Wednesday, January 17, 2018

DIA to discuss new convention center in downtown

By Derek Gilliam  –  Reporter, Jacksonville Business Journal
Jan 16, 2018, 4:06pm

The Downtown Investment Authority will discuss selling the old city hall annex and courthouse properties to a developer to build a convention center along Bay Street at its Wednesday meeting.

The agenda item would allow DIA CEO Audra Wallace to send out a request for proposals that would seek development of a minimum of a 350-room, full service convention center, parking garage and public convention space at 220 and 330 Bay streets.

“The DIA envisions a new convention center, hotel and parking garage, if developed, to be an immediate enhancement to the financial viability and dynamism of surrounding facilities in the urban core and sports complex and to the city,” the proposal read.

The resolution puts the following requirements for development of the convention center:
  • Food and beverage (including a full service restaurant)
  • Recreation
  • Retail
  • Function space (wedding receptions, banquets etc.)
  • Full service hotel (minimum - 350 rooms)
  • Public exhibit hall (minimum - 200,000 square feet)
  • Ballroom (minimum - 40,000 square feet)
  • Meeting / breakout rooms (minimum – 45 rooms)
  • Transient boat slips (optional)
Parking Garage
  • Hotel Parking Spaces (minimum 400 spaces)
  • Convention Center Parking Spaces (minimum 1,300 spaces)

The meeting will take place Wednesday at 2 p.m. on the eighth floor of the Ed Ball Building.

Wednesday, January 10, 2018

The Difference Between ROI and Cap Rate: Explained

Tshepo Samuel Maubane

Tshepo Samuel Maubane

Commercial Real Estate Specialist @commercialgurudubai

3 articles

There are several evaluation tools that are extremely useful in determining how much bang you are really getting for your buck in real estate. CAP Rate and ROI are some of the frequently used metrics when evaluating a real estate investment opportunity.
These terms are often misunderstood and sometimes incorrectly used by some investors as well as my fellow brokers in the market. Often, while putting together a commercial property deal, I will inevitably hear some of them incorrectly or interchangeably use the terms.
Well, needless to say, this presents an opportunity to address and hopefully clear up these misconceptions (and remember, obscurity is not good in my line of business).
Most importantly, for brokers, not knowing the difference between the two could lead to a catastrophic misrepresentation of a property’s financials. We all know how that ends.
So let’s dive right into it:
The Capitalization Rate (Cap Rate) is the Net Operating Income (NOI) of the property divided by the Price (or current market value). It measures profitability and tells you how much you’d make on an investment if you paid all cash for it.
Cap Rate (%) = Net Operating Income ÷ Property Value)
The beauty of using cap rates to compare properties is that an investor can easily distinguish how the risk and reward profile of one property compares with those of other similar investments. I’ll elaborate further on other instruments such as NOI, Cash flow, Debt Coverage Ratio and building classifications in my next blog.
The Return On Investment (ROI) also known as your Cash on Cash Return is something entirely different. It is your annual cash flow divided by equity. It measures the annual return on the initial capital you invested. The initial investment would include a down payment, closing cost, initial improvements and any other initial out of pocket cost associated with the property purchase.
ROI = Annual Cash Flow ÷ Equity
*Remember that your cash flow is your Net Operating Income (NOI) minus your mortgage payments (mortgage payment includes your principal/debt repayment and the interest)
Another way to look at it: ROI is the velocity of money; How fast my money is moving, how fast can I get back my initial investment back in my pocket.
Here are some examples:
(Now I will point out before somebody else does, I’ve ignored acquisition costs, broker commissions, potential vacancies, repairs etc. in the examples below)
ROI (Cash on cash) Example
Proper Value: AED 1,800,000
Down Payment: AED 450,000 ( 25%)
Rent – AED 150,000
Maintenance – AED 20,000
Net Operating Income: AED 130,000
Debt - 4%
LTV - AED 1,350,000 ( 75%)
Monthly Mortgage Payments: AED 7,597 pm ( @ 4% over 25 yrs)
Total - AED 91, 152 per year
Cash Flow: AED 38,848
ROI = annual cash flow ÷ down payment
8.6%= 38,848 ÷ 450,000
Note*: This is a snapshot of year one and does not take into account the potential increase in rental income and maintenance cost over the investment period, as well as interest on the reducing balance.
Cap Rate Example (Using the same figures as above) 
Cap Rate = Net Operating Income ÷ Market Value
7.2% = 130,000÷ 1,800,000
So in this example, your ROI is 8.6% and your Cap Rate is 7.2%.
I never understood why “ROI” is the prevailing metric used in our local market. We should be seeing a Cap Rate of a property advertised rather than an ROI for two reasons:
1. When an income generating property is listed for sale, it is when the Cap Rates really matters - when evaluating the true profitability without taking into account how the property will be bought. It is a method of showing us the (supposed) property’s worth in comparison with the income that it generates.
2. Assuming a financed property, ROI can vary per buyer because it is dependent on the financing terms used to buy the property. So one person’s ROI might be different from another person’s ROI for the same property.
Although they are unlikely to vary that much due to interest rates, it is more likely to vary depending on how big of a down payment a buyer puts down.
Essentially, it will differ depending on what the monthly mortgage expense is which differs depending on the buyer’s qualifications, the interest rate, and the down payment.
It’s important to keep in mind that a Cap Rate is still a useful metric to evaluate the investment even when debt will be used. The ROI measures how good the deal is and how good the financing is, whereas the Cap Rate will measure ONLY how good the deal is. So you might look at ROI and think it is low but that might be due to financing rather than the property itself.
So in short, the ROI has more to do with the investor and how it affects him/her, whereas the Cap Rate has more to do with the investment itself and how it’s performing.
My next blog is on the 7 commonly used Commercial Real Estate terms, stay tuned!
Connect with me on LinkedIn:
Tshepo Samuel Maubane
Director - Commercial Real Estate Advisory

Thursday, January 4, 2018

Forbes produced the following article with reference to 2018 housing market.

In 2017 Americans learned to expect the unexpected, whether it be politics, weather or housing. Driven by record low inventory, little about the housing market went as forecast last year. “We thought there would be some things to take the pressure off,” reflects Skylar Olsen, senior economist at home search site Zillow. Interest rates would rise. Construction would pick up. Price growth would moderate. “That did not happen at any impactful level.”
Instead the market got hotter: inventory tightened, prices rose, mortgage rates barely budged and, though new home construction picked up at the end of the year, it was not at the starter price points where new inventory is needed most. Like the soaring stock market, the housing market often seemed disconnected from the tumult in Washington and natural disasters elsewhere. Observes Javier Vivas, director of economic research for “We saw the economic growth and the economic momentum function as an override for a lot of external forces.”
With few clear signs of supply relief and the impact of the new tax law still being digested, reading the housing tea leaves is particularly challenging this year, but here are six things experts expect to happen:
1. The pace of sales will slow early in the year—but not for long. 
Several provisions in the tax bill signed into law by President Trump last month will directly impact housing. These include changes to the mortgage interest deduction and to property tax deductions. Other changes will impact how much money people have, requiring decisions on how to spend it. Experts anticipate households will take some time to do the math on how the tax plan impacts them and the value of their home before making any big moves. Nevertheless underlying demand should remain strong after the best year for wage growth since the recession. Pent up demand from renters who have been unable to find suitable homes to buy also means the lid won’t stay on for long.
2. Inventory will continue to be a drag. 
A crippling lack of inventory remained the defining trait of the housing market in 2017. At the start experts believed the crunch that characterized 2016 would bottom out; instead it grew worse. According to Zillow, housing inventory declined 10.5% in the 12 months ending in November. Data from brokerage Redfin shows that in November 2017 there were 653,347 homes for sale across the country. In November 2010 there were 967,604. Low inventory, says Olsen, “drove all the dynamics that we saw, from bidding war in the hottest U.S. housing markets, to the incredibly fast home value appreciation” across the country.
Looking to 2018, the general consensus is that inventory will pick up slightly. The biggest reason for this modest optimism is that the current situation is unsustainable. Prices cannot rise faster than wages forever. Plus, life events will eventually force reluctant sellers off the sidelines. Home search site Trulia found that 31% of Americans believe 2018 will be a better year then 2017 to sell a home, far more than the 14% who this it will be worse. (Though only 6% of homeowners say they plan to sell.) Another positive signal? New construction has started to swing away from apartments, typically built to rent, to single-family homes, which are built to own.
However, it has become clear that the typical assumption that demand and strong prices will entice construction are not holding true this cycle. There are structural reasons builders aren’t building: the high cost of land, skilled labor and building material, lack of buildable space and local regulations against density. Recently, however, builder sentiment has been brighter than consumer sentiment.
For a sign of how bad things have gotten, Nela Richardson, chief economist at Redfin, points to the aftermath of hurricanes and wildfires that wreaked havoc last year. Following those tragedies construction resources went to the places where it was needed most. This was necessary, but it “flat lined growth” elsewhere, says Richardson. Meanwhile, in the debate about the tax plan lawmakers indicated inventory woes are not top of mind, suggesting no policy relief on the horizon.
3. Price growth will slow—but not stop. 
National home prices have climbed for 23 consecutive months. From January through October 2017 the Case-Shiller U.S. National Home Price Index increased 5.92%, on track for the biggest gains since 2013 when the market was finally recovering from the bust. The hottest markets last year were western cities like Seattle and Las Vegas where closing prices rose 12.7% and 10.2% respectively. Experts say prices will continue their march higher in 2018, but the rate of increases will slow. “Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth. Some of these favorable factors may shift in 2018,” noted David Blitzer, head of the Index Committee at S&P in the most recent release of the monthly reading.
4. The rent versus buy equation could tilt toward renting in costly markets. 
Thanks to the new tax law, it just got more expensive to own a home in high tax and high price places. For some people the changes, combined with rising prices, may mean renting makes more financial sense than buying. “Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting” particularly in expensive West Coast cities, noted Blitzer.
“We begin 2018 with a frigid cloud of uncertainty surrounding the impact of the new tax bill that restricts State and Local tax deductions, both very high in states such as New York, New Jersey, Connecticut, California and Illinois,” noted Leonard Steinberg, president of brokerage Compass, in an e-mail with his quarterly report on the New York’s luxury market. “Will uncertainty lead the consumer to become a society of renters with diminished incentives to buy?” He thinks not.
Nevertheless, high rents and student debt loads have also made it difficult for young households to save up a down payment even if they can afford the monthly mortgage. Moreover, with prices rising so fast even a small increase in mortgage rates can put people over the edge on affordability. (Also read: Millennials Get A New Way To Clear The Down Payment Hurdle To Homeownership)
5. Mortgage rates will hover around 4%. 
In December the Federal Reserve bumped short term interest rates 25 basis points to between 1.25% and 1.50%. Historically, movement from the Fed has had a corresponding effect on mortgage rates, but three hikes in 2017 and two in 2016 only moved the cost of a home loan slightly higher, casting doubt on just how much of a difference the three hikes Fed policy makers have projected for 2018 will have on housing.
Experts tend to agree mortgage rates will finish the year between 4% and 4.5%. That’s a touch higher than the rates for most of 2017 but still historically low. What they disagree on is how we’ll get there. Ralph McLaughlin, chief economist at Trulia, for example, expects a slow and steady rise. Greg McBride, chief financial analyst at, anticipates volatility with rates “dipping below 4% at least once, spiking above 4.5% and closing the year around 4.5%.”
6. Millennial demand for housing will keep climbing. 
After a decade of decline the homeownership rate finally ticked up in 2017. By the third quarter, 63.9% of households were occupied by owners--up from a low of 62.9% in the second quarter of 2016. McLaughlin says 2017 will be remembered as “the year the bleeding stopped and the healing started.” As Millennials age this trend is expected to continue. The generation of adults born after 1980 were slow to enter the housing market, but as a growing share of them get married and have kids they are buying homes at rates equal to their parents. In fact, single millennials are more likely to own a home than prior generations of singles.
Eddie Segars, VP
Land & Investment Specialist

Florida Broker Lic# BK3205623

Wednesday, January 3, 2018

Dont let the media control your destiny.

This is a case in which the tenant could have avoided the bad media if they had addressed the issue with the landlord prior to the release of information. As a tenant representative, one would wonder if the confidentiality clause is reciprocal. As a landlord representative, one would say this was a good way to use the media for your negotiation. What do you think?

Although an update has been posted and all is now reportedly good between landlord and tenant, has additional damage been done to the tenant? What about  the relationship to the vendors who supply the tenant? Are the vendors now able to press the tenant for a higher cost of business because they are perceived as a higher risk?

Thursday, December 28, 2017

CRE Prices climb as sales slow down

According to research by Real Capital Analytics, CRE prices climbed in November 2017 by 1.2% from the previous month, and by almost 10% from November 2016.

Is now the time to sell? It depends, based on your individual scenario, tax implications, and other factors. If you would like to discuss potentially selling your CRE investment, please call me at 904.421.8528 or email me here.

Monday, December 18, 2017

Monday, December 11, 2017





When a person hears “Acreage”, it brings up different visions to different people.  As a boy, I spent every summer at Grandma’s 450 acre farm in Tennessee chopping cotton, slopping the hogs, milking 100 cows by hand, baling hay and taking eggs from the hen house to the kitchen.

To many families, acreage is a small plot with a mobile home, a fence, a garden and a few trees.  Farmers think of how many boxes or bushels per acre it will produce. Real estate developers envision retention ponds, curved lines of utility trenches, asphalt streets and concrete sidewalks leading to a spec house with a for sale sign.  Ranchers wonder how many cow/calf units can feed off the land.  Rare plants, wading white herons and roaming wild cats are considered by conservationists.  White tail deer, turkeys and quail are in the sights of all hunters in the woods.

In Florida, the owners of much of the acreage are interested in trees in long rows spaced six feet apart, known as pine plantations. Of the 34,652,841 acres in Florida, about 17,100,000 acres, almost half of the land in Florida, are in pine trees for production of timber.  More than 78,000 jobs are supported by timber.  About 11 million acres are privately owned and six million are government owned.  In the past 25 years, the private owners have reduced their holdings two million acres and the government owned has increased three million.  Some of the acreage on tax rolls is timberland at a small number, while suitable for much more intensive use, such as retail stores, subdivisions, or cropland.  Throughout Florida, you can find scattered land parcels in densely populated areas with cultivated pine trees and taxes of less than $5 per acre per year.  Brest, Hodges, Skinner, Davis and ICI Villages are some of the names with timber assessments that are development land in northeast Florida.

Sale prices of timberland, including the trees on site, if any, in eight verified sales in Florida in 2016 ranged from $703 to $2,448 per acre, according to Saunders Real Estate.  Those sales indicated values of bare land from $619 to $1,979 per acre. The highest price number was in Clay County where most owners think their land will eventually be subdivisions and shopping centers. The largest Florida sale was 29,265 acres in Hamilton County for $42,878,383, or $1,465 per acre.  In 2015, the largest sale was 562,738 acres mostly in Taylor County for more than $700 million, or a reported $1,265 per acre.  In August 2017, this office brokered 189 acres of timberland with low assessed value in Oakleaf Plantation area of Clay County for $5,100,000, or $27,000 per acre.  It will have 505 homes built on it eventually.

Factors that influence the value for growing trees includes the site index, which indicates the growth potential of the soils, aspect and slope.  In a 25 year cycle, a minimum index of 60 will yield only about 2/3 of a 70 index, and the rare 90 will yield much more.   Site preparation, survival rate, proximity to market, number of potential buyers, condition of interior logging roads, tree species, genetic quality of trees, wetlands quantity, and taxes per acre are other factors.  Quality of adjacent neighbors can influence higher or lower values, depending on the maintenance of their trees.  The Florida Forest Service was established 80 years ago and manages 1.1 million acres that generate $7.5 million from managed state forests.

In 2016, most Florida ranch and hunting land sold for between $2,000 and $5,000 per acre with sizes of 700 to 6,000 acres, some with improvements and some without. Crop land sold with a wide range of prices depending on location. In Dade County’s Homestead vicinity, typical sales for fruit groves were 40 to 60 acres with prices from $21,000 to $38,000 per acre. In Palm Beach County, the common crop is sugar cane with prices from $9,000 to $11,000 per acre.

Conservation easements are established providing for a wide range of purposes, most commonly for protection of wild life and greenery.  A little over 30,000 acres of easements were bought by federal, state and local governments for $61,800,000 in 2016.  Some farmers and timber owners of land close to cities have put easements in place that prohibit development, but allow agricultural uses, either permanently or for a time, to reduce taxes and provide for heirs to continue the existing business. Those easements permit whatever the owner wants, sometimes with oddities, such as no hunting by Mr. Jones is permitted on the back 160 acres.

“Under All Is The Land” was a well known book in real estate circles fifty years ago.  Its philosophy is still fulfilling for those of us who deal in land every day.  I invite your conversation about the benefits and dangers in buying, owning, or selling what is under you.  Please call me, Henry Rogers, at 904-421-8537 direct, or 904-614-4828 cell.