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Leaping Toward Asset Transparency

A new rent-roll reporting standard promises to improve underwriting and commercial real estate investment management Leaping Toward Asset Transparency


Q&A with C&W’s Benjamin Conwell

It's impossible to discuss online retail and not mention Amazon, which, despite having to close its struggling four-year-old U. S. restaurant delivery service amid fierce competition, recently surpassed Apple and Google for the first time to become the world's most valuable corporate brand, according to a new ranking of global enterprises. Benjamin Conwell, 57, a senior managing director and the practice leader for Cushman & Wakefield's eCommerce Advisory Group, knows the Amazon effect firsthand. Before joining C&W four years ago, he was the director of North America Logistics Real Estate for Amazon Fulfillment Services, the company's logistics and operations subsidiary. While at Amazon he doubled the size of the company's logistics footprint, managing a fulfillment network of 90 facilities comprising 60 million square feet. He also led the delivery of almost 30 million square feet of high-tech build-to-suit projects and repositioned more than five million square feet of repositioned existing buildings. Prior to Amazon, Conwell honed his leadership skills at organizations including Quadrant Homes and Weyerhaeuser Realty Investors. Conwell is based in Seattle, where he and his wife of 33 years raised his son and daughter. Commercial Observer caught up with Conwell at ICSC RECon last month to get the lowdown on what's next for e-commerce and the red-hot industrial real estate sector. Commercial Observer: There's a huge demand for industrial product in urban infill areas because of the need for last mile distribution centers, but there's less and less of it to go around. Given that, where is the next growth area? Ben Conwell: First let's talk a little bit more about urban infill. It is one of those key disrupters going forward. If we went back four or five years ago, if a retailer or logistics company needed to be close to their customers they had very few choices. There was the old logistics space which was not very functional, but happened to be in a great location. It happened to be 50-year-old warehouse space that used to be on the periphery of the area. Fast forward four or five years and many of those assets are now deep into developed areas. I used to tell clients that locating their supply chain assets was a story of tradeoffs, where you were in a great location with maybe not optimal facilities or you were further out where you might have a new, more utilitarian or useful facility that was compromised by where it is. But [now] we're seeing more and more development, redeveloping older buildings that tend to be in tremendous locations. What are some examples of that? We talk a lot about clear height. Thirty years ago a building that was maybe 18-feet high was considered state of the art. Now, out in the Inland Empire or as close as Chino, you see 40-feet and taller buildings. If a client wants to be able to do same day delivery or four-hour delivery, they may need to either settle for an 18-feet tall building to be in that location or they may wait two or three more years, work with a developer to build exactly what they want in that location. Multistory is a related big deal in industrial. That's a recent development, correct? Isn't that what Amazon has started to do? That's a different kind of multistory and there's a lot of great media coverage about what Amazon does with their key buildings. What I'm referring to right now are smaller buildings that are on a small urban site, but built at maybe two or three stories with trucks that can drive up to another level. The best example of that is in South Seattle, the project is called [Prologis] Georgetown Crossing and it is in leasing now. It's a great example of what folks in Asia and Europe are doing and they are well ahead of us. Are there other areas nationally that are the next prime markets for industrial real estate? In the big distribution markets in both developing logistics facilities and also retailers' interest in being there, it's New York/New Jersey. It's Atlanta, Miami, Houston, Los Angeles, Phoenix, San Francisco, Seattle and Chicago. It's that arc. I work with clients more and more about secondary markets because retail as a distribution network is strong in New York/New Jersey, [but] that doesn't do a lot of good for a whole lot of markets down the Eastern seaboard so we now see this national movement toward secondary markets. Which secondary markets are being targeted for industrial development? We have seen so many retailers go to these major markets and establish cornerstones for their distribution network based on the two-day ground delivery proposition. All of us shop online and, for years, we were ok with two-day delivery, right? Now everything is about same day [or] next day. So now many of those same retailers are coming back and developing smaller facilities in markets so that they can do next-day delivery in more markets. Markets like Nashville, markets like Jacksonville, Florida, are seeing active growth and not just from the Amazons of the world, but from major online retailers. It's not just the big players anymore; it's small- to medium-size retailers who are recognizing the importance of controlling some of their ground distribution. That's whether it's an online retailer or a physical retailer. Is there any concern from those clients about ramping up when we may be on the cusp of a recession, which would have a major impact on consumer spending? It's a timely question. With our clients, we work extensively on economic projections. The punchline is that, yes, we know there will be [a] recession, we know that the growth of online has been consistently in the mid-teens now for seven, eight, nine years even as it's grown to almost $600 billion a year. That growth and the adoption are so powerful. We're of the opinion that, to the extent that there is a slowdown economically, we won't see it as much in the online space. There's so much engagement. Lastly as it relates to vacancies in industrial, it's so historically tight, in all those major markets where vacancy is in the low single digits. Even if you were to bump up a couple of points, it's still infinitesimal in terms of the vacancy risk. What's on the horizon? What's next? A couple of things come to mind. The first is topline revenue has been what's of primary importance to the key leaders and growers in online whether they're public or not. It's about building share. It's about building recognition. It's about brand equity. At some point, just building to scale by itself is not going to be satisfactory to investors. They're going to have to see some profit, which is hard to do in the online space because it's expensive, it's capital intensive. Some people are good at it, some people are not. A mid-term trend would be more emphasis on actually making a little bit of money on every order rather than just buying your loyalty and my loyalty. We've kind of moved on from the free pass from Wall Street, [where they] just want you to grow. In the effort to always get closer to the customer, we will continue to see significant growth in buy online, pick up in store. Nationally, it is growing. For retailers, it's a smash. You're paying for Target's last mile delivery. You're doing it yourself. [That's] the most expensive part of that delivery for a company. Uber to Launch 'Flying Taxis' in LA and Dallas-Fort Worth by 2023 Uber to Launch 'Flying Taxis' in LA and Dallas-Fort Worth by 2023 Q&A with C&W’s Benjamin Conwell



NAI ALLIANCE NEGOTIATES SALES AND LEASES OF INDUSTRIAL AND OFFICE SPACE IN THE RENO/SPARKS, NEVADA AREA TOTALING ±13,156 SF Reno, Nevada—June 2019 NAI Alliance, a member of the world’s premier managed network of commercial real estate firms, announced today its Industrial and Office Team of Senior Vice President Dan Oster, SIOR, Senior Associate Chase Houston, and Associate Bryce Wiele recently negotiated sales and leases of the following industrial and office spaces totaling ±13,156 SF in the Reno/Sparks area: DVOZPC, LLC The buyer purchased the ±10,599 SF industrial flex building at 543 Vista Blvd. in Sparks, Nevada. Dan Oster, SIOR and Bryce Wiele of NAI Alliance represented the seller, WigglyDog RE Ventures, LLC. Ron Bath of Keller Williams represented the buyer, DVOZPC, LLC. NOTE: The industrial/flex condo sold for the highest price per foot ($120.29/sf) ever achieved in this development. MEDIAALPHA The tenant leased ±917 SF of office space at 9650 Gateway Drive, Suite 102 in Reno, Nevada. Dan Oster, SIOR and Bryce Wiele of NAI Alliance represented the landlord, Gateway Realty Holdings, LLC. SAGE SPRINGS MIDWIFERY The tenant leased ±824 SF of office space at 12 W. Taylor Street in Reno, Nevada. Dan Oster, SIOR and Chase Houston of NAI Alliance represented the landlord, Marmot Investments LF, LLC. JOHN CLARKSON The tenant leased ±311 SF of office space at 1325 Airmotive Way, Suite 206 in Reno, Nevada. Dan Oster, SIOR and Chase Houston of NAI Alliance represented the landlord, Airport Gardens Investors, LLC. US FINANCIAL LLC The tenant leased ±293 SF of office space 1325 Airmotive Way, Suite 175-D in Reno, Nevada. Dan Oster, SIOR and Bryce Wiele of NAI Alliance represented the landlord, Airport Gardens Investors, LLC. COMPLETE CONCRETE The tenant leased ±212 SF of office space at 1855 Sullivan Lane, Suite 210 in Reno, Nevada. Dan Oster, SIOR and Chase Houston of NAI Alliance represented the landlord, Sridhar Real Estate, LP. # # # NAI ALLIANCE NEGOTIATES SALES AND LEASES OF INDUSTRIAL AND OFFICE SPACE IN THE RENO/SPARKS, NEVADA AREA TOTALING ±13,156 SF NAI Alliance


Schedule for Week of June 16, 2019

The key reports this week are May housing starts and existing home sales.For manufacturing, the June New York and Philly Fed manufacturing surveys will be released.The FOMC meets this week, and no change to policy is expected at this meeting.----- Monday, June 17th -----8:30 AM: The New York Fed Empire State manufacturing survey for June. The consensus is for a reading of 10.0, down from 17.8.10:00 AM: The June NAHB homebuilder survey. The consensus is for a reading of 67, up from 66. Any number above 50 indicates that more builders view sales conditions as good than poor.----- Tuesday, June 18th -----8:30 AM ET: Housing Starts for May. This graph shows single and total housing starts since 1968.The consensus is for 1.240 million SAAR, up from 1.235 million SAAR in April.----- Wednesday, June 19th -----7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.During the day: The AIA's Architecture Billings Index for May (a leading indicator for commercial real estate).2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections. 2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement. ----- Thursday, June 20th -----8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 217 thousand initial claims, down from 222 thousand last week.8:30 AM: the Philly Fed manufacturing survey for June. The consensus is for a reading of 14.0, down from 16.6.----- Friday, June 21st -----10:00 AM: Existing Home Sales for May from the National Association of Realtors (NAR). The consensus is for 5.29 million SAAR, up from 5.19 million.The graph shows existing home sales from 1994 through the report last month. Schedule for Week of June 16, 2019


Leaping Toward Asset Transparency

Leaping Toward Asset Transparency June 3, 2019 A new rent-roll reporting standard promises to improve underwriting and commercial real estate investment management Reasonable people can disagree about whether specific provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act go too far in regulating financial institutions and instruments, but few would argue with the intent of the law as stated upfront in the 848-page document: “To promote the financial stability of the United States by improving accountability and transparency in the financial system.” Indeed, transparency of property-level information is key to accurately value a commercial or multifamily investment throughout its lifecycle, including at the origination of a deal and during the ongoing asset management of a deal, and to gauge relative risk. The mortgage industry has made great strides to promote transparency. The Commercial Real Estate Finance Council (CREFC), with its investor-reporting package, has set the standard for reporting bond, loan and property information for mortgages packaged as securities (CMBS). The U.S. Securities and Exchange Commission (SEC) also requires about 160 fields of this information to be filed regularly and made publicly accessible to investors through its EDGAR reporting system. The Mortgage Industry Standards Maintenance Organization (MISMO), which is affiliated with the Mortgage Bankers Association, has played a similar role. Its voluntary residential mortgage reporting standards have been embraced by Fannie Mae and Freddie Mac and, as a result, by the industry. A new commercial MISMO standard expected to be finalized this month provides a mechanism for reporting one of the most critical pieces of information: Rent-rolls for commercial and multifamily properties. By familiarizing themselves with these standards, commercial brokers and property owners can help ensure success for their clients and properties. Rent rolls Rent-roll data is the Holy Grail of property information. It is crucial to understanding the performance, health and value of an income-producing asset, including its creditworthiness. Until now there has been no generally accepted industry standard or format for the collection and reporting of commercial and multifamily rent-roll data, making it more challenging to value and transact assets. The new standard promulgated by the commercial arm of MISMO includes standardized fields for property and financial data. It also provides an easy way to maintain and share the data through widely used, secure, internet-based technology. This standard is expected to be embraced widely. Fannie Mae, which has actively participated in its development, has already endorsed the new standard for all multifamily loan originations and ongoing asset management. The hope is that Fannie Mae will use its muscle to drive adoption, and that the commercial mortgage-backed securities market, portfolio lenders and analytics vendors will accept the standard. Data containers The reporting standard was devised over the past few years by MISMO. The organization develops, promotes and maintains voluntary standards for the real estate finance industry to enable consistent loan information to be obtained and exchanged efficiently and securely between mortgage lenders, investors, servicers, brokers, appraisers, analysts, agencies and others. The new standard was designed to support all types of income-producing property, including office, industrial, retail, multifamily, assisted-living, self-storage, mobile home parks and hotels. About 90 fields in eight data containers make up the MISMO standard for a rent-roll. Specific data fields at the property level include tenant name, tenant-contract rent amount, sales amount for retail, unit number and tenant type, among others. Data fields developed for the standard were sourced from Fannie Mae as well as multiple lenders, vendors and commercial mortgage market participants, who rely on various rent-roll templates currently used by asset and property managers. The new standard contains the most commonly used data points and can be viewed online at The process is dynamic, however, and the standard could evolve over time. Also included as part of the standard is a logical data dictionary with updated rent-roll dictionary definitions, sample XML code for internet-friendly data reporting and sharing, the rent-roll data model (XSD), and business use cases that demonstrate the efficacy of the standard in multifamily, retail and senior housing scenarios. Transparency trade-offs Resistance to public disclosure of rent-roll information is apparent in some corners, with retail-property participants the most concerned, and players in the office and industrial sector somewhat less concerned. There is fear that disclosure of rent-roll information puts certain parties at competitive disadvantages for negotiating and other purposes. The argument for transparency is more powerful, however, especially for CMBS. In fact, it’s the borrowers who should benefit. Financing should become cheaper as investors feel more comfortable with the ability to monitor the performance of underlying collateral. And of course, there are always private lenders if disclosure is that big of an issue. Under the current CMBS reporting standards, borrowers are required to submit rent rolls four times a year for the life of a loan. Compliance is very strong but the formats that are used are inconsistent. Issuers could require borrowers to submit rent roll data using the new MISMO standard, which would reduce costs for servicers, investors and rating agencies. Going forward, the SEC could choose to make compliance with the new MISMO rent-roll standard mandatory for public securities, and the CREFC investor-reporting package could be updated to include the information, which would provide a mechanism for the SEC to incorporate the data. With or without Dodd-Frank, wide adoption of the rent-roll standard would be a major leap forward for transparency in the commercial mortgage industry which would translate and help ensure a healthy, robust primary and secondary market for all commercial real estate assets. — — — Jim Flaherty is CEO of and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders and investors. Leaping Toward Asset Transparency

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