Hartman Simons Commercial Real Estate Blog

Four on Friday: David Tennery of Regent Partners

A 30-year veteran of the commercial real estate industry, David Tennery is the principal of Regent Partners’ Office Properties and Development Group. Tennery joined Regent Partners in 2004 and over the course of his career, he has been involved in the development of nearly 6 million square feet of office, retail, industrial, mixed-use and hotel properties in the United States and Latin America.

In this Four on Friday, we talk with Tennery about his firm, his decision to leave accounting for commercial real estate and his love of the beach.

Give us a brief overview of the services offered by Regent Partners.

Tennery: Regent is a 25-year-old, full-services commercial real estate firm based in Atlanta. Regent has partnered with some of the largest institutional and fund organizations in the United States and Europe, as well as with local and regional groups with a focus on the greater Southeastern U.S. markets.

We develop hotels, offices, mixed-use sites and residential properties. Our passion for meaningful development and a history of strong execution on often very complex projects have allowed us to bring highly notable community-enhancing properties to our markets, including both new and re-development projects. With a key focus on value-add, Regent also has a strong record in the areas of acquisition, asset management, on-site property services and, when the time comes, asset disposition.

Looking ahead to the next few years, what's the biggest reason for optimism regarding Atlanta's commercial real estate market and what's the biggest cause for concern?

Tennery: Atlanta, while no more or no less challenged than other fast-growing major U.S. cities, does hold the strong advantage of truly being a great place to live, work and raise a family. The value proposition Atlanta offers is unusual in that our combination of a skilled and well-educated work force with a very cost-effective, high quality of life frequently puts Atlanta in the top tier of consideration for growth-oriented companies. When you add the fact that Atlanta is so well positioned to serve companies and individuals that require heavy domestic or international travel, we are hard to beat. 

If we look back over the past six months alone, we will see that more than one office submarket recovery has been fueled in large part by the in-migration of both corporate and tech-based firms.

From a risk perspective, we have a handful of substantive issues to resolve, but the issue that I find circling in my head frequently is the need to get focused on a real plan that over the next five to 20 years can put Atlanta at the forefront of multimodal-oriented transportation. Regionally, we certainly have the required highly capable human resources, but it will take the rare type of leadership that can and is willing to completely set politics and county/city boundary wars aside and reach for the best long-term overall solution.

We understand that you entered commercial real estate after being an accountant for a period of time. What spurred that move?

Tennery: It didn’t take long to realize that I was simply not an accounting personality nor did I really care to be. In the first two years of my professional life, I began to realize that I was much more of a big-picture visionary than I was a detailed, numbers guy.

Spending a lot of time in New York in my youth, I developed a strong interest in skylines and the work behind them, so I began looking at real estate development firms. My first real estate job, which was in Texas, landed me in a project-finance role, which was a good fit and a great way to learn the business. At the end of the day, my passion for working with a team that is serious about creating places that bring value and beauty to a community has been my professional driver, so development, re-positioning and marketing-type roles have been my greatest enjoyment. I do my best to limit my hands-on accounting to balancing my checkbook!  

A light-hearted question: What's your favorite place to vacation?

Tennery: There are lots of places I enjoy and can unwind, but the real answer would be the coastlines of the world. Sara and I both love to travel and love the beach, so we could be spotted walking on a beautiful beach most anywhere on the globe (or at least the ones that are three flight connections or less from Atlanta).

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Four on Friday: Kris Miller of Ackerman & Co.

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Multi-Housing News Online Interviews Hartman Simons' Summey Orr about Multifamily Investment

Multi-Housing News Online recently interviewed Hartman Simons managing partner Summey Orr about the state of the multifamily sector. During the Q&A, Orr offered the following take on investor interest in the apartment sector:

"On the investment side, we are seeing some fatigue in the market for multifamily. The popularity of these assets versus other property types that have come out of the recession more slowly has brought a fair amount of investor competition for apartment projects, in some cases driving up prices beyond the realm of common sense. It’s not yet to the point of the mythical restaurant that’s so crowded that nobody goes there anymore, but this sector has certainly attracted a group of buyers who previously didn’t fish in this pond."

To read the rest of the five-question Q&A, visit Multi-Housing News Online.

The Wednesday Wrap: May 15, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Malls, Self-Storage Led REITs in First Quarter” by A.D. Pruitt of The Wall Street Journal.

The performance of real estate investment trusts (REITs) exceeded analysts’ expectations in many cases during the first quarter, and REITs focusing on luxury shopping malls and self-storage facilities saw the largest gains, Pruitt reports.

Upscale malls and outlet centers that appeal to a wide range of shoppers haven’t been significantly impacted by online competition, according to Alexander Goldfarb, an analyst with Sandler O’Neill + Partners.

Additionally, self-storage REITs have performed strongly because of rising rents and strong tenant demand, Pruitt notes.

Office and apartment landlords continued to see earnings growth, but at a slower pace than in past quarters because of lackluster employment growth and increased competition, Pruitt reports.

• “Property Values Hovering Around Market Peaks” by Carisa Chappell of REIT.com.

“Five years after the onset of the global financial crisis, bellwether pricing indices indicate that commercial property values appear to have reached — if not surpassed — the market peaks of 2007,” Chappell writes.

According to the Green Street Advisors’ Commercial Property Price Index, commercial property values increased 1 percent in April, putting them above 2007 levels.

Another index showed that the unlevered property values of REIT-owned properties nationwide were almost even at the end of April with their January 2007 levels, Chappell reports.

• “Colliers: Shopping Centers’ National Vacancy Rate Down in Q1” by Marianne Wilson of Chain Store Age.

Shopping centers absorbed nearly 4.5 million square feet in the first quarter, causing the national vacancy rate to drop ever so slightly, from 10.09 percent to 10.06 percent, according to Colliers International’s “2013 Q1 North American Retail Highlights” report.

As the housing and job markets improve, consumers’ confidence is rising, and they’re spending more, the report notes. The six North American markets with the most shopping center leasing activity are also cities that are experiencing significant long-term employment growth and strengthening housing markets, according to the report.  

• “Expect Fed Decisions to Impact Lodging” by John Salustri of GlobeSt.com.

The Lodging Industry Investment Council’s annual member survey shows concern over the impact that sequestration and Obamacare will have on the market. 

Sequestration is “anticipated to negatively impact hotel owners,” the report says. “Fifty-five percent believe that the current government sequestration will cause ADR to decrease 1 percent to 5 percent in markets that rely heavily on government spending.”

Increased labor costs stemming from the new federal healthcare law and the sluggish economy are also expected to affect the industry, Salustri reports.

• “Running to Stand Still: The Office Sector Sees Marginal Improvements” by Brad Doremus and Victor Calanog of National Real Estate Investor. 

With sluggish job growth leading to equally sluggish growth in demand for office space, the national office vacancy rate declined just 10 basis points during the first quarter to 17 percent — the exact amount it declined in the prior quarter, Doremus and Calanog report. More expansive job growth would have a dramatic impact on the rate “since supply additions are virtually nil,” they add.

Asking and effective rents grew by 0.7 percent during the first quarter. “Despite 10 consecutive quarters of rent increases, rent levels are still anchored at benchmarks last observed in late 2007,” Doremus and Calanog report.

Still, tech- and energy-heavy markets are outperforming the national average in terms of asking and effective rent growth, Doremus and Calanog note.

EPA Provides New Guidance on a Prospective Tenant’s Environmental Liability, Due Diligence and BFPP Status

By Clinton Cole,

Partner, Hartman Simons

It is a common mistake among prospective tenants to assume they have no liability for past environmental issues at a property.  As such, tenants often perform less than adequate environmental due diligence prior to leasing a property, or they rely on sub-standard or outdated information provided by a property owner or lender with interests and risks far different from theirs.  Under CERCLA (and similar state environmental statutes), a tenant may be liable for past environmental releases on its leased property. Unlike prospective purchasers, who have historically been afforded so called “innocent purchaser” defenses if they performed a sufficient level of environmental due diligence prior to acquisition of the property, CERCLA did not specifically address the risks and protections for prospective tenants. In late 2012, EPA issued a memorandum further addressing tenant liability under CERCLA: Revised Enforcement Guidance Regarding the Treatment of Tenants Under the CERCLA Bona Fide Prospective Purchaser Provision (Dec. 5, 2012), which supersedes its Jan. 14, 2009, guidance on this topic.

The 2002 CERCLA Amendments and Continued Uncertainty for Prospective Tenants

The passage of the CERCLA “Brownfields Amendments” in 2002 provided the bona fide prospective purchaser (BFPP) definition and clarified some potential environmental risks to prospective owners and tenants; however, significant gaps and uncertainty remained regarding how a prospective tenant fit into the BFPP definition.  Since 2002, the BFPP status and derivative protections only applied to a prospective tenant if the underlying property owner qualified as a BFPP (i.e., a tenant derived its liability protection from the underlying property owner’s BFPP status and not directly based on the tenant’s action or inaction in its due diligence prior to leasing the property).

Four on Friday: Kris Miller of Ackerman & Co.

As president of Atlanta-based Ackerman & Co., Kris Miller sets the strategic direction for the firm’s investment, management and leasing initiatives. Miller joined the firm in 1996, and during his tenure, Ackerman & Co. has experienced significant growth and has solidified its reputation as one of the most prominent real estate firms in the Southeastern United States.

In this Four on Friday, we got a chance to chat with Miller about the state of the Atlanta commercial real estate market and his career in the industry.

Give us a brief overview of the services offered by Ackerman & Co.

Miller: Ackerman is a full-service commercial real estate company. We represent tenants seeking space, landlords renting space, and manage owned and third-party space. We also buy, sell and develop commercial real estate properties. 

What is your take on how the Atlanta commercial real estate market has recovered from the Great Recession? 

Miller: The recovery of the Atlanta commercial real estate market from the recession of 2008 has been gradual. Positive absorption of industrial space began in 2011, followed by the positive absorption of office space a year later. In both cases, those markets had endured net negative absorption for a longer period than any time in Atlanta’s history. The recovery now seems to be gaining momentum and spreading from the submarkets where it began to a metro-wide phenomenon.

What is it about commercial real estate that makes it such a satisfying career for you?

Miller: Commercial real estate is satisfying because the effort of your labor is tangible: you can touch it, see it, visit it, and explain to friends and colleagues what you do for a living.

If you could give one piece of advice to someone just beginning his or her commercial real estate career, what would it be?

Miller: Get experience as a tenant broker. All the value in commercial real estate is created when a broker brings a tenant to a landlord and a lease is signed. The better you understand this process, the more successful you will be in this business.

Related articles

Four on Friday: Chris Bosworth of CBRE

Four on Friday: Mitchell Brannen of NAI Brannen Goddard

The Wednesday Wrap: May 8, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Health-Care Owners Shun Nursing Homes” by A.D. Pruitt of The Wall Street Journal.

Some of the largest owners of healthcare facilities are scaling back their investments in nursing homes because of their growing concerns that the homes will be less profitable in the face of steep Medicare and Medicaid cuts, Pruitt reports.

Ventas Inc. has said it will won’t make any major new acquisitions until the effects of the cuts become clear, while others, like Health Care REIT Inc., say they might exit the sector altogether, Pruitt reports. 

A number of states are reducing Medicaid reimbursement payments to nursing homes, and the federal government cut Medicare rates by 2 percent on April 1 as part of the sequestration, Pruitt notes.

Other firms say they aren’t concerned about possible sequester-induced cuts and that the market risk is overstated, Pruitt reports.

• “Office Demand Still Catching Up With Job, Business Growth” by Randyl Drummer of CoStar.

Modest job growth has prevented a dramatic increase in demand for U.S. office space, and therefore rents have remained at relatively low levels, Drummer reports.

Average office employment is growing at a rate of just more than 2 percent, while demand for space is growing at just half that rate, according to CoStar Group’s First-Quarter 2013 Office Review and Outlook.

In the first quarter, the national office vacancy rate declined 10 basis points to 12.2 percent. The post-recession high was 13.5 percent, according to Drummer.

• “Samsung Opening 1,400 Mini-Shops inside Best Buy Stores across U.S.” by Salvador Rodriquez of The Los Angeles Times. 

Samsung is planning to open hundreds of mini-shops across the country inside Best Buy big-box locations, Rodriquez reports.

The electronics giant already has opened a couple of the shops and hopes to have 900 of them up and running by the end of May and 500 more shortly after, according to Rodriquez. 

Samsung considered opening its own retail locations, but found that partnering with Best Buy would allow it to open the stores more quickly, Ketrina Dunagan, Samsung’s vice president of retail and channel marketing, told Rodriquez. 

• “Miami’s Condo Market Rebounds, Stoking a Building Boom” by Terry Pristin of The New York Times.

Because of the demand of Latin American investors, only about 600 of the 22,000 condos created in downtown Miami during the pre-recession era are still on the market, Pristin reports. Now, developers are building more units, he adds. 

In February, home values rose by 10.4 percent in Miami versus a year ago, while national home prices jumped 9.3 percent, Pristin notes. 

Miami officials are encouraging condo developers to provide easy access to public transportation, street-level retail and underground parking, Pristin reports.

• VIDEO: “Quick Study: REITs Beat Market in April” by Allen Kenney of REIT.com.

In this clip, NAREIT Editorial Director Allen Kenney and Senior Vice President of Research and Industry Information Brad Case discuss the REIT market’s performance in April.

The two discuss how the REIT market performed in relation to the rest of the stock market and which sectors stood out for their performances.

Four on Friday: Bob Simons Judges Mock Negotiations at ICSC Atlanta Next Generation Event

Negotiations (and some local brews) were on the agenda this past Tuesday evening when Hartman Simons partner Bob Simons judged a series of mock negotiations at the ICSC Atlanta Next Generation’s “Fight or Flight - Mock Negotiations” event at the Red Brick Brewery.

The evening featured three “bouts” of mock negotiations. Two of the bouts pitted a landlord against a tenant; the third bout featured a project manager against a general contractor.

Hartman Simons partner Ryan Rivera is a member of the Atlanta Next Generation Program Planning Committee. “We work hard to plan events that broaden the skills and perspective of our members, and Tuesday’s event at the Red Brick Brewery was a great chance for the attendees to learn more about the crucial skill of negotiating,” Rivera said. “Bob provided some very valuable insight and feedback, and I know our Next Generation members learned a lot.”

For today’s Four on Friday, we present four photos from Tuesday’s event:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Wednesday Wrap: May 1, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are five stories that caught our eyes in recent days.

• “Retail Real Estate Cheer Momentum for Online Sales Tax On Capitol Hill” by Randyl Drummer of CoStar.

Many of those in the retail real estate industry see the advancement of the Marketplace Fairness Act of 2013 as a critical step in equalizing the battle for shopping dollars between bricks-and-mortar stores and online retailers, Drummer reports. 

Last week, the U.S. Senate approved a procedural measure to allow debate to move forward on the legislation. If passed, it would allow states to require Internet retailers with $1 million or more in annual out-of-state sales to collect sales taxes for the state and local governments of the buyers, Drummer reports.

“Why should online retailers be able to take advantage of a tax-free situation?” Greg Maloney, president and CEO at Jones Lang LaSalle Retail, told CoStar.

• “Entertainment Tenants Can’t Save All the Struggling Retail Centers” by Elaine Misonzhnik of National Real Estate Investor. 

As online retailers drive sales away from traditional big-box chains, retail landlords are increasingly looking at entertainment and restaurant tenants to fill vacant space left by closed large-format retailers, Misonzhnik reports.

Landlords are looking for tenants with natural protection against online competition, such as the growing number of dine-in movie theatre chains. These non-traditional tenants offer an experience that landlords say can’t be duplicated online, Misonzhnik reports. 

Movie theaters aren’t expanding rapidly enough to fill holes in every struggling shopping center, however, and a movie theater isn’t enough to make or break a center, Misonzhnik notes.

• “DLA Piper: Executives Feeling Bullish” by Brian J. Rogal of GlobeSt.

Eighty-five percent of the nearly 200 top executives surveyed in April by DLA Piper feel bullish about the real estate market, according to the law firm’s 2013 State of the Market survey. The firm’s previous survey in October 2011 found only 30 percent felt optimistic, Rogal reports.

Although the economy has been slow to recover, executives seem to be encouraged by easier access to capital, according to DLA Piper.

In contrast to the 2011 survey, respondents now see healthcare facilities as the most attractive investment, in part because of the growth of the sector under Obamacare, according to the survey.

• “Home Prices Score Highest Annual Gain Since 2006” by Nick Timiraos of The Wall Street Journal.  

Home prices rose 9.3 percent in February from a year ago, the largest growth rate in nearly seven years, according to Standard & Poor’s/Case-Shiller’s home-price index report.

The index tracks 20 cities across the United States, all of which posted an increase in prices versus one year ago for the second straight month.

The rise in prices was driven by sharp drops in the number of homes listed for sale and the growing demand for home purchases, Timiraos reports.

Atlanta’s prices rose 16.5 percent, the largest increase in that market in the 21-year history of the Case-Shiller series. Prices were up 23 percent in Phoenix, 18.9 percent in San Francisco and 17.6 percent in Las Vegas, Timiraos notes.

• “Private Real Estate Fundraising Declines to 10-Year Low in First Quarter” by Carisa Chappell of REIT.com.

Fundraising for private real estate investment reached its lowest level in 10 years in the first quarter of 2013, according to data from the research firm Preqin.

Private equity funds raised $5.2 billion in the first quarter, the lowest quarterly total since third quarter 2003. This compares to the $22.6 billion raise in fourth quarter 2012, according to the firm. 

Funds with a primary focus on North America raised the most capital in first quarter 2013, Chappell notes.

Four on Friday: Jesse Tron of ICSC on RECon 2013

We’re only a month away from the International Council of Shopping Centers’ (ICSC) annual RECon convention in Las Vegas (and from Hartman Simons’ annual show party). Therefore, we thought it was an ideal time to pose four questions to Jesse Tron, manager of communications and media relations at ICSC, about this year’s show. A big thanks to Jesse for his time.

Tron

For many reasons – the fading effects of the Great Recession and the growing presence of e-commerce, to name just two – this is a very interesting time for the retail real estate industry. What are some of the key issues and trends addressed by this year’s RECon educational sessions?

 

Tron: The retail landscape has changed. Varying store space requirements, new leasing strategies, diversification in the tenant mix and multi-channel consumer touch points all have changed the way the shopping center industry operates. A new retail reality is certainly upon us, and this year’s RECon sessions are designed to help attendees navigate this changing retail landscape.

Tell us a little about the show's lineup of keynote speakers. Is there one that you are particularly excited about hearing?

Tron: We have three unique keynote speakers this year. On Sunday, May 19, Steven Levitt, the best-selling author of “Freakonomics” and “SuperFreakonomics,” will use his counter-intuitive style to provide insights on problem solving that can be applied to everyday business situations.

On Monday, May 20, Randi Zuckerberg, the former head of marketing at Facebook and now the founder and CEO of Zuckerberg Media, will give a keynote address titled “A Day in the Life of the Modern Consumer.” You can also swing by the #iTechLounge in the Marketplace Mall to meet Randi after her talk. Also, Gregory Wasson, president and CEO of Walgreens, will address attendees on Tuesday, May 21, with a look at how the drugstore business in the U.S. is changing.

Personally, I am excited to hear Steven Levitt since I have read “Freakonomics” (and plan to read “SuperFreakonomics”) and think that his concepts are rather unique. I’m interested to hear how some of them can be applied to the retail sector.

What are some of the new show features planned for RECon 2013?

Tron: You’ll want to make sure you stop by the brand new Retailer Square, which will consist of 21 retailers in a single area of the South Hall Lower Level. Also, back for its second year is the Marketplace Mall, the exclusive home of product and service providers at RECon. The Marketplace Mall is the only show floor open on Sunday, and will give attendees a chance to check out the latest innovations and solutions that can help improve profitability for shopping centers and retailers.

Located in the Marketplace Mall and the Central Hall will be the brand new #iTechLounge, a place where emerging tech trends – from social media to mobile marketing to SEO – will be discussed and examined. Whether you are taking your first steps into creating an online marketing strategy, are interested in emerging trends or are looking for ways to integrate digital platforms, the #iTechLounge will have a session for you.

How many attendees and exhibitors are you expecting this year, and how do those numbers compare to 2012?

Tron: Attendance is running ahead of last year at this time by about 1,000 people, so we are planning to have between 33,000 and 35,000 attendees this year. We again plan to have nearly 1,000 exhibitors, similar to last year.

(To download the RECon 2013 program, click here.)

 

The Wednesday Wrap: April 24, 2013

Each Wednesday, The Wrap presents a compilation of recent noteworthy commercial real estate stories from a variety of publications. Below are four stories that caught our eyes in recent days.

• “Congress Looks at REIT Tax Exemption” by A.D. Pruitt of The Wall Street Journal.

As part of its comprehensive review of the tax code, the House Ways and Means Committee is reviewing the tax exemption REITs have enjoyed for decades, Pruitt reports.

“Like all other aspects of the code, it is reasonable to expect that REITs would be included in any top-to-bottom review of the code,” said a spokeswoman for the Ways and Means committee. However, because the exemption doesn’t pose a major loss of revenue to the Treasury, industry officials say it is unlikely that REITs will lose their exemption status, Pruitt reports.

Under the current tax code, REITs do not have to pay corporate taxes on their income as long as at least 90 percent of their taxable income is paid in dividends, Pruitt notes.

• “Don’t Look Now But Warehouse Demand Off to Strongest Start Since 2008” by Randyl Drummer of CoStar.

After finishing strong in 2012, this year is proving to be equally strong for the U.S. warehouse market thanks to increases in trade and manufacturing and the recovery of the housing market, Drummer reports. 

Forty-three of the 54 largest U.S. markets posted positive net absorption for industrial space, according to Rene Circ of CoStar’s Property and Portfolio Research (PPR). A recent transaction data survey by PPR showed warehouse new supply and demand at their strongest levels in at least five years.

During the first quarter, developers completed almost 13 million square feet of new warehouse space and 38 million square feet is still under construction, Drummer reports.

• “Hot Hotels: Big Boost Ahead for Lodging” by John Salustri of GlobeSt.com.

If the 2,500 hotel transactions that took place last year are any indication, hotel property asset sales will continue to climb through 2013, according to Gregory LaBerge, national director of Marcus & Millichap’s National Hospitality Group.

Supply was down last year, but demand soared; 2012 posted record room sales at nearly 1.1 billion nights, according to LaBerge. 

LaBerge says international business travel and tourism, along with low interest rates, are contributing to the growth in property sales.

National occupancy will rise 60 basis points to 62 percent in 2013, with ADR and RevPAR rising 4.8 percent and 5.8 percent, respectively, according to the National Hospitality Group’s latest report.

• VIDEO: “Awareness of Environmental Issues is Key for REITs, Farer Says” by REIT.com.

In this clip, Matt Bechard of REIT.com sits down for an interview with David Farer, chairman of the environmental department at Greenbaum Rowe Smith & Davis LLP, during the recent REITWise 2013 conference. 

The two discuss upcoming environmental legislation that will affect REIT development and trends emerging in green building.