June 22, 2017
By Dennis Kaiser
Connect Los Angeles brought together more than 450 CRE leaders for an information packed conference June 21st at the Hotel Indigo DTLA. During four panel discussions, top CRE leaders shared insights about the future of Los Angeles CRE, including how neighborhoods are being transformed, investment and development opportunities, CRE investment strategies and capital markets. Connect Media will be sharing more in-depth reports of each panel over the coming days, but here’s a few key takeaways and highlights that stood out from yesterday’s conversations.
The noteworthy moment of the conference was a special Lifetime Achievement Award presented to Nelson Rising that included a retrospective through the experiences of close friends, business partners and his son, Chris. (Pictured above L to R: Chris Rising, Rising Realty Partners, Ted Antenucci, Catellus Development Corp., Nelson Rising, David Herbst, Vectis Strategies, Jeff DeBoer, Real Estate Roundtable.)
A keynote conversation between The Real Estate Roundtable’s Jeff DeBoer and CBRE’s Chris Ludeman shed light on Washington, D.C. lobbying activities on behalf of the CRE industry. The discussion revealed that while there may be a perception that nothing of consequence is taking place relative to CRE, in actuality much is going on behind the scenes that’s critical to the industry. That includes tax reform, infrastructure, financial industry regulation, foreign capital into real estate and infrastructure, as well as energy efficiency, to name a few. DeBoer framed real estate’s significant influence in the Capital with an overarching fact: CRE contributes 60% to 70% of the revenues states collect.
Gauging the Climate: Buy, Build, Sell or Hold
A mix of the most active investors and advisors discussed their strategies to seek out their next deals, the capital markets climate and how they’re remaining successful in an ever-evolving economy.
- Cushman & Wakefield’s Marc Renard noted that many of the conversations he has these days with clients involve the question, what’s wrong versus what’s right.
- Monday Properties’ Phil Cyburt said “labor is everything to our tenants,” which makes access to “transit key.”
- Equity Office’s Rich McEvoy says companies are now acutely focused on “acquiring and retaining talent.”
- Rising Realty Partners Chris Rising notes that since California is ahead of other states in the area of sustainability, they see opportunities to gain an advantage by applying what they’ve learned in California on assets elsewhere. He believes they can do well for themselves by doing good for the planet.
Invesco Real Estate’s Charlie Rose says the company’s strategy is to align with partners in the marketplace who live and breathe the daily ebb and flow of a market. That let’s them see changes before the institutional players do and make a move on an opportunity.
Repositioning Space and Transforming Neighborhoods
As innovative companies continue to redevelop and reposition outdated space into luxurious and creative buildings, communities like Koreatown, Hollywood, and DTLA, are continuing to transform. Panelists shared why these standout projects are rising above the competition, and explained why developers and investors are choosing these neighborhoods for expansion.
- Greenland USA’s Ryan Aubry says one of the ways cities are being transformed is through the addition of amenities the community wants and needs. That’s why the amenity offering at Metropolis now includes a three-acre amenity deck that incorporates a park for children, which has proven to be a welcome addition to other downtown areas, such as Klyde Warren Park in Dallas.
- Newmark Knight Frank’s Ryan Harding notes that companies today prefer to be near other like-minded companies in like-minded communities.
- Three6ixty’s Dana Sayles says there’s “no more ‘same old same old,’” because communities prefer unique, different and out-of-the-box projects.
A Market Outlook & Industry Overview from the C-Suite
CRE industry leaders examined the the state of the industry from a national perspective. The conversation explored the outlook for the balance of the year and discussed the key factors driving and influencing the deals.
- Colliers International’s Martin Pupil says he favors the outlook in right-to-work states because that’s where positive job growth is occurring. Texas and Michigan are two examples of strong job creation. The certainty around taxes makes Texas No. 1 as a place to look for opportunities.
- Avison Young’s Mark Rose described the market as remarkably strong, confused and pausing. Uncertainty has caused those who can pause to do so until new rules get written. The bid-ask gap is pretty wide right now.
- Manulife’s Ted Willcocks believes it is a period of recalibration, as the market nears a peak.
Financing Los Angeles’ Deals
Top finance players shared how they’re funding some of the city’s timeliest projects. They discussed the money sources and their intended deals, both large and small.
- Hunt Mortgage Group’s Vic Clark says in the last six months the lending environment has compelled him to provide maximum leverage, or he felt they wouldn’t have any chance at winning the deal. He hasn’t seen that level of competition in the 25 to 30 years he’s been in the business.
- Walker & Dunlop’s Mark Grace noted that the year started off slow deal-wise, but in the past few months the deal flow has kicked into high gear “trying to make up for lost time.” Spreads are stabilizing and the Treasury has come back, he says.
- RealtyShares’ Bill Lanting notes that owners are looking for more leverage now. And they are seeing some interesting deals from CMBS exits, trying to time the best selling window.
- Thorofare Capital’s Brendan Miller says the slowdown in investment activity is due to the bid ask spread. Deals are still getting done, but they are working considerably harder to close them.
For comments, questions or concerns, please contact Dennis Kaiser