Real Estate Management News

January 30, 2020

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Upcoming Events and Deadlines

Call for 2020 Global Summit Presentations
Submission Deadline is January 31, 2020!

Accelerators: Live Webinars

Trends in Property Management for 2020

Commercial Real Estate and Economic Outlook

Calculating Effective Net Rent

Calculating Effective Net Rent

Classroom Course Offerings

Ethics for the Real Estate Manager - ETH800
2/7/2020 – Braintree, MA
2/10/2020 – Milwaukee, WI

Asset Analysis of Investment Real Estate - ASM605
1/31/2020 - Milwaukee, WI

Budgeting, Cash Flow, and Reporting for Investment Real Estate - FIN402
2/11/2020 – New Orleans, LA

Managing Residential Properties – RES201
2/10/2020 – Braintree, MA
2/11/2020 – Milwaukee, WI

IREM ® headlines

IREM and CCIM Members in China Take Action to Fight Coronavirus

In response to the outbreak of the new coronavirus in Wuhan, China, IREM China Shanghai and CCIM China Alumni Association joined forces to provide aid by launching a fundraising campaign. The fundraiser shows how CPMs and CCIMs in China are committed to the social responsibilities of both programs.

Both organizations gathered 173,000 RMB ($24,900.00) in individual donations and 130,000 RMB ($18,700.00) in corporate donation funds. Members also agreed to donate the remaining activity fund balance of 108,000 RMB ($15,500.00) to the fundraiser. In total, over 411,000 RMB ($59,000.00) in aid has been raised.

Coordinated efforts have helped purchase an initial batch of 5,000 face masks, which were delivered to Wuhan Xiehe Hospital. Wuhan has been the most severely affected city and has faced strict quarantines and restrictions on travel. More face masks and protective suits are currently being arranged for other medical sites.

Real estate professionals in China are committed to working as a team to help stop the rapidly spreading pandemic. The virus has spread to every major city in China in the past month, and new cases are being confirmed daily.

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10 Tips for Addressing a Pandemic

The Centers for Disease Control and Prevention (CDC) is closely monitoring the outbreak of respiratory illness caused by the new coronavirus, also called 2019-nCoV, which was first identified in Wuhan, China, and has since been confirmed in several other countries, including the United States.

Consider the following steps to help prepare for and respond to a pandemic:

  1. If you do not have a continuity plan for your business, you need to prepare one. Begin by seeking out a consultant to assist you with preparing for disasters. Make sure your plan contains strategies for a pandemic. Once your plan is in place, practice it.
  2. Keep your working environment healthy by establishing hygiene protocols such as providing easily accessible hand sanitizers, ensuring adequate air circulation and encouraging the use of sick leave as necessary.
  3. Cross-train and empower employees to ensure work can continue in the event of high absenteeism in a pandemic.
  4. Update policies to include family, sick and medical leave, work-from-home guidelines and compensation guidelines when job tasks change. Create travel guidelines and establish self-quarantine policies to prevent the spread of a virus in a pandemic.
  5. Enhance internet and other self-service tools for clients and business partners. A workforce limited by a pandemic may require greater use of these options.
  6. Educate your staff and tenants. When your plan is in place, ensure that everyone knows how it works. Include your plan as part of your new hire orientation program, and make it accessible by posting notices on your web page
  7. .Increase communication with employees, clients and your clients’ customers. In emergencies, employees will look to you for guidance, and clients will feel more comfortable knowing you are prepared. Your clients’ customers are not usually as informed as you, so assume the responsibility of informing them.
  8. Contact local agencies such as hospitals, health care services, emergency services, fire departments and so on, and request a copy of their emergency plans in an effort to integrate yours.
  9. Make sure basic first aid and medical assistance can be provided. First-aid kits should include a thermometer and alcohol-based rubs for hand hygiene. Consider enrolling staff in a 40- to 60-hour first responder training course.
  10. Thoroughly review all your leases to make sure they address potential business disruptions in a pandemic. Some tenants may default on their contractual obligations because they are suffering economic repercussions. Determine if leases require tenants to have a policy that addresses sick employees. To cover any gaps, consider creating a policy that addresses these issues as an addendum to existing leases.

For more information about coronaviruses, including 2019-nCoV, visit the Centers for Disease Control website.

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HUD Provides Guidance on Assistance Animals

The U.S. Department of Housing and Urban Development (HUD) has issued guidance concerning assistance animals and the obligations of housing providers under the Fair Housing Act (FHA) with respect to animals that individuals may request as reasonable accommodations. This guidance replaces HUD’s prior guidance, from 2013, on housing providers’ obligations regarding assistance animals.

There are two types of assistance animals: (1) service animals, and (2) other trained or untrained animals that do work, perform tasks, provide assistance and/or provide therapeutic emotional support for individuals with disabilities, referred to as support animals. Persons with disabilities may request a reasonable accommodation for assistance animals, including support animals, under the FHA.

Some of HUD’s guidelines are presented below:

  • If the animal is a dog, cat, small bird, rabbit, hamster, gerbil, other rodent, fish, turtle or other small, domesticated animal that is traditionally kept in the home for pleasure rather than for commercial purposes, an accommodation should be granted if the requestor has provided information confirming that there is a disability-related need for the animal.
  • Pet rules do not apply to assistance animals. Housing providers may not limit the breed or size of a dog used as a service or support animal.
  • Supporting information should come from a licensed healthcare professional and be specific to the individual’s disability and the support the animal would provide. Documentation from the internet, on its own, is not enough to establish that an individual has a non-observable disability or related need for an assistance animal.
  • For non-observable disabilities and animals that provide therapeutic emotional support, a housing provider may ask for additional information to conduct an individualized assessment of whether it must provide the accommodation under the Fair Housing Act.

The Fair Housing Act requires housing providers to allow reasonable accommodations for assistance animals. But the lack of clarity with respect to assistance animals has created opportunities for abuse, which minimizes the very real role these animals play in supporting disabled persons. Ted Thurn, IREM’s director of government affairs, says, “As property managers have encountered more challenges with assistance animals, IREM has been working with legislators to urge HUD to release guidance on this important issue. Until now, the lack of specific guidelines with respect to confirming legitimate requirements for an assistance animal has created the opportunity for abuse.”

For more information about assistance animals, refer to the HUD website.

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IREM Establishes Public Policy Priorities for 2020

The IREM Executive Committee recently approved the Institute’s public policy priorities for 2020. With the help of an annual survey taken by its leaders, the Institute identifies legislative areas to give precedence to in the upcoming year. The results then inform the agenda for IREM’s Capitol Hill Fly-in, Congressional In-District Meetings and Congressional Briefing.

The public policy priorities for 2020 include:

  • Assistance animals
  • Medical and recreational marijuana
  • Rent control
  • ADA lawsuit reform
  • Flood insurance
  • Data security
  • Fair housing , including disparate impact and source of income discrimination
  • Property management licensing
  • Federally assisted housing

The Institute encourages members and chapters to utilize these policies as guidance when monitoring legislative and regulatory issues and while seeking active participation from members in state, local and federal matters. IREM encourages such participation in the public policy-making process--the success and growth of IREM's government affairs program depends on it

Find more information about IREM public policy priorities for 2020 here.

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Industry headlines

Consider Fire-Resistant Barriers in Open Layouts
Buildings (01/13/20) Hall, Pete

Open plan layouts have increased in popularity as office workers enjoy the flexibility and freedom to rearrange rooms at will. Moreover, open plan offices encourage collaboration by breaking down barriers between workers, another positive for creative office workers. But while open plan layouts may help grow connections and boost creativity, they can be more dangerous than traditional offices in the event of a fire. Fires spread faster in open plan offices than in smaller, compartmentalized offices, shortening the response time and making orderly evacuation a more urgent task. Office workers are at risk of excessively inhaling gas, smoke, or toxic fumes. Traditional anti-fire measures, like sprinklers and smoke alarms, should always be incorporated into open plan offices.

But there are other ways to protect against the rapid spread of a fire in an open plan layout. While traditional offices can make use of fire doors to create a barrier and allow workers to put distance between themselves and the fire, an open plan leaves no room for a fire door. Instead, fire curtains can be used. Fire curtains are stored in the ceiling and set to drop into the office space if triggered by a fire alarm or smoke detector, thus creating a barrier much like a fire door. Other advantages of fire curtains is that they can be placed anywhere along the ceiling, and they do not need to be close to walls.

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Canadian Malls See Success Via Evolution
Commercial Property Executive (01/17/20) Murray, Barbra

The Retail Council of Canada said in its new 2019 Canadian Shopping Centre study that Canadian malls have generally thrived in the age of e-commerce. The report analyzed data from the 30 most prosperous malls in Canada. According to the analysis, a majority of those properties recorded a year-over-year increase in sales per square foot. In fact, 11 of those malls registered increases greater than C$1,000 per square foot, which in U.S. dollars is roughly $766 per square foot. That is not to say that Canadian malls have not struggled as e-commerce becomes increasingly popular. But mall managers have launched multi-pronged strategies to keep business up and increase foot traffic to brick-and-mortar stores.

The strategies most frequently include creating a profitable mix of retailers in a mall space. Accordingly, mall managers have phased out underperforming retailers and incorporated experiential attractions to keep customers coming even if the customers are not shopping in the traditional sense. Toronto's Yorkdale Shopping Center, the most productive mall in the study, has carved out its niche by incorporating a number of first-to-Canada retailers. Yorkdale also has a Tesla showroom, and a large entertainment center is set to open later this year. The focus on non-retail offerings mirrors a larger trend across malls worldwide, as more developers and managers seek to include experience-driven services, food markets, fitness centers, offices, and residential space.

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Class B/C Office Buildings More Valuable Green, Report Finds
Forbes (01/21/20) Pfister, Tom

A new report from the Urban Land Institute (ULI) and the Rocky Mountain Institute (RMI) explores the advantages of eco-friendly features in Class B and C office space. Throughout the 30-page report, which was funded by the Building Owners and Managers Association (BOMA) International and Yardi Systems Inc., the authors discuss the state of energy efficiency and green leasing in the two classes today. They also provide recommendations for managers of such space moving forward. The study operates under the general assumption that Class B and C office buildings tend to be older than their Class A counterparts, and therefore do not have the latest technologies. Generally, the authors found, Class B and C building managers have avoided upgrading to new sustainable features because of information constraints, resource constraints, and funding constraints. The report lays out a number of recommendations for these managers to help them incorporate green efforts into renovations and upgrades.

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Oakland Votes to Bar Landlords From Conducting Background Checks
San Jose Mercury News (01/22/20) Kendall, Marisa

Oakland has taken steps to become the first city in California to ban apartment owners from investigating the criminal history of renters applying for both public and private housing. The City Council unanimously passed the Fair Chance Housing Ordinance last week, prohibiting landlords from rejecting a potential tenant due to a prior criminal conviction. Owners and their management staffs will not be permitted to ask about an applicant's criminal history or require the applicant to disclose it through a background check. Advocates say the measure will help ensure residents released from prison are able to reintegrate back into society and not add to Oakland's homeless population. But some landlord groups are concerned the measure will sacrifice residents' safety. The measure, which passed in an 8-0 initial vote, requires one more vote on Feb. 4 before it will go into effect.

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Ford Seeing Success Worldwide With New Smart Labs
NewsWheel (01/22/20) Johnson, Kyle

As potential car buyers increasingly look for shopping environments different from the traditional dealership, malls have emerged as a leading location for car buyers. Ford Motor Co. has jumped on the mall train by putting Ford Smart Labs into many shopping malls across the world. In 2019, Ford launched smart labs on four different continents, with the labs arriving in cities including Quebec City, Canada; Shanghai, China; Sydney, Australia; Oslo, Norway; Brussels, Belgium; Saarbrucken, Germany; and Waasland, Belgium. Ford officials said those smart labs have been so successful that they plan to continue expanding into 2020 and beyond.

Ford Smart Labs have proven to be especially successful with new Ford customers. The smart labs have been strategically placed in malls to take advantage of the natural foot traffic there, and shoppers with no prior relationship with Ford are able to come in and see what the automaker has to offer. Michael Clements, the general manager of operations for the Australian Automotive Group and the Sydney Smart Labs location, said the smart labs attract shoppers because of the perceived environment there. Contrasting smart labs to dealerships, he said the labs "give potential customers an opportunity to explore our vehicles in an open, social, and engaging environment."

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CapitaLand to Create Asia-Pacific’s Third Largest REIT With US$6.2 Billion Merger of Singapore Office and Shopping Mall Trusts
South China Morning Post (01/23/20)

CapitaLand Mall Trust and CapitaLand Commercial Trust have agreed to merge their shopping mall and office building holdings in Singapore and Germany to create the Asia-Pacific region's third largest real estate investment trust by market value. CapitaLand Mall Trust will purchase all CapitaLand Commercial Trust units by stock, cash, and fees worth S$8.3 billion (US$6.2 billion). The combination will put 15 shopping malls and 10 office buildings, mostly in the Southeast Asian city, under one roof with a combined asset value of S$22.9 billion. "Both trusts are controlled by Singapore's biggest landlord CapitaLand Limited, a unit of state investment company Temasek Holdings," notes the newspaper.

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Lawsuit Filed Against United States Postal Service in Bowling Green
WNKY (01/17/20) Garrison, Krista

Apartment complexes in Bowling Green, Ky., have sued the United States Postal Service (USPS) after the mail agency changed its mail delivery process and left hundreds of Bowling Green residents without their post. The USPS said it changed its delivery procedure because it is not permitted to deliver mail to individual mailboxes for dormitories or residence halls. According to the USPS manual, an apartment complex technically counts as a dormitory or residence hall if it "consists of single or multi-room units that may share or have access to centrally located kitchens, bathrooms, showers, or social or common areas." Apartment properties that qualify under that description have been left to distribute mail themselves. The complexes filed suit against the mail agency, alleging that it ignored legal clauses mandating resident approval before converting to a new delivery system. As a result, apartment managers from at least four buildings in Bowling Green have rejected mail deliveries so as to deny that they ever complied with the new system. This has meant some Bowling Green apartment residents have been unable to access their mail.

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Triangle's Office Vacancy Is Up Due to New Supply, But Job Growth Is in a Good Spot
REBusinessOnline.com (01/20/20) Gates, Elizabeth

The Raleigh-Durham region has seen strong job growth in recent months, offsetting an increased office vacancy rate. The Bureau of Labor Statistics found that the region -- known as the Triangle -- added 24,200 nonfarm payroll jobs between October 2018 and October 2019 for an official growth rate of 2.5 percent. Local unemployment, meanwhile, has remained low at 3.1 percent. Some of Raleigh-Durham's largest companies announced they were adding hundreds of jobs, including Xerox, Q2 Solutions, Parexel, AmeriHealth Caritas, and HZO.

The strong job market reinforced Raleigh-Durham's position as one of the commercial real estate markets to watch this year. In their recent report, the Urban Land Institute and PricewaterhouseCoopers (PwC) named Raleigh-Durham the No. 2 market in the country for overall commercial real estate prospects in 2020. As of now, Class A office vacancy is hovering at 10.1 percent, and the average Class A asking rent rose to $29.89 per square foot. Several large office buildings are currently under construction, and more than 31 percent of the space in construction has been reported as preleased.

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SF Officials Want Landlord to Delay Sale of Apartment Buildings Amid Housing Worries
San Francisco Chronicle (01/26/20) Fracassa, Dominic

San Francisco city officials are reportedly interested in turning dozens of apartment buildings into permanent affordable housing amid a local housing crisis. Veritas Investments, one of San Francisco's biggest property owners, is gearing up to sell 76 of its apartment buildings, or 30 percent of Veritas' total portfolio in the city. Tenant advocacy groups have called on the city to turn those 76 apartment buildings into permanent affordable housing, and officials are reportedly warming up to that idea. Supervisor Dean Preston was expected last week to call on Veritas to delay any sales by 60 days to allow the city time to consider whether any can be added to affordable housing stock. Preston is also reportedly looking for a guarantee that residents of the 76 buildings are afforded protections against displacement.

Veritas first put the buildings on the selling block in December, offering them to a group of nonprofit housing organizations. But those organizations only expressed interest in 16 buildings, and none of the groups took concrete steps to reach a deal. After the 30-day window afforded to nonprofit groups passed, Veritas began to look for other buyers. Justin Sato, Veritas’ chief strategy and portfolio officer, said the company had done its due diligence by offering the buildings to nonprofits. "In our view, we really allowed them the proper window of time to evaluate the opportunities to see which properties might be a good fit for conversion to affordable housing," Sato said. But Preston contends that 30 days is insufficient to properly vet a housing portfolio.

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CVS CEO Larry Merlo Says 600 Remodeled HealthHUBs Will Be Opened by the End of 2020
CNBC.com (01/13/20) Clifford, Tyler

CVS Health Chief Executive Larry Merlo recently disclosed that the pharmacy chain is on track to meet its goal of overhauling more than 1,000 of its stores and said the chain is seeing positive early results. CVS launched three of its HealthHUB concept stores in the Houston area near the end of 2018 and expanded the program to 50 locations in four markets by the end of 2019. Merlo said hundreds more are scheduled to be overhauled by the end of this year. CVS is redesigning about 20 percent of the real estate in its front stores to feature more health-related services, including walk-in clinics and care concierges. The renovations coincide with rival Walgreens' plans to rehabilitate its stores in an attempt to drive more foot traffic.

"We're really excited about what we’re seeing from the consumers. The acceptance, the interest that is growing with our clients," Merlo added. "We've made a commitment to have about 600 hubs by the end of this year," with "a trajectory of 1,500 hubs by the end of 2021." Boston, Dallas-Fort Worth, North Carolina, and Ohio are among the next markets that CVS is targeting for its HealthHUB expansion this year. Florida, Maryland and Virginia are also on the list to carry the new concept in the first half of 2020 to make CVS more of a "health care destination."

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Entertainment Offerings Help Malls Compete with E-Commerce
Shopping Center Business (01/03/20) Conway, K.C.

As Amazon and other e-commerce vendors continue to change the way consumers shop, brick-and-mortar shopping centers are fighting back by diversifying their offerings. A common misconception that in-person retail is struggling to survive can be dispelled with a closer examination of the types of experiences offered at malls nowadays. Online sales do not yet represent 10 percent of total retail sales, but some experts have projected that the total could rise to as much as 25 percent by the middle of the decade. Analysts say brick-and-mortar stores' struggles are more the result of overleverage than sales poaching from e-commerce sites. Malls continued to expand at great rates in the first half of the 2000s, to the point where there were too many retail options for consumers in a given area. The recession at the end of the 2000s compounded stores' woes.

But today, brick-and-mortar shopping centers that cater to the public are reporting steady business. Mall construction has even rebounded somewhat. The high-profile American Dream Meadowlands recently opened in New Jersey and is an example of the path malls are taking now to remain competitive in the age of e-commerce. With an indoor snow park, water park, theme park, and regulation hockey rink, American Dream is prioritizing its experience-based offerings for shoppers. Malls today need to attract people who could otherwise shop for their products online, and the best way to do that is to provide such experiences that the shoppers cannot replicate online. Some retailers have followed suit. PGA Superstore, for example, is creating unique experiences at its mall locations by offering on-site golf lessons and apparel fittings.

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Nevada Officials Order Increase in Inspections After Fire
Washington Times (01/22/20)

Nevada state officials have ordered inspections at apartment complexes thought to be susceptible to fire after a deadly blaze late last month killed six people. The fire broke out Dec. 21 at Alpine Motel Apartments in the city. In addition to the six people who died in the fire, 13 were injured. City officials have ordered the increased inspections in an attempt to be proactive about fire safety and minimize the risk of a similar fire breaking out in the future. Alpine reportedly was missing some smoke detectors at the time of the fire, and others were faulty.

Jerry Stueve, the director of the state's Department of Building and Fire Prevention, says inspectors will focus their attention primarily on apartments and non-transient motel-hotel residences with center hallways and exits on either side. That was the layout of Alpine before the blaze broke out. Stueve has not said how many buildings in the county would qualify for inspections. He said it was difficult to know how many buildings within county limits were constructed before fire codes required sprinklers and smoke detectors. His agency will notify chosen apartments of their impending inspections within the next month.

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