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Integra Investments principal Victor Ballestas accidentally stumbled into the marina industry.

After having worked on numerous condominium developments, he co-developed a project in Bay Harbor Islands, near Miami, that had a marina component with 14 slips. Seeing the high demand for them, his firm went on to buy marinas in the Florida Keys and even develop a marina arm within the company.

“The boater demand is growing like crazy, but the supply of new marinas is obviously not moving too much,” Ballestas said during a Bisnow webinar about the future of marinas Nov. 4. “That supply/demand constraint is where we think that the opportunity lies in the space.”

Powerboat sales had already been seeing consecutive year-over-year growth this past decade, and the industry exploded since the coronavirus pandemic began. According to the National Marine Manufacturers Association, 115,000 new powerboats were sold in May and June alone, a 30% increase over the same time period last year. Additionally, Europe exports nearly $20B worth of boats each year. This is fueling demand for marina space.

“There’s nowhere to put ’em,” F3 Marina President John Matheson said.

Seahaven Superyacht Marina Harbormaster Marieke van Peer agreed. “The water space is so limited that the only way to go is up, in my opinion.”

Matheson’s company is developing marinas in the U.S. and Central America. A focus is on taking boats that are 30 to 50 feet in length, moving them to dry storage where they can be stored and retrieved with automated high-tech systems, and leaving space at docks for larger vessels.

 

F3 Marina is being developed as a 130-foot-tall, high-tech marina in Fort Lauderdale (PHOTO CREDIT: Miller Construction)

Miller Construction Co. CEO Harley Miller, whose company is building an F3 facility in Fort Lauderdale, had already built a similar automated self-storage facility for cars.

“Your boat and all of its dimensions and information is programmed in the computer,” Miller said. At the push of a button, it can be plucked and dropped into the water.

While seeing demand from new boaters, marina developers are also facing resentment from middle-class boaters who feel that access to the water is being hijacked by private interests.

“Developers can get around that by focusing on visual appeal,” Matheson said, “Particularly if it’s a dry stack marina, and in the case of F3 Fort Lauderdale, there’s a perception that these buildings are these old corrugated metal panel buildings with noisy forklifts flying boats around. Nobody wants to have that in their neighborhood, so we had to demonstrate that this is a completely different building.”

Optimum Asset Management USA Managing Director Matthew Barry is based in Miami and runs a fund out of Luxembourg. He is currently invested in the Monaco Yacht Club in Miami Beach, which has 39 residential units and 12 boat slips. Barry suggested that marina developers work harder to reach out to their adjacent communities.

“Get to know your neighbors, you get to know the land, you get to know the area surrounding it, and you find a public benefit. I think ultimately people aren’t necessarily against development,” Barry said. “They are against bad development. A public component can win over neighbors and politicians and bring up a neighborhood.”

One of the slips at Monaco Yacht Club is reserved for the whole building to use and a boardwalk along the back of the building allows public access directly to the water.

“While there are different considerations for all types of marinas, from boat storage facilities to destination marinas, developers should appeal primarily not to boat owners, but to their staff. Amenities like gyms can be key,” Van Peer said. “A happy crew is a happy captain, and a happy captain will keep coming back to the marina.”

 

Source: Bisnow

Business Rent Tax

Experts say changes are on the horizon to the decades-old language in retail and restaurant leases as a result of the Covid-19 pandemic.

New leases are being written with substantial changes, particularly in regard to provisions that provide relief for tenants that are unable to fulfill their contract obligations because of circumstances out of their control, such as a natural disaster or pandemic.

Steven Silverman, a shareholder at Miami-based Kluger, Kaplan, Silverman, Katzen & Levine PL, who deals in lease negotiations, said the language in these provisions is often broad, and landlords did not interpret them to apply to shutdowns caused by a pandemic.

“As a result, many new leases signed over the last few months include more specific language,” Jaime Sturgis of Fort Lauderdale-based Native Realty said. “Moving forward, there’s going to be a little more clarity. The provision is broad by design, so I think moving forward more clarity and more specific language addressing these types of situations. landlords and tenants have mostly settled on common ground on what those new clauses may include.”

Most new leases he’s seen include language that states that should there be any government-mandated business closures – whether by city, county, state or federal agencies – the tenant would be protected with partial rent abatement.

“That also protects the landlord, as these agreements often add that the tenant would need to pay a minimum rent to cover costs like property taxes and maintenance,” Sturgis said. “For the most part, everybody’s on the same page about it. People are looking to share the burden.”

Silverman said that while the two sides have found common ground, it was rare for landlords to give any ground on lease negotiations, but the pandemic caused a power swing rare in the industry.

“I believe that bargaining strength is going to change because I think there will be a glut of space on the market,” Silverman said. “When landlords are faced with that reality, they become more relaxed in how they’re going to sell their product.”

Signs of that power swing were apparent almost immediately.

Jenny Gefen, a broker for retailers at Colliers International South Florida’s Miami office, said Bolay was close to signing its lease 2,700 square feet at 810 Brickell Ave. in Miami, but after the pandemic came to South Florida, restaurant representatives requested a review of the language in the lease to protect themselves in case of future government-ordered restrictions or shutdowns.

“Bolay eventually signed the lease after representatives felt they would be covered for pandemic-like situations in the future,” Gefen said. “Many retailers signing new leases are requesting percentage rents for the first couple of years as their businesses recover from the pandemic.”

“Provisions that protect tenants from disasters or pandemics aren’t the only aspects changing in leases because of Covid-19,” said Eric Hochman, chief development officer at Boca Raton-based PEBB Enterprises.

Hochman said his company is working with prospective tenants to include clauses that outline what spaces are available for extra seating, fulfilling curbside and/or delivery orders should government restrictions be enacted again.

 

Source:  SFBJ

As shopping centre and high street landlords survey the wreckage left by coronavirus, warehouse owners are facing a different problem: how to deal with record demand.

The pandemic has pushed more consumers online, prompting a rush for warehouse space, from small “last-mile” delivery sites near city centres to cavernous “big-box” distribution centres

Amazon has led the charge. The company, which has added an eye-watering $600bn to its market capitalisation this year as sales have jumped, is inking lease agreements on mammoth warehouses around the world. It has committed to opening 33 “fulfilment centres” in the US this year, an additional 35m square feet spread from Atlanta to Arizona.

The US ecommerce giant is also the incoming tenant of a 2.3m square foot warehouse on London’s outskirts, according to people with knowledge of that deal. Amazon’s sprawling expansion is one reason why investors are sensing opportunity.

The take-up of UK logistics space hit record levels in the second quarter of the year, according to property group CBRE — despite the lockdown.

“Following a quiet few months after coronavirus hit, investors are back with a vengeance”, said David Sleath, chief executive of Segro, the dominant logistics company in the UK and a sizeable participant in Europe which last week said it had lifted first-half profit. “If you are a global institutional investor and you want exposure to commercial real estate, this is an attractive place to be.”

A decade ago, ecommerce accounted for 6.7 per cent of all retail sales in the UK, according to the Office for National Statistics. By February, the month before the outbreak, the figure was 19 per cent. By May it had hit 33 per cent. In April, 27 per cent of purchases were made online in the US, according to the commerce department and Bank of America.

Until recently, the most desirable property to own was a traditional mall. Malls had a natural moat, being difficult to develop and serving a catchment area

“That share was likely to diminish as stores reopened,” cautioned Mr Sleath, “but incoming tenants were looking to crystallise that temporary spike into increased capacity”.

“There’s a wall of cash coming into our sector,” said Marcus de Minckwitz, an investment adviser on European logistics at Savills property.

Every extra £1bn spent online means the addition of almost 900,000 square feet of logistics space, according to CBRE. New York-listed Prologis, the world’s largest warehouse company, estimates that 1.2m sq ft of space is needed for every $1bn in ecommerce sales in the US.

Gains from ecommerce tenants far outweigh the losses from bricks-and-mortar retailers, according to CBRE, one reason why Blackstone, the world’s largest private property owner, has described logistics as its “highest conviction” sector.

“Until recently, the most desirable property to own was a traditional mall. Malls had a natural moat, being difficult to develop and serving a catchment area . . . Logistics for a long time was viewed as the other end of the spectrum: not so exciting and more easily replicable,” said Ken Caplan, global co-head of Blackstone Real Estate. The rise of ecommerce had shifted that whole dynamic.”

In June 2010, Segro’s market capitalisation was less than £2bn, according to data from S&P Global. Now at £11.8bn, it is comfortably the UK’s largest listed property group; UK shopping centre owner Intu, meanwhile, has collapsed. The value of US peer Prologis has climbed a fifth this year to roughly $77.5bn.

Dozens of shopping centres in the US are being turned into industrial sites, according to CBRE, which says Covid-19 will accelerate the trend. This week, the Wall Street Journal reported that Amazon was in talks with mall owner Simon Property to repurpose department stores as distribution hubs.

Thanks to the ecommerce boom, CBRE predicts there will be demand for 333m sq ft of new space in the US by 2022 — treble its previous estimate — and expects rents to grow by about 6 per cent a year. Amazon is not the only eager tenant. Fashion retailers with a limited online presence have desperately sought space to park stock they could not shift in the pandemic.

“They already have warehouses full of clothes, then next season’s come in and they can’t stack it,” according to one UK property agent.

“But while some warehouse owners had suffered hits to rental income from retail tenants in particular, investors bidding for new sites were achieving few discounts,” said Mr de Minckwitz.

“Some indiscriminate investors were likely to get caught out, warned Mr Sleath. “There will be more retail fatalities, that will mean empty warehousing as well as shopping centres. It’s very important to think about where you place your money.”

Asset manager PGIM bought five German logistics sites last month and said it was optimistic that demand would only grow. Private equity firms are piling in too: as well as Blackstone, Meyer Bergman plans to raise €750m to invest in Europe.

“Investors needing long and strong sources of income, such as sovereign wealth funds and European pension funds, were also attracted by the sector,” said James Dunlop, a fund manager at Tritax Big Box.

“But some might come unstuck,” cautioned Adrian Benedict, head of real estate solutions at Fidelity. “There’s a flood of capital from retail to logistics. Inevitably, with every crisis, you see those poorly considered deals at the end of the cycle are the ones you really regret.”

 

 

Source: SFBJ

questions

COVID-19 deepens its hold on cities around the country, the question is increasingly becoming when it will peak in each city and for how long?

By now, U.S. cases have risen to top 600,000 despite a recent plateauing of cases in some areas. Even once the worst of it is officially behind us, we may continue to see the virus pop up here and there, menacing populations that may have thought they were safe.

One commercial real estate professional we spoke to, an asset manager at a major real estate investment firm, is conservative and practical in her recovery expectations. She said in a conference call that “if we shed 10 million jobs in March, we have never created more than 200 thousand jobs in a month. Even if we double that, it will take a lot of time to recover.”

Even after that recovery eventually, inexorably occurs, though, what will the world look like? We keep talking about a return to the way things were, but is that even within the realm of possibility? Or will this period of disruption be so destabilizing to our systems that it will completely change our social, economic and political norms?

While recovery may still be a long way off, it is not too early to estimate the impacts of the crisis on the activity within the commercial real estate industry. That’s why propmoda recently conducted an in-depth survey, in which we collected responses from industry professionals across the country and the world, working in fields from development to architecture to brokerage across a diverse range of property types. The resulting deep-dive report, The Commercial Real Estate Industry’s Reaction to the COVID-19 Threat, uncovered responses and sentiment about the affects of the pandemic on the industry.

Many respondents chimed in commenting on a need for a moratorium on commercial mortgages, and others just pointed to the dire need for an effective treatment or vaccine. One respondent, a leader at an office landlord in Turkey, said that “I don’t think the commercial real estate industry will recover to pre-crisis levels since both employers and employees will be accustomed to new business processes which make use of less office time. People will not change their habits.” So what kind of habits will change?

Will remote work become more commonplace now that we have all started growing accustomed to it? By the time this pandemic ends, all of us will have had a crash course in Zoom video conferencing. What about the way we cluster on city streets, take public transit, or shop at the grocery store? In many ways, COVID-19 seems to be shining a light on trends that were already bubbling under the surface. Online shopping for groceries, for instance, was already growing, by as much as 35 million U.S. consumers between 2018 and 2019.

Twenty three percent of our survey respondents said that they would be using remote working arrangements more, after the COVID-19 outbreak. We are not alone in picking out this trend. In another recent study of 317 CFO-type professionals, Gartner found that almost three quarters of finance leaders will be increasing the number of remote workers within their organizations by at least 5%. Not only that, but their survey also found that 4% of respondents would be transitioning fully half their company’s staff members to a permanently remote plan. 17% of respondents said they’d be sending 20% of their workers home. These numbers could be disastrous to the office market.

Beyond just office space use, COVID-19 is opening up entirely new questions that point to the very heart of the real estate industry. How will retail landlords survive when their tenants cannot welcome shoppers into their stores? How will industrial owners keep their warehouses humming with activity when huge numbers of non-essential goods aren’t being sold? How will apartment landlords respond when their residents can’t pay rent, but regulations prevent them from evicting non-paying tenants? According to the NMHC, April rent payments are down only 7% from March, before the worst of the outbreak came to the country, but that’s just one month. What happens next?

Social distancing is something that will likely come to an end, whether it is in two months or a year and a half. Hopefully, we can end it sooner than later, but the memories of the danger present in close human contact will likely stay fresh for a long time. The economy may get its engine running and wheels turning late this year or some time next year. But will it even be the same kind of car?

 

Source: propmoda

uncharted waters

It is reasonable to presume that no South Florida business will emerge entirely unaffected by the pandemic and subsequent economic downturn.

As companies figure out how to get back on their feet, commercial real estate brokers and property managers are helping them adapt to the possibility of staff reductions and structural changes to their businesses. The big picture will be a mixed bag of positives and negatives for owners, investors and tenants.

On the positive side for owners, low-interest rates will mean an attractive environment for refinancing quality loans. For domestic and international investors who still consider America the world’s safest place to invest, the time will be right to return to the market in search of new buying opportunities. Tenants who are hit hard by months of interruption and serious revenue shortfalls will scrap plans to expand.

The commercial real estate sector as a whole is navigating this evolving crisis through uncharted waters. Tenants have reached out to us to report the early impact of the coronavirus, or COVID-19, on their businesses. We are sympathetic to the economic uncertainty they are facing and are pointing them toward the various federal, state and local programs being deployed to help businesses recover.

Facing immediate fiscal challenges, landlords are not in a position to extend financial relief. Some are offering hope that when the crisis ends a comprehensive review of tenants’ circumstances can be performed and a response provided in due course.

We also are urging tenants to examine their own resources, including the terms of their insurance policies. For example, if coronavirus losses are sufficient to trigger business interruption coverage according to the terms of their policy, some tenants may be covered for income losses resulting from disruption of their operations.

No one knows the timeline for recovery, so until the pandemic is under control and the economy recalibrates, my staff and I are focusing on the things we can control. We moved rapidly to transition our firm to remote mode and are proactively taking the following steps to keep our team engaged and our customers reassured:

  • As the pandemic became imminent, we fast-tracked the companywide installation, training and roll-out of stay-at-home technologies. It was a substantial investment, but well worth the long-term benefits it will deliver to our business. We also made sure everyone had a laptop and video conferencing capabilities, and adapted our phone system for the seamless offsite handling of calls.
  • We hold mandatory virtual staff meetings every day to talk shop, share news, observations and suggestions. We challenge everyone to present fresh ideas to benefit our company, our clients and our community. In addition, for as long as the health authorities permit, two people per day go to the office to support the stay-at-home team by forwarding mail and other documents, as needed.
  • Each of us stays in touch with clients to share updates and assure them that we are taking care of everything in our power on their behalf. We visit their properties to make sure they are being properly maintained, and although we no longer can go inside tenant spaces, we make sure everything is being maintained as planned on the outside.
  • Working from home can offer quiet periods during the day to sit and think about what we can be doing differently. We are encouraging our brokers, property managers and administrative staff to carve out time every day to think about challenges and opportunities for moving our business forward and ultimately making it more successful than ever before.
  • Several members of our staff are using this time to hone their skills with online training
  • Most of us have that folder full of miscellaneous notes that might be useful someday but never make it out of the pile. With some extra time temporarily on our hands, most of us are getting more organized, filing all those business cards we’ve collected or reading those industry articles we’ve meant to read for months. It’s time well spent.

Instead of wasting precious time worrying about how and when the commercial real estate market is going to recover from the impact of COVID-19, we are preparing to hit the ground running when it does.

 

Source: SunSentinel