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CRE Market: Looking Back to Look Ahead

CRE Market: Looking Back to Look Ahead

By in Real Estate Investing
6 years ago
6 years ago 0 0 2011

In last year’s first blog of the year, “2017: A Mature Market,” I made some predictions about the commercial real estate market and investing for 2017. Here’s a look at what I predicted and what actually happened. It’s apparent I had some good predictions and some that did not come to fruition. INVESTING What I predicted: A good, but not great year for investing. What happened: Transactions and overall volume were down, but price per transaction continued to rise to new highs. INTEREST RATES What I predicted: Interest rates will increase, but will still be cheap by historic standards—with only a marginal effect on investment. What happened: Ten-year Treasuries were flat. Two- and five-year Treasuries rose, but not enough to impact the market. CASH FLOW What I predicted: A combination of more solid incomes and continued low interest rates will result in good cash flows. What happened: This prediction was

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Stan Sonenshine Discusses Amazon HQ2

By in Real Estate Development
6 years ago
6 years ago 0 0 5418

Stan Sonenshine was featured in Bisnow’s recent article, “Atlanta’s Odds Are Strong, But ‘Conservative Culture’ Could Hamper Amazon HQ2 Chances.” In the article, Stan questions whether Atlanta’s conservative culture could be a drawback and whether landing HQ2 may be disruptive to a city already experiencing healthy growth. You can learn more about Stan’s thoughts on HQ2 in his recent blog “Amazon HQ2 and The Gulch: A Symbiotic Relationship?”

Amazon HQ2 and The Gulch: A Symbiotic Relationship?

By in Real Estate Development
6 years ago
6 years ago 2 1 185884

Atlanta was originally called Terminus because the rail lines converged here. Eventually, the interaction of trains and cars became problematic, and streets were built over the railroad tracks. Existing shops were abandoned, and new shops were built on the new streets. Then, the Omni, Phillips Arena and the Georgia Dome were built, creating a big, empty space that you can look into. That area is The Gulch, a 120-acre site, currently made up of parking lots and rail lines. The Gulch: Past and Future Visions  For years, the vision was to turn The Gulch into a multi-modal station and then build mixed-use around the station, but that plan has never come to fruition, mostly because of the number of entities that would have to be involved—county, city, state and federal agencies; MARTA; and Norfolk Southern to name a few. However, according to a recent Atlanta Business Chronicle article, “The Gulch…is

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Intentional Development Around Stadiums: Can It Work?

By in Real Estate Development
7 years ago
7 years ago 0 0 2194

In my last blog “The Not-So-Obvious Connection Between Stadiums and Community”, I admitted my skepticism related to the community-building aspect of erecting new stadiums while acknowledging my hope for the success of such projects, like the Mercedes-Benz Stadium. But there’s an exception. And that’s the new Georgia State Football Stadium. Once Turner Field. Once the Olympic Stadium. (In fact, did you know this is one of the longest sustainable stadiums in the history of the Olympics?) What’s Different? Why do I think this example is different? It’s all in the approach. And I see private co-developers Georgia State University (GSU) and Atlanta-based Carter & Associates creating Summerhill, a development around the stadium, in an intentional and realistic way. In other words, this is not a “build it and they will come” project. GSU and Carter appear to be assessing what the community needs and then building it. To me, this

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The Not-So-Obvious Connection Between Stadiums and Community

By in Real Estate Development
7 years ago
7 years ago 0 1 2349

I admit it. I am a skeptic when it comes to the community-building aspect of sports stadiums—and I am not alone. This issue is particularly relevant in Atlanta with the recent openings of the Mercedes-Benz Stadium and SunTrust Park and the soon-to-be completed renovation of Philips Arena, all done with public financial assistance.  In this blog, I focus on the Mercedes-Benz Stadium because it is the most expensive and prominent. Here’s my question: How can a huge building, that looks like either the Lunar Lander or an alien landing zone (think big hole in the roof) and that is used less than 100 days per year, help revitalize a struggling community? Wasn’t this supposed to happen before with Turner Field and the Georgia Dome? Don’t get me wrong. I support public-private partnerships and these revitalization efforts, but in general, I do not see the connection. With that said, I do think the

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Cap Rates: They Have Their Place

By in Real Estate Investing
7 years ago
7 years ago 0 0 2163

Here’s the scenario. You have money you want to invest, and you do not want to manage real estate, but you want an income stream. When considering your options, you find the following: U.S. Treasury bond—2.3 percent return with virtually no risk; Municipal bond—4.5 percent return (with some tax benefits), still with minimal risk; and McDonald’s ground lease—5 to 5.5 percent return, with a slightly higher risk and illiquidity. These examples demonstrate very low risk situations, but make a comparison between similar investment options. So, where do Cap Rates (short for capitalization rates) come in? Cap rates are the benchmark that enable investors to compare various investments. Here’s a straight forward definition: “A cap rate measures a property’s natural rate of return for a single year without taking into account debt on the asset, making it easy to compare the relative value of one property to another.” In most basic

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The Pro Forma: Garbage In, Garbage Out

By in Real Estate Development
7 years ago
7 years ago 0 0 2100

I clearly remember one speaker’s comments from a 1985 NAIOP conference. His claim was this: One of the worst things that ever happened to the real estate business was the personal computer. How Can This Be?  For those who can remember prior to 1980—before the personal computer and in the early days of the financial calculator—real estate pro formas were done by hand. Income-producing properties were evaluated based on current income, and development pro formas rarely went beyond three years. With the onset of high inflation in the early 80s, pro formas showing annual increases in income became common to achieve high future evaluations, so real estate could compete with high bond rates. Even then you had to get the numbers (rents, expenses, cap ex, etc.) right on the first try because changing them after the initial projection was cumbersome and time-consuming. Enter the Financial Calculator and the Personal Computer. With

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Amazon’s Bold Purchase of Whole Foods: Why Exactly?

By in Real Estate Development
7 years ago
7 years ago 0 0 2211

Jeff Bezos has done it again. He’s managed to set the retail world on end with his unexpected, and possibly risky, move to purchase Whole Foods. And the move has left a trail of analysts wondering exactly why he did it. So, I guess I will chime in. Stan’s Prediction Amazon bought Whole Foods because it now has 431 convenient pick-up points for existing and future customers to pick-up more Amazon stuff. It’s my thought that future home delivery will only be available for the best of customers, and if you don’t rank, you will be picking up your Amazon shipment, still conveniently, at your local Whole Foods store. That may be one of the main reasons the transaction happened, but let’s look at other factors influencing this just under $14 billion-dollar transaction which recently lit up the retail market. Why Whole Foods? Organic food market becomes flooded. At one

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Development: Unpredictability in the Process

By in Real Estate Development
7 years ago
7 years ago 0 0 1828

Development: Unpredictability in the Process My last blog, “The Importance of Timing on Real Estate Investment,” focused on the unpredictability in investment, on what can happen over time once you own a property. In development, there is the added unpredictability during the process. For a broker selling a property or an investor buying a property, the complete process can be done in 90 days or less. But that is not the same with development, not even close. Process Derailment Developers have many considerations—they need time for inspections, site tests, neighborhood forums, entitlement or zoning processes, permitting, and soil boring tests, to name a few. While some of these can be controlled, others cannot. For example, everything could be moving forward smoothly and one ruffled neighborhood group at a zoning hearing or one difficult inspector could stop the project dead or at least create a significant delay, with the developer having

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The Importance of Timing on Real Estate Investment

By in Real Estate Investing
7 years ago
7 years ago 0 0 2020

A dollar today is worth more than a dollar tomorrow. So, the farther into the future one expects income or a sale to occur, the less it is worth in today’s dollars. In my opinion, investors don’t contemplate this factor enough when considering a real estate investment. Factors that are commonly considered for real estate investments include location, market, available financing and current cash flow. But when you invest and how long you plan to hold can strongly impact how well you do. The Effect of Timing + Buying Let’s look at some examples: Those who bought properties at the market peak in 2006-2008 with 3- and 5-year loans know the pain of debt maturing in a down market. While it is always prudent to buy in a down market, it is possible to buy too early. This could result in debt maturing before the market recovers or in anticipated

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    Stan Sonenshine
    770-512-0496 office
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