Real Estate Management News - 06/06/2018

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June 6, 2018
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IREM® HEADLINES
Hurricane Season Kicks Off
June Is Filled with Learning Opportunities
IREM Research Report on Benchmarking Practices Now Available

INDUSTRY HEADLINES
Need a Lunchtime Companion at Work? Check the Office App
What to Do When the Rain Stops and the Flood Recedes
How to Produce Eye-Catching Photography in Multifamily That Attracts Renters
Sears Will Close 72 More Stores, After Quarterly Sales Drop Nearly 12 Percent
Town Centers Now on the Margins
Downtown San Diego Apartment Boom Means Landlords Need to Up Their Game
Mall Massacre: 75 Percent of Shopping Malls Will Be Wiped Away
Keeping Rents Affordable After Upgrading
Walmart Remodeling In-Store Pharmacies to Include Private Consultation Rooms
As Office Parks Empty, Towns Turn Vacancies Into Opportunities
Longmont Residents Pushing for Ordinance Requiring Recycling at Multi-Family Properties
Unilever Transformed Its Old Office Park Into an Ultra-Sustainable HQ


 

IREM Headlines


Hurricane Season Kicks Off

June 1 marked the official beginning of hurricane season, just as Tropical Storm Alberto was making its way to Florida. Whether the 2018 hurricane season will be as disastrous as the 2017 season which brought Harvey, Irma and Maria remains to be seen. What is known is that there are steps property management can take in advance to prevent property loss should a hurricane hit.

• Identify in advance locally designated public shelters in the community.
• Closely monitor the television, radio or NOAA Weather Radio to keep abreast of storms progressing in the area. They will direct you to areas of public shelter.
• Learn safe routes inland.
• Review the need for and working condition of emergency supplies and equipment such as plywood and nails (for safeguarding windows), flashlights and battery-powered radios.
• Clear out clogged rain gutters and downspouts; secure loose gutters and downspouts.
• Seek out and secure objects out of doors that might blow away or cause property damage. These include trash cans and Dumpsters, signs, outdoor furniture and trash.
• Inspect roofs—repair loose gutters, shingles and coping; remove tools and loose objects; pick up trash.
• Inspect roof-mounted HVAC equipment for loose debris and improperly fastened panels; make needed repairs.
• Inspect storm sewers and catch basins; clear away debris.
• Close and protect windows and glass doors—board up windows, install storm shutters and apply masking or electrical tape (depending on the fury of the storm) in an X pattern on both sides of the glass.
• If near a coastline, stream or river, shut off gas and electricity.
• Instruct residents to move all patio and balcony items (pots, plants, etc.) indoors. Remove these items from balconies of residents who are not at home.
• Keep a supply of fresh bottled water on hand in case the storm contaminates the community’s water supply or damages distribution lines.
• Evacuate low-lying areas and any other areas when so directed.
• Have ice on hand to preserve food in residential complexes, and keep icepacks ready to treat physical injuries.
• Shut down all three-phase electrical service just prior to the hurricane striking.
• Move elevators to the second floor level and lock them off in the event of flooding. Secure elevator doors at lower levels to prevent entry into the shaft.

For more about how to prepare for hurricanes and other emergencies, get your copy of IREM’s Before and After Disaster Strikes: Developing an Emergency Procedures Manual, from which this checklist was taken.
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June Is Filled with Learning Opportunities

Looking for opportunities to learn more about asset management in the affordable housing space? New lease accounting standards? The real estate industry outside the United States? Look no further:

CHAM Conference in Chicago: Affordable housing asset managers will be gathering in Chicago June 11-13 for the 2018 Annual Conference of the Consortium for Housing and Asset Management (CHAM). The CHAM conference is the place for asset managers in the affordable housing sector to network, share state-of-the-art tools and seek inspiration. With its strong focus on improving project and portfolio-wide performance by promoting effective asset management techniques, this conference will bring together industry leaders and other key stakeholders to discuss an extensive range of issues affecting the industry. Go here for more information and to register.

IREM Webinar: Are you ready for life under ASC842 lease accounting standards that are going into effect for public business entities on January 1, 2019? Are You Ready? How Real Estate Tenants Can Prepare for Life under ASC842 Lease Accounting, taking place June 12, will present an overview of the latest lease standards and accounting for leases under these new regulations, addressing the effective dates and transition periods, planning for implementation, and the potential impacts on tenant behavior, using real world examples. Leading the webinar will be Tom Elmer, CPM, who has been involved in virtually every aspect of commercial and residential real estate during his career. Registration is just a click away.

SIOR International Conference in Warsaw: Lech Walesa, former president of Poland, is a confirmed speaker at the SIOR International Conference in Warsaw, Poland, taking place June 27-29. IREM is a sponsor of this conference, which also will feature Paul Redmond, expert in generational X, Y and Z theory, and Richard Baldwin, president of the Centre for Economic Policy Research. To learn more about this conference and to register, go here.
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IREM Research Report on Benchmarking Practices Now Available

IREM has released a report titled Measure What You Manage: Insights from the IREM Energy Efficiency Survey.

This free report is available for download from the IREM website.

The intent of the survey is to gain insights on building energy efficiency practices and perceptions among investment real estate professionals, including property managers. IREM sent the survey to its membership in spring 2017. BOMA International also sent the survey to its membership.
The report, based on survey responses and interviews with experts in the industry, focuses on survey questions about energy benchmarking practices. Topics explored in the report include:

• Benefits of benchmarking
• Benchmarking practices in the commercial and multifamily sectors
• Benchmarking tools used to track energy consumption
• Scales of comparison used when analyzing benchmarking data
• Impediments to benchmarking, including utility data access and staff knowledge and skills
• More advanced energy management strategies

Experts interviewed for the report include Deb Cloutier, CRE, Founder and President, RE Tech Advisors, Inc.; Craig Haglund, Program Manager, CRE & Multifamily, ENERGY STAR® Commercial & Industrial Branch, U.S. EPA; and Kelly Vickers, LEED Green Associate, GGP, Vice President, Corporate Social Responsibility, Alliance Residential Company, AMO.

For additional information on improving the energy efficiency of your properties, visit www.irem.org/gogreen or enroll in an IREM course on building energy management .

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Industry Headlines


Need a Lunchtime Companion at Work? Check the Office App
Wall Street Journal (05/29/18) Grant, Peter

A new weapon has emerged in the race among office building owners to deliver top-flight amenities: mobile apps for tenants. One example is CIBC Square, a pair of office towers being developed in Toronto by a partnership of Ivanhoé Cambridge and Hines. The three-million-square-foot complex, on track to be completed in 2023, will offer tenants many of the standard amenities of top-grade office developments these days, such as a fitness facility, conference center, and food hall. But the landlord is also developing a workplace app that will be given to most employees in the complex and enable them to do such things as book meeting rooms and fitness classes, change the lighting and temperature at their desks, order food, and more. "We're not managing buildings anymore. We're five-star hoteliers," observes Jonathan Pearce, executive vice president of North American leasing for Ivanhoé Cambridge. His firm is considering offering similar apps throughout its 35 million square feet of office properties, describing them as the "ecosystem that essentially brings all the amenities together."

Mobile apps also have been rolled out, or are in the process of being developed or considered, by such big-name owners as Brookfield Property Partners LP, Blackstone Group LP, and Tishman Speyer. Meanwhile, commercial property services firms are also developing workplace apps. For instance, CBRE Group Inc. has begun to roll out an app in office properties it manages that enables workers to do such things as order lunch and find colleagues to join them for that meal. In the years to come, CBRE hopes to expand it to include an even broader range of services. Not to be outdone is Workwell, a tech startup with offices in New York and Paris. In 2017, it launched an "open platform" office app that can be layered with whatever services building owners, managers, and their tenants want to add. It's presently in use in 20 buildings in France, including some owned by the country's largest landlords.
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What to Do When the Rain Stops and the Flood Recedes
Buildings (06/01/18)

Building owners and managers need to be aware that flooding forecasts are always a possibility during summer storm season. If a facility is in a high-risk area, there are several tips operators can follow to help minimize the damage. First, be prepared. If a storm is imminent and the facility will obviously be at risk, round up valuable items and documents and store them in a secure and dry location. Also, clean out gutters and downspouts and ensure the property's sump pump is working. Tip two, stay safe. If flood waters have reached the building, be sure to shut off all electricity in the affected areas. When you re-enter a damaged building, be aware of its structural integrity and other potential hazards.

A third tip is to clean up quickly. "Control or minimize the speed of mold growth by keeping air moving through the space with open windows and doors," according to the article's author. Four, be thorough. Anything wet and porous must be removed and disposed of. These include molding, insulation, and damaged portions of walls along with floor coverings like carpet, pads, laminate, tile, and sheet vinyl. At the same time, such items as furniture and clothing can be salvaged by washing them in hot water, soaking them in detergent, and using a disinfectant solution. Finally, dry everything. Know that some surfaces may feel dry to the touch, but that doesn't mean they are truly dry. In that event, consider a professional moisture assessment.
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How to Produce Eye-Catching Photography in Multifamily That Attracts Renters
Property Management Insider (05/18) Blackwell, Tim

Apartment owners and operators on a limited budget generally can't keep a professional photographer on staff. However, posting drab photos of a community can turn off prospects who come to that property's website first before visiting in person. Photos must capture the true living experience of an apartment complex. The most compelling images highlight amenities and interior and exterior designs that stand out. But taking those great shots requires a plan and some basic photo expertise, states Ed Blinn, the Apartment Association of Tarrant County's director of communications. The veteran apartment photographer offers several tips on how to take great pictures of multifamily housing communities.

First of all, use the right equipment. The novice photographer can buy a consumer-end digital SLR that includes a camera body, an 18-55mm lens, and a bag for around $500. Blinn recommends investing a little more in a wide-angle lens (14mm or 17mm) for interior shots. His second tip is to invest in a tripod to maximize sharpness and photo quality. Third, use natural light wherever possible. Tip four, compose your shot. "Blinn recommends starting with the Rule of Thirds," writes the article's author, "a fundamental photo technique where the photographer envisions using guide lines and their intersection points to align the subject, usually off-center." Finally, there is staging and setup. It's important to set the camera in the right place to take a well-composed shot. At the same time, don't hesitate to move things in the environment as much as possible to improve subject matter.
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Sears Will Close 72 More Stores, After Quarterly Sales Drop Nearly 12 Percent
National Public Radio (05/31/18) Chappell, Bill

Sears Holdings Corp., which controls both Sears and Kmart, has identified approximately 100 non-profitable stores, 72 of which will begin store closing sales in the near future -- the latest sign of the department-store retailer's struggles to stay afloat. The total represents nearly 8 percent of Sears' remaining stores. Sears Holdings announced the closures in its quarterly results that it released late last week, in which it recorded total revenues of approximately $2.9 billion. That's down from $4.2 billion in the same quarter a year ago. As of press time, Sears had yet to announce which specific stores will close.
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Town Centers Now on the Margins
Multifamily Executive (06/01/18) Anderson, Bendix

The best places to build a new apartment building today are rarely in a major market or downtown area where residents can walk to such amenities as restaurants, stores, and mass transit. When they become available, these development sites are typically far too expensive and tend to be surrounded by other new apartment buildings that are already competing to fill vacant units. Many of these locations simply have too much supply. Consequently, such developers as Cleveland-based NRP Group are deciding not to build at many of these sites for now, especially as the cost of construction is also reaching new highs. Developers are still finding a plethora of opportunities to build. But they're often far from the major markets and town centers they focused on earlier in the current cycle.

Some apartment developers are looking to suburbs with old, existing downtowns such as Pomona, Calif. Others are looking to secondary markets in the Midwest, where economic progress has been slower than on the coasts or in the Sun Belt. The problem is some of these markets may be vulnerable to overbuilding before long. These areas may not have sufficient demand for rental apartments to support more than a few projects, even in their strongest submarkets. "Given how long this market cycle has run, we've clearly done most of the comparatively easy development deals [already],” Greg Willett, chief economist at RealPage, says.
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Downtown San Diego Apartment Boom Means Landlords Need to Up Their Game
Bisnow (05/31/18) Stribling, Dees

Downtown San Diego is on the verge of an apartment boom of mostly high-end rental units. But there are only so many renters-by-choice. Owners will have to figure out how best to appeal to those residents. Greystar's newest development, the 718-unit Park 12, is the largest of the new apartment properties about to come online in downtown San Diego. "We hope to compete for residents by offering a variety of floor plans and price points from $1,705 [a month] in the mid-rise buildings to $20,000 at the top of the building in the high-rise," remarks Greystar Senior Managing Director of West Coast Development Jerry Brand. Just over 1,000 total new apartments were completed in the downtown corridor last year, with another 4,138 units now under construction. More than 4,100 more apartments have been approved, but are not underway.

Besides price points, Brand says new apartments will be competing on amenities -- and not just the traditional amenities, but ones that allow interaction among tenants. At Park 12, for instance, residents will enjoy more than a dozen distinct common areas featuring two swimming pools, observation decks, meditation gardens, and dog runs for both big and small pets. "That allows those in smaller apartments to enjoy the same package of areas for socializing as those in larger, more expensive apartments," he concluded. "The plan called for the democratization of a large development into four separate villages, all connected at the podium level by two bridges."
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Mall Massacre: 75 Percent of Shopping Malls Will Be Wiped Away
Axios (05/27/2018) LeVine, Chris

Former J.C. Penney CEO Mike Ullman recently warned that the death of the U.S. shopping mall will be more severe than forecast, with only 25 percent of the current 1,200 or so malls surviving. Until now, most experts have forecast that around 25 percent of U.S. malls will close. However, speaking at a recent Dallas Fed conference on technological disruption, Ullman reversed those numbers and projected that only around 300 malls will remain up and running. The rest will close over the next five years, due to such factors as changing consumer tastes and the continued rise of online shopping. Rockport is the latest U.S. retailer to file for bankruptcy, on top of 11 other chains since the first of the year. The closings are leaving gaping holes in some malls. According to Ullman, malls must have adequate cash or access to financing to make the transition to a new style of retail. A location catering to the top income quartile will also be helpful, along with an Apple and/or a Tesla store among the tenant mix.
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Keeping Rents Affordable After Upgrading
National Real Estate Investor (06/01/18)

Historically, multifamily housing investors would buy an older apartment property, completely renovate it, bring it up to Class A standards, and then charge Class A rents. Today, there is another trend taking hold -- investors upgrading properties a bit more modestly and then keeping rents affordable. When the renovation budget is more reasonable, the reasoning is owners do not need to raise the rents dramatically. Apartment complexes that are affordable to those making less than the area median income (or AMI) generally remain 100 percent occupied with lower resident turnover, delivering a more consistent net operating income for the investor.

For example, BH Equities LLC Chairman Harry Bookey acquired The Reserve at 77, formerly Lenexa Pointe Apartments built in 1972. This fixer-upper in Lenexa, Kan., housed very low-income renters -- families earning 50 percent or less of AMI -- in 39 percent of its units. Monthly rents averaged $140 less than the surrounding property rents. Bookey collaborated with JLL Capital Markets and L5 Real Estate Investments LLC to secure about $25,000 per unit for renovations. Freddie Mac Multifamily was contracted to work with them on the project. Freddie Mac helps borrowers fund renovations at reasonable costs by creating flexible moderate rehabilitation loans customized for multifamily.
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Walmart Remodeling In-Store Pharmacies to Include Private Consultation Rooms
DARK Daily (05/30/18) Schlingman, JP

As part of an $11 billion remodeling project, Walmart will add private consultation rooms in dozens of its store pharmacies. The majority of the store renovations will occur in Florida and Texas, where the company has allotted $477 million to remodel 82 stores and add 14 new locations. Walmart is also partnering with digital health company Sharecare to provide employees and community members with access to the Sharecare mobile health care app. Jacqui Canney, executive vice president and chief people officer at Walmart, says, "Partnering with Sharecare will provide our associates additional tools to inspire them on their wellness journey, help our programs continue to grow, and be a force for change in the communities we serve."
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As Office Parks Empty, Towns Turn Vacancies Into Opportunities
New York Times (05/29/18) Corasaniti, Nick

As more and more office parks are vacated, their local towns and municipalities are springing into action and finding creative uses of the space. Suburban office parks have lost their luster for a number of reasons, including a growing preference among younger employees to be closer to more dynamic urban centers than the sleepier suburbs. At the same time, the rapid pace of technological advancement has made the need for many clerical and processing jobs and the real estate to house them increasingly obsolete. Mostly, though, it was the recession and its aftermath that shuttered many suburban parks. New Jersey, for example, currently has more than 6.5 million square feet of vacant office park space, reports CoStar.

Some municipalities are seeing opportunities in the empty spaces. In some markets, the properties are being considered as a low-cost option to expand affordable housing. Other municipalities are looking to reimagine the buildings with amenities to attract younger workers, including banks, eateries, gyms, and open-design offices all housed within a walkable campus. One model in New Jersey has been especially successful: the former Bell Labs building in Holmdel. Now called Bell Works, it is a two-million-square-foot, glass-encased giant with coffee shops, pop-up restaurants and a nearly completed wine bar and food hall on the first floor that is open to the general public. Businesses occupy the rest of the space, with footprints as small as 350 square feet to as large as 350,000 square feet. Interest from tenants has been high ever since the complex opened five years ago.
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Longmont Residents Pushing for Ordinance Requiring Recycling at Multi-Family Properties
Longmont Times-Call (05/31/18) Lounsberry, Sam

A committee of Longmont, Colo., residents and the city staff's environmental sustainability plan are urging the adoption of a commercial recycling requirement for multifamily housing developments. For now, the more dedicated renters continue to haul plastic, paper, and other recyclable materials themselves to Longmont's Waste Diversion Center. Other tenants of Longmont apartment communities simply choose not to recycle minus an option to deposit items on-site. As co-chair of a zero-waste committee formed earlier in the spring under the Sustainable Resilient Longmont nonprofit environmental group, Emily Jacobson said she and other members have had numerous residents approach them to inquire about recycling options at apartment communities. "I didn't realize how difficult [recycling] was for people living in these apartment complexes before," Jacobson said.

In partnership with the Boulder County Recycling Center's operator, Eco-Cycle, her committee recently started a petition collecting signatures in support of a Longmont ordinance requiring recycling and compost pickup for multifamily housing units it plans to bring to City Council. Curbside recycling pickup is offered free of charge to single-family home customers of the city's trash service. The city's 120-page Sustainability Plan also lists the creation of a commercial recycling ordinance that includes apartments as a goal. Longmont presently requires apartment developments to have only trash service from either the city or a private hauler. The city's service has right of first refusal for the trash pickup business of apartment buildings of up to eight units. But Longmont must vie with private haulers to earn the business of bigger developments.
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Unilever Transformed Its Old Office Park Into an Ultra-Sustainable HQ
Fast Company (05/29/18) Peters, Adele

Employees who sit down to work at Unilever's U.S. headquarters in New Jersey can tweak everything from a room's temperature to its lighting using an app on their phones. Throughout the building, approximately 15,000 sensors also measure carbon dioxide, humidity, and who is present in a given room, helping the building adjust over time to become more efficient. On a Friday afternoon in the summer, for instance, many of the building's 1,600 employees are either working remotely or have left for the day. When the building's sensors report low occupancy, the company can opt to shut down entire floors. The technology is part of a recent total renovation of the consumer product giant's Jersey office park, originally constructed in the 1960s and '70s. The aim is to help the company reach its goal to be carbon positive in operations by 2030, as well as help attract a younger workforce. The renovation entailed four buildings being connected into one 325,000-square-foot space. Changes included swapping out old windows and lights and installing solar panels on the rooftop. Unilever now expects to slash the office complex's carbon footprint by 50 percent.

The building is expected to be certified both as a healthy workplace by the International Well Building Institute and receive the highest LEED sustainability rating. A bank loan helped fund some of the cost of the renovation. New low-flow plumbing will cut water use in half. In other innovations, there are rooms for doing yoga and de-stressing. Shuttles are expected to take as many as 40 percent of employee automobiles off the roads. A new atrium connects four formerly separate buildings and provides a place for employees to meet and work casually. Employees can also opt-in to be visible via the building's smart technology, making it easier for co-workers to find each other. Finally, the cafeteria is serving healthier food.
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