Posted by: Dan Oster
Wednesday, April 29, 2009
Posted by: Dan Oster
Monday, April 27, 2009
Posted by: Dan Oster
Thursday, April 23, 2009
775 336 4623
They argue the Port of Los Angeles will be seeing increased competition. Why? For a multitude of reasons, from increases in regulation to companies looking for ways not to put all their eggs in one basket. One reason for the latter rationale is the labor dispute last year that handcuffed the Port of Los Angeles.
Casey and Roth are not arguing that the neighboring ports of Los Angeles and Long Beach will lose their dominance as the entry points to the United States for Asia, but other ports along the West Coast, for example British Columbia and Oregon, will see an increase in business.
This may benefit the Northern Nevada industrial market along with other industrial markets competing with the Inland Empire. By businesses choosing to diversify their ports of entry, inland distribution locations located along rail lines may well see an increase in value through the natural increase in demand.
Hopefully, more news like this will help push along infrastructure spending, for example the rail line improvements to accommodate stack trains being proposed over the Sierra Nevada.
To read the article by Mr. Casey and Mr. Roth please click here.
Wednesday, April 22, 2009
Posted by: Scott Beggs
775 336 4644
NAI Global recently offered a webinar to their affiliate offices featuring a presentation by Dr. Peter Linneman, one of the leading real estate economists in the nation. During that presentation, Dr. Linneman described the current investment situation in which investors must be “bribed” into moving out of cash and into higher returning investments. The “bribe” comes in the form of a huge required risk premium on any non-cash investment opportunity. Basically, those entities with capital available for investment are choosing between two extreme investment alternatives: (1) a 0% real-return from cash equivalent investments, or (2) a requirement of 25%+ unleveraged returns over a three to five year holding period on equity investments in commercial real estate (regardless of the asset’s risk profile, which is highly problematic in my mind).
If an investment is not priced at a level that offers an investor these types of returns, those investors are staying away in droves. Investors justify this stance by pointing to all of the uncertainties inherent in commercial real estate at this point in the cycle. The most obvious risk being continued weakness in tenant demand which could lead to prolonged vacancies and/or deterioration in market rental rates. My first response to this view is that high-quality real estate investors should be able to underwrite and more importantly mitigate the risks of reduced demand in the space markets and should be able to weed-out those assets that possess undue demand risks. Secondly, this view suggests that the investor has a negative view of the resilience of the U.S. economy and a short-term perspective on investing. In that sense, these investors should maintain their cash positions because their view of real estate is too clouded by the anomalies of the last 4 years.
Another commonly noted risk of real estate investment is the fear of continued deterioration in the capital markets resulting in a prolonged (or worse, permanent) increase in cap rates. As for the risk of prolonged softness in the capital markets, those investors would seem to poses a fairly myopic perception of the long-term value of commercial real estate. (my·o·pic \ mi-ō-pik \ adjective: “a lack of foresight or discernment : a narrow view of something.”) At some point, the supply/demand fundamentals for commercial will moderate and eventually improve. Capital markets will begin to stabilize and the required risk premium on commercial real estate will decline. At that point competition amongst investors will grow and downward pressure on cap rates will build. And some investors will still have “dry powder” but they will have missed the opportunity created by this upheaval.
Tuesday, April 21, 2009
Wednesday, April 15, 2009
Many investors across the asset spectrum have found themselves, and their money, on the sidelines of the financial game. Most of these investors currently have a healthy percentage of their wealth in cash, money market accounts, or CDs. These little to no interest earning assets, while safe, won’t provide their owners with the long term returns they should hope to realize. I can understand why many of them withdrew their money from the market, however I believe in passive management as well as the long term hold approach to assets. Trying to time the bottom, or any point in a market, is a futile affair; to use a popular term, “It is like trying to catch a fallen dagger”. No one knows when the “bottom” will be reached, but the sooner we show confidence in our economy, by getting dollars into circulation, the sooner we’ll pull out of this trough.
Thursday, April 9, 2009
Posted by: Aaron West-Guillen
Land Specialist / Land Entitilement Consultant
775 336 4674
Aaron West-Guillen has 15 years of land acquisition, entitlement and development experience in northern Nevada.
Wednesday, April 8, 2009
For Owners, managers and investors are carefully watching the spring apartment lease-up. Retaining good tenants is now a top priority for every complex. Especially interesting are the properties with low vacancy at market rents, and how managers are achieving that in the current rental market. Very well located properties seem to hold occupancy consistently, even in a downturn, and senior units typically have a stable profile with increasing demand despite recent increases in supply. Another category of units able to attract and hold tenants are properties near UNR, whose total student enrollment now tops 20,000. Owners of properties under twenty units quickly move rents down to fill vacancies. But rising, double-digit vacancy now affects 70% of market-rate properties over 50 units (and 55% of market-rate properties over 80 units) as managers re-set rents and concessions to attract and retain qualified tenants. Tenants with stable employment have choices and they know it.
So who else does well in a downturn ? Often overlooked in a soft market is the economic strength and stability of the true rental community, defined as an apartment complex in which most of the tenants emotionally identify with their apartment community as a whole, not merely the single unit they live in. Investors say they can spot such properties when they find a resident manager who knows the residents by first name, where residents congregate on the property and where residents respect and look out for one another. Tenant spaces opening onto common area reflect an unusual pride of place. Residents of the true rental community see their apartment home as unique, they often stay for years and recommend the property to friends, co-workers and family.
For landlords, a true rental community is an operating gem. Turnover can decline 50% and retention rates are the highest among comparable properties. Promotional costs are reduced as residents refer new residents to fill vacant units. In good times, a waiting list is common. The owner can easily implement pro-active unit maintenance that’s welcomed by residents. Common areas typically need much less maintenance, as residents see their home as a safe and caring place, so problems are corrected quickly in a virtuous cycle of property improvement. Loss to lease expense is almost non-existent, and insuring these properties is cost effective because liability claims are few and small. The true rental community delivers stable, consistent net revenue and operating costs with few surprises. Shrewd owners will visibly improve the property continuously, and so keep rents slightly above neighboring properties because the comparative value to the tenant is an emotional intangible beyond price.
Owners of the true rental community often act as owner-managers to systematically improve their property, especially its curb appeal, amenities, security and cleanliness. Their resident managers are usually long-term employees who know the property well, select residents skillfully and are superb at really listening to tenants. Quick to act on good ideas, these managers are highly creative in promoting the community. They build good will among the residents by being positive, friendly and reliable. Both owners and managers of the true rental community excel in attracting staff for maintenance, leasing and grounds who exhibit the personality traits that residents deeply appreciate. These communities evolve from a committed owner and long-term manager, through careful resident selection and retention over years, and the result is something you can sense immediately upon entering the property.
In a downturn, the true rental community has several advantages. First, the communications between residents and management are open and frequent, so the retention conversation can occur early and comfortably. Tenants who need to double up, downsize, or blend rents to extend renewal don’t spend days getting an answer or make commitments to another property when the tenancy could have been rescued. Rather than drop the rent to meet the market on a vacant unit, the manager can blend the resident’s rate with an incentive to remain. Second, residents of the true rental community tend to be lifestyle renters with stable employment or income sources, not temporary renters in life transitions or young couples forming a first household. Such tenants tend to batten down in tough times, especially when their home is more than just a rental unit. Third, credit issues and revenue loss to lease both decline sharply in a downturn, as residents pare back non-essential spending and make sure priorities like timely rent payments are made as agreed. Fourth, the vendors who service these properties truly value the business, because the owner and manager are loyal to vendors who perform well, and both parties respond frankly to open discussions about costs and value in a downturn. Finally, these properties normally have low debt levels and manageable debt service, so basic capital expenditures and maintenance are not sacrificed to the burden of leverage.
Many properties in the Reno/Sparks region are now evolving into true rental communities, and some have long since matured into it, such as Dakota Crest, Vista Ridge and Kirman Garden. One excellent example is Water’s Edge Apartments, at 200 Booth Street, near Reno High School. Located in the premier school district of Washoe County, the property has been owner-managed for nearly twenty years. Built in 1977, the property has been continuously upgraded with modernized interiors and a common area that capitalizes on its site adjacent the Truckee River. But what can’t be easily described in facts and figures is an unmistakable quality of resident satisfaction in a true rental community.