fall 2015: a market for optimism & opportunity

8/20/2019 Fall 2015: A Market for Optimism & Opportunity

1/13

CONNECIONSCOMMERCIAL

A P U B L I C A T I O N B Y T H E N A T I O N A L A S S O C I A T I O N O F R E A L T O R S®

VO LU ME 15 / I SSU E 3 / FALL 2015

ALSO IN THIS ISSUE:

ADV OCA CY / Marketplace Fairness & Lease Accounting Cha

COMMUNITY DEVELOPMENT / REALTOR® Party Impacting

Local Markets

RES EAR CH / Q3 2015 Outlook & Like Kind Exchanges

EDUCATION / Commercial Focus at the REALTORS® Conferenc

A MARKE FOR OPIMISM& OPPORUNIY


2/13

COMMERCIAL CONNECIONS I FA LL 2

THE LATEST Attend REALORS® Conference & Expo is a don’t miss event and you will want to register quickly. A full slate of exceptional programing is lined

up to impress including the Commercial Caffeinated Networking

Breatkfast and the Commercial Red Carpet Reception hosted at alocal commercial property. Plan to attend the November 13th-16th

conference in San Diego! Realtor.org/Conference

ReadNAR’s new monthly e-newsletter, the Commercial Digest, focuses

solely on commercial real estate. Be sure your email in your NRDSMember Profile is current, and that you have selected at least one

commercial specialty in the Field of Business list.

Realtor.org/commercial/publications-info

ListenNAR’s most recent Commercial Podcasts have covered subjectsincluding drones, RESPA-ILA disclosure changes, land

conservation and success tips from high achieving brokers. Access

these short segments online to stay on top of the latest trends andissues affecting your business. Realtor.org/podcasts/commercial-podcast

Discover As foreign investment in the U.S. continues to grow and as investors

look for opportunities across the globe, it’s valuable to learn about the

market conditions, trends, tax issues and other specifics that can helpyou be most prepared to gain business. Certified International Property

Specialist (CIPS) courses offer an in-depth look at real estate, economicsand cultures in different parts of the world as well as the foundational

knowledge needed to work with international clients. Realtor.org/cipscourses

Network Fall into networking and professional development opportunities.

SIOR, IREM and the CCIM Institute have upcoming conferences.Check out page 11 to learn more about dates, locations and how to

register.

PRESIDENT’S UPDATE

CONNECIONSCOMMERCIAL

CHRIS POLYCHRON,

A MARK EFOROPIMISMA NOTE FROM THE PRESIDENT, CHRIS POLYCHRON, CIPS, CRS, GRI

NAR PRESIDEN

Chris Polychron, CIPS, CRS, GRIHot Springs, AR

COMMERCIAL LIAISON

Daniel E. Sight, CCIM, SIOR Leawood, KS

COMMERCIAL COMMIEE CHAIR

Steven Moreira, CCIM, CIPS, GREENLongwood, FL

CHIEF EXECUIVE OFFICER

Dale A. Stinton, CAE, CMA, CPA, RCE

SENIOR VICE PRESIDEN

COMMERCIAL & GLOBAL SERVICES

Janet Branton, CAE, CIPS

VICE PRESIDEN

COMMERCIAL & GLOBAL SERVICES

Jan Hope, CIPS, RCE

DIRECOR

MERCIAL DEVELOPMEN & SERVICES

Jean Maday, RCE

DIRECOR

COMMERCIAL RESEARCH

George Ratiu

MARKEING &

COMMUNICAIONS MANAGER

Lauren Van Holten

MERCIAL DEVELOPMEN ASSOCIAE

Shara Varner

GISLAIVE POLICY REPRESENAIVE

Erin Stackley

GULAORY POLICY REPRESENAIVE

Stephanie Spear

PRINED BY

Omega Printing, Inc.An Inc. 500 and NAPL Hall of Fame Company

www.omegaprinting.com

Realtor.org/Commercial

Tere is something I have noticed throughout theyear that I haven’t been able to put my finger on. In

every gathering I have attended with our commercialmembers, the mood has been downright confident.Not to say that our residential members aren’t feelinggood, but commercial real estate professionals areespecially comfortable with the state of their markets.

Tere is hard evidence supporting your buoyantattitudes. Te National Association of REALORS®recently released the 2015 Profile of Real Estate Firms;the annual survey found that commercial firms are themost optimistic with 75 percent expecting net incometo increase. Tat is a 4 percentage point increaseover 2014. Considering recent foreign currency andeconomic anxieties abroad, the U.S. is much moreattractive for international investment. After success atMIPIM 2015, one of the largest real estate events inthe world (more on pages 14-15), NAR is planning anexpanded presence in 2016 to bring your markets to aglobal audience.

So why else are commercial members feeling positive

about the future?

One quick look at the commercial market’s keyindicators tells the story. Te REALORS® CommercialReal Estate Market Survey for Q2 2015 found salesvolume rose 9 percent from a year ago while sales pricesincreased 7 percent year over year. New job growthand low interest rates are additional factors impactingcommercial real estate gains.

Te numbers don’t tell the whole story. Taren’t just the product of the market upswing. F

of us who have been through several cycles, whow to navigate difficult markets. It’s what mprofessionals.

What’s different this time is that we didn’t jusany down market; it was the worst of the wcommercial practitioners know better than anycommercial market lags a residential recovery18 months. So while the commercial market cquickly as the residential, your pain was compbecause it has taken longer to recover.

I can’t tell you how much it means to me tocommercial members feeling so confident. I dthat one of the reasons we made it is the camaraNational Association of REALORS® offerethose dark days after the real estate crash. NAPresident Ron Phipps often said it was the corps of REALORS® that buoyed our spirithe tough times. I agree with him. Tere aquantifiable benefits of being a member of N

often it is the intangible qualities—the friendssolidarity—that are the most valuable. In belosomething greater, we all held ourselves togeth

Congratulations on your well-deserved optimhappiness. You deserve it.


3/13

DID YOU KNOW? THESE STATES HAVE THE MOST WATER AND WETLANDS PER TOTAL LAND AREA

S T AT E T O T A L A R E A( IN S QUA RE MILE S )

WA T E R A R E A( IN S QUA RE MILE S )

P E R C E N T A R E A , W A T E

MICHIGAN 96,714 40,175 41.50%

HAWAII 10,932 4 ,509 41.20%

RHODE ISLAND 1,545 511 33.10%

MASSACHUSES 10,554 2 ,754 26.10%

MARYLAND 12,406 2,699 21.80%

ternet Sales Tax Fairness ccording to Bloomberg 1, fall is a busy time for theonomy- the retail sector in particular. Farmers startinging in crops at the end of the summer and the nation’s

orts are full of an extra $20 billion to $40 billion aonth in merchandise (with implications for warehouses,ansportation hubs and retail centers). By contrast, U.S.oss domestic product shrinks by about 3 percent everyinter, when grocery shoppers and construction workersay inside.

ternet Sales ax Fairness is the term given to the positionat states should be able to require online retailers to collect

nd remit sales tax on items purchased by their residents.urrently, states do not have this authority, and are thussing out on owed tax revenue needed for infrastructure

pkeep and reinvestment into communities. In addition,creates a disparity between what e-commerce retailers

nd traditional brick-and-mortar stores charge for the sameems, since the latter must include sales tax, creating anneven playing field for the two businesses. Real estateofessionals working in the commercial real estate industryrve the business needs of these brick-and-mortar retailers,y helping them buy and sell property for storefronts ording in the development of larger shopping centers

where they lease space. If these retailers struggle to stayopen, the impact will be felt throughout the commercialreal estate industry as vacancy rates rise and fewer propertytransactions are completed.

While legislation giving states this power has beenintroduced in the past, it has never been approved by bothchambers of Congress. Currently there are two bills – S.698, the Marketplace Fairness Act of 2015 in the Senate,sponsored by Senators Enzi (R-WY) and Durbin (D-IL)and H.R. 2775, the Remote ransactions Parity Act of2015, sponsored by Representatives Chaffetz (R-U) and Womack (R-AR), which would give states the authority torequire this uncollected but owed tax be remitted to themby online retailers. NAR supports this legislation, andwill continue to advocate for its passage.

In the absence of federal law regulating state sales tax forout-of-state online purchases, many states have enactedtheir own laws addressing the issue. Te Supreme Courtruled that states may only force a retailer to collect salestax if they have a physical presence in that state, and thatCongress is the proper body to ultimately resolve the issue.Some states though, in need of the sales tax revenue havetaken a broad interpretation of the term “presence” or

PRE PARING FOR HEFALL CONGRESSIONALS ES S ION

Erin Stackley, Commercial Legislative Policy Representative, NAR and Stephanie Spear, Commercial Regulatory Policy

epresentative, NAR

VOCACY

COMMERCIAL CONNECIONS I F A L L 2F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

“nexus.” Tis means that retailers may be required to collectsales tax for purchases sent to one state but not another,even though their “presence” in each state is essentially thesame. If you are working with clients who want to knowthe online sales tax laws of the states they are consideringpurchasing or leasing property, it’s best to advise clientsto consult with an attorney as to the current status of thestates’ laws.

Waters of the United States

Te Environmental Protection Agency (EPA), along withthe U.S. Army Corps of Engineers (Corps), went througha years-long process to rewrite the rules within the Clean Water Act that govern the definition of ‘Waters of theUnited States’ (WOUS), ultimately governing the EPA’sand the Corps’ jurisdiction over bodies of water within theU.S. Te revised rule would have greatly expanded the twoagencies scope.

NAR opposed the proposal from the beginning, filingseveral comment letters on its own and with industrypartners to highlight the challenges presented in theproposed rule. Te rule included provisions that wouldhave required expensive, time-consuming federal permitsto develop private property near most bodies of water,regardless of the navigability of the water. Te concernis that property owners could find themselves under theregulation without adequate compensation, as prescribedunder the 5th Amendment of the Constitution.

Despite criticism from many industries, includand other real estate partners, the EPA rulemafinalized in May 2015, with the expanded d Almost immediately, Congress responded with ain each the House and Senate blocking the rule frenacted.

A companion bill in the Senate, the Federal WateProtection Act, sponsored by Sen. Barrasso S. 1140, would also require the EPA to conadhere to the appropriate regulatory process anddefinitions of the kinds of waters that should befrom the rule.

In addition to those bills, a provision in the Appropriations Bill would prohibit the EPA from eany funds to implement the WOUS rule. Tipassed the House and is awaiting action in the Se

House of Representatives passed legislation,H.R

May requiring the EPA to scrap the rule and stTe bill is now in the hands of the Senate, andurging them to vote on this important legislation

Te EPA recently finalized regulations placing moof water under federal jurisdiction, including smaand isolated wetlands. Tese regulations have theto adversely impact real estate development andrights, requiring the vigilance of NAR to watch foin the regulatory landscape.

While the policy making calendar typically slows down in the summer months,

Congressional leaders on various committees continue to discuss a number of

sues, which means NAR remains vigilant all year long, especially as we prepare

or a busy Fall Session. Internet Sales ax Fairness and Waters of the U.S. are

wo issues that had a great deal of activity so far this year, and will continue to

e on our radar.

ttp://www.bloomberg.com/news/articles/2014-07-31/summer-s-a-time-to-relax-except-hardly-anyone-does U.S. OAL 3,796,742 264,837 7.00%

Visit the Source blogyou

blog.commer*

SOURCE: USGS


4/13

F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

R PERSPECTIVE

ACC OUNINGCHANGES

OULD GREATLY IMPACT COMMERCIAL REAL ESTATE LEASES –

ND THE MARKET

Joseph Larkin, CCIM, CIPS, SIOR

Tousands of U.S. businesses could be affected by aoposed regulatory change that would substantially shifte way they account for the real estate they lease, anduld have a seismic impact throughout the Americanarket and beyond.

Te proposed change, which could take effect as early2017, would prevent American companies from

ting leases as an “operating” lease, an off balance sheetansaction and would require them instead to includel leases on their balance sheets in one form or another.

ssentially, leases would no longer be classified as aapital” lease or an “operating” lease but referred toa “ype A Lease” or a “ype B Lease.” Te typical

mmercial real estate lease would be a “ype B Lease”nd may cause a lessee to account for their lease on thessee’s balance sheet.

Te proposed rules from FASB & IASB (Boards) wouldake it necessary for companies to include all lease

abilities and assets on their financial statements, forcingrms to list all of their leases on their balance sheet as aability, and would provide a more complete picture ofeir financial well-being.

Te updated reporting requirements may make somempanies appear more leveraged. Tis could affect theiredit ratings and create problems with existing loan

venants, especially if long-term leases are involved.Te new rules would apply to existing leases, regardlessf when they were implemented, but would not affectow a lease is treated for income tax purposes.

roponents of the change contend that it will createniformity in global accounting standards, and make

easier to compare the financial status of variousmpanies now that they all will be required to includeased assets and liabilities on their balance sheets.

Te effect on companies could be dramatic. Adding theincreased liability to their balance sheets may force somebusinesses to have their current loans called because ofchanges in their financial ratios. And it could make itmuch more difficult for them to attract investors andlenders.

Owners and landlords would also feel the pinch fromthe rules change. Companies discussing new leases

would likely try to negotiate more flexible terms, whilebusinesses currently leasing space would try to renegotiatefor shorter lease terms and more renewal options. At thevery least, those companies would be forced to monitorrenewal dates and termination clauses to a far greaterdegree than before.

What all this means to owners and landlords is theymay well have to change the way they do business. Forstarters, they’ll need to develop strategies to address farmore demands from lessees during negotiations. Teexpectation is that many companies would respond to thenew reporting requirements with demands to renegotiateand restructure their current leases.

Financial industry experts say adoption of the proposedchange is virtually assured. Te shift in rules wouldsignificantly change the playing field for commercialreal estate brokers, who would be able to count on newopportunities as more companies respond to the rules

change by buying, rather than leasing property. Any timethere is a change in the market, there is opportunity!

Joe Larkin is a 30+ year veteran of the commercial real estateindustry. He is a Senior Instructor for the CCIM Institute, andreceived his MS in Real Estate and Construction Management

from the University of Denver along with the CCIM,CIPS and SIOR designations. For the complete article visitwww.JoeLarkinCCIM.com.

Who you do business with is everything®

The Inland name and logo are registered trademarks being used under license. “Inland” refers to some or all of the entities that are part of The Inland Real Esta

Group of Companies, Inc. which is comprised of a group of independent legal entities some of which may be affiliates, share some common ownership or have b

sponsored and managed by subsidiaries of Inland Real Estate Investment Corporation.

Over $40 Billion in Acquisitions in the Last 15 Years.

Owned and Managed 29.6 Million Square Feet of Commercial Property.

Owned and Managed Property in 41 States.

Since 2000, More than $1.25 Billion in Commercial ReaEstate Sales and Leases.

$1.25 Billion in Commercial Loans Originated and Serviced$10.5 Billion in Institutional Transactions.

2901 Butterfield Road, Oak Brook, Illinois 60523 | www.inlandgroup.com | (630) 218-8000 | @inlandgro

THE INLAND REAL ESTATE GROUP OF COMPANIES, INC.

THIS IS INLAND

®

Proud Members of the National Association of REALTORS®


5/13

COMMERCIAL CONNECIONS I F A L L 2F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

MMUNITY DEVELOPMENT

ASSOCIAIONSIN ACION

embers of the Greater Las Vegas Association ofEALORS® (GLVAR) and its Commercial Allianceas Vegas (CALV) are working with a diverse groupf community partners to reimagine and redevelop ance-thriving commercial center in Las Vegas.

ALV helped secure a Smart Growth grant throughAR’s REALOR® Party funding p rograms, enablingganizers to create a weekend-long “Better Blocksve” event scheduled for Sept. 19th-20th in aruggling shopping center at Sahara Avenue andecatur Boulevard in the heart of Las Vegas. Troughe Smart Growth Grant program, NAR supports ade range of activities that support engagement innd-use or transportation-related issues with theimary goals of affecting public policies that support aore sustainable development paradigm. In addition,ese projects aim to raise the profile of REALORS®community leaders.

Te “Urban Villages” at Sahara & Decatur, once ariving business center, has been a concern in themmunity for some time. While other areas of thety have been redeveloped, this area has not despite

central location, resulting in loss of economic

opportunity and increased blight. Grant funding isalso being used to help with research of developmentcode to identify bulk standards that should be revisedto maximize development capacity, limit usable spaceand bring activity closer to enhance walkability.

CALV and GLVAR are partnering on this event withthe Hope Home Foundation, Urban Land Institute(ULI), Clark County, the City of Las Vegas, industryleaders and other stakeholders. With the help of thisfunding, the group has developed plans to bring thebusy intersection alive with pop-up attractions anda street fair featuring art displays, a children’s playarea, a dog park, live entertainment, a bike parade, ahomebuyer fair and a farmer’s market. As part of theevent, organizers will gather information and ideasfrom local residents and industry professionals duringa live charrette intended to improve an area wheremany stores and businesses have closed in recent years.“We want to hear from the community what theyreally feel is important,” said Dr. Robert Fielden, co-chair of the ULI: Nevada Smart Growth Committee.“Change takes time and careful planning.”

ULI has been collecting data and suggesting strategies

TY SPOTLIGHT: LAS VEGAS, NEVADA

Michele Caprio, Association Executive, Greater Las Vegas Association of REALTORS®

REALOR® Party grants are being utilized to positively impact economic

evelopment and community growth. Here are four stories of inspiring projects

rom across the country.

for redeveloping the area as a transit-oriented,pedestrian-friendly environment, with employmentcenters within walking distance or short transit rides.Te Hope Home Foundation is addressing housingneeds for the area’s working-class families.“Ourorganization has been successful working with areaemployers to provide their employees with housingbenefit programs,” explained Dawn Lane, a GLVARmember and CEO of the foundation. “We havedifficulty finding decent quality housing for our

workforce families. Tis was once a vibrant area of ourcommunity, and we want to bring those opportunitiesback. Many of the people we’re working with wouldlove to move back into this area. Te major propertyowners around the corner have been very supportiveand are helping in any way they can.”

CALV President Bobbi Miracle, a local comreal estate broker, added that “CALV was th join the project. Brokers have everything to joining with other community leaders to ethese community attributes are in place. Mever, buyers and tenants want the convenivalue of smart growth.”

Discover more about what happened at the event bNAR’s Te Source blog, www.blog.commercials– and find out what GLVAR’s next steps will be ichange this block of their community.


6/13

TY SPOTLIGH T:

YRTLE BEACH, SOUTH CAROLINAccording to its Regional Economic Developmentorporation, Myrtle Beach, South Carolina is aorld-recognized travel destination and a premiercation for business growth that now attracts morean 16 million visitors, residents and businessesch year. Overlooking the inter-coastal waterway,new hike/bike park in Myrtle Beach, needed someelp and REALORS® were there to answer the

ll. According to Nick Kremydas, CEO of Southarolina REALORS®, “Working closely with NAR,

olunteers and community supporters, the Southarolina REALORS® were able to contribute $2,000improve the park to include a new community spaceat include benches and signage that will overlook theaterway, creating a beautiful gathering space wheners want to take a break from the trail.”

TY SPOTLIGH T:

ALM BEACHES, FLORIDATe REALORS® Association of Palm Beaches

ommercial Alliance (RCAPB) received a PlacemakingMicro-grant to replace a vacant lot with a community

rden. Completed in May 2015, the Gladiolusducation Garden of Delray Beach, Florida now serves

teach the community how to grow healthy foodsa beautiful new setting. Belinda Krause, RCAPB

xecutive Director, has shared the story and inspirin gmages of this transformation on NAR’s Spaces to

aces blog, at http://spacestoplaces.blogs.realtor.org .

CITY SPOTLIGH T:

FORTVILLE, INDIANATe community of Fortville, Indiana turned anunattractive alleyway into a pedestrian-friendlypublic space with benches, planters and public art,partially funded by a NAR Placemaking Micro-grantrequested by the Metropolitan Indianapolis Board ofREALORS® (MIBOR) earlier this year. According toKathy Hall, MIBOR President, “Te creation of thisnew walkway will help connect Main Street to or withthe public parking lot. Te community has alreadyattracted investors to buy and renovate buildings and

rent storefronts. Main Street has seen a flourishing ofnew businesses.”

Interested in applying for a Community Outreach grant?Contact your Association Executive or reach out to Holly Moskerintz at [email protected] for moreinformation.

S C R I M M E D I A T E P A S T P R E S I D E N T R A N D Y H A R R I S O N P R E S E N T E D T H E N A R P L A C E M A K I N G

GRANT CHECK TO GREG BR INSON FROM THE SOUTHERN OFFROAD B ICYCLE ASSOCIATION(S O R B A ) A L O N G W I T H R E A L T O R ® T I M F O R S T O N A N D S C R C E O N I C K K R E M Y D A S .

P H O T O C O U R T E S Y O F N I C K K R E M Y D A S .

COMMERCIAL CONNECIONS I F A L L 2 0 F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

COMMERCIALEXPECAIONSFROM NAR RESEARCH

BY THE NUMBERS

COMMERCIAL FUNDAMENTALS OUTLOO

OFFICE

VACANCY

RATES

INDUSTRIAL SPACE

VACANCY

RATES

RETAIL SPACE

VACANCY

RATES

MULTIFAM

VACANCY

RATES

15.8% 10.3% 13.0% 6.7

GDP: 2.7 Payroll Employment: 1.8

42,878

RENTER OCCUPIED HOUSING UNITS

Demand for multifamily properties continued on

an upward path. Renter occupied housing totaled

42,878 units in the second quarter of 2015, a 4.9

percent advance from the first quarter, based on

U.S. Census Bureau data.

POTENTIAL SPEED BUMP

Rising consumer prices

Moderated consumer confidence

Strengthening U.S. Dollar

FOR NAR’S LATEST COMMERCIAL RESEARCH & STATISTICS, VISIT Realtor.org/commercial/research

THIRD QUARTER OF 20

MMUNITY DEVELOPMENT

AS SO CI A I ON S I N AC I ON CONINUED


7/13

THURSDAY, NOVEMBER 1212:30-2:00PM Commercial Legislative & Regulatory Board Meeting2:00-4:00PM Commercial Research Advisory Board Meeting

FRIDAY, NOVEMBER 13All Day

Conference Education Sessions 8:30-10:30AM Commercial Committee Meeting10:30AM-12:00PM Property Management Forum1:00-3:00PM

Commercial Economic Issues & Trends Forum3:00-6:00PM Commercial Marketplace at the Expo

SATURDAY, NOVEMBER 147:30-8:45AM

Commercial Caffeinated Networking Breakfast (TICKETED)All Day

Conference Education Sessions9:00AM-4:00PM Commercial Marketplace at the Expo featuring panelpresentations, tech tools and more

SATURDAY, NOVEMBER 14 CONTINUED9:00-11:00AM Commercial Leadership Forum4:00-6:00PM General Session with Emmitt Smith, CCIM6:30-8:00PM Commercial Red Carpet Reception (TICKETED)

SUNDAY, NOVEMBER 15All Day

Conference Education Sessions10:00AM-5:00PM

Commercial Marketplace at the Expo featuring panelpresentations, tech tools and more

MONDAY, NOVEMBER 16

All DayConference Education Sessions9:00AM-1:00PM

Commercial Marketplace at the Expo9:30AM-12:30PM

Commercial Property Pitch Event in the Commercial Marketplace

If you have any questions about governance meetings,commercial education or any of the other events planned, pleasecontact [email protected] . For complete details,the most up to date schedule, and to register for the REALORSConference & Expo, visit www.realtor.org/conference .

n Opportunity for New Business

Tis year’s event includes a new Commercial Marketplacethe Expo, featuring exhibitors with industry tools andoducts, a deal-making space for networking, panelesentations and a property marketing event. Plus– we

ave a few surprises in store – you won’t want to miss thecitement in this new space built for commercial realtate professionals.

sten and Learn

iscover a specialized slate of education sessions onmmercial topics including lending, technology, 1031

ke-kind exchanges and more. Attend forums focusedn commercial business trends, leadership and propertyanagement.

etwork, Network, Network art your Saturday morning with coffee and an energizingynote from a special industry speaker at the Commercialetworking Breakfast. Wind down on Saturday eveningith a conversation and refreshments alongside hundreds

f your peers at the Commercial Red Carpet Reception.ake the Commercial Marketplace your home during thentire conference– meet with colleagues to discuss business,charge your devices, and discover new tech tools that canelp you gain a business edge. One conversation might leadyour deal of the year!

“In today’s rapidly changing environment, it is essential for commercial practitioners to collaborate togetheron best business practices, technology and legislativeissues impacting the industry. Tis venue provides thatopportunity.”

LORI BURGER, CPM

“Tis conference is the place to be! It offers a schedule packed full of learning about commercial advocacyissues and market information. Plus, there are numerousopportunities to network with some of the best commercialindustry professionals in the country.”

STEVE MOREIRA, CCIM, CIPS

COMMERCIAL CONNECIONS I F A L L 2 0 F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

UCATION & NETWORKING

COMMERCIALIS I N FOC US

T THE 2015 REALTORS® CONFERENCE & EXPO

COMMERCIAL SCHEDULE AT THE REALTORS ® CONFERENCE &

PHOTO COURTESY OF THE SAN D IEGO TOURISM AUTHORITY

UPCOMING COMMERCIAL AFFILIATE NATIONAL CONFERENCES

SIOR FALL WORLD CONFERENCEOctober 8-10, Chicago, ILHighlights include keynote with bestselling authorNeil Pasricha; thought leadership panels with experts fromReal Capital Analytics, MI and Wharton; numerous

CE credit sessions.www.sior.com/conferences/2015-fall-world-conference

IREM FALL LEADERSHIP CONFERENCEOctober 18-21, Salt Lake City, UT Attend to take advantage of dozens of education sessionsincluding best practices in property management, buildingstandards and a keynote address from Robert Stephens,former chief technology officer of Best Buy.www.irem.org/events/irem-fall-leadership-conference

CCIM THRIVEOctober 27-30, Austin, TX

Gain insights from keynote speaker Sam Zell, pasessions featuring industry thought leaders and Capproved Ward Center for Real Estate Studies coufrom the CCIM Institute.www.globest.com/conferences/ccim-thrive-2015/


8/13

Tis past March, NAR took unprecedented action bysting the NAR - United States Pavilion at MIPIM,e of the largest international real estate events ine world, showcasing U.S. markets and members.IPIM brings together the most influential players

om all international property sectors - office,sidential, retail, healthcare, sport, logistics anddustrial, offering unrivalled access to the greatestumber of development projects and sources of capitalorldwide. o put this into perspective, MIPIM15 drew over 21,000 attendees from more than 90untries, and included 2,400 exhibiting companiesd 4,800 investors.

15 NAR President Chris Polychron stated, “Itended MIPIM in 2013; finding U.S.-specificsiness was almost impossible. Tat was eye-ening to me and it was then I knew NAR had a

gnificant role to play.” NAR’s Pavilion was a success:

created REALOR® brand awareness, demonstratedmmitment to commercial members and promotedal communities in locations such as Miami, Illinois,d Birmingham, along with the educational powerour affiliate organizations. Tanks to NAR, the

nited States gained a high profile at this global forumd many business relationships were initiated.

uilding on this success, in 2016 NAR will expand theotprint, creating opportunities for more associationsparticipate and represent markets with the potential

for development. As a NAR member, you benefitfrom this exposure – receiving a substantial registrationdiscount negotiated for you by NAR as a part of theNAR-United States pavilion.

o learn more about NAR’s MIPIM initiative andopportunities to showcase yourself or your market, go towww.realtor.org/MIPIM .

F A L L 2 0 1 5 I COMMERCIAL CONNECIONS COMMERCIAL CONNECIONS I F A L L 2 0

TERNATIONAL FOCUS

WHERE I NH E WOR LDS YOU R N EX

DEAL OR C LIEN?Jan Hope, Vice President, Commercial & Global Services, NAR

n 2014, over $100 billion in U.S. home sales were purchased by foreign

uyers, and over $40 billion in commercial property investment originatedutside the U.S. Data forecasts indicate an increase again this year.

“ MIPIM is the world’s fair of commercial real estate. You

can set-up, make a presentation and show attendees what you’ve got; you can walk around and see what they’ve got;and you can go to breakfasts, lunches, dinners, seminarsand discussions with the people who are buying, sellingand renting the planet from dawn until dusk andbeyond. But you can’t do any of it if you stay home, andthe rest of the world is there … in a big way.”

JOHN DOHM, CCIM, SIOR Miami, Florida

“Te MIPIM conference is an eye-opener to those

not fully aware of the global impact of real estatlocal marketplace and the sheer amount of businready and willing to come into your market frominvestors. All those investors need is a personal i from you to check out your city.”

CHIP WATTS, C

Birmingha

T H E U . S . P A V I L I O N R E P R E S E N T E D R E A L T O R S® A N D N A R P A R T N E R S APHOTOS COURTESY O

— Florida

— Illinois

— Miami

— San Diego

— Scottsdale

2016 SPONSOR

— IREM

Contact Jan Hope at [email protected] to find outhow your market area can take advantage of thisopportunity for exposure.

* At press time, these are the current markets where the REALOR® associationhas committed to space in the NAR-United States pavilion. As of September 1,there are 5 open spaces available.

2016 EXHIBITING MARKETS*


9/13


DUSTRY — LENDING

ONLINE LENDERSO HE RESC UE

istorically, banks have served as the primary sourcef capital for real estate loans, followed by governmentencies, life insurance companies and CMBS lenders.owever, recent regulatory and technological advances

ave allowed a new, emerging breed of alternativenline lenders. Tese lenders offer commercial realtate professionals an additional avenue for helpingeir clients secure financing for their deals, especiallythey are having trouble getting loans through

aditional sources.

anks certainly continue to play an important role innancing real estate transactions. Last year, local andmmunity banks served as the primary source ofpital for NAR members’ clients, accounting for 32

ercent of financing transactions, followed by regionalanks, which were responsible for 26 percent of deals,cording to NAR’s most recent Commercial Lendingrends report. It was private investors, however, whorved as the third biggest source of deal funding forAR members’ clients in 2014, accounting for 11

ercent of transactions.

or NAR commercial members, one of the biggesthallenges they experience in securing financingom traditional lenders is that they typically manageansactions that fall outside of traditional lendingarameters. Teir clients tend to invest in smaller dealsat usually involve properties located in secondary orrtiary markets. Tese deals are generally too smallr lenders, such as international banks, larger private

quity firms and CMBS shops that need to focus onulti-million-dollar transactions for efficiency. In

2014, even local and regional banks reported thattheir average loan size was $5.4 million, accordingto research firm Real Capital Analytics. Additionally,traditional lenders look to mitigate risk by preferringto invest in properties located within strong primarymarkets. Tey also tend to prefer borrowers whoalready have pre-established relationships with them.

As a result, securing financing for smaller, moreunconventional deals remains an issue for NARmembers. According to the Commercial Lendingrends report, 42 percent of NAR members’ salesfell through last year as a result of financing-relatedchallenges. In 19 percent of cases, a shortage offinancing options was to blame. In another 62 percentof deals, the underwriting standards proved too rigid.In consequence, 58 percent of surveyed professionalsfelt that lack of sufficient bank capital for commercialreal estate transactions was an obstacle to closing s ales.Tat situation is changing slowly, if at all—the FederalDeposit Insurance Corporation’s (FDIC) SeniorLoan Officer Opinion Survey for July 2015 found thatthe majority of bank officers felt their institutions’

standards for originating commercial real estate loansremained the same as in the first quarter of the year.

Online lenders, such as Los Angeles-based AssetAvenueInc., may offer a solution. Te firm’s core clientele ismade up of professional real estate investors lookingfor small balance bridge loans that they have troublefinancing elsewhere—a perfect fit with the types ofclients typically served by NAR commercial real estateprofessionals. AssetAvenue connects these borrowers

and brokers with institutional quality capital sourcesthrough its online lending platform and can helpthem finance commercial bridge loans ranging from$3 million to $20 million. Tey make it easier forinvestors to secure flexible loan terms and to closedeals in just a few days instead of a number of months.

AssetAvenue can also be a great resource for borrowersand brokers looking for residential rehab loans. Inaddition to offering flexible underwriting and fastclosings, they also provide instant online quotes withcustom terms. Tey are dramatically improving thetraditional application process by providing a simpleand intuitive online experience with transparentpricing. Borrowers and brokers can manage theend-to-end application for all of their loans throughtheir personalized online dashboard. Available 24/7, AssetAvenue gives borrowers and brokers the powerof convenience, allowing them to complete things whenever and wherever they want.

“We are using technology to improve a typicallyslow, labor-intensive and paper-driven process ofapplying for and s ecuring a loan,” according to DavidManshoory, CEO and Co-founder. “Tis involvesusing technology to remove the friction and makethe process faster and more streamlined from timeof application to completed funding. We currentlyoffer automated loan pre-qualifications and pricingfor residential rehab loans for borrowers and brokers,providing them with a menu of loan options to choosefrom that suit their specific financing needs. And inthe coming months we will be offering pre-qualifiedinstant pricing for commercial loans.”

AssetAvenue is one of a growing number of online realestate lenders. According to research firm Massolution,85 different real estate crowdfunding platforms fundedapproximately $1 billion in loans in 2014. By theend of 2015, the industry is projected to more thandouble, reaching $2.5 billion in funded loans. As

online lenders clearly continue to play an increasinglyimportant role in real estate financing, it is critical thatbrokers and borrowers include them in their arsenal offunding tools.

As U.S. real estate becomes an increasingly attractive asset to investors due to

mproving property fundamentals and rising values – the financing industry is

volving to meet the growing need for debt capital.

HEN TRADITIONAL OPTIONS FAIL

Michelle Katzman

ASSETAVENUE1100 Glendon Avenue, Ste 1800Los Angeles, CA 90024P: (855) 277-4055Email: [email protected] Website: www.assetavenue.com

COMPANY OVERVIEW AssetAvenue, a NAR REach® Class of 2015 compleading online lender for real estate investment pand has become one of the fastest growing stathe industry in its first year. Te company is

reimagining how real estate loans for investment are sourced, underwritten and funded. By technology into every aspect of the lending AssetAvenue is giving borrowers a better experivalues speed, transparency and the certainty of exefunding the loan. Brokers and borrowers alike in minutes, get instantly prequalified and be funlittle as 10 days. AssetAvenue is a premium non-baoffering institutional capital at the most competand flexible terms possible.

RESIDENTIAL INVESTOR REHAB • 1-4 Unit Non-Owner Occupied• Loans $350K-$5M• 6-18 Month Terms• No Income Requirements• Up to 80% LTV & 100% Rehab• Rates Starting at 7.99% + 2 pts.

RESIDENTIAL INVESTOR NON-REHAB• 1-4 Unit Non-Owner Occupied• Loans $350K-$5M

• 12-18 Month Terms• Up to 65% LTV• Rates Starting at 7.99%• Foreign Nationals Welcome

COMMERCIAL BRIDGE • Office, Retail, Industrial, Multifamily• Loans $3M to $20M• 12-36 Month Terms• Rates Starting at 7.99%


10/13


or a significant proportion of real estate marketarticipants, like-kind exchanges (LKE) provide anmportant vehicle to sell and acquire property. LKEslow a property owner to dispose of a property andquire another one of like-kind. Te Internal Revenueode (IRC) Section 1031 codifies that the tax owed

n any gain after a sale may be deferred as long as theroceeds are reinvested in a similar property through aKE. Te Internal Revenue Service (IRS) makes notef the fact that while the gain “is tax-deferred […], itnot tax-free.”1 At some point, the property ownersposes of the property and gains are recognized,ading to tax payments.

rom a historical perspective, LKEs were recognizedtax law going back to the Revenue Act of 1921. Te

nderpinning principle of the law was the fact that axpayer’s economic position did not change as a resultf an exchange of property for another of like-kind.

With no change in economic position, there was noeed to recognize or impose a tax on the transaction.ny gain from the transaction was deferred. Tisrinciple is important as it recognizes that LKEs are ax-neutral feature of the law, which does not result inloss of tax revenue.

Te main requirement of a LKE is that the disposition

f one property and acquisition of another propertyust be part of an integrated transaction, rather than

wo individual transactions. In addition, while bothal and personal property qualify, the properties muste similar, pursuant to specific criteria which delineateigibility. An important aspect of this process is theost basis of the original property. Te basis is carried

forward to any and all subsequent properties. Teproperty owner does not have the ability to depreciatea newly acquired property at the higher exchangevalue, but retains the disposed property’s original cost.

According to the IRS, “like-kind property is property

of the same nature, character or class. […] Most realestate will be like-kind to other real estate.”2 Generally,a parcel of land with a rental house may be exchangedfor vacant land. Similarly, an office building maybe exchanged for an industrial warehouse or a retailshopping center. Te IRS makes exception with realproperties located outside the United States, notingthat domestic U.S. real estate may not be treated aslike-kind to international real estate.

Like-kind exchanges provide several major benefits.Te main one is the freer flow of capital. LKEtransactions allow property owners to allocate capitalmore efficiently to be flexible in the face of changingeconomic and market conditions. Another mainbenefit is that LKE transactions lead to commerce—as they involve multiple parties—as well as economicgrowth through job creation. Generally, LKEs involveadditional investments in improving properties—especially for real estate—which shorter-term generateconstruction jobs, but also longer-term employment

opportunities for property managers, leasing agents,maintenance staff etc.

Te NAR Like-Kind Exchanges: Real Estate MarketPerspectives 2015 report provides a real estateperspective on the issue, based on a national surveyof NAR members. Te report indicates that LKEs

SEARCH

LIKEKINDEXCHANGES

N IMPORTANT VEHICLE FOR ECONOMIC GROWTH

George Ratiu, Director of Quantitative & Commercial Research, NAR

are important to small businesses and small businessowners. Based on the data, close to half of LKEtransactions occurred between small investors— thesurvey results show that 48 percent of the total fairmarket value of exchanged properties was held in anindividual or sole proprietorship.

Like-kind exchanges also featured prominently inNAR members’ real estate transactions. Based on thedata, slightly over 60 percent of respondents indicatedthat they participated in at least one LKE over 2011-2014.

Just as importantly, the report illustrates that LKEtransactions facilitated additional capital into the localmarket. When asked if they or their clients investedadditional capital in order to make improvements afteracquiring real property, a majority of REALORS®—86 percent—answered affirmatively.

Moreover, 56 percent of respondents indicated thatthey or their clients made property improvements in

the 10 – 24 percent range of the acquired pfair market value. Commercial practitionersto the fact that these additional investmgenerally responsible for the creation of new joas construction and property management.

Based on responses, 40 percent indicattransactions would not have happened at al2011-2014 without the availability of LKEs. 24 percent reported that about 75 – 99 petheir transactions would not have occurredpercent of members marked that 50 – 74 ptransactions over a four-year period would

occurred absent the tax-deferral option. Tisanswer to any question about the potentiaupon real estate transactions in the absence odeferral provision of IRC Section 1031.

o read the entire Like-Kind Exchanges: Re Market Perspectives 2015 report, visit www.rereports/like-kind-exchange-survey.

nternal Revenue Service, Like-Kind Exchanges Under IRC Code Section 1031, FS-2008-18, February bid

CHART: NUMBER OF LKE TRANSACTIONSFOR ALL MEMBERS 2011-14

37%

40%

14%4%

5%

CHART: LIKELIHOOD OF LKE TRANSACNOT OCCURRING WITHOUT TAX DEFEPROVISION

40%

24%

18%

9%

10%

■1-3 ■4-6 ■7-12 ■MORE THAN 12 ■NONE ■1-24% ■25-49% ■50-74% ■75-99%


11/13

COMMERCIAL CONNECIONS I F A L L 2 F A L L 2 0 1 5 I COMMERCIAL CONNECIONS

CHNOLOGY

USING DAAEFFECIVELY

COMMERCIAL REAL ESTATE

Mark Frank, Chief Operating Officer & Vice President of Finance, TermScout

ou’ve probably adopted smartphones and tabletsell in advance of the general market, purely for thenvenience and access to analytics: the more you

now, the more you can sell or lease. However, whileost brokers successfully utilize technology to assistevaluating and closing a transaction, many still relylely on referrals and word of mouth to find new

usiness.

What About Sales Intelligence?We know that technology opens up new opportunitiesnd increases capacity. Software advances have drivenown the costs of data acquisition and there areultiple platforms that can now aggregate data fasteran ever. Tis provides increased access to real-time

nalysis that can directly impact your business. Cloudmputing and storage technologies that reduce lag

me on data transmission make it faster and cheaper

acquire data and interpret it.

Modern sales intelligence platforms go beyond theasic numbers that drive most commercial real estatenalytics. Great sales solutions also include data thatas been mined from news, social media, email andher hard-to-find sources. Tis in-depth researchves you the ability to find new prospects within yourarket that are outside of your normal referral sources.dditionally, data that is specifically-tailored for your

individual market can help you better understandyour client’s situation, build a stronger relationshipand provide better service to help meet their propertyneeds.Generating New ProspectsEven the most experienced commercial brokers wouldlove to increase the number of prospects in theirpipeline. Whether you are new to the business, or havebeen involved with commercial real estate for decades,it’s beneficial to utilize as many tools as possible tokeep your pipeline filled. Cultivating contacts througha combination of referrals, direct contact and throughsocial media helps keep you relevant in the minds ofyour prospects.

Some platforms help you mine your ‘likes’, ‘follows’and ‘+1s’ and other social media shares for newprospects. By automating the process and keeping

original contact via online channels, you can continueto stay top-of-mind. Te most successful commercialbrokerage firms all have direct consumer referraloptions to make the process quick and easy.

Measuring Client Intent A successful sales intelligence and lead-generationplatform can help align your prospecting efforts toimprove the conversion rate on leads, all by measuringnot just whether or not the prospective client is

Commercial real estate has always been driven by the numbers. Successful

ommercial brokers have hundreds of information sources at their fingertips

urrounding inventory, trends and market conditions.

interested, but also by measuring their immediateintent. Generating a large volume of leads is not thesolution in commercial real estate. Instead, lead qualityplays an increasingly important role in determining which prospects ultimately improve sales numbers.Data intelligence platforms can improve your leadquality by sorting those prospecting into differentquality categories. Commercial brokers can then usea combination of prospecting analytics and their ownintuition to prioritize precious client-facing time.

Continually Improving to Grow RevenueTe most important thing for commercial bremember is to always pay attention to n ew a ways to generate quality prospects, servicefficiently and limit wasted efforts on ineffectgen methods. Successful brokers spend thinteracting with prospects and clients, not coresearching for new leads. Tere are a varietyout there - start using them.

ermScout (www.ermScout.com ), a NAR REach® Class of 2015 company, provides a predictive sales intelligfor commercial brokers. enant rep brokers waste precious time researching dozens of information sources of new clients. ermScout completes that research with SCOUS - trigger events such as executive changes,events and lease expirations delivered right to your inbox or CRM. Your SCOUS always contain the keinformation you need to connect with new clients and close more deals. Commercial brokers can now grbusiness using the actionable, timely and accurate market intelligence with ermScout.


12/13

MBER SERVICES

urce: August 2015; CommercialSearch.com is operated by Xceligent, a REALOR Benefits® Partner. Listings are populatedaggregation of data uploaded from commercial real estate firms, franchise, individual brokers and agents, as well as MLSsd CIEs. Visit www.CommercialSearch.com to add your search listings.

GROWINGNUMBERS

111,067USERS

417,337PROPERTY LISTINGS

1.4millionLISTING VIEWS

July2014 Dec2014 July2015

57,997 USERS

389,059 LISTINGS

867,891 VIEWS

75,515 USERS

386,791 LISTINGS

1,459,872 VIEWS


REALORSPROPERY RESO URCE®VALUE SPANS BUSINESS FOCUS

by Laurie Brown, Marketing & Communications Manager, RPR

In the apex of a finance course at REALOR®University’s Master of Real Estate program, Adrienne“Abe” Wagner needed to identify, analyze and thenbring to market a commercial property in order to passthe class. “I’d been using RPR for my business for a longtime, but only for my specialty, which is residential,”said Abe, an associate broker with Berkshire HathawayHomeServices, Donegal, PA.” We don’t have citysewer on our main road so our commercial propertiesare very limited. I knew this assignment was going tobe a challenge.”

Never one to back away from a challenge, Abe, whoholds a Bachelor of Science in Economics, set outto become an expert in RPR Commercial. “’Know what you don’t know’ is common parlance amongcommercial real estate brokers,” she said, “so learningto use the tools provided by RPR Commercial gave meeverything I needed to generate an amazing array ofreports on my income producing property. I couldn’tbelieve the wealth of information and tools provided

on the site.”

Increasingly, agents in rural communities are turningto RPR to identify marketplace opportunities forbusiness owners, property managers and developersintent on progressing into their areas. Using RPR’sadvanced analytics and tools to produce persuasivetrade area analyses, commercial property reports, andbest business reports coupled with powerful thematicmaps, ultimately help agents determine the right fit fora client’s enterprise.

Abe’s favorite RPR features include phooptions that allow users to get an immedialocation with adjustable aerial views, in addoverlaying tax maps that highlight boundarieextensive o Purchase or Pass on an Office InOpportunity project, Abe created a proposalon an existing commercial property in LPA. Drawing from RPR reports, Abe and identified dozens of data sets for the including economic forecasts, tax and mfigures, employment, population trends, cspending, lifestyle preferences, education andcomparisons, photos, and maps.

Abe underscores the value of RPR’s extensive tools, “Te amount of data this tool compilesreport is impressive.”

“Generating the reports was very easy,” sh“When I came across small stumbling blocksthe tech support group. And they were f

RPR’s Help Desk is available to members 24day, seven days a week – and as with the RPRat no additional cost to the member.

Enhance your next commercial property prolearning how you can leverage these tools by a RPR® Commercial webinar. Visit learn.nacommercial to register.

Buzz about RPR’s commercial platform is humming across the nation

sometimes in an unexpected, but valuable way.

111,067 USERS

417,337 LISTINGS

1,488,711 VIEWS


13/13

fall 2015: a market for optimism & opportunity

Documents