Real Estate Management News - 12/06/2017

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December 6, 2017
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IREM® HEADLINES
Tax Reform – Update
The Art of CAM Reconciliations
Now Accepting Nominations for 2018-2019 Next-Gen CPM Leaders!

INDUSTRY HEADLINES
Could Recent Sexual Harassment Cases Change Office Design?
Social Media Impact on Multifamily Industry
Office Tenants Today Value and Expect Quality Connectivity
Microsoft to Modernize Redmond Headquarters Campus in 2018
LeaseLock Wants to Eliminate Security Deposits With Insurance for Property Managers
Meditation Brings Calm to CEOs
Three Tips for Retailers Entering Nontraditional Spaces
The Ability to Work From Home: A Must Have For Employees
Shopping Centers to Reinvent Themselves as Simply 'Centers' By 2030
The Importance of Reputation Management
Simon Bridges Online and Brick-and-Mortar With 'The Edit'
Green Building Council Adopts Perkins+Will Resiliency Standard for LEED


 
 

IREM Headlines


Tax Reform – Update

One Saturday, December 2, the Senate passed its version of the Tax Cuts and Jobs Act by a vote of 51-49. Informal negotiations between the House and Senate are already underway, but differences between the two bills will be formally reconciled through a conference committee. The committee has stated that it would like to release a draft next week.

At this time the House and Senate bills are favorable to IREM’s priority issues. Although there will be a lot more discussions about the tax proposals, below is how the draft legislation lines up with IREM’s priorities:

IREM's Priority Issues:
  • The House and Senate bills preserves 1031 Like Kind Exchange for real estate, but eliminates the like kind exchange for personal property
  • Carried Interest has been retained, however a three-year hold period is required to qualify
  • The Section 179D Deduction for Energy Efficient Commercial Buildings was not addressed by either bill. Currently, it is set to remain expired as of December 31, 2016. IREM is part of a coalition of industry stakeholders fighting to extend and strengthen the 179D deduction. IREM signed onto a letter urging members of the House to support the deduction, and will continue urging the Senate to do the same
For more details on the House and Senate versions of the tax reform legislation, check out the comparison charts on IREM’s Public Policy website.
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The Art of CAM Reconciliations

Calculating operating expense adjustments is as much of an art as it is a science. Science does apply when it comes to straightforward concepts, such as lease type, expense caps, pro rata and expense exclusions. However, the property manager becomes an artist when dealing with property/client strategy, landlord-reimbursed expenses/refunds, recoverable capital and gross-ups.

“It is our job to creatively and strategically help our owners meet their goals,” said Angela Gomez Mettler, regional director for the REMM Group, AMO, at IREM’s 2017 Global Summit. More often than not, the client will want to pass back something that is not allowable (e.g. a decorative façade), but it is the role of the property manager to determine and advise on which expenses truly benefit the tenants. If in doubt, always refer back to the lease when determining which expenses to pass back to the tenant. Look for language defining billable CAM as any recoverable capital item that reduces or lessens the tenant’s operating expenses.

It’s important to note that precedent is a factor. Errors on the part of past owners and managers may affect what can be charged in the future. However, if an expense truly benefits and lowers the operating cost of the tenant, the lease notes that such expenses may be charged, and the owner agrees that it should be passed back, it is up to the property manager to assign these charges and communicate this change to the tenants.

Learn more about CAM by checking out IREM’s recorded webinars CAM Reconciliation: Lessons Learned, and Everybody’s Got CAM: How to Sail Through CAM Season.
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Now Accepting Nominations for 2018-2019 Next-Gen CPM Leaders!

Do you work for an AMO Firm and have a rock star employee under the age of 35 who you want to invest in? Would this person be a great candidate to earn the CPM designation and get additional leadership training within a condensed 16-18 month timeframe? If yes, you can nominate him/her for IREM Next-Gen CPM Leaders!

IREM Next-Gen CPM Leaders is a talent management initiative exclusively for AMO Firms. This initiative fast tracks a class of young professionals through the CPM program, providing supplemental leadership training at a savings of more than 50% on tuitions and registrations. The program will not only help your firm develop talent, it will create a sense of community and camaraderie among the participants to network and share best practices from around the country. A win-win for your company and your employee!

More details on the eligibility requirements and commitments can be found at http://www.irem.org/Next-GenProgram.

Nominations for the 2018-2019 Next-Gen CPM Leaders class are due by February 15, 2018.

For more information, please contact Career Services at IREM Headquarters at academics@irem.org or 312-329-6001. We look forward to seeing your nominations!
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Industry Headlines


Could Recent Sexual Harassment Cases Change Office Design?
MarketWatch (12/04/17) Lamagna, Maria

Workplace design experts say the current wave of sexual harassment incidents will help spur the current trend towards more democratically designed offices where senior management sit among the other employees or behind glass walls. The good news is the allegations come at a time when open-office layouts have become quite popular, observes Scott Lesizza, a founding principal at the design firm Workwell Partners. Even shared spaces, like conference rooms, now often have glass windows or walls that could help with efforts to cut down on harassment in the future.

Workplaces might also do well to take ideas from college campuses and after-school programs by adding better lighting, surveillance cameras, and security personnel, states Laura Palumbo, the communications director for the National Sexual Violence Resource Center. This, plus open plan offices, might deter workers from having sexually explicit or offensive conversations. It's hard to imagine a time when C-suite executives will have no office for confidential phone calls, meetings, and hosting high-profile visitors. And unfortunately, the highest-level executives -- who have recently shown they can abuse their power -- are also the ones more likely to choose what type of office they have. Moving forward, this means more corner offices will be glass and fewer managers will have meetings behind a closed door.
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Social Media Impact on Multifamily Industry
Multi-Housing News (11/10/17) Marcut, Adina

Social media advertising has rapidly become a go-to tactic for the majority of today's marketers, and there is now mounting evidence social media has the power to change the way property management professionals do business. Such popular platforms as Facebook, Instagram, and Twitter have become an important source of influence and communication between a property manager and a future resident. Consequently, as a property manager, it is important to understand what potential residents want from these social media groups. One of the most important things in keeping your audience interested in what you have to offer is to be active. There are a lot of tools available that make posting and interacting easier by scheduling posts and monitoring your social media outlets. Consider assigning one or even two staffers to manage social media, track conversations, and/or measure campaign results. Another option is to hire a company that provides social media management services.

It is also important for property managers to know their audience to understand exactly who they are in order to better reach them. To do so, you have to ask yourself a few questions: What is the average age of your residents? Are they mostly singles, couples or families? What is the average income level? Another top tip is keep the content interesting. Choose photos, videos and articles that will draw people in and inspire them to interact. Perhaps most importantly, when you are using your social media networks, your posts, tweets, hashtags, shares and photos should demonstrate the value of your community, as well as increase demand and foot traffic.
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Office Tenants Today Value and Expect Quality Connectivity
National Real Estate Investor (11/30/17) Kirk, Patricia

A poll of 150 U.S. office leasing decision makers conducted by Radius Global Market Research for WiredScore determined that a building’s Internet connectivity is second only to location in importance to tenants when seeking office space today. Those surveyed in Fort Worth, San Francisco, Washington, Houston, Boston, and Atlanta, found that 80 percent of tenants experience connectivity issues at one time or another. Meanwhile, 77 percent of them say poor connectivity affects their bottom line. In addition, 77 percent say they would sign a longer lease if a building has superior technology or sign a lease more quickly if assured the building's connectivity meets their business requirements. Other findings include that respondents are willing to pay more per square foot for superior connectivity infrastructure (84 percent) and have a preference for a "Wired Certified" building (79 percent).

Tony Morales, an international director with JLL based in downtown Los Angeles, observes that connectivity infrastructure is more of an unknown in new developments. But in certain locations or buildings already occupied, the quality of fiber infrastructure is a known or assumed to have sufficient speed. "Tenants are looking for connectivity and will pay a premium for quality service," concludes David Cochran, a Colliers International executive vice president in Dallas and the company's local building technology expert. "They always want to know which Internet providers are in a building they are considering. And if a top-rate provider is not there, it can deter a potential tenant."
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Microsoft to Modernize Redmond Headquarters Campus in 2018
eWeek (12/01/17) Hernandez, Pedro

In five years, Microsoft Corp.'s Redmond, Wash., corporate campus will look very different. As it stands now, the headquarters site is sprinkled with several, fairly non-descript office buildings. Employees walk, bike, or are bussed between offices, laboratories, and other facilities -- often negotiating vehicular traffic to get to their destinations. That's about to change starting in the fall of 2018, with the software giant is embarking on what it is calling a "multi-year campus refresh." The five- to seven-year project involves replacing a dozen existing structures and putting up 18 new buildings at the company's East Redmond campus. In an environmentally-friendly move, the new construction will feature building and energy monitoring systems powered by Microsoft's own Azure cloud-computing platform. "Today, Microsoft has 125 buildings in the Puget Sound region," noted Brad Smith, president and chief legal officer of Microsoft. "When this project is complete, our main campus will be comprised of 131 buildings -- including the equivalent of 180 football fields of new and renovated space -- of modern workspace for the 47,000 employees who work here every day, plus room to expand operations and add up to 8,000 more people."

In addition, Microsoft is investing $150 million in transportation infrastructure, green spaces, athletic fields. and various public areas. Once finished, the revamped corporate campus will put pedestrians first, with car-free walkways, trails, and gathering spots. A two-acre open plaza that can fit 12,000 people is part of the plan, providing a backdrop for large-scale company events. By 2020, a new pedestrian and cyclist bridge will link both sides of the campus. Three years later, the Redmond Technology Transit Station will pull up to the new bridge, providing light rail service to Microsoft's headquarters. Automobile commuters have not been entirely ignored. Cars will be kept out of sight and out of mind with an underground parking facility.
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LeaseLock Wants to Eliminate Security Deposits With Insurance for Property Managers
Realty Biz News (11/28/2017) Wheatley, Mike

LeaseLock is hoping to do away with the need for security deposits to help renters gain approval while insuring apartment owners and operators for losses because of unpaid rent or damage. The start-up is touting itself as the first security deposit insurance firm to go nationwide in the United States. Renters are required to pay a small monthly fee instead of a big security deposit, while apartment owners and property managers pay nothing at all. LeaseLock then provides an insurance policy that covers them against financial losses on account of non-payment of rent or damage to the rental unit.

LeaseLock replaces the need for a co-signer, guarantor, or collection of extra security deposits. The system works as such: The prospective renter applies for approval at LeaseLock's website. Once he or she is approved, the renter will pay a monthly fee ranging from $15 to $75 according to their risk profile. The goal is to help renters who are either unable or unwilling to put down a big security deposit, which could range anywhere from $500 to $2,000 for an apartment that costs $1,500 a month to rent. LeaseLock replaces that security deposit with its policy that provides assurance for landlords, while tenants will have more money at the outset of renting to spend on other things.
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Meditation Brings Calm to CEOs
Wall Street Journal (11/29/17) Lublin, Joann S.

A growing number of CEOs -- including the top executives at Aetna Inc., Salesforce.com Inc., Tupperware Brands Corp., Whole Foods Market, and Williams-Sonoma Inc. -- meditate to lower their stress levels and boost productivity. Many even meditate at the office and are actively encouraging staff to take the time and follow their lead. To this end, Salesforce now offers so-called "mindfulness zones" in 14 of its office buildings worldwide. Meanwhile, Ultimate Fitness Group LLC opened a company meditation room earlier this year at its Boca Raton, Fla., headquarters.
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Three Tips for Retailers Entering Nontraditional Spaces
Chain Store Age (12/01/17) Broder, Richard

Vertical mixed-use developments continue to flourish, and towns and cities nationwide are pursuing such projects as a way to revitalize their civic centers. At the same time, retailers find themselves presented with abundant opportunities to seek expansion in "non-traditional" urban spaces. First-floor retail beneath office or residential space can be an especially ideal fit for urban mixed-use projects. But the development calculus changes when merging retail with office, residential, or hospitality. The article's author details the top three things that retailers and developers need to keep in mind when evaluating retail fit in non-traditional urban space, with the first being "fit and functionality." Simply from an operations standpoint point, all concerned must think carefully about how to accommodate retail logistics. The notion of fit also extends to more nuanced considerations regarding brand and "tone." The author writes, "A high-end law firm might be an awkward pairing with a Disney Store, for example."

The second thing retails and developments must keep in mind is "striking a balance." In any instance where you have two or more different uses coexisting in the same building, you need to be both thoughtful and strategic about balancing the different needs of each component. It's also important to achieve a balance within both the larger project and the overall marketplace, asking questions like "Is this what people want?" and "Is this a good fit for the surrounding neighborhood/overall project?" A third and final consideration is "respect civic context." The need to make smart decisions can be a particularly urgent priority in a city like, say, Detroit where a comprehensive civic renaissance is currently underway. In such places, there is a need to be really strategic and conscious of context and consequences in an urban landscape that is comparatively "young" and in the process of being "re-filled."
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The Ability to Work From Home: A Must Have For Employees
Buildings (11/27/17)

Employers are at risk of losing top talent to competitors who are better able to adapt to office trends such as the ability to work remotely. According to the recent Staples Workplace Survey, which polls thousands of workers nationwide, 43 percent of respondents say the ability to work remotely is a must-have despite only 38 percent of employers allowing it. Four-fifths of workers surveyed believe that employers have a responsibility to keep employees mentally and physically well -- and the ability to work from home plays a big role in doing just that. Data from the survey also suggests that open office designs are distracting to 37 percent of workers. To this end, more than half of employees polled -- 57 percent -- say that working remotely removes distractions that occur in the office. These distractions range from overhearing co-worker conversations personal phone calls to working in high-traffic areas and working near someone who is angry or upset.
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Shopping Centers to Reinvent Themselves as Simply 'Centers' By 2030
American Journal of Transportation (12/01/2017)

Retail will remain in a state of flux for the remainder of this decade and likely the next, according to new insights from The Future Of Retail 2030, a series from CBRE. Shopping centers of the future, for instance, will become just "centers" as they reinvent themselves as mixed-use destinations. Many will be adding healthcare, educational, and even leisure uses. CBRE researchers also foresee that the focus of traditional gas stations will change as they become important mini-logistic hubs, including serving as collection points for online shoppers. A third prediction: ownership of electric- and hydrogen-powered automobiles will become increasingly common, and there will be an increased need for fast-charging points. Natasha Patel, CBRE Director, Global Retail Research, remarks, "The speed of change may catch some people by surprise, as the mindset and requirements of the consumer will evolve more quickly than the industry can adapt. This means that investors and occupiers need to get ahead of the changing trends rather than catching up."

CBRE's Future of Retail 2030 examines a total of 40 "futurist" insights on how the world of retail will change in the future. The property services firm revealed the first eight of those trends early last month at MAPIC, the retail real estate conference in France. Other insights outlined by CBRE in the Retail 2030 series include: there will be a decrease in the overall dependency on smartphones, but mobile commerce will grow; independent stores will be more prevalent, as local clientele will crave more unique offerings; the in-store checkout desk will be replaced by faster cashless ways to pay; and fitting rooms will help as opposed to hinder the shopping experience, as technology will enable customers to try on an outfit in a virtual environment and show items already owned in combination with the item being considered for purchase. Finally, the number of wellness establishments will grow.
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The Importance of Reputation Management
Multifamily Executive (12/01/17)

Since the Internet has become ubiquitous, mastering reputation management has become crucial for multifamily housing operators. National Apartment Association staffer Les Shaver recently spoke to several of industry insiders to determine how they handle online reviews. Christy Ebert, a manager at Wood Partners, said, "Your online reputation is the new curb appeal. Prospects won't even visit your property if they see bad reviews online. Reputation management has become a game-changer." If an apartment owner or operator does not respond to online feedback, Ebert added, customers will draw their own conclusions.

Not leaving anything to chance, some companies have opted to hire a vendor to handle reviews. Going this route costs a nominal fee, but it does save employees a lot of time. "They sort the responses and measure our response times," remarked Steve F. Hallsey, executive vice president of operations for Wood Residential Services. "If there is something trending that you need to be aware of, they let you know." Fogelman has constructed a reputation management dashboard that is provided by a third-party partner. Fogelman's Chief Administrative Officer Melissa Smith explained, "It is a one-stop shop so we don't have to go to every site every day and see what is posted about us. We can look at these comments in a snap shot and be able to respond to everything."
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Simon Bridges Online and Brick-and-Mortar With 'The Edit'
Retail Dive (11/30/17) Howland, Daphne

Simon Property Group recently launched "The Edit" at the Roosevelt Field mall on Long Island, which the retail developer describes as "a first of its kind, scalable, turnkey retail platform." Designed by O'Neil Langan Architects, The Edit boasts a rotating selection of diverse new brands, including some that have sold only online. They include Raden Smart Luggage, menswear brand Vitaly, athletic apparel favorite Rhone, and beauty brand Winky Lux, among others. The effort recalls "In Real Life," which was launched by GGP and partner The Lionesque Group at GGP's Chicago-based Water Tower Place. That project is basically a store that allows e-commerce retailers to serve mall customers. Mall vacancy rates in this year's third quarter increased 0.2 percent to 8.3 percent, and mall vacancy increased in 34 of 77 U.S. metro areas. But those numbers belie the reality that many shopping centers are thriving, including top malls like Roosevelt Field and Water Tower Place.

In addition to adding non-retail businesses to their properties, mall owners are also spiffing them up with such technology as chatbots, in the hopes of boosting foot traffic. This makes perfect sense, as these days customers are on their phones for shopping even when they puirchase goods and merchandise from physical stores. Zachary Beloff, Simon's national director of business development, described in a statement the Roosevelt Field project as "a completely transitional place to discover new product and technology in a brick-and-mortar space." It helps the e-retailers, too, which stand to benefit from interacting with customers "in person" especially at Simon's fairly strong centers. "We are a brand that wants to reach new customers where they are already predisposed to shopping," Josh Udashkin, CEO of Raden Smart Luggage, summed up. "Simon has malls with lots of traffic. We believe the mall is an under-penetrated market for new brands that should be taken advantage of."
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Green Building Council Adopts Perkins+Will Resiliency Standard for LEED
Finance & Commerce (11/27/17) Jossi, Frank

The U.S. Green Building Council has adopted a national construction resilience standard developed by the Minneapolis office of the Perkins + Will architecture firm. The RELi standard will be incorporated into the council's Leadership in Energy and Environmental Design (LEED) certification. RELi is a point-based system in which buildings gain recognition and certification through hazard preparedness, disaster recovery, crisis communications, resilient food production, health promotion, energy efficiency, water-use reduction, and other practices. One of the first efforts will be to synthesize the RELi and LEED standards to reduce overlap.
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