2015’s Most Desirable Investment Property Types

Home » Blog

2015’s Most Desirable Investment Property Types

2015 will be the office and industrial sector’s turn to shine as a fully recovered labor market finally starts to translate into meaningful tenant demand in these property types.

 Expect the OFFICE sector to lead the pack in 2015 because demand, occupancy and rent growth are poised to accelerate with the continually improving job market.

The INDUSTRIAL sector performance continues to strengthen as increased tenant demand and investment activity returns to historical norms. Industrial is benefitting from increased demand for warehouse space, driven by increasing global trade and the continued expansion of e-commerce. The rapid advance of e-commerce fueling commitment to same-day delivery services from large retailers such as Amazon and Wal-Mart is pushing the integration of retail and warehousing.

Investor appetite for MULTI-FAMILY properties has driven pricing well beyond replacement costs in many markets. While the long-term demographic outlook for household formation is very positive, the current level of supply when combined with pricing is a challenging environment for investors seeking core properties.

The RETAIL property type is closely aligned with the general health of the U.S. economy. In spite of healthy job gains and the re-achievement of prior peak employment levels in spring 2014, retail sales remain sluggish. The two primary reasons have been meager real wage growth and unwillingness on the part of consumers to re-leverage. As a result, most consumers have remained modest spenders, demonstrating why bargain/discount store formats continue to perform well post-recession. E-commerce is another major factor. Although internet retail sales currently account for just 7% of retail sales (excluding automobiles), growth has been rapid. Over the last 3 years, e-commerce sales have increased by almost 60%, compared to approximately 10% for total non-auto retail sales. Needless to say, online shopping is sapping a portion of sales from brick-and-mortar stores. Investors should seek well-located, neighborhood and community centers that are anchored by or include “thrifty” store formats as well as grocery-anchored retail centers rather than traditional department stores. In addition, investors should also consider retail tenants with omni-channel delivery systems and a strong online presence, thereby providing a better probability for long-term profitability.

LODGING demand historically correlates with the economy (consumers and businesses spend more when confident) and the nation’s hospitality industry has seen increases in both occupancy rates and room rents. Though average hotel occupancies and rates have been increasing the recent strength in the dollar and a slowing global economy could result in near-term slowdown in tourism from foreign visitors. The outlook for the U.S. lodging industry remains positive in 2015 with the economy forecast to stay strong. Accelerating demand, increasing but still-moderate supply, and large amounts of capital seeking investment makes for a favorable outlook for the lodging sector. Given the pricing of high-quality hotels, investors wishing to reap the benefit of a strong hospitality industry may wish to consider development or value-add/repositioning strategies. In 2015, a new, state-of-the-art hotel can be built for the same cost or less than an outright purchase. In addition, the fact that a newly built hotel will have no deferred maintenance or capital expenditures, may increase the likelihood of an even better profit margin. Of course, there are always risks in new construction, including the fact that the economy can change dramatically in the time it takes to deliver the product to market, plus the additional time for the asset to stabilize and provide return on investment.

 

Read more

5 STEPS TO BE, HAVE, DO AND ACCOMPLISH ANYTHING

Your aim is to do something GREAT and wonderful with your life, and to accomplish extraordinary things.  However, you cannot simply go out and have a great life; you must go out and make a great life!

 The word “GREAT” has 5 letters, which stand for the 5 keys to success in your life, and in anything you decide to be, have, do and accomplish:

 1.    GOALS:  You must know exactly what you desire to be, have, do and accomplish.  Many people wander through their entire life never taking this critical first step.  Determine what you want and write it down.  Highly successful people write down goals as if they already have accomplished them (for example, “I am a straight ‘A’ student.”), and they review and re-write them often.  [Derek Jeter decided he would be the shortstop for the New York Yankees when he was a young boy. It didn’t just happen because he was lucky!]

 2.    RESULTS:  You must deliberately focus and direct your thoughts, words, feelings, gratitude and emotions toward the desired results. Meditate daily and visualize the end results, seeing yourself in the picture, using all 5 senses, for 5 minutes before going to sleep and/or after waking up.  [Example: Fist pumping the air and high-fiving teammates after making a perfect tackle, receiving an “A” on a math test, or getting that job promotion and pay raise — feeling, seeing, hearing, smelling and tasting the experience.]  Think, speak and act as if you already are a star player, an “A” student, or a business executive earning your desired income!

3.    EXCELLENCE:  Strive for excellence!  The key to success in any field is to get good, get better, and be the best!  When you resolve to be the very best at what you do, and to do more than the minimum required or expected, you will find very little competition.  Your weakest skill usually sets the height at which you can use all your other skills.  Ask someone you trust (teacher, coach, parent, brother) if they see any weaknesses in your performance (“feedback is the breakfast of champions”).  Continually invest in yourself.  Use your time wisely to improve your knowledge and skill and become excellent at what you do.  Your daily choices of what to do, and what not to do, will determine everything that happens to you.  [Example: You can choose to study and practice, or to watch TV and play video games – but either choice will lead to very different results.] Your actions must be consistent with your goals. Use your time in a manner that most helps you produce the desired results for yourself and your team.

4.    Act Now! You must take action in the direction of your goal.  Do something daily — homework, study, practice, work, research, exercise, etc., that moves you closer toward your goal. Procrastination is the big killer of human potential (putting off big, important tasks until later, or never getting to them at all).  Procrastination is a habit based on inertia or fear. You can and must get over it!  Make a habit of deciding what you want to do and then moving quickly, before you have time to think too much or become afraid.  “Act boldly, and unseen forces will come to your aid.”  Action gives you momentum that keeps you going after the average person has quit.

 5.    Try, Try, Try!  You must persist.  Never, ever give up!  As you follow these 5 steps to make a GREAT life and accomplish your goals, unseen forces in the universe are working tirelessly on your behalf, moving mountains, to help your dreams come true, and making progress in ways often invisible to you.  Your persistence is a direct measure of your belief in yourself.  Great success comes with great risk, and often follows great failure.  But no one ever succeeded by quitting.  Continue relentlessly focusing on what you want and taking action to achieve it, without regard to critics, doubters, obstacles and setbacks.  Repeat to yourself, “If it’s meant to be, it’s up to me!”

Copyright Murnane 2014

Read more

Business and Real Estate Innovation — U-Fix-It Automotive

Regal Properties’ principals have teamed up to establish and open one of San Diego County’s most innovative new businesses – which, coincidentally, includes an interesting real estate investment opportunity.

U-Fix-It Automotive has instantly become the premier provider of automobile repair facilities, tools, parts, and services for Do-It-Yourself car owners, enthusiasts and mechanics. Located at 2420 Industry Street in Oceanside, California, the shop offers everything for the shade-tree mechanic, including service bays, car lifts, air compressors, tire-balancing equipment, pneumatic tools, engine lifts, and other specialty tools, as well as automobile parts below retail costs, and on-site technicians to help complete any job at about half the cost of a garage mechanic. Each service bay has a computer monitor to research over 40,000 repair manuals, technical service bulletins, recall notices, and how-to videos. U-Fix-It even offers free classes on basic repairs, such as preventive maintenance, brake replacements, and oil changes.

 The real estate investment opportunity?  Buying vacant industrial properties at a discount and then adding substantial value by leasing them to U-Fix-It franchisees, for resale or rental income.

For more information go to www.sandiegoufixitauto.com.

 

Read more

Regal Properties Ventures 88 More Lots for Projected 71% IRR

On the heels of closing a JV for 93 lots in Bakersfield, Regal Properties, and its affiliate, Capital Real Estate Solutions LLC (“CRES”), co-invested with a capital partner to acquire 88 more paper lots for detached, single family homes in Bakersfield, California. CRES entered into a joint venture with the same “Builder of the Year,” who again agreed to match its capital investment to develop the homes. After this initial funding from CRES and the builder, the project will be self-funded until the anticipated completion date of October 2016 – this time with an anticipated investor IRR of 71%!  Regal Properties remains bullish on Bakersfield, as the 7th top performing housing market in the country.

Read more

Regal Properties Continues to Invest in People and Property

Regal Properties continues to invest in people and property by recently contributing to and supporting NoSilenceNoViolence, a non-profit organization providing education, training, and resources relating to domestic violence.

Read more

Retail Net Leased Cap Rates Plunge to Historic Lows

The cap rate for single tenant, net-leased retail properties in the USA plunged to a record low of 6.5 percent in the second quarter, as reported by Shopping Centers Today this month. Retail assets remain the most desired net-leased property type, as evidenced by the cap rate premium of 127-147 basis points compared to office and industrial sectors, respectively, according to the report.  The passive nature of net retail leases has generated historically higher demand and the largest spread compared to these other sectors in approximately 15 years, despite a 17.2% increase in retail net-lease offerings in the second quarter of 2014.  Expect private investors to continue to prefer these stable yields over potentially higher returns, at least for  the remainder of this year.

Read more

“If you want PEACE, work for JUSTICE.”

During the social turmoil of the late 1960s, and the movement for peace at home and abroad, Pope Paul VI said “If you want peace, work for justice.” The same holds true today. If we work for justice by feeding the hungry, paying a living wage, making clothing, shelter and healthcare reasonably available to all, ministering to prisoners, caring for the elderly and infirm, speaking with love and empathy, offering counsel and comfort, providing affordable education, shunning excessive materialism, preserving the environment, respecting the human and civil rights of others, and so forth, we foster peace in the world. In another famous quote by a great promoter of peace and justice, Mahatma Gandhi, “Be the change that you wish to see in the world.”

Read more

Regal Properties JVs 93 Residential Lots in Bakersfield

Regal Properties, and its affiliate, Capital Real Estate Solutions LLC (“CRES”), co-invested with an existing capital partner to acquire from a bank 93 paper lots for detached, single family homes in Bakersfield, California. The lots were scheduled for foreclosure by the bank, so the deal required all cash and a quick closing by June 27, 2014. Prior to the closing, CRES entered into a joint venture with a prominent local builder, who agreed to match its total capital investment in order to improve the lots and develop and build the homes. We anticipate the selling bank will provide the same non-recourse construction financing of 70% loan-to-cost, at 5% interest, for ¼ point, as it recently did for a similar project involving Regal Properties and CRES.  After the initial funding from CRES and the builder, the project will be self-funded until the anticipated completion date of June 2017, with an anticipated investor IRR of 65%

Read more

Recession Amendments to California’s Anti-Deficiency Laws

During the recent recession, California’s legislature has amended the real estate anti-deficiency laws in the Code of Civil Procedure in three important ways:

No Deficiency Judgment for Approved Short Sales: SB 931 added subsection “e” to CCP Section 580, which prohibited any first lender who approved a short sale from obtaining a deficiency judgment against the seller.  Subsequently, the enactment of SB 458 provided that any home mortgage lenders who approved short sale transactions, which closed escrow, thereby released the borrower from any deficiency, for senior and junior trust deeds, purchase money and recourse loans, owner occupied homes, second homes, vacant homes, and investor properties with one to four residential units; and, further, lenders could no longer require sellers to contribute money as a condition for short sale approval.

Purchase Money Loan Protection Extended to Refinance Loans: Prior to January 2013, California law protected borrowers from personal liability at foreclosure for the difference between the principal balance and what a lender receives if the loan was a purchase money loan secured by an owner occupied property with one to four residential units. SB 1069 extended this anti-deficiency protection to include any loan used to refinance the purchase money loan, plus any loan fees, costs and related expenses for the refinance. This anti-deficiency protection does not extend to any cash-out refinance when the lender advances new principal.

No Collection Actions Against the Borrower: Even though lenders could not obtain a deficiency judgment for a purchase money loan under CCP 580b, some lenders made it a practice to report these debts as delinquent on the debtor’s credit reports, and to seek payment on the deficiency from the borrower, or they would sell the debt to a third party who then pursued collection. SB 426 amended CCP 580b and 580d to add that no deficiency “shall be owed or collected” under the circumstances covered by the above statutes. The legislature subsequently clarified the statute does not affect the liability a guarantor might otherwise have with respect to the deficiency, or that might otherwise be satisfied from other collateral pledged to secure the obligation.

Read more

Central Valley Development Opportunities

Regal Properties, and its affiliate, Capital Real Estate Solutions LLC (“CRES”), desire to align with one or more capital partners for the purpose of acquiring completed, partially completed, and in-fill, entitled, detached, single-family home subdivisions.

Our team has a unique ability to find and acquire attractive land opportunities. After acquiring from a local bank a small completed subdivision in Kerman (suburb of Fresno), we began exploring the Central Valley market more thoroughly. We strongly believe the residential market is currently experiencing a solid recovery, and there will be an acceleration of home building in Fresno and the surrounding areas. All of the publicly-held home building companies have already began, or will soon begin, construction in these targeted communities.regal

Our goal is to acquire as many of these projects as possible which fit our specific criteria — projects in a meaningful location, in markets that are already or soon will be emerging, which we can hold for maximum investment returns driven by future market conditions. Our extremely thorough due diligence process ensures all aspects of any given property are fully understood prior to acquisition. The exit strategy will be to sell the homes to consumers or create pools of rental properties which are sold to equity investors. Profit maximization will be the key decision-making criterion.

We have solid banking relationships in this region and have already done multiple transactions with one of these lenders.  Local banks have demonstrated they will provide us with exceptional financing terms, not available to other local builders and developers, on a deal-by-deal basis.

We have already identified several opportunities which we are prepared to acquire when adequately capitalized, and we are currently in the process of moving 3 transactions from agreed Letters of Intent to executed Purchase Agreements.  These off-market opportunities, recently presented to us as a bulk deal by a publicly held home builder, became available due to an unusual internal circumstance. Because of a solid working relationship, and our reputation with this builder, they approached us and we struck a deal.

We have also been offered, with very attractive returns, the opportunity to furnish equity for existing projects which have a need for capital, in the Bakersfield and Fresno areas.  We are currently analyzing these opportunities.

Regal Properties and CRES have assembled residential development opportunities in these Central Valley cities:

Fresno, California

Fresno is the county seat of Fresno County, and one of the fastest growing areas in California.  The Central Valley of California is known as “the breadbasket of America” due to the prodigious output of agricultural products.  Even though California has experienced a significant draught in recent years, the prices for agricultural products have skyrocketed and the local farming community has flourished.  Additionally, the advancement in technology for oil extraction has rekindled the dormant oil industry and created a mini “oil boom” in the Central Valley.

The 2013 census reports Fresno’s population as 509,000, making it the 5th largest city in the state and the 34th largest in the nation.  It is, by far, the largest inland city in the state, and the Fresno Metropolitan population is now 1,107,000.

Fresno proper is home to 5 four-year universities and 2 community colleges and has one of the largest Enterprise Zones in California.

Even though the Central Valley suffered greatly with the economic downturn beginning in 2006, it is currently rebounding at the fastest rate of any area in the state.  Housing prices have increased at an average annual rate of 20% over the last two years.  Every major national home builder is represented in the Valley.

Kerman, California

The City of Kerman California is a bucolic farming community located 15 miles west of downtown Fresno.  The town boasts a beautiful historic main street dating back to the mid-1800’s when the city was a major rail stop.  With a population of only 14,300, Kerman had population growth of 5.6% from April 2010 through April 2012, almost triple the State of California’s growth of 2.0%. Walmart has just opened a Super Store that compliments a full range of services currently offered in the city, along with other major retailers such as CVS and Rite Aid. Currently, there is no residential construction taking place in Kerman, and very little existing home inventory on the market.

Madera, California

Madera, population 62,000, offers an affordable alternative to the cities of Fresno and Clovis.  Located only 23 miles north of Fresno on Highway 99, residents will benefit from ease of access to Fresno’s major employment, airport, hospitals, dining and family entertainment.

Tulare, California

Tulare, population 61,000, is located approximately 30 miles south of Fresno, and is favored by many as a bedroom community.

Sanger, California

Sanger, population 25,000, is located just a few miles east of Fresno.

Los Banos, California

Los Banos, population 36,000, is located northeast of Fresno at the upper end of the Central Valley, within reasonable commuting distance of Silicon Valley.

Bakersfield, California

Bakersfield is located on the southern end of the Central Valley and is the second largest city in the valley after Fresno.  Bakersfield is a fast growing city with a population of 360,000, and is headquarters to the oil boom currently occurring.

Read more
« Previous PageNext Page »