Commercial Real Estate

Risk Management and Social Media in Commercial Real Estate

Business Management, Finance No Responses »

Jan 152012

2011 was marked by a global wave of civil unrest. The fact that social media played such an important role has prompted many government agencies and businesses to step up their monitoring of Twitter and other social networks. These actions confirm the widening power of social media as an accelerator of social and business change.

Commercial property industry leaders increasingly recognized that social media immediately amplifies negative buzz about their brands and reputations, and can have an impact on positive imaging and sales if used effectively.

Many leaders, like CBRE and GE Capital Real Estate, asked us to start monitoring what’s being said about them and help engage online movers and shakers. As risk/reputation management and investor relations grow in importance, we also expect many other REITs, developers and publicly held real estate service providers to leave nothing to chance in 2012.

In Q4, 2011 our proprietary CREObuzz™ algorithm identified four times more discussions about Brookfield Office Properties than SL Green or Vornado. The most buzz corresponded to the removal of “Occupy Wall Street” protesters from Zuccotti Park, a space controlled by Brookfield.

Stay tuned for our upcoming insights, as well as filtered news mobile apps focused on commercial real estate. 2012 will mark the turning point in how CRE industry leaders take much more deliberate steps to better mitigate reputation risks in social media channels and define themselves rather than leaving others, like “Occupy Wall Street” protesters, to do it.

CREOpoint will be leading the way with powerful social media management dashboards to help you manage in this new and challenging environment.

JC Goldenstein, CREOpoint CEO and CREObuzz founder

JC Goldenstein: Who is Influencing Perceptions about the CoStar LoopNet Deal Online and What Are They Saying?

Business Management No Responses »

May 162011

Recently seen online: “CoStar to Buy LoopNet in $860M Deal. Wow. Headlines Used to Only Be About Both Companies Suing One Another…Hello @Google. Are you building a competing #CRE listing solution?”

JC Goldenstein CREOpoint Founder and CEO

As expected after a recession, the big continue to get bigger. Further to recent deals involving ARGUS Software, DTZ, Newmark and ProLogis, CoStar announced on April 27th an agreement to acquire LoopNet for $860m.

Having recently founded a company in the online space, I followed with interest this exit by LoopNet founders. So first, congratulations to the founders of CoStar and LoopNet who took great personal risks and changed how our industry does business.

As the acquisition news broke, I did not even have time to think about how organizations like NAR, Bloomberg, Moody’s, DMGI and the CBREs of this world would react. The phone began to ring. Many brokerage firms who buy our trusted insights were eager to learn what was being said online, and asked us what the CREObuzz ™ was.

From the instantaneous reaction of blogs and forums to traditional news sources, we instantly know what is being said across the 10,000 CRE-relevant sources CREOpoint monitors. We uniquely filtered through the numerous broker’s listings as well as the numerous references currently in the press from the Cannes Film Festival, where stars, costars and fans created so much irrelevant online noise.

As we narrowed about one million articles a month down, we found 1,085 relevant online conversations in 485 sources during the period April 27-May 10, including many from members of the CREOpoint community. For example we found insightful comments from brokers, lawyers, IT and publishing professionals like Bo Barron, Chris Clark, Coy Davidson, Dave Lewand, David Bodamer, David Stejkowski, David Niles, Duke Long, John Reeder, Joe Stampone, Paul Brokmeyer, Richard Harris and Robert Pliska among others.

Commercial Property Executive asked CREOpoint to share some of theCREObuzz ™ highlights regarding the industry’s reaction to the acquisition. People agreed that there was a clear fit between Research and Marketing, and between CoStar physical presence and LoopNet e-commerce site. John Reeder from Sperry Van Ness thought that LoopNet’s less people-intensive business model was more scalable and profitable. Since CoStar was trading at 90X earnings they may have decided to pull the trigger before being overtaken by LoopNet. Was this a case of buy or be bought? The big questions now are how will the industry react, and will the real estate industry ultimately accept it?

The sentiment was mixed. There was agreement that the combined company would be a “strong” (569 online mentions) “giant” “winner”. Both CEOs Andrew Florance and Richard Doyle had pushed upbeat messages about innovation, cost reduction and cross selling. However after the initial positive reactions and despite CoStar waving not raising their prices the last couple years, most of the buzz ended up being about the “I own the market” culture of CoStar and likely price increases:

“LoopNet suddenly just got significantly more expensive, as LoopNet served as the only real competition to CoStar.”
“Get the checkbook ready! Can it be blocked?”
“All brokers are going to give away their data for free to one company who will sell it back to us at what price?”
“It makes us think twice about sharing comps going forward.”
“Not good news, CoStar is not as user friendly”
“Right now the listing systems are run like a swap meet.”

Of course@CoStarSucks on Twitter also weighed in:

What's being said online about your brand?

Net-net, our industry is subject to the same economic forces besieging all the others; it just has taken longer for consolidation to occur on a broad scale. We see the CoStar-LoopNet transaction as a harbinger for many more mergers in the technology, finance, brokerage and service sectors of commercial real estate. And yes, expect to pay more for the services provided by the new CoStar. They will be cross selling and bundling PPR, CoStar and Loopnet services. Ultimately that might provide savings just like when we buy CableTV, internet, and phone services together.

Also expect CoStar to address the above publicly once the deal closes… If you’d like to know more about the power of online media to influence perceptions about your business reputation, visit CREObuzz.com. Find out how your business compares with your peers. In the meantime, to keep current on the buzz about CoStar, simply follow our blog here and CREOpoint.comfor updates. The integration phase, marketing later this year and corresponding competitive responses are likely to prove very interesting…

Peter Belisle of JLL: Roof Condition Affects Solar Opportunity

Sustainability No Responses »

Mar 272011

JLL Peter Belisle solar power and roof replacement

Peter Belisle of Jones Lang LaSalle discusses the impact of rooftop age and condition in considering solar power installations. E.g., an owner facing roof replacement might defray the cost by leasing rooftop space to a third-party solar power company.

Peter Belisle: Solar Doubles Down

Sustainability No Responses »

Jan 232011

2010 was a big year for solar power in the U.S. And thanks in part to two recent federal legislative actions, 2011 is shaping up as an even bigger year.

One of those legislative actions was part of the tax deal that famously extended Bush-era tax credits and unemployment benefits. Embedded in the bill was a provision allowing companies to depreciate 100 percent of the cost of renewable energy in the first year.

Congress also extended Section 1603 of ARRA for another year, which means property owners can continue to get a 30 percent Treasury Grant for solar installations. The 30 percent was originally designed to be a tax credit, but was switched to a grant since many businesses are not profitable enough to use the credits.

There are some great state incentive programs as well, particularly in New Jersey and Maryland, which require utilities to get a percentage of their power from renewable sources generated by private-sector firms. Right now, a commercial property owner in the right area can make a tidy profit from a solar program that’s implemented properly.

Incentives have played a big role in the growth of solar in the U.S. Nationwide solar capacity doubled in 2010 and broke the 1 gigawatt mark for the first time, according The Solar Energy Industries Association. The cost of solar fell 8.5 percent in just six months, fueling demand but also as a result of increasing demand. SEIA predicts the market will double again in 2011, and we will end the year with about 2 gigawatts of capacity.

All these government programs have the same catch – you have to act fast. In the case of state utility programs, the need for speed is simple supply-and-demand economics: Utilities are willing to lock in agreements at high rates now because their requirements exceed local renewable energy capacity. When enough owners catch up with solar installations in a couple of years, market balance will be restored.

The federal programs require fast action simply because they’re short-term incentives, designed to stimulate jobs and investment as well as to generate clean energy. The wind and solar industries employ nearly 200,000 Americans between them, and solar alone added an estimated $18 billion to the U.S. economy, including exports. The government wants to accelerate that.

But most owners aren’t ready to make a quick decision on renewable energy. There are several different ways to structure a deal, and many of the people knocking on owners’ doors are pitching their solution as the one that works best. Faced with conflicting information and a “buy-now” sense of urgency akin to late-night infomercials, owners will tend to do nothing rather than risk falling for a snake-oil sales pitch. That’s understandable, but unfortunate. There really is a great opportunity hidden in all the hype.

Spreads drop, loan-to-values rise as lenders struggle to find loans for their CMBS pools

Finance No Responses »

May 072010

By: James DuMars, managing director-NorthMarq Capital’s Phoenix office

We’re seeing increased activity from several large banks and investment banks as they seek to accumulate loans for their CMBS programs as well as increase “on book” commercial real estate loans.

Just this week, I met with one national bank and learned that they funded approximately $1 Billion in new permanent loans in the past 60 days within their Commercial Mortgage Origination group, bringing their total year-to-date production to $1.6 Billion. Their goal this year is $3 Billion, significantly more than the $700 Million they originated in 2009. Many of these loans are slated for CMBS but if need be, the bank will hold these loans. Their plan is to take a portfolio of $500 Million to market sometime later this year. When asked about the supply of “B Piece” buyers, the bank representative replied that they believe the pool will be fully subscribed but if need be, the bank will hold their “B” piece. They’re confident in their underwriting.

Despite the fact that since 2008 no traditional type CMBS pools have been securitized, this trend to accumulate CMBS structured loans and sell them is consistent with business plans of several national banks and investment banks.

Lenders report their survey of the market tells them there’s no shortage of investors. It’s just difficult to find deals that make sense or borrowers willing or able to borrow, which in some instances involves writing a check to pay down an existing over leveraged property. This imbalance of supply and demand is creating inertia for spread compression and slightly more aggressive lending. Again, this activity surrounds the perception that the typical CMBS pools of the past can again be profitable for firms even though none have yet to be taken to market.

For example, the recent $309 Million Pool RBS/Natixis securitized wasn’t exactly what we would call a traditional CMBS pool. Reportedly, it was multi-borrower, a total of six loans and most of the loans were nearly simultaneously closed with the securitization of the pool. Rumor has it that some of the loan documents had “flex language” meaning if need be the originator could have the borrower agree to changes to the documents to satisfy the bond buyers. Finally, the securitized portion of the pool was all investment grade rated with a private placement of the mezzanine piece.

Today’s loans range from 70-75% loan to value, 225-240 spreads over 5-or-10 year swaps depending on loan term, which equates to an interest rate of 5% and 6% respectively. Amortizations are typically 30 years with the loans sized to 10% debt yields and 1.35 X debt coverage ratios.

Rents are being marked to market or being blended to market depending on tenant credit. Typically a market vacancy is applied when underwriting or a micro-market vacancy if the asset is uniquely competitive.

James DuMars, managing director/senior vice president of NorthMarq Capital’s office in Phoenix, has more than 20 years of experience resolving complex commercial financing issues. Contact James at (602) 508-2206 or jdumars@northmarq.com