Avoid the Sins of CRE Investment
Investing in a CRE asset without due diligence or market analysis is just not smart.

Avoid the Sins of CRE Investment

3 weeks ago 0 0 31

A recent Globe St.com article “The Seven Deadly Sins of CRE Investment” argues, “Buying a CRE asset above its value or at a low cap rate is rarely a route to a successful transaction.” I couldn’t agree more. While situations exist where it is acceptable to pay up, such as the need to acquire a key piece in an assembly, I never advocate buying investment property without proper due diligence or market analysis. Unfortunately, vigorous deal competition coupled with the need to invest idle capital, particularly funds with time limits, inevitably leads investors to commit some of these sins mentioned in the article. After all, what is one or two bad deals in a large portfolio if the other deals are good, right? I disagree. Also, often individual investors invest foolishly because they are driven by the desire to avoid taxes on the gains resulting from a sale. So, they overpay to

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What is the worth of WeWork?

The Worth of WeWork?

1 month ago 0 0 48

Business Insider posted a recent article entitled, “NYU professor calls WeWork ‘WeWTF,’ says any Wall Street analyst who believes it’s worth over $10 billion is ‘lying, stupid, or both’.” Here’s my take on this article: WeWork looks like any other office landlord, just wearing a different suit. Outside of being cool, WeWork owns nothing proprietary, and as I have argued before, there is no barrier to competition from real landlords. If it were such a great concept, office property owners and developers would be providing more flexible space options. But they wouldn’t be able to obtain financing because debt service relies on a steady and reliable income stream—which this concept certainly is not. WeWork might pull off this IPO because of the current market euphoria, but they won’t be getting any of MY money.    

Family Office: Need to Do Due Diligence

Family Offices: Do Your Due Diligence

2 months ago 0 0 63

I recently read the National Real Estate Investor article “Survey Shows Family Offices Falling Short on Due Diligence for CRE Deals.” This article is 100% on point. Investors not familiar with the nuances of private real estate investments do not consider the elevated risks often posed by real estate, which result from its illiquidity, debt, lack of transparency, and reliance on a sponsor. Family-office professional DJ Van Keuren’s questions that family offices should ask during due diligence (modified below from the article) hit the mark. What is the sponsor’s track record? How long has the sponsor been in business? How much of its own money is the sponsor investing in the deal? What are some examples of deals that went south? How did you handle those situations? What is the market demand for this type of property? How many similar projects are in the local development pipeline? Has the sponsor run the numbers

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Atlanta Office Market: Hot or Not?

Atlanta Office Market: Hot or Not?

2 months ago 0 0 109

Think back to the office market in 1985. People were saying, “Nothing can go wrong. People are still coming.” Those same people were soon singing the blues because surprise, surprise, something went wrong. Is Atlanta’s office market as hot as it seems? BizNow’s recent article The Fastest-Growing Office Rents in the U.S. Are in Atlanta touts Atlanta’s office market success, but, in my opinion, fails to give a full picture. I see it more as a tale of two cities—the institutional office market and the local office market. Midtown + Buckhead: Hot Atlanta Office Markets Media likes to focus on the hot markets, like Midtown and Buckhead, and rightfully so, according to these stats: “Rents at premier office spaces in Midtown and Buckhead have risen 14.2% since last year, breaking the $50/SF ceiling for the first time.” Plus, 2.2M SF of new prime office space is underway with “Selig Enterprises

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In the Development Market Phase of the real estate cycle

Development Market Phase: How Long Will It Last?

4 months ago 0 0 178

The business cycle is “long in the tooth,” and the real estate cycle is also very, very mature. Last year, in Timing the Real Estate Cycle, I focused on real estate cycle phases, which included Recession, Distressed Selling, Value Creation (Stage 1 + Stage 2), Mature Investment Market, Development Market and Overdevelopment + Bust. Right now, we are in the Development Market phase. Here’s how I previously described it; see if it rings true. Rents and values are up. Vacancies are down. New construction accelerates. Investors…are flush with cash. Lenders are aggressive. Values of existing properties are peaking. There is simply more capital chasing deals than there are opportunities. The downside risk is increasing. The “nothing can go wrong” mentality is taking over.  New project announcements are appearing almost daily. Development Market Phase: Alive and Well Here’s what I see now: Transaction volume on the sale/investment side of business has

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Mentoring as an Investment in Our Young People and the Future

Mentoring: An Investment in the Future

5 months ago 0 1 238

My Dad was tough around the edges, but he was a kind and generous man. Whether it was family, friends, acquaintances or strangers in need, Dad always tried to help them get back on their feet. While I respected him as a businessman, my greatest admiration was due to his willingness to help others. A Legacy of Giving One way I choose to continue my father’s legacy of giving is by mentoring students and early career adults. A few years back, I wrote a series on mentoring. The first blog of the series offered industry professionals mentoring tips. The second blog advised how mentors can help young professionals in the CRE industry. And the final blog examined mentoring benefits. I am a mentoring advocate, whether you participate in a formal program, act informally as an advisor or assist a young colleague. I currently advise ten individuals. Formal Mentoring I participate

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Crowdfunding Becomes More Popular, But Skeptics Remain

Crowdfunding: A Viable Option?

6 months ago 0 0 208

National Real Estate Investor recently published an article titled Real Estate Crowdfunding Firms Push Further into the Mainstream, in which the writer argues that although first questioned, crowdfunding continues to gain a base of active sponsors and investors. One sponsor, using the CrowdStreet platform, says “it serves as a consistent, recurring source of equity, as well as a capital source that is accessible for smaller dollar amounts, under $3 million.” Crowdfunding: Who’s in the Crowd? Here’s what I think about crowdfunding: I like to enter a deal with the fewest, financially-qualified partners as possible. Either directly and indirectly having a large number of unknown partners pretty much scares me. I assume this approach works well when the market is good and properties are performing well. But I am always thinking ahead. What happens in a market slowdown, and a property funded by crowdfunding gets into trouble? The results could be very

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Co-Working In Hotels

Co-Working in Hotels: Check-In or Check-Out?

6 months ago 0 0 201

Reading the recent “Coworking Checks Into Hotels” article in Commercial Property Executive left me with a few questions. The article discussed hospitality brands contemplating how co-working in hotels “might strengthen community ties and bring in additional revenue,” arguing it’s a logical next step as many lobbies currently serve as de facto office space. Some brands, like Moxy Hotels, Hoxton, Ace and Virgin, already offer co-working at their properties. My question is how can you control access or charge for the co-working space. I assume creating a unique situation for hotel guests or loyalty program members is one option, but I remain skeptical about how the concept would perform as a revenue generator. And based on my recent blogs about WeWork and other co-working and incubator models, like Roam and Atlanta Tech Village, the universe of co-working (with or without the hospitality component) is becoming awfully crowded. How many of these

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Many Co-Working and Incubator Models Exist

The Sharing Economy: Co-Working and Incubator Models

7 months ago 0 1 351

I recently asked the question, Does WeWork Work? And answered the question with a “We’ll see…” But there’s other co-working/incubator models out there worthy of discussion. Co-Working and Incubator Models On a recent panel at GSU’s Views From the Top was a Roam Innovative Workspace representative. Like WeWork, Roam is an alternative office model, but currently boasts only five locations. There are also Incubator tech business models out there. One such model is the Atlanta Tech Village. One model is not necessarily better than the other, but what is certain is they all disrupt the office market. Quick Thoughts on WeWork I dove deep into WeWork previously and questioned how the concept can compete with traditional landlords, REGUS and CBRE’s Hana concept, which can easily adapt to the changing market. Essentially, WeWork acts as a landlord, but offers more flexible leasing options. It is very much a real estate-based model, with

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CBRE Launches Flex Office Space Initiative to Compete with WeWork

CBRE’s Hana: A Threat to WeWork?

7 months ago 0 0 277

The Empire Strikes Back The Wall Street Journal’s recent article “CBRE Launches New Co-Working Business, Taking on WeWork” offers proof to points made in my recent blog, “The Sharing Economy: Does WeWork Work?” Here’s what I said: “[WeWork] does not have a monopoly on the concept. Ordinary landlords can easily replicate the model.” And that’s just what CBRE plans to do with its new offering, Hana. Hana’s main offering, Hana Team, offers professional teams (8 – 300+ people) customizable space with desirable amenities. Each Hana facility will also contain Hana Meet, on-demand meeting rooms, and Hana Share, shared desks and coworking space. In Stan’s Opinion There’s no doubt WeWork has changed the office leasing paradigm. But I do doubt the company will survive in the long run. Their concept can be easily replicated, and existing landlords control what happens in their buildings. In addition, companies like Regus have adapted their flex

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