You are here: Home / Archives for Commentary

ICSC Recon 2012 – Before the Show

May 18, 2012 By Leave a Comment

ICSC has always been the biggest trade show amongst all of the trade organizations for commercial real estate.  In looking back at my 2009 post, I am definitely more optimistic about this year.  It is always good to look back and then look forward.  2007 was the peak with over 50,000 people in attendance.  2009, was well under 30,000 people in attendance.  Fast forward to this year, they are expecting over 30,000 people in attendance.

I remember with clarity the attitude for expansion in 2008, 2009 and 2010 was to check back in 2012 and 2013.  Well, here we are.  I am looking forward to providing a daily update of events of the trade show back to you.

In the meantime, if you are going, let’s meet up!  I will either be at our company booth (CPI Booth S56047), CCIM Booth (CCIM Booth – Booth #C1920) or walking the halls or attending some of the education breakout sessions.

Looking forward to seeing you all in Vegas!

Filed Under: Commentary Tagged With:

Local Real Estate Professional (Nick Miner, CCIM) Discusses Marketing

March 22, 2012 By Leave a Comment

PHOENIX — March 19, 2012 — Nicholas L. Miner, CCIM, vice president-investments of Commercial Properties, was quoted in the March/April issue of Commercial Investment Real Estate, the magazine of the CCIM Institute. Please read his comments in “Marketing for Today’s Market,” which is available in the PDF file accompanying this release. To read the entire issue, visit http://cire.epubxpress.com.

CCIMs have earned an internationally recognized professional designation that signifies their expertise in commercial investment real estate. Do you want to get this expert’s take on the local commercial real estate market? Contact Nicholas L. Miner, CCIM, at 480-522-2790.

###

About the CCIM Institute

Since 1969, the Chicago-based CCIM Institute has conferred the Certified Commercial Investment Member (CCIM) designation to commercial real estate and allied professionals through an extensive curriculum of 200 classroom hours and professional experiential requirements. Currently, there are more than 9,000 CCIMs in 1,000 markets in the U.S. and 31 additional countries. Another 7,000 practitioners are pursuing the designation, making the institute the governing body of one of the largest commercial real estate networks in the world. An affiliate of the National Association of Realtors®, the CCIM Institute’s recognized curriculum, powerful technology tools, and networking programs impact and influence the way CCIM members do business. Visit www.ccim.com, www.stdbonline.com, and www.ccimredex.com for more information.

Filed Under: Commentary Tagged With:

Cap Rate vs IRR vs Cash on Cash vs ???

March 21, 2012 By Leave a Comment

Over the years, my experience in working with investors from different walks of life, has always fascinated me when it comes to what is their ultimate go or no-go decision when looking at investment real estate.

Some clients only look at the cap rate.  Their rationale is that most of the time you can predict the first year of revenue stream but after that, it is all assumptions.  It is simple and easy to calculate and really allows a person to play simple what if analysis based upon vacancy and operating costs because you are using the Net Operating Income (NOI).

Then I have some clients that want to take the analysis just one small step further and look at the Cash-On-Cash return based upon their investment.  Most of these clients are utilizing OPM or debt and want to know if they buy an asset based upon a certain down payment with a certain loan that their actual cash-on-cash return will be.  If the cash-on-cash return is higher than the cap rate – they achieve positive leverage and they will more than likely purchase the property.  If the cash-on-cash return is lower than the cap rate – negative leverage – they will more than likely pass or try to renegotiate.

Some of my clients today are using Internal Rates of Return (IRR).  There are some pros/cons to IRR measurements.  From Wikipedia.org: IRR assumes reinvestment of interim cash flows in projects with equal rates of return (the reinvestment can be the same project or a different project). Therefore, IRR overstates the annual equivalent rate of return for a project whose interim cash flows are reinvested at a rate lower than the calculated IRR. This presents a problem, especially for high IRR projects, since there is frequently not another project available in the interim that can earn the same rate of return as the first project.  Not to further pick on our friend IRR, but if you have a negative cash flow and then a positive cash flow but then lose a tenant and have another negative cash flow, your IRR could be misleading.  Also adding onto this, someone has to make some assumptions about the property’s future cash flows (beyond year 1) and what you could sell the property for down the road.

So, why do we go through this brain damage?  Two words: Opportunity Costs.  Everyone only has so much money to do so many things and everyone wants to make sure they are getting the best return that they can on the money they have to invest!

I would be curious to know, what are you using when talking to clients about returns of a property?

Filed Under: Commentary Tagged With:

ICSC Southwest Idea Exchange 2012 Recap

February 23, 2012 By Leave a Comment

The Southwest Idea Exchange has always been the official kickoff to the Phoenix Retail Market leasing activity.  We are past the holidays, the bowl games, car auctions, the Phoenix Open and Super Bowl.  It is really the turning point when everyone in the industry finally comes back to office to finish the projects that have lingered over the previous 60 days or so.

This year, it was definitely more positive than it has been for the past 4 years.  I was reminiscing with a few colleagues around the middle of the conference as to previous years:

-2008 we started to see trouble.  Deals were becoming tough to do.
-2009 – utter horror on what was happening in the economy and our local market.  We had all jumped off the steep ravine and were in free fall.
-2010 – we hit the ground with a loud thud.  There would be a heartbeat or two this year, but still shocked from the fall.
-2011 – we looked around to see who was still left and jokingly would say we have survived.
-2012 – I must say, it was very positive and I believe a good indicator for us all as we move forward.

The retail tenant panel that started the event…it was kicked off by them all saying they were planning to open stores in 2012 and 2013.  Significant increases since 2008.

In the two breakout sessions I attended, the panelist did a great job.  Even in the loan workout session, there were positive comments made about the situation most owners are facing when it comes to a looming loan maturity on properties that have lost value since peak prices.  It doesn’t mean that everyone will be saved, but there are now options that can work.

All in all, the negativity of the past 4 years is finally behind us.  We have survived, we have been humbled and we have all learned some invaluable lessons.

Filed Under: Commentary Tagged With:

IREM / CCIM Economic Forecast Recap – 2012 by Nick Miner, CCIM

January 22, 2012 By Leave a Comment

I attended the CCIM/IREM Economic Forecast here in Phoenix on Wednesday (January 18, 2012).  Whenever I attend these events, I like to summarize my notes to help people know what others are saying besides my own opinions.  The event was a little different format this year from previous years so let me summarize it based upon the event for you.

Keynote Speaker, Barry Broome from GPEC, kicked off the event.  As always, Barry has a very charming way of describing what is going on and what they are trying to do to get more businesses to move to Phoenix.  Some of the interesting takeaways from him:
-Phoenix is the 3rd youngest metro in the USA
-GPEC is actively working to create a new brand that clusters around the ASU Supercomputer
-Phoenix is set to do very well in digital tech, personalized medicine (due to BioTech companies locating here), aerospace & defense
-Venture Capital investments are tough in Phoenix because we don’t necessarily have the social platform needed but they are working to build an Eco System that could support more VC investments.

The Operations Panel
This panel was made of receivers, lenders, owners and property managers.  Some of the key takeaways: -Landlords under distress will do what they can to keep tenants
-the first dollar lost is the best dollar lost for most banks
-Lenders are still struggling to get their arms around market vs actual lease rates
-22% of all apartments are still offering rental concessions-this is down from 70% in 2009
-Regarding tenant delinquencies-lockouts are still a landlords best option, however, most landlords are more willing to work with tenants today
-Landlords/Managers are trying to get something from tenants today before locking out
-Landlords/Managers are more flexible with retail tenants today
-Perfecting the  landlord liens for auctioning of tenant property is more frequent today, however, the quality of the equipment leftover is not there
-How to handle HVAC units from tenants that don’t have cash to pay?
-Negative cash flow properties in receivership-most banks/lenders are good for making advances to take care of issues
-Loan restructuring-in bus to extend credit. Dependent on the loans getting repaid.  When asset class is weakened, credit gets rerated (tdr-trouble debt restructure).
-Apartments-life is good again.  Rents are starting to increase.  Market rate rents need to be $1.50/sf to build. Right now it is at $1.14/sf in best areas. Rest of the market is $.80-1.05/sf
-Retail-more activity, there are still lots of concessions; strengthening of the market and more confident in leasing vacant space
-Office-larger assets coming and more maturity defaults again $150B of loans coming due in the next 3 years

The Transaction Panel
The comments below are going to be more relevant to Office Properties because the makeup of the panel was more structured towards this product segment.

-Office-2011 a little better than 2010
-Title companies are seeing growth of transactions by 25%
-Healthcare recovering
-Senior Housing has moved to hyper supply
-Bioscience is in expansion
-Seeing a recovery in CRE
-There will be a hiccup this year when it comes to loan maturity
-3/4 of a trillion dollars of unpaid loan balances coming due
-Having to prove that new construction on spec
-Big questions are who’s controlling the product-note pool buyers
-cost of capital from FDIC is zero
-Special Servicer now controlling REO assets.  This so going to be a slow trickle.
-Strategy for Brokers is to split their business in to thirds-1/3 to special services, 1/3 to banks, & the last 1/3 to private clients
-Trophy vs trash mentality
-The great exchange-still hasn’t happened.
-Can’t generalize the market pricing
-Medical users becoming more intense than ever before.
-Hospitals are going back to institutional services
-Hard to mix medical & office together
-Underlying zoning could be issues for medical users in traditional offices
-Biggest barrier to entry for buyers today is access to capital.
-Buying trend is changing; there have been a lot of cash deals with a focus on intrinsic value
-Trophy deals, life company loans available.
-REITS were competitive on medical.
-what would you do differently-be more selective on who they work with  by interviewing owners before taking something on assignments
-Receiverships will taper off in 2-3 years.
-Services are reorganizing to sell assets.  If small, they will move quicker.
-Rents should stabilize in office & it will be 2014 until vacancy is under 20%
-Companies are going to start hiring today if running a skeleton crew
-Phoenix is affordable
-There will be an uptick in stress for Q1-Q3 but will clear out quickly

To summarize, in my opinion, Phoenix started a decline in late 2007.  There are good signs of a leveling off and no one is expecting any huge change in value.  2012 is the year to look hard at good properties and finally jump in and buy.

If you want to further discuss any of my notes and the market, please give me a call!

Filed Under: Commentary Tagged With: ,
« Older Posts
footer script.