Real Estate Management News - 05/16/2018

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May 16, 2018
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IREM® HEADLINES
IREM Connects with Rural Housing Service and HUD
Creating Value Is Key Message at International Conference
The IREM Leadership Conference is Set for Montreal
Louisiana House Bill 748

INDUSTRY HEADLINES
Living in a Sustainable Building 'Very Important' to 84 Percent of Residents
How to Meet ADA Bathroom Requirements
Blackstone Bets $7.6 Billion More on the Amazon Revolution
Building Profit With Back-Office Outsourcing
From Toys R Us to Pilates Studios: Malls Fill Empty Stores With Latest Fitness Fads
CA Building Code Requires Rooftop Solar for New Apartment Buildings
Supervalu Announces Strategic Shift
Dragging Anchor: Large Retail Vacancies Hit All-Time High in Chicago Area
A Strong Future for Airport Retail
Luxury Apartment Community Offers Fully-Integrated Smart-Home Living Experience for Residents
What Is a Mall in 2018? How Portland Shopping Centers Change to Meet New Consumer Demands
Bigger May Not Always Be Better to Insure


 
 

IREM Headlines


IREM Connects with Rural Housing Service and HUD

IREM remains committed to having a strong relationship with agencies in Washington, DC, that impact members’ business, and this is especially true of relations with the U.S. Department of Agriculture’s Rural Housing Service (RHS) and the U.S. Department of Housing and Urban Development (HUD). This was evident last week when IREM’s Federal Housing Advisory Board met with RHS and HUD to discuss directives regarding federally assisted housing.

Discussions with RHS addressed its 2018/2019 budget, Non-Profit Asset Management Fee, Unliquidated Loan and Grant Obligations, and an update on their Capital Needs Assessment (CNA) E-tool. Discussions with HUD included updates on:
• Performance Based Contract Administration (PBCA) Contract/Rebid;
• Disaster Relief from hurricanes Harvey, Irma and Maria;
• Rental Assistance Demonstration (RAD) project; and
• Housing Assistance Payments.

IREM members also met with HUD’s Fair Housing Department to push for guidance on the companion animal issue.

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Creating Value Is Key Message at International Conference

“Connecting Bridges and Borders in Real Estate Property Management” was the stated theme of an international real estate management conference held last week in Jersey City and hosted by New Jersey City University (NJCU) School of Business with IREM as a sponsor. But the underlying message delivered by nearly all of the speakers was about value creation—value creation through differentiation, technology, innovation, scalability, sustainability, talent development and customer focus.

Kicking off the session and speaking on behalf of IREM was Chip Watts, CPM, CCIM, of Watts Realty Co., AMO, in Birmingham, Ala. Watts set the stage for the role real estate management plays in the investment process by noting that “at the end of the day, the value of a real estate asset isn’t tied to the bricks and mortar.” He went on to explain, “Rather, it’s based on the cash flow generated by the property. And this is where quality, professional management excels and makes a difference.”

Dustin Read, Ph.D./J.D., associate professor of property management at Virginia Tech, shared insights on what institutional asset managers are looking for in their third-party property managers, insights gained from research he has undertaken on IREM’s behalf. Speakers from Spain and Dubai complemented those from the United States in discussing best practices in property management and the policy issues and trends that are driving both operational and strategic real estate decisions.

The conference was organized by David A. Weiss, founder and director of NJCU’s Institute for Dispute Resolution. Weiss also participated on a panel focusing on mediation and arbitration as dispute resolution vehicles that should be considered before resorting to litigation.

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The IREM Leadership Conference is Set for Montreal

The scenic and historical city of Montreal is the backdrop for IREM’s Annual Leadership Conference, taking place May 29-31. Offered in conjunction with the Real Estate Institute of Canada’s (REIC) annual conference and general meeting, whose theme is “Exploring Opportunity,” IREM’s segment will concentrate on sharpening skills and gaining a deeper understanding of the crucial role of volunteer leaders in an association. Sessions will cover the successful oversight of committees and boards, volunteer recruitment and engagement, and the further strengthening of the IREM-REIC relationship. The IREM rebrand, in cooperation with REIC, will also be featured.

The IREM officer team—Donald Wilkerson, CPM, Cheryl Gray, CPM and Chip Watts, CPM—will serve as presenters at the Leadership Conference, along with CEO Denise Froemming and other IREM staff. Shannon Alter, CPM, an IREM instructor, will present a workshop on presentation skills and crafting the perfect elevator pitch.

REIC is IREM’s oldest international partner, and together they have been working to present the Leadership Conference in Canada annually for over a decade. The conference is open to all IREM Members. Click here for more information and to register.
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Louisiana House Bill 748

Those who hold certifications in the state of Louisiana were concerned last month when the Louisiana House of Representatives passed House Bill 748, which would ban the use of the term “certification” issued from professional credentialing bodies unless such certification was tied to licensure. If enacted, the legislation would have negated certifications issued by non-governmental boards and agencies. The legislation would have directly affected IREM credentials, including the CPM®, ARM®, ACoM, and AMO®, which demonstrate a commitment to, and passion for, good management.

On May 10, the bill was amended to address these issues, with the term “certified” being deleted entirely from the bill. The new language now reads:

“Pursuant to the authority in this Chapter, the governor shall review on an annual basis not less than twenty percent of the agencies engaged in regulatory and licensing activities. Within five years, the governor shall have reviewed all such agencies.”
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Industry Headlines


Living in a Sustainable Building 'Very Important' to 84 Percent of Residents
Multifamily Executive (05/11/18) Shanesy, Lauren

Today's apartment renters are showing an increasingly strong interest in living green. AMLI Residential recently polled approximately 2,800 residents living at its apartment communities in major markets nationwide to find out how important sustainable living is to tenants. The survey, AMLI's inaugural Sustainable Living Index, included a heavy base of Millennials -- 59 percent of participants were under the age of 34. The research showed that 84 percent of respondents said living in a sustainable or eco-friendly building is "very important" or "moderately important" to them. Another 85 percent believe living in a sustainable home is beneficial to their personal health. Perhaps most importantly, 64 percent said they would pay a higher monthly rent to live in a green community.

"A lot of our residents are interested in sustainability for various reasons," Erin Hatcher, vice president of sustainability at AMLI, comments. "Some have indicated they enjoy the health and wellness benefits that come with sustainability. Others like the idea of being part of a larger movement in sustainability that's reducing their carbon footprint. And then some just, frankly, love to save on their utilities." Indeed, 77 percent of respondents said they believe the green living features at AMLI apartment properties had saved them money on utilities. In other findings, 94 percent said living in a smoke-free community was most important to them, followed by 93 percent who want energy- and water-efficient features. Finally, 85 percent ranked access to public transit and strong walk–bike scores a high priority.
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How to Meet ADA Bathroom Requirements
Buildings (05/10/18) Penny, Janelle

Americans with Disabilities Act (ADA) compliance applies to every part of a building. Restrooms, though, can be particularly tricky to get right when considering their relatively small space and the number of objectives building owners are required to meet. It is crucial that owners and operators identify any non-compliant areas and address them. Consulting with an ADA expert is highly recommended. Furthermore, while facilities managers are not typically experts in all things ADA, the facilities team's handling of ADA compliance or noncompliance may make the difference between a verbal complaint versus a lawsuit. When trying to understand why ADA compliance in restrooms is such a worrisome issue for both building owners and occupants with disabilities, it is necessary to put yourself in the user's shoes. Imagine, for example, not being able to get into a stall with a mobility aid.

One of the most common compliance problems is ADA-compliant mirror height. Almost always, a restroom's mirror will be more than 40 inches above the floor. One must be a really tall person in a wheelchair to be able to see one's reflection in a mirror that high. Often it's 10 to 18 inches too high, and it's clear the restroom's designers have not thought about a man or a woman in a wheelchair. Another common problem is the absence of vertical grab bars. They were not required in the original 1991 standards, but were added in the 2010 update. All bars must also have at least an inch and a half of clear space in every direction. Toilets, meanwhile, must be located within 16 to 18 inches from the centerline of the wall. Any more or less than that makes maneuvering difficult. With regards to sinks, the 1991 requirements permitted the sink to butt into the maneuvering space required for the toilet. But the 2010 update prohibits that. As a result, older buildings often run into trouble. Finally, otherwise compliant bathrooms will sometimes have the door installed improperly so that it swings into the bathroom instead of outward.
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Blackstone Bets $7.6 Billion More on the Amazon Revolution
Bloomberg (05/07/18) Mulholland, Sarah; Syed, Sarah

Blackstone Group LP has inked a $7.6 billion deal to acquire Gramercy Property Trust. The shift toward online shopping has increased the need for warehouse space by retailers eager to expand their digital operations and slash delivery times. This, in turn, has lured investors into logistics real estate at a time when sales of other commercial property types have slowed due to concerns over rising interest rates and other factors. Purchases of industrial buildings climbed 34 percent in the first three months of this year from a year ago to $20.9 billion, reports Real Capital Analytics Inc. Blackstone Real Estate Partners VIII affiliates agreed to pay $27.50 in cash for each Gramercy share.
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Building Profit With Back-Office Outsourcing
Property Management Insider (05/18) Alerasoul, Sarah

Collapsing apartment operations into digital is disrupting talent models, as well as ending traditional workflows. In the midst of this shift, apartment owners are running into a big slowdown -- keeping the books. Accounting and financial procedures can create drag on the margins when it should improve an operator's ability to build profit. "Owners want to run properties, not keep books. That's really their highest calling," remarked Kim Kowalski, Vice President of SmartSource operations for RealPage. For many, outsourcing is the solution. Back-office outsourcing takes the burden of the books off property owners' hands and puts them into the experts'. This, in turn, creates additional revenue streams and improves their ability to turn a profit faster.

Many owners who would never have thought of outsourcing such services in the past now find the strategy attractive, mainly because it ensures the work is taken care of without the fear of staff turnover. To this end, outsourcing back office services has become a key strategy for new apartment operators. At the same time, owners can add dozens of multifamily housing communities to their portfolio without increasing the headcount of the management team at home. "The math becomes very simple," concluded Kowalski. "Accounting is a critical part of multifamily operation. But where you stand -- that is, the owner's distance from this function -- often determines where energy and thought is invested."
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From Toys R Us to Pilates Studios: Malls Fill Empty Stores With Latest Fitness Fads
USA Today (05/08/18) Jones, Charisse

In today's changing retail landscape, traditional department store anchors and aging fast-food chains are closing and are being replaced with new, wellness-oriented gyms and trendy eateries. Indeed, a growing number of Pilates studios, juice shops, and other fitness- and health-focused businesses are filling the void as such companies as Sears, Toys R Us, and Subway shutter locations. The shift is not only being spurred by retail property owners looking to appeal to the changing tastes of the public, but wellness businesses that desire the foot traffic and ready-made storefronts left behind when traditional restaurants and stores close. Shaun Grove, president of the Club Pilates fitness chain, forecasts that in the next year or so, between 5 percent and 10 percent of his company's clubs will be located in spaces previously housing retailers. Grove remarks, "What we're seeing -- and we have been seeing over the last several years -- is these landlords wanting to break up those centers into four or five pieces and bring in different boutique fitness concepts that are all very complementary to each other."

To be sure, fitness is not the only non-traditional business moving into empty storefronts. Offices, apartments, and even family attractions like aquariums are also filling vacant spaces in malls and outdoor shopping centers. CBL Properties, which has commercial real-estate holdings in 27 states, said that 70 percent of its new leasing activity was for non-retail uses in this year's January-through-March stretch. Meanwhile, an International Council of Shopping Centers survey found that 65 percent of shoppers generally visit non-retail tenants while at the mall. "Our job is to figure out . . . what does the American consumer want," concludes Melinda Holland, senior vice president of business development at mall owner GGP. "Right now it's all about fitness and it's about food and it's about healthy lifestyle. So that's the type of retailer that we're going to try and bring into our shopping centers."
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CA Building Code Requires Rooftop Solar for New Apartment Buildings
Energy Manager Today (05/10/18) Danigelis, Alyssa

The California Energy Commission voted unanimously this past week to update the state's building code, requiring rooftop solar panels on all new apartment building and condominium construction beginning Jan. 1, 2020. The change would make California the only state with such a rule. The move is part of a larger effort in the state to cut emissions by 40 percent below 1990 levels by 2030. New apartments and condos up to three stories high being built will be required to have solar PV systems. Shaded and taller buildings that cannot accommodate rooftop systems will be eligible for exceptions or alternatives. Although commissioners project that the long-term benefits of solar panels will outweigh the upfront costs, the investment will be considerable. Contractors in the San Diego metro area estimate the code change will add around $20,000 to construction costs, depending on the size of the multifamily complex.

Bob Raymer, technical director for the California Building Industry Association, counters that the revisions would add an estimated $8,400 to $12,400 to the current cost. The change also comes at a time when solar installers are dealing with the Trump administration's tariffs on solar panels made abroad and estimating that the new tariff's on imported steel and aluminum could hike the price of racking systems for the residential market by $100 to $200. "Anything that's going to expand the market and increase awareness is great," concludes Barry Cinnamon, CEO of San Jose-based Spice Solar, which specializes in residential installations.
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Supervalu Announces Strategic Shift
Commercial Property Executive (05/11/18) Loria, Keith

Supervalu Inc. last week completed a sale and leaseback of seven of its distribution centers as part of the supermarket retailer's new strategic shift, transitioning from operating traditional grocery stores to running a grocery wholesale and distribution business. The sale and leaseback of an eighth property is also in the works and should be completed by the fall. Together, the eight facilities combine for nearly 5.8 million square feet of space, with an aggregate price of nearly $483 million. Proceeds from the sales will be used to slash outstanding debt, including paying off a mortgage related to one of the sold facilities. Following the sale, Supervalu signed 20-year lease accords for each of the seven facilities, with five-year renewal options on each site.
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Dragging Anchor: Large Retail Vacancies Hit All-Time High in Chicago Area
The Real Deal (05/07/18) O'Brien, John

CBRE researchers report that the amount of available retail anchor space has hit a record high of 12.3 million square feet in the Chicago metro area, up from 10.8 million sq. ft. a year prior. Thanks to retail bankruptcies and store closings among such chains as Toys R Us, the amount of vacant anchor space has soared 50 percent in just the last couple of years. The problem can extend beyond a vacant anchor space, as smaller stores in shopping malls depend on their larger neighbors to bring in consistent foot traffic. "When their leases come up for renewal, some of those tenants may choose not to renew," Morningstar real estate debt analyst Edward Dittmer explains. "When you start to see in-line tenants leave that part of the mall, it's hard to recover from that."

Some retail landlords have been able to fill the vacant anchor spaces. To take over most of a three-story, 250,000-square-foot Sears store at Oakbrook Center in suburban Oak Brook, Chicago-based mall owner GGP signed up Life Time Fitness; Land's End; L.L. Bean; Ballard Designs; and KidZania, a children's entertainment concept. Discount apparel chains like Ross and Marshall's have leased more anchor space here than any other tenant category, CBRE adds. Fitness and entertainment tenants also have been popular with mall operators, partly because they are not vulnerable to the rising e-commerce threat.
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A Strong Future for Airport Retail
Aviation Pros (05/07/18) Petrie, Joe

Airport retail is thriving, and more industry insiders are starting to take note. Among them is Hudson Group President and CEO Joe DiDomizio, who notes that e-commerce is "cannibalizing street retailers, but our business is very different than street retail. When you get to an airport, we're satisfying the immediate needs and wants of travelers. We have a captive audience. Average dwell time is around 75 minutes. These customers have a high propensity to spend and we really focus on catering to their immediate needs and wants."

Technology will continue to make an impact in this niche, where there is a long-term opportunity to leverage such digital platforms as payments and product consulting. DiDomizio says airports are dynamic and evolving, as they look to grow non-aeronautical revenue, which he sees as advantageous for travel retailers. "I think the challenge we have is to be proactive by meeting those changing habits because it has happened very quick." He adds that airports rely on their retailers to be "innovators in product assortment" and ahead of the curve on consumer trends.
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Luxury Apartment Community Offers Fully-Integrated Smart-Home Living Experience for Residents
MultifamilyBiz (05/04/18)

Apartment developer LMC recently announced the start of leasing at Marlowe, a luxury mixed-use apartment complex integrated with smart-home technology in Chicago's River North neighborhood. Set to open in phases, the 15-story building features 176 rental units equipped with the most comprehensive smart-home technology available in an apartment community in that part of the Windy City. Among the technologies incorporated into every apartment are a Honeywell Lyric smart thermostat, a Ruckus Router, and a Sonos One with Alexa and Lutron Pico Remotes for dimming lights and controlling smart-home speakers. Select units will boast Lutron Roller Shades, which can be controlled from a smartphone.

Doug Bober, division president of Central and Midwest for LMC, remarks, "Apartment residents have heightened expectations for a tech-enabled living experience. We believe that combining these smart-home conveniences with an incredible architectural design will not only meet the demand of today's renter, it will surpass it." Marlowe also incorporates ground-floor retail, including a Limitless coffee shop integrated into the lobby. Building amenities range from a skyline deck and outdoor lap pool to a community lounge with gaming tables and a bar, plus a fitness facility with flex space and a pet run/pet wash with owner's lounge. Marlowe residents will also have access to self-service package and dry cleaning lockers, along with a community library, electric-vehicle charging stations, and bicycle storage.
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What Is a Mall in 2018? How Portland Shopping Centers Change to Meet New Consumer Demands
The Oregonian (OR) (05/07/18) Acker, Lizzy

In Oregon, a number of Portland-area malls are getting creative in their attempts to combat online retail and maintain customer traffic. With the goal shifting from selling mass quantities of products to branding, more mall owners are placing greater emphasis on creating an experience to draw people in. "You go to a concert at the mall, you have a cocktail," Kathleen Healy, a broker with Commercial Realty Advisors NW, said, "the priority being we want to create places where people want to come." Bridgeport Village, for instance, has created an immersive environment that mimics a small downtown. At nearby Pioneer Place, WeWork coworking space has taken up residence in the top floor, pushing the building toward becoming both an employment center and a shopping center.

Different things "help activate certain centers depending on the mall," said Ashley Heichelbech, another broker with Commercial Realty Advisors NW. "Maybe a school or daycare." At Portland's Lloyd Center, an empty Sears department store is set to become a multi-screen cineplex. At Pioneer Square, a three-level Zara, the Spanish fast fashion retailer, is now under construction. "Malls will continue to evolve and go through change in order to adapt to our culture and environment," Healy concluded. "If driverless cars become a reality in our world, and something that people start to utilize widely, that will change parking requirements for malls, and retail in general. That's just one example of what's to come."
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Bigger May Not Always Be Better to Insure
Canadian Underwriter (05/03/18) Gambrill, David

A new Insurance Institute of Canada study indicates that tall structures of more than 90 stories are becoming an increasingly big challenge to insure. Allianz Global Corporate and Specialty stated in a recent risk bulletin that "impact of any seismic or natural catastrophe activity -- in particular, flooding during the construction stage; the threat posed by wind loads and fire; choice of building materials; and the unique complexity of managing projects that can involve as many as 10,000 workers and over 100 subcontractors -- represent the key risk challenges." Having insurance and risk consultants on site is important, the firm concluded, especially as insured values for these super-tall buildings continues to rise.
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