Investor confidence in multifamily real estate begins recovery

According to a survey by National Real Estate Investor, confidence in multifamily properties appears to be recovering after a dip in 2018, though all other classes of commercial real estate have been neutral or dropped slightly. The survey asked respondents to rate the attractiveness of the major commercial real estate markets on a scale of one to ten. Most investors prefer multifamily and industrial properties over hotels, office, and retail; last year multifamily and industrial were tied for desirability, but this year multifamily pulled ahead at a 7.9 and industrial fell to a 7.5. They are both still well ahead of the other categories, though; hotels are a 5.9, offices are a 5.8, and retail is just a 4.8. 

Compared to 2018’s rankings, hotels dropped .2 points, offices dropped .1 point, retail held steady, and industrial dropped .2 points. Overall, multifamily has been a rock in the current real estate cycle, despite cap rates being driven lower by the high demand for multifamily. 

While desirability doesn’t necessarily reflect actual sales and purchases, sentiment can be a useful data point in the commercial real estate market. For more information about the current state of the market and how the San Francisco Bay Area differs from the nation as a whole, contact one of our advisors; we have specialists in multifamily and industrial properties as well as office and retail.

Source: National Real Estate Investor

Milpitas’ Great Mall unveils major revamp as Silicon Valley shopping centers up the ante

As retail sputters in some places around the country, Silicon Valley retailers and property owners are facing a different challenge: How to compete in a market where investment is still hot in the retail sector.

The Great Mall in Milpitas is one of those looking for a competitive edge in a region where the traditional malls are either going by the wayside or upping the ante to create a space that offers not just shops, but experiences.

Indianapolis-based Simon, an international shopping center and mixed-use property owner, last month wrapped up an extensive, two-year renovation project for the massive shopping center, which has more than 200 stores. (For fun facts about the revamp, click through the slideshow above.)

The revamp added or expanded some of its stores, but also redesigned what it is calling a “dining pavilion” that has 10 restaurants.

“Our goal is to provide the best shopping and entertainment experience for our guests and this transformative renovation makes that possible,” Angela Pyszczynski, general manager at the Great Mall, said in a statement.

Read more on Silicon Valley Business Journal

 

 

 

Seeing Pros and Cons in “Digitization” of Real Estate

A future-focused Urban Leaders Summit discussion in Frankfurt in May on embracing new technology raised just as many questions as it answered.

Many German business leaders have been fretting about what they call Industry 4.0—the sweeping changes created by machine learning, automation, the “internet of things,” and big data—innovations they categorize under the umbrella of “digitization.” The waves of change triggered by this digital shift are going to be felt for generations to come, as more and more jobs are capable of being done by machines. Will we need humans at all? Will we create a superintelligence that finds us an unnecessary burden?

But going back to the present, Sascha Friesike, professor of digital innovation at VU Universität Amsterdam, wondered why urbanization continues to grow even as we increasingly decentralize work. If jobs can be done from anywhere, why do we still largely choose to move to cities?

Klaus Dederichs of Drees & Sommer was wary about the rush to incorporate the internet of things into properties. Tests have shown that the current generation of smart devices, which usually operate over wi-fi, is easy to hack. “They are compromising buildings’ cybersecurity,” he said. “What if terrorists attack smart buildings rather than drive into crowds?”

But Dederichs did also note some potential for buildings to get smarter, optimizing energy use being one of them. Building information modeling (BIM) is another promising field in the world of smart buildings. This digitizing of the planning, construction, and maintenance of buildings increases efficiency and extends the life of a project. Thus far, BIM has not seen huge adoption rates in Germany; the industry is hesitant largely because of the financial investments and the additional training needed for workers.

Blockchain came up in practically every discussion, as did artificial intelligence. It is difficult to find the middle ground between viral anxiety and tech evangelism, said Thomas Metzinger of the Johannes Gutenberg-Universität Mainz. “What do we do when a smart city crashes? And it will crash. We need graceful degradation,” referring a web design term that refers to designing a project to continue to function even if some features fail.

“We aren’t going to build houses that aren’t future-proof anymore,” said Martin Rodeck of EDGE Technologies, owned by OVG Real Estate. You cannot risk a new building being outdated within five years. And you should not jump on a trend like blockchain or virtual reality just because everyone else is doing it—you need to focus on how to solve the problem at hand.

Read more on Urban Land Institute

 

Exclusive: East Bay shopping center lands new grocery tenant to anchor redevelopment strategy

The new owners of the regional mall have mapped out a multi-phased plan to redevelop the East Bay property into a shopping and entertainment geared toward the region’s strong Asian demographic.

LBG Funds has finalized a 35,000-square-foot lease with Taiwanese grocer 99 Ranch Market to anchor the first of four phases that the Los-Angeles-based investor is planning for the once-struggling Richmond property.

Rebranded as the Shops at Hilltop, the first phase will also include leases for 55,000 square feet of restaurant space; new tenants for a 20,000-square-foot food hall and 12,000-square-foot food court; as well as a variety of incoming shops, entertainment and pop-up uses.

LBG is estimating work on the first retail phase will be completed in mid-2019.

 

 

Read more from San Francisco Business Times

 

 

 

What Do Single-Tenant Net Lease Deals Offer High-Net-Worth Investors?

HNW investors are especially attracted to single-tenant net lease deals in the retail sector.

For more and more high-net-worth (HNW) real estate investors, dollar stores and drugstores make for a winning combination, although these assets can turn into losers if the sole tenant leaves.

Office and hotels still draw a lot of attention—and dollars—from HNW investors. But a rising number of them are betting on single-tenant net lease properties such as dollar stores, drugstores and fast-food restaurants to help round out their portfolios.

By and large, net lease properties are magnets for HNW investors because they’re viewed as safe, recession-proof assets that preserve cash flow and yield.

Read more from National Real Estate Investor

Effort to bring tech campus to former Alameda naval base

ALAMEDA — The city is looking to transform three buildings at the former Alameda Naval Air Station into a tech campus, and is now seeking design and architectural firms to offer proposals for taking on the project.

The 519,219-square-foot complex — known as the Bachelor Enlisted Quarters — was once used as a dormitory and for dining facilities for sailors. The overall site, which includes the buildings, nearby parking and sports fields, totals about 21 acres.

The city said it wants to create “a cool, one-of-a-kind technology campus” that would be close to the other tech companies already located at the former Navy base, such as Google, Wrightspeed, Saildrone, Natel Energy and Astra Space, according to a background report.

The site is within walking distance to a ferry terminal to San Francisco. St. George Spirits, Faction Brewing and Rock Wall Wine Company are also nearby.

More from East Bay Times

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NAI Northern California Represents Buyer and Seller in $7.34M Sale of Absolute NNN Walgreens in Elk Grove

ELK GROVE, CA – July 12, 2017- NAI Northern California, the Bay Area presence for NAI Global, the largest commercial real estate brokerage network in the world, is proud to announce the $7.34 million sale of a Walgreens located in Elk Grove, CA. Vice President, Mary Alam, arranged the sale and represented both the buyer and seller in this off-market transaction.

Mary Alam, who specializes in single and multi-tenant retail investment sales, indicated that this transaction reflects the continued demand for more secure real estate investments in light of negative news surrounding the state of brick and mortar retail.

Drugstores have proven to be among the most successful and stable of retail tenants in this environment. This 10-year-old, long-standing Walgreens purchased at a 5.64% CAP presents itself as a valuable opportunity as an absolute NNN investment providing a stable, trophy asset for investors.

“This acquisition is a great addition to the buyer’s portfolio due to the high credit rating of the tenant, the long-term NNN lease with no landlord responsibilities, and a great location in Elk Grove which has consistently ranked as the fastest growing city in California,” said Alam.

Located on 9200 Elk Grove Florin Road, this property stands on the busy four-way intersection  of Elk Grove Florin Road and Bond Road with easy access to Highway 99. The 14,480 SF drugstore is the only large pharmacy within a one-mile radius and provides ample parking, a double-lane drive-thru window, as well as charging stations for electric and hybrid cars.

About NAI Global
NAI Northern California is at the leading edge of technology, collaborative culture, and training, giving our local professionals a competitive advantage and creating better outcomes for our clients. We are consistently a top Commercial Brokerage in the Bay Area, and continue to grow our team and revenues.

NAI Global is the largest commercial real estate brokerage network. Founded in 1978, today NAI Global has more than 400 offices worldwide and over 7,000 professionals, managing over 425 million square feet of property. Global offices deliver market-leading services locally and combine their in-market strengths to form a powerful bond of insights and execution for clients with multi-market challenges.

To learn more, visit www.nainorcal.com

Explore career opportunities with our winning team at www.nainorcal.com/careers

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NAI Northern California Represents Seller and Buyer in $13.6M Transaction of Newark Square Shopping Center

Newark, CA – June 29, 2017- NAI Northern California, the Bay Area presence for NAI Global, the largest commercial real estate brokerage network in the world, is proud to announce the $13.6 million sale of a neighborhood center, Newark Square Shopping Center.

Vice President, Mary Alam and Investment Advisor, Joshua Ballesteros represented both Buyer and Seller in this off-market transaction.

“With 26 tenants and approximately 40 years of operating history, we are pleased to have helped our Buyer and Seller in evaluating, managing, and communicating the large amount of data associated with this property,” said Alam who, with her partner, Joshua Ballesteros, managed this transaction over a long and often challenging eight-month escrow. “We are thrilled to have closed this sale to everyone’s satisfaction,” she added.

Newark Square includes six buildings spread over three separate parcels with a total lot size of approximately 5.1 acres. The center which was constructed in 1960, hosts a number of long-term, stable tenants with below-market rents and NNN leases, and offers ample parking and prominent signage. Tenants at the property include well-known franchises such as Subway, Round Table Pizza, Taco Bell, Carl’s Jr., and Check Center. The latter three tenants occupy their own separate retail pads.

“The property is a neighborhood center with services that cater to the daily needs of the local population. With the projected continued growth of the Fremont-Newark corridor, it is expected that demand for these services will increase as the area draws more residents to its relatively affordable housing and its easily accessible location,” said Alam.

Located on 5510-5650 Thornton Avenue in Newark, CA, Newark Square is a 50,047 square foot neighborhood shopping center located less than one mile away from the I-880 Nimitz Freeway and the intersection of Thornton and Cedar with an average daily traffic volume of 21,548 visitors. The area boasts a population count in excess of 160,000 people within a three-mile radius and a healthy average household income of $115,000.

About NAI Global
NAI Northern California is at the leading edge of technology, collaborative culture, and training, giving our local professionals a competitive advantage and creating better outcomes for our clients. We are consistently a top Commercial Brokerage in the Bay Area, and continue to grow our team and revenues.

NAI Global is the largest commercial real estate brokerage network. Founded in 1978, today NAI Global has more than 400 offices worldwide and over 7,000 professionals, managing over 425 million square feet of property. Global offices deliver market-leading services locally and combine their in-market strengths to form a powerful bond of insights and execution for clients with multi-market challenges.

To learn more, visit www.nainorcal.com

Explore career opportunities with our winning team at www.nainorcal.com/careers

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Selling Commercial Real Estate: Single-Tenant Net Leased Assets

By Kathleen Silver, Associate VP of Sales and Operations

Why do real estate investors buy STNL properties?

Investment grade triple net-lease (NNN) properties are a valuable and powerful addition to an investor’s portfolio.

A single-tenant, net-leased investment gives total (fee-simple) ownership of a freestanding, single-tenant commercial property, which is pre-leased to a high credit retail tenant (Ex: Walgreens, Jack in the Box, Walmart or Best Buy, all on long-term leases, providing a stable and predictable, long-term cash flow.) In the case of a NNN lease, the tenant is responsible for the maintenance, taxes, and insurance to the property.

Example:  An investor buys a Walgreens in San Francisco, CA (there’s a ton of them!). The lease purchased with the property is for a non-cancelable, 25-year period. The tenant is responsible for all costs to operate and maintain the property (including property taxes). In many cases, when the lease expires, the property owner owns the property free and clear. This is sometimes referred to as a “care-free” or “absolute” NNN lease.

Who Should Buy a NNN Lease Asset?

NNN lease ownership is ideal for first-time real estate investors as well as for savvy veterans seeking to simplify their holdings by selling off management-intensive properties and trading into less complicated real estate holdings.

The price range for a NNN lease property varies depending upon the lease length, quality of tenant, and location. Dollar stores and fast food restaurants are typically more affordable, while drugstores can be valued in the tens of millions. Because most investors borrow funds to acquire their NNN property, it is essential to work with a qualified mortgage broker to acquire the best possible financing. The minimum down payment typically required by lenders is 20-25% for investment grade tenants and 25-40% for most other tenants.

Advantages of Owning a NNN Leased Property

  • Capital gains deferment of taxes through a 1031 tax-deferred exchange
  • Either 100% management-free or require very little involvement from the landlord/owner
  • High residual value and a liquid investment
  • Can obtain non-recourse, fixed financing for more than 10 years with NNN lease properties
  • There are little to no vacancy factors, tenant improvement costs, management fees or leasing fees
  • Location! Location! Location! Many are in prime retail areas with high traffic counts and great demographics
  • Tenants sign leases of 5 years to 25 years

Why Would a Commercial Investment Advisor Want to Exclusively Sell NNN Lease Properties?

NNN properties allow a real estate agent/broker to engage in many benefits that are not commonly seen with other property types:

  • NNN advisors with NAI Northern California have a database filled with leads nationally – not just regionally. Easily do deals in other states.
  • NNN lease investments are fairly easy to understand, which will allow a new, more green agent to learn the product type quickly.
  • Since NNN properties are one of the most highly sought after property types, you will find that a “clean” deal, accurately priced will have no lack of buyers. Most of the time, you will get all cash offers with short due diligence timelines.

Our NNN Team is lead by Sr. Investment Associate, Chris Lomuto and Investment Associate, Milo Spector. Their team maintains direct outreach to thousands of property owners of NNN assets nationally. NAI Northern California is a member of a 6,700 associate 375 global office network of advisors. Our NNN team is highly connected to the national NNN lease market.

To be a part of this team means you will have the training, technology platform with leads ready to go and marketing support to provide you the shortest runway to success. Please visit our LinkedIn company page to follow us!
 

Connect with Kathleen on LinkedIn or Twitter.