New Year, New Approach to Budgets

Budgeting season is typically mundane. Most businesses have their standard process for creating the next year’s budget that has been that way for ages. But this year, we can all agree creating your company’s budget has been anything but normal. To start, with shelter-in-place orders varying across the country as COVID-19 hot spots flare up, 2021’s budgeting process should include a thorough evaluation of how productive your brokerage business can work digitally if it is required. Running a 20-person brokerage and acting as principal of a CRE software company (which has since been sold to Yardi), I had the opportunity to speak with numerous managing principals. These experiences gave me insight into conducting self-evaluations of business and operations. During your evaluation, every aspect of your business will likely be under review as the industry moves into an increasingly digital age. Although there seems to be overwhelming opportunities to digitally market listings, multiple options can help your CRE brokerage operate more productively and profitably on the back-office side. Amid all this chaos, covering the basics is still important when creating a thorough budget for the upcoming year. Some managing brokers have shared that they are also focused on enhancing agent time, effectively managing corporate desk cost, and understanding their deal pipeline. Click here to read more at www.ccim.com.

Longpoint Realty Partners of Boston Started Construction on Point 35/190 a 178,000 SF State of the Art Office Warehouse Project

Carrollton, Texas – Longpoint Realty Partners of Boston has started construction on Point 35/190 a 178,000 square foot state of the art office/warehouse project. The project is located at the northwest corner of Interstate 35 and George Bush Freeway. The building is designed for one to four tenants and provides excellent exposure to the freeways. The building features a 32-foot clear height, 44 dock high doors, two drive in ramps and a 142-foot-deep truck court. Additionally, the project has four acres of extra land that can provide abundant trailer parking spaces or vehicle parking spaces for a tenant’s requirements. The project is scheduled to be completed June 2021. Proterra Properties is providing development services as well as leasing services for the project.

Eruption Ahead: Pent-Up Demand Will Drive the Economy

January has long been the time for market predictions, for economists to put their nickel down on which way the dollar will go. But how do you do that following the most fractious three quarters in living memory? Undaunted by the events of 2020, Dr. Mark Dotzour did exactly that, providing the keynote remarks for the 19th annual Commercial Real Estate Forecast Conference. While offering the caveat that economists are generally only right 50 percent of the time, he nonetheless expressed bullishness for the upcoming year. The biggest factor that will impact the U.S. economy during the next 12 months is pent-up demand. Currently, Americans aren’t spending money, they are saving it. This is an untenable situation since, as Dotzour put it, “Americans don’t tolerate deferred gratification.” COVID fatigue set in months ago for many people. Once the vaccines have been widely distributed, he foresees an explosion in spending. But instead of toilet paper and hand sanitizer, there might be a shortage of hotel rooms and airline seats. Dotzour said he is not underestimating the power of this pent-up demand for goods and services such as new clothes, vacations, conventions, gyms, live music, restaurants, weddings, theaters, business travel, going back to school and more. The supply chain proved to be more fragile than most people would have expected once the lockdown started in March of last year. As an example, half of all toilet paper typically goes to restaurants and half goes to homes, but most domiciles don’t have the hardware for three-foot-wide wheels of toilet paper, hence the shortage of that product. Will the supply chain fail us again once life returns to “normal”? Dotzour believes it’s hard to say. His biggest concern is that the supply chain remains robust enough to dispense the vaccines, pointing out that there are thousands of distribution job openings right now. Another worry is that there may be runaway inflation in our future, though Dotzour downplays those concerns. Factors such as higher gas prices, hotel rates, airline tickets and tuition could lead to inflation of the U.S. dollar. However, he feels that there are enough protections in place to prevent a runaway scenario. The Federal Reserve’s control of interest rates, for example, should mitigate escalating mortgage rates as housing is going to help lead us out of this recession. The real long-term concern is the likelihood that we will see another jobless recovery. That doesn’t mean we won’t have new jobs, but they will materialize too slowly. Historically, regardless of which political party is in office and notwithstanding tax cuts, the U.S. averages job growth at 2.5 percent. The main factor for this is globalization. Emerging economies around the world are creating more competition for the U.S. “We have purposely exported our jobs around the world. These are now tough competitors,” Dotzour said. “The world in which the U.S. is competing in 2021 is different than it was in 1980.” That said, Dotzour believes that money is going to flood in again. Private equity is sitting on $204 billion of dry powder. While we are all aware of distressed sellers, Dotzour labels these funds as “distressed buyers”—they’ve raised the capital and are hungry to deploy it. Global institutions continue to raise their allocations to real estate. The general rule of thumb used to be to spread funds 50/50 between bonds and real estate. Each year, higher CRE yields have led to more growth in institutional investment. “If you thought there was too much money chasing deals before, there’s a lot more coming down the road,” Dotzour said. The pandemic has impacted the U.S. just as it has other nations, though we may be taking a larger hit than most. Additionally, 2020 and even early in 2021 have proven that there is a lot of societal and political angst in our populace. Despite its problems, however, America is still going to be an attractive target for global investors. “Money is not flowing out of U.S.,” said Dotzour. “We have our problems, but we are still the prettiest pig at the trough.” Dotzour covered many more topics during his keynote, such as the urban to suburban migration, the future plans of the Biden administration, rising shipping costs and much more. It will be interesting to see how the next 12 months shake out; the ride hopefully won’t be as bumpy as the past 12 months.

Gross-ups and COVID: Alpha Office Escalations Solves Complicated Calculation Issues

With news of a potential vaccine on the horizon, the thought of returning to “life as normal” seems more possible than ever. However, the pandemic may have changed some of our behavior permanently, specifically impacting how we think about the safety of our work environment. “For the first time in my life, I find myself unconsciously counting to twenty every time I wash my hands, which I now do more often than ever before,” said Bill Brownfield, Counselor of Real Estate (CRE), Certified Commercial Investment Member (CCIM) and co-author of The Escalation Handbook for Office Buildings with Larry Mayerhofer, CPA. “Extrapolate that behavioral change out to include many millions of office employees and you can quickly conclude that some, probably a lot, will want to work in offices that have an office version of the proverbial Good Housekeeping Seal of Approval.” As a result, Brownfield said many office owners and managers are executing new and/or expanded operational protocols designed to improve air quality and safety so tenants will feel comfortable when they return. “Most of their operational adjustments have been implemented by now and are becoming normal daily routines for cleaning, security and social distancing,” Brownfield said. “Some have made capital investments in HVAC upgrades, touchless technologies, UV lighting and other preventive strategies.” In many cases, those operating expenses can be allocated on a pro-rata basis to a property’s tenants, along with their base rent, via escalations. But because leases so often vary, calculating the appropriate share for each tenant accurately can be a challenge. “We know that owners and property staff care deeply about doing the right thing. But the scope of responsibilities for property managers and accountants has expanded so much over the past two decades that they have little time for deep dives. They’re pedaling as fast as they can, so they need new tools to automate and speed up work processes,” said Brownfield. Click to read more at www.rednews.com.

Pearlstone Partners and ATCO to Present the City of Austin Design Commission a 41-Story Residential High Rise at 84 East Avenue

AUSTIN, Texas—November 23, 2020. Austin-based Pearlstone Partners and New York-based ATCO Properties and Management announced they are presenting plans for a density bonus for their newest multi-family condominium development to the City of Austin Design Commission this evening. Currently referred to as “The East Tower” for permitting purposes, the developers are in the naming process with the formal name to be released at a later date. The East Tower is to be constructed at 84 East Avenue in Austin’s dynamic Rainey Street Historic District. Co-Developers, Pearlstone Partners, a full-service real estate development firm with more than 100 years combined experience in the local real estate industry, and ATCO Properties, the New York-based investment group, are still finalizing many of the details for The East Tower. The firms expect to break ground on the project in the second quarter of 2021, with completion projected for the fourth quarter of 2023. The 41-story condominium tower, situated on 0.41 acres is expected to offer approximately 284 residential homes at an average size of 975 square feet. The East Tower plans for the Design Commission will include the below updates:
• Compliance with Great Streets by fee-in-lieu due to the location and proximity to IH-35 and TXDOT Right-of-Way not allowing for full Great Streets. In addition to paying the fee-in-lieu, the ground level of The East Tower has been moved back to incorporate a more pedestrian-friendly streetscape.
• The streetscape was designed by DWG. and will feature several large planter boxes with full-sized trees and native Texas plants, as well as, a tree-shaded sitting area for passers-by and bike racks. At the northeast corner, planter boxes and a vine cabling system will create an over 100-foot-tall green wall adding life and vibrancy to the area.
• An exterior mural and sign visible via a public access easement will direct visitors and residents from Rainey Street to the public art gallery located adjacent to the rear lobby. Once a neighborhood of sleepy bungalows, the Rainey Street Historic District is now the densest neighborhood in the city in terms of population, offering class-A apartments, high-rise condominiums, and high-end hotels; 25-plus restaurants and food trucks, many of them award-winning; and 20-plus uniquely designed bars—all within a coveted neighborhood that earns a 90+ walkability score. Anticipated common amenities for The East Tower include a rooftop community clubhouse, sky-deck pool, cabana, outdoor kitchen, fireplace, and lounge; a resident fitness center, featuring private spin and yoga studios; a sky dog park, lawn and washing station; a community courtyard and gathering table; and a ground floor co-working space. The rear lobby will likely feature a public art gallery and mural showcasing works by local artists, with direct access to Rainey Street and its many inviting shops, eclectic variety of restaurants and cafes, live music venues, and other entertainment options. Pearlstone Partners and ATCO to Present the City of Austin Design Commission a 41-Story Residential High Rise at 84 East Avenue The East Tower will be less than a mile from the Austin Convention Center, a mile and a half from the
Texas State Capitol, two miles from The University of Texas at Austin, and just steps away from the coveted Ann and Roy Butler Hike-and-Bike Trail, which stretches more than 12 miles around Austin’s venerable Lady Bird Lake. With close proximity to major employers—including Google, Facebook, Atlassian, Parsley Energy, Indeed Tower, Oracle, and many independent start-up firms, as well as to UT Austin and the State Capitol Complex—The East Tower will offer an ideal live-work-play lifestyle. The architect for The East Tower is STG Design, the civil Engineer is Wuest Group, the interior designer is McCray & Co, and AECOM Hunt is providing pre-construction services. The property will be marketed exclusively by Prospect Real Estate.
“Pearlstone Partners is one of the few developers focused on developing an attainable urban housing portfolio,” said Pearlstone Partners CEO and Principal Robert Lee. “We are excited that this project will offer a new price point for buyers who have been priced out of the downtown market with the recently delivered developments. Appealing to an array of buyers including young professionals, empty nesters, first- and second-time home buyers, and anyone else who is attracted to the area’s energy, culture, and urban, walkable lifestyle, the development will feature one- and two-bedroom residences. The East Tower will aim to price the majority of the units from $499,000 to $999,000, which would be the lowest priced new build, downtown high-rise, especially in the highly sought-after Rainey Street District.”

About Pearlstone Partners

Austin-based Pearlstone Partners is a full-service real estate development firm with more than 100 years of combined experience in the local real estate industry. The company has been responsible for more than $200 million in locally developed real estate and has more than $600 million actively invested in a broad range of commercial projects, including office buildings, condos, multi-family and mixed-use projects in some of Austin’s most desirable areas, with an emphasis on urban properties in pedestrian-oriented locations. Pearlstone Partners engages in the economic development of Central Texas by creating high-quality, profitable real estate development projects. With experience managing every stage of the property development life cycle, Pearlstone is uniquely qualified to execute projects from concept through completion. For more information, visit //www.pearlstonepartners.com.

About ATCO

ATCO is a closely held real estate investment and ownership platform deploying capital in select cities across the United States, with a particular emphasis on urban properties in pedestrian-oriented locations. For over nine decades, ATCO has owned, managed, and developed a diverse real estate portfolio, primarily in and around New York City, and provided a range of services to other real estate owners. ATCO’s real estate operating company includes investment management, development, marketing, architectural design, and construction management, property management, and commercial and residential brokerage. ATCO’s investment and development portfolio consist of projects in excess of $2.2 billion in gross asset value.