Industry Changing Insights from ICSC RECon

ICSC’s 2018 RECon Global Retail Real Estate Convention hosted the world’s largest global gathering of retail real estate professionals, among whom industry acumen and insights were shared and discussed. We answered questions like “What is the future of malls and power centers?” “How will technology play a role in maintaining a competitive advantage for retail real estate companies?” and ” How are internet sales impacting retailers?” From our various meetings and conversations, here is how the industry is changing, and what you can expect to see in the future:

1. Contrarians looking for power center product are finding higher yields, but are having a difficult time assessing risk. How this shows up in the market is fewer offers made, and pricing significantly off of Sellers’ expectations. There still is a truing up process going on in this part of the market, and the balance of 2018 will reflect this shift.

2.There is high competition for grocery anchored product, with pricing remaining firm in this product type. This lack of softening on pricing reflects investor sentiment that there is less risk in this area of retail.

3. Daily needs shopping is not as threatened as was perceived last year – Internet sales are enhancing sales for daily needs retailers, and not threatening them. Most shoppers still want to pick certain grocery items personally. However, some items they are pre-ordering which they pick up after shopping for non-preordered items.

4.Malls continue to seek their equilibrium point in the market – pricing for this product type remains very soft, reflective of reduced demand, lack of financing, and a collective view is that there is much more fallout in this sector – some saying that there will be half as many malls in the future as there are today. The adjustment will take many forms, ranging from partial repurposing to alternative uses, to complete scrapes.

An interesting observation from one seasoned client: The demise of malls started with the rise of the two-income family, which led to shorter and fewer shopping trips, and a higher focus on value, which fostered the development of power centers and the advent of discount retailers.

5.Technology is a key to maintaining a competitive advantage. For some it will involve AI, and for others a more robust use of existing technology. Real estate in general has been slow to adopt technology, however retail tenants are definitely embracing technology as part of their operating strategy. Mobile phone data is being leveraged in many ways including tracking consumers, spending patterns, etc.

6. There remains a disconnect between buyers and sellers on pricing overall, but that gap is narrowing, and we anticipate a high volume of transactions in the third and fourth quarters of this year.

In general, we are in a transitional market with more optimism than pessimism. Retail investors need to carefully assess the risk of their portfolio and their new acquisitions. Fears about online retailing undermining sticks-and-bricks retail are overblown; however the industry is rapidly moving further toward value and convenience, tied to the changing lifestyle of the average American. Companies investing in technology maintain a competitive advantage. Let us know how we can help you.

Maximizing Communication Through the Marketing Process

Communication is one of the roots to successful project management, and the main difference between a project running smoothly or a project filled with missed deadlines and avoidable bottlenecks. One of the areas with a high probability for communication to affect process and productivity is in the creation of marketing collateral and marketing campaigns.

Process, Process, Process…

Miscommunication is deadly to productivity within the fast paced lifecycle of a marketing campaign. Many times, properties have strict client deadlines, and in many cases it is as soon as humanly possible. With speed-to-market being a top priority, it is imperative that a team operates on the same page from the beginning of the marketing process.

Project managers, graphic designers, analysts, brokers, and additional administrative assistants all help funnel along a marketing campaign from its inception to its launch. Having a battle-tested process is one of the most reliable ways to ease a communication dilemma. Our team has various processes for various product types, most of them beginning with a project kick-off call or meeting. This not only helps the brokers iron out any property positioning quandaries, it helps the team understand the project vision and their individual roles within the collateral building process while creating accountability.

A process is only as strong as its level of adherence, and this is where accountability becomes king.

Establishing Defined Roles for Greater Accountability

As mentioned above, defined roles create accountability. When analyzing the effectiveness of process—how to build, improve, and even celebrate—roles are critical to seeing where communication strengths and weaknesses lie. Defined roles also pair nicely with process because it promotes a symbiotic system of checks and balances.

When our team creates an Offering Memorandum for a property, we have various stages of quality control. Ultimately, there is one person who has the final check and stamps approved to launch. If someone misses an edit, the next person can catch it and so forth.

We can also invoke the imagery or reference of a McDonald’s assembly line. Each person has their defined role and strength in completing a certain task along this assembly line. When a team process is created, you put your team members with unique abilities in a position to complete certain tasks within that role. It sounds like common sense, but many teams rely on the wrong person to complete certain tasks. You wouldn’t go to a dentist for a haircut, would you?

How to Communicate with Different Productivity Styles

There are various ways to effectively communicate, though since every team is different, no exact formula exists. Our team utilizes various tools to understand how to effectively communicate with each other, including defining our productivity styles as illustrated in Travis Carson’s Market Force chart below:

All personality types cannot be completely defined to fit in these four categories, but it can provide a few tools and can help cultivate clearer channels of communication and understanding.

It is also helpful to see communication as a two way street. People are not mind-readers, and most often do not think the same way as you. After years of working with someone, you can learn subtle nuances and come to intuitively understand your teammates; but that cannot replace clearly communicating thoughts, ideas or instructions.

Make sure everyone is on the same page early on in the process, and those few extra minutes it might take you to explain your vision will undoubtedly make a difference in the end result.

Market Trends and Volatility on Real Estate Values

Assessing market cycles and risk is a necessary component of any investment strategy. Whether in a positive or negative cycle, there are opportunities in real estate beyond the “buy low; sell high” saying, depending upon long-term goals. However, it is much easier to assess previous trends. It is difficult to predict the future; otherwise, everyone would have predicted the market crash of 2008. To measure performance, we should look at how real estate compares to historical and emerging data, as well as other securities to mitigate risk.

Historical Data

Historical data includes sales information, vacancy rates, and interest rates. Sales data is widely used by the appraisal methods as it gives an indication of where property values have been. The downside is that sales comparables are often lagging and may not keep up with immediate corrections in the marketplace. Vacancy rates can tell us whether there is an surplus of spaces.

A great example is provided by Harvard Market Cycle Quadrants using vacancy and construction to show phases of the market cycle. If an increase in vacancy in a specific market is starting to occur, we may consider this phase to be an indication of an impending downward trend. Often new construction falls behind market phases. Once the market is in an expansion phase, companies look to new construction to capitalize on investment momentum. However, construction often takes time including design, permits and production. By the time the new product hits the market, there could already be a change in the cycle or even cause a change by increasing available units.

 

Another trend to look at is interest rates. When the Federal Open Market Committee raises rates, it affects the housing economy as well as investment properties. Generally as interest rates rise, a negative impact on residential properties will occur. Monthly payments increase and thereby affect affordability. As expected appreciation decreases, the desire to own may also decrease. And of course, interest rates affect investment yields. As the cost of borrowing increases, expected rates of returns must also increase. Recently, we have seen interest rates already increase with anticipated additional rate hikes throughout the year.

Securities

The risk of investing in real estate also must also be compared with returns on other security investments such as bonds, stocks, and treasury bills. Recently, the rates on treasury bills have increased, making those more appealing to more risk adverse investors. T-bill rates impact real estate income yields as investors then expect higher returns when compared to the benchmark of a riskless investment.

REITs are an alternative source of offsetting risk by investing in portfolio holdings and different asset types. Many of our clients are REITs and have positioned their success on the ability to purchase our value-add retail listings thereby increasing yield.

What is the future real estate outlook?

Using some of these indicators we make more informed predictions about the future of expected returns. While purchasing real estate always entails some risk, it also comes with reward. From at least 1985-2009, real estate investments exceeded the rate of inflation and produced investment returns. Increasing returns is also a hedge against concerns about inflation. While uncertainty in the market can be a factor affecting values, knowing how to analyze the trends can help offset volatility.

Our team is uniquely qualified to walk investors through multiple retail assets from single tenant, multi-tenant, to grocery anchored power centers and properly position dispositions ahead of the market curve.

The Real Estate “Occupy Movement” : The Last 10%

The Occupy Movement

The Occupy Movement started in 2011 when an activist blogger in New York started a Tumblr post entitled “We Are The 99 Percent” with a focus on income inequality, among other things, and spawned the Occupy Wall Street and other Occupy events at that time. The blog was inspired in part by economist Joseph Stiglitz’s May 2011 Vanity Fair article “Of the 1%, by the 1%, for the 1%” where he observed that 1% of the US population take home nearly 25% of the nation’s income, and control 40% of the nation’s wealth.

Occupying the Last 10% in Retail Shopping Centers

This blog post is about another Occupy Movement that preoccupies every owner in our industry, and that is the push to get all of the GLA occupied in our centers. Occupancy equals cash flow and value, the end game of the ownership of real estate.

When I worked as a portfolio manager for a shopping center REIT, our COO had a saying that has stuck with me to this day, “Every dollar a day sooner.” He said that to keep everyone’s focus on getting our vacant spaces leased as soon as possible – to limit downtime, and to push for maximum lease dollars. This is the job of every owner.

The Cash Flow Impact

Every square foot of retail space is worth anywhere from $0.50 and $4.00 per square foot per month, depending on the market, and location of the space within the center. So, a 1,000 SF space is worth anywhere between $500 and $4,000 each month. And NOT leasing that space “costs” its owner $500 to $4,000 per month. Adding in NNN charges (typical for most leases), the opportunity cost moves to $950 to $7,300 per month, equating to anywhere from $11,400 and $87,600 per year.

I don’t know many people who would not want the opportunity to have additional cash flow like this!

There are mitigating circumstances that may make it difficult to get every square foot leased, but the goal of every owner is to lease up vacant space.

For instance, an owner with 5,000 SF of vacancy in his or her portfolio, with rents of $15 PSF annually, and NNN costs of $3 PSF, leasing the vacancy brings in $90,000 extra income. For 20,000 SF of vacancy, and rents of $20 PSF (and NNN costs of $3 PSF as an example), that adds up to $460,000.

The Value Impact

This additional income has a far greater effect on value.

Using a 6% cap rate as the “market” for valuation of a center, the impact of leasing space is as follows (market rents across the top row, GLA leased along the left column):

SF/Mkt Rent $5 $10 $15 $20
5,000 $670,000 $1,080,000 $1,500,000 $1,920,000
10,000 $1,330,000 $2,170,000 $3,000,000 $3,830,000
15,000 $2,000,000 $3,250,000 $4,500,000 $5,750,000
20,000 $2,670,000 $4,330,000 $6,000,000 $7,670,000

As one can see, that additional cash flow has a huge impact beyond the immediate cash flow benefit. This impact is not only affects a sale, but also affects financing proceeds, and in most cases, financing terms. Lingering vacancies can be perceived as market weakness, or a functional problem with a certain space, however it may be perceived as sponsor (borrower) weakness and affect loan terms. Not always the case, but one wants one’s best foot forward at all times.

While some underwriters may still apply a market vacancy factor to a center, beginning at the highest possible number is always the best place to start.

A Solution For The Last 10%

Sometimes it is difficult to get leasing agents to focus on these last spaces in a center. We propose that owners consider contracting a company on a fee basis in order to “stand watch” on these last spaces. This contract amount benefits in several ways:

  1. The amount does not need to be onerously large
  2. The fee could be included in a monthly management fee, to be included in NNN charges
  3. The incentive on the remaining space will be focused on fulfilling the contract obligation and less focused on the leasing fee, which in most cases is small
  4. The leasing firm would welcome the recurring revenue which benefits their EBITDA and value
  5. Having a leasing person paying regular attention to the center may lead to other larger opportunities and will increase ownership’s exposure to market trends

Reach out to our team to discuss your portfolio, including and any lingering vacancy issues so that we can proactively come up with a plan to add cash flow and improve the value to your portfolio.

Top Five Considerations to Make When Purchasing Corporations that Hold Real Estate​

Our team has recently been assigned the task of selling 100% of the shares of an S corporation which holds real estate assets. This opportunity brought up a challenge in assessing the benefits and risks of holding real estate in a corporation as opposed to an LLC or a sole proprietorship, and the tax implications for this transaction.

The motivation for the seller of this corporation is that they inherited their real estate portfolio in a C-corp, and after assessing that situation, elected to convert the C- Corp to an S- Corp. They then faced the issue of selling the assets individually or in bulk, and based on the advice of their legal and tax counselors, elected to opt to sell the S Corp outright.

Advantages and Disadvantages of C-Corporations

Holding real estate in a corporation has various advantages. A C-Corp is a taxable entity, where the corporation itself is taxed on its income (as opposed to other structures which simply pass income along which is subsequently taxed). For those that do not necessarily need to pull all of the net income out of their corporation, the C-Corp provides for keeping cash in the entity. It also provides the benefit of income splitting, where the business’s income is split so that part of it is taxable to the corporation and part of it is taxable to the owners of the corporation. However, C Corp taxation is such that distributions are subject to double taxation, where the corporation is taxed on its income, and the shareholders are taxed on the dividends received.

The Tax Cut And Jobs Act has invoked recent changes to the US tax code, and has reduced the corporate tax rate from 35% to 21% thereby reducing the deductibility of state and local income tax payments in determining federal income. Now that this code has passed into law, the advantages for some Real Estate Investment Trusts (REITs) to convert to C-Corps is starting to have “legs.” Most times, this involves a simple measure of becoming a Real Estate Operating Corporation, or REOC. What this means is that REITs, which ordinarily must distribute 90% of their net income as dividends, may find it advantageous to de-REIT and become a C-Corp. REITs that would benefit from this change would be those that have assets that have lease up/rollover risk, require capital expenditures, and/or need to be redeveloped.

The REIT structure in this instance puts the company at the mercy of the market, and requires the sale of assets to to raise capital. REOCs benefit from this structure as they can self-finance their expansion, and can retain capital and reinvest it in a more tax-efficient way, and in a manner that is consistent with the nature of real estate.

REITs that do not need this structure are those that own triple-net assets, self-storage and, in some cases, health care properties. REITs that would benefit from C-Corp conversion would be those that own malls, large shopping centers with redevelopment needs, and office properties.

S-Corporations Versus LLC Ownership

The S-Corp holding manner has some tax savings as profits from the S-Corp are not subject to self-employment tax. However, the S-Corp still must pay any owner-employee a reasonable salary which is subject to Social Security and Medicare taxes. S-Corps are significantly more complicated than LLCs and require more professional input, meaning billable hours for accountants and attorneys.

Ownership as an LLC has no tax advantages or disadvantages. In California, LLCs are subject to franchise taxes in addition to typical income taxes. LLCs, particularly single-purpose LLCs, are also the preferred method of ownership for lenders, and in some cases absolutely required.

Purchasing a Corporation

In purchasing a corporation for the purpose of controlling the underlying real estate assets, one must understand that this transaction differs significantly from a straight real estate transaction in many ways; namely, taxes, financing, and ultimately, value.

  1.  The purchase of the corporation does not qualify for a tax deferred exchange. Trade dollars can be used, but the purchase would not qualify for a 1031 tax deferred exchange. This does not affect value directly, but limits the utility of the transaction for the buyer.
  2.  The sale is, in effect, a change of control, which may trigger issues with loan covenants (if there is debt on the portfolio) and in California, reassessment of real estate property taxes.
  3. The purchase of the corporation can be financed as a corporation purchase which may or may not have the same metrics as financing for straight real estate purchases. Overall loan dollars will be affected by the valuation of the corporation itself, which may or may not follow the underlying real estate assets. Some lenders may only offer credit lines for these transactions, and some lenders limit the loan dollars to a lower loan-to-value ration on the purchase. However, some lenders offer more dollars on a refinance, so structuring a transaction with bridge financing to be taken out as a refinance later may be beneficial in this instance.
  4. The basis by which capital gains are computed does not change in the sale of the holding corporation. This means that there is no “step up” in basis, and the original basis follows. Also, depreciation is inherited as well, and does not re-set. This must be properly reviewed by one’s tax and legal professionals.
  5. The acquisition of the corporation will put you in the place of the former principals, including responsibility for liabilities. One must fully explore the potential liabilities that might be inherited. If the corporation has been carrying “per occurrence” insurance, that insurance is supposed to cover claims made in the future for anything alleged from the past. This should be carefully reviewed with the insurance carrier during due diligence, as well as legal counsel. Also, full due diligence on all prior activities should be done, and as an additional measure of safety, an umbrella liability policy might be in order. This is the stuff that makes careers for insurance and legal professionals, and definitely consult both to fully understand the issues.

Purchasing a corporation has benefits and risks. Carefully explore both before launching into the venture. Please also feel free to reach out to a team member to discuss further.

The Future of Drone Technology in Commercial Real Estate​

The Technical Advances of Drone Usage Across Industries

Technology advances so quickly it often feels faster than it should. As a professional in my thirties, I have lived through the advent of home internet and the progression of dial-up to wifi; pagers progress to the handheld technological magic we commonly refer to as our smartphones; and music being played from a Walkman, to a portable cd player, and now the multiple streaming platforms that give me access to any song at anytime and anywhere. Drone technology is progressing just as quickly, and we are continually seeing applications of drone usage across various industries.

Even in an industry that is often late to adopt cutting edge, and even sometimes commonplace technology, drones have made their mark in commercial real estate. We have discussed laws and regulations around drone usage as well as how our team, among others, have utilized this technology in marketing commercial real estate assets. Which begs us to ask, where is drone technology going? And, more importantly – what does that mean for commercial real estate?

The Future of Drone Application in Daily Life

The future has arrived and the vision of a world where drones are fully integrated into our daily lives has come to fruition. Drones have already become very commonplace and are even being integrated into our daily routine, including law enforcement using them to patrol large crowds. We saw this at this year’s Coachella music festival, where local law enforcement utilized drones to prevent potential safety incidents.

Photographers can be hired for events to take bird’s eye views of the festivities, delivery services have begun amassing fleets to launch same-day and even same-hour deliveries, and a few cities have begun utilizing drones for disaster response. These are just a few ways industries have applied drone technology. Drones have been fully integrated, and now companies are finding ways to further this technology through augmented and virtual realities.

Augmented Reality, Virtual Reality, & Mixed Reality

The first two terms have been buzz words in the marketing community in recent years and we should take a moment to clarify the difference between the two. Virtual reality (VR) aims to create a new environment, fully immersing the user’s reality into a digital world while augmented reality (AR) enhances a user’s experience in the real world with virtual elements through overlays and digital lenses. A tangible example of augmented reality would be social media filters or Pokémon Go.

There is also a third segment called mixed reality (MR) which combines aspects from AR and VR. The relationship between AR and MR is more similar. The concept is still settling into its own stride and MR products have hit the market such as Microsoft’s Hololens. This hybrid reality anchors the user’s virtual world into the user’s real world enabling a virtual object to interact with the real world. Not only would a virtual object like a box, or person be able to interact in our reality; a user could also be fully immersed in a virtual world that blends together with real-world surroundings.

Drone Application for Commercial Real Estate

This is an exciting time in technology which directly correlates with a multitude of industries. Commercial real estate can take advantage of new technology by utilizing drones to help create AR, VR, and MR elements for marketing.

Drones will aide in the ability to create virtual tours of properties and /or build interactive renderings of what a future building or build-out could be before funding construction costs. Furthermore, developers could create virtual worlds and test concepts on consumers before a property is even built.

Marketing campaigns will become immersive experiences, giving an investor the ability to tour and interact with a property from the comfort of their office or home.

The future also holds applications of drone and MR technology outside of marketing. The combination of the two could provide safer, easier and quicker site inspections.  A site inspection could be conducted remotely, providing a safer route for sites that are under construction or structurally damaged. Thermal cameras could also be utilized and surveys could be conducted through automation.

Drone technology could also improve building security and work hand in hand with human surveillance. Companies could monitor properties remotely and improve response times by utilizing drones to investigate potential security risks.

As technology advances, the commercial real estate industry will find new ways to pair drone technology with best practices. Drones have the potential to provide improved client experiences through convenience and impressive visual collateral. The possibilities are endless, exciting and inspiring.

The Secret to Success in a Commercial Real Estate Career

If you are considering commercial real estate as career, or find yourself within the industry looking for ways to accelerate your growth, the one piece of advice I will offer is to align yourself with the right mentor.

Your talents and energy are needed more than ever in an industry that is late to adapt to new technologies, innovations and creativity. The commercial real estate industry is in constant fluctuation and is going through a rapid transformation as the industry tries to meet the needs of the next generation.

The Challenge Facing Commercial Real Estate

In my opinion one of the most critical challenges facing the commercial real estate brokerage industry is a major talent shortage. Senior executives are getting older, working later in life and there is a wide age divide between the deal makers (that account for roughly 80% of all real estate transactions) and the younger talent that is still building their track record after surviving the great recession. This talent disparity began as a result of the first dot com bubble in the late 90s when most of the entrepreneurial-minded graduates opted to jump into the new and exciting world of technology, which was fueled by stock market investors seeking to capitalize on the potential of newly created tech companies. This bubble burst in early 2000s, but the trend initiated a shift from traditional financial services companies like commercial real estate toward the creation of Silicon Valley and other international tech sectors that are still growing today.

As a person embarking on a new career in commercial real estate, today’s industry presents a huge amount of opportunity in a wide open field that seeks new energy, innovation, and creativity more so than at any time in history. New demands from millennial consumers are pivoting the entire way that users look at commercial real estate space and transforming investment real estate decisions. At the same time, most major firms have strategically decided to stop costly training programs for young professionals, deciding instead to use those resources toward the (somewhat less risky) practice of poaching existing talent from competitors.

The reality is that most new people coming in to the industry must quickly find their path to success or they will be part of the 90% of new commercial real estate brokers that do not make it past their fifth year in the business. One common denominator that successful people in our industry have is that they attribute part of their success to aligning themselves with the right mentor.

How To Find a Right-Fit Mentor

While exploring career options within commercial real estate, most graduates look for the well-known companies, the right discipline (leasing v. sales), and the desired segment (office, industrial, or retail, etc.) However, to really increase your odds of a successful real estate career nothing compares to finding the right mentor. Whatever field and discipline you decide to follow, make sure you are aligned with the right mentor, and the right mentor can be different for everyone. Mentors are sometimes called “senior agents” or “senior partners.” These are the people who you will learn from and, in exchange, you will alleviate much of their workload. This is why I refer to the individual in this role as the “right-fit” mentor. 

Here are two questions you should ask yourself to make sure you are aligning yourself with the right person:

What is your value proposition to your mentor?

Even though your knowledge of real estate may be limited, you should by now understand what unique qualities about you make you different. If you do not know or need clarity, consider asking your parents, teachers, or co-workers. Do not ask your close friends because they may have many similarities to you and may not be able to identify what makes you different.

You should be able to recognize if you are the one that is going to look at spreadsheets and loves to analyze, or if you are you the social one that loves to meet people and talk to everyone. A few questions to ask are:

  • Are you the planner who loves to think big picture or are you a task master who thrives on crossing out your daily to-do list?
  • Are you the life of the party or are you the one who makes sure no one gets hurt at the party?

There are no wrong answers and everyone brings value to the table – your ability to accurately identify yours will allow you to thrive.

Do I Complement My Mentor?

Once you identify your value proposition, you want to complement your mentor’s talents rather than duplicate them. In other words, if your mentor is a strong business generator then you want to be the one that can help them transact that business. If you are If you’re the analyst you want to find a mentor that loves to meet and talk to people.

I have a colleague who early on aligned herself with a senior agent that refused to respond to marketing inquiries. The Senior excelled at earning business and would get some wonderful assignments. He was horrible at following up with marketing inquiries and opted to “sell” his deals to people he already knew or was seeking business from. Being new in the industry, my colleague took on the task of following up with every marketing inquiry and was able to grow their clientele and create new opportunities from each marketing campaign. Being task oriented and following up on details was her strength and balanced out her Senior who was naturally more reactive to opportunities and had a terrible time sticking to a schedule. She found a way to create value to his business, and years later he is now retired and she has a very successful brokerage business.

Conclusion

There is a lot of good advice out there on how to succeed in our industry and what I offer is simply one very important component to your development: find your value and use it to complement a senior agent/mentor.

Technology’s Potential in Property Marketing: Drone Usage & Applications

Now that we have learned about important laws and regulations on the use of drones, let’s discuss how drone technology is integrated into marketing usage within commercial real estate.

Drone Photography

One of the most pivotal components of marketing commercial real estate assets is photography. In order to create any collateral, you need a picture of what you are selling – ideally many pictures in fact and strong ones at that. Drones have brought a wonderful new perspective to real estate photography.

Because drones are able to take a bird’s eye view of the property, photographs are now able to give an investor an image of the property at all angles. This also provides your marketing team with high quality and unique photography options to create visually striking marketing collateral.

A drone can only fly up to 400 feet, so if you want to get a trade area shot that encompasses a larger radius, stick with helicopter or plane aerials. Costs for drone photography vary, but they tend to be less expensive than helicopter or plane photography. Drones can get very distinct shots of the property at angles a helicopter of plane cannot achieve.

Drone Video

The next practical application of this technology is drone video. Often, if you are hiring a drone pilot to fly drone aerial photography you will also contract them to get drone video footage. Property marketing videos have become more commonplace in commercial real estate to give an investor the opportunity to view the property more immediately than a property tour.

Drone Video has also given marketers a new medium to craft telling and compelling marketing campaigns. Getting the video footage  is only the first step in the process; the next step is contracting an editor and visual effects artist to cut and animate the footage.

This can be costly, but when done correctly drone video adds layers of sophistication and distinction to property marketing campaigns.

Contracting Drone Photographers and Pilots

One of the greatest challenges in executing both drone photography and video is finding a pilot you can trust. To set yourself up for success, start by finding out if they are licensed by the FAA and carry an insurance policy. This is very important, especially if something were to happen during a shoot. Secondly, do some research to discover what your drone preferences are. What kind of angles do you like and how do you like your video footage shot?  Providing this information to your photographer will help cut extra costs and will also help your pilot deliver exactly what you want and what you need to deliver to your post production team. This extra step will save a lot of time and money on re-shoots and the overall post production process.

The Future of Technology in Real Estate Marketing

With the advent of VR, we can only presume that drones will be a huge part of where commercial real estate marketing is going. There’s the potential for every technological opportunity from virtual reality tours to area flyovers. Drone technology is also becoming more exact. Now, many of the drones  carry bluetooth technology and motion sensors allowing the pilot to direct the drone with the slide of their own hand. Drones can also detect when they are in range of a no-fly zone and will often times not work until they are within safe parameters.

The future is opening new doors for real estate marketing — don’t let potential pass you by​.

Merging Talent, Experience and Values as a Client-Centric Team​​

Patrick Toomey and Tom Lagos have joined forces at JLL. While running competing teams in the industry, they found that they shared a deep conviction in a client-first approach to the business. Tom and Patrick also realized that they would have the proper balance of business development and execution to have a high-quality and high-volume team.

With Patrick’s institutional principal-side background, he is able to provide a perspective and level of service to clients that is unequaled in the industry. Tom has a dynamic business development strength and deep client relationships with an outstanding track record that, when combined with the execution side that Patrick provides, will bring outstanding brokerage experience to their clients. Together they have transacted more than 500 individual commercial retail real estate deals valued at more than $4 billion, which provides a depth and experience that is unparalleled in their peer group. Their focus will be on multi-tenant retail center disposition assignments. The JLL platform is an excellent place to bring these skills and experiences together.

Joining Patrick and Tom is Jordan Uttal, who will be spearheading the team’s net lease practice. Jordan has years of experience in this space, as well as a unique background in marketing having been one of the founding members of a Silicon Valley startup specializing in interactive online marketing, which is now publicly traded and valued in the billions. Jordan has brought this background to the commercial real estate industry and has developed numerous innovations for marketing commercial properties. His depth of knowledge and insight on net lease investments will be a tremendous asset to the team and its clients alike.

Heather Boren joins the team from Colliers where she led the Shopping Center Advisers team as the lead analyst and underwriter. Heather has valued and marketed hundreds of properties and her depth of knowledge and experience go well beyond that of underwriting. Heather teaches ARGUS (the industry standard underwriting program for commercial real estate) at Pepperdine University and UCLA, and is a professor of real estate at Pepperdine University. She teaches graduate-level ARGUS and leasing strategies.

Maadhevi Comar also has come from the Shopping Center Advisers team to lead the marketing effort of the group. With a broad experience in positioning commercial properties for sale, plus an advanced degree from University of California Berkeley, Maadhevi produces quality work on the team’s best-in-class marketing products.  Maadhevi leads not only property marketing but also all of the team’s outbound marketing materials.

Finally, Alex Salvatierra leads the team’s graphic production effort. With years of experience in graphical production in the commercial real estate field, Alex’s work is known to be the highest quality. He produces all of the team’s visual content. Alex is not only known for his industry-leading work, but also for training top level professionals at Colliers International and Matthews Retail Group – individuals who still benefit from his insights and lessons today.

Together we are excited and honored to be part of the JLL team, and look forward to providing the highest level of execution for our clients!

Disneyland Retail: a Case Study for Driving Value

Although not a standard street in the typical sense, Main Street U.S.A Disneyland is destination shopping at its finest: classic retail storefronts, a delicious candy store filled with fudge, toffee and caramel apples shaped as Mickey Mouse, an old movie theater playing “Steamboat Willie,” and even a French-style cafe where you can rest your tired feet with a cup of coffee. It’s no surprise that Disneyland is supposed to be the most magical place on earth, so why wouldn’t it resemble the most magical of Main Streets?

As I watched snow fall from the sky (ok fake snow) in front of Sleeping Beauty’s Castle, biting into my caramel apple, my inner real estate curiosity got the best of me and just in time for the holidays – I started to think if Main Street was a real street with non-Disney owned real shops, how sustainable would it be in a retail market? And how would it be valued?

Comparable Market Rents

From a financial perspective, we can compare Disneyland’s Main Street to many high-street retail environments, especially being located in Southern California. Main Street in Santa Monica is a beautiful water adjacent community with a collection of eclectic shops, bars, cafes, and restaurants. You’ll come across Urth Cafe, Coffee Bean, and local favorites like The Victorian and O’Briens. Rents on the street also seem just right for this wealthy area with prime asking rents over $5.00 per square foot/per month plus NNN expenses for just a small stretch of about a mile. And you won’t forget the very first Starbucks in California opened right there.

Downtown Ventura evokes old historic California charm with predominately local “mom and pop” shops and eateries. Strolling along you will come across locals grabbing a cup of coffee at Palermo or a late-night brew at Rookees Sports Bar. Although it certainly has its fill of national brands, rents around $2.00 per square foot/per month plus NNN expenses keep this ocean town balanced between up-ward rents and small-town charm.

That Destination Feeling

With people traveling to visit from all over the world, Disneyland creates a feeling of wanting to spend more money. In our recent article regarding the state of the Retail Industry, shopping centers and retail are taking note creating a “resort-type experience.” For instance, Westfield has recently created projects in the Woodland Hills/Warner Center area including The Village and the proposed $1B development at the Promenade. Retail is moving away from the old indoor mall concept. Rather, Westfield and other developers are investing in the consumer experience. Now, it is more common to find open-air concepts with beautiful landscaping, sculptures and art, music, DJ events, children play-areas, wine and beer tastings, and more to keep customers staying longer.

Millennials are contributing to the growing demand for experience-driven-retail. Our shopping center advisers’ resident millennial expert Marisa explains she will, “choose to spend $20 towards trying a new restaurant over buying a new top” in our recent article Boomers and Millennials. Retail is evolving to capture the new generation of customers. Disneyland is also evolving by creating new attractions for Star Wars and Marvel, to meet with new demands. Such new experiences will attract more visitors and more customers.

Property Positioning

Based on the above characteristics, our team would position the property to owners who look for highly sought-after trophy and core assets. Our unique Property Positing Matrix [see below] showcases assets across four quadrants. We could safely assume that Disneyland’s Main Street would fall along the bottom quadrants focused on buyers who enjoy long-term stability and strong trade areas rather than high-yield opportunities. And based on our transaction history of achieving historical low cap rates for many of our clients, our goals would be the same for such a property.

 

Ultimately, Disneyland’s main street retail would fit just nicely in today’s retail environment. The only downside is Disneyland does not serve alcohol (except for an exclusive members-only club); that means there are no local pubs to help foster sales. At least the $6.00 candy apples and $5.00 lattes are perfect for prime locations.