Hartman Simons Commercial Real Estate Blog

Four on Friday: Jesse Tron of the International Council of Shopping Centers

Believe it or not, May is just around the corner. That means it’s almost time for one of the commercial real estate industry’s most important annual events: the International Council of Shopping Centers’ (ICSC) RECon convention in Las Vegas.

We recently got a chance to speak with Jesse Tron, a senior communications and media specialist with ICSC, about what awaits the retail industry at this year’s show.

HS: What are some of the notable changes to RECon planned for this year?

Tron: While a show of this magnitude will always have some variable components each year, we are pleased to announce, for 2012, what is truly a major new feature at RECon: the Marketplace Mall. The Marketplace Mall will be the new, exclusive home for product and service providers at RECon, all on one show floor. With more than 300 exhibiting companies, a Product Demo Theatre, the Social Media and Technology Pavilion, a cash-and-carry café, the only free Wi-Fi on any of the show floors and on-site registration, the Marketplace Mall will be a destination unto itself.

The other major new feature is the Cities of the World Pavilion. Located on the Leasing Mall floor, the pavilion will afford attendees the opportunity to visit with economic development officials from more than 60 cities and counties to discuss new or existing opportunities in their communities. 

HS: There is a lot going on in the retail industry these days. What are some of the key issues and trends addressed by the show's educational sessions?

Tron: One of the major concepts at play right now is the globalization of retail and the impact of that on the industry. There has been a concerted effort by retailers and retail property developers to maximize profits by taking advantage of untapped markets. So while asset management is what’s on the agenda for mature markets, there are still significant growth opportunities for retailers and landlords in emerging ones. A session on Tuesday morning at RECon will discuss this topic and introduce the ICSC World Summit, a conference held every five years to consider the role the industry plays in our economies and societies and how best to shape the industry’s future. The World Summit, this year focusing on the globalization of retail, will be held in Shanghai from Sept. 11-14.

HS: Tell us about the show's lineup of keynote speakers. Which one are you most excited about hearing?

Tron: We have an incredible lineup this year overall, but I am particularly excited about Malcolm Gladwell and Leslie Wexner. Gladwell, bestselling author of “What the Dog Saw," “Outliers,” “Blink,” and “The Tipping Point,” will take a look at new concepts in the social sciences and show how they can be practical and applicable in the business arena. He will speak at the opening session on Sunday, May 20, at 1 p.m.

Leslie Wexner, founder of Limited Brands, will be the keynote speaker on Tuesday, May 22, at 12:30 p.m. He founded Limited Brands in 1963 with a single store and has since then built the brand into a $10 billion segment leader. Wexner last spoke at RECon 25 years ago, so it will be interesting to hear the changes he has noticed within the industry over that period as well as what his expectations are for the future.

HS: How many attendees and exhibitors are you expecting this year and how do those numbers compare to 2011?

Tron: We are once again expecting about 1,000 exhibitors, and the show will encompass more than 1 million square feet of space in the Las Vegas Convention Center. Attendance in 2011 was just more than 30,000. We are currently running ahead of last year at this time, so we anticipate that attendance will end up slightly higher than last year, perhaps just north of 31,000.

(To download the 2012 RECon program, visit the show's website.)

The Wednesday Wrap: April 11, 2012 (with video)

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

• “U.S. Apartment Vacancy Rate Falls to Decade Low” – by Ilaina Jonas of Reuters. For the nation’s apartment sector, the good times just continue to roll. The U.S. apartment vacancy rate reached its lowest level since 2011 in the first quarter, dropping 0.30 percentage points to 4.9 percent, according to a REIS report summarized by Jonas.

In another good trend, effective rents rose by 0.9 percent to $1,018 per month. That’s the largest increase in four years.

All is not perfect, however. Up to 200,000 new units are scheduled to be delivered next year, which could put the kibosh on rent growth. “Once that supply hits the market next year, we may find that this is the year rent growth peaked,” Victor Canalog of REIS told Jonas. “It's still going to be a great year for apartment landlords.”

• “CMBS Delinquencies Spike Again in March” – by Paul Bubny of GlobeSt.com. After showing steady improvement since last summer, the delinquency rate for commercial mortgage-backed securities (CMBS) is once again on the rise. According to Fitch Ratings, the rate rose by 13 basis points to 8.43 percent in March. Meanwhile, Trepp pegged the March increase at 31 basis points, which placed its rate at 9.68 percent.

“The special servicers are going to remain busy for the foreseeable future,” Manus Cancy, senior managing director at Trepp, told Bubny. “There’s a lot of wood to cut, and we will continue to see a combination of bifurcations, extensions, rate relief and in some cases, foreclosures and seizing of properties. I think it’ll be a very mixed bag across that spectrum.”

• “Retail REITs Continue to Prune Portfolios” – by Jennifer Popovec for National Real Estate Investor. Call it their version of spring cleaning: in the wake of the Great Recession, retail REITs are looking to toss non-core assets out of their portfolios.

The trend “is not the run-of-the-mill recycling of assets common among REITs and, instead, is a direct outcome of the credit crisis, according to REIT analysts,” Popovec writes.

“Post-Great Recession, retail REITs - and REITs overall - have been a lot more focused on selling assets,” Alexander Goldfarb, managing director of Sandler O'Neill + Partners LP, told Popovec. “One of the takeaway lessons from the credit crisis was that if you can sell assets that do not fit your purpose, you should do so. REITs realized that they tended to hold onto too many assets.”

• “Reform May Impact the Medical Office Sector, but Nontraditional Spaces Promise Continued Growth” – by Mike Jansen for National Real Estate Investor. The uncertain future of President Obama’s healthcare reform law and the possibility of future cuts to Medicaid and Medicare are not dampening investor appetites for the medical office sector. On the contrary, the sector appears to be more popular than ever among investors.

“We’re just seeing more and more investors being attracted to the space because of the stability of the product type,” Chris Bodnar, who leads CB Richard Ellis’ healthcare capital markets group, told Jansen. “Physicians usually invest a lot of money into their spaces, and patients are location-sensitive.”

In the years immediately preceding the Great Recession, the sector got overbuilt, Jansen notes, but it’s now faced with the opposite problem. “There is probably as much or more capital chasing medical office transactions than there ever has been,” says Shawn Janus, head of Jones Lang LaSalle’s the national healthcare practice. “The issue has been a lack of product.”

The vacancy rate for medical office properties grew to more than 12 percent in 2009, but that figure has dropped to a shade under 11 percent, Jansen reports.

• VIDEO: Bill Hoffman, president and CEO of Trigild Inc., says the commercial real estate recovery has begun but will proceed slowly for a couple of years (from GlobeSt.com).

Four on Friday: Hartman Simons Lends Helping Hand to Atlanta Humane Society

With the commercial real estate sector showing increased activity, this promises to be a busy spring at Hartman Simons. Nevertheless, we’re still taking some time out of our hectic schedules to help our four-legged friends.

Throughout the month of April, we will be working to raise money and supplies for an organization near and dear to our hearts: the Atlanta Humane Society (AHS). Below are four components of this month-long effort.

• Sponsorship of the Upcoming AHS Pet Parade. Hartman Simons has contributed a $1,000 sponsorship of the parade, which will be held at 11 a.m. on Saturday, April 21, at Atlantic Station.

The route for the parade is just over a mile long and winds through Atlantic Station. Walkers are welcome to bring their dogs, as long as the animals are on a leash and are up to date on their vaccinations.

Events surrounding the parade, which will be held rain or shine, will include an adopt-a-thon and various pet contests.

• Participating in the Parade. Hartman Simons attorneys and staff will be walking in the parade and are encouraging their friends, family and clients to do so as well as a member of the firm’s team. Registration is $30 in advance and $35 on the day of the event.

Each team member will receive an online fundraising page where friends and family members can support their participation by making a donation. The event web site will track how much money Hartman Simons and the other teams raise for AHS. Donations can be made online (which includes a small processing fee) or by check.

For more registration information, visit the parade’s website. To view Hartman Simons’ overall fundraising page and those of its individual team members, click here.

• Donating Supplies. The firm also will be collecting items needed by AHS. Requested supplies include bleach, non-clumping cat litter, dog bowls, laundry detergent, pet shampoo, towels, paper towels, copy paper and housetraining pads. For AHS’ complete wish list, click here.

• Jeans Days. Throughout the month, Hartman Simons attorneys and staff can wear jeans to work on Wednesdays if they bring $5 or a supply on the AHS’ wish list. The money will support the $1,000 sponsorship, with the firm contributing the rest.

The Wednesday Wrap: April 4, 2012 (with video)

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

• “American Cities Are Revitalizing Their Downtowns and Recreating Their Profiles” – By Susan Piperato of National Real Estate Investor. Cities across the country are revamping their downtowns, even during the Great Recession. This article looks at how four cities – Miami; Newark, N.J.; Oakland, Calif; and Oklahoma City – have pumped new life into their central business districts.

In each case, development agencies have lured businesses, retailers and residents by successfully combating unfavorable images of their cities. Newark and Oakland officials have had to deal with perceptions that their downtowns are crime-ridden, while Oklahoma City has been saddled with the image that it’s too reliant on the oil industry.

Cities “live on the back of a story about themselves,” Alan Greenberger, Philadelphia’s deputy mayor for planning development, told Piperato. “And sometimes it might be old and outdated.”

• “Construction Jobs Grow but ‘Too Many States’ Still Suffering” – by Erika Morphy of GlobeSt.com. Construction jobs increased in 30 states from February 2011 to February 2012, according to a recent analysis of Labor Department data by the Associated General Contractors of America.

Eighteen states suffered declines during that timeframe, while the numbers remained the same in two states.

Ken Simonson, chief economist for the association, said in a statement that the numbers are encouraging but added, “The industry is still struggling in too many states to declare that construction is in full recovery.”

• “Economy Watch: Consumers Feeling Pretty Good” – by Dees Stribling for Multi-Housing News. The Reuter’s/University of Michigan Consumer Index, which measures the optimism of households about their financial condition, reached 76.2 in March, up slightly from 75.3 in February and the highest mark since early 2011.

Consumer spending also reached a seven-month high in February, according to numbers recently released by the Bureau of Economic Analysis. Spending was up by 0.8 percent when compared to January.

• “Retail Construction Starts to Stay at Record Lows Until Debt Maturities Are Resolved” – by Elaine Misonzhnik of Retail Traffic. The retail sector is definitely showing signs of improvement, but it’s likely to be a while before developers feel bullish enough to begin new construction. There are, however, some exceptions.

“In strong gateway markets, there is an appetite for financing new projects—provided they’ve got a good credit tenant base,” Bill Rose, director of Marcus & Millichap’s National Retail Group, told Misonzhnik. “There are projects getting financed in Washington D.C., Baltimore, New York and Houston, but they need a good story and a good tenant mix. If you are saying to the lender ‘Can we get a deal done somewhere in Wisconsin?’ the answer is ‘Probably not.’”

• VIDEO: “Commercial Real Estate Over-Leveraged, Neidich Says” from Businessweek.com. Daniel Neidich, CEO of Dune Real Estate Partners, discusses what he sees as the weaknesses of the U.S. commercial real estate market.

Four on Friday: 2012 Final Four Predictions

This weekend brings college basketball’s premier event: the NCAA Final Four. This year, the Kentucky Wildcats, Louisville Cardinals, Kansas Jayhawks and Ohio State Buckeyes will gather in New Orleans to battle it out for the national championship.

To commemorate the festivities and help you prepare for the games, we turned to four of our resident basketball experts to get their predictions on who will prevail in Saturday’s national semifinal contests and Monday’s championship game.

Enough of the introduction – let’s get to the prognostications and commentary, shall we? And by the way, after reading the analysis below, don't be afraid to chime in with your own thoughts in the comments thread.

Will Lovell

Semifinals

• Kentucky over Louisville: 80-70. Rick Pitino is no match for the NBA players at Kentucky

• OSU over Kansas: 70-68. Sullinger dominates Mr. Robinson

Championship game

• Kentucky over OSU: 75-68 - Kentucky is clearly the better team. OSU loses another national championship game.

(editor's note: this guy has a good track record of picking big games.)

Jeremy Cohen:

Will neglected to mention that if either Ohio State or Kansas win the whole shebang, he wins the firm pool and lots of bragging rights for the next year. If Louisville wins it all, then I win the pool and will make folks around here miserable for the foreseeable future.

As such, I will continue to ride the Big East champs all the way to the Winner’s Circle. 

Semifinals

• Louisville 73, Kentucky 71

• Kansas 70, OSU 62

Championship game

• Louisville 74, Kansas 69

Charles (Buzz) Wood:

Semifinals

• Kentucky over Louisville: 84-75. Another rivalry game for the Cats during the Tournament. First Indiana goes down, the next is Louisville.

• OSU over Kansas: 69 – 60. After Danny Manning left for the head coaching job at Tulsa, the spark from courtside is gone.

Championship game

• Kentucky over OSU: 85- 70. It’s been a long time coming for the Cats.

Ryan Rivera:

Semifinals

• Kentucky over Louisville: 81-67. With a roster loaded with talent and a coach that is on a quest for his first national championship, I see Kentucky running away with this one on Saturday night.

• Ohio State over Kansas: 75-72. You can’t help but pull for Thomas Robinson with all he’s dealt with on a personal level over the past 18 months, but the bruisers from the Big Ten will be too much for the Jayhawks.

Championship game

• Ohio State over Kentucky: 82-77. As a Big Ten alum living in SEC Country, I have no choice but to pick the Big Ten over the SEC.

RELATED POSTS:

• Five on Friday: Super Bowl Predictions

Hartman Simons Partner Lori Kilberg Speaks to Memphis CREW Chapter

Women may have made undeniable progress in the workplace in general and in commercial real estate specifically, but they continue to be kept out of the C-suite, the top management level that contains positions such as CEO and CFO. That’s one of the points Hartman Simons partner Lori E. Kilberg made earlier this week when speaking to the Memphis, Tenn., chapter of the CREW Network.

Kilberg’s presentation was covered in the Memphis Daily News.

“They may be in middle and upper management, people that essentially run the show or do al of the legwork but [they] are not the ones that are maybe making all the global decisions,” Kilberg, who is on the CREW Network Board of Directors and is the immediate past president of the network’s Atlanta chapter, told the Memphis chapter.

Kilberg said companies who fail to promote women are not giving themselves their best shot at success. “Women are generally better educated than their males peers,” she said. “Several studies have found the correlation between significant numbers of women at the top of a company and the success of the company in the marketplace.”

Women need more “sponsors,” i.e., high-rankings executives who will actively tout their achievements and aggressively lobby for their promotions, Kilberg said. Since relatively few women are in the C-suite, more men need to sponsor women for them to be fairly represented at the executive level, she added.

While the workplace is generally friendlier to women than it was decades ago, continued exclusion from the C-suite and the ranks of upper management could begin to drive them away, Kilberg warned.

“They may turn down promotions, seek opportunities outside their firms or leave the corporate world altogether because the factors have convinced them that the odds of getting ahead in their companies are too daunting,” she said.

To read more about Kilberg’s remarks, visit the Memphis Daily News’ website.

RELATED POSTS:

• Four on Friday: Lori Kilberg Addresses the Georgia Society of Certified Public Accountants

The Wednesday Wrap: March 28, 2012

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

• “Trepp: $362 Billion of Commercial Real Estate Debt Matures in 2012” – from Citybizlist.com. A total of $362 billion in commercial real estate debt will come due this year, according to a new estimate from Trepp. The figure is an increase from the $346 billion that matured last year.

Approximately $1.73 trillion worth of commercial real estate debt is set to mature from 2012 to 2016, Trepp calculates. Ominously, the firm estimates “that as much as 56 percent of the 2016 maturities are underwater by 10 percent or more, reflecting the large volume of 10-year mortgages that were originated at the market peak in 2006,” said Matt Anderson of Trepp’s research team in a statement.

• “Tech Firms Go Far and Wide for Space” – by Eliot Brown and Laura Kusisto of the Wall Street Journal. Almost every industry has decreased its office space in recent years. There is, however, at least one notable exception: the technology sector. According to Brown and Kusisto, “landlords in multiple cities throughout the country – including some that didn’t have a big tech sector in the past – are enjoying the benefits from expanding Internet-focused firms, software companies and other technology employers.”

“Companies in the tech sector accounted for 29 percent of all growth in the U.S. office market in 2011, adding an estimated 10.2 million square feet of space – nearly the size of four Empire State Buildings,” Brown and Kusisto write.

Austin, Texas; Cambridge, Mass.; New York; and Washington D.C. are just a few of the non-Northern California markets to benefit from tech firms’ need for more space.

• “CRE Starting to Embrace the Tweet” – by Miriam Lamey of GlobeSt.com. A new GlobeSt.com poll shows LinkedIn is the preferred social-media network of commercial real estate professionals but also indicates that Twitter is gaining popularity in the sector.

Twitter has something to offer virtually all of the segments of the commercial real estate industry, Robert Krueger, manager of social media outreach and communications for the Urban Land Institute, told Lamey. “If you are in the hotel and hospitality sector, [Twitter] can be used as a way to drive online traffic to your review websites and alert [users] to limited time specials,” he said. “If you are a developer, Twitter can be used to build public support for your project. Building owners and architects can also use it to raise awareness for a project, build their industry reputation and brand themselves as ‘green.’”

• “Don’t Look Now but Investor Interest Reviving in Warehouses” – by Randyl Drummer of CoStar.com. A slowly but steadily improving labor market has increased investor interest in U.S. warehouse properties, says this article by Drummer, based in large part on a new survey from PricewaterhouseCoopers.

Nearly all of the major U.S. industrial markets experienced positive net absorption last year and a few, such as the Inland Empire in Southern California, are in a full-fledged recovery, according to Drummer.

“Combined with limited construction over the past few years, the potential for rent growth in most markets is now a key driver for acquiring industrial assets,” he writes.

• “Six Tips for Leasing a Retail Center Profitably” – by Ben McLeish for REBusinessOnline.com. When leasing a shopping center, the first thing a landlord should look for are tenants whose customers are likely to visit those stores more than once a week. That’s one of six leasing tips offered by McLeish, the director of retail services for Colliers International Tampa Bay.

Another tip: make sure your rental rates remain competitive. “Don’t give space away, but realize that thriving retailers have plenty of choices for space in this market,” McLeish writes. “If you aren’t competitive with retail centers down the street, you won’t get the tenant. It’s that simple.”

Four on Friday: Bisnow Atlanta Retail Summit

Several of Atlanta’s leading retail lights gathered in Buckhead Thursday for a wide-ranging panel discussion on how the commercial real estate sector is performing. And Hartman Simons played a crucial role in bringing them together and guiding the ensuing talk.

The 2nd Annual Atlanta Retail Summit, which Hartman Simons co-sponsored with ASD, was held bright and early at The Ritz-Carlton. For the second year in a row, firm partner Bob Simons moderated the panel discussion.

The panelists included Mike Cohn, executive vice president of Cousins Properties; Andre Koleszar, regional officer of Regency Centers; Kate Peterson, senior real estate manager for Home Depot; Mike Puline, vice president and director of Southeast leasing for DLC Management; Pat Senn, the Georgia real estate manager for Family Dollar Stores; and Rebecca Water, vice president of leasing for EDENS.

Below are four summaries of the many interesting topics/points touched on in the 90-minute discussion.

• Family Dollar Is Going Great Guns. Senn rattled off some figures buttressing the oft-heard observation that discount retail is thriving. Family Dollar will open 500 new stores during its current fiscal year and could open another 600 in its next one. The retailer also remodeled more than 950 stores last year and will complete another 1,000 remodels this year.

“Did you say there was a recession going on?” Senn joked at one point, adding later, “I apologize. My phone rang because we just had two more stores open up.”

• This Isn’t Your Father’s Retail Sector. Several times, the discussion returned to the tremendous impact technology has had on the segment, as brick-and-mortar tenants cope with growing online sales and wade into the social media pool.

Home Depot is now seeking to court the online shopper by offering a service through which someone can purchase an item through the company’s website and pick it up in a store one hour later, Peterson said. DLC Management aids tenants’ social-media efforts by managing their Twitter and Facebook accounts and providing them with display stickers that ask shoppers to follow the tenants on those sites, Puline added.

Tenants shouldn’t look at online sales and social media as a threat, but should instead seek “a symbiotic relationship” with the online universe, Koleszar said. 

• Making Concessions. Panelists said the extent to which landlords are making concessions in leases varies from market to market. In suburban areas, leverage tends to tilt toward tenants, Cohn said.

“We are seeing lots of competitors offering concessions that I’ve never seen: six months, a year’s worth of free rent,” Puline added.

Meanwhile, “we’ve experienced a considerable uptick in tenants exercising options instead of renegotiating,” Koleszar said. “That points to pricing power.”

• Support for SPLOST. Cohn closed the session by urging attendees to vote this summer in support of the 1 percent transportation sales tax (known as TSPLOST). The tax would fund metro Atlanta transportation projects aimed at reducing traffic congestion and improving air quality.

The area is losing jobs to other cities because of its traffic woes, Cohn said. His urging seemed to go over well. The tax has broad support within the metro Atlanta business community.

(Above photo: Hartman Simons partner Bob Simons, right, and Regency Centers' Andre Koleszar just before Thursday's panel discussion got underway.)

RELATED POSTS:

• Four on Friday: Kate Peterson of Home Depot

• Four on Friday: Eitan Ovadia

• Four on Friday: Lori Kilberg Addresses the Georgia Society of Certified Public Accountants

The Wednesday Wrap: March 21, 2012

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

• “Pricewaterhouse: Atlanta Office Market Still in Recession” – by Douglas Sams of the Atlanta Business Chronicle. It should come as no surprise to hear the Atlanta office market is still struggling. However, you will be disappointed to hear the market’s funk could continue for nearly three more years.

As detailed by Sams, a new PricewaterhouseCoopers report says anemic job growth will prevent the Atlanta office market from recovering until the end of 2014. Still, investors are showing a noticeable interest in buying office properties in the area.

“The investment side of the office market demonstrated a rush of sales in the fourth quarter of 2011,” the report says. “Investor appetite increased as many believe now is the time to lock in a few bets on the leasing market's recovery.”

• “Profits for U.S. Hotels Will Surge, Says PKF” – by Matt Valley of ReBusinessOnline.com. Attendees of this week’s Hunter Hotel Investment Conference in Atlanta say the immediate future of the U.S. hotel industry is extremely bright. Mark Woodworth, president of PKF Hospitality Research, said during a conference presentation that U.S. hotels rented more rooms last year than ever before.

“By anybody’s definition, you would therefore say demand has fully recovered,” Woodworth said. “Other things have not, but the demand side of the equation has fallen into place.” With new supply limited because of a tight lending market, PKF says hotel profits will grow at an average annual rate of 10.3 percent through 2014, Valley writes.

• “Jump in Retail Sales Solidifies Recovery Momentum” – by Hessam Nadji of Marcus & Millichap’s Research Brief blog. A rise in February retail sales indicates the sector is set for a noticeable improvement in real estate performance. Total retail sales increased by 1.1 percent last month when compared to January, Nadji notes.

The overall retail vacancy rate declined 30 basis points to 9.7 percent in 2011 and is on pace to drop to 9.2 percent by the end of this year, Nadji writes. Still, certain economic factors could decrease consumer confidence, curb spending and send the sector’s fundamentals heading in the other direction.

“Numerous headwinds could constrain trade, spending and the pace of economic growth, most notably mounting tensions in the Middle East creating a spike in oil prices, as well as the cyclical weakness in the European economy,” Nadji writes.

• “The Smart Grid Is the Next Big Thing in Green Building. So Why Aren’t More Buildings Connecting?” – by Susan Piperato of National Real Estate Investor. Despite the abundant talk of building commercial properties with smaller environmental footprints, the overwhelming majority of building owners are not using smart grids and demand response (DR) systems, Piperato reports. A smart grid is a digital network that connects a utility with a user, and it communicates with a DR system to automatically adjust a building’s consumption based on supply conditions.

According to a recent survey by CoR Advisors, only 19 percent of buildings have a smart grid connection and a whopping 68 percent of building owners say they have no plans to connect to a smart grid system within the next five years. “No one wants to be a guinea pig,” John Bredehorst, executive vice president with WSP Flack+Kurtz’s New York office, told Piperato.

• “Growth Slowed in Metros Where 8 of 10 Americans Live” – by Frank Bass of Bloomberg BusinessWeek. About two-thirds of the largest U.S. metro areas experienced slower population growth from 2000 to 2009 than they did in the 1990s, a new report from the Brookings Institution says. Among the markets experiencing the biggest slowdown: Atlanta.

“The Brookings Institution’s Metropolitan Policy Program found the slowdown most pronounced in Southern and Western metro areas, especially in the suburbs of cities such as Denver, Atlanta, Miami, Salt Lake City and Las Vegas,” Bass writes.

The slowdown in these markets is largely due to the usual suspects: weak housing markets and poorly performing local economies, the Brookings Institution says.

Four on Friday: Helping Westlake High School

On Monday, attorneys from Hartman Simons joined other members of Atlanta’s legal community to help juniors and seniors at Westlake High School prepare college and scholarship applications. The event was organized by the Atlanta Association of Legal Administrators (AALA) and gave volunteers a chance to work one-on-one with the students. The evening also included an informational session for parents on the transition from high school to college.

At Hartman Simons, we always find it rewarding to give back to our community, but this event has a special place in our hearts, as Westlake’s principal is Grant Rivera, brother of our attorney Ryan Rivera. Furthermore, Rachelle Jones, our office administrator, is the chair of community relations for AALA and was one of the main organizers of the evening.

To document this special evening, we present four numbers related to the event.

53 – The total number of volunteers who participated in the evening. The volunteers came from 17 law firms as well as business partners of AALA.

15 – The number of volunteers from Hartman Simons, including family members of employees, who were present. Attendees from the firm included Mark Florak, Diane Haeger, Jones, Will Lovell, Eitan Ovadia, DeLoris Person, Sharon Poland, Rivera and Benno Rothschild.

The firm and Subway donated food for the event.

75 – The number of Westlake students who received valuable help with their applications.

250 – The dollar amount of several scholarships awarded during the evening. Hartman Simons awarded a $250 scholarship to offset the cost of books, and Westlake gave away a couple of $250 scholarships for the same purpose, as well as six ACT and SAT preparation books. Also, Syracuse University pledged to provide two $250 scholarships to the first two Westlake seniors that are accepted to the school.

All in all, it was a very special evening. “I’m not sure who was more excited about this event – the students, the parents or the volunteers!” Jones said.

The Wednesday Wrap: March 14, 2012

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

• “Apartments Lose Luster with Investors” – by Matthew Strozier and Dawn Wotapka of The Wall Street Journal. The multifamily market has been one of the few sources of consistently good news in the commercial real estate arena during the past few years, but investors are losing enthusiasm for the sector.

“Investors are pushing back on property prices, rent growth is slowing and yields are flattening in some markets,” Strozier and Wotapka write. “While few investors believe that apartment buildings will be a bad investment, the best rent rises of this cycle are likely ‘in the rearview mirror,’ said Andrew McCulloch, an analyst at Green Street Advisors, a real-estate investment trust research firm.”

Investors are particularly concerned about oversupply in the Washington D.C. and Seattle markets, according to Strozier and Wotapka.

• “The Millennials Check In” – by Janet Morrissey of The New York Times. As it seeks to emerge from the Great Recession, the hotel industry has begun to target the demographic known as the Millennials, meaning young adults in their 20s to mid-30s. Adults in this age range were the fastest-growing segment of travelers in 2010, according to Morrissey. 

To reach this technology- and design-obsessed group, owners and operators “are remodeling existing hotels or introducing new ones that offer free hotelwide Wi-Fi connections; large, welcoming lobbies with plush, comfortable furnishings; state-of-the-art fitness areas; in-room power consoles to plug in iPads, laptops and other devices; and stylish bars that spill into the lobby,” Morrissey writes. “Some are also scheduling nightly social events, like happy hours and free wine tastings, aimed at luring the iPhone-toting generation to their hotels.”

The target marks a major shift from a decade ago, when hotels concentrated on luring those in their 50s and 60s. Hotels that don’t actively court Millennials will be at “a very severe competitive disadvantage,” Mark Woodworth, president of Colliers PKF Hospitality Research, told Morrissey.

• “Can Commercial Real Estate Investors Help Revive Single-Family Housing?” – by David Bodamer of National Real Estate Investor. The struggling single-family housing market may have an unexpected rescuer: commercial real estate investors.

The Federal Housing Finance Agency (FHFA) recently announced a pilot program through which investors can buy foreclosed houses in bulk and turn them into rental properties, Bodamer reports.

“To date, investors have purchased homes in foreclosure auctions and rented them out,” Bodamer writes. “But investors can only buy one or two assets at a time this way. The idea here is to enable investors to buy larger pools of foreclosed homes in order to get them on the market as rentals and deal with the glut of troubled assets more quickly.”

“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties and reduce the supply of REO properties in the marketplace,” FHFA Acting Director Edward J. DeMarco said in a statement.

• “Sources Predict Continued Brokerage Firm Consolidation” – by Natalie Dolce of GlobeSt.com. On the heels of the news that Grubb & Ellis has declared bankruptcy and is selling its assets to BGC Partners Inc., those in the commercial real estate industry say more brokerage firm consolidations are on the horizon.

Chris Wilson, president of the Wilson Commercial Real Estate retail brokerage firm, told Dolce the Grubb & Ellis development was the “continuation of some significant changes in the commercial real estate brokerage industry.” According to Dolce, Wilson expects “a creation of more boutique brokerage firms and further mergers and acquisitions over the next four or five years as the commercial real estate service industry and its salespeople adjust to the new economy.”

• “Cushman’s CEO Sees Slow Start, Strong Finish for Global Market in 2012” – by Paul Rosta of Commercial Property Executive. The global real estate market will take a while to shake off the doldrums of fourth-quarter 2011, but investment sales should recover in the second half of the year, said Glenn Rufrano, CEO of Cushman & Wakefield, in an exclusive interview with Commercial Property Executive.

Investment sales should total about $867 billion worldwide in 2012, a 7.5 percent increase from 2011, Rufrano said. North and South America will see a 25 percent rise in investment sales this year when compared to 2011, he predicted.

Four on Friday: Kate Peterson of Home Depot

As a senior real estate manager for Atlanta-based Home Depot, Kate Peterson has some very important responsibilities. She oversees the site selection, planning and development, asset management and disposition of all Home Depot real estate in seven Southern states. We recently got a chance to speak with Kate about her career, and she filled us in on some new Home Depot initiatives – as well as which band she thinks her grandchildren won’t tease her for liking.

 

HS: You've been a real estate manager for Home Depot since 2006 and before that you were with North American Properties. What drew you to the world of commercial real estate and what makes it exciting for you?

Peterson: The opportunity to create something real drew me in a long time ago. I grew up in the real estate business. My father is a developer in southwest Florida, and I spent a lot of time with him doing everything from answering phones to walking construction sites and attending public hearings.

One of my dad’s first big centers, The Landings, was in our neighborhood - across from my elementary school - and I witnessed the process from conceptual plans until it became a living, breathing part of our community and local economy. Each day, we all have an amazing opportunity to touch something real and have a positive impact on a community’s landscape.

HS: With Home Depot having slowed its expansion in recent years, what kinds of projects and initiatives are you working on these days? 

Peterson: First, let me say that the Home Depot is an incredible company to be a part of. We have more than 2,200 stores across the world, and are we constantly refining and challenging all aspects of our business to create the best environment for our customers while returning the highest value to our shareholders.

Our real estate portfolio makes up one of the company’s largest assets, and our department strives to create additional value anywhere we can. One of the best examples of this is our carve-out program. We are strategically identifying and selling unused portions of our parking fields for other retail uses, which results in synergies for our customers and dollars to our bottom line. We are still continuing to expand our retail presence also. One of the most exciting things I am working on right now is a brand called Home Decorator’s Collection, which is owned by Home Depot. We opened a new showroom for this furniture and décor concept in Alpharetta last summer, and over time we will continue to look for more opportunities to expand that business.

HS: What’s the most valuable bit of advice that you’ve received about succeeding in commercial real estate?

Peterson: It is a really small world; treat all people with respect. It’s as simple as that.

HS: If you could listen to one only musician/group for the rest of your life, who would it be?

Peterson: This is a really tough question. I like all kinds of music, from classic rock to pop and opera (yes, opera). From an intellectual position though, I believe that the band Coldplay has a unique mix of passion and talent, and they seem pretty stable and grounded. I think that their music will continue to evolve and that my grandkids would not make fun of me for listening to it.

The Wednesday Wrap: March 7, 2012

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

• “CMBS Delinquency Rate Drops in February but Outlook Unclear”– by Matt Valley of REBusinessOnline.com. In February, the delinquency rate for commercial real estate loans in commercial-mortgage-backed securities (CMBS) fell to its lowest mark – 9.37 percent – since June 2011, according to New York-based Trepp LLC.

Whether the rate rises or falls in the months ahead will be determined in large part by the performance of CMBS loans that are past their balloon payment date but are current in their interest payments, Valley writes. These loans – which currently total about $900 million in value – are not classified as delinquent by Trepp.

“The rate should remain fairly stable if [the loans] are modified or refinanced but watch out if these loans slide into foreclosure,” said Manus Clancy, senior managing director at Trepp, in a statement. 

The value of delinquent loans is currently $56.4 billion.

• “The Malaise Afflicting America’s Malls” – by Kris Hudson of The Wall Street Journal. Many high-end malls are thriving even in today’s halting economic recovery, but their mid-range counterparts continue to struggle. This performance gap likely will only widen in the future, “with major repercussions for shoppers, retailers and tax-hungry local governments,” according to Hudson.

Malls outside the high tier of properties “are getting slammed especially hard by online shopping, the spread of discount retailers and store closures by such mall stalwarts as Sears Holding Corp., Abercrombie & Fitch Co. and Gap Inc.,” Hudson writes. “These malls are suffering from high vacancy rates, declining numbers of shoppers or have had to shut down completely.”

• “Builders Poised for Rental Rebound” – by Misty Williams of The Atlanta Journal-Constitution. With the homeownership rate tumbling in metro Atlanta, apartment builders in the area are slated to begin construction on 7,400 new apartment units this year, Williams reports. The number is a dramatic increase from the dog days of 2009, when work began on a measly 1,700 units.

However, even with a number of factors pushing many Atlantans away from single-family homes and into the multifamily market, construction financing is still difficult to obtain, making it uncertain how many of the units will actually be built, Williams writes. “This is not a runaway market,” Alan Wexler, president of the real estate tracking firm Databank Atlanta, told Williams.

• “Developers Are Increasingly Pursuing Adaptive Reuse Opportunities” – by Jennifer Popovec for National Real Estate Investor. An ever-increasing desire to live and work in urban cores combined with the difficulty of pursuing new development and a burgeoning tax-credit market have sparked a wave of adaptive-reuse projects across the country, Popovec reports.

“During a recession, when real estate is slow, investors will sit on a greenfield site longer than an existing building,” said Bob Habeeb, president and COO of First Hospitality Group, in the article. “A building cries out: ‘I’m built. I’m here. I’m lonely. Do something with me.’”

Developers considering adaptive-reuse projects should be prepared for their complexity, Habeeb cautions.

• “Economic Growth Resembles a Recovery, Not a Head Fake” – by Hessam Nadji of Marcus & Millichap for GlobeSt.com. The U.S. economy is on the verge of “solid growth” this year and in 2013, Nadji writes, and that expansion will have an overall positive impact on the commercial real estate industry.

The multifamily sector should continue to sparkle in the months ahead, but the office sector is still a ways away from taking off, according to Nadji. “Companies simply have too much excess space, and those renewing leases are looking for efficiency and cost control,” he writes. “A broader and more robust level of net absorption will remain elusive until prosperity extends to small and mid-sized companies as much as it has to large multi-nationals.”

Four on Friday: Lori Kilberg Addresses the Georgia Society of Certified Public Accountants

The commercial real estate sector is in the midst of a halting recovery, and women are making halting advancements in the commercial real estate industry. Those were the themes of Hartman Simons partner Lori E. Kilberg’s remarks to the Georgia Society of Certified Public Accountants earlier this week. Below are four of the interesting points she made in her presentation.

• Not Reaching the Top. While women are making strides in the commercial real estate industry, they are not consistently being promoted to what Kilberg referred to as the “C Suite,” meaning executive positions such as CEO, CFO and COO. “That’s one of the real problems,” said Kilberg, who is the immediate past president of the Atlanta chapter of CREW Network, a national organization dedicated to the advancement of women in commercial real estate. She also is currently on the organization’s Board of Directors.

“We’re getting stuck at the level below [the C Suite],” she said. “It’s hard to understand how slowly things have changed.”

• The Persistent Wage Gap. While the gap between what women in commercial real estate make and what their male colleagues make is narrowing, it’s still there, Kilberg reported.

According to a 2010 CREW study, women aged 35 and older in commercial real estate make about 75 percent as much as their male counterparts. The news is slightly better for younger women: those between the ages of 25 and 34 make roughly 89 percent as much as their male colleagues.

• Slowly Getting Better. Citing several commercial real estate forecasts, Kilberg said 2012 should be a year of improvement for all of the commercial real estate property types. The multifamily sector is poised for the strongest performance in the year ahead, followed by the industrial, office and retail markets, she noted.

At Hartman Simons, “we’re finally seeing a big uptick in [commercial real estate] activity across the board,” Kilberg said. But overall, the industry is “making its way very slowly to recovery.”

• The Office Sector: Go Intown and Buy Your Own. While the office sector continues to struggle in many areas of the country, properties in central business districts are generally performing better than their counterparts in the suburbs, Kilberg said, in part because the smaller companies and start-ups that generally lease suburban space have yet to experience renewed job growth.

Kilberg also said Hartman Simons is seeing an increasing number of users buy their office buildings. She noted that Hartman Simons did so several years ago.

Surging Ahead: Atlanta's Industrial Sector

By Summey Orr, managing partner of Hartman Simons

Note: This post originally appeared on the Atlanta Business Chronicle's Real Talk blog.

As the media focuses attention on trouble in Atlanta commercial real estate, those of us looking for good news might have an unlikely place to start: the industrial sector.

During the upcycles of real estate, industrial property tends to be the ugly stepbrother of the more glitzy retail and office sectors. Warehouses and distribution centers don’t majestically rise 1,000 feet in the air, they don’t boast trendy restaurants on their ground floors, and they don’t creep into your subconscious as you drive past them several times a week (well, unless you’re just driving around industrial parks all week, which is a troubling habit, generally speaking).

But by many accounts, industrial real estate might be coming out of the ditch a little sooner than some of its real estate brethren. How, and why, would this occur?

Here’s an explanation that a notable Atlanta industrial developer gave me back in April 2009. He said, “Industrial real estate relies on a company’s real estate manager going to his or her boss in the fourth quarter and saying, ‘We need more space. Let’s get a warehouse expansion in our budget for next year. ‘ Now, nobody in his right mind will make that pitch in 2009. Not only that, but I doubt things will have changed enough by the fourth quarter of 2010 to give anyone the courage to ask for that in their 2011 budget.”

“What we’re waiting for, really, is the corporate world’s budgeting process during the fourth quarter of 2011,” the developer continued. “By then, either the economy will have improved enough that management will feel comfortable asking for more space, or the economy will not have gotten markedly worse, and managers will decide they are so desperate for more room that it at least makes sense to ask. So, I think we’ll have a little activity in 2011, more in 2012 and maybe even a pretty good 2013.”

The Wednesday Wrap: Feb. 29, 2012

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

• “Space Influx Will Challenge Office Market” – by Laura Kusisto of The Wall Street Journal. Next year could be a scary year for the New York office market. With the economy in the midst of a halting recovery, more new office space is set for delivery in the Big Apple in 2013 than in any year since 1989.

But developers tell Kusisto they’re not stressed. “They note that the recent surge of new construction follows years of virtually no new development, so the city won't get deluged with new space like it did in the late 1980s,” she writes.

“I sleep well at night,” one developer told Kusisto.

Perhaps that developer should be tossing and turning: Among other warning signs, “the bulge in the delivery pipeline comes at a time when demand in the New York office market is showing signs of flagging because of the contraction in the financial-services industry,” Kusisto writes.

• “Are Institutions Ready for More Risk?” – by Beth Mattson-Teig for National Real Estate Investor. After a sustained focus on purchasing core properties in gateway markets, pension funds, life insurance companies and private equity funds may be ready to take what for them is something of a walk on the wild side by investing in higher-risk facilities in secondary markets.

“While institutions are still proceeding cautiously, they are also starting to take incremental steps toward more value-add opportunities,” Mattson-Teig writes. “‘We spent most of 2008 and 2009 curled up in a ball, hoping. Now we are slowly coming out of that defensive crouch position,’ says Jeffrey Havsy, director of research at the National Council of Real Estate Investment Fiduciaries (NCREIF) in Chicago.”

• “Social Media in CRE No Longer Just for Socializing” – by Mark Heschmeyer of CoStar Group. The commercial real estate sector hasn’t exactly been at the forefront of embracing social media websites like Twitter and Facebook, but many within the industry are starting to use the sites in the hopes of raising their profiles and increasing business.

Still, the industry remains divided on social media, Heschmeyer reports. “Many others still refuse to join the fold and flat out state they will resist until they're the last ones online,” he writes.

“Clearly social media is still a divisive issue in commercial real estate – the difference in sentiment between enthusiastic adopters and major detractors parallels the sentiments in other industries driven by client relations, such as nonprofits and law firms,” Angela Brown, external communications manager for CoStar Group, told Heschmeyer.

• “AIA Billings Index Remains Positive for Third Straight Month” – from the American Institute of Architects’ (AIA) web site. The institute’s Billings Index clocked in at 50.9 in January after registering scores of 51 and 52 in December and November, respectively. Any score above 50 reflects an increase in architectural billings.

Kermit Baker, chief economist for AIA, says the organization is expecting “modest” improvement in the design and construction sectors over the next few months. “Even though we had a similar upturn in design billings in late 2010 and early 2011, this recent showing is encouraging because it is being reflected across most regions of the country and across the major construction sectors,” he added in a statement.

• “Commercial Real Estate Vacancy Rates Improving” – from the National Association of Realtors’ (NAR) website. The most recent quarterly market survey complied by the National Association of Realtors says national vacancy rates for all the major commercial real estate sectors will decline somewhat in 2012.

The survey predicts the national office vacancy rate will drop by 0.4 percentage points, the industrial vacancy rate by 0.8 percentage points, the retail vacancy rate by 0.9 percentage points and the apartment vacancy rate by 0.2 percentage points. “Sustained job creation is benefiting commercial real estate sectors by increasing demand for space,” said Lawrence Yun, chief economist for NAR, in a statement. “Vacancy rates are steadily falling. Leasing is on the rise, and rents are showing signs of strengthening, especially in the apartment market where rents are rising the fastest.”

Four on Friday: Eitan Ovadia

We are thrilled to welcome associate Eitan Ovadia back to Hartman Simons. Eitan, who was with Hartman Simons from 2006 to 2008, recently returned to our firm after three years as general counsel for The RADCO Cos., a real estate development and portfolio management firm. We recently got a chance to speak with Eitan about coming back to Hartman Simons.

What will be your primary scope of work at Hartman Simons?

Ovadia: A large part of my practice will be working with Hartman Simons’ banking and investor clients to manage their loan and REO portfolios, including a fair amount of foreclosure work. I will represent clients in the acquisition of existing multifamily housing and commercial space and - if things continue to improve – the development and construction of new projects. I will also be involved in lending and leasing, as landlords begin filling shopping center vacancies, industrial warehouses and office space across the country once again.

What did you do for The RADCO Cos.?

Ovadia: It really ran the gamut. I managed the company’s acquisition and disposition of notes and multifamily developments. I negotiated disputes, financial settlements and loan workouts on behalf of the company and our clients. I assisted institutional lenders and private equity firms in navigating through an array of pre- and post-foreclosure issues, ultimately securing title to large residential developments where we would then act as a successor developer to add value for our clients.

The several opportunities I had to serve as a receiver while at RADCO also ranked among the most interesting and educational experiences I’ve had - the variety and complexity of issues never left a dull moment.

What excites you most about working at Hartman Simons?

Ovadia: The people, no doubt. If it’s possible, I think everyone associated with Hartman Simons – employees and clients, alike – seems to share a common sense of humor and positive outlook on life.  It’s great to work with such a friendly and fun-loving group.

What are some of your hobbies and interest outside of work?

Ovadia: My one year old nephew just moved back to town (with his parents, I think) and I take every opportunity I can to spend time with him. I’m forever trying to get to the gym; instead, I’m always at a new restaurant. I’m still looking for a good squash court in Atlanta and maybe a few players.

The Wednesday Wrap: Feb. 22, 2012

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

• “Grubb & Ellis Files for Bankruptcy and Agrees to Sell Assets to BGC” – By Kevin Roose of The New York Times. Citing the depressed real estate market of recent years, one of the nation’s largest commercial real estate brokerage firms has filed for bankruptcy and will sell almost all of its assets to BCG Partners.  BCG will provide financing of up to $4.8 million to keep Grubb & Ellis operating until the acquisition closes, according to Roose. 

In its bankruptcy filing, Grubb & Ellis listed $150 million in assets and $167 million in debts.

“We are confident this will be a seamless transition for our clients and that becoming part of BGC is an extremely attractive opportunity for our brokerage professionals and employees,” said Thomas P. D’Arcy, CEO of Grubb & Ellis, in a statement.

• “Banks Face Crisis in Bungled Commercial Mortgages” – By Constantine von Hoffman for CBSNews.com. A new report by Harbinger Analytics Group warns the “nation's banks are looking at a robo-signing problem with commercial real estate [that] may dwarf the one for home mortgages,” von Hoffman writes.

Many analysts say 2012 could be a record year for commercial real estate loan defaults but banks could be hampered in their foreclosure attempts by the “widespread use of inaccurate, fraudulent documents for land title underwriting of commercial real estate financing,” von Hoffman says.

• “Will Rollover Risk Sink the Office Recovery in 2012?” – By Victor Calanog, contributing columnist for National Real Estate Investor. The office market has shown some signs of improvement recently – the national vacancy rate dropped by 30 basis points last year – but lots of five-year rents signed in 2007 are coming due this year and that could spell trouble for some areas, Calanog says. Specifically, with effective rents still far from their 2007 levels, many office properties could be looking at a serious dip in revenue.

“The sky isn’t about to fall for office properties around the nation … ,” Calanog writes. “Still, some properties that have large tenants will find it challenging to renew leases at rent levels signed prior to the downturn.”

• “Commercial Real Estate Has and Will Outperform Other Asset Classes” – By Natalie Dolce of GlobeSt.com. Given the ever-present fluctuations in the stock market and dissatisfaction with bond returns, institutional investors continue to seek a safe haven in commercial real estate, Dolce reports. 2012 should therefore be a busy year for commercial real estate transactions.

“Limited new construction, signs of economic expansion and a low interest rate environment provide compelling justification for long-term aggressive rent growth,” Marc Renard, executive managing director of Cushman & Wakefield of California’s Capital Markets Group, told Dolce. “As a result, 2012 should prove to be an excellent, vintage year for strategic acquisitions.”

• “Generation Y Fuels Atlanta Rental Growth Boom” – By Douglas Sams of the Atlanta Business Chronicle. Two new apartment high-rise properties are in the works for Midtown Atlanta, and the developers of the projects say that 24- to 34-year-olds are a big reason why.

Known as “Generation Y” or “Echo Boomers,” the demographic frowns upon long commutes to work and embraces intown living, Sams writes. Not only that, they simply are not all that jazzed about buying a home.

“Home ownership is no longer the American Dream that it once was,” Mark Stewart, director of investments for Batson Cook Development, told Sams.

Four on Friday: Dr. Lee Resnick of WellStreet Urgent Care

Dr. Lee Resnick is the chief medical officer and chief operating officer of WellStreet Urgent Care, a client of Hartman Simons that opened its first facility two weeks ago in Peachtree Square in south Buckhead. We recently got a chance to chat with Resnick about the company’s growth plans, its operating philosophy and his medical career.

You just opened the first WellStreet Urgent Care site. When will you be opening others and where will they be?

By the end of 2012, we will have opened 12 of our urgent care centers. They will be all across the metro Atlanta area. In 2013, we will begin to explore other markets. We will look at secondary markets in Georgia, and we’re also open to looking at other metropolitan areas across the nation.

What is the operating philosophy and strategy of WellStreet?

Urgent care is an impulse decision: someone gets sick or gets injured – maybe Johnny breaks his leg sliding into second base – and all of a sudden you’re faced with, “Where do we go? What do we do?”

We want to be the brand that is people’s first thought in those situations. By locating in Class A real estate – properties that have high visibility and high traffic counts – we create a high profile in our communities and will be top of mind when those times come. We want to create an easy option and provide patients with the path of least resistance.

Once they are there, we will provide clinical care that is second to none. Our facilities foster an environment of care. They feature wide hallways, warm colors, spacious waiting rooms, coffee and tea. In an environment like this, patients feel more comfortable, and it becomes easier for them to talk with our doctors and to tell them more information, which in turns helps our physicians.

To ensure the best quality of care, we hire the best talent and put them through a 66-hour urgent-care training program.

You have long been at the forefront of improving the quality of urgent care throughout the country. Fill our readers in on your medical career and your background on the issue of urgent care.

I am board-certified in family medicine and an assistant clinical professor in the Department of Family Medicine at the University Hospitals Case Medical Center in Cleveland. I have spent the past decade in various urgent-care leadership roles.

I’m the founder and president of the Institute of Urgent Care Medicine, which specializes in the development of continuing education programs for urgent-care medicine. I’m also a founding board member and the past president of the Urgent Care Association of America.

Additionally, I’m a founding board member of both the Urgent Care College of Physicians and the Urgent Care Foundation, and I serve as the editor of The Journal of Urgent Care Medicine.

How do you enjoy spending your time when you’re not working?

When am I not working? (laughs) I really enjoy traveling with my family. My wife Stephanie and I have two children: a 13-year-old daughter named Paige and an 11-year-old son named Ian.

I’ve had speaking engagements all over the world, and I’ve usually been able to take my family with me, which has provided us with some wonderful opportunities to be together and experience places like New Zealand and Ireland. It’s been a lot of fun. 

The Wednesday Wrap: Feb. 15, 2012

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

• “Less Building Now, Higher Office Rents Later” – By Eliot Brown of The Wall Street Journal. A paucity of new office development – only 56 million square feet of construction began last year, the lowest in at least 50 years – is paving the way for a much-anticipated rise in office rents, Brown reports.

Gateway markets like San Francisco and New York – where demand is likely to jump quickly if the economic recovery picks up – would be the most likely areas to see rents increase, whereas cities harder hit by vacancies, such as Las Vegas and Atlanta, would probably take longer to experience rent growth.

• “Retail Sales Rebound as Consumers Step Up Spending” – By Christopher S. Rugaber of The Associated Press. Retail sales increased by 0.4 percent in January when compared with the month before, a positive sign after a sluggish holiday season, Rugaber reports.

“The positive data suggest that hiring gains have boosted confidence and are encouraging more people to spend,” he writes.

Pierre Ellis, an economist at Decision Economics told Rugaber, “The good news is that the strong January gain establishes that the consumer trend is not folding.”

• “National Industrial Vacancy Continues Steady Decline” – By Jacqueline Hlavenka of GlobeSt.com. The national industrial real estate market experienced a noticeable uptick in its fundamentals last year, this article reports. The vacancy rate dropped from 10.8 percent to 10.1 percent over the course of 2011, and 417 million square feet of industrial leasing was completed last year, a 20 percent increase from 2010.  

Speaking about about the vacancy rate decline, Jim Dieter of Cushman & Wakefield told Hlavenka, “It’s pretty dramatic. That doesn’t sound like much, but the [size of the market] is around 12 billion square feet. When you have a drop in vacancy rates of almost 1 percent, you can see that’s pretty dramatic.”

• “MBA Attendees Expect Continued Growth in 2012” – By David Bodamer of National Real Estate Investor. The Mortgage Bankers Association (MBA) is projecting commercial and multifamily mortgage originations to reach $230 billion – which would be an increase of 17 percent from last year’s total. By 2015, the figure should climb to $290 billion.

“We’re in a period of stability,” Tom Fish, executive managing director of Jones Lang LaSalle’s Americas Real Estate Investment Banking division, told Bodamer. “Everyone is talking about increasing volume. Barring a major dislocation in capital markets, it should be a strong year.”

• “Construction Lenders Advise Caution on Apartment Construction Front” – By Liz Burlingame of ReBusinessOnline.com. The multifamily sector has been perhaps the only segment of commercial real estate to perform well during the Great Recession, but lenders warned during a recent panel discussion that the industry could be on the verge of becoming overbuilt, at least in certain markets.

Speaking at the MBA’s commercial/multifamily finance conference in Atlanta, Marc McAndrew of PNC Real Estate said Seattle, Houston and Dallas are markets in danger of having an oversupply problem.

According to Burlingame, fellow panelist Ken Broussard of KeyBank, “said the bank has internally discussed the possibility of too much apartment development and whether it may cause a bubble in the sector.”

“All of our regions are seeing a lot of requests for new construction and financing in multifamily,” Broussard added.

Four on Friday: More Positive CRE Stats

As we discussed a while back, we’re catching wind of more and more indicators demonstrating that both the economy in general and commercial real estate in particular are on the mend. The progress may not be proceeding at the pace we all want, but it is steady and is much-welcomed news after the past few years.

Below are four more positive real estate stats that caught our eyes in recent days:

• The national warehouse vacancy rate declined to 9.6 percent in fourth-quarter 2011, a decrease of 24 basis points from its third-quarter mark and an almost 80-basis-point drop from the same period in 2010, according to CoStar Group. Furthermore, net absorption for the U.S. warehouse sector was a positive 110 million square feet in 2011, the best showing since 2008.  

Still, asking rents for warehouses declined in 122 of the 210 markets tracked by CoStar during the fourth quarter. “Rents aren’t growing yet because the gap remains wide between the vacancy rate and the availability rate,” a CoStar report explained. “The former is based on space that is actually vacant, while availability is based on space being marketed by landlords who are anticipating vacancy. The availability rate remains above 14 percent.”

• Consumer spending for Valentine’s Day is expected to rise this year, which is good news for the nation’s retail sector. The average person celebrating the event will spend $126.03, according to the National Retail Federation (NRF). The amount represents an 8.5 percent increase from last year’s $116.21 and is the highest mark in the history of NRF’s decade-old Valentine’s survey.

“As one of the biggest gift-giving holidays of the year, it’s encouraging that consumers are still exhibiting the desire to spend on discretionary gift items, a strong indication our economy continues to move in the right direction,” said Matthew Shay, president and CEO of NRF, in a statement.

• In the National Multi-Housing Council’s (NHMC) most recent quarterly survey of apartment market conditions – conducted at the end of January - the council’s Market Tightness Index rose to 60, up from 52 in October 2011.

NHMC defines a “tight” market as one in which vacancies are low and rents are high. A score above 50 means that apartment markets around the country are getting tighter, while a mark below 50 means that, on the whole, vacancies are increasing and rents are decreasing.

Indices measuring sales volume and the availability of debt and equity financing also showed positive trends.

“In the face of an unprecedented virtual shutdown of development, the apartment market continues its strong recovery as developers play catch-up to the growing demand for rental housing,” said NMHC Chief Economist Mark Obrinsky in a statement. “Investors continue to view apartments as a preferred asset class in today’s environment and long-term demographic changes favor rental housing. However, we expect the pace of improvement in transaction activity to ease somewhat moving into 2012.”

• Rents for prime office space in the world’s major cities increased by 0.8 percent in the fourth quarter when compared to the preceding three months, according to a new report by Jones Lang LaSalle. Even better: the rents for such space were 6 percent higher at the end of 2011 when compared with one year earlier.

“The rental outlook for 2012 has been tempered by ongoing economic uncertainty, although we continue to expect positive rental growth in most major prime office markets – the notable exceptions being Hong Kong and Singapore,” the report said. Beijing, Toronto and San Francisco are expected to perform particularly well in the year ahead and could experience double-digit rent growth, according to Jones Lang LaSalle.

An eight-page PDF of the report can be downloaded here.

The Wednesday Wrap: Bank of America Plaza Edition

Today marks the debut of The Wednesday Wrap, a new weekly feature of the Hartman Simons Commercial Real Estate Blog. The Wrap will present a compilation of recent noteworthy commercial real estate stories from a variety of publications.

Today’s installment will focus exclusively on what was a historic day in Atlanta commercial real estate history. Yesterday, the 55-story Bank of America Plaza, the tallest building in the Southeast, was sold for $235 million at a foreclosure auction to LNR Partners, which held the note on the property. The price represented a breathtaking drop from the $436 million that BentleyForbes paid for the tower in 2006.

Our attorneys featured prominently in the abundant media coverage of the landmark transaction, and we enjoyed sharing our knowledge and industry perspective with the Atlanta Journal-Constitution, 11 Alive and WSB-TV. Here are a few pieces with different takes on the news:

• “Bank of America Plaza Becomes Atlanta’s Priciest Repo” – By Scott Trubey of the AJC.

This article on the nuts and bolts of the deal included some perspective from Hartman Simons partner Gil Burstiner.

Burstiner told reporter Scott Trubey that “the ordeal will help reset market prices for real estate, and the eventual new owner will likely set rental rates at a new or near the bottom and improve the facilities to lure tenants.”

• “Bank of America Plaza: Why It’s Facing Foreclosure Today” – By Doug Sams of the Atlanta Business Chronicle.

This piece presents a detailed timeline showing when and how things went wrong for the tower after its purchase by BentleyForbes.

• “American Foreclosure Bottoms at Atlanta Tower Auction” – By Bloomberg Businessweek.

Looking for some broader context on how this deal may be representative of the Atlanta office market? Bloomberg presents sobering perspective, noting, Atlanta is “now squarely in the bust category with the highest rate of late payments for loans on offices bundled into bonds among the largest U.S. metropolitan areas, at 25.3 percent, according to data compiled by Bloomberg. That's increased from 10.4 percent a year ago and is more than triple the 7 percent national rate.”

• “Bank of America’s Towering Symbol of Foreclosures” – By Dan Freed of The Street.com.

Freed also says the sale is emblematic of Atlanta’s woes during the Great Recession. He writes, “What may also be seen as fitting is that Bank of America is not the biggest loser in this story. That misfortune may go to the city of Atlanta, which was booming just a few years ago and is now one of the cities hardest hit by the crisis. Atlanta recently saw home prices hit a 13-year low and received the second-lowest ranking among 20 cities tracked in the Case-Shiller home price index - second only to Detroit.”

Five* on Friday: Super Bowl Predictions

In only two days, seemingly the entire nation will gather in front of television sets for Super Bowl XLVI. With all of the talk about the mega-budget commercials, the halftime show and preparing the perfect chicken wings for the perfect watching party, it’s sometimes easy to forget there’s an actual game to be played.

This year’s contest pits Tom Brady and the New England Patriots against Eli Manning and the New York Giants. It’s a rematch of the 2008 Super Bowl, in which the Giants upset an undefeated Patriots team 17-14.

Vegas again has the Patriots as the favorite, but we decided to turn to five of our firm’s biggest sports fans to get their take on Sunday’s showdown. As you will see, some of them aren’t afraid to go against the grain.

Will "Blue Horseshoe" Lovell: Giants 21, Patriots 17 

 

 

 

 

 

Ryan Rivera: Giants 24, Patriots 17

 

 

 

 

 

Jeremy Cohen: Patriots 27, Giants 23

 

 

 

 

 

Bob Simons: Patriots 28, Giants 24

 

 

 

 

 

Charles Elrod: The over.

 

 

 

 

 

 

*(Yes, this feature is usually called “Four on Friday,” but in honor of the big game, we’re bending the rules a bit and giving you five predictions.)

A Conversation with Solange Warner of the World Chamber of Commerce

Just more than four years ago, the Dunwoody, Ga.-based World Chamber of Commerce (WCC) didn’t exist. Tonight, it’s hosting an impressive and sold-out “International Hero Awards and Networking Event” at the Woodruff Arts Center, with Atlanta Mayor Kasim Reed and former Atlanta Mayor Andrew Young slated to appear. Hartman Simons partner Andy Litvak will be among the attendees.

We chatted with Solange Warner, founder of WCC, about the growing organization’s mission and tonight’s event. Here are a few highlights from that conversation:

HS: Tell us a little bit about the history of the World Chamber of Commerce (WCC). When did you found it, and for what purposes did you create it?

Warner: I founded the organization in 2008 to promote international trade in general as well as Atlanta’s and Georgia’s presence in international business. The organization also seeks to promote cultural and humanitarian issues on a global scale. For instance, in addition to helping members reach out to lucrative global business markets, we have promoted awareness of the human trafficking problem and undertaken efforts to provide assistance and relief to victims of the massive earthquakes that struck Haiti and Chile a couple of years ago.

WCC seeks to unify countries through common financial, cultural and humanitarian goals.

HS: What are the benefits of membership in WCC?

Warner: First of all, we help members establish new connections in international business. Members have many opportunities to meet with visiting dignitaries, members of the Consular Corps and international trade commissioners.

Our members also have access to mentor programs, networking and educational seminars. Over the years, our members have had opportunities to learn about topics ranging from what to expect from Georgia’s ports in the coming years to finding international opportunities in a tight economy to the problem of human trafficking. 

HS: Tonight, you are holding your annual membership meeting and awards event at the Woodruff Arts Center. What’s on tonight’s schedule?

We will hold elections for our new board of directors, its chairman and the new WCC president. Our candidates include three state senators, the mayor of Auburn, Ga., the consul general of the United Kingdom, the consul of Lithuania, and Charles Shapiro, a former U.S. ambassador to Venezuela. It’s an impressive group.

We will also be honoring various dignitaries for their efforts in international trade and relations, including Atlanta Mayor Kasim Reed, whom we will be presenting with the Special International Hero Award. Civil rights icon and former Atlanta Mayor Andrew Young, who also served as an ambassador to the United Nations and is currently the honorary chairman of WCC’s Board of Directors, will present Reed with his award, and he will also present awards to Alvaro Uribe, former President of Colombia, and others.

The evening also will include silent auctions for first-class Delta tickets for international travel, as well as Atlanta Symphony Orchestra and Chastain Park Amphitheater tickets. The festivities will conclude with a concert by the Atlanta Symphony Orchestra at Symphony Hall.

HS: You obviously devote a good portion of your time to WCC matters. Tell us about the other facets of your career.

Warner: I’m the CEO, president and founder of Ashton International, which provides in-depth international trade consulting services. The U.S. Department of Commerce recently recognized Ashton for its work in exports.

I have more than 20 years of experience in international markets and previously worked as a senior manager of multinational accounts for American Express for seven years. I have managed Fortune 500 multinational corporations.

I also host and produce the “Global Matters” television show on Comcast Channel 25. The show promotes WCC initiatives.

I was born in Chile and have traveled extensively in more than 50 countries, so I truly am passionate about international issues.

MOBs: A Prescription for Commercial Real Estate Investors

By Andy Litvak, Hartmans Simons partner

 

Note: This post originally appeared on the Atlanta Business Chronicle's Real Talk blog.

The last several years have proven to be an extremely volatile period for investors and owners of commercial real estate properties.

While real estate investment has never been for the faint of heart, thoroughly vetted and calculated investment strategies have typically proven to produce strong yields (irrespective of asset class). Given the nature of these tumultuous times, I have observed many of my clients gravitate toward far ends of the investment spectrum.

By way of example, many have employed a "carpe diem" attitude and have attempted to seize the day by capturing perceived home run opportunities and returns in the distressed property arena. These distressed asset strategies have been the topic of much discussion of late, and there are certainly no shortage of hungry investors seeking to acquire REO or so-called "value" add properties, purchase notes at significant discounts or otherwise eager to recapitalize underfunded partnerships by injecting fresh equity.

On the other side of the spectrum, however, there are legions of investors seeking stable properties which produce consistent, low risk dividends. Many of these buyers are institutional players (REITS, life companies and pension funds), and their individual investors and annuitants are craving "coupon-clipper" deals producing reliable and consistent income streams. Along these lines, net-leased properties with corporate or other high credit tenants and grocery anchored retail centers have proven to be very attractive.

The strong demand for these stable properties has resulted in bidding wars and cap rate compression. Although, perhaps the new leading contenders in this category are "MOB's" - medical office buildings.

Long before the current real estate downturn, MOB's were viewed as recession resistant properties. The strength and credit of the physician practice group tenants, historically low turnover and consistent patient base requiring medical services lends to an inherently strong degree of stability. Now, fast forward and infuse equal doses of the ever-evolving world of health care legislation reform, new trends in practice group and hospital consolidation and other anticipated changes in health care delivery models — and you have all the ingredients to attract major interest in MOB investment by sophisticated investors.

Four on Friday: Jim Irwin of Green Street Properties

Jim Irwin is knee-deep in one of the most exciting projects in Atlanta real estate: the transformation of the historic City Hall East on Ponce de Leon Avenue into a mixed-use facility. When finished in two years, the in-town building – once a Sears warehouse and distribution center – will feature more than 1 million square feet of office, retail and residential space. 

Irwin is vice president, development, at Green Street Properties – a Hartman Simons client – and is leading the effort to redevelop the property. Green Street is a subsidiary of Jamestown Properties, which recently purchased the building from the city of Atlanta. We recently caught up with Irwin and asked – you guessed it – four questions about his firm, its projects and his hobbies.

HS: Your most high-profile project in Atlanta is the Ponce City Market project. What’s the current timeline for development of the facility, and how will the space be divided up when it’s finished? 

Irwin: We are slated to open in the spring of 2014. Construction began last October. The first phase has largely been one of demolition, and will last a total of about six months. We will begin demolishing the old parking deck by the beginning of February.

We are not removing any historic structures, but there are a lot of layers to remove to get to the original structure.

These are rough numbers at this point, but the final building will have about 300,000 square feet of retail, 400,000 square feet of Class-A office space and 200 apartments, and maybe a boutique hotel.  All under one roof.

There’s really no other project like it in the market. There’s a dearth of loft Class-A office space in Atlanta. The building still has the original hardwood floors from the 1920s and all the associated character, but will be combined with all of the modern conveniences of a new office building.

HS: Explain Green Street’s development philosophy. Is the Ponce City Market project indicative of the kind of projects your firm undertakes? 

Irwin: It is. We focus on urban infill projects located in historic, character-driven buildings. Another recent example in Atlanta is the Westside Provision District, a 110,000-square-foot, mixed-use project that we developed out of an old meatpacking plant on Atlanta’s West Side. The development features retail, fine dining and high-end residential units. 

Also, sustainability is a fundamental part of what we do. Our development projects are part of the live-work-play movement, and our consulting team offers a range of LEED, Energy Star and overall energy efficiency services for both new and existing buildings.

Ponce City Market’s proximity to the Beltline is huge for the project and is an example of the way that our projects incorporate accessibility to rail, biking trails, etc.

HS: What demographics are most responsive to your projects?

Irwin: They particularly resonate with the “creative class.” But we’re finding companies of all stripes are interested in office space in these live-work-play environments. They are becoming very savvy about employee satisfaction and retention, and they know that their employees want to be in authentic places, buildings that have a lot of character and are unique.

People – whether it’s residents, office workers, shoppers – they want to be in places that aren’t sterile.

HS: How do you like to spend your free time?

Irwin: I like to spend time with my two sons: Drew, age 2, and James, age 4. I enjoy coaching them in sports. I also enjoy four-season gardening and have been fascinated lately with beekeeping.

Co-Tenancy Clauses Now at the Forefront of Retail Lease Negotiations

With the wobbly economy taking a toll on retailers in recent years – Borders, Circuit City, Filene’s and Linens ’N Things are some of the high-profile chains that have filed for bankruptcy since the recession started – the issue of co-tenancy clauses is bigger than ever.

The January 2012 issue of Southeast Real Estate Business examines the subject in its cover story, and Hartman Simons partner Lori E. Kilberg (pictured at left) is quoted extensively in the article.

A co-tenancy clause is a lease provision that gives a shopping-center tenant some sort of protection – perhaps reduced rent or the option to terminate its lease – if one of the center’s key tenants vacates its space. A retailer often selects a shopping center because it anticipates spillover traffic from a high-profile co-tenant. 

The brutal economic climate of the past few years has brought co-tenancy provisions to the forefront of retail lease negotiations: tenants, skittish about the financial well-being of their neighbors, want them more than ever, while property owners, desperate to hang on to other revenue streams in the event that an important tenant goes belly up, are more reluctant than ever to grant them.

“Landlords have seen what has happened with co-tenancies and centers emptying out because of the domino effect of a couple tenants leaving,” Kilberg told Southeast Real Estate Business.

A co-tenancy provision usually gives a property owner a certain amount of time to find a qualified replacement before another tenant’s relief takes effect. However, when it comes to replacing a Borders or a Circuit City, “the problem is, how many big-box tenants are still around to take those places?” Kilberg said in the article. “Depending on how stringent the qualified replacement tenant definition is, landlords can be really hard-pressed to find qualified tenants to take that space.”

For more from Kilberg and other experts on the subject, read “Clause and Effect: Co-Tenancy Provisions Pit Landlords against Retailers.”

Four on Friday: Positive CRE Stats

As 2012 gets underway, there are numerous signs that commercial real estate markets – along with the economy – are making slow but steady recoveries. While the current climate hardly resembles the boom days of 2005 and 2006, there is finally good reason to believe we are on the right track. Below are four recently released stats indicating the industry’s continuing comeback:

• The Architecture Billings Index, compiled each month by the American Institute of Architects (AIA), was 52 in December, marking the second straight month the index demonstrated growing demand for design services. Any score above 50 reflects an increase in architectural billings.

The index also was 52 in November.

While noting the Index demonstrated increasing demand in late 2010 –only to fall below the 50 mark for much of last year – AIA Chief Economist Kermit Baker said in a statement the recent scores are “very good news for the design and construction industry, and it’s entirely possible conditions will slowly continue to improve as the year progresses.”

• The National Retail Federation (NRF) says retail sales will increase by 3.4 percent – to $2.53 trillion – in 2012. While that’s lower than the 4.7 percent growth of 2011, “the retail industry will still grow at a rate faster than many other industries,” NRF said, noting economists typically are projecting the real U.S. gross domestic product to rise by 2.1 to 2.4 percent.

• The CoStar National Composite Index, which measures commercial real estate sale prices, increased for the seventh consecutive month in November 2011, when it rose by 0.6 percent when compared to the preceding month. CoStar attributed the growth to the “continued decline in the number of distressed property sales, and solid price gains in investment-grade property sales.” 

In November, prices for commercial properties were an average of 1.8 percent higher than they were in the same month in 2010.

• The U.S. office market absorbed 50.4 million square feet in 2011, up from the 18.7 million square feet it absorbed one year earlier, according to a new Cassidy Turley report. Sixty-five of the 80 metropolitan areas tracked by the firm experienced positive absorption in 2011; in 2010, only 43 of the markets did.

The national office vacancy rate has declined for the past five quarters, but it is still 200 basis points above the 20-year historical average of 14 percent. “The U.S. office sector is still a solid 12 months away from registering consistent upward movement in rents across the country,” said Kevin Thorpe, chief economist for Cassidy Turley, in a statement.  “In most metro areas, vacancy is at least 200 basis points above where it needs to be to trigger sustainable rent growth.”

Four on Friday: Marci Rossell Addresses CREW Atlanta

In her days as CNBC’s chief economist and co-host of the popular “Squawk Box” show, Marci Rossell gained a loyal following because of her lively and humorous analysis of economics and politics. On Thursday, Rossell, currently a visiting professor at DePaul University, brought that engaging style to the Cobb Energy Performing Arts Centre for CREW Atlanta’s monthly luncheon. (In the adjacent photo, Rossell, left, is pictured with Hartman Simons partner Lori E. Kilberg, the immediate past president of CREW Atlanta.)

Rossell’s nearly hour-long remarks detailed her commercial real estate and economic forecast for 2012. Below are four of the many noteworthy points she made during her talk.

• Commercial Real Estate Markets Are Improving. After bottoming out in 2009, commercial real estate experienced improved transaction volume and financing conditions in 2010 and 2011. Pricing has yet to improve, but it is always “the last phase of a [recovery] cycle,” she said.

The real estate and broader economic recoveries would be farther along if not for the disruptions caused by last year’s earthquake in Japan and the decreased consumer confidence that resulted from the federal debt-ceiling crisis. “Those two things temporarily caused a slowdown across the board,” Rossell said. “We’re just now seeing those effects wash away.”

• Single-Family REITs Are Growing. REITs that buy single-family homes and then rent them out to tenants are among the “fastest growing segments of commercial real estate,” Rossell said.

• Atlanta is at a Crossroads. The population growth that largely insulated Atlanta and much of the South from the effects of previous economic downturns has slowed, Rossell noted. During the past three years, the population of the Atlanta region has increased by just 1 percent, leaving the area more exposed to the ravages of the recent recession, she said, adding “that [percentage is] starting to look like the rest of the United States.”

As a result, Rossell said, Atlanta officials must ask themselves, “Do we become Charlotte or do we become Detroit?” Charlotte, she explained, adjusted to the decline of its manufacturing sector in the early 1990s by opening “itself up to [the] financing [sector],” while Detroit has stubbornly continued to rely on the automobile industry. 

The recent streamlining of its permitting process, which officials hope will make Atlanta a more appealing destination for business expansions and relocations, indicate the city is responding to the challenge, Rossell said.

• A Break-Up of the Euro Zone Wouldn’t Significantly Harm the U.S. Economy.  Rossell estimated there’s a 60 percent chance the euro zone will break up this year. Contrary to conventional wisdom, though, such an occurrence wouldn’t derail the U.S. economy, she said. “I believe that’s been priced into U.S. financial markets already.”

What would create a setback is an unexpected event, such as last year’s earthquake in Japan or debt-ceiling crisis. “What bumps you away from the [recovery] cycle? The unexpected things,” Rossell said. “Is there anybody here that hasn’t heard that Greece is in trouble?”

Four on Friday: Chelsea Dennis

One month after joining Hartman Simons’ litigation team, Chelsea Dennis agreed to answer FOUR questions so we could get the inside scoop on the firm’s recent addition. Dennis joined Hartman Simons from Seyfarth Shaw, LLP where she served in the commercial litigation group. She graduated from Michigan State University and holds her law degree from Emory University.

HS: What will be your primary scope of work at Hartman Simons?

CD: As a member of the litigation team, my main focus will be representing clients in confirmation actions, deficiency actions and note-suits. I will also represent creditors in both corporate and individual bankruptcy proceedings.

HS: What excites you most about working at Hartman Simons?

CD:  All of the attorneys are extremely approachable and have a wealth of experience in law and business. I am impressed with the relationships the attorneys develop with their clients and I am proud to be a part of the Hartman Simons team.  

HS:  First impression of the firm?

CD:  Everyone has been very kind and welcoming. 

HS:  Can you share a fun fact about yourself with our readers?

CD:  I was a competitive figure skater for 13 years and obtained the highest level of testing in individual freestyle figure skating.   I was also a member of Michigan State’s synchronized skating team, competing on the regional and national levels.

 

Four on Friday: Best Blogs of 2011

It has been a busy year at Hartman Simons – including on the social media front! In 2011 we launched Hartman Simons’ Commercial Real Estate Blog, Facebook page and Twitter Account. We also redesigned our website to better serve our clients. It was hard to pick favorites, but we thought it would be fun to select four of our best blogs from 2011 for our last Four on Friday of the year!

1. Looking out for Landlords (April) – Written by Partner Jeremy Cohen, the blog entry outlines three questions landlords should consider when an existing tenant comes to renegotiate its lease before a renewal period. This blog remains relevant and is a must-read for landlords and tenants.
2. Thinking Outside the Traditional “Retail Box” (July) – Leasing to non-traditional tenants (NTT) was a big trend in 2011. As retail continued to struggle, Partner Lori Kilberg saw everything from outpatient clinics to colleges leasing space in traditional shopping centers. Lori shares why this can be a win-win for landlords and NTTs.
3. The Art of Landing – and Keeping – Clients and Customers – (September) Who better to give this advice than our Managing Partner Summey Orr? Summey shares seven tips to reel in – and keep – clients. His insightful blog also will put a smile on your face with tips like “Don’t be a Hater” and “Know Thyself (And Assume the Prospect Can Figure Thyself Out).”
4. Conflict Waivers – a Continuing Conundrum (October) In our last (but definitely not least) pick, Partner Benno Rothschild provides the lowdown on conflict waivers. He defines conflict waivers and also explains how conflicts of interests happen and how the process for identifying them has changed in recent years.

Let us know if there are topics you want us to tackle in 2012. We have 28 attorneys ready to share their insights and advice ­– and they’re all vying for a spot on next year’s best blog list.

Hartman Simons would like to wish all our readers, clients and friends a prosperous 2012! 

Check out a word cloud from our 2011 blogs!

 

Partner Lori Kilberg to Serve on CREW Network’s Board of Directors

I officially began my duties as CREW Atlanta president in the midst of a massive snowstorm (more on that below) and ended it interviewing one of Atlanta’s most important businesswomen, Carol Tome of The Home Depot. In between, I have learned a great deal, met many fascinating women in real estate and become even more committed to CREW (which stands for Commercial Real Estate Women).

I look forward to 2012. I have been appointed to serve on CREW Network’s 2012 Board of Directors.  As a liaison for eight CREW chapters in the Southeast, I will participate in the 2012 Leadership Summits and Council Meetings taking place in Albuquerque and Montreal, respectively. This year I will also serve as the board liaison to the member education committee for CREW Network Convention to be held in October this year in Chicago. As I embark on new challenges, I am excited to welcome CREW Atlanta’s 2012 president elect Heather O’Toole who serves as general manager with PMRG.

I hope Heather has a smoother transition into her position than I did. I will never forget my first role as president – co-hosting the annual CREW Atlanta and CoreNet Global economic forecast luncheon in January – originally scheduled just days after the huge snowstorm that paralyzed the city. We were expecting 500 guests! I spent an entire day figuring out how to reschedule. Fortunately, our guest speaker Marci Rossell, former CNBC chief economist and co-host of SQUAWK BOX, was accommodating and the program was rescheduled two weeks later. The event went off without a hitch. If you missed Marci last year, you will have a chance to hear her speak at this year’s economic forecast lunch on January 12.

Despite the snowy start, the rest of the year was filled with sunnier times. I finished the year with a fireside chat with Carol Tomé, chief financial officer and executive vice president at The Home Depot. Tome told me her formula for success is to be truly passionate about what you do and to surround yourself with a team that is committed, motivated and equally passionate (and very, very smart!). It was great to start and end the year with two such impressive women.

With approximately 300 members, the CREW Atlanta chapter has a special place in my heart. My involvement helps me establish relationships with other women in the field and gives me training to better my practice. This year will be an exciting one for the chapter as it celebrates its 30th anniversary. Cheers to 30 more years and a great 2012!

 

Four on Friday: Hartman Simons’ Holiday Bash

On Saturday, Hartman Simons employees put on their dancing shoes and boogied the night away at the firm’s holiday bash. Held at 5 Seasons Brewing Company at Prado, the entire team enjoyed a rocking collection of classic rock, dance and party tunes played by Atlanta Band Yuppie Scum. Partner Benno Rothschild, Hartman Simons’ recently elected Minister of Fun, helped Human Resources Administrator Rachelle Jones plan the holiday shindig. Rachelle agreed to answer FOUR Questions and share FOUR party pictures for this week’s Four on Friday.

HS: Why is it important for Hartman Simons to host a holiday party?

RJ: During the firm’s busiest time of the year, it is great for everyone to take an evening to relax, enjoy dinner and chat about something other than commercial real estate. Hartman Simons attorneys and staff have a great time when we all get together.

HS: Who attended?

RJ: The party was for Hartman Simons’ 56 employees and their significant others. We had great turnout with 85 attendees!

HS: Any holiday giveaways?

RJ: There were eight drawings. We gave away AmEx gift cards, restaurant certificates and movie passes with drinks. Two lucky winners even won six-month passes and three personal training sessions to Life-Long Fitness located in front of our office. Those winners could enjoy the dessert catered by Rhodes Bakery guilt free!

HS: Highlight of the evening?

RJ: It is hard to pick one, but I think the impromptu karaoke from our Director of Business Development Sharon Poland was a firm favorite.  

 

Summey Orr and Rachelle Jones

 

 

 

 

 

 

 

 

Benno and Karen Rothschild

 

 

 

 

 

 

 

Bob Simons and Andy Litvak

 

 

 

 

 

 

 

 

Sharon Poland, Jim Kilberg, Lori Kilberg

Four on Friday: Michael Smythe

From dealership owner to commercial real estate developer, Michael Smythe has done it all. He and his family owned several car dealerships in California before they decided to sell to AutoNation in 2000. In 2002, he got involved in commercial real estate and is now the owner and developer of Blue Oaks Town Center in Rocklin, Calif. This 600,000-square-foot mixed-use development is home to a hotel, restaurants, entertainment and retail. We asked Michael FOUR questions about the challenges Blue Oaks Town Center has overcome and why he picked a law firm in Atlanta!

HS:  How was Blue Oaks Town Center affected by the downturn?

MS:  The crash was devastating to the entire country, especially retailers. Two retailers in the development, Mervyns and Shoe Pavilion, declared bankruptcy and liquidated at the end of 2008. Mervyns vacated an 80,000-square-foot space and Shoe Pavilion left a 25,000-square-foot space. Fortunately, after dividing the spaces we only have 13,000 square feet vacant as a result of losing these two tenants. The replacements are a 16-screen multiplex cinema, laser tag facility and gym.

HS:  How did Hartman Simons help you through these challenging times?

MS:  We first engaged Hartman Simons on this project back in 2005. I have worked with Bob Simons and Jeremy Cohen and both are very hands-on and trusted  advisors. Cohen continually helps me find creative leasing solutions. 

HS:  What businesses are thriving?

MS:  It is interesting. There are three businesses that tend to do well during an economic downturn. 1) Cinemas 2) Value-orientated fitness clubs 3) Liquor stores. In Blue Oaks Town Center we were able to attract two of these business types to fill vacancies.

HS:  You are located on the West Coast. Why choose Atlanta-based Hartman Simons?

MS:  We needed a law team that could represent us well and understood what retailers wanted. We did not want to waste time on lease negotiations. Hartman Simons attorneys are focused on getting deals done instead of finding reasons why deals should not be completed.

 

A Morning with Carol Tomé

By Lori Kilberg, partner

Last Thursday, attendees at CREW Atlanta’s December breakfast program enjoyed quite a treat.  As one of my last acts as CREW Atlanta President, I had the honor  of interviewing Carol Tomé, chief financial officer and executive vice president at The Home Depot.

The discussion focused on leadership and Tomé shared stories about her personal journey, obstacles and successes. She said her formula for success is to be truly passionate about what you do and to surround yourself with a team that is committed, motivated and equally passionate [(and very, very smart!)].

Our chat included an update on The Home Depot, which was particularly interesting to me since the company is a long-time Hartman Simons client. At Hartman Simons, we work on new store and outparcel development for The Home Depot. According to Tomé, one of the current real estate challenges is finding creative ways to use excess property. One solution has been constructing cell towers on several sites.

Despite the distressed economic climate, Tomé believes The Home Depot has done an excellent job getting associates to buy into the vision for great customer service and making the most of a down market through collaboration.  She attributes this success in part to The Home Depot’s policy requiring every executive to spend time working in the store.

Tomé is not exempt from this rule and has worn an orange apron. She told attendees a story about a customer she encountered purchasing a wheelbarrow. The woman was concerned about getting the wheelbarrow home so Tomé helped load the wheelbarrow into the customer’s car, followed the woman home and helped unload the purchase. The woman was so grateful she offered Tomé a jar of homemade jam. Tomé said she couldn’t accept a tip, and went on her way. Several weeks later, the company received a letter from the woman praising the associate in the red-rimmed glasses. Little did she know the company’s CFO had been her helpful associate.

Tomé has held several key positions in the public and private sector. Currently, she provides leadership in the areas of real estate, store construction, financial services and strategic business development and growth initiatives for The Home Depot. In 2009, the CFO Roundtable recognized Tomé as CFO of the year. She also serves on the board of  UPS and chairs the board of the Federal Reserve Bank of Atlanta. She ranked 16th in Forbes magazine’s 2008 list of the World’s 100 Most Powerful Women and was included in The Wall Street Journal’s list of 50 Women to Watch in 2007.

Tomé is an active volunteer. She serves as a member of The Committee of 200 and a member of the Atlanta Botanical Garden board of directors. She will chair the board of the Atlanta Chamber of Commerce in 2012. 

 

Predictions for Atlanta’s Real Estate Market in 2012

By Sharon Poland, director of business development

On Friday, the Omni Hotel in downtown Atlanta will be buzzing with predictions about the 2012 real estate market. Several Hartman Simons attorneys plan to attend  ULI Atlanta’s  “Real Estate Outlook 2012 – What’s Next for Atlanta”. The Dec. 9 event will take place from 7:30 a.m. to 10:30 a.m.

The annual meeting will feature a panel of leading real estate experts from around the country. Panelists are Dean Schwanke, executive director of the ULI Center for Capital Markets and Real Estate; Doug Sams, a commercial real estate reporter for the Atlanta Business Chronicle; Will Yowell, vice chairman of CB Richard Ellis’ Investment Properties Institutional Group; Lance Patterson, president of Patterson Real Estate Advisory Group; David Hudson, senior vice president at Bank of America; and Kris Miller, president of Ackerman & Co.

There also will be a presentation about the recently released “Emerging Trends in Real Estate 2012,” a publication by PwC and ULI. Now in its 33^rd edition, the publication is one of the most highly regarded forecast reports in the real estate industry. The report reflects survey results of nearly 1,000 experts including investors, fund managers, developers, property companies, lenders, brokers, advisors and consultants.

According to the 2012 report, “U.S. real estate players must resign themselves to a slowing, grind-it-out recovery following a period of mostly sporadic growth, confined largely to ‘wealth island’ real estate markets.” 

Atlanta was ranked 36 out of 51 cities as an “investment prospect for commercial/multifamily properties.” The report states: “A classic buy-low, sell-high market, Atlanta once again may be ripe for investment.”

Atlanta did not even make the lists for “development prospects for commercial/multifamily properties” or “for-sale homebuilding prospects.” One interviewee said about Atlanta, “We’re a development town with no development.”

For more Atlanta highlights, including descriptions of the soft office market and the sale of condos, read the complete report here.

If you have not registered for this week’s event, there is still time! Check out the registration page on ULI’s website. Hope to see you there!

 

Four on Friday: Karen Davis

‘Tis the season for giving! During the month of November, Hartman Simons sponsored a 10-man combat army unit for the holidays.  According to Karen Davis, a legal administrative assistant who helped organize the effort, the 400 pounds of goods she packaged over the past few days are a testament to the generosity and outpouring of support from the Hartman Simons team. Everyone is just hoping the soldiers send a picture of themselves unwrapping the gifts.  Davis agreed to answer FOUR questions about the effort for this week’s Four on Friday!

HS: How did the firm get involved?

KD: The Bert Show on Atlanta’s Q100 recently had a letter writing campaign to the troops called “Bert’s Big Thank You,” so every soldier stationed or deployed outside the United States could receive a letter on Thanksgiving Day.  Participating in that letter-writing campaign was inspirational and gave me the idea to check with our management team to see if Hartman Simons could get involved by sponsoring a troop for the holidays. The rest is history and through http://www.anysoldier.com, we were able to find a troop that needed our help.

HS: What type of materials did you collect?

KD: In addition to many donated items the employees themselves purchased using the soldiers’ “Wish List” as a guide, an estimated $1,000 in cash donations was collected from employees and the firm itself, with which we were able to purchase and send LED cap lights (flashlights that clip to helmets), weapon cleaning kits, fleece blankets, ankle socks, energy drinks, playing cards and magazines, to name a few.

HS: Any stories from the campaign that stand out?

KD: The troop made a special request for Guppie Multi-Tools. Each tool can function as a utility knife, screwdriver, pliers and much more. Unfortunately, they are quite pricey, but Hartman Simons managing partner Summey Orr believed it was a must have for the troops. He purchased a Guppie for all 10 soldiers. He really is my hero.

HS: Most creative gift sent?

KD: Christine Davy, our managing partner’s legal administrative assistant, had the fabulous ideas of sending pillows to the troops.  She sewed and I helped fill a desert camouflage pillow for every soldier.  It was a fun and thoughtful idea. 

 

Selling of Distressed Notes is Big Business

By Jeremy Cohen, partner

If you told me five years ago that the selling of distressed notes by banks would become a virtual retail industry, I wouldn’t have believed it. Yet here we are, and business is booming. As an example of the frenzy, I recently had three different clients bidding on the same note. Pretty amazing.

As detailed in this article by Elaine Walker of the McClatchy Newspapers chain, Real Capital Analytics says there is about $172.4 billion worth of outstanding, distressed commercial real estate debt.  Whereas a few years ago, banks would have been more inclined to foreclose on a non-performing commercial real estate property, they are now choosing to sell the note.

Why? Banks are in the business of lending money, not owning and operating real estate. By selling the note rather than going through the expensive process of foreclosing, a bank stays out of the chain of title, doesn’t become liable for the property’s environmental conditions and doesn’t have to worry about the time – and expense – of other property-management issues. Add in the cost and effort of marketing the property to potential buyers, and you can see why banks are skittish about going through foreclosure.

For buyers, the benefit of purchasing a non-performing note is clear: the chance to get the loan at a steep discount. After purchasing the note, the buyer has options: it could negotiate a new loan for the borrower, or it could foreclose on the property itself. More often than not, the buyer – often a developer or experienced real estate investment firm who sees a chance to turn the property around – wants to own the site and will foreclose.

Those looking to purchase non-performing notes need to keep the following things in mind:

• Make sure you know the foreclosure laws in the particular state in which the underlying asset is located. In some states - such as Georgia, with its non-judicial foreclosures - the foreclosure process is straightforward and can be completed rather quickly.  However, in other States, such as Florida, the process can drag on for quite some time.

• Know how to get your hands on the original note and all related amendments and assignments (i.e., Allonge).

• Try to procure as much information as possible from the lender about the asset before investing money on due-diligence investigations. The lenders have extensive files about each asset – you just have to push them to release the materials to you.

• If time allows, procure an updated property condition report and environmental report before purchasing the note, but certainly obtain such a report before completing the foreclosure. The property condition report is crucial in determining any necessary capital improvements and that amount will be used ultimately to determine how aggressive a note buyer can be with the rental rates.

 

Four Trends on Black Friday

It’s Black Friday! Nicknamed “Black Friday” because it is traditionally the day retailers go from being “in the red” to being in “the black,” the day after Thanksgiving has become an American tradition, as well as an early predictor for holiday shopping sales. At Hartman Simons, we have many, many retail clients — so we keep a close eye on industry trends. The National Retail Federation conducts great research and here are FOUR of the organization’s predictions for today and for the holiday shopping season.

1) This year, 152 million people planned to shop Black Friday weekend (Friday through Sunday), higher than the 138 million people who planned to do so last year. NRF’s survey also showed 74 million people said they would definitely hit the stores and another 77 million were waiting to see if the bargains were worth braving the cold and the crowds.

2) Holiday sales will rise approximately 3.3 percent this year. This is more than the ten-year average, but not as high as the 5.2 percent gain we saw last year.

3) Half of Americans with smartphones will use their devices for holiday shopping this year. Consumers will use them to research products, read reviews, compare prices, redeem coupons, and check store hours/locations. However, only 16 percent will use their phone for making purchases.

4) Although the majority of shoppers will visit discount retailers for holiday shopping, nearly every retail category will see increased traffic including clothing, grocery, department, craft and electronic stores. 

 

Five on Friday: Bob Godard

Bob Godard is a household name if you have been in the Atlanta real estate business for any length of time. The founder and president of Compass Real Estate, Bob has completed hundreds of millions of dollars in real estate transactions during his career. Compass is currently focused on acquiring office, industrial and retail properties and associated notes throughout the Southeast.

We typically call this Four on Friday, but Bob had so many interesting points about investments (and nice things to say about Hartman Simons), we couldn’t limit his Q&A to four questions. Bob, thanks for participating in this week’s Five on Friday!

HS: What are the pros of investing in Atlanta?

BG: Atlanta is a top market in the country. It is a good place to own real estate because of its business friendly environment, sustained high employment and job creation, low cost of living, moderate climate, stable government, excellent infrastructure, great health care, high-quality educational system, particularly its colleges and universities, and world-class airport.

HS: What are some challenges associated with investing in Atlanta real estate?

BG: Everyone in Atlanta seems to be in the real estate business – some just dabble in real estate and others have made careers in the business.  Those of us who have been in the business for any length of time understand the nuances and complexities of commercial real estate because we have dealt with many of the challenges unique to this asset class.  When we do our jobs well, we make good risk adjustments and understand how to price properties appropriately based on both market dynamics and asset specifics.  Many of our larger and most active competitors are in the money management business and have little or no experience owning and operating real estate.  Some of those who have been most successful raising huge amounts of money to buy distressed real estate haven’t ever built, owned or managed a single property.  While most of these people are exceptionally intelligent, we often find that they don’t understand and appropriately account for risks and are, therefore, willing to pay more for assets than we would.

HS: What will change Atlanta’s investing landscape?

BG: There is a lot of uncertainty and the lack of leadership at all levels of government is a major issue.  While we are active in the distressed real estate debt market, the broader issue is our national governmental debt.  Unless and until there is a major change in how we operate our government, I am afraid that there are growing systemic issues that might be irreversible.  Also, when interest rates are very low, investors can’t get yield anywhere.  This has pushed a greater share of total capital into commercial real estate as investors seek yield, which has pushed up prices and pushed down return expectations.  According to the Fed, interest rates will be held low through the next presidential election and into early 2013.  A significant concern is what will happen when interest rates rise, especially if it happens quickly and/or dramatically.

HS: Why Hartman Simons?

BG: I have worked with a number of attorneys at Hartman Simons for the past nine years. They all understand that their job is to get deals done.  Hartman Simons has big firm expertise, with a small firm feel and attention to detail.  

HS: What is something most people wouldn’t know about you?

BG: I’m naturally introverted.  While I love interacting with people and find the people to be the most interesting part of this industry, I have always been happier spending time with individuals and small groups of people than at large social functions with hundreds of my business friends. 

 

Fundraiser Kicks Off 2011 ICSC Southeast Conference

By Sharon Poland, director of marketing and business development

Last night's fundraiser for Georgia ICSC's political action committee proved a large success as hundreds of people packed the party that officially kicks off of the ICSC Southeast Conference. Hartman Simons is proud to have been a sponsor of the event.

Retailers, brokers, investors - and of course, attorneys - attended the event, held at Cinco Mexican Cantina across Akers Mill Road from Atlanta Galleria Office Park. The mood was incredibly upbeat, and several attendees said they sensed a retail market rebound is on the horizon.

(In photo at left, Hartman Simons partner Peter Hartman, left, poses with Hilary Zuckerman and Dotan Zuckerman. Dotan is a leasing manager with North American Properties, one of the firm's favorite clients.)

Duke Long, a leader in commercial real estate social media, was in town from Indianapolis and enjoyed the party atmosphere (while tweeting about it, naturally). He is scheduled to lead a panel on the topic at the conference.

Bisnow Atlanta reporter Jarred Schenke covered the party, and as as his report is online, we'll link to it. Meanwhile, for more on Georgia ICSC's PAC, check out this previous entry from our blog.

 

Four on Friday: Join Hartman Simons and Support America SCORES Atlanta

Poetry and soccer may seem like an unusual combination, but not for America SCORES Atlanta, an afterschool program addressing illiteracy and obesity. Hartman Simons managing partner and America SCORES Atlanta board member Summey Orr is one of several board members who helped organized a fundraiser for the organization themed “Inspired Art.”

The event will be held Nov. 17 at Alston + Bird’s offices at 1180 West Peachtree from 6 p.m. to 9 p.m.  Twenty-two local artists created and donated pieces of art inspired by poems written by students in the program.  Those pieces of art will be on display and for sale by silent auction during the evening. Several students from the program will be in attendance to read their poetry.  There also will be a live auction for a lunch with Congressman John Lewis as part of the fundraiser.

For this week’s Four on Friday we are showcasing four paintings that will be auctioned off next Thursday. Tickets are $35 each and will be available at the door or from any board member. Don’t miss out on this great event!

 

 

“What I am” by Becky Fried

 

 

 

 

 

 

 

 

 

 

“Summertime” by Jennifer Josephs

 

 

 

 

 

 

 

 

 

 

 

“Seeing Red” by Cat Tesla

 

 

 

 

 

 

 

 

 

 

“Tornado” by Ann Rhodes

 

 

 

 

 

 

 

 

 

 

According to Program Director Laura McCrodden, America SCORES Atlanta is important for students’ heath and grades.

“America SCORES Atlanta shows students someone outside their family cares,” said McCrodden. "Our programming provides students with faith, fun and education. We want to expose students to things they have never seen before.”

America SCORES Atlanta is an affiliate of the national organization, America SCORES. The program, now in its sixth year, is based at Woodson Elementary in west Atlanta and currently serves 75 third, fourth and fifth-graders. Participants in America SCORES Atlanta attend the after-school program five days a week from 2:30 p.m. to 5:30 p.m.  To learn more about America SCORES Atlanta visit http://www.americascores.org/affiliates/atlanta

 

Four on Friday: ICSC Law Conference

By Lori Kilberg, partner

Changing lease provisions in the new economic environment and negotiating operating covenants were among some of the hot topics discussed at the ICSC Law Conference last week in Phoenix. However, for this week’s Four on Friday I wanted to share four key takeaways and a picture of four of us enjoying a break from the seminars with a hike to the top of Camelback Mountain. I even had the pleasure of attending the conference with four of my Hartman Simons colleagues - Peter Hartman, Ken Clayman, Mark Florak and Charlie Brake. A special shout-out to Charlie who gave an excellent presentation on due diligence.

My four key takeaways:

1. You always get more accomplished when you meet people in person. I also enjoy putting names with faces and finally meeting attorneys I have been working with.
2. I always manage to get a lease done at the law conference.
3. The ICSC Law Conference is a great opportunity to pick up a year’s worth of CLE credit and attend some great programs.
4. Camelback Mountain is much more challenging than a 1.2 mile hike would indicate - especially when the climb is straight up! Check out the picture below from this memorable excursion.

My four favorite hikers:

From left: Nancy Rendos, Macerich; Amy Nathan, GNC; me (Lori Kilberg, Hartman Simons); and Glenn Browne, Braun, Browne & Associates, PC.

Hartman Simons Receives “Best Law Firms” Ranking

The rankings are in and U.S. News Media Group and Best Lawyers® has named Hartman Simons one of the 2011-2012 “Best Law Firms.” Hartman Simons is ranked for its real estate law practice area.

According to U.S. News Media Group and Best Lawyers®, achieving a high ranking is a special distinction that signals a unique combination of excellence and breadth of expertise. The rankings in their entirety are posted online at http://bestlawfirms.usnews.com.

“Hartman Simons has one of the largest and most fully integrated law practices focused on commercial real estate in the country, and we are pleased to be recognized in this way and to be in the company of such great firms, ” said Hartman Simons Managing Partner Summey Orr.

The mission of “Best Law Firms” from the start has been to help guide referring lawyers and clients — from the country’s largest companies needing corporate legal advice to individuals needing to get a divorce or write a will.

"U.S News has more than two decades of experience in providing the public with the most accurate and in-depth rankings of a wide range of institutions, including our Best Law Schools rankings," says Tim Smart, Executive Editor of U.S. News & World Report. "Law firms are an integral part of our rankings and a natural accompaniment to the law schools rankings."

 

Help Hartman Simons Support ICSC’s Political Action Committee

By Sharon Poland, director of marketing and business development

Mark your calendar for a Nov.14 fundraiser for Georgia ICSC’s political action committee, which lobbies for the shopping center industry. This year, the committee is focused on water and transportation issues, according to Ted Sandler, chairman of the committee.

The fundraiser will be at Cinco Mexican Cantina and will serve as a kick-off for ICSC’s Southeast Conference that takes place from Nov. 14 to Nov. 16 at the Cobb Galleria Centre. ICSC's Southeast Conference is the largest annual networking, educational and deal-making retail real estate event in the region.

ICSC PAC is the only federally registered political action committee that represents the interests of the shopping center industry and ICSC members. In Georgia, the committee monitors legislative initiatives from the Georgia General Assembly and determines their impacts on the shopping center industry. If legislative initiatives do not support the best interests of the industry, the committee works to have new legislation considered.

Sandler said the Georgia PAC currently has two focuses:

• Supporting a proposed transportation referendum. This month, Georgia’s special transportation districts will be asked to vote on a ballot question to levy a one-percent sales and use tax to fund transportation projects in their regions.

• Dealing with water issues. Once again, Georgia is experiencing a drought. In the 2012 session there will most likely be discussions about the availability of clean water and how storm and wastewater should be handled.

But before we get down to serious business, please join the Hartman Simons team for a margarita (or two) in support of the committee and its efforts.

See below for event details and click here to register!

When: Nov. 14, 2011 from 7 p.m. to 11 p.m.

Where: Cinco Mexican Cantina (2851 Akers Mill Road, Atlanta, GA 30339)

Sponsors: Platinum Sponsors are Hartman Simons, North American Properties, Colliers International and Franklin Street

Gold sponsors are Stafford Properties, Benning Construction Company, DLC Management Corp., Wolverton & Associates, Equity One Inc.,  The Sandler Law Group, Wheeler/Brand Management Company, SRS Real Estate Partners, RCG Ventures, Grubb and Ellis and Retail Planning Corporation

 

Four on Friday: Christine Gorham, CCIM

Meet Christine Gorham, CCIM with Eastwood Real Estate Services. In 2010, she partnered with Lee Eastwood (last week’s Four on Friday) after 24 years of medical experience in both the operations and real estate sectors (including 10 years at Northside Hospital and Director of Asset Management and Leasing nationwide for SRS Investments).  The dynamic partnership has continued to grow Eastwood Real Estate Services, a commercial real estate firm specializing in medical and dental transactions.  Christine currently serves as a director on the board of CREW Atlanta. In 2009 to 2010 she served as co-chair for Leadership CREW and has been active in CREW Atlanta since 2005. Christine and Lee were recently nominated by CREW for the Entrepreneurial Spirit award in Washington, D.C.  Check out Christine’s insight into what’s happening in medical office and why CREW is important to her!

HS: What are some trends you are seeing in medical office real estate?

CG: There are some common misconceptions that the healthcare industry is doing well. We are still doing deals, but the industry has been largely affected by the economy and job layoffs. People are rolling the dice and not carrying insurance, which has reduced the volume of patients in doctor offices. This, combined with healthcare reform and pending Medicare cuts, has the healthcare industry in caution mode. Doctors are being more thoughtful about leasing space for their practices. It used to be that five and ten-year medical office leases were standard. Now we are seeing more three and five-year deals.

HS: How is Atlanta doing compared to the rest of the country?

CG: In terms of medical office, we are doing better than a lot of the other markets in the South. It basically comes down to density. People seem to be migrating toward larger cities and growth is still expected in Atlanta over the next decade. The city is currently experiencing mild growth while other markets are falling apart.

HS: Why has CREW been important to you?

CG: The quality and breadth of resources my partner Lee and I can utilize is immeasurable. In addition, I personally feel strong about supporting women in the industry. Last March I spoke at a conference in New York City, and out of a room of 300 commercial real estate professionals, there were only 13 women. Women are outnumbered in the commercial real estate industry and it is nice to have such an excellent network of women you can turn to and count on.

HS: What keeps you busy when you are not in the office?

CG: I am the wife of a busy husband and mom of three awesome boys; I really make an effort to attend all of their activities.  I also help with the PTSA, usher at my church, participate in my sorority alumnae chapter, play volleyball & tennis and of course cheer on those Clemson Tigers…did I say ranked 8^th out loud?  Lee and I have been working very hard and are looking forward to celebrating our successes with some great Fall-weather golf! The last time we played together in a tournament I won the long drive contest so we are planning to use my winnings at Chateau Élan very soon!

Four on Friday: Lee Eastwood, CCIM

Meet our Four on Friday guest and medical real estate guru, Lee Eastwood, CCIM. Lee has worked with Atlanta’s largest healthcare providers including Emory Healthcare, Grady Health System, Kaiser Permanente, Northside Hospital System, Saint Joseph’s Hospital and many of the area’s medical and dental practices.  In 2004, she founded Eastwood Real Estate Services, a commercial real estate firm specializing in medical and dental transactions. A past CREW Atlanta president and co-founder of CREW Leadership, Lee recently won the national Career Advancement Award from Crew Network. CREW is also where Lee met her business partner, Christine Gorham, CCIM and legal counsel, Hartman Simons’ Lori Kilberg. Lee, thanks for sharing more information about your firm and some interesting medical real estate trends! (Check back next week for a Four on Friday with Lee’s partner in crime Christine Gorham!)

HS: Eastwood Real Estate Services is a boutique firm focused in medical real estate. How did you get into this niche?

LE: I used to work on the landlord side of leasing office space for a number of large development firms. In 1989, I leased 30,000 square feet to Kaiser Permanente for the company’s first Atlanta clinic.  Through the transaction, I started to learn the unique challenges related to medical real estate. At this point I was hooked.  I worked at Cousins Properties doing leasing and marketing for their medical building portfolio before I started Eastwood Real Estate Services. (Pictured below: Lee & Christine discussing medical office space with a client)

HS: How has a struggling office market affected your business? 

LE: It has drastically increased our business. Some of the larger firms along with owners have referred medical clients and/or listings to us because of our expertise in the medical arena.

HS: How has CREW helped you and your firm?

LE:  Even though we are a boutique firm, CREW helps us meet other women in the industry and provides us with a wide range of resources. There are so many different types of jobs and careers in the commercial real estate industry and CREW has representation from most areas. For example, we don’t have engineers or architects on our staff, but CREW allows us to tap into a lot of these resources without having them on our payroll.

HS: When you are not working, what keeps you busy?

LE: My grandson. He inspires me everyday. Even though he has Cystic Fibrosis, he recently received his black belt and is one of the youngest black belts at his academy. 

 

Four on Friday: Daniel Malino

QR Capital’s Daniel Malino is fresh off the heels of purchasing two sizable apartment complexes in metro Atlanta. Founded just two years ago in the height of the recession, QR Capital manages approximately 1,600 apartment units located in Georgia and Florida. Lucky for us, we get to work with these guys and served as the company’s legal counsel during its recent acquisition of Gwinnett Station and Concord Village. Please welcome Daniel, our multifamily expert and this week’s Four on Friday guest.

HS: What makes QR Capital different?

DM: There are a number of companies managing and operating multifamily properties. However, in addition to our operations background, we have capital markets and structuring expertise that helps us with creative deal making while allowing us to utilize a variety of capital tools to minimize risk to and maximize returns for our investors.  We believe that our knowledge of both property operations and capital markets allows us to provide our investors with a unique value proposition. 

HS: What is QR Capital’s business strategy?

DM: QR Capital focuses on acquiring underperforming and/or distressed multifamily properties. We focus on acquiring assets where we can optimize the operations and actively add value through our management/renovation expertise.

HS: What trends are you seeing in multifamily and how does Atlanta measure up?

DM: The long term demographic trends in the Southeast favor strong growth in the multifamily sector in a way that we believe will outpace the rest of the country.  While Atlanta has experienced substantial economic disruption and continues to suffer from high unemployment, the disruption has been a source of opportunity for QR Capital, affording us a number of excellent buying opportunities.

HS: What might we find you doing in your free time?

DM: I have a lot less free time now that I have two young children. However, I enjoy golfing, shooting hoops and boxing. I also love playing jazz on the piano and guitar.

 

Conflict Waivers – a continuing conundrum

By Benno Rothschild, partner

At Hartman Simons we represent both landlords and tenants. This is advantageous for our clients because we understand both sides of a deal. However, this aspect of our business causes us to run into potential conflicts of interests every day. We feel it is important for anyone working in commercial real estate to understand how conflicts of interests happen, the reasoning behind them and how the process for identifying one has changed in recent years. I recently spoke at a Continuing Legal Education (CLE) seminar about ethical issues in commercial real estate and conflicts of interest and client waivers were hot topics.

The Lawyers Real Estate Dictionary states, “A conflict of interests occurs when a person who has a duty to act in the interests of a client also has a duty to act against the interests of that same client.” For example, Hartman Simons’ attorneys represent a number of national retailers. We understand the ins and outs of each business and what the company looks for in a lease. However, landlords also hire us to represent shopping centers where these national retailers want to lease space. Even though the retailer has different representation for the deal, we are faced with a conflict of interests. This begs the question of whether the retailer is willing to waive the conflict.

A few years ago, it seems to me conflicts of interests were waived more frequently. Going back to our example, many national retailers are fine with us representing the landlord in a deal. The retailer wants the deal done quickly and the company leadership knows our attorneys understand their business and will not waste time asking for unrealistic clauses. This thinking still occurs, but conflict waivers seem to be issued less frequently.  With retailers making fewer deals, some may decide a law firm they do business with knows too much about the company. Even though a different attorney would work on the deal who has never done their work in the past, the retailer may decide not to sign a conflict waiver.  We understand both lines of thinking and at the end of the day we want all parties to be comfortable with the legal arrangements.

Now we have identified conflicts of interests and how the real estate community responds to them. Next question, how do attorneys identify a conflict?  It is improper for us to begin work on a project until we are sure no conflicts of interests are present or they have been waived. When I started in the business 25 years ago, the only way to find out if there was a conflict of interests was to ask around. Too many times a conflict would not be uncovered until all parties were immersed in the deal. As you can imagine, this caused all types of problems.

Fortunately, technology has improved since the mid 80’s and all reputable firms have computer programs to help vet conflicts of interests. Our system will not allow any attorney to open client files until the software has been run and no conflict of interest was identified or a waiver has been signed. At Hartman Simons, we even take this vetting process a step further to make sure nothing falls through the cracks.  Technology can make anyone complacent and single-purpose entities are oftentimes not caught by the program. With every proposed deal we send an email to all attorneys and paralegals to ask if anyone can identify a potential problem.

This can be a frustrating process because time kills deals. However, we see multiple conflicts of interests come across our desks each day and it is important we do our due diligence to protect our clients and ourselves. 

 

Four on Friday: Spin for Kids!

With Oct. 23 just around the corner, Hartman Simons is getting pumped for Spin for Kids. Now in its sixth year, Spin for Kids is Camp Twin Lakes’ annual bike ride fundraiser that helps send children with serious illnesses, disabilities and life challenges to camp. This year Hartman Simons is sponsoring our own corporate cycling team and we look forward to pedaling toward a good cause.

Four things you need to know about this year’s event:

1. It’s not too late to get involved! We are working to sign up as many commercial real estate and corporate teams as possible. Join teams like Halperns’, NAI Brannen Goddard and Sweetwater Brewery. Click here to sign up as an individual or as a team!

2. Hartman Simons has 13 riders on our corporate team including attorneys Andy Litvak and Benno Rothschild. Our team also includes Blake Snyder, senior vice president at State Bank & Trust and valued Hartman Simons client. A special thanks to the following sponsors that made this year’s team possible: North American Properties, Atlantic Town Center, State Bank & Trust and Trilogy Group. To see the complete team roster or donate to the Hartman Simons team click here! Help us reach our fundraising goal of $7,500.

3. To date, 700 riders have registered and over $111,000 has been raised for Camp Twin Lakes.  

4.  Whether you are a recreational cyclist or planning to ride in this year’s Tour de France, the weekend offers something for you. On Saturday, Oct. 22, Spin for Kids hosts the Mountain Bike Ride. Participants can choose from 8-, 12- or 20-mile rides through Fort Yargo State Park. The road ride, held the following day, features 5-, 27-, 47-, 62- and 100-mile options. Following the Sunday ride, all Spin for Kids riders, along with their friends and family, are invited to a post-ride celebration featuring food, music, and fun camp activities at the beautiful facilities at Camp Twin Lakes-Rutledge.