Where is the “Add” in “Value-Add”?
Past the Value-Add Cycle in the Real Estate Cycle

Where is the “Add” in “Value-Add”?

6 days ago 0 0 18

Late in the Cycle As discussed in previous blogs, I believe we are very late in the real estate cycle, a period which is characterized by fully priced assets and increasing ground-up development. Yet, I keep hearing the term “value-add” tossed around both by brokers trying to sell properties with low current yields and buyers convinced that rents will continue to increase and add value. I am skeptical. In addition, with fewer transactions occurring, lenders are becoming more aggressive by offering longer “interest-only” periods and equity funds are becoming lenders to make up for the lack of good buying opportunities. I find these trends troubling. This is the sort of activity that usually pushes the market over the edge. The Real Deal  In a true value-add market, sellers are usually under pressure, rents are low, and vacancies are high. Buyers in this market are more risk-tolerant and are focused on

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Inevitable RE Downturn

Are You Prepared for the Inevitable Real Estate Downturn?

1 month ago 0 0 64

Heading for a Correction? A BisNow article from earlier this year directly asks the question on everyone’s mind: “When is the correction going to hit?” In “From Bullish To Bearish: Tips To Prepare For The Inevitable Real Estate Downturn,” the author says not to worry so much about when it hits, but more so with how prepared you will be when it does. The article offers these four tips: Negotiate long-term leases Pursue Rehabs and Upgrades Stop Putting Off Maintenance Embrace Technology Stan’s Viewpoint For the most part, I agree with this article. I would add that the strategy for a given property really depends on the property’s current status. That status will dictate whether to sell (if a key lease has just been extended), upgrade (a longer-hold strategy) or refinance. I would caution this: If an owner is looking at new financing, the debt/value ratio and debt service coverage should

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Investment Strategies for Real Estate Cycle Phases

Investment Strategies for Real Estate Cycle Phases

1 month ago 0 0 137

Recently, I’ve taken an in-depth look at the real estate cycle and its phases. The first blog in this series defined the real estate cycle phases. The second blog described the unique aspects of the recent recession and recovery. And the latest blog described crosscurrents impacting the current recovery. In this blog, I offer investment strategies for the different phases of the real estate cycle. While I’ve said this before, it is worth repeating. Before making investment decisions, you must always consider: Your personal situation Your objectives Your risk tolerance Post Market Peak/Recession Strategy Stay out of the market. Fundamentals are declining, and although prices are starting to look cheap, you don’t know how bad it will get. Better to be a little too late than too early. Risk You miss out on some good buying opportunities. Early Recovery Strategy This is the best time to be a value-add buyer.

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Current Real Estate Recovery Has Been Impacted by Shifts in Office

Crosscurrents Impact Real Estate Recovery

2 months ago 0 2 147

My last blog “Not Your Standard Recession and Recovery” discussed how—due to the disruption in the financial markets—the most recent real estate recovery was anything but straightforward. In addition, this real estate recovery has experienced crosscurrents, which have made it even more unpredictable. These include the impact of global markets, technology disruptors, high construction costs and demographic shifts. Global Market + Economy Impact As world economies become more intertwined, foreign markets more broadly impact the U.S. economy. The Chinese economy’s size and its growth impacted demand for U.S.-made products, resulting in drastic increases in some material prices. Weak European economies and actions of European central banks created greater demand for U.S. Treasury notes, which has kept interest rates artificially low. More foreign investors have sought U.S. assets, including real estate, with safety being a greater priority than yield. All of these factors contribute to a spike in U.S. property values.

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Great Recession and Recovery is Unique

Not Your Standard Recession and Recovery

2 months ago 0 2 229

Most recessions and recoveries are straightforward. There’s oversupply, too much money and aggressive lending. The economy goes into recession. Values plummet, lenders foreclose, and occupancies and rents go down. Everything is distressed. Then, distressed assets are sold, the economy improves and rents and occupancies increase. Happy days are here again. But the Great Recession of 2007-09 and subsequent recovery have been anything but straightforward. Due to financial chaos and a slow-to-recover economy, the road from the valley to the mountain top has been long and winding. Financial Chaos In 2007-2008, government policy and deregulation encouraged overaggressive lending and leveraging of lender’s balance sheets, not unlike when the government deregulated the Savings and Loans and changed the tax laws in 1986. Not only did this create a deep recession, but it also caused a near collapse of the U.S. financial system. So, how did this impact real estate? Bank Failures +

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Timing the Real Estate Cycle

3 months ago 0 1 207

Know Your Phases We all know the phases of the moon. You start with the new moon, move toward the glorious full moon and always return to the new moon. Just like the moon, the real estate cycle has phases. There’s no real starting point and no real ending point. It just recycles, repeatedly. Every phase of the real estate cycle presents unique challenges and opportunities; it’s essential to recognize which phase is currently occurring. Failure to do so can mean a huge misstep, resulting in significant monetary loss. I’ll address the real estate cycle in the next three blogs, which will include: Descriptions of each phase Strategies for each phase How the current real estate cycle differs from previous cycles Recession Recession, Depression, Down Market. Call it what you want, but this phase of the real estate cycle is typically characterized with oversupply in at least one property type.

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Atlanta's Edge Cities are creating downtown centers, like Sandy Spring's City Springs, to offer amenities to attract future residents to the area, like the Sandy Springs Performing Arts Center

Atlanta’s Edge Cities: Alive and Well

5 months ago 0 0 436

Two years ago, in Atlanta’s Edge Cities Develop New City Centers, I focused on how several of Atlanta’s edge cities, like Sandy Springs and Alpharetta, were attempting to create an “attractive sense of place.” This trend continues today, with Sandy Springs’ continued development, Roswell’s success and Peachtree Corners’ growth. More millennials are in their 30’s, and they’re looking for affordable housing in Atlanta to own, proximity to quality schools and work, convenience and, above all, a sense of place. With the rise of multi-use developments and entertainment centers in Atlanta’s suburbs, these folks are settling more and more in edge cities. Let’s take a closer look at some of these communities: Sandy Springs In my first blog, City Springs, the soon-to-be 14-acre civic and cultural center of Sandy Springs, was still renderings and plans, but earlier this year, it announced its first [retail] tenants, with construction expected to reach completion

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Altanta BeltLine Westside Trail

Atlanta BeltLine’s Westside Trail: Open for Business?

6 months ago 0 0 367

My partner and I recently looked at a property on the newly-opened Westside Trail of the Atlanta BeltLine. This got me thinking about one of blogs I wrote last year, “The Atlanta BeltLine: Will the Westside Trail Match the Eastside Trail’s Success?”. In that blog, I suggested the expectation that the Westside Trail’s success would equal the Eastside Trail’s success was unrealistic. With the Westside Trail now open for six months, it’s a good time to consider what’s happening in the area and whether it’s a good place to invest. Westside Trail: A Description On its website, the Atlanta BeltLine describes itself as “a transportation and redevelopment initiative.” The Westside Trail, a $43 million project, is the largest section of the BeltLine yet—it runs from University Avenue between Oakland City and West End MARTA rail stations up to Washington Park, near the Ashby MARTA rail station. The Atlanta BeltLine sees

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Should Atlanta Lure Amazon HQ2?

6 months ago 0 0 231

A recent Atlanta Business Chronicle article, “Atlanta Activists: We don’t want Amazon ‘HQ2’ here, touts “a growing sentiment that the resulting income inequality, unaffordable housing and traffic congestion is not worth even the 50,000 jobs” that landing Amazon HQ2 would bring to Atlanta. Stan’s Response  While I’m not as opposed to Amazon choosing Atlanta for its HQ2 as these folks appear to be, I do question why our City, which is experiencing a booming film industry and new corporate move-ins and expansions on a regular basis, offer what looks like a “distressed sale” giveaway. If we have so much to offer, and I believe we have a lot, why set this precedent? In my recent blog, Amazon HQ2 and The Gulch: A Symbiotic Relationship?, I address many of the pros and cons of swallowing the Amazon Whale.

CRE Responds to House Bill 851 Effects on Affordable Housing Development

House Bill 851 Threatens Georgia Affordable Housing Development

6 months ago 0 0 255

This blog post was co-authored by Steve Rothschild and Chris Martiner, CayCap Advisors. State tax credits provided under Georgia’s Department of Community Affairs Housing Tax Credit Program are proven tools that are critically important in the creation of high-quality affordable housing for the citizens of Georgia. The state tax credits incentivize local businesses and individuals to give back to their communities in a socially responsible manner, as the investments are used as a capital source, along with other state, local and federal funds, to finance and develop affordable rental communities. The continuance of the tax credit program is critically important to all areas of the state – rural and major metro areas. Atlanta, for instance, is experiencing rapid growth in population. This has led to a tighter market and increased rental rates. Further, gentrification in many neighborhoods has effectively displaced many long-term residents, forcing them into uncertain and unaffordable circumstances.

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