Time for a “NNN Up Periscope in Q2 2018” from the Great Recession of 2008-09…what is really going on Ten Years later?

Contributing Author: Sean O’Shea

Remember, as we have stated in a number of prior Net Lease Blogs, that Not all Net Lease properties are the same”.  Never more true.

We have just completed a series of IRC 1031 Exchange Transactions, which have provided us a new vantage point:

“Where we are 10 years later” in Q2, 2018?

“Where we may be going for balance of the year 2018-2019?”

Almost all knowledgeable observers and participants in the Net Lease Sector of the real estate industry would, now, admit, that we are in the late phase of this Real Estate Cycle after a whole Decade of Recovery.   The subject matter in industry publications has changed recently.   Subjects have shifted from NNN inventories, to issues of hedging inflation for the 1st time in 10 years, to raising interest rates (and presumably cap rates) moving northward.  Some are even whispering about “A new Recession” in the predictable near term future is new subject matter.  Continue reading Time for a “NNN Up Periscope in Q2 2018” from the Great Recession of 2008-09…what is really going on Ten Years later?

Timing Your Exit Strategy as An Office Landlord

Contributing Author: Jay Verro, CCIM

With the ever-changing landscape in the office leasing market, it makes sense for landlords to have an ever evolving 5-year plan. Generally speaking, office leases in the Albany MSA market are 3 to 5-year lease terms, often with matching length renewal options.

With corporate downsizing, company mergers, telecommuting and smaller office size requirements, there is an incredible amount of space options available to tenants. Landlords who do not recognize that fact along with those who lack the creativity to get a lease to the finish line will sadly end up with vacancies for an extended period.

While challenging to accept, landlords need to be informed that not every asset appreciates in value. Continue reading Timing Your Exit Strategy as An Office Landlord

15 Commercial Real Estate Terms You Need to Know

Contributing Author: Levi Steier

As with any industry, Commercial Real Estate (CRE) vocabulary can sometimes be intimidating for the inexperienced. If you are starting a new business or considering investing in CRE, your interests would be best served by gaining some insider knowledge.

While you should always consult an experienced commercial real estate broker and retain their services, having a baseline understanding of some key terminology and concepts will improve your experience, make you more comfortable, and inform your decision making as you work toward a deal that is right for you and your needs.

  1. Expansion Rights – The legal right given by a landlord to a tenant to occupy additional leasable area in a building in the future.

Continue reading 15 Commercial Real Estate Terms You Need to Know

What is the real role of NNN Properties in the Real Estate Industry?

Contributing Author: Sean O’Shea

It’s kind of funny to be considered, nominally, as a ‘nationally-recognized net lease expert’ after all these years.

My first exposure to this asset class was back a few decades ago, when I was charged with developing a real estate portfolio for a mineral-asset based Family Office in Fort Worth whose patriarch and predecessors were legendary oil wildcatters who wanted diversification to their Bond Portfolio.

My own background had been as a junior partner in a regional development firm with appropriate higher risk returns; and as a Shareholder of a regional commercial brokerage, whose business model was based on acute data and cultivating relationships, as the foundations for our demonstrative success in tough East Coast markets. Continue reading What is the real role of NNN Properties in the Real Estate Industry?

2017-18 Indiana University Student Housing Research Report

Contributing Author: Sean Lyons

An in-depth analysis of the private student housing market at Indiana University conducted by Triad Real Estate Partners. Triad Real Estate Partners concentrates in private student housing and multi-family real estate brokerage. Triad Real Estate Partners’ research team compiles in-depth student housing market research reports on leading Universities in the United States.

 

Total Enrollment: Down 0.13%

Total enrollment at Indiana University’s picturesque Bloomington campus declined slightly in fall 2017, with the 43,157 students enrolled falling 56 short of the school-record set in 2016. Since the 2013 changes in enrollment allocation, Triad believes that the total “degree-seeking” enrolment figure to be the most accurate depiction of the number of students on campus. Continue reading 2017-18 Indiana University Student Housing Research Report

Choosing the Right Warehouse Space – One Size Does Not fit All

Contributing Author: Cory M. Tyksinski

The decision to lease, or buy the right warehouse space for your operation can be much more complex than just ceiling heights and dock doors. Often the process involves items that have little to do with the building itself. Most local municipalities and fire districts have the final say over who occupies a warehouse space and what is being stored in it or around it.

Would-be occupants of a warehouse need to assess their overall needs for both space and location.  During this assessment some important details are sometimes overlooked: Continue reading Choosing the Right Warehouse Space – One Size Does Not fit All

Late Cycle Behavior of NNN Investors

Contributing Author: Sean O’Shea

Here we find ourselves almost nine and one-half years from the impact of the Great Recession of 2008-09. While the market conditions that led up to the public acknowledgement of the financial crisis, were years in the making, many observers could have foreseen the Storm Warnings.  I remember having my NNN Advisory Team in tow at the annual ICSC Regional event in San Diego in the spring of 2008.  As we wandered through the various vendors’ booths and exhibits, we passed the Lehman Brothers booth.  Displayed were the usual swag items that populate these kinds of industry events.  Sitting on a display table, I spied a pile of very well designed and finely detailed ‘Baseball-type caps’ with LEHMAN BROTHERS, emblazoned on the crown of the caps.  I suggested to my Team, that they may wish to grab one of them, as a souvenir of a “Soon-to be Bygone Era,’”; since these guys at legendary Lehman are going down, based on the structure of interest only loans and other deals that we had tracked in the prior few go-go years.  They all looked at me, as if, I was ‘nuts’; but, nonetheless, each grabbed their souvenir hats.  Now, a keepsake of lending period that contributed, mightily, to the Financial Crisis as it unfolded. Continue reading Late Cycle Behavior of NNN Investors

NNN 1031 Case Studies

Contributing Author: Sean O’Shea

Most investors have experienced a run up in real estate values; and with a prospective sale of a real estate asset pending, in consultation with their accounting professionals, they begin to explore how to defer substantial capital gains in the most efficient manner. Utilizing and executing a successful IRC 1031 Exchange Provisions is the principal vehicle that was retained in the recent Tax Act.

The IRC 1031 Compliance timelines require an “Identification” of your trade replacement property within 45 days of their completed sale of the relinquished property; and, then, an additional 135 days to complete the purchase of the new property that tax deferral transaction.    Easy…Right!

Well, not so fast.

The challenge, in part, is to define your client-specific investment objectives: Continue reading NNN 1031 Case Studies

Are Sellers of Multi-family Investments Ready to Be Realistic on Their Value Expectations?

Contributing Author: Jay Verro, CCIM

It’s no secret that the Multi-family investment sector has been a strong, solid, stable performer in most marketplaces for more than a decade and it does not appear it will change in the years to come. However, most sellers have yet to adjust their mindset towards proper valuations as interest rates rise. Over the past year, the 10-year Treasury, which has been as low as 2.02%, is now hovering in the 3% +/- range. When you couple this with a lender’s upward trending interest rates, the lender’s underwritten NOI compared to a seller’s provided income and expenses, there is a disconnect between bank valuations and seller’s expectations. Recently, these factors have had a negative effect on underwriting and ultimately on the perceived asset value.

I’ve seen this in smaller properties, as well as properties that are operated with a seller’s staff that are shared over multiple sites. It is quite common for the allocation of salaries to be reported artificially low on the property being sold, which is a significant piece of the underwriting process. Continue reading Are Sellers of Multi-family Investments Ready to Be Realistic on Their Value Expectations?

ISS Conference (Inside Self Storage)

Contributing Author: Nick Miner, CCIM

Recently, I attended the ISS conference in Vegas. This was my first time at this event to learn a little about the self-storage product type. The overall layout of the conference and education sessions were well thought out. It allowed me to pick a track of education and achieve a better understanding of the product type and how it operates.

The first educational session I attended focused on the financing of the product. Where it is today and where it has been. Some of my key takeaways from this session were:

-SS operations are always focused on revenue management
-SS historically has the lowest default rate on CMBS loans of any product type
-In January 2018, the default rate of CMBS loans was .04%
-Underwriting SS is based upon historic NOI (usually the trailing 12 months)
-They are seeing a plateau of occupancy (upper 80s low 90s)
-Since 2016, they have seen almost $10B of new construction
-2016-$2.5B
-2017-$4B
-2018-$4B is expected
-SS is micro market specific (usually uses 3.5 mile demographic analysis)
-Average SS uses 7 SF per individual for gap analysis
-They are starting to see interest-only (I/O) loans for the term of the loan (CMBS)
-Rates are hovering around 180 bps over the 10 Year
-Banks are getting more creative in in their financing terms for property acquisitions
-Life Companies are starting to focus on SS as a property to fund loans on Continue reading ISS Conference (Inside Self Storage)

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