Student Housing Investments – Complimentary Lunch – Feb. 22, 2017

The Mark, Tempe The Mark, Tempe, AZ – 228 beds 

This free luncheon and talk will be next Wednesday, Feb. 22nd at Le Cafe Stella in Santa Barbara. Brian Nelson, MBA and co-founder of Nelson Brothers Professional Real Estate will present details on these investments. There are only 30 seats available for investors seeking more information on these jointly-owned DST and TIC  investments. For the flyer click here.

Highlights:

  • Professionally managed, institutional quality properties
  • Locations adjacent to major universities with historically consistently increasing enrollment
  • Ideal 1031 exchange replacement properties
  • Minimum investments as low as $30K-$50K
  • High cash flow opportunities with low risk
  • To reserve a seat call 800-580-1031

I have represented several investors who have sold local high equity, high involvement, low return properties and exchanged into these high cash flow, hands-off investments. It is a perfect strategy for many investors looking for better cash flow and less involvement.

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What’s Coming up in 2017? SABER Meeting Review

SABER Logo

 

 

Review:  SABER Meeting, Nov. 10, 2016
Changes Ahead in 2017: “Renewed Economic Vigor or Collapsing Into Recession…?”

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I attended the Santa Barbara Executive Roundtable (SABER) on Nov. 10, 2016. This group generally holds monthly meetings at the University Club in Santa Barbara. Topics are timely and feature great speakers. The meetings are open to members and the public. The public cost is $35 per meeting if paid in advance.

future-crystal-ball

I don’t attend every meeting as some of the topics are not of interest. I was excited about this meeting as it was just post-election and featured a great speaker lineup:

 

  • Mark Schneipp, PhD – California Economic Forecast
  • Brian Johnson, General Manager – Radius Group
  • Keith Berry – Keith Berry Real Estate (Coldwell Banker)
  • Justin Anderson, President – AmeriFlex Financial Services

Locals will recognize these men. Mark Schneipp was the go-to economist for the Statistical Review Committee for the Santa Barbara Board of Realtors for years and was on staff at UCSB and featured at their economic forecast events. He is independent now and always insightful.

Mark Schneipp was featured last as he was the lead speaker. His take on the election reminded me of Alfred E. Neuman of Mad Magazine – What me worry? We basically have full employment, less debt and higher wages. What’s not to like? The stock markets had recovered and then some by this date and are expected to remain stable at least in the near term. Interest rates will rise in a long-predicted, stable manner. Real estate markets will continue in the same trajectory. Millennials will postpone buying a home or can’t afford one. Unemployment in this segment is much higher than with the 35+ year old segment. Buying a home is just not as popular an option for this group as in prior generations and they’re OK with that. Coastal markets will remain unaffordable with a dwindling middle class and the social dislocation that comes with that.

However, the one thing we can count on over long periods of time is that markets fluctuate. They do not ascend in an upwards pattern forever. This is one of the longest expansions we have had. We are due or perhaps overdue for a change, so don’t be surprised when it comes. Be prepared.

Brian Johnson is a bright, young man who has some impressive brokerage production under his belt. He is now the general manager of Radius Group, one of the larger commercial real estate companies locally. Brian gave a snapshot of all local commercial markets. The local commercial and industrial markets have exhibited stable to shrinking vacancy rates and surprise! The Funk Zone is the hot retail market. There is lots of activity in the multifamily market with the number of sales volume set to surpass the 1999-2000 mark. I track this market niche and can tell you that the cap. rates are at the lowest point since 1993. That doesn’t seem to affect volume though. Almost 1/3 of these sales have been off-market. There is substantial demand.

Keith Berry – What can I say? I’ve known Keith from the beginning of my career in 1979. He was one of my mangers. I have a great deal of respect for Keith. He is a gentleman and thoroughly knowledgeable in the local residential market, especially the upper-end. Segments of this market have shown fewer sales than in 2015. Escalating prices and fewer sales make for a few very shallow market segments. Most of the lower-end and mid-range market is not much changed in volume.

Justin Anderson – I don’t personally know Justin Anderson very well although I have met with members of his firm several times in various real estate related financial planning meetings. Justin was cautious which I thought was good advice. He felt that certain sectors of the market have some opportunities for safety and perhaps some growth. He named dividend producing stocks and seemed excited about some plays in the health-care market that has been particularly hit hard of late. He advised defensive plays in today’s market. In his opinion, the market has just been good for far too long.

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Brian Bailey is the broker-owner of Central Coast Investments. He is one of the leading multifamily brokers on the Central Coast covering Santa Barbara, Ventura and San Luis Obispo counties. He has a four decade history of success.

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Student Housing Investments – Free Luncheon in Santa Barbara Next Tuesday, Oct. 18th!

Tuscany Place
Tuscany Place – 284 beds

This will be a free luncheon next Tuesday, at Le Cafe Stella in Santa Barbara with a talk by Brian Nelson, MBA, Co-founder of Nelson Brothers Professional Real Estate. There are only 30 seats available for investors seeking more information on these jointly-owned DST and TIC  investments. For the flyer click here.

The highlights:

  • Professionally managed, institutional quality properties
  • Locations adjacent to major universities with historically consistently increasing enrollment
  • Ideal 1031 exchange replacement properties
  • Minimum investments as low as $30K-$50K
  • High cash flow opportunities with low risk
  • To reserve a seat call 800-580-1031

I have represented several investors who have sold local high equity, low return properties and exchanged into these high cash flow, hands-off investments. It really is a perfect strategy for many investors looking for better cash flow and less involvement.

Save

South Coast Multifamily Sales Trends – 1993 to 2015

1993-2015 - All GRM, CR 10 Yr BondClick chart to enlarge.

I’ve kept tabs on all of the 5+ unit sales on the Santa Barbara County South Coast since 1993. This comes in handy for listing presentations and in gauging the direction of the market. When the data is laid out visually in a graph it’s easier to understand market direction. Trust the data over advice that you should just pay over full price because someone else might buy the property.

Yes, there are pockets of perfection in Santa Barbara where the rules of gravity almost cease to exist: much of East and West Beach, parts of the Mesa, parts of the Riviera and a small group of core areas downtown. If you can afford a trophy property with nonsense numbers good for you. If you need to buy a property that is not in this etheric zone pay attention to the sales data. Also, don’t apply a broad stroke observation to every property equally. There is a world of numerical difference between a small building in a great location and a very large building in a mediocre location.

I just updated my study through Oct. 22, 2015. It’s been a banner year with lots of sales. It’s good to keep history in mind when making decisions in the present. However, opportunity exists in any market. So, what is going on in this market? The GRM / Cap. Rate[1] charts show a market turning solidly towards a sellers’ market since 2013. In fact, the trajectory during 2015 appears to have gone off the charts with excessive buyer behavior.

However, this seeming over-exuberance may be better understood in light of the dramatic rent escalation that has occurred during the past two years. According to the Dyer-Sheehan Group South Coast Apartment Market Survey report rents have increased 5.3% through Oct. 2014[2] with a similar trajectory for 2015. Maybe you can accept a 4% cap. rate if rents will increase 10% in the next 24 months.

The trendlines indicate a market that is very similar to the market in 2004-2005. This market was followed by a rather bleak period that lasted for years. However, it’s likely that continuing substantial rent increases will offset a portion of the current excesses. It seems that all sins of over-exuberance are forgiven locally if you own a property for more than 10 years.

Sets of graphs for each sub-set of multifamily properties: 5-9 units, 10-24 units, 25+ units and the entire set are available to clients.

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[1] GRM (gross rent multiplier): Value or price / annual gross operating income (GOI) = GRM. This is another factor in measuring or determining the value of a property.

Capitalization rate (cap. rate): The return of the property expressed as a percentage without relation to debt – net operating income (NOI) / price or value = cap. rate. This is one factor in measuring or determining the value of a property.

[2] Oct. 2014 Santa Barbara County – South Coast Apartment Market Survey, Dyer Sheehan Group, Inc.

 

1031 Tax-Deferred Exchange Update – May 2015

According to a recent issue of Commercial Connections, a print and web publication of the National Association of Realtors the several proposals to repeal or limit 1031 tax-deferred exchanges in the 113th Congress were not adopted. Read about it here. However, new proposals and plans tend to borrow heavily on previous ones so expect the 1031 tax-deferred exchange to remain vulnerable.

My advice to sellers: Why wait to complete your exchange? We are in the midst of a robust, fully-recovered market.

Economic Summit – April 2015

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South Santa Barbara County Economic Summit
Economic Forecast Project, UCSB – April 2015

I attended this program on April 30, 2015. Note that they called it an “economic summit” and not the more typical “economic forecast”. There was not a lot of forecasting done. But that’s OK; predicting future macro-economic events is a bit like predicting the weather a year from now.

I enjoyed this program as usual. It is a nice break from similar local events more geared towards marketing and provided a more neutral viewpoint of macro and micro trends for the Santa Barbara area with bits of wider information on California, the U.S. and the world. UCSB is a world-class university and this event measured up to its high standards.

On the local real estate front – now here’s a surprise: high demand, low supply, rising prices, problematic affordability both on the purchase and rental fronts. Of course, we’ve been hearing this in an endless loop forever, so it’s not likely to change.

Mark Flannery, Chief Economist and Director, Division of Economic and Risk Analysis at the U.S. Securities and Exchange Commission gave a talk about the different levels of risk allowed between “registered” investors and everyone else. This was interesting as I had not realized the entirely different level of risk that is OK with those that oversee these things for people of high net worth and income. It is very expensive to comply with all of the auditing and disclosure requirements in the sale of securities to your man on the street, but your 1% investors get to fly by the seat of their pants. I don’t know if this is a good thing.

By far the most interesting segment of the program was the segment on “Business in The Social Media Age” with Matt Kautz, Director of Social Media and Analytics, Walt Disney Studios and Lisa Jenkins, VP of Marketing & Client Services, The Marketing Distillery. This segment was moderated by Megan McArdle, Columnist, Bloomberg View. Megan did a great job of moderating this cutting edge segment and injecting great humor into the discussion.

If you are not involved in social media in your business you should be. The different social media agents were broken down as to how they might assist the entrepreneur in targeting core groups. Facebook remains the most important and versatile form of social media. Google analytics provides some very interesting data engines to comb all social media for mention of your company, name or interests and email you when a hit is found. Social media is essential in creating brand identity. Expect to spend two to three hours a week on posting and blogging in order to be effective. Define what you want to accomplish and who you are targeting. I guess that this is my weekly contribution right now!

Another extremely interesting segment was a presentation on the AlloSphere Research Facility at the NanoSystems Institute at UCSB. This endeavor is an effort to present visual data analysis in a three and four dimensional venue. Is your head hurting yet? Mine was.

This facility is a sphere located in the California NanoSystems Institute building (Elings Hall) at UCSB. The presentation example involved an examination of the decoupling of the Swiss Franc from the Euro that occurred on January 15, 2015. This move caused a 23% rally in the Swiss Franc almost overnight. The AlloSphere example was a minute by minute examination of this event from several axes. If your head isn’t hurting by now, check your pulse!

Wow! I actually can imagine some applications in engineering and physics, but I am having a bit of trouble understanding how this would be an improvement in economic analysis which would typically be various charts and spreadsheets. As an English literature major maybe I’m not supposed to. But I don’t care. This was a truly amazing presentation. I had no idea of the existence of this facility 10 minutes from my home. I wonder what other wonders lurk on campus?

So, how are we locally and in California? We are doing quite well locally except for the ever-present bugaboos of affordability and the ever-decreasing middle class. Employment has continued to click up quite nicely in comparison, but most job creation is for low-paying positions. Something that will warm some local hearts is that local government employment, the not-surprising largest local employer, actually decreased a few percent from the prior year.

We are doing far better than much of the world though. With Europe, Russia, China and Japan in the economic doldrums our historically modest economic accomplishments look quite good. Look forward to more disturbing news about the economies of Greece, Italy and Portugal.

So, guess what? We are in one of the most sought-after parts of the United States which is doing quite well thank you in relation to most of the world! That’s got to be good news. And no one else has an AlloSphere to boot! I went away quite happy! Now to work on my blogs…