Blog

Home-Rental Market Gets Major Lift

Michael Gerard is Marketing Director at GRS Group(949) 272-0022mgerard@grs-global.com

Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
mgerard@grs-global.com

Commercial real estate’s multifamily market gets plenty of coverage and analysis for its continued success over the last decade. But the single-family rental market has not received as much attention.

That has changed with the $10.7-billion merger between Blackstone Group’s Invitation Homes and Starwood Waypoint Homes. The combined company will have 82,000 assets in 17 metro areas. The second-largest competitor is reportedly American Homes 4 Rent, with 49,000 locations.

This deal involving Blackstone, one of the world’s largest commercial real estate investors, shows that there is increased interest in this asset class, as homeownership fails to pick up at a rapid pace.

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Multifamily, 1031 Sectors Not Happy With Tax Reform

(804) 486-9465sfrancis@grs-global.com

Steve Francis, Director
GRS | Title
(804) 486-9465
sfrancis@grs-global.com

Some major commercial real estate organizations are unhappy with the current direction tax reform is headed.

The National Association of Realtors is reportedly saying that proposed changes to the personal tax code could lead to another housing crash. It could negatively impact home buildings as well as mortgage lenders. And we saw how well that worked out for the commercial real estate industry during the Great Recession.

As Bisnow reported in May, the National Apartment Association and the National Multifamily Housing Council joined forces, forming an effort called Protect the Lease.

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Messin’ with Sasquatch… in Cleveland!

Alec Pacella Senior Vice President NAI Daus (216) 455-0925 apacella@naidaus.com

Alec Pacella
Senior Vice President
NAI Daus
(216) 455-0925
apacella@naidaus.com

One of the most interesting pieces of American folklore is the nation’s infatuation with Bigfoot. Although the idea of a creature that is half man and half ape dates back to the 1800s, most of us think of that famous 1967 footage showing a grainy ape-like creature somewhere in the Pacific Northwest. Clevelanders have their own version of Bigfoot – it’s called IKEA. Rumors have swirled for nearly 30 years, with “sightings” ranging from North Olmsted to Beachwood. But before we talk about what could be, let’s first talk about what we know.

The Netherlands-based retailer offers a variety of household items. Although it is most noted for trendy, affordable and built-it-yourself furniture, it also carries kitchen items, bedding and office furniture, among other items. They operate over 400 stores worldwide, including 40 stores in the US. The facilities aren’t small, averaging around 300,000 square feet. Clevelanders infatuation with the chain dates to 1989, when IKEA opened a store in Pittsburgh. It was their 4th US location at the time but Clevelanders quickly took notice and within a few years,

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Split Estates: The Impact of Mineral Rights on Property Values and Use

The Big Picture: Do you know what you really own?

Reprinted with permission.  Authored by John Childs and Joshua Cook

A basic understanding of mineral rights can be important to evaluating your property. One common source of confusion when buyers or landowners contemplate value is the concept of the split estate.   “Split Estate” refers to the separation of surface and mineral ownership, whereby two or more individuals own separate rights in the same land. Split estates are quite common throughout the American West, and many landowners do not even realize that their homes, businesses, or ranches are subject to the mineral rights of third parties. Understanding the relative rights of split owners, knowing where mineral ownership may be uncovered, and understanding how to investigate the likelihood of mineral development can help landowners negotiate risks and properly assess land values.

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Spirit’s REIT Spinoff SpinCo Shows Net Lease Confidence

Allen Brown Director, GRS | Title (480) 428-5575abrown@grs-global.com

Allen Brown
Director, GRS | Title
(480) 428-5575
abrown@grs-global.com

The net-lease sector of commercial real estate has been strong throughout economic cycles, and now there is more evidence of perceived investor interest in these types of assets.

Major net-lease REIT Spirit Realty is splitting off part of its portfolio into a separate real estate investment trust called SpinCo.

At the root of this transaction is retailer Shopko, which has about 370 mass-merchandise stores based in the Midwest and West Coast. The retailer, which is privately held by private-equity group Sun Capital Partners, has been opening stores over the last couple of years, according to a press release from 2016. Shopko stores average between 15,000 and 35,000 square feet.

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Staples and the Death of Big-Box Competition

Kevin May Director, GRS Group (310) 614-9329kmay@grs-global.com @kmay_grs

Kevin May
Director, GRS Group
(310) 614-9329
kmay@grs-global.com
@kmay_grs

It wasn’t long ago when there were several large national big-box retail chains that sold a singular category item, such as books, electronics, toys and even men’s formalwear.

You can potentially add office supplies to that list.

There are reports that Staples could be selling off all of its 1,500 stores to competitor Office Depot. This is only one month after the retailer was acquired by private-equity firm Sycamore Partners for $6.9 billion. Meanwhile, Office Depot, which already merged with competitor OfficeMax in 2013, has fewer stores than Staples, at about 1,400.

This seems like a continuation of what has happened in retail for the last several years.

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CMBS Experiences a Q2 Climb

Matthew McGovern Director, GRS | Corteq (646) 760-0851mmcgovern@grs-global.com

Matthew McGovern
Director, GRS | Corteq
(646) 760-0851
mmcgovern@grs-global.com

Good news for commercial real estate borrowers came from CBRE recently.

Commercial loan closings rose 27 percent year over year during the second quarter, reported the commercial real estate services firm.

Much of this had to do with a spike in CMBS issuances, which hit $38.8 billion year to date, a jump from $30.7 billion over 2016’s first half. CMBS reportedly accounted for 36 percent of commercial-loan issuances during the second quarter, a spike from only 16 percent in the first quarter.

And all of this happened with two interest-rate increases by the Fed this year.

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2028 L.A. Olympics a CRE Game Changer

Michael Gerard is Marketing Director at GRS Group(949) 272-0022mgerard@grs-global.com

Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
mgerard@grs-global.com

The announcement of Los Angeles securing the 2028 Summer Olympics is definitely big news for the metropolis in general, but there is little doubt that it will be a major booster for commercial real estate in the city.

Reports at the beginning of the year said the economic impact of the L.A. Olympics could hit $11 billion, and that was if it had won the 2024 bid, which was handed to Paris.

First of all, it is bound to boost hospitality construction, with a projected 3.3 million visitors to city over the Games’ course. Los Angeles is already experiencing some of the strongest RevPAR (revenue per occupied room) growth in the country. On top of this hotel construction in Los Angeles has boomed as of late, with new and coming additions such as Wilshire Grand, Metropolis and Oceanwide Plaza. Most of this new development has taken place downtown, but expect a flood of new construction around venues surrounding the city center, possibly near the Rose Bowl, in Pasadena; the L.A. Forum, in Inglewood; and other locales.

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Starbucks’ Tea Party Is Over

Tony Mueller, Director GRS | Corteq (312) 476-7621 tmueller@grs-global.com

Tony Mueller, Director
GRS | Corteq
(312) 476-7621
tmueller@grs-global.com

It’s well known that for a warm pick-me-up drink, coffee is the leader in the United States.

But for tea enthusiasts, Teavana is a cool, mainstream alternative to an independent specialty store where one can try a variety of different flavors and blends, not to mention the ability to purchase of a variety of drinkware.

Well Starbucks, the owner of Teavana, is shutting all of its 379 locations. Poor sales are reportedly the main culprit and the concept’s predominant presence in malls.

It’s a bummer for tea lovers, as well as Starbucks, presumably. The coffee giant spent $620 million to purchase Teavana in 2012. At the time, Reuters reported that Starbucks founder Howard Schultz said: “We will do the same for tea as we did for coffee.”

This obviously did not transpire.

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Sale-Leasebacks Now Relevant for Hospitality

Kevin Baumgartner, Director CLS GRS | Corteq (561) 325-9857 kbaumgartner@grs-global.com

Kevin Baumgartner Director
CLS, GRS | Corteq
(305) 547-9879
kbaumgartner@grs-global.com

The sale-leaseback sector of commercial real estate is mostly associated with retail pad sites, such as a drug, convenience store or quick-service restaurant. It can also be associated with sectors like office and industrial, but now another one is getting some attention.

Hotels are on now on the sale-leaseback menu, according to an interesting GlobeSt.com article. Reportedly sale-leasebacks for hospitality assets are a common occurrence in Europe but becoming more recurrent in the United States.

The example that GlobeSt. points to is Germany-based Deka Immobilien purchasing the Hyatt Centric hotel in downtown Chicago for $110 million. The original developer, Murphy Development Group, will continue to operate the facility.

So how common are hospitality sale-leasebacks?

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NYC Multifamily Transactions Bounce Back

Mark Halloron, Director  GRS | Corteq (732) 450-8960 mhalloran@grs-global.com

Mark Halloron, Director
GRS | Corteq
(732) 450-8960
mhalloran@grs-global.com

It’s hard to imagine, with rents so high in New York City, that the multifamily market could have challenges. Apparently, that was the case in the first quarter of this year, when transaction volume was down, according to Aerial Property Advisors.

However, activity picked up in the second quarter, as highlighted in a recent report by the firm. Between the first and second quarters, there was a 42-percent jump in transactions, hitting $1.93 billion.

Much of the problem during the first quarter was reportedly hesitancy surrounding the presidential election. Though there was still some weakness in April, it was apparently the best quarter for the number of transactions seen in the city since last year’s third quarter.

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CMBS Situation Better Than Anticipated

Matthew McGovern Director, GRS | Corteq (646) 760-0851mmcgovern@grs-global.com

Matthew McGovern
Director, GRS | Corteq
(646) 760-0851
mmcgovern@grs-global.com

There was concern about the CMBS maturities hitting the market, reported by Bisnow, based on information from an Avison Young executive. There were several originated in 2006 and 2007 that are now coming to maturity, prompting supposed worry that another wave of payment-delinquent landlords could face serious problems.

Well, those fears have been largely abated.

National Real Estate Investor reports that the worries about potential CMBS delinquencies are being taken in stride, based on data from Trepp. Though they rose 28 basis points, hitting 5.75 percent in June, this is by no means a crisis that the commercial real estate industry has anticipated over the last decade.

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GRS | Corteq Approved for Freddie Mac Multifamily Green Advantage Program

Jeff Coyne Director, GRS | Corteq (510) 962-9534jcoyne@grs-global.com

Jeff Coyne
Director, GRS | Corteq
(510) 962-9534
jcoyne@grs-global.com

Freddie Mac has approved GRS | Corteq as a preferred provider for its popular Multifamily Green Advantage program deliverables.                  

Under the Freddie Mac Green programs, if a borrower has a property where they are planning energy-saving improvements for either an acquisition or refinance they can save on financing in a few ways. The Freddie Green Advantage Program works in conjunction with the current Freddie Mac Conventional, Targeted Affordable and Seniors Housing products.

The Freddie program for green mortgage loans essentially runs on two tracks – Green UpSM, or Green Up PlusSM. Under the programs, borrowers must qualify for, and commit to implement, property changes geared toward reducing EITHER energy or water consumption by a minimum of 15% property wide.  Borrowers who qualify have the ability to choose the upgrades they want to implement to meet both the 15% energy/water savings threshold while also spending a minimum dollar amount per unit (currently $350/unit).  If the property is eligible for the program, and the property/borrower is able to meet these thresholds, the borrower may qualify better pricing and more funding to make the green enhancements.

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Infrastructure Improvements Seem Tabled for Now

Michael Gerard is Marketing Director at GRS Group(949) 272-0022mgerard@grs-global.com

Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
mgerard@grs-global.com

Despite what has happened with the political turmoil in this country and the polarity the U.S. presidential election, there is one thing nearly everyone in the commercial real estate industry could agree upon — President Trump’s promise of a $1-trillion plan to improve the infrastructure in this country would be a good thing.

Nothing about his presidency would make more sense for commercial real estate than to apply upgrades to the nation’s roadways and transportation hubs, many of which have been in dire need of repair for some time. After all, the transportation of goods in a timely manner and workers more easily accessing their jobs, among other pluses, could only help the success of office, industrial and retail assets.

But it’s never that easy.

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Are Underwater Warehouses the Future?

(858) 433-0441 scanty@grs-global.com

Steve Canty, Director
GRS | Corteq
(858) 433-0441
scanty@grs-global.com

We were surprised to see images of Amazon’s beehive drone hub patent a few weeks back.

Now the e-commerce leader could further change commercial real estate’s industrial sector with another interesting patented concept – underwater warehouses.

The goods it sells could reportedly be placed into large lakes by several modes of transportation to be later retrieved for shipment. Amazon’s reasoning for these aqua spaces is that above-ground distribution centers are increasingly not sufficient to house all of the products that the company offers.

As part of its patent for the idea, the company will have sound sensors on balloons which will inflate and bring a water-tight container of items to the surface when they are transacted.

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The Problem With the Rite Aid Buy

Kevin May Director, GRS Group (310) 614-9329kmay@grs-global.com @kmay_grs

Kevin May
Director, GRS Group
(310) 614-9329
kmay@grs-global.com
@kmay_grs

In the world of retail real estate, drug stores are a pretty solid bet. An aging population, mixed with an increased amount of goods provided by these businesses makes them a necessity for most people. A consumer can even obtain basic grocery goods at a pharmacy, which would have been unheard of several years ago.

So why did the proposed Walgreens acquisition of Rite Aid fail?

There was regulatory scrutiny over Walgreens Boots Alliance purchasing its competitor for just over $9.4 billion back in 2015. This led to Walgreens only buying about 2,100 stores for slightly less than $5.2 billion, which is essentially half of Rite Aid’s portfolio of locations. What makes this more complicated is that Ralphs, another pharmacy owner, was supposed to be sold a portion of the Rite Aid portfolio, and that transaction is no longer taking place.

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Canadian CRE Wins Big at BOMA

(858) 433-0441 scanty@grs-global.com

Steve Canty, Director
GRS | Corteq
(858) 433-0441
scanty@grs-global.com

Canadian commercial real estate is setting some trends for innovation if the recent BOMA International Conference & Expo, which took place in Nashville, is any indicator. Of the 15 assets that won major awards, four of them were located in Canada.

They won in some pretty serious categories, too: Industrial Office Building, Medical Office Building, Retail Building and Over One Million Square Feet.

Since we haven’t reported on our neighbors to the North much recently, it’s a good time to take a brief look at each property and the overall commercial real estate market in Canada.

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One Day You Might Only Shop at Amazon

Michael Gerard is Marketing Director at GRS Group(949) 272-0022mgerard@grs-global.com

Michael Gerard is Marketing Director at GRS Group
(949) 272-0022
mgerard@grs-global.com

That could be a bit of an exaggeration. Or maybe not?

Amazon was already blowing up our radar screens this year when analyzing retail real estate. The e-commerce juggernaut is often blamed for the hundreds of store closings taking place across sector categories in all types of shopping centers.

Then it recently dropped two huge bombs on the industry within a week. Not only is Amazon buying Whole Foods, but the company is also launching Prime Wardrobe, which will allow consumers to try on items for free before making the commitment to purchase an article of clothing.

That’s a pretty effective week if your goal is to terrify retail real estate investors.

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Is IBM’s Remote Working Dismissal a Trend?

Matthew McGovern Director, GRS | Corteq (646) 760-0851mmcgovern@grs-global.com

Matthew McGovern
Director, GRS | Corteq
(646) 760-0851
mmcgovern@grs-global.com

The age of IoE (Internet of Everything) frees up companies to allow employees to work from wherever they want. After all, since most daily tasks done in an office are performed on a computer, and there are several ways to remotely monitor a worker’s productivity and accomplishments, why does location matter?

Apparently, it’s still important for some executives to have their employees show up in offices, regardless of whether or not their tasks can be done from home. IBM recently announced that it is giving its employees an employment-location choice: leave the home office and start working at a regional IBM branch, or quit the company.

Once thought of as a groundbreaker in the remote-working space, IBM is making the change because “bringing small, self-directed agile teams in these fields together,” a spokesperson told the Charlotte News & Observer. The tech company follows Bank of America and Yahoo, which have undertaken similar switches over the last few years.

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A New Look at PCB-related Risks in Property Redevelopment

Ross Simmons Project Manager GRS | Corteq

Ross Simmons
Project Manager
GRS | Corteq

Demolition or renovation projects always present surprises and challenges. But, by 2017 dealing with asbestos and lead-based paint issues has become pretty routine for developers, lenders and consultants. And we all know PCBs are a potential issue in old electrical transformers. But, with every year that passes there are fewer PCB-contaminated transformers around, and besides they are usually the responsibility of the utility company anyway.

Polychlorinated biphenyls (PCBs) have been used as coolants and lubricants in transformers, capacitors, and other electrical equipment because they don’t burn easily and are good insulators. The manufacture of PCBs was stopped in the U.S. in 1977 because of evidence they build up in the environment and can cause harmful health effects.

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Data Centers’ M&A Activity Increases

Tom Woodard, Director GRS | Corteq (561) 325-9857 twoodard@grs-global.com

Tom Woodard, Director
GRS | Corteq
(561) 325-9857
twoodard@grs-global.com

Data centers seem like a pretty safe financial bet for commercial real estate investors.

As most major companies in the country, despite what industry they are in, become tech heavy, the need for data storage is only going to increase. Many offices and industrial buildings aren’t suitable for large numbers of servers, which have significant cooling and power needs that data centers provide.

This need has made the data-center especially attractive and valued, as illustrated in Digital Realty Trust’s $7.6-billion acquisition of DuPont Fabros Technology for 12 data centers in the Chicago area, Northern Virginia and the Silicon Valley. That’s quite a price tag for 12 assets, and it boosts Digital’s cloud-data-storage capabilities.

Just after that deal, CommScope announced the formation of the Multi-Tenant Data Center (MTDC) Alliance, which has partners in 88 countries around the globe, and is a resource for the firms that do business in building and maintaining those facilities. The move comes as more service providers are selling off their data centers to third-party operators.

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Is There Demand for a Major Trump Hotel Chain?

Mark Halloron, Director  GRS | Corteq (732) 450-8960 mhalloran@grs-global.com

Mark Halloron, Director
GRS | Corteq
(732) 450-8960
mhalloran@grs-global.com
@mhalloran_grs

It’s easy to forget that President Trump has his roots in commercial real estate. After all, his past activities in the industry are obviously overshadowed by the fact that he now leads the most powerful country in the world.

But that hasn’t stopped the Trump Organization from continuing to pursue CRE endeavors.

Trump’s company recently announced that it is starting a hotel chain called American IDEA. The concept, planned to launch in the Mississippi Delta area, targets midscale consumers and will reportedly concentrate on promoting local flair, coupled with “neighborly service.”

Though there are only three locations currently hammered out with partner Chawla Pointe, a family run organization, and MMI Hotel Group, the firm that runs its Chawla’s current portfolio, its sounds as though the Trump Organization has big plans for American IDEA. Eric Danziger, chief executive Trump’s hotel division, told The New York Times that there could be hundreds of American IDEAs eventually. At first, the company plans the concept for small and mid-sized towns that have a strong base of Trump supporters and a lack of midscale hotel options beyond lower-end travel facilities. The first three deals represent renovations of existing hotels under the Holiday Inn and Comfort Inn banners.

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Student Housing Investment, Development Get High Marks

(858) 433-0441 scanty@grs-global.com

Steve Canty, Director
GRS | Corteq
(858) 433-0441
scanty@grs-global.com
@SteveCanty_GRS

The student-housing sector experienced a mega deal for this commercial real estate asset class earlier this month that’s indicative of the sector’s strong overall transactional performance.

Mapletree Investments, a Singapore sovereign-wealth fund, acquired a student-housing portfolio for $1.6 billion from Kayne Realty Advisors. The transaction totaled 18 properties across the United States and Canada.

The deal is indicative of how institutional investors are starting to show more interest in a sector dominated more by private firms.

This is on top of a trend that has been building. There was $10 billion spent on student-housing transactions last year, the largest ever on record, according to an ARA Newmark Student Housing Group report cited by Bisnow. Student housing has been favored in the past during downturns in the economy, but that’s not the kind of climate we are currently facing. And like other commercial real estate sectors, investors are getting priced out of class A properties and going for value-added plays.

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Senior Housing CRE Boasts Mega Deals

Julie Sorensen, Director  GRS | Corteq  (312) 476-7658  jsorensen@grs-global.com

Julie Sorensen, Director
GRS | Corteq
(312) 476-7658
jsorensen@grs-global.com
@jsorensen_grs

Senior housing isn’t usually the first thing on investors’ radar when considering a stake in commercial real estate, but a recent mega deal might have them thinking differently.

Sabra Health Care REIT and Care Capital Partners merged in a $7.4-billion deal last month. The combined entity, once the deal closes later this year, will operate just under 560 senior-housing and healthcare facilities across North America. For its part, Sabra announced a $1-billion development pipeline two years ago.

This is not the only significant recent merger in the senior-housing sector. Colony NorthStar was formed last year in a $17-billion marriage between NorthStar Asset Management Group and Colony Capital.

Besides these mega deals, senior-housing transactions in general are on the upswing, according to the National Investment Center. Total purchases of these assets totaled $4.4 billion during the first quarter. Institutions and private buyers are currently leading the way in these deals. Private-equity firm Blackstone alone made two buys totaling about $1.9 billion.

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U.K. Elections Bring Uncertainty, But Not Expected to Derail CRE

Kevin May Director, GRS Group (310) 614-9329kmay@grs-global.com @kmay_grs

Kevin May
Director, GRS Group
(310) 614-9329
kmay@grs-global.com
@kmay_grs

Businesses, commercial real estate firms among them, are usually not very thrilled about elections. After all, a change in political parties, or newly elected politicians, can have an adverse impact on the economy. At the very least, a degree of uncertainty can give investors pause.

This hesitancy is happening in the United Kingdom with elections taking place today. But it doesn’t seem as if the sky is falling on commercial real estate, especially in London.

CBRE UK points out that just because an election is taking place, there is no reason to think that there will be negativity in the market, and says that during any point in the political cycle, policies could impact commercial real estate. The firm also reports that most commercial real estate investors are very aware that if policies impacting their industry are put into place, they can take a very long time to come to fruition. The United Kingdom is also considered a safe haven commercial real estate, despite Brexit.

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