Commercial Real Estate Finance

Archive for the ‘Multi-Family’ Category

Mensch 

Noun, informal. A decent, upright, mature and responsible person. 

Schlemiel 

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

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Mensch of the Week:

Todd Schuster, Ares Commercial Real Estate

Ares Commercial Real Estate (NYSE: ACRE) has been busy. The mortgage REIT, which focuses on mid-market multifamily loans, recently announced the acquisition of AREA Property Partners in a move that quadruples the company’s capital to $8 billion, according to Commercial Property Executive. Last week, ACRE bought EF&A Funding (better known as Alliant Capital LLC) for almost $63 million while also announcing a new co-CEO, Todd Schuster.

Mr. Schuster is a board member with both ACRE and an Alliant Capital affiliate, which makes him ideal to lead the unification of these these two companies. This appointment is also an extremely high-profile one and likely pleasing to investors. Read the rest of this entry »

There’s an ongoing competition among urban multifamily developers to create the most upscale, desirable residential properties in their market. In cities throughout the country, especially those with active central business districts and growing populations, they’re constantly one-upping each other to see whose ground-up or converted residential property has the best exterior, nicest amenities, most elite brand, and wealthiest clientele.

In the last few months, developers have announced or broken ground on a number of high-end residential projects in the Northeast. Here in Philadelphia, a joint venture is converting a historical landmark at 16th and Walnut Street into a 206-unit luxury multifamily building with a private deck, media rooms, yoga studio, pet grooming service, quartz countertops, etc. The project is being branded “ICON,” which sounds about right…

Across the river in University City, Brandywine Realty Trust and Campus Crest Communities are building an upscale student housing high-rise with a rooftop swimming pool, 24-hour fitness center, and “hotel-like amenities.” That’s right, hotel-like amenities in a student housing tower.

In Manhattan, meanwhile, developers have announced a luxury residential project at 432 Park Avenue. When completed, it will be the third tallest building in Manhattan (and the tallest residential property this side of Dubai).

Whenever I hear about these projects, my first thought is always, Sweet! But then the bleeding-heart populist in me thinks, But what about those of us who aren’t ultra-wealthy? Read the rest of this entry »

Executive Interview:

Carl Dranoff

Dranoff Properties

Civic leader, entrepreneur and urban visionary, Carl Dranoff is president and founder of Dranoff Properties. For over three decades, he has been a leader in creating unparalleled residential destinations that revitalize the urban core. Though based in Philadelphia, Dranoff’s work has gained national recognition and respect, with a portfolio range of historic rehabilitations, ground-up skyscrapers and complex mixed-use projects.

Dranoff earned his B.S. in Civil Engineering at Drexel University and his MBA from Harvard University. He has been awarded an Honorary Doctorate in Engineering from Drexel University and has been named “Entrepreneur of the Year” by Ernst & Young.

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Q: How did you get your start in the real estate development business?

From an early age I knew I wanted to be a builder.  To prepare, I armed myself with the proper education, graduating from Drexel University with a degree in civil engineering and earning an MBA at the Harvard Business School.

I started my career working for Jack Blumenfeld and Company on the 1500 Locust Street apartment project, then under construction.  I’ve always had a strong entrepreneurial spirit, and working for Blumenfeld helped feed my dream of establishing my own company.

Q: What is your favorite part of your job? What do you find most challenging?

I love proving the naysayers wrong, undertaking projects the pundits say are impossible or too risky. Our projects are complex and the coordination and management of all the aspects really separates us from the competition. We go into cutting edge locations, reinvigorate a neighborhood, and deliver an imaginative and high quality project.

Dranoff Properties employs the best and most experienced staff, along with our veteran executive leaderships.  However, we work in a very fast paced industry, and as any successful company can attest, keeping everyone on the same path can be challenging. Honestly, finding enough hours in the day is the biggest challenge I have. We have projects underway, irons in the fire and a strong vision for the future – it’s an exciting time for us.

Q: How have economic conditions affected Dranoff Properties’ strategy? Have you widened or narrowed your focus due to present conditions?  Read the rest of this entry »

Even though multifamily has been the best-performing asset class since the recession hit, the multifamily sector has been hotter in some markets more than others. From Integra Realty Resources’ Viewpoint 2013, here is a ranking of the Top 10 Markets for Multifamily Deals!

(Rankings are based on volume of reported transactions in 2012) 

10. Seattle

9. Austin

8. Houston

7. Phoenix

6. Denver

5. Atlanta

4. Dallas Read the rest of this entry »

No self-respecting luxury developer makes “apartments” anymore. Nowadays, high-end residential units are called “lofts.” If you ask me, calling apartments “lofts” is like saying vahz instead of vase. Also, many of today’s so-called lofts are ground-up developments, rather than converted industrial buildings as the term originally implied. (Thus we have a distinction between “hard” lofts and “soft” lofts.)

Okay, we’ll call them lofts. Either way, they’re big business, both for national REITs and local investors, and a source of much-needed economic activity for cities big and small.

I often gripe that secondary markets are overlooked for investment opportunities. One potential opportunity in some secondary markets is luxury multifamily properties. The underdevelopment in some non-gateway markets often leaves centrally located parcels of land with strong development potential.

Take, for instance, Philadelphia’s Avenue of the Arts. This district, formed two decades ago on South Broad Street, hosts some of the city’s most prominent theaters, hotels, and restaurants. At a certain point, however, this thriving area abruptly stops.

Local developer Carl Dranoff has realized the potential for the great amount of unused or underused land only blocks from City Hall. In recent years, he and Dranoff Properties have deployed many millions of dollars into this area to bring high-end residential offerings to match the quality of its location. Last week, Dranoff Properties broke ground on its newest project, an 85-unit mid-rise project to feature green technology and an elaborate work of public art called “Light Play.” Read the rest of this entry »

Mensch:

Noun, informal. A decent, upright, mature and responsible person.

Schlemiel:

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

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Mensch of the Week:

Allan Domb

Greater Philadelphia Association of Realtors

Back in January, the Philadelphia Business Journal announced that Allan Domb, a local realtor specializing in luxury condominiums, had been appointed the 88th president of the Greater Philadelphia Association of Realtors.  

As usual, I’m about two months late in congratulating Mr. Domb, but better late than never.

Allan Domb is a major force in Philly’s luxury residential niche, marketing and leasing properties in the city’s most desirable locations: Rittenhouse Square, Washington Square, the Delaware waterfront, etc. As a longstanding member of Philly’s real estate community, he was a clear choice as new leader for GPAR, which calls itself “The voice of real estate in Philadelphia.”

Unfortunately, high-demand neighborhoods like those of Center City are generally rare for Greater Philadelphia. A trade organization such as GPAR is essential to this city, where the commercial and residential markets have significant room to grow–provided the right conditions are in place. Read the rest of this entry »

Last fall, in one of our Executive Interviews, real estate attorney Jerry Kline discussed how members of the real estate community are prone to overreaction. Regardless of market, asset class, or real estate cycle, this industry (as a whole) tends to go overboard in its investments and developments. Mr. Kline explains,

Real estate suffers from what I might call the “Three Bears” phenomenon, i.e.,  market reactions tend to be disproportionate to the conditions that cause them, so nothing is ever “just right.”

Prior to the 08/09 financial crisis, office, retail, and especially single-family residential were areas of substantial expansion. Thanks to the market’s overall confidence and availability of financing, projects were springing up all over the country–until the recession left them in distress, unfinished, or canceled before a shovel even hit the ground.

While the market may be bearish toward those assets most associated with the recently burst bubble–single-family, in particular–this isn’t to say the real estate industry has learned its lesson–at least, not the more general lesson. The tendency toward over-development/over-investment has simply shifted to other product types.

I had a professor in college who always said, Humans are chronic underestimators. In this case, we seem to be underestimating the likelihood of a shift in fundamentals.

Consider multifamily. Obviously, this asset class has outperformed its peers in the wake of the recession, and continues to stand out as CRE’s most valued property type. Though multifamily demand began to level out last year as sentiment toward the single-family market improved, it remains a major target for investors. In the near term, the abundance of multifamily developments is a very good thing. In Philadelphia, Natalie Kostelni writes, Read the rest of this entry »

I’m interested in the ongoing evolution of America’s cities, as you can no doubt tell if you read the Llenrock Blog on a regular basis. Even though the “urban experiment” is still very much a work in progress, a few things are becoming clear. One of these is the demographic shift that has brought greater numbers of Americans from the suburbs to downtown areas. As members of the so-called “creative class” gather their fixed-gear bicycles and English degrees and crippling student debt to move into urban apartments, cities must meet the needs of a growing populace with more efficient systems of transportation.

I looked at this idea last month in a post exploring the role of train stations and bus lines as anchors for mixed-use, retail, and residential real estate. Today, I want to discuss a related subject: walkability.

There’s a fascinating website called Walkscore.com, which–as the name implies–scores cities according to their convenience and accessibility for pedestrians. Here’s how the site ranks America’s largest cities:

10. Oakland

9. Minneapolis

8. Miami

7. Washington, D.C.

6. Seattle

5. Philadelphia

4. Chicago Read the rest of this entry »

There are a number of ways to determine the nation’s “top” multifamily markets. It all depends on one’s specialty or investment strategy. Even so, this ranking, based on late-2012 vacancy data from ReisReports, is a good place to start. Here are the Top 10 U.S. Multifamily Markets by Vacancy Rate:

10. McAllen, TX: 2.3%

9. Honolulu, HI: 2.3%  

8. Fargo, ND: 2.3%

8. Once more, in case the enormity of the statement hasn’t yet sunk in: Fargo, ND: 2.3%

7. Bellingham, WA: 2.3%

6. Scranton/Wilkes-Barre, PA: 2.2%  Read the rest of this entry »

Looks like the results for our newest survey can be summed up with “all of the above.” Personally, I prefer the air hockey tables…

See our previous polls here.