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Architecture & Design, Commercial Real Estate, Development, Property Management

History of the Empire State Building: A Financial Flop for Nearly 20 years

By QuickLiquidity | Date: June 13, 2017 | Category: History

In the late-1920s, New York’s economy was booming and a competition to build the world’s tallest building was heating up. One man who was at the center of it all was Walter Chrysler of the Chrysler Corporation, who wanted to build the world’s tallest building as a monument to himself and American capitalism. Chrysler began construction of his monument, the Chrysler Building in 1928 at 405 Lexington Avenue. Despite the buildings name, the Chrysler Corporation did not pay for the construction of the building and never owned it. Instead Chrysler paid for it himself, with the hope of his children one day inheriting the world’s tallest building.

The architects of a competing building, 40 Wall Street, had devised a plan to prevent the Chrysler Building from ever becoming the world’s tallest building. Seeking the title for themselves, they planned 40 Wall Street to be 925 feet tall: 85 feet taller than the Chrysler Building had originally planned to be. When Chrysler found out about 40 Wall Street’s plans he decided to add a surprise 186-foot spire to his building. 40 Wall Street finished construction first in April of 1930, and held a celebration for being the tallest building in the world, without knowing that they were about to be surpassed. Less then two months later, the construction workers at the Chrysler Building hoisted 4 parts of the secret spire to the top and riveted them together in 90 minutes. At 1,046 feet high, the Chrysler Building became the world’s tallest building¹.

John J. Raskob of General Motors, a rival of Chryslers, also aspired to build the world’s tallest building. Raskob purchased 350 Fifth Avenue and began construction of the Empire State Building in March of 1930, only a few months before the Chrysler Building was completed. Raskob hired architect William F. Lamb, who finished the original drawings for the Empire State Building in only two weeks. In one of their first meetings Raskob had taken a jumbo pencil, stood it on its end and asked Lamb, “Bill, how high can you make it so that it won’t fall down?” Using over 3,400 laborers a day, the building went up in just over a year, well ahead of schedule and under budget at $40 million, which would be nearly $600 million today. During certain periods of construction, the frame grew a remarkable four-and-a-half stories a week. Not to be bested by the Chrysler Building, Raskob put the final cherry at the top of his building – a spire, making the Empire State Building a soaring 102 stories and 1,250 feet high. The Empire State Building was completed in May of 1931 and became the world’s tallest building, a title it would hold for nearly 40 years until the World Trade Center was completed in 1970. While successful in beating the Chrysler Building in height, the Empire State Building was far from being the success Raskob had hoped.

 

Full Article: http://www.quickliquidity.com/blog/history-of-the-empire-state-building-a-financial-flop-for-nearly-20-years.html

Development, Industrial Real Estate, Industry News, Investment Real Estate, Minneapolis / St. Paul Housing, Office Real Estate, Property Management, Real Estate Trends, Residential Real Estate, Retail Real Estate, Twin Cities Real Estate, UST Program News

2014 Real Estate Outlook

Last week, Twin Cities real estate professionals gathered at the University of St. Thomas for the third annual Real Estate Outlook event. The program included a series of panels featuring leading experts in local real estate market segments, each offering their views on the current state of the market and their expectations for the coming year. The event was co-sponsored by Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business and Integra Realty Resources. Here is a recap of some of the major themes presented:

Economic Forecast

The keynote presentation was made by State Economist Laura Kalambokidis, who discussed the current state of the economy locally and nationally. Minnesota has generally fared better than the nation in recovering from the economic downturn. Employment in the state has now climbed back to pre-recession levels. Unemployment in Minnesota is at 4.6%, well below the national rate of 7%. Employment growth has been strongest in the health services, business services, retail, and hospitality industries, all of which have grown between 2.5 and 4% year over year. Government and manufacturing were the worst performing job sectors over the previous year, each declining by about 2%. Despite a slight drag on the economy from policy uncertainty related to the federal budgetary process, continued modest growth is expected locally and nationally over the next two years.

Laura Kalambokidis, State Economist

Office Market Update

Mike Salmen of Transwetern started off the office panel with a report on 2013, which was a decent year for Twin Cities office real estate. Absorption was modest at approximately 200,000 sf. Vacancy has slowly been decreasing thanks to the job growth and low unemployment noted by Ms. Kalambokidis. While Class A Space is performing well, Class B and C space and certain sub-markets are still seeing high vacancy.

Steve Chirhart of TaTonka Real Estate Advisors agreed, noting that the St. Paul and East suburban sub-markets were the weakest office markets in the region, although vacancy has declined from a peak of over 25%. Mark Kolsrud of Colliers stated that the St. Paul CBD had the least amount of investor interest of the regional submarkets, and that this was due to a lack of interest from lenders.

On the other side of the metro, the 394, Southwestern, and Minneapolis CBD submarkets are all performing very well. Mr. Salmen believes the I-394 corridor is currently the hottest office market in the Twin Citeis, with rates pushing into the mid-teens and low vacancy. Vacancies are also low in the Southwest submarket, despite the addition of 3 million sf of space since 2007. An anomaly in the West Metro is the Northwest submarket, which has among the highest vacancies at 24%. Mr. Kolsrud pointed out a 150 basis point swing in cap rates from the 394 area to Northwest submarkets. Like St. Paul and Eastern suburban, Northwest is unlikely to attract interest from institutional investors, although the panelists believed a local developer could find a way to make a deal work.

Lastly, the Minneapolis CBD remains the largest submarket and currently has vacancy at 15%. A big concern for office real estate downtown is the impact of the Wells Fargo build-to-suit deal with Ryan Cos. for new office space in Downtown East; the panelists speculated that this move could pull 1 million space of occupancy out of the downtown core as Wells Fargo consolidates employess in the new buildings. Another concern is the increasing obsolescence of older buildings, where mechanical systems and floorplans don’t support the employee density and layouts now desired by office tenants. But despite these concerns, downtown continues to see strong investor interest, as institutional investors from the coasts seek out the comparatively higher cap rates available in Class A properties in Minneapolis. Additionally, institutional investors are increasingly interested in “non-traditional” investemnets, such as office conversions in historic warehouse buildings in the North Loop area.

Office Panel

The office market panelists ended with a discussion of a macro trend that will have a large impact the office market going forward, which is coporate users taking less space per employee. The average space used per employee is expected to decline from over 220 sf to 150 sf by 2015. Among ten large renewals over the last 18 months, almost all took less space than they had before. Thus despite employment growth, the outlook for office absorpbtion is flat.

Retail Market Update

The retail market panel featured a lively discussion with Jim McComb, John Johannson of Colliers, and Skip Melin of Cushman Wakefield. In the Twin Cities, 2013 saw declines in vacancy and somewhat flat absorption of roughly 900,000 sf. However, Mr. Johannson noted that good space is mostly full, and gave the example of 16 formerly vacant spaces over 12,000 sf in the Southdale area, of which 13 have leased in the last 16 months. Mr. McComb noted that there isn’t much vacancy in smaller neighborhood spaces either. He pointed out that changes in the economy and demographcis are creating opportunities in retail markets.

One of the most significant retail developments currently underway is an outlet center in Eagan. Mr. Melin noted that the center will have 400,000 sf of space for 19 tenants, anchored by Saks Off 5th. Mr. Johannson then described another large 450,000 sf outlet development currently in the planning stages, this one also in Eagan. These two projects are all the more interesting because they are just about the only large multi-tenant retail developments currently in the works in the Twin Cities. Each are banking partly on capturing tourist trade from the nearby Mall of America but also taking advantage of a submarket in Eagan that is currently under-retailed.

The panelists noted that grocery-anchored retail centers continue to Continue Reading

Architecture & Design, Commercial Real Estate, Development, Economics, Investment Real Estate, Office Real Estate, Property Management, Real Estate Trends, Think Outside The Box

Changing Office Trends Hold Major Implications for Future Office Demand

Office TrendPioneered by Tech Firms in California, Communal Workspace Model Becoming More Mainstream Among Big Office Firms

 The article below is reposted from CoStar. It was written earlier this year but I believe that it is still very relevant. There is a major change underway in how office space users are looking at their future office space needs and the utilization of their esisting office space.  This is a long term trend that is going to have a significant impact on office space owners, users, and investors.      – Herb Tousley, Director of Real Estate Programs, University of St. Thomas

 

By Mark Heschmeyer

 
Perhaps just as the inevitable disappearance of music, video and books stores should have been foreseen at the onset of a digitized connected world, so too should the commercial real estate industry start taking a hard look at changes occurring in the office market.Tenants are downsizing their offices, particularly larger public firms, as they increasingly adopt policies for sharing non-dedicated offices and implement technology to support their employees’ ability to work anywhere and anytime, according to Norm G. Miller, PhD, a professor at the University of San Diego, Burnham-Moores, Center for Real Estate, in a webinar he presented to CoStar subscribers last week.Miller said he put together the webinar to examine what would happen if office tenants used 20% less of the nation’s current office space, which has a total valuation of $1.25 trillion. That decrease in demand would represent $250 billion in excess office capacity. Although the current situation is not that dire, Miller said the trend is real, and he presented how it is currently playing out and the long-term implications for office building owners and investors.Following the webinar, CoStar News interviewed Dr. Miller for a more in-depth discussion of the topic and surveyed a wide sample of webinar participants to share their firsthand account of the ongoing trend and its implications.
 
According to Miller, four major trends are impacting the office market:
* Move to more standardized work space.
* Non-dedicated office space (sharing), along with more on-site amenities.
* Growing acceptance, even encouragement of telecommuting and working in third places, and
* More collaborative work spaces and functional project teams.
 
“Historically, under the old corporate hierarchy, everyone had their own assigned office or work desk and we saw utilization rates of 50% or so,” Miller said. “Firms that have moved to sharing space are seeing much more efficient utilization rates of 80% to 95%, sometimes using conference space seats to handle unexpected overflow. Some also have arrangements with temporary office space vendors like Liquid Space, Regus, HQ, Instant Space, as well as supporting employees working from home or third places.”“The average amount of leased space (per employee) has been shrinking,” he said. “As of mid-2012 the average was 185 square feet per worker, well below the average space assumption in most office-demand models, and well below figures 10 years ago.”There have definitely been changes in office demand, agreed Tim Wang, director and head of investment research for investor Clarion Partners in New York. “Ten years ago, 250 square feet per office employee was the gold standard in office real estate. Today, that average has dropped to approximately 195 square feet. While some office tenants are hesitating to commit to large leases primarily due to economic uncertainties, the long-term trend is clearly shifting towards efficient space usage.” Brian J. Parthum, who tracks employment and economic trends for Southeast Michigan Council of Governments (SEMCOG) in Detroit, said his group is a case in point. “Our own organization recently moved into a smaller space,” Parthum said. “Efficient office design has allowed us to rent 7,000 square feet less space — down from 34,000 square feet — and at a lower rate. Additionally, we now have an office that is more attractive to the next generation of staff. The new space takes advantage of natural light, promotes face-to-face contact, and utilizes laptops, wireless technology, and mobile devices to allow for a more flexible work environment.”“Technology is allowing companies to be more paperless and work from a single laptop or device,” agreed Jason Lewis, president and managing broker of EcoSpace Inc. a brokerage firm in Denver that specializes in working with tenants to find sustainable workplaces. “Culturally the new generation of employees is requiring a more flexible and open environment. And in regards to the economics, there is the need for both startups and corporations to lower their burn rate and conserve cash, something that can easily be done by restructuring the way they view their office space,” Lewis said.For now, at least, the trend is more prevalent among large corporate office users with locations in multiple cities. John G. Osborne, executive director, leasing and marketing at Bergman Real Estate Group in Iselin, NJ, said also that the trend to shared office space is more prevalent among larger publically traded companies than smaller firms. “The majority of our smaller tenants, those that lease less than 5,000 square feet, still prefer private offices than an open plan,” Osborne said. “The majority of our smaller tenants, those that lease less than 5,000 square feet, still prefer private offices than an open plan,” noted John G. Osborne, executive director, leasing and marketing at Bergman Real Estate Group in Iselin, N.J.For many office-using firms, the Great Recession made downsizing a greater imperative. Occupancy rates dropped across the country as employers downsized staff and sought efficiencies through lower square foot per employee footprints. “Everything we’ve seen since 2006 and 2008 could be called the ‘Great Deleveraging,’” said Wilson Greenlaw, vice president of Thalhimer in Fredericksburg, VA. “Companies were removing fluff and eventually someone got around to looking at space utilization. Now that it is on the table, it will be maximized and implemented, resulting in a cultural shift for the office worker.”“Some of it is economic,” agreed Miller. “That is, companies realized they could save money by minimizing excess space. But I believe the single biggest factor driving this trend is technology. Now that we have moved to cloud-based file storage and can access our work from anywhere and it can be easily shared, workers no longer have to be tethered to an office to be productive. Technology is very much at the heart of this transformation.”Follow this link to read the rest of the article:  http://www.costar.com/News/Article/Changing-Office-Trends-Hold-Major-Implications-for-Future-Office-Demand/146580 

Affordable Housing, Government Policy, Multifamily, Property Management, Real Estate Law, UST Real Estate in the News

Should Property Owners Be Required to Provide Air Conditioning to Tenants?

Steve Katkov, UST Real Estate Professor and business and real estate attorney at Thompson Hall, talks to Fox 9 about renter’s rights in the summer months. Should landlords be required to provide air conditioning to their tenants in the summer similar to the cold weather rule in the winter? Here is what Professor Katkov had to say:

KMSP-TV
Industry News, Property Management, Real Estate Programs

Who’s Who in Twin Cities’ Property Management

This post was written by Dan Jackson, a 2012 UST MBA graduate.

As I reflect on the many courses taken during my time at the University of St. Thomas, I wanted to use this post to reflect on one of my first experiences in the program.  REAL 600: Real Estate Decision Making is a course within the MSRE program designed to introduce students to the key concepts related to the world of real estate.  This was an important course for me as it laid the foundation for what I could expect in the remaining real estate courses that I would take here on campus.  In the course, students learn the components that go into how to value a property, what legal issues should be considered when dealing with a property, the steps towards completing a market analysis, as well as the introductory components of the time value of money and its importance in real estate.  Students also gain brief exposure into the world of property management.

The text that we used during the course, Real Estate Principles, A Value Approach, provided good insight into the key roles and responsibilities of a property manager.  The book

Real Estate Principles by David Ling and Wayne Archer
Photo credit: Google

explains that property managers are in charge of the day-to-day operations of a property.  Typical functions include marketing the property to prospective tenants, selecting tenants, signing leases, collecting rent, maintaining the property, complying with all applicable landlord-tenant laws, maintaining tenant relations and communicating with the property owner.  While this book definition provided great introductory knowledge, I find it very useful and enjoyable when I can apply textbook knowledge to a real world scenario.  I was excited to learn more about companies here in the Twin Cities that perform these types of activities on a daily basis.

The Twin Cities Business Journal recently released the 2012 Book of Lists, highlighting the top companies within various industries (including real estate) in the Twin Cities metro area.  The online version of the Business Journal featured the top 5 Property Management Companies – the full list of 25 Top Companies requires online membership.

The rankings of these companies were completed using the Gross Leasable Area of the properties that each company managed.   While the list highlights these companies’ accomplishments with property management, many of these companies offer a broad and wide selection of real estate services.  The following list below reveals the top 5 commercial property management companies and provides a brief overview of what they do (adapted from each of their websites).  The list provides a good starting point for any student who wishes to further explore the world of property management. Continue Reading

Industry News, Investment Real Estate, Property Management, Real Estate Trends, Residential Real Estate, Uncategorized

Silver Bay Realty Files IPO To Be First Single-Family Rental REIT

A recent report from CoStar written by Mark Heschmeyer indicates that a local company may be the first publicly REIT that invests in single family homes.
 
September 19, 2012 

Silver Bay Realty Trust Corp. is aiming to be the first firm out of the IPO gate to become a publicly traded REIT focused on the acquisition, renovation, leasing and management of single-family rental properties for rental income and long-term capital appreciation.

The proposed REIT won’t be alone in chasing deals in the distressed housing market as several private investors have also been raising money for such ventures.

The Minnetonka, MN-based Silver Bay filed a proposed initial public offering of its common stock looking to raise up to $287.5 million.

Two Harbors Investment Corp., a New York-based publicly traded mortgage REIT, will contribute its portfolio of some 700 single-family rental properties valued at approximately $75 million to help form the venture.

The contribution is intended to be part of a larger transaction in which Silver Bay expects to acquire two other large portfolios containing about 800 homes from Provident Real Estate Advisors LLC while concurrently offering its common stock.

Silver Bay will be externally managed by PRCM Real Estate Advisers LLC, a joint venture between a Pine River Capital Management affiliate and Provident Real Estate, a private capital management firm. An affiliate of Pine River also serves as the external manager of Two Harbors Investment.

In its IPO filing, Silver Bay called the large-scale, single-family residential rental industry a relatively new market in the U.S.

“Until recently, this industry has been fragmented in both its ownership and operations, consisting primarily of private and individual investors in local markets and managed by local property managers,” Silver Bay stated. As a result, the firm believes a compelling opportunity exists to accumulate a large portfolio of properties and lease them to tenants for attractive yields.

Read the rest of the article:  http://www.costar.com/News/Article/Silver-Bay-Realty-Files-IPO-To-Be-First-Single-Family-Rental-REIT/141622?ref=100&iid=298&cid=FC4C5ECBFF14BCA42CFC3FCF0353A739

Commercial Real Estate, Executive Insight Series, Property Management

Steve Wellington of Wellington Management Shares Development Insight

Stephen B. Wellington, Jr., Founder and President of Wellington Management, Inc.

It is not surprising the top 10 ranked developer Stephen Wellington, drew a large and attentive audience when he recently spoke at UST’s Executive Insight Series on development and property management.

For those who have not yet had the opportunity to meet Steve, he is an impressive and literally towering figure.  With a brilliant educational background (cum laude graduate of Yale University, a master’s degree in public affairs from the University of Minnesota and a second master’s degree from Stanford University’s Graduate School of Business), coupled with a largely successful professional track record – both as a entrepreneurial developer and as a leading public development official, all ears were finely tuned to hear what this CRE pro had to say.

As founder and President of St. Paul based, Wellington Management, Inc. (WMI), Steve communicated his company’s development and management approach as “disciplined and opportunistic.”  Through buying right and managing intelligently, the company chiefly operates through a buy and hold investment strategy. Currently, WMI’s portfolio is valued at $375 million, including approximately 90 properties located throughout the Twin Cities metro. Continue Reading

Economics, Government Policy, Industrial Real Estate, Industry News, Multifamily, Property Management, Real Estate Trends, Retail Real Estate, Senior Housing

Treasury Instructs IRS to Increase Audits of Returns with Rental Real Estate Income

Property Owners: As If You Didn’t Have Enough Issues To Deal With Already.

Apparently, the Department of the Treasury feels that a significant number of real estate property owners have mis-reported rental income.  They, as a group, have been singled out for special attention by the IRS.  See the article below by Steven Katkov.  Steven is an adjunct instructor who teaches Real Estate Law at the University of St Thomas.  He is also the Senior Partner in the Katkov Law Group.

The Internal Revenue Service (IRS) should increase its examinations of personal tax returns that report losses from rental real estate activity, according to a new audit report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA’s report, “Actions are Needed in the Identification, Selection, and Examination of Individual Tax Returns with Rental Real Estate Activity,” was conducted because a Government Accountability Office report in August 2008 stated that at least 53 percent of individual taxpayers with rental real estate activity for Tax Year 2001 misreported their rental real estate activity, resulting in an estimated $12.4 billion of net misreported income. Continue Reading

Appraisal, Business Valuation, Commercial Lending, Commercial Real Estate, Development, Economics, Government Policy, Green Building, Industry News, Multifamily, Property Management, Real Estate Trends, Residential Real Estate, Retail Real Estate

Location, Location, Location

Whether you are looking for ways to position Minnesota as a good location to buy real estate or simply need a reminder of why we like living here next time it snows, the Greater MSP, the Minneapolis St. Paul Regional Economic Development Partnership website is a great resource. Not only do they put together videos about the highlights of the areas on their  YouTube channel, they provide statistics to backup why this is a great area to do business (location, transportation, financing & incentives, demographics, taxes, utilities, innovation, the economy), to live (education, cost of living, healthy lifestyles, philanthropy and volunteerism, sports and recreation, arts and culture, shopping and attractions) and workforce information (labor force statistics and projections, wages, employment by industry and occupation, colleges and universities.)

YouTube Preview Image

Just a few of the reasons Minnesota is a great place to live, go to school and do business:

  • #1 region to be an urban cyclist.  Bicycling Magazine
  • More golfers per capita than any other region in America.
  • Top 4 states for workforce quality. CEO Magazine
  • Among America’s top regions for brainpower. The Daily Beast, 2010
  • Where you can get a good cappuccino and eat Thai food yet live on a quiet tree-lined street with a backyard and send your kids to public school. Garrison Keillor Continue Reading
Executive Insight Series, Multifamily, Property Management, Senior Housing, Uncategorized, Upcoming UST Events

Dominium to share Multifamily Insights on December 6th

dominiumlogoMark Moorhouse of Dominium, the Midwest’s premier owner and developer of affordable, luxury, and senior multifamily real estate will speak at the University of St. Thomas on Tuesday, December 6 at 5:45 p.m.  This is the last event for 2011 in the Real Estate Executive Insight Series.  This event is free and open to the public but please register here.

As senior vice president and project partner for Dominium, Mark Moorhouse is responsible for development and acquisition activity. Since joining the firm in 1996, Moorhouse has played an integral role in the financing of over $140 Million of apartments and has helped raise in excess of $40 Million in equity.