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EBG Listings of The Week 03-22-2024
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EBG Listings of The Week 03-15-2024
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EBG closes 2023 with strong momentum!
EBG closes 2023 with strong momentum!
We’ve been busy in December, and now we are looking to help more retail owners, like you, get their spaces fully leased and their renewals maximized!
We cater to retail owners who want more profits and fewer headaches from their assets!
Give me a call today and let’s chat about making 2024 your most profitable year!
License #0593483
New Team Members
New Team Members
Introducing Our New Real Estate Team Members: Elevating Excellence and Expertise
08/25/2023 – Eureka Business Group is thrilled to announce the latest expansion of our real estate family with the addition of three exceptional new team members who bring high levels of motivation, dedication, and innovation to our firm. We are committed to providing unparalleled service to our clients, and our new team members are poised to further enhance our capacity and exceed client expectations.
Meet Our New Team Members:
Makila Ballard, Commercial Real Estate Advisor
Specialty: Retail Leasing & Sales
Makila moved to Dallas, Texas in May of 2022 keen to get involved in the commercial real estate market. She has a Bachelors Degree in Business Management from Rhodes College where she learned about responsibly and promptly identifying opportunities, effective communication, and the vital importance of handling business. Makila is committed to bringing value to her clients and their transactions with her transparency, ability to listen and understand your needs and wants in your property journey. With experience in customer service, management, and planning, Makila supports her clients’ search for the perfect real estate!
Khyrique Colon, Commercial Real Estate Advisor
Specialty: Multifamily
Khyrique excels in social networking, communication, and marketing. Listening, understanding, and providing quality services for clients is Khyrique’s passion. Bringing value to your real estate transaction is his primary focus. Khyrique has ambition and commitment to commercial real estate.
Brock Vigus, Commercial Real Estate Advisor
Specialty: Retail Leasing & Sales
Brock has lived in the DFW area all his life. He worked for his family’s foundation drilling company for the last 10 years . Brock is committed to transparency and, having strong work ethic in every transaction.
Company Vision and Goals:
At Eureka Business Group, our primary goal is to provide comprehensive real estate solutions that reflect our commitment to professionalism, integrity, and client satisfaction. With these new additions to our team, we are even better positioned to deliver on this promise. Our company’s vision remains unwavering: to be the trusted partner that clients turn to for all their real estate needs, backed by a team of dedicated experts.
Quote from EBG Principal, Joseph Gozlan:
“We are delighted to welcome our new team members to the Eureka Business Group family. Each individual brings a unique set of skills and experiences that will undoubtedly enhance our ability to serve our clients effectively. This expansion is a testament to our dedication to continuous improvement and the pursuit of excellence in everything we do.”
About Eureka Business Group:
Established in 2008, Eureka Business Group is a full-service commercial real estate brokerage with a passion for providing creative solutions to complex real estate situations. As licensed brokers and experienced commercial investors ourselves, we specialize in the purchase, sale, management, value-add, and repositioning of commercial real estate assets.
May 2023 DFW Industrial & Flex Active Listings Insights
May 2023 DFW Industrial & Flex Active Listings Insights
Author: Joseph Gozlan, Eureka Business Group | Published: 05/09/2023
As in every month, we share on our DFW Industrial & Flex Digest some interesting insights drawn from the DFW Active Industrial & Flex Listing.
The data source we use is Costar and conversations we have with local owners & brokers. For the sake of data simplicity and the interest of our clients, we focused our research on the Class A/B Industrial & Flex properties at the sizes between 5KSF and 60KSF.
As of the first week of May 2023, there are currently about 140 Such properties actively offered for sale in the DFW market place. Of these 140 properties, there is a relatively even distribution between the small, medium and larger properties (within the above mentioned range).
Asking Prices: One of the things we found very interesting was the massive differences in the price per SF regardless of property size. Each size group had cheap properties in the sub $40/SF range and very expensive properties asking over $750/SF.
Locations wise, Dallas is leading the list with about 20% of the total number of available properties. No less than 44 cities have at least one industrial property available for sale within the city limits which shows how important the asset class had become in recent years. No more hiding the industrial/flex spaces in the cities around the airport in areas w/o public transportation and accessibility. Affluent suburbs such as Plano, Allen, Prosper and Celina all have available industrial or flex properties to sell and leading the northern suburbs is Frisco with 9(!) industrial properties offered for sale.
Days On Market: Surprisingly enough, the Average DOM (Days on Market) was lower in the larger category (over 20KSF) standing at 145 days compared to 195 and 243 for the small and medium sizes.
For more insights on the average asking price, Construction materials, property vintage, etc.
Click here to download the full May 2023 DFW Industrial & Flex Active Listings Insights PDF
#industrialrealestate #commercialrealestate #legacywealth
2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle
2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle
Author: Joseph Gozlan, Eureka Business Group | Published: 04/21/2023
Juniper Square has recently released a comprehensive report analyzing the commercial real estate acquisition volumes by asset class in 2022. The report offers valuable insights into the current state of the market, and how it is evolving. As a commercial real estate investor, understanding these trends can help inform your investment strategies and help you make informed decisions.
The report reveals that the multifamily asset class continues to dominate the market, accounting for 45% of all commercial properties acquired in 2022. This comes as no surprise, given the favorable agency debt, strong rent growth, and a plethora of multifamily “gurus” that flooded the real estate circles in the last few years…
Multifamily has consistently held the top position in the past decade, with its share of the market fluctuating no more than 5% of the overall share of commercial real estate transacted.
On the other end of the spectrum, the office and hotel asset classes have experienced a significant decline, with their combined share dropping from 34% in 2013 to just 22% in 2022. The pandemic has had a significant impact on both asset classes. The demand for office space plummeted, with remote working becoming the norm for many businesses. As a result, office buildings have seen a decline in occupancy rates, and investors have become more cautious about investing in this asset class. Similarly, the pandemic has significantly impacted the demand for hotels, with travel restrictions and reduced business travel leading to decreased occupancy rates and revenue.
However, one asset class that has emerged as the real winner in 2022 is industrial properties. The report reveals that the industrial asset class has experienced a 450% growth rate since 2013, rising from just 4% to 18% of the commercial real estate acquisitions volume in 2022. The growth in e-commerce has played a significant role in driving demand for industrial properties. As e-commerce businesses continue to thrive and expand, they require larger spaces beyond the confines of the founder’s living room or garage. This has resulted in increased demand for industrial buildings, with businesses seeking spaces ranging from 2,000SF flex suites all the way up to millions of square feet distribution centers.
The report highlights the importance of keeping abreast of the latest market trends and using data to inform investment decisions. As a commercial real estate investor, it is crucial to identify emerging trends, evaluate their potential impact on the market, and adjust your investment strategies accordingly.
In conclusion, while multifamily remains the dominant asset class, industrial properties are emerging as a significant growth opportunity for investors. It is essential to keep abreast of the latest market trends, evaluate the potential impact on your investments, and make informed decisions based on the data available.
What do YOU see in this chart? Do you agree with the above insights or do you think differently?
Feel free to vote, comment, like as you see fit!
Joseph Gozlan,
Commercial Real Estate Advisor
- Email: Joseph@EBGTexas.com
- Office: (903) 600-0616
- Mobile: (469) 443-6336
Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years
Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years
Author: Joseph Gozlan, Eureka Business Group | Published: 04/18/2023
I came across this article by Redfin: https://www.redfin.com/news/redfin-rental-report-march-2023/?utm_source=newsletter.credaily.com&utm_medium=newsletter&utm_campaign=rent-prices-drop-yoy-for-the-first-time-since-2020 and felt that this needs to be said…
In a world where sensational headlines dominate the news cycle, it’s easy to get caught up in the hype. But when it comes to investing in the multifamily real estate market, it’s important to take a step back and read through the noise.
The past few years have been turbulent for the multifamily market, with rising rents and a shortage of affordable housing driving demand for rental properties. However, the tail end of COVID-19 pandemic and the rampant inflationary conditions have introduced a new set of challenges, with some markets experiencing sharp declines in rent growth while others continue to grow steadily.
Despite these challenges, multifamily remains a strong asset class and is often one of the first to recover from recessions. But as investors consider their options for 2023, it’s important to take a closer look at the factors impacting the market and make informed decisions based on a comprehensive understanding of the landscape.
The State of the Market
According to recent data, rents are still overall very high in most markets, despite some areas experiencing a decline in growth. For example, Austin, TX has seen a significant 11% drop in rent growth, while other markets remain relatively flat or experience minimal growth in the 1%-2% range.
It’s important to note that rent growth is only one side of the equation when it comes to assessing the health of the multifamily market. Investors must also consider the impact of rising expenses on the net operating income (NOI) of their properties.
Challenges and Opportunities
One of the biggest challenges facing multifamily investors in 2023 is the increasing cost of labor and materials. The COVID-19 pandemic has led to a shortage of workers in many industries, including construction, which has driven up wages and made it more difficult to complete projects on time and on budget.
Additionally, the cost of materials has also risen sharply, with shortages of lumber, steel, and other essential building supplies leading to supply chain disruptions and price spikes. These factors have contributed to a significant increase in expenses for multifamily properties, which can erode the NOI and make it more difficult to achieve desired returns.
However, despite these challenges, there are also opportunities for savvy investors who are willing to think creatively and adapt to changing market conditions. For example, some investors may be able to take advantage of the current climate to acquire distressed properties at a discount and add value through strategic renovations and improvements.
Others may be able to leverage technology to streamline operations and reduce costs, such as by implementing smart home features that allow for remote monitoring and energy management. By staying up-to-date on emerging trends and taking a proactive approach to asset management, investors can position themselves for long-term success in the multifamily market.
Making Informed Decisions
As with any investment, it’s important to approach the multifamily market with a clear understanding of the risks and rewards involved. While multifamily can be a lucrative asset class, it’s not without its challenges, and investors must be prepared to navigate the ups and downs of the market.
If you’re considering investing in multifamily in 2023, it’s important to do your due diligence and research the local market conditions, including factors such as job growth, population trends, and the supply-demand balance for rental properties. You should also work closely with a trusted advisor who can help you evaluate potential properties and assess their potential for long-term growth and profitability.
Ultimately, the key to success in the multifamily market is to take a measured approach and avoid getting caught up in the hype of sensational headlines. While it’s tempting to react to short-term fluctuations in rent growth or other market indicators, it’s important to keep your eye on the long-term trends and make informed decisions based on a comprehensive understanding of the market dynamics.
This requires a willingness to read through the noise and stay focused on the fundamentals of real estate investing, such as cash flow, NOI, and long-term growth potential. By taking a disciplined approach and working with experienced advisors and partners, investors can position themselves for success in the multifamily market in 2023 and beyond.
In conclusion, the multifamily market is facing a range of challenges and opportunities in 2023, from rising expenses to changing market conditions and emerging technologies. However, with the right approach and a willingness to adapt to changing circumstances, investors can position themselves for long-term success in this dynamic and ever-changing asset class. Whether you’re looking to buy, sell, or hold multifamily properties in the coming year, feel free to reach out to us so we can help you achieve your goals!
Joseph Gozlan,
Commercial Real Estate Advisor
- Email: Joseph@EBGTexas.com
- Office: (903) 600-0616
- Mobile: (469) 443-6336
Fixed Vs. Floating Rate Loans
Fixed Vs. Floating Rate Loans
Author: Joseph Gozlan, Eureka Business Group | Published: 04/17/2023
Commercial real estate is a dynamic and ever-changing industry that requires constant attention to emerging trends and market shifts. One such trend in recent years is the short-cycle property purchase phenomenon that has become prevalent in the multifamily sector. This trend has created a challenging environment for owners of these properties, and it is important for industry professionals to stay informed about the potential risks and challenges associated with short-cycle purchases.
Historically, multifamily properties were purchased with agency debt from Fannie Mae, Freddie Mac, or Ginnie Mae. These long-term loans carried heavy exit penalties using deficiencies or yield maintenance, which meant that a sale within one or two years would result in a massive penalty, rendering the deal unprofitable. As a result, owners of multifamily properties would rather hold onto the property for the duration of the loan term than sell at no profit.
However, in the last few years, the short-cycle purchase phenomenon has emerged, especially in the multifamily sector. These properties were bought and sold on very short cycles, as short as six months in some cases. This trend created an unnatural and uncharacteristic behavior in commercial real estate driving owners to seek alternative financing options. Bridge loans became increasingly popular as they allowed owners to purchase properties with the intention of reselling within a year or two and also allowed buyer to acquire poorly managed properties that didn’t meet the agency debt requirements (usually 90% occupied for the last 90 days).
According to a recent report by CBRE, bridge loans accounted for approximately 18% of all multifamily financing in the first quarter of 2022. This is a significant increase from the previous year, where bridge loans accounted for only 12% of all multifamily financing. That is a 50% increase!
While bridge loans offered a way to finance these short-cycle purchases, they also created a risky environment where owners were essentially playing a game of musical chairs, hoping to sell the property before the music stopped. Unfortunately, the music did stop with the recent rate hikes and the banking crisis, leaving many multifamily owners with bridge loans that are now due.
According to a recent report by Trepp, there are approximately $17 billion in multifamily loans that are set to mature in 2022. This represents a significant increase from previous years and creates a potential risk for owners who may struggle to refinance their debt.
Owners of multifamily properties with bridge loans that are due this year are facing real challenges in finding replacement debt.
There are three main scenarios that these owners face:
Do a “call for cash” from the investors to bring cash to the table to satisfy the bank’s DSCR requirement.
Seek preferred equity or mezzanine debt to stack over a low LTV loan.
Default on the loan and/or try to negotiate a loan modification.
Sell and hope they can save some of their investors’ equity.
None of these options are ideal, and we are likely to see some distressed properties go on sale before the end of the year.
According to a recent report by Real Capital Analytics, the distress rate in the multifamily sector has increased from 0.3% in the first quarter of 2021 to 0.9% in the first quarter of 2022. While this is still a relatively low rate of distress, it represents a significant increase (300%) and underscores the potential risks associated with short-cycle purchases and bridge loans.
In conclusion, the recent trend of short-cycle property purchase & sale in the multifamily sector has created an environment that is challenging for owners of these properties. While bridge loans offered a way to finance these purchases, the current market conditions have left many owners in a precarious situation. As professionals in the commercial real estate industry, it is important for us to stay informed about market trends and developments to ensure that we stay alert and help our client prepare for any challenges that may arise.
Joseph Gozlan,
Commercial Real Estate Advisor
- Email: Joseph@EBGTexas.com
- Office: (903) 600-0616
- Mobile: (469) 443-6336
6 Things Multifamily Owners Should Pay Special Attention In This Market
6 Things Multifamily Owners Should Pay Special Attention In This Market
Author: Joseph Gozlan, Eureka Business Group | Published: 04/13/2023
Everyone has been talking about the $230M multifamily portfolio that was foreclosed on by Arbor (a Fannie Mae DUS lender) in the past week.
Everyone has been talking about the $230M multifamily portfolio that was foreclosed on by Arbor (a Fannie Mae DUS lender) in the past week.
The main talking points were pointed at syndication, education groups and such. Not many were talking about what can multifamily owners do today to avoid being in the same unfortunate position. So I thought I’d share some hard learned lessons from our own experience as owners, operators, syndicators and brokers of multifamily and other commercial real estate.
#1 The income-expense graph inversion
Every multifamily investor can tell you that NOI (Net Operating Income) is composed of Income less Operational Expenses. In the past 10+ years we’ve been living in a world where the rent growth graph has been growing at a rate of 5%, 10% and in some cases even 20% year over year while the expenses graph was growing at a normal inflation rate of 2%-3% per year. That means there was a positive difference between the two graphs which pushed NOIs higher year over year and created the multifamily merry-go-round where properties were bought and sold withing months(!) and everyone kept making money.
And then COVID happened…
All of the sudden, supply chains were stuck, causing material shortages. People found ways to work from home, which caused a huge labor shortage in the blue-collar jobs sector. The government was printing money like there’s no tomorrow, and everyone was spending money like there’s no tomorrow which pumped the economy with a lot of hot air until the end of 2022 when the balloon just popped. Now we have inflation rates ranging between 6% and 8% officially and much more unofficially. Chick-Fil-A is paying $19/hr and Walmart distribution centers are paying $24-$26/hr.
Why does it matter? Because the graph is now inverted! Expenses are growing at a much faster pace than rents, which in most of the country are going flat or worse.
What does it mean? It means that that a stabilized property is now on a down trend for the NOI!
So, the first thing multifamily owners should pay attention to is: The income-expense graph inversion
#2 Checks & Balances
Many Multifamily owners use 3rd party property management companies to run the day day-to-day operations of the properties. Unfortunately, many of these management companies have very little is any checks and balances systems to make sure everything is running as it should be. We’ve seen fees not being charged, fraud, embezzlement, unreported deposits, move-outs without final account statements, move-ins without deposits and many other issues that the lack of audit processes let through and hurt the property’s bottom line. Multifamily owners, specifically ones that don’t self-manage, should reach out to their 3rd party management teams and ask what checks and balances systems and processes they have in place to ensure that what they think is being done is actually done and done correctly. If you find the management team is lacking the required systems and processes, then you need to work with them to make sure these gaps are covered ASAP. Management teams that refuse to do so in a timely manner, should not be trusted with the care of your property…
#3 The Language In The Loan Documents
Not all loan documents are born equal, and every lender will have their own version. In fact, same lender, different loans can have significant differences because lenders (especially Fannie/Freddy DUS lenders) use a pool of agency approved attorneys and they have different format and different approach to the loan documents. The strength of the borrower’s attorney is also a factor in this.
All multifamily owners, regardless of the status of their property, should revisit the loan documents and refamiliarize themselves with the terms and conditions in it. What the lenders can ask/demand/force and take a note of these things. Multifamily owners should probably make a list of these things that would be considered technical defaults and work with their management team to review and make sure the properties are in compliance so the lenders won’t have any ammunition against you!
#4 The Cashflow Analysis
As mentioned above, many Multifamily owners choose to use a 3rd party property management company to run the day-to-day operations of the properties. As such, some owners choose to receive monthly reports and just glimpse over them, paying only attention to the bottom line. In today’s market, especially considering the income-expense graph inversion mentioned in the beginning of this article, paying attention to the cash-flow of the property is critical! Multifamily owners should prepare and/or review a cashflow analysis report that shows every dollar that came in and every dollar that was spent. Please note, this is not(!) the P&L report provided by the property management team (which in many cases is on an accrual basis). Every dollar that made it to the bank vs. every dollar that left the bank. Poor cashflow is the #1 cause for properties to get in trouble with the lenders. Poor cashflow also causes deferred maintenance and ironically, in a circular notion, deferring maintenance will allow incompetent managers to mask poor cashflow until a very late stage!
#5 Physical vs Economical Occupancy
There’s a fine line between “keeping it full” and high occupancy. Many Multifamily owners have a benchmark of occupancy for the management team which in some cases leads to “let’s not evict” and “give them another chance” mentality because the management company doesn’t want to show a drop in occupancy. Compensating a 3rd party property management company based on occupancy could incentivize the wrong behavior. Multifamily owner should regularly review the delinquency report and pay attention to how high the balances are compared to the monthly rent (e.g., if the unit rent is $800 and the outstanding balance is $2500 then that tenant didn’t pay rent for 3 consecutive months!). Most multifamily management software would also indicate next to every unit/tenant how many times they were late on payment in the past 12 months. Tracking this information on a regular basis will help Multifamily owners identify bad trends and allow them to take action sooner rather than later!
#6 Labor Costs
One of the large expenses, if not the largest one, is payroll. On-site managers, office team, maintenance techs, grounds, etc. are all hard to hire and retain in the post COVID world and the average salaries have increased by tens of percentages. Monitoring your labor costs closely can help identify inefficiencies, time theft (that’s a real thing!), abuse of overtime and over staffed teams. These items can prove to be massive money pits and put a real financial strain on the property!
As owners of multifamily ourselves, brokers, asset managers and special servicers for lenders we predict that many multifamily owners will find themselves in a corner that will be hard to get out of if they don’t pay closer attention to the details until we see an improvement in the market conditions and the income to expense graphs find their way to normalcy.
If you are a multifamily owner and need help with assessing the situation on a property or a portfolio, we can help with that. We can be as high level as reviewing reports and pointing out potential risks or we can be as thorough as spending time with your on-site team and reviewing the operations and financials of the property. Call me today (my number is on my profile) to discuss your needs and see if our service can bring value!
Joseph Gozlan,
Commercial Real Estate Advisor
- Email: Joseph@EBGTexas.com
- Office: (903) 600-0616
- Mobile: (469) 443-6336