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Interest Rates, Tax Uncertainty Help Slowdown of Multifamily Investment Sales

For the first time since 2009, the U.S. multifamily real estate sector’s annual sales volume is flirting with falling below the preceding year’s total. Through the first three quarters of 2017, U.S. multifamily investment sales totaled a little over $104 billion, according to Real Capital Analytics (RCA), which tracks sales of multifamily properties and portfolios that are $2.5 million and greater.

Experts don’t anticipate sales activity in the last quarter of the year to be enough to surpass last year’s grand total of $160.6 billion in trade volume.

As a follow up to the cover article “Coming Back Down to Earth” from the September issue of Southeast Real Estate Business, we caught up with Darron Kattan, managing director of Franklin Street’s Tampa office, to get his take on the U.S. multifamily market. The following is an edited interview:

Southeast Real Estate Business: Thus far in 2017, multifamily investment sales are on track to be below 2016 totals. In your opinion, what is causing the decreasing volume?

Kattan: A few factors are contributing to this trend. First, the slight increase in the interest rates have given the market pause. Many sellers that have owned for a long time are sitting squarely on the sidelines in the hopes that tax reforms (particularly lowering capital gains) are going to happen and they are waiting on selling to not lose out on that savings. The market was so fluid in the last three to four years with such a high percentage of the market trading hands that there had to be a slowdown at some point as the deals can’t be value-add and flipped that quickly.

Also, target exit pricing has become so robust due to the acquisition costs that it will necessarily take time for people to grow the income in order to hit exit numbers. Finally, people are shy about selling as they don’t see any inventory to buy and don’t want to get stuck holding cash. Property owners know what they have and its producing good returns. Selling with the hopes of finding the next deal is a scary proposition these days.

SREB: In your estimation, what’s driving the uptick in demand for multifamily?

Kattan: The continued lack of single-family supply (both new inventory and existing homes for sale) is forcing people to rent who otherwise may have bought. Some other factors contributing to this trend are the continued push of millennials into renter households and the baby boomer retiree push, where we are seeing an increased percentage of renter-by-choice in that demographic. Millennials are indeed renting for longer in life, so there is less home buying, which is keeping the rental market tight.

SREB: RealPage/Axiometrics reports that the U.S. multifamily space is at full occupancy, or above 95 percent. They’ve also tracked rent growth at 2.6 percent annually. What takeaways should we have from these numbers?

Kattan: I would argue that not enough multifamily development is happening today. There is a need for affordable housing and for development one notch below the ultra-luxury product that is dominating the pipeline. It makes economic sense for developers to focus on the high-end consumers, so I would expect that trend to continue. Lenders have closed the spigot a significant amount, which will naturally slow the pipeline down. With the total lack of new construction from 2008 to 2012, we are still playing catch up on supply. If immigration laws don’t restrict population growth, I anticipate a strong tailwind pushing the industry forward with absorption numbers continuing to be at torrid paces throughout the high-growth Southeast.

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Awards

From continuing education to fast casual restaurants, here are the 2017 Corporate Philanthropy finalists

Excerpted from Tampa Bay Business Journal.

Twenty-eight Tampa Bay area firms and organizations have been chosen as finalists for the Tampa Bay Business Journal’s 2017 Corporate Philanthropy Awards.

The Corporate Philanthropy program is designed to spotlight the many corporate-sanctioned giving and volunteer programs that stand out in the local business community.

Bigger category (101-500 employees)

Franklin Street

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Topgolf. iFly. Now, Dave & Buster’s. This suburban Tampa development is a prime example of retail’s evolution.

Excerpted from Tampa Bay Business Journal.

Brian Bern, a senior director with Franklin Street in Tampa, said one of the restaurant clients he represents is considering The Estuary. It’s only been within the last year, he said, that retailers and restaurants are willing to consider The Estuary and the surrounding area — and that’s all because of Topgolf, Dave & Busters and the other anchors.

“It’s the only location people are going to drive from pretty good distances to go there,” Bern said.

For full story, visit https://www.bizjournals.com/tampabay/news/2017/10/30/topgolf-ifly-now-dave-busters-this-suburban-tampa.html

 

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Open-Air Shopping, Entertainment Landmark on Tap for Broward County

Dania Pointe, an $800 million, open-air shopping and entertainment center, is expected to become a signature lifestyle destination by merging retail, residential, office and hotel uses on a 102-acre tract in Broward County. 

The massive project along Interstate 95 in Dania Beach, Florida, south of Fort Lauderdale, is under construction and scheduled to open in time for the 2018 holiday shopping season, according to developer Kimco Realty Corp. of New York. 

Tenants that have signed on to the project include electronics and appliance retailer BrandsMart USA, TJ Maxx, Hobby Lobby and Outback Steakhouse. At buildout, the center will have approximately 1 million square feet of retail space, but that’s only a part of the mix. 

Dania Pointe eventually will have up to 500,000 square feet of office space, 1,000 luxury apartments and condominiums, and two hotels in a project designed to appeal to residents, workers and tourists. 

“It shows you, in my opinion, the change in consumer behavior of the older generation and the newer generation,” said Robert Granda, director of retail investment sales for Franklin Street. “I’m 37 years old, and the way in which my parents experienced retail shopping centers is a lot different than the way I experience them. Millennials don’t want to be tied down to one impractical place. It’s more than just the act of going to purchase an item; it’s all about the experience.” 

Giving the customer an experience helps these centers draw patrons who might otherwise stay home and shop online, Granda and other retail analysts explain. 

For full story, visit http://www.costar.com/News/Article/Open-Air-Shopping-Entertainment-Landmark-on-Tap-for-Broward-County/195379

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Hurricanes create rise in costs, delays on projects

When your business is construction, you do not have to be at the center of a major hurricane to feel its effects. Con­tractors, suppliers and commercial real estate lenders in Georgia are seeing some impacts from recent hurricanes Harvey, which made landfall on August 25, and Irma, which hit Florida on September 10. 

Taquetta Harris saw the devastation in South Florida first-hand. She man­ages several South Florida properties for Franklin Street, a commercial real estate management company. 

“During the storm and right after, when Wi-Fi and phone lines were down there, I was the point person for the team on the ground, keeping owners and ten­ants informed,” said Harris.

After the storm passed, she spent about two weeks onsite getting downed trees and debris removed and arranging for repairs to buildings. 

“The biggest challenge was restoring power, and then finding companies to remediate water damage,” Harris said, “but repairs are underway and mostly completed.”

For full story, visit 
https://www.bizjournals.com/atlanta/news/2017/10/28/hurricanes-create-rise-in-costs-delays-on-georgia.html

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The Costliest Mistake Commercial Landlords Make

There are any number of mistakes commercial real estate landlords can make. Some, of course, are more costly than others. GlobeSt.com caught up with Melissa A. Hazlewood, LEED Green Associate and vice president of management services at Franklin Street, to get her thoughts on this topic in our exclusive interview.

For full story, visit http://www.globest.com/sites/jenniferleclaire/2017/10/27/the-costliest-mistake-commercial-landlords-make/.

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Awards & Recognition

Franklin Street’s Jordan Wean Receives NAIOP’s Developing Leaders Award

NAIOP, the Commercial Real Estate Development Association, has recognized Jordan Wean, director, commercial investment sales, Franklin Street, with its prestigious 2017 Developing Leaders Award. 

“NAIOP is proud to recognize Jordan Wean of the NAIOP Central Florida chapter for his outstanding professional accomplishments and dedication to our association, the industry and his community,” said Thomas J. Bisacquino, president and CEO of NAIOP. “His leadership and talents are already making an incredible impact on the industry and will continue to shape the future of commercial real estate.” 

As director of commercial investment sales, Wean represents owners and investors of income­producing commercial properties, with a primary focus on multitenant unanchored retail properties in the $2 million to $15 million range throughout Central Florida. His efforts help to maximize potential income and reduce unnecessary or elevated operational expenses to best position the company’s clients for future sales. He then helps to facilitate the sale through an aggressive marketing campaign in order to bring the company’s clients a top of market price from a qualified buyer. 

One of seven young professionals to receive NAIOP’s honor this year, Wean was honored at an award ceremony on Wednesday, October 11, at NAIOP’s CRE.Converge 2017 conference in Chicago. 

Established in 2006, the Developing Leaders Award has been given to rising industry professionals from across NAIOP’s chapter network in all sectors of commercial real estate. Recipients are professionals under the age of 35 who have distinguished themselves due to their exceptional professional accomplishments, strong leadership and community involvement. 

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People on the move: Tim Rogers

Tim Rogers was appointed as an associate at Franklin Street, Orlando.

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Franklin Street Expands Retail Landlord Services In Orlando

Franklin Street has added Tim Rogers as an Associate, specializing in retail landlord representation in the Central Florida market.

In this role, he will focus on leasing services, including transaction management and execution, as well as market analysis and business development on behalf of clients.

Rogers will work closely with Franklin Street retail leasing expert Terrence Hart. Prior to joining Franklin Street, Rogers served as Associate Director at Front Street Commercial Real Estate Group, where he focused on retail and shopping center tenant and landlord representation.
 
Franklin Street is actively recruiting great young talent like Tim, as well as experienced senior agents who align with our corporate core values of collaboration, integrity, accountability and hard work,” said Franklin Street’s Yvonne Baker, Regional Managing Partner of the Orlando and Jacksonville offices.  “Tim’s retail background and local market expertise will further strengthen our tenant representation capabilities throughout Central Florida.”

“Our retail landlord services division has a proven track record of finding tenants that achieve the best results for our clients,” said Cary Beale, Franklin Street’s Senior Vice President of Retail Landlord Services. “Tim brings a high level of energy, experience and enthusiasm to our team. We are excited to welcome Tim to Franklin Street.”
 
“Joining Franklin Street and the retail landlord services group was attractive to me because of the firm’s full-service capabilities, and the significant growth opportunities available in the Orlando market,” said Rogers. “I’m excited to play a role in the continued expansion of our retail leasing team.”

Rogers received a bachelor’s degree in Finance from The Ohio State University and is currently pursuing a master’s degree in Real Estate from the University of Central Florida. He is actively involved with Urban Land Institute (ULI) Central Florida and is a member of the International Council of Shopping Centers (ICSC).
 

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Industry Outlook: Orlando CRE leaders share top deals

Excerpted from Orlando Business Journal. Yvonne Baker was among industry leaders who participated in the Orlando Business Journal’s Commercial Real Estate Industry Outlook panel.

“We thought people in Maitland would leave when I-4 Ultimate started, but people see the future of Maitland Center. Buildings have been refreshed. You have great institutional owners.” – Yvonne Baker, regional managing parter, Franklin Street