Situs Newswatch 11/13/2017

Situs at NCREIF: Urban Resilience and Big Data
Situs RERC Director Dane Anderson joined other members of Situs leadership at the NCREIF Fall Conference last week and attended a panel on Urban Resilience followed by a session about Big Data.

Katherine Burgess from the Urban Land Institute presented about Urban Resilience, defined as “the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events”. Urban Resilience as a concept was presented as being at both a city/community level and a site/asset level.

For the city/community level, several areas were covered:

  • Resilience land use – land uses that respect the existing natural systems and therefore development is concentrated in areas that are less vulnerable to a natural disaster;
  • Resilient infrastructure – combinations of gray and green infrastructure designed to reduce the damage from natural disasters provide other benefits;
  • Regional cooperation on the above points;
  • Economic resilience – a diversified economy that won’t disappear due to a natural disaster;
  • Social resilience – a strong community and network of people.

For building resilience, the following areas were highlighted:

  • Elevation of buildings and access to buildings above the 500-year flood plain;
  • Connection to resilient, and likely redundant, infrastructure;
  • Ability to “island”  – on-site co-generation, on-site water recycling/purification, etc.;
  • Backup systems for HVAC;
  • Elevating mechanical systems above the ground floor;
  • Super-insulated windows, also operable windows;
  • Building-wide emergency, business continuity, and evacuation plans.

“Urban resiliency carries a number of benefits,” Anderson said. “Areas that embrace the idea of urban resiliency are more likely to avoid losses from natural disasters, leading to lower insurance premiums. It is also likely to increase desirability for tenants and create energy savings.”

Big Data, a popular topic in real estate for the past few years, had a nice breakout session presented by John Sheffield, partner at Linnaean co. Mr. Sheffield presented an overview and simplified explanation of various big data concepts that have become buzzwords in popular news – such as deep learning, machine learning, artificial intelligence, and neural networks.

Sheffield emphasized that subject matter experts, such as those in the room, weren’t likely to be replaced by AI. Subject matter experts were needed in the initial development process of big data tools and at the interpretation level of the output they are producing. From Sheffield’s experience, if companies want to be successful with big data, they need to adhere to highly developed organizational practices and habits around data.

Why More Real Estate Companies Are Getting Into the Tech Game
Over the weekend of Oct. 13 through Oct. 15, the Real Estate Board of New York hosted its inaugural hackathon, which brought teams from 40 different organizations together to compete for who could develop the best app to address real estate problems.

Prescriptive Data, a one-year-old software company, came away with two wins at the event’s sustainable maintenance and operations, and location intelligence categories.

It should be noted Prescriptive Data had a serious leg up. It was spun off from a division of institutional landlord and developer Rudin Management Company to sell its software Nantum, which gathers building data, such as occupancy, electricity usage and other factors, to help maintain optimal indoor temperatures and efficient energy use.

This is one of the open secrets of real estate and tech: Despite all the hand-wringing about how real estate is populated by dinosaurs who understand only brick and mortar, there are plenty of landlords worried about just how far behind the industry is and have been actively trying to fix the problem. Landlords are investing venture capital directly into new companies, creating venture capital arms or funding venture capital firms that invest in real estate tech, and making their own in-house technology.

read more: Commercial Observer

Greystone launches CMBS Mezzanine Loan Product
Greystone, a leading CMBS lender, has launched a product that allows owners of commercial real estate to borrow even more against the value of their multifamily properties, office buildings, hotels and industrial properties.

The company now offers mezzanine loans, a kind of second-lien debt, to borrowers obtaining a first mortgage destined to be bundled into collateral for commercial mortgage bonds.

It’s another example of a nonbank filling a lending void created as banks pull back in response to regulatory pressure. Before the financial crisis, many banks offered mezzanine loans to CMBS borrowers, but this has become much less attractive for them under capital requirements were revised following the financial crisis.

Greystone’s CMBS mezzanine loans range from $500,000 to $5 million and have terms of five or 10 years, the same as the first mortgage. The loans may also pay only interest, and no principal, for their entire terms, consistent with the first mortgage. Coupons range from 12% to 15%, depending on the loan-to-value ratio, debt service coverage ratio and sponsor.

That’s a market segment that is not well served by either banks or debt funds, said Rob Russell, head of CMBS production at Greystone. “This mezzanine loan product meets a need for capital that is overlooked by traditional providers of mezzanine financing due to the smaller size — yet it’s still a critical component of the capital stack,” Russell said in a press release.

read more: National Mortgage News

Historic aerospace plant to be turned into ‘creative’ offices in El Segundo
A gated enclave spanning 30 acres in El Segundo where secret aerospace work has been going on for decades will be opened up to laid-back techies and other creative types in a $100-million makeover.

Los Angeles real estate developer Hackman Capital Partners — which last month landed a large Amazon Studios lease at another property — is redeveloping four industrial buildings near Los Angeles International Airport that it acquired from defense giant Northrop Grumman.

The site off Douglas Street features 550,000 square feet of research and manufacturing space that will be converted into an office campus once the military contractor finishes its tenancy in coming months, said Michael Hackman, chief executive of Hackman Capital.

The price of the acquisition has not been disclosed.

Hackman invests in several U.S. real estate markets and has a strong presence in Culver City, where it owns Culver Studios. Amazon, which is beefing up its original content business, is taking more than 280,000 square feet of space there, including at the studio’s mansion on Washington Boulevard.

The studio is a landmark where “Gone With the Wind,” “Citizen Kane” and other classic movies were filmed. The El Segundo industrial complex, though less famous, is historic in its own right too.

read more: LA Times

Retail Clouds Darken as Mall Operator CBL Is Downgraded to Junk Status
The storm battering the retail sector entered a new phase this week as two credit-rating firms downgraded a major mall operator’s debt to junk status for the first time since the financial crisis.

Both S&P Global Ratings and Fitch Ratings slashed the rating of CBL & Associates Properties Inc. after the company last week reported weaker-than-expected third-quarter earnings and announced a sharp cut to its dividend.

The moves are the clearest signal yet that the troubles facing the retail property sector are intensifying as landlords grapple with the growth of e-commerce and fast-changing consumer behaviors.

The U.S. economy is expanding at a steady clip and job growth and retail sales remain robust. But consumers increasingly are ditching the mall and shopping from their phones and computers instead.

read more: WSJ

Banks Seek Level Playing Field for CRE Construction Lending
A bill that would ease Basel III capital requirements on commercial real estate loans could level the playing field between depository and nonbank lenders and spur more construction lending.

The Clarifying Commercial Real Estate Loans Act, H.R. 2148, codifies and clarifies exemptions to the requirement that high volatility commercial real estate loans carry a 150% risk weight for capital retention purposes. The bill passed the House on Nov. 11 and now heads to the Senate.

HVCRE lending is a subset of acquisition, development and construction loans that applies to commercial properties being built. The current Basel III requirements forces banks to keep more capital on their books for these loans, resulting in higher borrowing costs compared to other lenders not subject to Basel III.

“Many of these changes are just very practical adjustments to conform the rule better to the way real estate development is conducted,” said Gregg Loubier, a partner in Alston & Bird’s Finance Group. Some banks were cautious and automatically classified construction loans as HVCRE to avoid regulatory problems. Others, typically smaller banks, only made loans that qualify for the exemption to avoid the capital hit.

read more: American Banker

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