour with the flags a few times a year. A total of 550 flags, including American flags, and flags representing the various military branches, MIA/POW, and message of support to the troops are in the entire display.

Please take a moment this weekend to remember those military who were killed in action defending America all during out nation's history, and those who served, came home to civilian life, and today are no longer with us. I am reminded of my father, who served in WW2, and earned a combat medical badge and a bronze star for heroic action during landings at Okinawa and Leyte Gulf. Dad, you have been gone nearly 18 years, but your nation, and your son, thank you for sacrificing your youth to defend our nation.

The Memorial Day weekend. .... A time for gatherings of friends and family .... A day of solemn remembrance ....

Saturday, May 28, 2011

Strategies For Green Office Improvements

For owners of medium sized commercial properties, and even large scale office complexes, there are a number of initiatives owners can take to make their buildings more "green-friendly."

Remember, the benefit is a dual-whammy, of sorts. One, there are cost savings to be had, as well as the opportunity to charge lessees a higher per square foot rent. Second, more and more tenants (especially young decision-makers) are gravitating toward sustainable facilities.

Here are a few ideas for owners of smaller office buildings who are giving their structures even the most modest of face-lifts. Most of these concepts focus on improvements to restrooms and come from House And Garden Television (HGTV).

1) Cabinetry and Vanity Tops
Look for cabinets made from wheatboard or other low Volatile Organic Compound (VOC) materials. Standard cabinets typically are made with urea-formaldehyde, which some experts say can excrete gases from VOC compounds for up to 15 years.

2) Lighting
If possible insert a window or skylight into the bathroom area. Sean Ruck, spokesperson for the National Kitchen &Bath Association says any natural light you can introduce, even from a tubular skylight, will dramatically lessen your dependence on electric light.

3) Low and No VOC Products
Many caulks, adjesives and sealants made for bathrooms include some sort of mildewcide or other mold-inhibiting compounds. While these make it easier for janitorial staff to keep bathrooms clean because less potentially irritating cleaning agents are required, many also include harmful VOCs. During renovation, it is best to look for paints, stains, adhesives and caulks labeled "Low VOC" or "No VOCs."

4) Hot Water Heaters and Toilets/Urinals
Tankless hot water heaters (instand hot water) cost several hundred dollars more than traditional hot water heaters, but they use 20 percent less energy than the traditional units. In just a few years, the extra up-front cost will be recovered via savings in energy used to keep a large, traditional tank hot 24 hours a day.

Additionally, composting toilets and waterless urinals, in particular, are becoming very popular in green commercial buildings in Europe and the U.S. because of the water they save. A number of companies manufacture these systems, and they increasingly are piercing the residential bathroom market.

Just a few ideas to help owners make the leap into the sustainable world. Again, as I have written before, its not about what owners believe. It is about what more and more tenants want.

With increasingly frequency, and budget, lessees are gravitating -- by choice -- toward green buildings or buildings that have gotten facelifts and whose owners are incorporating sustainable business practices.

Thursday, May 26, 2011

Congrats To Buddy Tony Yacoub, CCIM

I am sending a quick shout out to my good friend and colleague Tony Yacoub, who recently earned his CCIM designation. Tony was my VP when I was president of Columbus Real Estate Exchangors, and was great counsel to me as we led the organization for a year.

A great guy, a super friend, and a gifted counselor to his clients, Tony has spent the past three years in New York. While he is away from traditional brokerage, he is utilizing his superb real estate skills on an assignment in New York with the General Services Administration, where he is works with the Department of Homeland Security's Law Enforcement Branch.

You worked hard for the right to list those letters after your name, Tony. Congrats my friend!

We miss you.

Columbus, Penn National Shake On $400M Casino Deal; Annexation Fight Appears To Be Over

Like the song, The Long And Winding Road, it has taken the City of Columbus and officials at Penn National -- the gaming company charged with developing a $400 million casino on the city's west side -- quite some time to come to an agreement.

At issue? Annexation into the city. Water/sewer tap in fees. And who reaps the reward of income taxes for the 3,500 construction jobs leading to a 2012 opening, and the 2,000 full-time jobs at the casino.

With a deal in place, the parties now have a few months to iron out the details. But the argument isn't over entirely. Franklin Township would have liked to have been the beneficiary of the income taxes, and had already granted a certificate of use for the property, an old Delphi automotive plant site.

Of course, relations between the city and Penn National have been cool at best much of the time. When voters across the Buckeye State went to the polls and were asked whether casinos should be allowed to be constructed in Ohio, Central Ohio voters voted against the measure. Still, the proposal called for casino sites in Columbus, Cincinnati, Cleveland and Toledo. So whether city officials or residents wanted one, people residing in Ohio's capital city were getting a casino. That was only the beginning. Then there was the mayor, who said he didn't want a casino downtown in the Arena District (a superior location if you ask me, but no one did....). The replacement site on the west side suggested and acted upon, but accusations from both sides that the other had reneged on some oral agreement.

And things sort of went downhill from there. The issue of how much the casinos will pay the state in royalties, taxes has come to the forefront again, as well. Here is hoping that the resulting development do as promised: breathe new economic life into the stagnant Columbus west side. New businesses, a refurbished mall or two, and perhaps some new hotels. Time will tell....

Wednesday, May 25, 2011

Mortgage Deduction, Commercial Lead Paint Disclosure, Lease Accounting and Dodd-Frank Among Critical Issues Facing CRE Owners

Unwritten rules implementing Dodd-Frank, mortgage interest deduction elimination, lease accounting, commercial property lead paint proposals .....

What do these items have in common? If you guessed they all are proposals before members of the U.S. Congress, and highly detrimental to commercial property owners and commerce depending on which way the political winds blow, you would be correct!

The pages below are forwarded from Central Ohio colleague Greg Hrabcak, a fellow commercial real estate practitioner at Real Living: The Commercial Partnership, who is involved on the national level with the National Association of Realtors' government affairs division.

In the Issue Brief I have inserted below, I have highlighted in yello the major issues facing commercial real estate owners AND lessees. Those items with a green star next to the highlight are those issues which I believe merit particular scrutiny.

Keep in mind, in Washington DC there are few people or groups representing property owners -- whether they be owners of their own homes, or owners of commercial/investment property. As such, the National Association of Realtors is stepping up and launching an aggressive lobbying campaign to protect the interests of commercial/investment property owners and homeowners, alike. Such as the impact of the proposal that commercial buildings be mandated to submit to the same lead paint reporting requirements, etc. as required for residential structures. When was the last time you saw a child sitting in an office building eating paint chips? In addition, some of the lease accounting proposals are problematic, both for owners as well as lessees.

And don't even get me started on Dodd-Frank implementation. While well meaning, it is a clear illustration of the pendulum swinging too hard one way. For example, talk to anyone in this industry and you will get hugely divided opinions on whether the 84-year-old woman in Florida is allowed to sell her Ohio farm land for house development lots using land-grant financing. You know... owner financing. There is significant evidence to show she would be a felon if she did so. HUH? How does that protect anyone, or help spur property movement and development for the good of all? A great debate, to be sure, but just try to get a consistent answer to the very simple question out of lawmakers or their staff in Washington. You can't even get attorneys to agree on much of this, but on one thing about Dodd-Frank they generally concur. As voiced by one local counselor whom I trust: "I can tell you what you can't do, I just can't tell you what you can do."

Then there is the ridiculous proposal to eliminate the mortgage interest deduction.......

Whether you are a commercial/investment agent, broker, investor, lessee or asset manager -- at least one (and frequently several) of these "issues" impact you, your commercial property, and your bottom line.

If you are not familiar with these critical issues, take a moment to take a look. I promise you it's worth your time. Then pass it on .......

NAR: Overseas Buyers In U.S. Getting 'Fire Sale' Prices

According to the National Association of Realtors, foreign clients -- not just investors, but future homeowners as well -- spent $41 billion in the United States in 2010. That does not include the additional $41 billion that "individuals with visas to stay for more than six months" spent during the same time period.

The report shows that though "foreign" buyers tended to buy "on the high end of the market" over the previous year ($315,000 vs. U.S.-buyers' $218,000), this year invernational investors are trending downward toward sales below $200,000.

The reason? U.S. property prices are just too good to resist, and overseas investors are taking advantage of the weakness of the U.S. dollar and pouring millions of their savings and investment pool into properties here. With the current exchange rates they can invest in assets at great values with tremendous upsides.

And, IMHO, the U.S. is one of the safest places to put your money. Away from unrest of northern Africa, various places in Europe, and the uncertainty of Japan in the wake of the tsunami and resulting nuclear plant issues.

Tuesday, May 24, 2011

IR 1031 Tax-Deferred Exchanges Gaining Traction Thanks To Lending Surge

Isn't it funny how certain initiatives or plans can be stymied because of reliance on another industry. Such are commercial/investment and development projects, each so inter-connected with others and their expected deliverables that if one piece falls out the entire project can fall apart.

And so it goes in our business, as tax-deferred exchanges -- which accounted for 30 percent of investment sales during the industry's boom years, slowed to a trickle recently as the recession ground so much momentum to a halt. But change is inevitable. And fueled by a renewed availability of capital, those deals are re-emerging.

Oh yea....

Bill Rose, a contributing columnist for Retail Traffic Online, notes that 2007 was probably the juiciest year for IR 1031 exchanges -- some $4.1 billion in tax-deferred exchanges were exeucted on 765 transactions nationwide. And as investors and practioners know all too well,  the velocity was short-lived.

"The subprime lending crisis led to a full-blown credit crunch that began to rear its ugly head during the first quarter of 2008. As a result, banks, conduits and other institutions shut off the capital spigot for all types of investments. Most significant was the near shutdown of the CMBS market, which accounted for almost half of all commercial lending during the first half of 2007," Rose says. "As a result, a high-leverage, speculative investment climate was replaced by a renewed focus on operations underwriting. Of the retail transactions that managed to secure financing and close during the global economic crisis, the majority were all cash deals priced under $5 million."

No doubt. We weathered this storm in Ohio, as did investors and the market across the U.S, and yet somehow were able to eek out transactions using far more creativity than most realized they had in their briefcase of ideas. Fortunately, we are seeing things improving as the flow of capital slowly starts to pick up. Rose concurs, noting that 1031 exchange activity inched upwards in 2010, when more than $1 billion in exchanges were executed on 231 deals.

Today, we are seeing owner encouragement to upgrade or reposition their real estate holdings.

Rose believes that prior to the recession that investors were commonly seeking to exchange from single-tenant net-leased assets to other single-tenant net-leased assets. Investors now, he writes, are targeting apartment building to single-tenant asset trades.

That's not surprising since apartment assets have stayed relatively strong (assuming they were properly managed). And these savvy owners are looking to move from management-intensive properties into assets that require less-intensive oversight.

So where are we? As has been stated in earlier posts on this site, AND from other practitioners and futurists watching the commercial/investment industry, there is momentum and the environment is improving. Plus, as an enthusiastic promoter of IR 1031 tax-deferred exchanges, I am excited that numbers are ticking upward again. It shows that health is returning to our industry, that investors area ready to move upward, and that lenders are sloooooowly seeing the light.

More to come.....

Monday, May 23, 2011

Report: Q2 NREI/M&M Investor Sentiment Index Says Appetite For Commercial Real Estate Growing

A new research study is out and the news is positive for commercial/investment real estate.

Specifically, it comes to the following conclusions: Buyers are bullish on apartments and hotels, and retail is heating up. National Real Estate Investor and Marcus & Millichap have published research since 2004. The NREI/M&M Investor Sentiment Index for Q2 2011 rose to 164 in the second quarter, up from 152 in the fourth quarter of 2010.

More notable is that each property sector reported a marked improvement in investor sentiment.

Apartments recorded the highest index rating with a score of 166, followed by hotels at 158, industrial at 140, mixed-use at 139, retail at 135, and office at 123.

Wrote the editors: "Overall, investors' increasing confidence in the U.S. economy and the commercial real estate recovery is fueling demand for assets across property types. The outlook for property values has climbed dramatically in the last few yers. In the fourth quarter of 2009, nearly half of survey respondents (47 percent) expected retail property values to drop in the ensuing 12 months., with only 15 percent predicting an increase. Now those numbers have nearly flipped with 44 percent anticipating an increase, and only 9 percent forecasting a decrease in property values."

Good news, indeed!

Hotels also are benefiting from the ability to react quickly to an improving economy and scored 158 on the index. Apartments remain the favored property choice with 59% of respondents indicating that now is the time to buy apartments followed by industrial (35%), hotel and retail (34%), office (31%), mixed-use (30%)
and undeveloped land (29%).

Among the driving factors, according to the Q2 study, is the improving jobs picture and the relatively low interest rates -- both of which are bolstering investor confidence. The addition of 244,000 nonfarm payroll
jobs in April was the biggest monthly gain since 2006. The 10-year Treasury yield, a benchmark for long-term commercial real estate financing, hovers around 3.2%, near historic lows.

In fact, eight out of 10 respondents cite low interest rates as the biggest factor driving their decision to increase the size of their commercial real estate portfolios.

Again, further evidence of what we are seeing here in the trenches.....

Property Tax System Changes Coming To Ohio; Farmers In For A Rude Awakening

A new way of calculating residential property tax -- adjusting for whole neighborhoods instead of on a property-by-property basis -- will be rolled out in one Ohio county, with an eye toward statewide adoption. Designed to "fix" perceived unfairness, I still see problems with this concept.

But FAR more problematic is Ohio's practice of taxing agricultural land based on current agricultural use valuation (CAUV). Its not he practice, per se, that is wrong. But that if a land owner disagrees with the assessment there is no legal means to challenge the audit value.

Here is the looming problem that will definitely see news coverage in the coming 12-18 months. As commodity prices (corn, soybeans, etc.) spike, Ohio farm property taxes will see dramatic increases. While the valuation has generally been  fair -- considering we have had more than a decade, until recently, of low prices paid for grain -- farmers are in for a fiscal whammy when they see their next tax bills.

Ohio farmers are going to see a large increase in their valuations due to state soil values, said Licking County Auditor Mike Smith at a meeting of Central Ohio real estate professionals and affiliated service providers. "Locals have no control over that and the property owner has no right to appeal, so its kind of a double whammy," he told those attending the meeting. "They'll see that next year, on their 2011 taxes payable in 2012. There is nothing you can do about it."

Wow! Nothing? Not for long, I would think. Individual farmers, the Ohio Farm Bureau, Ohio Agricultural Union and others will have something to say about it, as will rural resident/property owners who do not farm, but instead rent their farmland to professionals who grow food. Clearly, all involved will not be pleased to see their land taxes spike. Amazingly, there does seem to be no appeals mechanism at the state or local level. With commercial and residential properties, however, owners can petition to have their property taxes reduced by providing evidence through sales comparables that similar nearby properties are selling at far lower values.

Under current state law, property valuation of land used for agriculture is based on crop prices, and since these prices have been rising dramatically around the world, property values follow. Smith noted that huge increases have been seen in Fairfield County, and the people there are "grabbing pitchforks," a euphamism for rallying against taxes and demanding changes from lawmakers.

The current formula says that owners are making so much money off the soil. As corn prices and bean prices go up, soil values go up. And Ohio's six-year cycle means the jump in valuation is a big one when it comes.

Smith was a featured speaker at an area real estate association. He outlined another issue facing his office, specifically the perceived unfairness of property-by-property valuation (for taxes) adjustments. He said most of Ohio's 88 counties re-appraise on a three-year cycle. Licking County Auditor Mike Smith says market-adjusting valuations of individual properties as they transfer was either genius or it was stupid. So the plan is to adjust for entire neighborhoods, so that similar properties pay similar taxes.

I see problems here also that could impact investors or existing homeowners. There are homes of varying values in any neighborhood, based on their condition, rental income, etc. But equalizing values as an alternative to "huge inequities?" Where are the huge inequities. The value of the sale is the value of the sale. The intent is for similar properties to pay similar taxes. But that smacks of the practice of some police and sheriffs who "selectively enforce" traffic laws. Specifically, picking out one or two automobiles to chase for a speeding or other traffic infraction when far more are breaking the law.

Selective enforcement in law enforcement is harshly frowned upon. So how can it be okay wrong to market adjust at the time of each sale, and try to "equalize all the values?" I'm sorry but frankly this sounds an awful like the words coming out of Washington, whose White House leaders continue to talk of "spreading the wealth."

Keep tuned. Farmers with pitchforks upset over their land taxes, and homeowners unhappy with "neighborhood valuation" as opposed to property-by-property valuation may well be two giant political  issues here in the Buckeye State. Will they have an impact on elections later this year and into 2012. Who knows?

Sunday, May 22, 2011

National Flood Insurance Operating In The Red

This has NOT been a good year for the National Flood Insurance Program.

Specifically? The FEMA administered program is approximately $18 billion in the red, and counting......

Saturday, May 21, 2011

Is The Traditional Office Becoming Obsolete?

A great question, with many answers. Of course, the variety of answers depends on who you talk to.

A new report from Regus and Unwired says the office of the past is not likely to to become completely extinct, but must evolve to meet the needs of new kinds of workers driven by technological advances, and management's desire for a lighter, cheaper real estate footprint.

Case in point? The modern real estate office, at least in my opinion. But this piece looks mostly at large traditional corporate buildings and the challenges faced by heads of real estate for companies, and the interests of their increasingly mobile work force.

This is a very good read, both for owners and prospective investors who need to know what the Tenant of today -- and the future -- want and are willing to pay for.

Click here for the full story.

In Good Company On LoopNet List Of Top CRE Bloggers

Received a phone call yesterday afternoon from an industry colleague in Idaho, who asked me if I had looked at LoopNet lately. Of course, my response was I look at LoopNet all the time!

Then he said that I was featured there, and of course I thought me meant one of my listed properties was featured, which it is -- a $2.45 million neighborhood shopping center here in Columbus (SUBTLE HINT: Bring Me Buyers!). I popped over to see what he was talking about and found that LoopNet had published a list of the top commercial real estate bloggers. And there I was ranked among the top five listed at Loopnet, along with peers whom I greatly respect -- Coy Davidson of Colliers International in Houston, Texas; Tony Brettkelly of San Francisco's Latitude 38 Group, Miguel de Arcos down in Florida at Sperry Van Ness Florida Commercial; and Natvar Nana at Sperry Van Ness in Orlando. Coy, and I, BTW, both follow each other's postings on Twitter.

 As they say at the Oscars, it is an honor just to be nominated. This author is truly humbled to be included among such outstanding CRE practitioners -- and writers.

Thursday, May 19, 2011

Prudential To Roll Out 'Bring Your Challenges' Campaign

The Prudential family of companies, which of course includes commercial/investment and residential real estate, financial services and insurance products, is rolling out a $50M national campaign centering around the theme: "Bring Your Challenges."

A multimillion dollar initiative, designed to increase visibility and understanding of the iconic "Rock" product offerings (which a long time ago expanded beyond its insurance lines), the theme will include print, television and electronic advertising with a message that crosses all areas in which our firm has a presence.

The company already spends around $60M annually on general Prudential brand awareness, and studies show the Rock device and Prudential name are recognized by 98 percent of consumers.

But this additional campaign is centered around a specific theme -- Bring Your Challenges.

Now my personal business philosophy, "What you want, how you want it." is always (of course) tempered with my counsel. What it still comes down to, however, is creating solutions that fit my clients' long- and short-term goals.

So bring me your challenges.....

(and thus concludes my shameless self promotion.....)

Wednesday, May 18, 2011

Recycling Shipping Containers Into Office, Residential, Medical Space

You've seen photos of shipping containers stacked high on the decks of ocean-going vessels? Or perhaps being moved by rail?

Did you know there is a growing movement to convert these sturdy metal boxes into mini offices, clinics and residences?

A fascinating trend. I actually had considered acquiring one to put on a piece of family farmground in southeastern Ohio, and convert to living space. That was after I heard they were being converted to medical clinic space and transported to 3rd world nations and pretty much dropped in anywhere they need to be.

But use as offices within larger warehouse, or connecting several to create a larger office scape? I LOVE the creativity! Think about it -- in a sense, it is the ultimate way to recycle....

Tuesday, May 17, 2011

Not Everyone Agrees That Things Are Improving

Forget the fact that, IMHO, I am seeing things improving here on the ground in Central Ohio, and that various industry publications that examine the commercial/investment real estate market with a careful, independent eye generally concur.

Still, there are those who believe CRE has a long way to come before things are better. True, some markets fared far worse than others and have a longer climb up the ladder out of the well. Las Vegas, southwest Florida, and southern Michigan are three that come to mind immediately. The recovering is coming fast in Lee and Collier Counties in Florida. Las Vegas is showing signs of life. Michigan's recovery will be, like the song, a long and winding road.

Still, this forum -- while a fusion of (mostly) my opinion, industry reports and the thoughts of others -- is not a one-sided place for all things retailMUHindustrialofficelandspecialtyusecommercial. And so I offer some contradicting opinions of the future of commercial/investment real estate.

Reuters News Service is out with several pieces during the past month that that we have a long way to go. True! I would agree that things are not rosy everywhere.

An earlier Reuters piece in February talked of prices growing too high too fast, with lagging rents unable to justify high prices. This I definitely HAVE seen. Unrealistic owners who either "need" or "want" a certain number, and seem unable to see that their income statements don't come close to justifying the asking prices. While those properties still are out there -- and are still available largely due to that gap -- properties coming to market recently seem to be priced with a dose of reality.

CNNMoney was more blunt, but for reasons I am missing someone there doesn't get it. A contributing writer wrote that CRE is still a gamble. DUH!!! HELLO!!! ALL investment, whether in stocks, gold, commodities, or a personal loan to a favorite nephew, is a gamble. Overall the story is not too bad, BUT The headline is so misleading it isn't funny. Keep in mind, also, that CNNMoney rarely writes on commercial/investment real estate, showing its continuing penchant (bias?) for the stock market. There ARE no guarantees with any kind of investment, and the editors overseeing the work of Mr.Kit R. Roane, a contributor to CNNMoney, should know that! So that story really doesn't count. But I included it to show how there are some in positions of influence who, for lack of a better way to say it, have no clue what they are writing about. Or in this case I should note that Mr. Roane's story never uses those words. The misdeed was the fault of the CNNMoney headline writer. Inexcusable......

A piece I tweeted today at @BrentGreerCRE concerned the worry that our nation's infrastructure is becoming so fractured that it is the second part of a "one-two punch" of problems facing the United States commercial/investment real estate market. Maureen McAvey, an executive vice president at Urban Land Institute, stated the obvious, but it is a problem -- we are not keeping up with our infrastructure needs, let alone developing new more efficient modes of transportation, etc. Good points all, which may have an impact on future values down the road, particularly with investment from overseas in the decades to come.

And an accounting rule change may force banks to disclose that they have many more troubled CRE loans on their books. Only time will tell...

The bottom line? Opinions are diverse. Facts are facts, and improvements or declines are trending differently in different parts of the U.S. Sufficed to say, things are improving here and there. Do your homework and learn what is happening. Like anything else, don't just jump into an investment or trade out of one because you "heard" it is a good deal. Overall, CRE is improving. In much of Ohio, things are improving though there are pockets of economic trouble here and there. Central Ohio remained relatively stable, but still saw a slight dip. The old saying that all real estate is local never was more true.

The best investor is the most informed. And that is what CoC strives to do for readers. Inform. Thanks for stopping by.

Monday, May 16, 2011


Again, I am humbled.

This time by the words from one of the organizers of the annual Ohio Military Hall of Fame for Valor induction ceremony.

I received this letter today, thanking me for what I did . . .

 . . . And all I could think through the ceremony was how humbled I felt in the company of these men who sacrificed their youth in so many different American conflicts. For those we never met, and only heard their citations, we are diminished.

Thank you again, Ted, P.J and everyone on the OMHFV Board for asking me to participate in your very important ceremony.

Friday, May 13, 2011

'Green' Isn't Just About Making A Difference; It Matters To Younger Investors, Business Owners

Are you one who rolls your eyes when NBC, MSNBC, Univision, CNBC, M-O-U-S-E all put a little green logo at the corner of their screens once a year during their "week focused on environmental issues?"

Eyes then glaze over as news stories or syposiums talk about LEEDs certification and "environmentally responsible" or "green buildings?"

Yep. I know it well. Have seen it often. But if you are an investor/owner who thinks this is so much "hooey," think again. Its not about whether you as an owner believe the hype, or whether you think it is alot of Chicken Little-ish wah-wah. Its about what your tenants, and their customers, and your future tenants believe. AND WANT.

As the old saying goes, "perception is reality." And the base of clients out there for leaseholds isn't getting any older. But as more and more Gen-Xers, Gen-Yers and the like come into more funds, start building businesses and catch the entrepreneur bug, they are increasingly looking for lease space that is "green-friendly." You already knew these generations of future clients -- whether they be tenants next week or buyers next year -- already exploit technology like no one's business. But they are more in touch with -- and advocates for -- green building standards, sustainable community planning, energy efficiency, and the like. They are consumers, whether of electronics, food, or clothing, and they are gravitating toward firms with green policies.

Some statistics from a recent program presented to our Blue Rock Midwest commercial real estate network meeting a few weeks ago:

-- If given the choice between two office spaces in two different buildings, with all other factors being equal (rent per square foot, TI, rent bumps, etc.), the prospective tenant -- by a large margin -- will choose the "green building."

-- Though there are added costs to "green" building design, or retrofitting, above traditional construction methods, "sustainable" buildings routinely demand and get a premium per square foot rate.

-- "Sustainable" building design frequently reduces operating costs. And the one most intangible argument: For a Tenant who wants to "go green," they feel they are a part of something important, and socially responsible.

Again, if you don't buy in to the discussion, that's fine. But your future Tenants want it. Don't take my word for it. News today from New York is that LinkedIn, the world's leading social networking tool for business has decided to lease the entire 25th floor in New York City's Empire State Building. Why? Partly because the owners are completing a "green makeover" of the building that cost $550 million. A popular networking tool utilized worldwide by business people of all ages (but with a demographic that skews young), LinkedIn is only one example. Google is doing the same in Mountain View, Calif. Here in Central Ohio, the brand new Franklin County Courts building was designed from the ground up to be green.

Going "green" attracts business, also. Numerous automobile dealers across the U.S. have installed "windmills" adjacent to their businesses. Whether those wind machines are hooked into the grid remains to be seen. But for younger auto buyers, most of whom are environmentally conscious, the windmill is not just a highly visible landmark to be used to give people directions. There is a subtle "sell" here from the retailer, signalling to the world that the business is a supporter of alternate forms of energy. And for a young car buyer trying to decide where to check out new or used rides, the environmentally conscious tend to lean to businesses they perceive as thinking as they do.

Again, it is entirely irrelevant what you and I think. What is vitally important is what a growing -- and economically powerful --  percentage of Tenants and future investors want. More importantly, "green" is what they are absolutely enthused about and willing to pay for.

Wednesday, May 11, 2011

A Tale Of Two (MOB) Theories...

No, this post has nothing to do with Tony Soprano, but the headline probably did intrigue you! I'm talking about MOBs as they apply to CRE. Confused? Okay, enough of the acronyms -- here is the MOB 411 .....

So on the one hand prognosticators are saying there isn't a better time to invest in Medical Office Buildings (MOBs), as the market changes.

Specifically, CCIM Institute reported recently, quoting from a report entitled The Outlook For Healthcare, that demand for medical services in the U.S. will mushroom. That, combined with an aging population, healthcare reform, population growth and advances in medical technology, all will drive demand for modern medical-office buildings in coming years. Specifically, the net result will be an increased demand for new and refurbished MOBs.

Okay, with that said...

Then, the same week comes details from a roundtable discussion at the 2011 Medical Office Buildings & Healthcare Facilities Conference, attended by nearly 700 healthcare real estate executives. The headline from the conference (sponsored by the Building Owners and Managers Association)? Though there is a perception that physicians are rolling in dough and have no trouble paying hefty rents for luxurious medical office space, that is not the reality. Most physicials, in truth, are dealing with declining reimbursements from both Medicare and Medicaid -- making cost containment a priority for both the healthcare community and developers.

So which theory is right? Both actually.

For developers, the focus is now on constructing new properties at different price points, especially out-patient facilities. And be focused on size, speed and spend -- the three S's. For investors, medical office still can be a very smart investment. If purchased right (and I mean by carefully looking at the numbers and making a reasonable offer, NOT stealing it), and most importantly, if managed properly!

Conditions will vary across geographic markets and will be somewhat dependent on local socio-demographics and the eventual evolution of the healthcare market. Generally, MOB have proven to provide reliable cash flow and investment returns, performing well during both good and bad economic times. The only wild card is federal intervention into healthcare, which in actuality is not intervention into healthcare, but an attack on the insurance industry. But that is a post outside the realm of real estate. Except for how the insurance industry's real estate needs are being impacted by these proposed changes. But that is a subject for another day.

Sufficed to say, the properties an evolving healthcare industry will require must evolve themselves to account for continued advances in technology, mergers and acquisitions among hospitals and health systems, and a shift toward employed rather than independent physicians.

If some predictions are correct -- and economist E. Gary Shilling projects that MOB demand will increase some 19 percent by 2019 -- savvy investors, assisted of course by seasoned commercial/investment real estate counselors, will stay ahead of this curve.

Monday, May 9, 2011

2011 Inductees To OMHOF A Reminder

When I need a jarring reminder that my "bad days" aren't that bad, there are several "places" I can go: the slow death of one of my aunts from brain cancer, the lingering death of my father from congestive heart failure, and so on.

Last Friday, I participated in a event, that I had only watched from a distance before, that adds to the list. The 2011 induction ceremony of the Ohio Military Hall of Fame.

All of these veterans honored last week were lucky to make it home alive, but what distinguishes the Class of 2011 from other service veterans is that they were decorated for Valor. They weren't just "there," but risked their lives for a greater objective.

I was honored to serve as Master of Ceremonies for the 2011 ceremony last Friday at the Ohio Statehouse. Listening to the citations, and pondering those actions described while standing just feet from most of these men or their families, brings it all back home. When I think I am having a bad day, it is nothing compared to the significant sacrifice of their youth, whether it was in one of the world wars, Korea, Vietnam, the Gulf War, or the Global War On Terror.

To the Board of Directors of the OMHOF, thank you for honoring me by asking me to emcee the event. It is a day I will never forget.

And of these honorees, we should never forget how they fought for our freedoms, and the reminder it gives us of the men and women who sacrifice right now (often in anonymity) who are fighting for our freedoms in faraway places even today.

Thursday, May 5, 2011

Sister Residential Company Rolls Out Text Marketing Technology

Prudential One REALTORS is our sister residential company, operating in some 17 counties in southwest Ohio, with a number of offices anchored by a huge presence in Cincinnati and Dayton. In fact, POR is the largest Prudential residential franchise in Ohio.

Anyway, I wanted to comment on a nifty marketing tool they recently rolled out. An "Text To MLS" tool that enables buyers using a smart phone to receive detailed information and photographs about a specific home, and similar homes being offered in the same neigborhood, by simply texting a five-digit number to POR.

Pretty slick.

As my colleague Nancy Cropper says, if you can vote for Dancing With The Stars or American Idol, you can use this service! Gotta love technology.....

VLOG: Life Settlement Notes Help CRE Sellers, Buyers Bridge The Gap

Wednesday, May 4, 2011

ASU Study Shows That Commercial Market In Phoenix Rebounding

Why is it important to note that fundamentals of commercial/investment real estate are coming back in Phoenix, Ariz.?

Because the Phoenix area -- like Las Vegas, like Southwest Florida, and a handful of other areas -- were among the hardest hit by the DROP in housing and commercial property values. So here we have an independent study by a major university noting that commercial property prices in the Phoenix area are "gaining steam."

More good news and yet another piece of the larger puzzle illustrating the market is coming back strong.

Tuesday, May 3, 2011

Warren Buffet Says CRE Showing Signs Of Strength

Respected financier/investor Warren Buffet -- who is financing many multifamily acquisitions through a joint venture around the U.S. -- acknowledges that the commercial/investment real estate sector is showing signs of strength.

“There’s been certainly less of a crack in prices than I would have expected,” Buffet said in an interview Sunday in Omaha, Neb., where his Berkshire Hathaway organization is headquartered.

For the full story, click here.