ULI Spring Meeting Notes| Philadelphia| April 2016

May 20, 2016

Successful Suburban Development

  • Massive wave of people ditching cars, moving to more walkable urban downtowns. True-more people doing so, suburbs continue to grow.
  • They are evolving to serve as economic hubs formed around office/industrial parks, shopping malls and lifestyle centers.
  • Many millennials prefer the idea of living in an urban setting. They still choose suburbs-they are demanding those suburbs be dynamic communities. As a result, more suburban communities are developing town centers and areas that resemble urban downtowns.
  • Developers are responding by providing diversity of housing—important to offer luxury housing that appeals to company executives-otherwise difficult to attract corporate headquarters to that suburb.—Ballantyne Corp. Park for example.
  • 3 Washington D.C. Suburbs-enjoyed recent growth in gross square footage development by creating places for gathering and social activities, placing transit oriented development around train stations and expanding transit options connecting neighborhoods to rail stations.

 

Need for Instant Gratification Drives Real Estate Ingenuity

  • On demand economy means goods and services can be delivered by a tap or swipe of the finger. Immediate gratification is what consumers expect. New project-the Bloc-large scale renovation of an aging downtown LA mall into a vibrant mixed use marketplace. Bloc highly anticipate that future customers and close observers of downtown development want to be instantly provided with updates. Ratkovich is documenting on Instagram, website and social media channels-the renovation and public meetings associated with the project.
  • Ten-X. Google Capital funded website for buying and selling properties. Goal is to condense transaction timeline. Typically 6 mos. to close a deal, deals on Ten-X executed in 30-45 days. Goal is not to replace brokers but free them to focus on client. Ten-X is the nation’s leading online real estate marketplace. Founded in 2007, have 1000 employees, have sold 200,000 properties worth over $37 billion. Largest sale ever—Manhattan Towers in Southern California–$96 million for 2 buildings totaling 309,734 square feet.
  • Home Away-on line portal for short term vacation rentals, pose no threat to hotel industry—offers an alternative method of booking travel and broaden menu of properties.

 

Flexiblity is the Key to Housing Design for the Future

  • Greater informality in housing design, greater emphasis on wireless technology, greater diversity in land uses-mixed use facilities,
  • Greater use of kitchen space as the “nesting center” of the home.
  • Seniors aging in place and millennials needing adaptable spaces to suit their lifestyles.
  • For millennials, more outdoor living space, open floorplans-particularly in the kitchen. Some rent out part of their space to help cover cost of ownership.
  • Micro units in NYC-300 sf-furnished with multi use furniture, that takes up minimal space and serves a variety of purposes. Amenities include fitness centers, retail space, bike storage and laundry rooms.
  • Live Large, Carry Little—Futures Company exec thinks this is the new norm—redefining consumer priorities. People value the ability to forge relationships over the ability to own products, want greater social connections with people—technology provides this. Smart phones outrank cars in importance, enhanced ability to rent or share, access to plenty of free or inexpensive services.

 

William McNabb—CEO of Vanguard

  • With political and economic uncertainty, coupled with fully valued equity markets, you will get an increase in volatility-expect a period of lower returns on your equity investments. Over past 80 yrs. returns on equities averaged about 10% per yr, after inflation equates to 6% real return. Over next decade Vanguard anticipates returns in 5-7% range, real returns in 3.5 to 5.5%.
  • Recovery is unlevered-consumer slow to borrow, decline in leverage is seeing debt reduction rather than credit availability.
  • Cyber Security-98% of transactions are on line, spend $100 million each yr on this security type.
  • Lots of bad guys-hackers, cybercrime guys in Vanguard’s operation center see over 1000 attacks per day.
  • People are paying a lot of attention to this. Gov’t agencies are coming together on this and Vanguard, T. Rowe Price, Fidelity are working together and cooperating, all about safeguarding their investors $.
  • 2 Factor Authentication-enter password and on another device, enter code that verifies within 10 minutes—better technologies are coming, but this is best they have now. Middle innings in terms of knowledge.
  • Vanguard is the largest 401 k money manager in the world. Boomers retiring now, theory that they will not put pressure on the market. Thinks people will live as long in retirement as they did working. Equities will be as important as diversification. Have been more focused on accumulation rather than decumulation—will see plans coming out to help us with this. How to make your money last is going to be important going forward—different from defined benefit plans available previously. Wall Street rigor and mid-west values is their mantra—put client first-then treat all employees with the Golden Rule. Want employees that are coming for a career, not just a job.
  • Book—The Art of Leadership—George Manning and Kent Curtis
  • Leaders should clear the way so everybody can do their jobs. He assumed CEO on 8-31-08—told employees they would keep their jobs, focus on the client-had town hall meetings-met with clients in the field, tried to keep everybody calm—leap of faith that we would come out of this crisis. 108 colleges and universities within 2 hours of Philly. 15,000 employees, 10,000 in Philly, operations in Scottsdale and Charlotte.
  • His view of millennials—positive, lots of creativity and passion, more skeptical about investing in the market but are willing to save-paying down some debt.
  • Need to simplify tax code—would reduce uncertainty among businesses.

 

New Residential and MPC models that assure success—moderated by Gadi Kaufman

  • Stapleton-Denver-introducing new products to reach new buyers—higher density.
  • Be disciplined in your segment.
  • Green Valley Ranch-planned for 75,000 residents, targeting active adults, detached units, Anthem, Inspiration and Whispering Pines—55+ Denver master planned communities—smaller plans, don’t forget rentals—can increase absorption.
  • Imagination Homes by David Weekley—1st time buyer focused, simpler floor plans, standard finishes. Central living – hi density detached and attached, densities up to 25 units/acre
  • Encore-age restricted 55 and age targeted, single level plans with open design concept, Lifestyle Director.
  • Marketing—secret shopper, web linking process-customer sign up, can track customer, location tracking software and project beacon—-point is that data is the future—more focus on consumer behavior—watching retail world trends.
  • Innovation-takes time, involves failure, millennial workshops. Millennials-community based, lifestyle driven communities—mixed use, renters, lofts.
  • Renting by choice—they can afford to buy, need better design for lifestyle rather than by legislation.
  • Amenity ideas for younger audiences—MF developers have figured it out—look at their amenities. Using rooftops as cool gathering places.
  • Brambleton in N. Virginia – funding public art—creates value, different experiences.
  • Woodlands-Houston, Texas
  • Tejon Ranch-driverless cars—looking at spaces, working with regulators, rights of way, etc.
  • Google Fiber—what’s in it for you? work with local utilities-future development and millennials—complete master plan with technology.
  • Engaging the community in problem solving—do it early on—can anticipate future opposition. Know more about the consumer—your customer.

 

Development Opportunities in Shared Space

  • Co-housing, car sharing and micro unit housing are ways consumers are seeking to share the environment they occupy.
  • In D.C. near the Shaw metro station, a new multi-family building, Oslo, developed by Ditto Residential, is a design targeting Craigslist demographic—crowd that wants to live in D.C. and sees finding a group house or multiple roommates as a solution providing affordability. 9 units—33 bedrooms, 3 and 4 bedroom units—3 bdrms are 970 sf, 4 bdrms are 1400 sf. All residents have their own private space—bedroom and bath, plus shared space—living room and kitchen—helps reduce rent and fosters community building. Units have walk in showers, stackable washer/dryers, roof deck, 3 off street parking spaces for rent.
  • Hotel sector—young developer thought 1 size fits all in hotel industry was silly—all had a desk and couch and elements that took up space. Thought hotel could eliminate these and have common areas for conference work area, pitched to hotel group-Hyatt I think, they developed a project based on his idea.

 

Product Council Market News—Resort Recreational Development

  • Yellowstone Club and Big Sky—turning to the membership to sell properties, ski guides are major sales force.
  • Aspen-sales volume down 40% due to energy related issues.
  • Dallas housing market—can’t build homes fast enough-job growth and population growth outpace supply, 1.5 months’ supply of existing, 2 months of new—40 day average on the market, focuses on the $200k to $350k and over $750k.
  • Durango Mountain—High end buyer is not there—some is oil/gas last 6 months, normally would be seeing demand for hi end homes.
  • Hawaii-4 Seasons resort–$1400-$1500/night, feels a softening however, not sure if it is a cycle or just a shift.
  • Carolina coast—Kiawah sales are very strong, lot sales are flat—particularly the very high priced ones. Ocean Park–$500k to $4 million for lots.—OP is 70 acre park-looks and feels like a golf course, between the marsh and ocean—has revitalized the island.
  • Some discussion about condos in Charleston, new hotels at Palmetto Bluff and Sea Island—generating new, younger buyers. PB—420 completed homes with 160 under construction. Public programming and events are driving sales.
  • Luxury hotel business is really strong from an operational standpoint.
  • Significant number of honeymoon cancellations in Costa Rica due to Zika influence.

 

Trends discussion

  • Is there a resort product in the shared economy?
  • See clean, more glass, more contemporary products
  • Terraces as a room, more gathering spaces
  • Dog Park Bar—highest alcohol sales
  • East West partners-disconnect parking from condo sales—rent directly from the developer—doing this in d/t Denver
  • Examining young buyer’s needs—functional fitness center with proper equipment
  • More people playing tennis and pickle ball
  • Cultural experiences-cooking classes, farm to table, eat fresh, gentleman farmer-do it yourself.
  • Millennials—Airbnb—is that a resistance to commitment?
  • Demographic trends—will millennials move to the suburbs?
  • Concern about jobs—may not be paid enough to support a second home.
  • Book—Play—Stuart Brown

 

John McNellis—Making It in Real Estate

  • Must Buy it right—all happy real estate deals start with at Motivated Seller
  • If the numbers don’t make sense to you, sit it out. Think of yourself as a seasonal farmer, some good years, some not so good—might do 1 deal a year or multiple ones.
  • Where should you buy?—that matters a lot. Google—shrinking cities in U.S.—don’t develop there.
  • How should you buy?-make sure the Broker is highly motivated—financial incentives are powerful—make sure Broker gets his full commission.
  • If you must fall in love, fall for the numbers, not the property.
  • Don’t sweat the purchase contract. If price, contingencies, closing date are right, proceed. Do your own due diligence—read everything yourself. Learn to walk away.

 

Bob Hughes—“A thing well bought is half sold”

  • Offer a low price, you might get it. Need a cushion, may have to bail at some point.
  • Do not borrow money to buy land. You don’t have to have that land. If you don’t buy it right, you will be working for the seller the rest of your life. Have another choice—a second site in mind.
  • If the seller doesn’t say it, it doesn’t count. Meet with the seller and find out what his motivation for selling is.

 


2016 UNC Real Estate Conference Notes – April 7, 2016

April 13, 2016

 

Keynote Speaker: Ron Terwilliger, Chairman of Terwilliger Pappas – Perspectives on Multifamily Real Estate Cycles and the Current Environment

  • Worked with Sea Pines Co.—Palmas Del Mar, Amelia Island, 1974 prime was 12.5%
  • Worked with Mr. Trammel Crow directly for 7-8 yrs.
  • TCR-Atlanta—no big salaries, wealth accumulated through interest in properties they developed.
  • Advice—operate your business as if there will be a recession and you will not see it coming.
  • Bob Faith-Greystar—diversifying revenue sources, fees will dry up after a while.
  • Changes—new competitors—Childress Klein, East-West Partners
  • Millennials focused on urban and walkable, building codes-more restrictive, add to the cost, different product – lots of growth in single family rentals, construction costs escalating between ½% to 1% per month. 900 sf unit with surface parking—build for $160,000.
  • Budgets for lease up at 20/month—more rigorous underwriting and more engagement by investors.
  • Crabtree in Raleigh recently—built for $140k, sold for $200k, cost today would be $180k.
  • Apartments will lease in the downturn, Ron is pushing for 5 yr. loans-getting 42 months. Prefers a longer construction loan time frame.

Conference Speaker: Richard Barkham, Chief Economist Global, CBRE

  • U.S. unemployment gives a good, clear cyclical indication. We have been in this cycle for 6-1/2 years—in the mature phase-could go 9 yrs.
  • Unemployment rate moving down, cap rates also moving down.
  • Unemployment rate going up, vacancy rates (office, industrial) also goes up.
  • Unemployment rate comes down, rental growth is accelerating.
  • Unemployment comes down, retail value grows. Had charts for each of these sectors.
  • What could bring this to an end?
  • Normally it is wage pressures.
  • Leads to an uptick in inflation.
  • Interest rate rises – none of these are occurring.
  • So-geopolitical events – ISIS, terrorist, –he thinks they have no impact, no relationship with the unemployment rate in the US.
  • China could derail the global economy—there is a slowdown in the Chinese economy, their currency is a concern. Yuan is overvalued—gives power to consumers, a way to stimulate their economy. If they drop their currency, the world markets would plummet—doesn’t think this will happen.
  • A serious slowdown in US manufacturing. As $ goes up, it hits exports earnings, rise of $ will hurt emerging markets. Fed will hold rates lower, longer. Consumers are in robust, good health. Confidence is at a 9 yr. high. Retail sales volumes are growing strongly. Cycle comes to an end when?—Projecting unemployment suggests late 2018.
  • When recession hits, cap rates will spike, not drift down. Real estate cycle mirrors the economic cycle.

 

Market Sector Panel:

Retail – Bob McClain, Crow Holdings

Opportunities in retail are with small centers-4 to 8 tenants, dominated by food and service-Zoe’s, Chipotle, Dominos, Verizon, ATT, mattress firms, bank branches. Near hospitals, colleges, corporate office headquarters, and white collar affluent neighborhoods. Can keep them full and raise rates, this is safe space. Major concern with the 50 large malls in the country and how to stay relevant to today’s on line shoppers. Big box retailers have a difficult time retrofitting today.

Multifamily Sector – Charles Brindell Jr., Mill Creek Residential

  • Affordability is not an issue today, but it will be. Saturation point—2020
  • Has 22,000 units—average age in his communities is 33.
  • Tenants who move out to buy a home is typically 15%, his is 10%–just see folks staying longer in apartments. New dynamic of lock and leave adults selling big house, have a second home, don’t want yard maintenance and taxes, renting larger apartments for longer time frames.

ULI Fall Conference – October 2015 – San Francisco, CA

November 29, 2015

Brian Chesky—cofounder of AirBnB

34 years old, unemployed artist/designer 7 years ago, living with mom and dad. Told him you need to start paying rent—find a job that has health insurance. Brainstormed with friend in SF-upcoming conference, rented out their room with 3 air mattresses—hence the name.

Aha moment—when put in a challenging environment, see if you can survive, helps you realize your potential—need to be deeply passionate about your work. China has lots of potential for their business—1/2 business today is France and England. Last week had over 1 million guests in airbnb’s around the world.

Charles Kenny—today 10% of the planet lives on less than $1.25/day. There has been tremendous economic growth over the past 20 years due to global output.

Survey—more and more people are saying they are happy with their lifestyle.

Global medium income is $3,650.00, top 10% is $34,000.

Rest of the world is getting richer, great news for U.S. in that developing countries are investing in us and vice versa. Carbon dioxide output is increasing—China is largest culprit. There are still billions of people living lives of deprivation worldwide. There are reasons for hope however.

Jack Uldrich, Futurist

AHA—awareness, humility, action

Trends transforming the world:

  • Wearable technology-Fitbit-Oculus-Facebook bought for $2 billion—shop on line looking at a Nordstrom’s pocketbook for example from all angles and make a decision to purchase right then.
  • 3D Printing—GE printed all components for a jet engine recently. 2017 will have other airplane parts. China is building homes with 3D.
  • Advances in Nano technology—self healing materials like concrete, passive radiant cooling—reducing energy consumption.
  • Robotics revolution-drones and self-driving cars
  • The Internet of things—adding so much new technology—opportunities for smart buildings-10,000 sensors in Paris building—reduced energy consumption by 85%.
  • Gene sequence technology—need to prepare to live to 110-120.
  • Artificial intelligence—computer processing power.
  • Data storage—Amazon and grocery delivery business. Their end goal is that you can get anything you want from them. Have filed a patent for predictive shipping.

Humility—what color is the yield sign—used to be black/yellow—now is red/white, point is that taxis used to be yellow—now UBER-has a $50 billion valuation and all you need is access to an automobile. WeWork has a $10 billion valuation.

Action-take a week to think about the future—read and reflect

Trends—net zero energy buildings—Walgreens, –organic farms, online education, and Nano degrees.

Jack can be followed on Google Plus, recommended reading The Economist—4 times/year publish here is what is coming.

How many bullets can the economy dodge?—Brad DeLong, Ph.D. from Berkeley

Prime age employment rate is 25-54, only 77% employed. Fall off in employment is one half of the baby boom generation. Hope is economy grows and brings them back into employment.

U.S. real long rates—decade ago expected long term rates of 3.75%, Fed believes in secular stagnation, Fed Funds down to 3.5%, will have permanently low interest rates for a long time.

  • Forces for higher inequality still on the march—political counter measures are anemic, large concentration of income and wealth at the top. If income is $121k/year that is top 10% in U.S. Income inequality has been rising—our customer have more free cash flow available—what this means for recreational real estate: Good cycle for us, top has lots more income than we thought and feel relatively flush, have $ to spend.
  • We spend 15% of GDP on food. Technology is a leisure time sink, not a money sink. Rising inequality trend is likely to continue. Valuations would have been bid sky high by historically low interest rates, but we are at the end of a 33 year bull run for bonds—interest rates will not fall any further.
  • Question about how to address inequality?—lots of people who should be going to college are not because they are concerned about student debt. If you make it rich, you should pay some of it back to your university.
  • Drug companies have too much power/control over generic brands.
  • NIMBYS are a powerful restriction on growth.
  • Proposed free public education and rents on intellectual property.

Content Marketing—Toni Alexander—InterCommunications

What has not changed is the need for overarching strategy and storytelling. Content Marketing should be authentic, relevant, intriguing, timely.

Content is a product, develops awareness and sells the idea, establishes credibility/authenticity, resonates with the younger demographic, encourages action.

 How does CM work for real estate? Compelling strategy for the brand, unique value proposition, build awareness, comprehensive story that will resonate with your audience.

Results of good real estate content marketing:

  • Allows prospects to learn before they buy,
  • Gives you a list of prospects that want to hear from you and
  • Can track the results of your investment $ and refine your communications.
  • It is content that can work over time.
  • Case study—Potomac Shores—30 miles south of D.C.—almost 300 sales in 2 years at an average price of $600k.
  • Case Study—Four Seasons Private Residences—very high end in Hawaii
  • Emotional pitch,
  • Cultural/creative—brought in a design expert—designer for Elton John and Jennifer Lopez.
  • Rational/risk mitigating—video and high gloss brochure
  • Intellectual—provide brokers with IPads
  • Results—40% reserved before groundbreaking—61 units total, penthouse sold for $50 million. Strategic partners reinforce credibility.

Not your grandfather’s country club—

  • Adam’s Rib Ranch, (Colorado)—rebranded to Frost Creek—Fred Kummer started Adam’s Mark Hotel—lost his major investment in this property—new owners built 7 cabins btw 2500 and 2800 square feet with 4 bedroom/ 4 baths for members and guests.
  • Weiskopf golf—mountain bikes for members to use, pickle board is popular, wants to be year round club, provide snowshoes for each cabin, jeep for members use, initiation is $15-$20k, annual dues of $5k-$7k.

Tom Benniston—Club Corp.—Acquisition and Reinvention Strategy

Partnered with IA to determine what next generation club would look like. Developed pricing strategy and value proposition—anytime lounges—members come in to relax—like an upscale Starbucks. No more white tablecloth, making them as family friendly as possible with media rooms, outdoor dining and lifestyle features—touchdown rooms—office for day/hour for members. Spending $1to $4 million reinvesting in their clubs.

  • ONE concept—member pays $25-$65/month-gives them a discount for food and non-alcoholic beverages at their home club-members are using more and bringing guests. Simplified process for members to use other clubs—have 27 in Dallas. Other benefits include golf at Firestone, etc.
  • Las Colinas CC-built in 1963—Irving, Texas. Spent $2mil on outdoor space with TV’s, fire pits, interior modernized and more dining opportunities.
  • Morgan Run-Rancho Santa Fe—outdoor dining, motion studio, baby sitting services, reinventing practice facilities—better turf and good music!  Started reinvesting in 2007, $60 million in various clubs—results include more members, more revenue, better EBITA—unlevered cash on cash of 15-20%.
  • Bay Club has 24 properties in California—mainly fitness centers, country clubs, and swim/tennis. Started as Fitness/Athletic clubs-very price sensitive. Fitness platform is their base—maybe 5000 members-ages 30-55, modern mom, creating great social networks. Cost from $150/month all way to $25k initiation for exclusive country clubs.

New Ways to Deliver Successful Master Planned Communities

Westrock is the new Meade West Vaco. 3 communities around Charleston—East Edisto, Summer Corner and Springs Grove

Lifestyle is key—partnered with Clemson’s Master Gardner program, makes their community real, authentic and credible. Have flexible areas like pop up tents,, food trucks and farmer’s market. Making memories for families, cobranding with YMCA, repurpose the clubhouse—cooking kitchen—lots of events for stakeholders.

Harvest communities, (6 in Calif.)—common theme is food and edible landscaping, community gardens, rich programming and strong community partnerships. Master gardening programs, lifestyle director. Housing is secondary, all the other stuff is what is important. A lot of resources are already in place so no real need to spend lots of $-find partners as resources.

Note—go to Nexton website and Next Door—privately owned web platform.

Summer’s Corner—people are starved for human contact—wine and food events for stakeholders, Info center café—welcome center-capitalized on Charleston foodie reputation and brought in restaurateurs from there.

New ways to deliver product and segmentation:

Insist on product innovation, must relate to existing surrounding community. Roofs are large open spaces that are being utilized more for events, etc.

Seeing some townhome rentals as opposed to stack flats—2000 sf, getting density of 16-20/acre—looking at sf/acre in Calif. Today’s renters are tomorrow’s home buyers.

Emerging Trends 2016 report identified Charlotte as a market to watch—reflects desires of millennials and other demographic groups to gravitate to 18 hour cities for job opportunities, urban lifestyle and amenities!!!


ULI Fall Meeting in NYC – 10/2014

November 4, 2014

Recreational Development Council—Gold Flight

Speaker David Norden

  • Consumers are looking for the “smart buy”, “intelligent consumption”. Looking for utility—they will use it –dealing with an “uber” informed buyer. Baby boomers are managing real estate like investments—want safety and low risk.
  • “Truth telling” in the sales process—less selling and more managing the process.
  • Focus is on well being, health and happiness, life long learning. Diet—where is the food coming from—local is 1st priority.
  • Spiritual connection—emphasis on yoga, philanthropy—looking to give back.
  • Programming—family is the new golf. 2nd home communities are becoming primary homes due to people being so busy. Gen X Mom’s coordinate everything—moving to 1 stop shop amenities—simplified amenities with intensified programming. Golf is not dead—more vineyards and open space in communities. “A” properties in “A” locations is working for the high end—there is a downsizing of product taking place. Completed, ready to move in product is selling. Boomers wan it now, custom is too time consuming.
  • Big push toward contemporary—brighter, fresher, cleaner, modern. Outdoor living is popular, simplified ownership is the way to go.
  • Who is buying? Gen Xer—35 to 50 (Martis Camp—Tahoe)—still about family, boomers want to leave a legacy. “drive to” is desirable—utility of home/community.
  • Marketing today—need to hit all the avenues, not great time for pre-sales, need to build confidence and show how this is going to work.

 

New Demands from 2nd Home Buyer Prospects

They want to buy—don’t want to be sold, risk averse, want to be listened to, don’t trust sales reps, skeptical of developer. Talked to but not talked at. Come with an agenda-want a choice-don’t like 1 size fits all. Time is their greatest asset, want to see finished product. Don’t hand them a registration form to fill out—give snapshot of offerings-no buffery!

IMI—developed an “establishment clause”—they build credibility and respect by communicating the way their clients want to be communicated with.

1-Establish rapport with client—know everything about them

2-Establish expertise-client knows about the project/community—recent sales activity—planning their visit is vital—build in the expectation as to what business will transpire upon their visit.

3-Establish urgency—shorten sales cycle—offer incentives—“alternative currencies”—not just price. Extended family is engaged in the buying decision now.

Marketing—enlist key brokers-wine and dine-provide them with materials so they can drive clients to your community. Call to action—don’t load your website –need to control the information. IMI does a lot of direct mail that is highly targeted, state of the art visuals, created an app for Martis Camp—when sale is generated, homeowners are in the know.

Full time SEO—must keep website updated, it changes constantly, virtual tours are critical, role playing is key, relationship marketing and ask for referrals…..

 

Future of 2nd Home Communities

2015-challenged economy-multi-generational-emphasis is on creating a new brand.

Hualalai built a beachview restaurant and pool with a bar–$150 million in sales this year with average price of $10 million. Always about the experience. Believer in the grand opening concept, soft programming is a key to being successful.

Costa Elena-Dreams Las Mancas-Costa Rica—emphasis is on FUN! Upscale but not threatening.

Harry Frampton—E/W Partners

  • In early 2000’s decided on different track from Vail Resorts and Beaver Creek projects. Thought the new resorts will be in urban cities and college towns. NYC—sports, theater, parks, etc. People are moving to urban cities for 2nd homes. Denver-you don’t need a car, has 100 miles of bike trails without crossing a street.
  • Charleston—downtown is a fabulous resort with restaurants, college, culture, etc. More people want to be part of the city. College towns like Boulder and Chapel Hill are flourishing. We want to be around younger people where there is a vibrancy—you will live longer.
  • Milennials don’t think beach/mountains as a resort like their parents.
  • Financing is still difficult to obtain for resort projects, founders programs seem to still work, people are buying finished product.
  • Soho House—Chicago—club for 30 to 45 yr. olds active in creative industries—have thousands of members. The Summit Club—designed for millennials—have to be in the digital world—have 30,000 + members. Bay Club in San Francisco—country club without golf. Insperado—low cost club alternative $5000 to $10,000 to join—gives you access to lots of clubs.
  • Lots of focus on yoga and well being—serving your inner needs. Hears that everyone is going smaller with product but has not seen that as a trend.

ULI South Carolina – Capital Markets Conference in Kiawah 9-30-2014

November 3, 2014

Keynote Presentation:  The Millennial Generation’s Influence on Real Estate Demand

by Gregg Logan, Managing Director, RCLCO

  • 1980-81 to 1996 Millennial Generation and their influence on real estate demand.
  • US is older, more unequal, more diverse, more tolerant, less married, less religious, less socially mobile today.
  • Millennials represent 24% of national population—80,000,000
  • Today they are in rental housing—reputation for smaller households, delayed marriages, delayed childbearing, lifestyle centered, more diverse, more liberal, more impatient, economic mobility, frequently changing jobs.
  • 39% likely to live in mid size or big city, 38% say they will end up in apartment, duplex or TH upon their next move.
  • Millennial influence on real estate:
    • Apartments-smaller units at lower $ rents, High square footage in good locations, micro units. MF for sale—demand for “urban” owner occupied housing.
    • Homebuilding—growing influence on for sale market—tension btw urban location and single family detached housing preferences.
    • Community development—reported preference for urban or urban like places.
    • Retail-on line shopping, smaller stores—more like warehouses. Millennials are driving the recovery in MF dev. Next 3-5 years, millennials and MF market—location/neighborhood as primary amenity-place where there is an educated population and growth in professional and business service jobs, lower cost of living, high turnover, less established markets with substantial institutions, hospitals, universities—Austin, Charlotte, Nashville.
  • Millennials do want to be homeowners. Historically, 1st time buyers are 40% of the market, currently are 28%.
  • Millennial population is large but household formations have been weak. 32% of mil have stopped buying from companies that have unacceptable social practices.
  • Single family detached is still the most preferable housing type.

ULI Spring Meeting in Vancouver, April 2014

April 15, 2014

New Communities—the latest and greatest

DMB developing Eastmark—3200 acres in se valley of Phoenix, site of old GM proving grounds, beside Phoenix/Mesa airport which serves 3000 passengers/day, entitled for 15,000 residential units, 6,000 hotel rooms and 20 million square feet of commercial. Home to Apple’s Sapphire manufacturing facility and a branch of ASU campus. Will develop as a city over 20-25 yr. period—largest challenge is how to phase development over this time frame and who are the users for 20 million square feet?

DMB also developing Verado—8800 acres, have sold 2500 homes, entitled for additional 11,500 homes. Separate section—Victory—is active adult community with multiple builders—(unusual)—“nobody want age isolation”.

Lesson learned from downturn—phasing golf course—built 5 holes, will add 4, then 9 over 2 year period—prospects still have amenity to see and play. Not buying land today, lots they still control.

When asked how to control out of line sales associates—developer is using a “choke collar”!!!

Newland—largest private developer of planned communities—owned 25% by largest home builder in Japan. Are in 22 markets, 14 states.

Tool Box for customer intelligence and engagement—database of 30,000—customer database(CRM)—get into how people want to live using customer segmentation, product testing, targeted emails, online and search optimization.

Newland is working with their builders closely to develop new product—that which their prospects want and Newland is paying for the architectural drawings. Eliminating builders that don’t buy into their program. Looking at amenities differently and re-engineering the sales and marketing process—no longer building welcome centers, but fully functional structures that are experiential, lifestyle based. Uses might be as a café where the coffee provider is a licensed sales agent. Might sell alcohol and food as well. Introduced electronic swipe cards so prospects can visit the models at their leisure.

Johnson Development Group—Doug Goff—major Texas developer-primarily Houston.

Developing Lake Arrowhead in Cherokee County outside of Atlanta—been there for a long time—lesson learned—“don’t fall in love with the land”. Johnson is being aggressive in acquiring new properties, even looking outside of Texas.

Take a look at Newland’s website and interesting to read about Oread Capital—mentioned quite a bit at this session. www.oreadcapital.com

 

 

 


UNC Kenan-Flagler 2014 RE Conference

March 31, 2014

March 27, 2014 – Chapel Hill, NC

CONFERENCE NOTES

Douglas Linde, Boston Properties, President

Office Market (and real estate) changing due to: (where and how buildings are positioned)
– Technology
– Cost pressures from clients
– Regulatory pressures
– Macro economy
– Demographics (where do people want to live)

How people are living, working … Where do they want to live and work? Change is happening quicker today than ever in the past.

Physical layout of space is different:
• e.g. look at an old law firm set up, now – scaling all offices – sharing of admins; no library (850 – 500 sq ft per person)
• e.g. look at banking – then – smaller perimeter offices; now – shared workspace

Today all about the amenities – space dedicated to gathering places; conversation areas; fresh prepared food; relaxation, workout, retail services (hair cut).

How will you market yourself to the non-typical user now?
Example of San Mateo County outside of San Francisco in 2000 had 1% vacancy rate. Today it is the weakest market in the San Fran region—a hole in the donut—demographics and employment trends are changing where people work. All about growth in the technology business—moving into traditional buildings, non- traditional demand.

Boston Market—hottest area is Cambridge-center for life sciences and bio tech—Aventis, Pfizer. In the financial district—PWC is moving to the seaport district from 300,000 ft. to 275,000 ft. with smaller employment base. Large law firm moving from 400,000 ft. to 300,000 ft.—what happens to buildings they are leaving? They are not functionally obsolete—they are inefficient and cost is a factor.

Creating density (use less space/more efficiently) in the office space as well as outside the office space.

Financing—3 components of valuations per Boston Properties:
– Interest rates (impacts leverage)
– Rental rates (where are they)
– Amount of capital in market

They amount of capital looking for high value buildings is huge—larger buildings are getting more play.
Non-publicly traded REIT’s are a big player today—raising new capital in the billions! Sovereign wealth funds are back in the game in a large way. Lots of Far East $, valuations are higher today than in 2006. On the suburban side, things are different. Overall returns are well below where they were in 2005 and 2006.

When looking at market report, today you have to look at the submarkets – can’t just look at the market as a whole . . . careful of generalizations. Need to be more thoughtful and smarter on location decisions – think about the changing of office use when deciding. People and the times are changing quickly.


Will McIntosh, Ph.D., USAA Real Estate Company, Global Head of Research
US Economic and Property Market Outlook 2014

Optimistic about the US Economy
Strengthening fundamentals, improving housing market, Fed deficit being reduced, well capitalized banks, improving consumer confidence, deleveraging—improving balance sheets-both public and private.
– Should see GDP to go up to around 3% in 2015
– Employment – to grow of 200,000 per month (which should be enough to push down unemployment rate) – 6.5% this year; maybe 6.3% in 2015
– Consumer Confidence – more spending in households; households are borrowing money again – at the highest point sense the recession (bodes real well for RE industry)

Transaction Volume – Up 19% from 2012. Risk is back on. Capital flowing to the gateway markets. Cap rates are dropping and more investors are looking for yield.

Office Market – Very interesting asset class.
Seeing office employment growing – but demand for space is different, market is more efficient. Looking for specific qualities – e.g. open space. Thinks there is an opportunity for new office in next few years—keep the tenant in mind. Vacancy trends are headed in the right direction. In next couple of years, demand will exceed supply. Need to think about the unique needs (be thoughtful about how you play it). $38B of new capital (1/2 from Canada) – US looks like a “safe place” to put their $$

Residential Market – SF & MF
MF – Need 1.7 million starts per year. We are getting almost a million.
Housing market is coming back gradually.
Strong absorption of MF but supply has picked up significantly and in 2015 supply will exceed demand. You need to make sure you are looking by submarkets – because it depends. Rates are up and it may impact growth. Growth in rents is slowing.

Retail Market
Retails up 4.2% last year – good amount coming from online. (Online growing faster than in store). Little construction in retail around the country. Net absorption is exceeding supply. Retail is not over built – it is under demolished. Space is going to be different from the past – need to modify formats to accommodate ecommerce and other changes in industry. Cap rate spreads have narrowed but remain above historical averages. When Fed raises short term rates, we will still have some cushion. With next round of raising interest rates, cap rates will not increase that much.

Top and bottom 10 employment recovery markets
Top 10 Markets – Austin, San Antonio, Houston, DFW, Nashville, DC, OK City, Pittsburgh, SLC, Columbus, OH

Bottom 10 Markets – New Orleans, Cleveland, Memphis, Las Vegas, Riverside- San Bernardino, Sacramento, Providence, Milwaukee, St. Louis, Detroit

Industries of interest: High tech, energy, health care, university

Factors driving continued strength in commercial real estate market
– Improving fundamentals
– Positive demographic trends
– Supply remains near historically low levels
– Capital market conditions and relative attractive of CRE

USAAs view of the year ahead
– Strong economy and RE market in 2014
– A year of price uncertainty
– More attractive opportunities may exist in secondary markets
– Cautious approach to acquisitions
– Focus on value-add, development, debt, and recapitalizations
– Focus on value creation

Investment Challenges for 2014
– Possible higher interest rates and higher cap rates
– Development yields on cost have hit historic lows
– Increasing level so f investment capital keeping pressure on cap rates
– MF deliveries are rising rapidly


Byron Carlock, Jr., PWC, National Partner
Real Estate 2020 – Building the Future

Follow-up to Emerging Trends in Real Estate

As confidence returns to real estate, the industry faces a number of fundamental shifts that will shape its future.

Mega Trends
1. Demographic Shifts
2. Economic Power Shift (to emerging markets)
3. Accelerating Urbanization (72% increase in urbanization)
4. Climate change and resource scarcity
5. Technological break thrus

New Era of RE investments
– Growth of infrastructure funding! Investment will drive development.
– With a fast-growing population, by 2030 we’ll need:

  • 50% more energy
  • 40% more water
  • 35% more food

Changes are intuitive and game changing.
– Impact of infrastructure
– Sustainability assessment – meeting needs of changing audience

A new paradigm change in serving customers, users and government.

 


ULI Capital Markets conference—Kiawah Island September 30th-October 1st, 2013

October 15, 2013

Michael Cohen-Property and Portfolio Research

Labor force in the south has consistently risen since 2010; housing recovery contributes to growth as does the demand for autos.

Growth is contingent upon the global economy—Housing, health care, manufacturing.  Consumption is the largest share of the US economy—grown from 57% in 1952 to 72% in 2012.

Exports as a % of GDP rose in the 2nd qtr of 2013.  Sunbelt will continue to have positive population growth—Charlotte has grown 3 times the national average in the last 10 years.

Education levels matter—Raleigh is in the top 5 cities in the US in terms of employees with advanced degrees.(RTP)

Median home prices are up 15% over the entire market—energy markets like Houston and Dallas have fared the best.

Tech metros like Austin, Houston, Dallas and Raleigh are doing well.

Healthcare employment has risen by 210% from ’82 to ’12-driven by demographics-aging adults.  Currently 50 million uninsured Americans, with ACA-22 million of those will be insured. Economic impact for the South will be positive.

Manufacturing sector has added 500,000 jobs but he expects that sector to be flat.  Energy—spike in oil and gas production.  Every recession in US has been preceded by an oil shock-(increase in price by 40%). A real concern is that Federal debt is 104% of GDP.  Long term structural issues are the entitlement programs.  Interest rate shock of 200 basis points could result in loss of 3 million jobs and 10% unemployment!!!!!!!

Residential panel consisting of Charles Teal, Diana Permar, Pulte rep, David Frame of Landeavor made the following points:

In the next 20 years, 43% of the US population growth will be concentrated in 10 strategic growth corridors—Charlotte is well positioned.

Charles—the markets they build in—Charlotte, Raleigh, Charleston are very competitive—he looks at submarkets and neighborhood by neighborhood.  Pent up demand has been met and the low levels of activity are behind us—the recovery has begun, but the ability of buyers to move up is strained due to interest rates moving up.  Locations are key.

David Frame—Landeavor is developing land with cash flow and equity, can’t develop lots fast enough in Charlotte or Raleigh.  Hard to know how much demand is out there since our business is driven by job growth.

Charles—local developers are out of business, large banks are starting to do some A&D financing.  Saussy Burbank is doing a fair amount of infill product, replacing the small custom builders who are mostly gone. Concerned about the void in the new lot development space with entitlement process taking 9-12 months and development time of 6-9 months.

Diana Permar—we have not seen the innovation you would expect coming out of this recession—reason is that capital is saying prove it works first before lending on it.  People have learned from this downturn—no short memories this time.  Buyers today ask a lot of questions, people will own houses longer—not churning-that cuts down on demand.  We better know what today’s buyers want in a house to be successful.  Boomers are back—want nice finishes, not necessarily high priced homes.

David—D.R. Horton is buying lots of land nationwide, land prices in Texas have doubled in the last year.  Thinks it will be 18-36 months before we see a supply-demand balance.

Pulte—find a partner you can trust—they definitely see a shift to smaller houses.

Charles—today’s buyer is constrained by lack of appreciation—might rent if don’t know how long his job will be for.  Shock to young buyers that rates have risen from 3.125 to 4.25%.

Generation Y-want to be owners—“practicality” is the buzzword here. They live with a high degree of uncertainty—want good school districts, yards and flexibility.  Opportunity for home design with multigenerational buyers and how families change over time.

David—Cost is a huge issue—materials and labor are up 25%–creep of cost is impactful in overall housing.  Charles—Dependable trades are a challenge as well.  Buyers are really focused on “A” locations and want value appreciation.

Opportunities in the residential housing market:

Diana-data mining, social media and understanding customers in real time.  Design-look at how customers want to live their lives today.  They want walkable communities, parks, trails, open spaces where they can walk and bike.  Technology must work too.

David-the boomers are back—if you have product available, they will buy.

Charles-mark your assets to market—you make $ when you buy the land.

2nd home market—Diana—the best places are selling well.  2nd/3rd tier will struggle longer.  Wealthy in this country are doing well.  Need more structures built in 2nd home communities—must be easy to get to for 2nd home buyers—people want available product—ready to move into.  No price increases yet—private equity is slowly coming back in this market.


ULI South Carolina–Reinvention, Reinvestment & Innovation

February 13, 2013

February 7-8, 2013

Leadership and Innovation panelists—Jim Chaffin, Jim Light, Peter Rummell, Ron Terwilliger.  Moderator-Diana Permar

Topic was Charles Fraser, Chairman of the Sea Pines Company

How you came to work for Sea Pines?

Light- arrived in 1968 at age 25, William Hilton Inn and Adventure Inn were the only hotels, about 1000 people living on HHI.  Goal was to develop 100 lots and 20 condos on average per year.  Charles was capital starved, bought land from a family for $1 down and a note.  Greenwood gave him $ for the 1st golf course in a swap for ocean front property.  Light followed Charles around and took notes—gave him a position of “authority”.  Light recruited Chaffin out of grad school.

Rummell was in his second year at Wharton; Terwilliger was at Harvard Business School and joined the company at the end of 1970.

Thoughts about Charles:

He was passionate about ULI—1971—leadership starts at the top,

He had a thirst for learning and intellectual curiosity—had to know what was going on. “Never invent when you can steal”-important to learn from others.  ULI ethic—share information openly and candidly.

Charles’ leadership style:

1-clarity of mission—wrote consumer protection guidelines early on and committed 25% of the land for open space.

2-guy who takes notes, controls the meetings—Light

3-tuned in to how hard his people worked—invited spouses to meetings and appreciation dinners.

4-he was a delegator—his young team had lots of responsibility.

Achieved $106 million in sales year ending 2-28-74.

Rummell—we tried to do too much, too fast. Charles was creative and an avid reader—introduced bike paths, rules on tree cutting, nature/open space.

Terwilliger—Charles was “Steve Jobs” like in that he conceived what consumers might want.  Took an idea and evolved it by talking to lots of people.  “Process is as important as creativity.” He took a good idea and stayed with it—was a good listener.

“Connectedness” is important to today’s consumer—family, health, making friends are what have importance, not sticks/bricks and amenities.

Terwilliger—must have long term view—sustainability—Daniel Island-no debt.

In resorts—gates are more for sense of security than elitism today. Gates are a negative today.  Golf is not front and center.

Rummell—isolation is a huge issue-doesn’t work socially, environmentally or in terms of infrastructure—becoming more a vertical world, access to services, etc. is important.  Theme will be Health—huge opportunity in 1st and 2nd home communities.  There is a mentality in place about the way you think about things as people get older—Wellness and Continuing Education.

Light—it is just fine to rent—may be out of necessity—but attitudinal as well.

Sea Pines experience/lesson:

Light—tenacity—concepts he believed in.

Terwilliger-business is cyclical-must organize to get through the downturn.

Chaffin-talked about Charles’ passion and joy, coupled with his persistence and courage.

Rummell-ideas can come from anywhere.


Joel Kotkin—author of The Next Hundred Million, America in 2050

January 16, 2013

Notes from a presentation to True Homes, January, 2013

What are great cities?—where you can go and change your position in life, are offered upward mobility.

U.S. Growth Trends—there is a shift to affordable, business friendly states and places.  Migration of educated workers and a new generation. Immigration.  Suburban-lower density focused.  People are going to places that are aspirational.

Largest domestic migration gains—2010-2011–Texas, Florida, Arizona, N.C., Colorado.  Migration losses—New York, New Jersey, California.

Population growth 2000-2010—Charlotte (30%), Atlanta (24%),

Net domestic migration leaders 2010-2011: Austin, Tampa, San Antonio, New Orleans, Charlotte and Denver.

Charlotte gained its population growth from Chicago, the Northeast and California.  We lose population to Atlanta and Houston.

People coming to Charlotte due to housing affordability.

In Charlotte, 58% of the people live in suburbs.  A majority of immigrants in US now live in the suburbs.  Millenials prefer to live in the suburbs—85% want to get married and 77% want to have children.

Millenials (born btw 1983 and 2003), particularly those born in early ‘80’s are just now entering the housing market due to the poor economy, but they will be a strong segment of the home buying market.

Coming Next—Multi-generational suburb—“suburbia will be a melting pot, not just by race, but age and ethnicity.”—Randall Lewis

There will continue to be a need to lessen commutes, create more housing options and build more self-sufficient communities.