SF Real Estate Summit Tackles “Financing Deals: The State of the Real Estate Market”
The first panel at this year’s EisnerAmper Real Estate Principals Summit in San Francisco discussed the state of the real estate market. The panel, “Financing Deals: The State of the Real Estate Market,” was moderated by Sunil Pandya, Senior Vice President, Wells Fargo. He was joined by panelists Todd Chapman, President & CEO, JMA Ventures LLC; Michael Eisler, Vice President, Baco Realty Corporation; and Susan Lowenberg, President, Lowenberg Corporation.
The first question addressed the industry difficulty of obtaining financing through debt and equity. The panel agreed that in this market, inventory (not financing) is the issue. With REITS climbing in popularity as an investment tool, it has limited the amount of potential buys. Another factor limiting investing in the current real estate market is the cost of construction and labor. The demand for contractors is so high that they have been able to increase prices and be more selective on taking jobs. Also, with the limited workforce available, the cost of labor has increased. Susan could not emphasize enough that an increase in trade and vocational schools would greatly help the workforce supply in the construction industry.
Being a Bay Area Summit, naturally the topic of technology came up. Todd Chapman, whose real estate portfolio includes a fair amount of consumer-facing properties like ski resorts and luxury workout facilities, said that when it comes to technology’s impact, people value experience now. It used to be that a mall was comprised of 20% food and beverage and the rest was hard and soft goods. Those ratios have now completely flipped because people value experience and online shopping. Susan added that companies like Amazon have also added to the demand for more warehouse/industrial real estate and less bricks-and-mortar stores, which has actually worked to her advantage since the Lowenberg Corp. specializes in the industrial space.
Sunil asked his fellow panelists about their future plans given the current market. Three different strategies were mentioned: stay the course, branch out in secondary markets, and become more active buying and selling. All of these strategies are different, but given the favorable conditions in the market, all can succeed.
The overall real estate market outlook from these second-generation real estate investors was positive. Although the market doesn’t quite seem to be at its peak, as it was in recent years, the numbers are up and opportunities exist. The panelists cautioned, however, that this market isn’t going to last forever, so it’s best to properly position yourself to handle the inevitable downturn.