Real Estate Management News - 07/12/2017

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July 12, 2017
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IREM® HEADLINES
Negotiation Skills: Why “Winning At All Costs” is a Losing Proposition
Into the Weeds: Commercial Real Estate and Legalized Marijuana
Spend Time With Your Congressman This Summer!

INDUSTRY HEADLINES
Chicago Grabs Lead in Green Office Buildings, Study Shows
3 Strategies for Maximizing Resident Satisfaction
Allianz, Columbia Form $1.3 Billion U.S. Real Estate Venture
What's the Newest Tool to Attract Metro Detroit Renters? The Power of Scent
3 Tips for Implementing Low-Flow Fixtures
Why Are These CRE Companies Magnets for Millennials?
City Is Waging a Campaign Against Office Buildings With Outdoor Space
The Age of Amenities: Adding Value to Apartment Communities
NYC Benchmarking Law Tracks Energy Efficiency
Facebook Wants to Add a Mixed-Use 'Village' to Its California Headquarters
Shopping-Mall Owners Pay Up to Stay Relevant in Amazon Era
Greystar Fund to Acquire Monogram in $3 Billion Deal


IREM Headlines


Negotiation Skills: Why “Winning At All Costs” is a Losing Proposition

Setting a firm bottom line, taking a hard bargaining position, and trying to squeeze out every penny in a negotiation (perhaps employing some of the many negotiating “dirty tricks”), may work for some situations – but not many. Employing hard line negotiating strategies can result in a couple of major problems.

We overlook what might be in our best interests: By setting a hard “bottom line,” negotiators can become anchored to that position too easily. Egos can take over, and the bottom line position becomes more important than what the negotiator is really trying to accomplish. We give up on looking for creative solutions that might serve our interests better. Furthermore, both sides can leave “money on the table” and end up with less than what they could have received.

We create strained relationships with the other parties: Most of the time, the negotiation process is just part of an ongoing relationship between the parties (or the start of what we hope to be an ongoing relationship). That’s certainly true with clients and tenants/residents – where eventually we will want more business or renewed leases. But even “one time” deals can require a continuing relationship during the implementation phase of the agreement. Bitter feelings can make it tougher the next time you need to renegotiate with a client or tenant/resident. And the vendor’s customer service might not be quite as good as you expected in implementing that “sweet deal” you forced them into.

To learn how to improve your negotiating skills, check out IREM’s Leadership Handbook for Real Estate Professionals.
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Into the Weeds: Commercial Real Estate and Legalized Marijuana

WEBINAR: Tuesday, July 18, 2017 – 3:00pm ET; 2:00pm CT; 1:00pm MT; 12:00pm PT

Medical and recreational marijuana legalization has exploded throughout the country. In 2016, sales of legal marijuana in North America were nearly $7 billion dollars and, by 2021, are expected to exceed $20 billion. In states that have opted for legalization, the marijuana industry has had both positive and negative impacts on the real estate market. Marijuana industry participants, hungry for commercial real estate to grow, distribute and manufacture their products, are leasing and buying real estate at very aggressive rate and reshaping markets. Alternatively, the conflict with federal drug law and velocity of the emerging market has created uncertainty for commercial real estate owners and managers.

Join Scott Peterson, General Counsel of the Colorado Association of Realtors, and Steve Pelikant, CPM, to develop an understanding of the pitfalls and other important considerations for property owners and managers as the marijuana industry “grows” up in their market.

Register Now!
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Spend Time With Your Congressman This Summer!

With the United States Congress’s winding down for their August recess (July 31- September 1st), it’s a perfect time to reach out to your U.S. Senators and U.S. Representatives to participate in the IREM Congressional In-District Meeting program. Contrary to popular belief, it is often easier and more effective to meet with federal legislators in their district offices than on Capitol Hill. Scheduling a meeting with a Member of Congress or their staff is easy. You can find your federal legislators and their contact info on our website.

During your meetings, you will want to educate your federal legislators and their staff real estate issues, including the importance of retaining 1031 like-kind exchanges during the tax reform process. In addition, you will want to ask for their support on ADA reform. For more information on the issues that could impact the industry, see IREM’s 2017 Issue Briefing Papers.

As you make your appointments, please submit the details on our website. Don’t worry if the meeting is not finalized, you are able to resubmit information at a later date. So let your voice be heard in Washington, without actually having to go there.
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Industry Headlines


Chicago Grabs Lead in Green Office Buildings, Study Shows
Bloomberg (07/09/17) Chasan, Emily

According to a study published late last week by CBRE Group Inc. and Maastricht University, Chicago now has the highest percentage of certified LEED or Energy Star office buildings (66 percent) among the country's 30 biggest commercial real estate markets in the U.S. The Windy City increased its percentage of green office space square footage by 6.5 percent in the past year, taking the No. 1 spot away from San Francisco. The City by the Bay fell to second place in the yearly study. Ggreen buildings now represent nearly 62 percent of commercial office space in San Francisco. "Green certification is no longer an oddity or nice to have," reports Nils Kok, associate professor at the Dutch university. "In many top markets it's an oddity if you're not green certified." Atlanta, Houston and Minneapolis rounded out the top five cities for green buildings, according to the researchers, who tracked buildings that have been LEED or Energy Star certified in the past five years.

Across the top 30 U.S. real estate markets, the study shows that the average proportion of green certified square footage is 38 percent. The U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program rates buildings based on such environmentally friendly features as solar lighting and efficient water systems. Meanwhile, the EPA's Energy Star certification shows a building has met strict energy performance standards. Chicago's office structures have gotten visibly greener as city officials built incentives for buildings to add green roofs and expedited permitting for buildings with sustainable certification, states Matt Baker, former editor of Sustainable Chicago Magazine. Some buildings now place energy monitors in their lobbies, showing how the building is performing on water or heating.
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3 Strategies for Maximizing Resident Satisfaction
Multifamily Executive (07/06/17) Wick, Cindy

To stay competitive, today's apartment owners and operators must have a strategy for constantly providing optimal service and maintaining a strong sense of community for their residents. Many multifamily housing properties are touting themselves as pet-friendly, then going the extra mile by offering such things as dog-walk areas and on-site pet spas. Another strategy is to offer unique resident events and activities. Today's residents, especially those in the Millennial demographic, place a tremendous value on community. That's why hosting events like barbecues and ice cream socials that foster this feeling is essential. To go the extra mile, try and add a personal touch. For instance, Western National's Parcwood Apartment Homes in Corona, Calif., provides handwritten "letters from Santa" during the holidays to all children whose parents living on the premises request them. Finally, use social media to drive engagement. When apartment owners and managers regularly update their social media channels and community website with engaging content, residents feel an even greater sense community and, in turn, encourages them to connect more with the property. Apartment managers should also regularly update their ILS sites -- Apartments.com, Zillow, and so forth -- to source new prospects and ensure that all rental information is up-to-date.
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Allianz, Columbia Form $1.3 Billion U.S. Real Estate Venture
Bloomberg (07/06/17) Chiglinsky, Katherine

Allianz SE and Columbia Property Trust Inc. have partnered to create a $1.26 billion joint venture for U.S. real estate. Allianz SE has contributed an office building at 114 Fifth Avenue in New York City. For its part, Columbia Property Trust Inc. contributed office buildings in Palo Alto and San Francisco, Calif. The partnership comes as more insurers are using real estate as a means to increase investments in long-term assets. As part of the deal, Allianz SE owns a 22.5 percent stake in the California properties. The insurer expects to increase that stake to 45 percent in 2018. Both companies plan to pursue more office acquisitions in the future.
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What's the Newest Tool to Attract Metro Detroit Renters? The Power of Scent
Detroit Free Press (07/08/17) Kovanis, Georgea

Buildings in which many people live and work -- particularly those in downtown Detroit -- are being scented with fragrances such as Rain Shower and Green Tea. Piped into lobbies and other public areas via building ventilation systems, the scents are the latest in architectural amenities. They are something building owners, managers, and developers have started using to try to make their interiors extra appealing in the booming and increasingly sophisticated office and apartment rental scene. "The marketplace has become so much more competitive out there, a lot of our customers are looking for a way to differentiate themselves from the norm," states Sue Wieland, manager at Ambius, a global company whose Novi office is responsible for scenting many Detroit-area buildings. "The first five seconds are typically where people make a decision whether they like a space or not [and] our emotions are evoked by scent."

While all of our senses play a role in decision-making, studies have shown that our sense of smell is especially influential. According to researchers, it is the sense that is tied directly to the part of the brain that is responsible for memory and emotion. Such retailers as Abercrombie & Fitch, Victoria's Secret, and Hugo Boss have been using scent to tug at customers' emotions and attract foot traffic for years. The practice reportedly goes back to the 1920s, when Coco Chanel instructed her Paris sales employees to douse the store with her signature scent, Chanel No. 5. Sofitel is now welcoming guests to its lobbies with a scent that's a combination of lemon leaves, bergamot, sandalwood, and French vanilla, according to the website for the company that provides the scent. The Westin, meanwhile, uses its signature White Tea fragrance. As a result, scenting companies are posting impressive growth numbers.
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3 Tips for Implementing Low-Flow Fixtures
Buildings (06/28/17)

Whether you’re phasing out the last few inefficient restroom fixtures in your building or simply replacing yesterday’s efficient models as they reach the end of their useful life, property managers can make the process relatively hassle-free by approaching the selection process in a methodical manner. The article's author details three tips for implementing low-flow fixtures in your facility's men's and women's bathrooms. Number one, "fit the fixtures to your facility." There are a variety of options available that can help reduce water use depending on the building's needs and what ownership is comfortable with. There are three key toilet styles to choose from, for example, along with waterless and low-flow uirinals. With regards to sinks, simple aerators can be installed on many faucets to reduce the amount of water coming out and can reduce water use by as much as 75 percent. Tip two is to "compare with similar buildings." It's always a good idea to reach out to fellow building managers, especially those who have recently completed similar projects, to get an idea of their costs and resulting savings. Speaking to colleagues, particularly those located closest to you, is ideal as you know they more than likely pay the same utility rates you do. Finally, tip three entails "retraining staff on maintenance." To this end, facility managers should review the recommended maintenance schedule and procedures with staff, especially when installing an unfamiliar fixture style such as a waterless urinal.
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Why Are These CRE Companies Magnets for Millennials?
National Real Estate Investor (07/09/17) Egan, John

With the retirement wave continuing among the Baby Boomer generation, the commercial property sector is having to deal with a graying workforce. The Institute of Real Estate Management reports that the average age of a property manager is now 52, with many real estate professionals in their 40s and 50s. Consequently, decision-makers responsible for attracting and retaining workers in commercial real estate recognize that they must woo Generation Y in order to keep their businesses running. However, recruiting Millennials to work in the commercial real estate sector goes beyond providing unlimited vacation or bestowing other cool perks on them. Fortune magazine recently issued its ranking of the 100 Best Workplaces for Millennials in the country, and several commercial real estate firms appear on the list.

Ranking No. 38 is Transwestern, the Houston-based commercial property services company. Millennial-age employees are strongly encouraged by Transwestern management to get involved in young professionals groups at the company's major offices to cultivate personal empowerment and teamwork. Transwestern also hosts holiday parties, year-round social events, wellness activities, one-on-one mentoring, and training and skill development courses. Walker & Dunlop, a Maryland-based provider of commercial real estate financing, placed No. 83. It sponsors a "high potential" program for employees who have been with the company for a few years and have established a track record of success. In that program, a manager identifies someone who's got the potential to rise through the ranks and nominates that individual to take part.
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City Is Waging a Campaign Against Office Buildings With Outdoor Space
The Real Deal (07/05/17) Hall, Miriam

In a campaign that has already delayed dozens of projects, New York City's Department of Buildings (DOB) is clamping down on proposed office buildings that feature outdoor space. DOB examiners are claiming that rooftops and setback can only be used for plants. As a result, they are frequently challenging whether or not a roof can support a certain weight. Spearheading the campaign is First Deputy Commissioner Thomas Fariello. At the same time, the Real Estate Board of New York (REBNY) has reportedly contacted the Department of City Planning (DCP) asking it to "convince the DOB that what we're asking is well within scope of what zoning allows," reports REBNY's Michael Slattery told the newspaper.

According to Slattery, some building owners who have had their terrace plans approved by the DOB have recently been told the approval could be withdrawn. One of the buildings that may be affected is Durst Organization's 1155 Sixth Avenue, which is set to get new terraces as part of a $110 million renovation. An unnamed spokesperson for Durst conceded, "This is a problem. Access to outdoor space is a critical component of a healthy work environment and a vital part of sustainable development as well as a major recruitment tool for New York's businesses." The DOB and DCP have since issued a joint statement. In it, they said they are "aware of the questions that have been raised regarding roof terraces" and will be "working together to arrive at a solution that supports both safety and clarity."
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The Age of Amenities: Adding Value to Apartment Communities
Property Management Insider (07/03/17) Blackwell, Tim

More and more apartment communities are upgrading their basic amenities to include such simple add-ons as ceiling fans and in-unit washers and dryers. The National Apartment Association's (NAA's) recent "Adding Value in the Age of Amenities War" study proves that most owners and operators do not always depend on flashy upgrades to earn a good return. The NAA study surveyed approximately 100,000 rental units in 35 states, examining more than 40 unique amenities. The goal was to identify the most popular upgrades since 2014 and those that had the greatest impact on revenue at the apartment community and unit levels. The research also cited the return on investment for updating apartment communities with popular amenities. Washers and dryers proved to be among the low-cost upgrades with the best returns. Energy efficient appliances and high-end kitchen appliances also ranked high. While each netted a 15 percent to 16 percent of revenue enhancement per unit, washers and dryers still gave the best return. "With costs averaging almost 60 percent less than energy efficient appliances, washers and dryers clearly o­ffer the greatest return on investment," the survey's authors wrote.

The average cost of upgrading washers and dryers was $835 per apartment. Lighting, plumbing and electrical upgrades, ceiling fans, and garbage disposals were among other popular upgrades that cost $1,000 or less per unit. The study also showed that apartment owners are upgrading with socialization in mind. With regards to exterior amenities, upgrading clubhouses and common areas designed for socializing garnered the biggest bang for the buck versus unit-specific upgrades by an average of $25 per unit in rent increase. Amenities suited for dogs proved to have the greatest return on investment, while fitness facilities, swimming pools, outdoor kitchens, and play areas are among the other features that add good value. A separate J Turner Research study indicates that residents are willing to pay a premium for fitness and wellness-related amenities, but owners surveyed did not spend as much on either.
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NYC Benchmarking Law Tracks Energy Efficiency
Commercial Property Executive (07/04/17) Gagiuc, Anca

New York City implemented several local laws in 2009 as part of the city's ambitious Greener, Greater Buildings Plan. The goal was to curb energy waste in the Big Apple's existing buildings and contribute towards the city's target of reducing emissions by 80 percent from 2005 levels by 2050. One of these laws, 84/09, the New York City Benchmarking Law, calls for owners of large buildings to annually measure their energy and water consumption in a process called "benchmarking." This law affects single buildings larger than 50,000 square feet or groups of buildings on a single lot that encompass more than 100,000 square feet.

In October 2016, the city passed Local Law 133/16, which extends the list of buildings required to benchmark to include mid-sized buildings of 25,000 square feet and larger. Their owners are expected to benchmark for the first time by May 1, 2018, and by May 1 every year thereafter. The reports will be submitted to the U.S. Environmental Protection Agency (EPA), where they will need to register first. They will also be required to enter utilities data from Jan. 1 to Dec. 31 of the previous year into the EPA's Energy Star Portfolio Manager. Buildings that do not submit their utilities data as required under the NYC Benchmarking Law will be fined $500 per quarter, up to $2,000 per year.
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Facebook Wants to Add a Mixed-Use 'Village' to Its California Headquarters
Yahoo! Finance (07/07/17) Novet, Jordan

Late last week, Facebook took the wraps off renderings and details about its plan for the 56-acre Menlo Science & Technology Park it purchased two years ago in California. The social networking giant envisions an on-site grocery store, pharmacy, and other retail sites across a swath of 125,000 square feet to make employees' work-life balance easier. John Tenanes, the company's vice president of global facilities and real estate, notes that Facebook also aims to incorporate housing into the mix with 1,500 units. Of those, 15 percent will go for below-market rates.

The new site is close to Facebook's current corporate campus. The social media company will submit its new plans to the city of Menlo Park by the end of this month, with the goal being for the first phase of the project to be ready in the first quarter of 2021. In recent years, rivals Amazon and Alphabet have both shown off fanciful corporate campus designs that could woo potential employees. Those two companies have floated so-called "bubble" concepts. Recently, Alphabet's Google has proposed housing as part of its new San Jose campus that could span six to eight million square feet. Facebook is also investing in nearby Highway 101 to help ease commute strains.
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Shopping-Mall Owners Pay Up to Stay Relevant in Amazon Era
Bloomberg (07/05/17) Mulholland, Sarah

Time Equities Inc., the owner of the Newgate Mall in Ogden, Utah, plans to spend $500,000 overhauling the center's outdated food court in a bid to lure both restaurateurs and hungry shoppers. The food hall is indeed part of a larger effort to breathe new life into the 718,000-square-foot mall and increase foot traffic, states Ami Ziff, director of national retail at the New York-based retail landlord. The company purchased Newgate from GGP Inc. for $69.5 million last year. It is one of a number of retail property owners bettering that elaborate makeovers will keep their malls competitive in the age of Amazon. Such companies are turning to everything from new bars and eateries to miniature golf courses and rock-climbing gyms. Today's patrons appear to be more interested in being entertained during a trip to the mall than they are in buying electronics and apparel.

The new tenants will pay higher rents than struggling department-store chains like Macy's and Sears and hopefully attract more traffic for the smaller retailers at the property, states Mizuho Securities USA LLC analyst Haendel St. Juste. On the downside, it's quite costly to build and maintain large, customized spaces that require extensive updates such as commercial kitchens, notes St. Juste. Mall owners' capital expenditures -- ranging from repairs to remodeling to leasing costs -- are rising relative to the income being generated by retail properties. As the retail business evolves, such capital expenditures will become increasingly important in assessing mall property values, concludes Green Street Advisors LLC.
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Greystar Fund to Acquire Monogram in $3 Billion Deal
Fortune (07/04/17) Gallucci, Jaclyn

A new fund led by Greystar Real Estate Partners, the nation's biggest operator of apartments, has agreed to buy luxury U.S. apartment developer Monogram Residential Trust Inc for around $3 billion. Texas-based Monogram owns, manages, and develops luxury apartment communities in such coastal and urban as Boston and South Florida. The new Greystar-led fund, dubbed Greystar Growth and Income Fund LP, received additional founding capital from affiliates of APG Asset Management N.V. of the Netherlands, Singaporean sovereign wealth fund GIC, and Canadian real estate investor Ivanhoe Cambridge.
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