Tag Archive for: property values

How CRE Investors Can Still Create Value In A Rising Rate Environment

10349421 - hand of businessman holding dollars

A building that makes “no sense” to most investors could be a diamond in the rough to another — and knowledge and information is key in the current rising rate environment, according to one industry watcher.

“You can’t add value to bonds — and unless you own a VC firm or you’re Warren Buffett or Elon Musk, you really can’t create value by owning stocks,” says Marcus & Millichap’s John Chang. “Other than owning a company or a franchise, only real estate allows investors to roll up their sleeves, either physically or metaphorically, and create value in an investment.”

And Chang says this happens in one of three ways: repositioning, management, or knowledge.  Repositioning can be as simple as upgrading common areas and as complex as transforming high-rise office towers into apartments (a trend that’s happening at a rapid rate in some major metros).  It can also fall somewhere in between those extremes: think moving a Class C property to Class B or repurposing an outdated shopping mall into a mixed-use asset.

“Creating value in management can also run the gamut,” Chang says. “At the simplest level, an investor may see some high value but basic operational things that can be done — perhaps just cleaning up a property, adding professional management and moving the rents to market. Something more complex may be re-tenanting a building. An office investor I know bought a very large property with an enormous vacant space. He already had a major tenant lined up so he bought the building, restructured the space a bit and then plugged the new tenant in. Boom: the building went from 25% occupancy to 90% occupancy and the property value changed dramatically.”

Chang also draws on another anecdote, this time in the multifamily space, to illustrate this point further. He says an investor he knows with a great apartment management team bought several small- to mid-sized near the ones he already owns and leveraged that team across multiple units.

And finally, there’s knowledge, which Chang says is “all about finding market inefficiencies and exploiting them.” This could include acquiring assets based on emerging demographics or population migration, or could come on the heels of a major employer changing its HQ location or in advance of a tax or policy change. Chang says there are ample opportunities to “capitalize on information where the pending changes are not baked into an asset’s price.”

Several recent examples bear that out: the global supply chain dilemmas plaguing virtually every sector of the economy have prompted many companies to consider re-shoring or near-shoring to mitigate those types of risks in the future.

“These and more opportunities are out there, and a lot of them will make sense regardless of rising interest rates or other factors affecting the market,” Chang says.

 

Source: GlobeSt

,

$2.4 Billion In New Construction Raises Broward County Property Values To A New High

New construction is fueling Broward County’s growing property values, which reached an all-time high this year, according to new preliminary 2017 values released Friday by the Property Appraiser’s Office.

The new figures will be used by local governments to set their tax rates and budgets for the coming year. (Click here to see the latest property value figures for the county and local cities.)

Leading Broward cities in new construction this year were Hollywood and Dania Beach, reaping the windfall of FPL’s new $1.2 billion “clean energy” plant in their portion of Port Everglades that was added to the tax rolls this year.

But right behind those cities were two that have been consistently near the top of the county’s new construction list in recent years: Fort Lauderdale and Parkland. They’re the only two Broward cities to be in the top five when it comes to new construction in each of the past six years. And they couldn’t be more different.

Fort Lauderdale is the county seat with a booming downtown and an upscale beach that are attracting substantial high-rise and redevelopment projects. Parkland, with its 30,000 population that’s a sixth of the size of Fort Lauderdale on the county’s northwestern fringe, doesn’t have a beach or a downtown.

What Parkland does have is vacant land to build on, something that’s a rarity in the rest of the county. In recent years, the suburban community has been annexing for development portions of the Wedge, a nearly 2,000-acre triangle of vacant land that was transferred from Palm Beach County to Broward in 2009.

“Developers are purchasing large agricultural parcels in Parkland and developing them into single-family home communities,” Property Appraiser Marty Kiar said.

Major builders there include Lennar, Toll Brothers and CalAtlantic Homes. The projects include the Parkland Golf and Country Club, Watercress, Mira Lago, Heron Bay and Parkland Bay. Construction in the city was largely responsible for a 52 percent increase in the number of Broward homes started during the first three months of this year.

“That land that came in is highly desirable as so many people want to be in Northwest Broward and Parkland,” said Broward Commissioner Michael Udine, a former mayor of the city. “They love our open space, great schools and family-friendly environment. People are moving from within Broward and many from out of state.”

The new figures released Friday put Broward’s new construction this year at $2.4 billion, which was $111 million more than the amount listed in the initial report that came out in May. The county’s overall taxable value came in at $177.3 billion, up $17 million from the May report.

Existing property values in the county are up 7.8 percent from a year ago, while the increase is 9.3 percent when new construction is included. For property owners, higher values signal a growing return on the investment they made, but they can also mean higher taxes to be paid.

Miami-Dade County is reporting an overall taxable value of $272.4 billion, an increase of 8.4 percent, with $8.2 billion in new construction. In Palm Beach County, property values reached $176.8 billion, a 7.3 percent increase, with new construction totaling 2.7 billion.

Among Broward cities, overall totals show Dania Beach leading the county with a 20.7 percent increase in property values and Hollywood second with a 15.6 percent increase. Fort Lauderdale values are up 9.3 percent, Pompano Beach 9.2 percent, Pembroke Pines 8.6 percent, Miramar 7.7 percent and Coral Springs 7.4 percent.

 

Source: SunSentinel