Commercial real estate investors and developers know the term: “Green”. In Florida, it seems that “green” is the phantom criteria for real estate: many have heard of it, few have seen it. The term brings to mind vague notions of sustainability and energy efficiency, but what exactly is it? What is the merit in “going green”? As an effort to shift toward sustainability becomes a rising trend in the nation, Florida continues to lag behind as commercial developers and investors grapple with the nebulous nature of sustainability and green construction.
Sandra Adomatis, SRA, and LEED green associate is an appraiser with a focus on green initiatives and sustainability in real estate. Based out of Punta Gorda, Florida, Sandra has over 25 years of experience in real estate appraisal in the state of Florida. Sandra is a green valuation expert for the Appraisal Institute. Through course development, seminars and literature, Sandra has been helping commercial real estate investors integrate sustainability and energy efficiency into their investments.
6 Elements of a True Green Building
Low-flow plumbing, greywater recycling, rain barrels/cisterns, energy star rated washing appliances
Many of our past guests on the show have referenced the Jacksonville real estate market in their lists of rising, hot Florida markets. The area has been making a steady recovery since the economic recession and investors are taking notice. With a stable economic base and opportunity in a variety of asset classes, the Jacksonville real estate market has a lot to like for investors.
Maxwell Lee and Kelly Lei, of Glocal Network, know firsthand the appeal of the Jacksonville real estate market. Two years ago, Kelly and Maxwell both left traditional, W-2 income careers for a life in real estate investment and started Glocal Network, a real estate investment firm based out of Jacksonville. Though the company is young, they have a combined portfolio of individually owned and partnered investments of over 20 properties in a diverse collection of asset classes. Kelly’s brokerage and agent’s license combined with Maxwell’s hometown knowledge of the Jacksonville real estate market have established Glocal Network as a leading investor in the Jacksonville real estate market.
Jacksonville Real Estate Market
Large amounts of single family foreclosure properties still being released
40th largest metro in U.S., with strong growth potential
Strong single family markets: Riverside; Avondale; Springfield; San Marco
Successful real estate investing requires knowing the terrain. Investors need to play the field and work hard to find the right deals. Florida real estate markets are garnering a lot of interest from investors and asset classes across the board are becoming more competitive. An investor starting out in single family can become full-time institutional real estate investor with strategic planning and a strong capital base.
Greg Williams, Co-founder and Principle at Cardinal Point Management of Tampa is a true testament to this fact. Greg was introduced to real estate investing out of college. After 4 years of experience building in a variety of asset classes as part of investment firms, Greg set his sights on becoming an institutional real estate investor in the Florida real estate market, focusing on. Though he started small, Greg aspired for larger more diverse deals. Bringing a competitive spirit and strategic approach, Greg maneuvered Florida’s real state industry and has become a success story as a leading institutional real estate investor.
Cardinal Point Management
Drawn to Tampa’s diverse commercial opportunity
Began small, raising capital through family and friends
Full-service development, management and brokerage investment firm
1st Institutional Lender Deal
Retail center, S. Tampa, 22k sqf, 95% occupancy
Purchased at $255/sqf on non-recourse loan through mortgage broker (Jermey Pino); 8.25-8.5% cap rate; $5.3 million total
Sold in March, 2016 for $10.6 million w/ 5.5% cap rate
Focus on geography
Knowledge of structuring deals in variety of asset classes
Eye on upcoming or forgotten markets
Outperformed by other asset classes in FL
Discount on replacement cost
Cash-flow during hold period
Path to grow NOI (Net Operating Income)
Focus on day-to-day
Build relationships, be transparent
Greg attributes his success as an institutional real estate investor to adopting his father’s hands-on business approach and his self determination and team-building background from competitive sports
Greg can be contacted with inquiries on deals, opportunities or advice on transitioning to a becoming an institutional real estate investor by visiting the Cardinal Point Management website
Things are happening in the Miami real estate market… Well things are always happening in the Miami real estate market, but BIG things are happening right now. Miami has long been the focal point for real estate investors due to the density and scale of development and the investment opportunity for a variety of asset classes. Real estate investors all over Florida have looked towards the Miami real estate market as a forecast for current and future conditions throughout the state.
Tom Blazejack, of Blazejack & Company knows all of the ins and outs of the Miami real estate market. In addition to nearly 40 years’ experience as a real estate appraiser and analyst, Tom is also a native of Miami. Tom’s extensive appraisal knowledge of commercial and residential properties and intimate knowledge of the Miami real estate market make his consultation highly sought after by investors. This episode, Tom gives us an overview of the Miami real estate market, including development highlights and what investors should expect.
Miami Real Estate Market
2011 purchase of Miami Herald building for $236 million marks return of market
Foreign investment and cash-heavy market
Foreign investors seeking stable properties to invest cash
New deposit requirements for investors and developers insures accountability
Lenders alleviating construction loan costs for developers
Projects moving quicker
Land price increases
Miami seeing $200-300/sqf on new commercial developments but even as high as $3000 in some prime locations
Residential continues to increase… up to $3/sqf in best projects
Development spreading into surrounding Miami
Little Havana, Wynwood, Coral Gables all seeing new projects
Real estate development in Florida is currently in great demand. With real estate investors turning towards ground-up real estate development as an increasingly more viable means of investing, new projects are springing up state-wide. However, with increased pressure on real estate development and a construction workforce stretched thin, it is important to keep in mind key points if looking into real estate development as an investment goal.
Jonathan Moore, AIA is president and founder of InVision Advisors. His firm offers owner’s representation and project consulting services for owners and investors, architects and contractors during real estate development. As owner’s representatives, InVision Advisors takes a comprehensive approach to real estate development deals handling day-to-day and overall project oversight. As an experienced architect, Jonathan brings a unique insight to his knowledge of the real estate development industry. This episode, Jonathan discusses hot points for investors to know about real estate development.
7 Real Estate Development Hot Points
Markets state-wide are saturated with work
Sub-contractors control velocity of development
Artificial inflation caused by over estimation of construction costs
Problems frequently arise due to lack of communication
Loss of face-to-face time and on-site meetings contribute to communication breakdown
In a recent episode, we spoke with an investor who managed a Florida real estate portfolio from outside the country. This week’s episode features an investor who runs a foreign investment firm out of his home-base in Davenport, Florida.
Garrett Kenny started building his investment portfolio in Florida after being introduced to Orlando’s vacation markets in 1996. Since then, he has built his investment firm, Feltrim, into an international name for foreign investment in Florida real estate, handling all aspects of the investment process. This episode, Garrett discusses foreign investment in Florida and hot real estate sub-markets in Orlando.
Foreign Investing in Florida
Most foreign investors can expect to average 6% annual ROI
Easy to find financing options, but many do cash deals
Usually require more up-front from investor for financing
4-4.5% interest rates
Some foreign investors use local banks and mortgage brokers
Some financing may be available through institutions in home countries
Brazil and China emerging as dominant foreign investors in Florida markets
Foreign investors expanding portfolios in Florida real estate
62 million visitors to Orlando area in 2014
Diverse investment opportunity
Vacation rentals, commercial and industrial markets
Top 3 vacation rental areas – Championsgate, Davenport, and Kissimmee
Medical + Technology – Lake Nona
Long-term investing in 30 mi. radius of Disney
Other hot sub-markets
Distressed and repossessed homes
“Class A” properties – Windermere, Winter Park
Tips on Foreign Investment
Having a local knowledge of your desired market is key
Find out about the area before investing
Location, Location, Location
Finding the right location for your investment is important
To find out more about Garrett and Feltrim’s services or about investing in Orlando real estate, visit the firm’s website
For the average Florida real estate investor, Wall Street banking and investing practices may seem worlds away. However, one investor and developer in the state has managed to successfully fuse his expertise in Wall Street investing with the Florida real estate market.
Santosh Govindaraju is a Florida developer with an interesting history. Prior to finding success in Florida real estate markets, Santosh was immersed in the world of high-strategy investment banking on Wall Street. After moving to Florida, Santosh applied his investment banking expertise to Florida real estate with a focus on the Tampa market. Santosh and his firm, Convergent Capital Partners, have been providing equity and debt investment options in a variety of Florida commercial real estate for over 17 years. This episode, he discusses his transition to real estate investing and what’s next for the Tampa market.
Wall Street Lessons
“Reversion to the Mean” – markets and prices fluctuate, but they will always indicate a trend, or mean
Relative-value trading – With two similar asset classes, sell asset class sitting above the mean and buy the asset class sitting below the mean
Convergent Capital Partners
Santosh paired his understanding of financial side of investing with partner’s physical knowledge of real estate
Saw relatively stable markets in FL during late 1990s
Opportunistic commercial investing: all commercial asset classes except industrial; looking for properties with mixed-use potential
Private Equity Platform Fund-Operation: base of 10 investors; deal offered first to fund as whole, then to individual memebers
Strong recent investment/development growth
Institutional capital competing for projects
New vision for Downtown Tampa
Harbor Island Project: “The Point” – Convergent Capital developing 115k sqf. property in Tampa harbor
When transitioning from residential or simply starting your investment portfolio in commercial real estate, it is important to remember one thing: commercial leases are not the same as residential. Commercial leases are subjected to a much higher percentage of risk if not properly structured.
Elise Batsel has made it her business to ensure landlords are protected in any commercial lease issue from the ground up. As counsel with the Tampa firm Phelps Dunbar, LLP, Elise specializes in commercial real estate land-use and zoning. Elise represents developers and institutional lenders in acquisitions, dispositions, financing and transactions as well as all aspects of commercial leases. In this episode, Elise discusses seven hot-topics all landlords and owner/operators should know about commercial leases.
Commercial vs. Residential Leases
Commercial properties have different costs and expenses that can be transferred to tenants: common area maintenance expenses (CAMs)
CAMs may include: utilities, landscaping, management fees and other costs associated with owning and operating commercial properties
CAM and Triple Net Leases
Triple Net Lease – For landlords and tenants who want stability; does not account for unanticipated expenses or for properties without a familiar investment history
CAM lease – Serves as umbrella to protect landlord/owner from future costs and expenses incurred from property management; specifies expenses and tenant liabilities
Though not frequently addressed in lease, tax implications are a major tenant-landlord discussion that could be beneficial for both parties
Leases can stipulate landlord ownership over tenant-improvements with proper recompense for tenant
Americans With Disabilities Act (ADA)
Commercial real estate considered public accommodations and subject to more ADA compliance regulations
Represents huge liability for landlords not in compliance
Sub-letting and Tenant-Assigned Leases
Landlords can address sub-leasing and assigning terms in commercial leases
Landlords entitled to portion of income from tenant leases
Do not attempt to draft generic commercial leases if self-managing property
There are many changing facets to follow when drafting commercial leases
If drafting your own lease, have attorney or specialist review
Protection Against Bad Tenants
Always ensure strong deposit from tenant
Write effective demand letter to tenant
For any commercial lease, zoning or land-use issues and questions, Elise can be contacted by phone at 813-472-7564 or through email at email@example.com
The coming year is looking to be an eventful period for mortgages and financial lending in real estate. Debt markets are poised to undergo significant changes over the following years amidst regulatory changes and geo-political headwinds. Investors, both seasoned and novice, should be aware of the changes and the effects they could have on current and future mortgages.
Livingston Hessam, Vice President of financial solutions firm Walker & Dunlop and financing expert, discusses these changes in the debt markets and what investors need to know about their impacts on mortgages and other debt-equity options.
2016 Mortgage Bankers Association Conference
Annual conference gauges financing market for coming year
Winter is coming… And so are national interest rate increases.
The Federal Reserve has recently announced a new national interest rate hike, the first since 2006. Real estate investors are very anxious about the announced rate hike. Many investors are wary that the rate hike may be instituted prematurely in an economy that is not capable of facilitating the effects on real estate markets.
Mark Fleming, Ph. D. serves as the Chief Economist for First American Financial Corporation. With over 20 years’ experience in mortgage and property information, Mark analyzes and forecasts national mortgage and real estate markets. This episode, Mark lends his expertise to our discussion on the new rate hike‘s effect on current real estate markets at a national level, and tells us why investors shouldn’t be so worried.
Federal Reserve Rate Hikes
First rate hike in 9 yrs
2006 – +5% increase
2007 -’08 to Present – 0%
End of Year (2015) – .25% increase
2016 – +1% increase
Instituted to correlate with expected income/wage growth
Long-term, fixed-rate loans not affected
Good for housing markets
House-price appreciation seeing “asset inflation”, especially in Florida
5-6% nationally, higher in FL markets (South Florida)
Out-pacing current wage growth, causing increase in housing rates
Rate hike should slow appreciation growth rate
2016 and Beyond
Rate hike est. 5% increase
House-appreciation (Nationally) projected to slow to 3-4%
Income growth est. 3-4% increase
Commercial real estate to benefit from economic growth
Multi-family to benefit from strong millennial rental market