Strategic Plays for the 2nd Half of Market Recovery: DetroitEDR
This document summarizes a presentation on strategic plays for the commercial real estate market recovery in the second half of 2013 and 2014. It notes that market fundamentals are improving, with increasing transaction volumes, lending, and CMBS issuance activity across various property types and market sizes. It highlights opportunities in target industries like private equity, foreign investors, and growing lenders. It recommends leveraging technology to improve efficiency and using education to establish expertise in areas like the new ASTM standards. The presentation provides an overview of improving conditions and strategic recommendations to capitalize on opportunities in the recovering commercial real estate market.
1) According to the document, commercial banks have $2 trillion in deposits sitting on the sidelines that they are not lending out, which has caused spreads to tighten and loan structures to loosen.
2) The document discusses how loan maturities will be high in the coming years, with $318 billion maturing in 2013, $353 billion in 2014, and $428 billion in 2015.
3) There is a lot of capital chasing deals currently, which has driven down cap rates and increased valuations, according to speakers at the conference summarized in the document. Some see valuations as "crazy" and too high.
IEDC has extensive experience providing various types of assistance to support economic recovery following disasters, including:
1) Conducting organizational management and capacity building for economic development organizations impacted by disasters.
2) Providing small business assistance through research, workshops and programs to help small businesses recover.
3) Performing economic recovery assessments immediately following disasters to identify needs and recommend recovery strategies.
The European political establishment has focused
primarily on how to reduce Greek spending and improve
economic efficiency through austerity, privatization,
and other structural reforms. Although there can
be no question that irresponsible borrowing was an important driver of the current economic crisis, the Greek
government actually did repeatedly reduce spending
and raise taxes during the last decade, when debt levels
were still at high but acceptable levels — in fact, by
enough to fully offset its pre-crisis debt entirely. Today’s
full-blown financial crisis isn’t the result of Greece taking
on yet more debt, but instead can be attributed to a
massive contraction in economic output, which began
five years ago. In other words, austerity has made
Greece’s debt problem worse, not better.
The reason, and ultimately the real cause of the
current crisis, is that Greece simply doesn’t have enough
world-class capable companies. Such companies can offer
competitive products and high-wage jobs, attract
investment and innovation, stimulate exports, and,
most importantly, support a healthy ecosystem of related
and supporting industries — which in turn are needed
to support the broader network of retailers, schools,
daycare centers, and providers of other critical services.
Instead, the Greek economy consists almost entirely
of the self-employed and very small businesses that
are unable to compete against strong foreign competitors
and incapable of supporting broader economic activity.
Even Greece’s leading industry, tourism, is dominated
by small and midsized businesses.
IEDC presents the first Economic Development Week, May 8-14. All week long communities will be highlighting the importance and value of economic development. IEDC has created a celebration guide for you to download to use to increase awareness and participation throughout your community. For more information and to download the guide: http://www.iedconline.org/90years
Conducting the VEC Investigation for a Phase I - Boston DDDEDR
This document discusses conducting a vapor intrusion evaluation as part of a Phase I Environmental Site Assessment using the newly revised ASTM E2600 standard. It provides an overview of vapor intrusion vs. vapor encroachment and why vapor migration should be considered in a Phase I. It then outlines the process for conducting a Tier 1 vapor encroachment condition screen, including defining the area of concern, identifying known contamination sources, and making a vapor encroachment condition and recognized environmental condition determination. The document emphasizes using professional judgment and all information from the Phase I investigation when conducting the Tier 1 screen.
This document discusses case studies related to REC, HREC, and CREC determinations. It presents six hypothetical cases involving different properties and prior uses, and poses questions to a panel of experts about whether each case represents a REC, HREC, or CREC based on the definitions in the E1527-13 standard. The cases involve issues such as a former dry cleaner, gas stations, industrial usage, and more. The panelists provide their opinions on the classification for each case. The document also reviews the relationship between RECs, HRECs, and CRECs.
Strategic Plays for the 2nd Half of Market Recovery: DetroitEDR
This document summarizes a presentation on strategic plays for the commercial real estate market recovery in the second half of 2013 and 2014. It notes that market fundamentals are improving, with increasing transaction volumes, lending, and CMBS issuance activity across various property types and market sizes. It highlights opportunities in target industries like private equity, foreign investors, and growing lenders. It recommends leveraging technology to improve efficiency and using education to establish expertise in areas like the new ASTM standards. The presentation provides an overview of improving conditions and strategic recommendations to capitalize on opportunities in the recovering commercial real estate market.
1) According to the document, commercial banks have $2 trillion in deposits sitting on the sidelines that they are not lending out, which has caused spreads to tighten and loan structures to loosen.
2) The document discusses how loan maturities will be high in the coming years, with $318 billion maturing in 2013, $353 billion in 2014, and $428 billion in 2015.
3) There is a lot of capital chasing deals currently, which has driven down cap rates and increased valuations, according to speakers at the conference summarized in the document. Some see valuations as "crazy" and too high.
IEDC has extensive experience providing various types of assistance to support economic recovery following disasters, including:
1) Conducting organizational management and capacity building for economic development organizations impacted by disasters.
2) Providing small business assistance through research, workshops and programs to help small businesses recover.
3) Performing economic recovery assessments immediately following disasters to identify needs and recommend recovery strategies.
The European political establishment has focused
primarily on how to reduce Greek spending and improve
economic efficiency through austerity, privatization,
and other structural reforms. Although there can
be no question that irresponsible borrowing was an important driver of the current economic crisis, the Greek
government actually did repeatedly reduce spending
and raise taxes during the last decade, when debt levels
were still at high but acceptable levels — in fact, by
enough to fully offset its pre-crisis debt entirely. Today’s
full-blown financial crisis isn’t the result of Greece taking
on yet more debt, but instead can be attributed to a
massive contraction in economic output, which began
five years ago. In other words, austerity has made
Greece’s debt problem worse, not better.
The reason, and ultimately the real cause of the
current crisis, is that Greece simply doesn’t have enough
world-class capable companies. Such companies can offer
competitive products and high-wage jobs, attract
investment and innovation, stimulate exports, and,
most importantly, support a healthy ecosystem of related
and supporting industries — which in turn are needed
to support the broader network of retailers, schools,
daycare centers, and providers of other critical services.
Instead, the Greek economy consists almost entirely
of the self-employed and very small businesses that
are unable to compete against strong foreign competitors
and incapable of supporting broader economic activity.
Even Greece’s leading industry, tourism, is dominated
by small and midsized businesses.
IEDC presents the first Economic Development Week, May 8-14. All week long communities will be highlighting the importance and value of economic development. IEDC has created a celebration guide for you to download to use to increase awareness and participation throughout your community. For more information and to download the guide: http://www.iedconline.org/90years
Conducting the VEC Investigation for a Phase I - Boston DDDEDR
This document discusses conducting a vapor intrusion evaluation as part of a Phase I Environmental Site Assessment using the newly revised ASTM E2600 standard. It provides an overview of vapor intrusion vs. vapor encroachment and why vapor migration should be considered in a Phase I. It then outlines the process for conducting a Tier 1 vapor encroachment condition screen, including defining the area of concern, identifying known contamination sources, and making a vapor encroachment condition and recognized environmental condition determination. The document emphasizes using professional judgment and all information from the Phase I investigation when conducting the Tier 1 screen.
This document discusses case studies related to REC, HREC, and CREC determinations. It presents six hypothetical cases involving different properties and prior uses, and poses questions to a panel of experts about whether each case represents a REC, HREC, or CREC based on the definitions in the E1527-13 standard. The cases involve issues such as a former dry cleaner, gas stations, industrial usage, and more. The panelists provide their opinions on the classification for each case. The document also reviews the relationship between RECs, HRECs, and CRECs.
2014 Forecast: Entering the 2nd Half Of Market RecoveryEDR
Current stats on commercial real estate deals, metros to watch in the year year, lending trends and risk tolerance as we head into 2014.
Presented by Dianne Crocker, Principal Analyst, EDR Insight
EBA RMC monthly call, January 2014
The document provides an update on the commercial real estate market and keys to navigating an uncertain market. It notes that while transaction volumes are up slightly from last year, the rate of growth has declined in recent quarters. Multifamily and class A office properties are driving most deals. Lending is also up but remains cautious, with tighter underwriting for any assets perceived as risky. Risk aversion is high among investors and lenders. The document outlines some areas of opportunity in the recovering market and strategies for environmental professionals to adopt to succeed.
EDR Insight Market Update: Navigating in an Uncertain Market - OrlandoEDR
The document provides an overview and analysis of the commercial real estate market. It notes that while transactions were up in the third quarter of 2012, the rate of growth has declined in recent quarters. Multifamily and office properties are driving most deals. Distressed assets from the downturn are also re-entering the market. Lending is increasing but remains cautious, focused on low-risk deals. Risk aversion is high among investors and lenders. Opportunities exist in focusing on active lenders and markets. Education of clients is key as the market recovers. Overall, improvements are expected in availability of capital and transactions in the coming year.
This document summarizes a presentation on estimating supply and demand for microcredit in a community. The presentation is given by representatives from Friedman Associates, an organization that helps microfinance institutions achieve their goals of sustainable and economically vibrant communities. The presentation covers conducting a supply and demand analysis through quantitative data analysis and qualitative key informant interviews. It discusses estimating the size of the capital gap in a community and identifying high priority zip codes for microloan programs. It also provides guidance on assessing if a microloan program is ready to ramp up, including reviewing strategic goals, loan guidelines, lending procedures, use of portfolio data, and investing human resources. The overall document aims to help microfinance organizations better understand their market opportunities and make strategic decisions about their micro
The commercial real estate market is recovering gradually with transaction volume up 25% in the second quarter of 2012 compared to the first quarter. However, lending remains cautious with banks focusing on top-quality assets in major markets. Investors are risk averse and concerned about potential issues that could negatively impact property values. Areas of opportunity include increased lending by government programs, REIT acquisitions, retail expansion, and energy benchmarking requirements. Consultants should focus on client education and differentiating themselves through technology to succeed in this uncertain market.
This document provides an overview of the TREF I investment fund, which focuses on secured first loans for small commercial and non-owner occupied properties in the Chicago area. The fund was founded by investment professionals with over 50 years of combined experience in mortgages and real estate. It aims to provide high and stable income to investors by lending at above-market rates and protecting principal through underwriting and collateral. The managers have extensive experience in commercial lending and mortgage brokering in the Chicago market.
How Alternative Credit Data Provides Lift in Your PortfolioExperian
What is alternative data and how does it differ from traditional credit data?
How can alternative data be used to maximize your portfolio?
Learn how to leverage this new data set to maximize profits in your business. We’ll cover the latest findings in lender and consumer perspectives on alternative credit data and ways to use alternative credit data across the customer lifecycle giving you a deeper view of the consumer.
5 predictions for commercial real estate, risk management and lending in 2018. Presented by Dianne Crocker, EDR Insight in her opening comments at the Environmental Bankers Association Conference in Long Beach, CA on January 15, 2018.
How To Perform In The Brisbane Market By Not Buying Brisbane CBDReal Estate Investar
This webinar reviewed investment opportunities in Brisbane suburbs Yeronga and Mount Gravatt East compared to the Brisbane CBD. It summarized that over the past decade, property in Yeronga and Mount Gravatt East appreciated 76% and 56% respectively, significantly outperforming the 19% growth in the Brisbane CBD. Rental demand is also much higher, at 17x and 47x excess demand respectively, compared to 1.3x excess demand in the CBD. The webinar then reviewed details of recently completed boutique development projects in Yeronga and Mount Gravatt East, including floor plans and financial projections showing solid long-term capital growth and rental returns.
This document discusses various strategies for funding business growth, including reinvesting profits, tapping into trade credit, lining up credit lines early, expanding banking relationships, alternative lending sources, equity funding, and employee share plans. It provides details on each strategy and emphasizes reinvesting profits as the perfect way to fund growth using patient capital without taking on debt or dilution. The document also discusses trends in capital raising, including the importance of online marketing and social media, the ability to approach global investors, and the rise of individual investors from emerging markets.
The document provides an overview and analysis of the commercial real estate market. It notes that while transaction volume increased in the second quarter of 2012, growth has slowed in recent months. Multifamily, office, and retail properties in major markets are driving most deal activity. Lending is increasing but remains cautious, with larger banks focusing on prime markets and lower-risk deals. Risk aversion is high industry-wide, and environmental due diligence is an important consideration in transactions. Overall, the market recovery is expected to be gradual with continued geographic and asset-type disparities.
EDR Insight Market Update: Navigating in an Uncertain MarketEDR
The document provides an overview of the commercial real estate market and environmental due diligence industry. It notes that transaction volume increased in the second quarter of 2012 but slowed in July and August. Lending has also increased moderately mainly for top-quality assets. Distressed properties are bringing more contamination issues to light. The industry faces challenges from lender risk aversion and time constraints but also opportunities from new lending sources, property acquisitions by REITs, and energy audits required by new regulations. Strategies for success include business development, client education, and leveraging technology.
Grady L. Shields provides legal advice on how underwriting needs to change in today's market. Underwriters should look beyond just price and consider non-scope issues like asbestos. They should also take property condition assessments and potential compliance issues into account as these could threaten a borrower's ability to pay or expose the lender to liability. Underwriters must make it clear borrowers cannot rely on the lender's due diligence. Post-loan, lenders should follow up on issues like brownfields remediation and conduct risk-based due diligence for refinancings.
This document discusses the potential impacts of the Trump administration on brownfield site cleanup and redevelopment. Key points include: regulatory and budget uncertainty at the federal level; proposed cuts to EPA and other agency budgets that support brownfields work; the emphasis on devolving programs to states and private partnerships; and opportunities through continued tax incentives and bipartisan interest in Congress to enhance existing brownfield programs. Overall the outlook presents challenges but also opportunities if state, local, and private actors can help fill gaps in federal support.
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Similar to Strategic Plays for the 2nd Half of Market Recovery: Orange County
2014 Forecast: Entering the 2nd Half Of Market RecoveryEDR
Current stats on commercial real estate deals, metros to watch in the year year, lending trends and risk tolerance as we head into 2014.
Presented by Dianne Crocker, Principal Analyst, EDR Insight
EBA RMC monthly call, January 2014
The document provides an update on the commercial real estate market and keys to navigating an uncertain market. It notes that while transaction volumes are up slightly from last year, the rate of growth has declined in recent quarters. Multifamily and class A office properties are driving most deals. Lending is also up but remains cautious, with tighter underwriting for any assets perceived as risky. Risk aversion is high among investors and lenders. The document outlines some areas of opportunity in the recovering market and strategies for environmental professionals to adopt to succeed.
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The document provides an overview and analysis of the commercial real estate market. It notes that while transactions were up in the third quarter of 2012, the rate of growth has declined in recent quarters. Multifamily and office properties are driving most deals. Distressed assets from the downturn are also re-entering the market. Lending is increasing but remains cautious, focused on low-risk deals. Risk aversion is high among investors and lenders. Opportunities exist in focusing on active lenders and markets. Education of clients is key as the market recovers. Overall, improvements are expected in availability of capital and transactions in the coming year.
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The commercial real estate market is recovering gradually with transaction volume up 25% in the second quarter of 2012 compared to the first quarter. However, lending remains cautious with banks focusing on top-quality assets in major markets. Investors are risk averse and concerned about potential issues that could negatively impact property values. Areas of opportunity include increased lending by government programs, REIT acquisitions, retail expansion, and energy benchmarking requirements. Consultants should focus on client education and differentiating themselves through technology to succeed in this uncertain market.
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How Alternative Credit Data Provides Lift in Your PortfolioExperian
What is alternative data and how does it differ from traditional credit data?
How can alternative data be used to maximize your portfolio?
Learn how to leverage this new data set to maximize profits in your business. We’ll cover the latest findings in lender and consumer perspectives on alternative credit data and ways to use alternative credit data across the customer lifecycle giving you a deeper view of the consumer.
5 predictions for commercial real estate, risk management and lending in 2018. Presented by Dianne Crocker, EDR Insight in her opening comments at the Environmental Bankers Association Conference in Long Beach, CA on January 15, 2018.
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This webinar reviewed investment opportunities in Brisbane suburbs Yeronga and Mount Gravatt East compared to the Brisbane CBD. It summarized that over the past decade, property in Yeronga and Mount Gravatt East appreciated 76% and 56% respectively, significantly outperforming the 19% growth in the Brisbane CBD. Rental demand is also much higher, at 17x and 47x excess demand respectively, compared to 1.3x excess demand in the CBD. The webinar then reviewed details of recently completed boutique development projects in Yeronga and Mount Gravatt East, including floor plans and financial projections showing solid long-term capital growth and rental returns.
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Grady L. Shields provides legal advice on how underwriting needs to change in today's market. Underwriters should look beyond just price and consider non-scope issues like asbestos. They should also take property condition assessments and potential compliance issues into account as these could threaten a borrower's ability to pay or expose the lender to liability. Underwriters must make it clear borrowers cannot rely on the lender's due diligence. Post-loan, lenders should follow up on issues like brownfields remediation and conduct risk-based due diligence for refinancings.
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Strategic Plays for the 2nd Half of Market Recovery: Orange County
1. For presentation at:
Irvine Due Diligence at Dawn workshop
March 2014
Strategic Plays for the 2nd Half of
Market Recovery
Presented by:
Dianne P. Crocker, Principal Analyst
2. Survival Mode
True start of
market rehabilitation
Year of
refocusing
and repositioning
Market in Transition
2008 2010 201220112009 2013 2014
5. View of Market: 50,000 Feet
Y-on-Y Growth
CRE lending +14%
-SBA Lending +13%
Property prices: +15%
Property transactions:
-Large +19%
-Small (<$5M) +17%
-Portfolios +20%
CMBS Issuance +46%
• All debt spigots are open.
• Growing investor confidence.
• More diversity in lenders,
investors.
• Activity across broader spectrum
of properties.
• Improving property
fundamentals.
6. •Deal flow up 19% in ’13
•Stronger-than-expected 4Q transactions
•January traditionally slower than December
•…but up 32% vs. Jan 2012
Large Commercial Real Estate
Deals Up
7. • The velocity of small-cap sales is more than
keeping pace with the larger deals.
• Up 17% in 2013
• Forecast for another double-digit year in 2014
(Boxwood Means)
Small Cap Transactions
8. • Multifamily was the “belle of the ball”
• up 31% Y-on-Y
• Industrial sector fast emerging as the new
favorite
• especially warehouse
• Office getting more interest in some metros
• Retail: sales of strip centers are up 30%
Property Types in Favor
9. • U.S. Retail Store Closings in 2013:
• Blockbuster (460)
• Fashion Bug
• GameStop
• Store Expansions in 2014:
• Walmart (just doubled its forecast)
• Dollar General
• Family Dollar
Properties in Flux
10. Good News on the CMBS Front
• 2012:
• Post-recession high of
$48B
• 2013:
• Easily surpassed year-end
2012 issuance
• 2014:
• Forecast to reach $100
billion for 1st time in six
years
12. • 2013 was a “come-back year for lending”
• Lenders have returned to originating commercial real
estate loans as values and credit quality improve and
demand increases
• 4Q13 originations were the highest since 2007
• Apartment lending back to 2007 volumes
• Growth forecast:
• 2014: 7%
• 2015: 6%
• 2016: 5%
Source: MBA CREF, February 2014
Come-Back Year for Property Lending
13. LENDING: A Positive Take
“More banks were lending on income-
producing commercial real estate
properties in more places by year-end
2013. The number of lenders who plan
to increase property loans in next 12
months far outnumber those who plan
to lower them.”
~ Sam Chandan, president and chief
economist at Chandan Economics
14. • A lot of optimism out of MBA CREF show last month
“All of a sudden, the banks are comfortable with real
estate, which scared the daylights out of them from
2007 to 2009, and they are looking for opportunities.”
• 91% of the top firms expect originations to increase in 2014
• Almost two-thirds (64 percent) expect their own firm’s originations
to increase by 5 percent or more.
• More aggressive lending, strong borrower appetite, intense
competition among lenders expected.
Source: 2014 MBA CREF Outlook Survey, conducted between December 11
and December 20, 2013.
Bottom Line on Lending
15. • Supported more than $29B in loans in FY13—its third-highest
year ever.
• More than 54,000 loans backed through its 7(a) and 504
programs
• 4.6% growth in 7(a) loans in FY 2013.
• 7(a) lending is picking up steam after being halted by the
government shutdown in 4Q.
SBA Lending: A Bright Spot
19. • Investment prospects still considered strong.
• Development and homebuilding up significantly from
2012.
• A lot of multifamily under construction.
• Office sector: the Fashion Island area is active.
Points in Irvine-Orange County’s Favor
21. • 94%of institution’s boards now devote more time to risk
management oversight than five years ago
• 80%percent of chief risk officers report directly to either
the board or the CEO
Source: Deloitte lender study
Banks and Risk Management
22. • 55% of respondents agree:
• My clients are demanding more thorough environmental
due diligence on deals today than in past quarters.
• 51% agree:
• Lenders tightened their environmental due diligence
standards in 4Q13 and are more demanding in terms of
having thorough environmental due diligence conducted.
• 42% of EPs agree:
• My clients are more willing to discuss Phase II
sampling and other forms of additional investigation than
they have been in past quarters.
Source: EDR Insight’s 4Q13 Quarterly Survey of EPs
Attitudes Toward Environmental Risk
23. Benchmarks in Environmental
Due Diligence
4Q11 4Q12 4Q13
% of EDD for
foreclosures 17% 11% 5%
Liquidating CRE
loans (% of
respondents)
51% 38% 32%
Selling REO
(% of
respondents)
77% 69% 60%
Phase Is
proceeding to
Phase IIs
6% 10% 16%
25. California Phase I ESA Trend
• Quarterly volatility
• 8,457 Phase I ESAs in 4Q13
• 2% growth vs. prior year
Source: EDR ScoreKeeper Model, State Profile Report 4Q13
29. • Intense pressure on price and turnaround time continues.
• Latest results show that $1,800 - $2,400 is a typical basic
Phase I ESA pricing range
• Higher prices on the East and West coasts.
• Average turnaround:
• 2-3 weeks
• As short as 8-10 days on portfolio projects.
• Speed has become a differentiator…
Phase I ESA Pricing and
Turnaround Time
30. • “Due to demands for fast turnaround and specialized service,
we have felt justified in charging more for our services.
Even with increased rates, we are still being awarded the
work. Might raise our prices a bit more next quarter.”
• “Based on large volume of work coming in the door and the
demand for quick turnaround times, we have increased our
prices and are choosing the clients we want to work with.”
Turnaround Time and Phase I
Pricing
31. “It’s a dog eat dog world.
I say we just wait it out.”
34. • Developers
• Equity REITs
• Foreign investors (Asia, Europe)
• Institutional capital and equity funds
• Financial institutions, insurance, credit unions
• M&A
• Retail/big box
STRATEGY #1:
Target Drivers of Phase I ESA Growth
35. • The universe of buyers is growing rapidly
• The number of active buyers over the past twelve months
grew by 3,300 participants with the private sector seeing
the greatest growth.
• Foreign investors forming U.S. alliances
= new opportunities for expanding client base
New Clients Emerging:
39. • Wells Fargo
• 1st for 5th consecutive year ($ volume)
• Approved 18% more 7(a) loans in ’13 over prior year
• Chase
• 1st for 4th consecutive year (# of loans)
• Approved 4,104 7(a) loans in FY13
• Other institutions that dominate SBA lending include:
• Key Corp., Regions Financial, Huntington
Bancshares, M&T Bank, Citizens Financial
Group, Citigroup, Bank of America, TD Bank, US
Bank, PNC Bank and SunTrust Bank.
Top SBA Lenders
40. • “We've recently seen lenders aggressively come back to
this business who retreated during the crisis," said Philip
B. Flynn, CEO of Associated Banc-Corp.
• SunTrust Banks:
• “We’ve put our distress problems behind us and are back
to focus on growth."
• Growing its retail, office, multifamily and industrial CRE
relationships.
• Also building out its REIT business
• GE Capital Real Estate is increasing lending by 40% this year
Which Lenders Are Growing
Originations?
41. • Efficiency is KEY to data
management
• Need for constant
communication
• Better collaboration
• Reduced cost/time
• More engagement with clients
• 29% of EPs believe that the
adoption of new technologies
is "extremely important, gives
us an edge“ (4Q13 Survey)
STRATEGY #2:
Leverage Technology
42. One EP’s Take on Technology
How has technology changed the way that you conduct Phase I
environmental site assessments?
“Now I can go on a site visit, take photos on my smartphone or
tablet, record my notes in real time, go to a coffee shop, upload
everything to my computer and write my report. I can do all of this in
between site visits, especially if I’m on the road or out of town. I used
to carry around too much clutter to a site visit. Each time I performed a
new function, I would have to put down one object to use
another, distracting me from my greater purpose. Going into the field
with just a smartphone or tablet is one of the most enlightening
experiences for me.”
Duncan Anderson, Odic
44. • NYC technology conference:
“More data. More transparency. If we can all get data into
people’s hands faster, it’s a win-win for everyone. And
these apps need to be rapidly deployed. They can’t take users
even one second longer to use.”
• Xceligent has a mobile app, eXplore™ iPad App, that gives
commercial real estate professionals real-time access to over
50 fields of data by using a set radius or by drawing a polygon
around a customized search area.
CRE and Tech Intersect
49. • Refocuses attention on education and awareness
• Some new requirements to consider
• Valuable reminders on certain areas of EDD (e.g., user
responsibilities) that risk managers may not have given much
thought to in the past eight years
Impact of a New ASTM Standard
Page 49
50. • Vapor intrusion awareness
• New SBA SOP 50 10 5(f) as of Jan. 1st
• OCC Guidance, August 2013
• Real-world examples/reminders of why environmental
due diligence is critical
Other Opportunities to Educate
51. 1. Watch the market barometers.
2. Be strategic in your business targets.
3. Leverage technology.
4. Get your name out there as a technical expert.
Playbook Strategy Summary
52. • Property markets:
• Improving slowly
• More $$s, more players, broader geographic reach
• Risk:
• Fear, uncertainty, regulator pressure breed aversion
• Your Challenges:
• Competition, efficiency, pricing, speed
• Forecast:
• There’s now a viability to the recovery that we haven’t
seen thus far since the market downturn began.
2014 Forecast
53. Dianne P. Crocker
Principal Analyst, EDR Insight
Research and Analytics:
www.edrnet.com/EDRInsight
Twitter:
@dpcrocker
Email:
dcrocker@edrnet.com
Editor's Notes
Good morning, everyone. Great to see such a healthy turnout My name is Dianne Crocker I’m the principal analyst in EDR Insight where we closely track trends in the commercial real estate and environmental due diligence marketsSo what I’m presenting here is drawn from our recent research. And before I start, let me say that you will all be getting copies of my slides via email so just sit back and listen to the story.I’m here to give you my take on where we are in terms of market recovery. As you’re about to see, the market is in MANY ways much better now than it was at this time last year. Not great…but better.
This shows you where the market is in terms of its recovery.Things kind of bounced along after the market crash. Firms cut to the bone.Gradual improvements but 2013 was really the first year of true market rehab.Optimism has finally taken root. Business confidence, profitability and investors’ forecasts are more positive than they have been in recent years. Despite the uncertain economic outlook, theprospects for property assessment firms are more encouraging than at any time since 2008. 2014 will be a year of refocusing and repositioning in a still-challenging market. So let’s take a look at some of the trends shaping our market today—and I’ll give you names of any key players wherever I could
Let’s start with Commercial Real Estate…and the status of lending on commercial properties, in particular. The U.S. commercial real estate recovery, although slow, is visibly improved in terms of:Transaction volume,Fundamentals like vacancy rates, Rent growth and asset pricing, And capital availability.
Here’s the view right now from 50,000 feet. READ STATS. I don’t have to tell anyone here it’s been a slow unpredictable erratic recovery so far. It’s been a loong time since the numbers looked this good across the board. These are growth rates in lenders and dealmaking year on year. They are all in the double digits.For the first time in years, all of the debt spigots are open. The major sources of lending have stepped up their activity. It's not a rush of capital, but definitely a big change from a couple of years ago. There’s also more diversity in terms of who’s lending and who’s capitalizing deals.There’s growing investor confidence, property pricing is improving. This has invigorated dispositions by banks which not only drives due diligence but also puts bank balance sheets in a better position.So in general, the barometers are collectively looking pretty favorable, but a guy in retail I know in retail in San Diego said “it’s enough to start feeling optimistic but not sustainable enough that developers are lighting cigars with $100 bills.”Let’s look a little deeper into the numbers.
Let’s start with CRE deals. Property transactions make our world go round.The market is baby stepping. As any good economist will tell you, you have to look at a trend line to get the real picture. You see here that going back five years, deal volume has been coming back slowly since 2009.It’s been doing that for several years. A strong quarter a weak one. Fears that sent everyone to the sidelines then a gradual return. An election that gave an already nervous market an excuse to take a breather. Then back on trackAfter a few years of stumbling, the market today appears to be on more stable footing…This graph shows quarterly data on deal volume back to the start of 2007. Full year 2013 easily surpassed the 2012 total of $300 billion. With buyer activity mounting, it goes to show that the money was there all along---just caution keeping it locked up…and now the vaults appear to be opening slowly.
What we’re also seeing now that I very much like is more smaller transactions…
By property type, Most of the work you’re doing is still on multifamily the favored asset class but retail and office/industrial are getting more interest tooMULTIFAMILY: The apartment market continues to be the ‘belle of the ball,’ with multifamily mortgage originations running 31 percent ahead of last year’s first-half total.On RETAIL “A couple of years ago, it was the institutional quality strip centers that were changing hands and seeing the value increases,” he added. “Now the market is starting to spread out to all [retail] properties.office/industrial are getting more interest too
Let’s switch to the lending world, starting with commercial mortgage backed securities.This is a sector that once drive about 25,000 Phase Is a year and bottomed out in 2009. CMBS has been VERY slow to recover. Healthy stream of deals closed out the year and as you see here, a strong 2013.That’s good news for the market because it finally opens up lending a bit more and it’s good news for the EPs that serve this sector in terms of more demand for Phase Is.Trepp believes CMBS will return to sustainable levels in another 3 years—by 2016—and that doesn’t mean reaching the levels of the market highpoint in 2007…it means getting back to the levels we had in the 2004-05 timeframe. So this market is highly likely to recover, but not for another 3-4 years. Over the near term, CMBS is expected to see a good year so that’s good news for EPs operating in this sector
Let’s switch now to the broader lending market.This shows the trend of banks now carrying a lighter load of non-performing property loans on their books.There have been more dispositions of poor loans by banks in the past two years than at any time since 2008. Banks were criticized for not doing this quickly enough …kicking can down the road….but they waited until property prices rebounded and in retrospect, that looks like a pretty good strategy.U.S. commercial-property values have increased 42% since hitting their post-crash trough in 2009As a result, the larger banks are in a much better financial situation. It’s the community banks in particular continue to struggle, and banks with less than $1 billion in assets have cut their OREO and delinquent loans by only 40% so they still have a ways to go.
The ingredients lenders needed to come back to CRE lending are now present:Better balance sheetsBetter property priceBetter credit quality More demand Generally speaking, banks have seen across-the-board increases in total CRE loan origination volume.
The good news is that for most major banks, the recession is receding further and further away in the rearview mirror. Lenders are getting more active in secondary and tertiary markets where there are well-qualified borrowers who have been unable to access the borrowing markets.Chandan said survey data that his firm has collected with the Real Estate Lenders Association show that the number of respondents who plan to increase their loan commitments in the next 12 months far outnumber those who plan to lower them. There are more loans being made, but there are more lenders out there, so they’ve got to be fairly competitive, and that leads to a lot of the pressures you’re facing from lenders to do things cheaply and quickly.
Remember: the market is good. Not greatLending is gaining steam slowly from a pretty low bottomStill well below the highs of 6 years ago but baby stepping its way back
The pace of the economic and real estate recovery remainsuneven across U.S. metropolitan-area markets. Survey respondents in 2013 expressed a desire to move into secondary markets in search of higheryields. The desire was clearly there in 2013, but 2014 may wellbe the year when we will see these plans come to fruition. Onefund manager notes, “The focus is now on top 25 markets, notthe top six. We like markets that have the potential for growth.” While this was the same sentiment as last year, what makes it more likely to occur in 2014 is that the pace of market fundamental improvement is now viewed as being sustainable, so the economics of the investments are now meetingmore investor risk/return metrics. The top five markets remain virtually unchanged with only some moderate reshuffling. San Francisco maintains the number-one position in the overall rankings. This tech-influencedmarket is also attractive to young workers, and with meaningfulsupply constraints in place, its location at the top is no surprise.The recovery has clearly had more momentum in marketswith favorable demographics, exposure to growing industrysectors, and those with an attractive cost of doing business. reflects the views of over 1,000 individuals who completed surveys or were interviewed as a part of the research process for thisreport. The views expressed herein, including all comments appearing in quotes, areobtained exclusively from these surveys and interviews and do not express the opinionsof either PwC or ULI. Interviewees and survey participants represent a wide rangeof industry experts, including investors, fund managers, developers, property companies,lenders, brokers, advisers, and consultants.
Building on the long-awaited recovery of the housing market, banks are starting to extend more construction and development loans Primarily multifamily and residential projects by some of the biggest builders in the country; and the capital is largely flowing from regional banks, not their larger counterparts
As you just saw, the market’s better in a lot of ways, but the road of recovery has been slow.The market’s still uncertain and uncertainty breeds aversion to risk.What does an uncertain market mean to your clients?They’re nervous
Banks’ feet are really being held to the fire right now to manage risk better, to engage in safe and sound lending practices.2 stats that really speak to to the importance of risk management is that READ
These are some quotes that came out of research we did into how lenders view the environmental risk management function today5. Bank policies are getting attention like never before. A smaller bank told me they’re gearing up for their first envl policy. EVER and this is “huge.”Interesting to watch this as the market recovers
Also on the topic of MORPHING, this is a summary of how some key metrics we track with our quarterly surveys of risk managers at financial institutions are changing.First is one foreclosures. The question asked for the %age of due diligence that is for foreclosures vs new orig’s or refis. That percentage for foreclosure-related due diligence has fallen from 17% almost 2 years ago to only 5% today. On the topic of liquidating loans, fell from 51% to 36% still high as small banks go through the processSelling REO a less pronounced decline from 77% to 63% (there is still a lot of asset unraveling happening, esp at the smaller scale of the banking sector so those opps will be aorund for awhile)Lastly the average percentage of Phase I ESAs going to Phase Iis is up—reflective of the risk-averse mindset. In late ’11, 6% of Phase Is were going to Phase Iis. Now it’s almost tripled to 16%.These are good signs for the market in the sense that drivers for property assessment services are shifting!...from foreclosures to originations/refis
Very consistent w/ the overall US marketAnd typically we see a year-end rush. Last yr was particularly pronounced Likely we’ll see a strong 4Q here to close out 2013 above last yr’s volume.
In the midst of a stumbling recovery, there is intense pressure in the market today…The expectations just keep going up.
Part of this is the sign of a mature market. Part—a big part—is the competitive pressures that clients are underway to make $$ in a tough market, keep costs down, improve efficiency.That’s the world we live in. Things are moving quickly. Clients want more, and to meet their needs, we have to continuously raise the bar.
Let’s talk for a minute about benchmarks for pricing and turnaround time.It’s the not-so-good newsPricing pressure is still the biggest pain point in the industry right now.1800-2400 is the range Think these are too high? Remember they include Phase I pricing over all clients types and a sample size of about 300 EPs. Focus solely on the lending sector, however, and the survey data shows that average pricing falls by about $500-600. There’s about a $500 differential between the two.It’s intense, no doubt about itTurnaround time pressures are equally intense—if not more so. READ SLIDE THENThis time pressure is giving some firms an opportunity to differentiate themselves and to be rewarded for efficiency with the ability to charge a premium for faster delivery.
The market’s not bad but it could be better. The last key to navigating in an uncertain market is adopting winning strategies.One of the great things about working in such a large, fragmented industry such as the one we all work in, is that any one of the thousands of companies in it can grow and prosper.I’m convinced that today there are more opportunities than ever. And I’ve watched what firms have done in the downturn…which ones have done better than others and there are some definite trends in the things they’re doing, the culture they foster.They’re not better at predicting the market, they’re better at preparing for it.The market’s not great. I’m not going to lie to you. You can’t control it. But you can control your reaction to it. The market is different and it’s still changing so companies need to decide what they’ll do differently to achieve their goals
The market is a mature one. There are so many different drivers for your servicesGrowth is happening but slowly…and it’s highly highly competitiveSo if you’re looking for what’s growing and where you should focus, consider some of the strongest prospects for your firm and work from there.
We talked already about developersFor the 7th straight quarter, developers are at the top of the list of client sectors with the highest scores for strong demand. Builders need inventory and are looking to close deals before construction costs climb any further. If you can get aligned with developers you might have some success
As I said before, CRE lending is shifting from headwind to tailwindBanks are aggressively coming backPrior to the Great Recession, SunTrust Bank was one of the primary providers of commercial real estate capital. Now the bank, one of the largest in the Mid-Atlantic and Southeast, is gearing up its CRE lending again. We’ll hear from SunTrust’s environmental manager later in the program. They’re busy.Bank of America is anotherAnd GE Capital among the world’s biggest property investors before getting burned in the financial crisis,
There’s more scrutiny on risk management than ever before that’s GOOD but it’s coupled with a need to do more with less. That’s CHALLENGING!Technology is playing a HUGE role in helping EPs be more efficient and helping their clients be more efficient.On the lending side, there are more eyes on environmental. A sense that risk management is everyone’s business.so it needs to be reportable and accessible to more peopleI believe it will matter to your competitive profile if you don’t leverage technology It’s happening in every industry and it’s happening in commercial real estate: Family Dollar’s real estate management team uses a platform for site selection that allows better collaboration among internal teams, and reduced site evaluation times 67 percent.one-stop shop for everything they need as a company to make the best real estate decisions,
Clients want things fasterTechnology is giving an EPs a way to deliverIt’s as simple and as complicated as thatlenders. They want reports to be prepared in a cost-effective and timely manner, in accordance with the terms of their clients’ loan specifications. Time can have a huge impact on their deals. So if an environmental professional can spend less time and energy fiddling with various software programs or duplicating their efforts compiling notes and photos at the office, and use technology to their benefit, the report could be prepared before the deadline and everybody wins. If my clients look good to their borrowers, then their business increase
Gartner just released a forecast predicting that in just two short years, mobile application use in the workplace will double. Perhaps not surprisingly, the most popular had to do with travel, data documentation and eating. The apps that consultants get the most jazzed up about are the ones like camscanner that allow document scanning in the field. As one gushed, "this app is so good, it's like having a high-quality scanner in your pocket that can convert multiple pages of documentation quickly into a pdf."
one panelist aptly observed that it’s all about speed and efficiency in today’s deal-making environment: jSee slideThe point being that in the deal making world, clients are getting used to (and demanding) ways to access data quickly, interact with it, customize it, experience it, analyze it and act on it. The winners will be the ones who figure out a way to give clients a way to make decisions faster and better manage risk, those who break out of the old way of doing things and improve the process.
Education is a key strategy of winning firmsIn anticipation of increases in lending or refis/foreclosures, some banks and investors replaced environmental staff that were laid off during the downturn.In some cases, this now means that the indiv’s requesting EDD are new to the business. So there’s a learning curve and an education that needs to happen.I’ve been hearing from many EPs whose firms are using the downturn to provide education to clients.It’s a great way to gain clients’ trust, “dev lasting relationships”, become more of a trusted advisor to them.ASTM E 1527 Any update to SBA SOPI understand HUD changes are comingAll of these…or an interesting project…can be effective ways of staying in front of your clients On lending front, banks and Community banks, in particular, ask a lot fo questions about the value of EDD and ex’s of what can go wrong. It’s a great thing to focus on in building up trust, standing out from the crowd in a competitive marketLet me give you an example: A bank in Illinois foreclosed on a residential property adjacent to a former dry cleaner site. The bank had failed to perform a proper environmental site assessment (ESA) and therefore missed that the adjacent site was known to be a part of Illinois’ Voluntary Site Remediation Program. Post-foreclosure testing revealed that the plume of tetrachlorothylene (also known as perchloroethylene, or “perc”) and other contaminants from the dry cleaner’s 35 years of operations had migrated onto the property now owned by the bank. (Perc is known to be a potent carcinogen.) After much litigation, the dry cleaner was recently held responsible under CERCLA and RCRA for past response costs and for the declaratory judgment claim regarding future response costs, but it remains to be seen whether the decision will be upheld, and, if so, whether the bank will be able to collect.
For you EPs, that’s your opportunity to educate…before one of your competitiors gets there firstThere are some positive impacts associated with the release of a new Phase I standard.It’s been 7 years since we had the 2005 version on the heels of the AAI ruleIt will shed light on the need for attn to the process, the need for improvements and valuable reminders of area of EDD like user responsibilities that risk managers may not have given much thought to in the past eight years—or even longer. You potentially have a new CREC term, new attn on vapor and just a focus on the fundamentals again.Already getting CERCLA questions This will continue as the new standard moves closer to completion
if you play the market smart, you should see more opp’s in 2014 with the usual caveat of “barring any unexpected market upsets" Watch the market barometersBe strategic Leverage technologyEducate and do it better than the next guySo I am optimistic. The market is growing not shrinking. The opportunities for you are growing not shrinking but the challenges are intensifying too.strong drivers, strong competitive pressures and need for greater sophistication. Differentiators: Personalized service, expertise, trust, fast TATThere’s a new ASTM standard coming out so that creates a need for education and reminders about the role of environmental due diligence in liability protection. Technology is changing how we all communicate and receive/process/manage data and use it in our decision-making.It’s a very exciting time for our market. I believe opps are expanding and I hope that you can all see that.So much has improved in terms of market confidence even from where we were last fall leading up to the election. The dog days, I believe, are over. And with that, I will turn you over to the capable hands of Anthony Buonicore
So that’s how things look from where I’m sitting…and that gives you a sense of the type of research we’re doing.Everything we publish is readily available here.And my contact info is there if you ever have any questions about the market or areas of opportunityIf you have an appetite for the types of information here, jot your email address on your evaluation and you’ll get our biweeklies With that, we have a few minutes for questions…Here during the break and after, so feel free to approach me or email me anytime.