California’s New Energy Benchmarking & Disclosure Law Takes Effect

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California’s New Energy Benchmarking & Disclosure Law Takes Effect

California’s Assembly Bill (AB) 1103 energy benchmarking and disclosure law became effective as of January 1, 2014.  Implementation of the requirements begins on January 1, 2014, for a building with total gross floor area measuring more than 10,000 square feet, and on July 1, 2014, for a building with a total gross floor area measuring more than 5,000 square feet. The law requires certain non-residential business owners to input energy consumption and other building data into the Environmental Protection Agency’s ENERGY STAR Portfolio Manager system, which generates an energy efficiency rating for the building.  Ratings are from 1 to 100, with 100 being the most energy efficient.  A building’s energy data and rating for the previous year must be disclosed to prospective buyers and tenants of the entire building (at least 24 hours before executing the contract), or lenders financing the entire building (no later than submittal of the loan application), for the following building types: Assembly, Business, Educational, Institutional – Assisted Living, Institutional – Nonambulatory, Mercantile, Residential – Transient (e.g., a hotel), Storage, and Utility – Parking Garage.  An electronic copy of the “Data Verification Checklist” must be sent via email to the California Energy Commission at AB1103report@energy.ca.gov.

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Changing Office Trends Impact Future Demand

Changing office trends toward increased densification, more efficient use of space, greater integration with technology, and a shift toward more collaborative work spaces, as well as greater acceptance of remote access, hold major implications for developers, investors and building owners.

Tenants are downsizing their offices, particularly larger public firms, as they increasingly adopt policies for sharing non-dedicated offices, and implement technology to support their employees’ ability to work anywhere and anytime, according to Norm G. Miller, PhD, a professor at the University of San Diego Burnham-Moore’s Center for Real Estate. In addition, most of the downsizing is coming from decreased square footage for “work space” in buildings, and not in the amount of public and shared space, which actually is increasing, according to Norm Miller.

“Based on anecdotal evidence, I’d say for every two square feet a firm gives up in individual office space, they add one square foot of extra and flexible meeting space,” Miller said. “This mitigates the downsizing somewhat, and instead of going from say 250 square feet to 125 square feet, they end up at 150 or 175 square feet, and firms targeting to go down to 100 square feet will probably end up at 125 to 130 square feet based on my simulation research,” Miller said.

To be competitive in the future, office space needs to offer natural light, better temperature controls, better ventilation, and options for more flexible reconfiguration, according to Miller.

Downsizing appears to be here to stay, as this new generation demands a more collaborative, flexible and social work environment.  The increased density of populations and increased ability to work mobile will soon render obsolete the huge corner offices and closed-wall work environments.

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Fast Food Property Cravings Continue

The insatiable investor appetite for fast food restaurants persists, as evidenced by the increasing volume and average price of sales in 2013. Cap rates averaged 6.9% for fast food transactions in the third quarter of 2013, compared to an average of 6.5% in the second quarter, and 7% a year ago.  Upper-tier fast food properties are generally moving with cap rates below 6% nationally; with some higher quality assets in great locations with more desirable long-term tenancies in place (e.g., McDonald’s, Jack in the Box, Chick-Fil-A, In-N-Out) trading at sub-5% cap rates. Nationally, middle-tier fast food properties are averaging 6-8% cap rates, and lower-tier and/or value-add properties are  generally trading at cap rates above 8%. However, despite current demand, expect cap rates to increase by the latter part of 2014, as interest rates rise.

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Dodd-Frank Mortgage Reform Makes Qualifying for a Home Loan More Difficult in 2014

As of January 2014, some homebuyers will have more difficulty qualifying for a mortgage.  Under Dodd-Frank, lenders must scrutinize a borrower’s income and assets more diligently to confirm his or her capacity to make the monthly mortgage payments, including any second mortgage, property taxes, insurance and homeowner association fees.  Additionally, any child support and alimony obligations must be factored, and the borrower’s debt-to-income ratio must be lower than 38 percent to meet the definition of a safe loan. 

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Matching Challenge for Children’s Home

Please join Regal Properties in an effort to build much-needed children’s housing for Hogar Infantil, near Tijuana.  Currently, when the children reach the age of about 12-13 they have to be turned away from the existing home and split up from their siblings because of insufficient resources and facilities.  Some of them are quickly recruited and exploited for illicit purposes like prostitution.  Therefore, Hogar Infantil has a goal to build 4 large houses on its property, at a cost of $150,000 each, which will be used to address this need.  Fortunately, an anonymous benefactor who shares the desire and commitment to build these 4 houses, will match every dollar pledged or contributed by you toward this cause during this month of November.  In other words, your gift of $100 = $200, and your gift of $10,000 = $20,000!  No gift is too small, and the donor will match up to $150,000 (which means we can get 2 houses for the price of 1).  All donations are tax deductible.

Please help by mailing a check TODAY, payable to Hogar Infantil, Inc. c/o Regal Properties, at 690 West B Street, San Diego, CA 92101, and reference “Matching Challenge” on the check memo, and you will receive a receipt for your tax deductible contribution. 

For more information about this children’s home, visit www.Hogar-Infantil.org.

Thank you!

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Retail Rents and Occupancy Rates Continue to Climb Going Into 2014

Heading into 2014, a robust demand for retail space continues to drive down vacancy rates and drive up rents across the nation, according to CoStar. After closing some stores in 2010, many national tenants have begun expanding again, seeking space to open new stores. For example, less than two years ago many commercial real estate analysts predicted the demise of Starbucks while the company braked growth and even closed some stores; but now Starbucks has resumed opening stores, including some it previously closed.

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Regal Properties Leads the Pack in 2013 Deal Closings

Less than one year after closing one of the largest retail purchase transactions in the United States, in 2013 Regal Properties has already successfully closed: (1) the purchase of a 40,000 square foot retail center on Cave Creek Road in Phoenix, (2) the purchase from a bank of a broken residential subdivision in Kerman, California, (3) the purchase of a 12,600 square foot automotive center in Phoenix, and (4) the office lease negotiations, on behalf of 22 tenant-in-common owners, for 123,000 square feet of rentable space occupied by US Cellular in Tulsa, Oklahoma.  Before the end of 2013, Regal Properties expects additional closings in the retail, hospitality, land, office, self-storage and residential sectors based on currently pending transactions and activities.

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122,826 Square Foot Office Lease Negotiated with National Credit Tenant in Tulsa, OK

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Regal Properties successfully negotiated on behalf of 22 tenant-in-common owners of a distressed office building in Tulsa, Oklahoma, a lease with USCC Real Estate Corporation (US Cellular) for 122,826 rentable square feet in this Union Pines Building at 4700 South Garnett Road.  Regal Properties has since been retained by the owners to sell the property.

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Shopping Center in Phoenix, AZ

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Regal Properties represented the buyer in the purchase of this 40,000 square foot retail shopping center on Cave Creek Road in Phoenix, Arizona.

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The Shops at Lake Havasu — 704,000 Square Foot Regional Mall Sold by Regal Properties

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Regal Properties represented BOTH the buyer and seller in the purchase and sale of this 704,000 square foot regional mall for less than $22 per square foot, after successfully facilitating an enormous loan write-down and riddance of the seller’s personal guarantee, in what has been referred to as “the commercial real estate transaction of the year.” Regal Properties orchestrated a complex workout with the seller, existing lender and anchor tenant to enable the buyer’s purchase and the seller’s release of liability to the lender.

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