The similarities of Commercial Real Estate & Yes…BEER!

Given the amount of breweries that are popping up in the Greenville and Upstate, South Carolina area lately, its only fitting that this paradox be celebrated. Apparently commercial and real estate and good beer go hand in hand, fundamentally at least. Below is a list of breweries which have recently opened or are now calling Greenville Home.

Birds Fly South Ale Project
Brewery 85
Fireforge Crafted Beer
Quest Brewery
Rail Line Brewery
Shoeless Brewing Company
Thomas Creek Brewery
Upstate Craft Beer
13 Stripes
Blue Ridge Brewing
Carolina Bauernhaus Ales
R.J. Rockers

Many more are following suit to and the Upstate is quickly catching up with Asheville, NC as Beer City USA. Watch out Asheville!

An IPA Isn’t Just a Beer, It’s a Secret to Commercial Real Estate Investing

By KARLIN CONKLIN | Investors Management Group
January 15, 2019 I kiplinger.com

When investing in real estate, picking the right property is paramount, and one way to go about that is by using my “IPA” evaluation philosophy.

Believe it or not, while most of us are familiar with the term IPA from the world of beer, it has significance in the world of real estate, as well. This acronym stands for a guiding philosophy I use to identify multifamily acquisitions for rehabilitation and long-term investment success.

‘I’ Stands for Intrinsic Value

Real estate value is derived by its qualities — some changeable and others that are not. Savvy investors acquire properties with high “intrinsic value,” defined as compelling characteristics that are fundamentally permanent.

Examples of a building’s intrinsic value include quality construction with appealing design, desirable floor plans and an attractive community layout. My firm specializes in acquiring value-add multifamily, typically built in the 1980s and ’90s, usually considered a core or “A/B+” asset when constructed but today is cosmetically aged.

The property’s aesthetics relegate it to “B” status and lower rent levels, but the property still possesses the intrinsic values of comparable “A” properties. We strategically acquire, aesthetically improve and reposition such properties to compete as best-in-class assets.

Property markets and submarkets also possess intrinsic value. Some of the intrinsic qualities to look for in a strong commercial real estate market include:

  • Above-average proportions of people moving into the area vs. out of it
  • High job gains and forecasted income growth
  • Balanced housing supply and demand
  • Quality lifestyle factors such as regional recreation, neighborhood amenities, favorable commute times, accessible education and medical centers
  • Healthy local/regional economic climate
  • Proven public commitment to city infrastructure; high rankings in transportation, renewable energy and internet access

Without these conditions, even the best-managed properties can’t perform to their potential. Our firm has been active in the Southeast (Charlotte, Atlanta, Raleigh and South Florida) and the Pacific Northwest (Seattle and Portland) for more than 25 years. Each of these regions has proven intrinsic value to form the foundation for successful real estate performance.

‘P’ Stands for Price Per Pound

A good real estate investment begins with a good buy. Because real estate investors lock in the basis on the day of purchase, they need to get it right.

Our strategy to buy right, at an attractive “price per pound,” relies on subjective valuation and an objective understanding of market trends. Comprehending the facts reflected in comparable sales and rental data is the first step in an acquisition decision.

As an example of this approach, one of our investor groups purchased a “B-” multifamily property in the Seattle metro in 2015 at a price of $99,000 per unit. Sales comparables were 10%+ above the purchase price, rent comparables suggested significant income upside, and economic fundamentals supported 6% annual organic rent growth.

We then invested $1.5 million into capital improvements and managed a positive turn-around in operations to capture additional value of the apartment community. The property was refinanced in early 2018 — less than three years from its acquisition — at an appraised value of $193,000 per unit. This is a dramatic example of equity growth, but it all began with a smart “price-per-pound” purchase.

‘A’ Stands for Affordability

In commercial real estate, assessing a project’s “affordability” does not mean your cost to purchase the property as the investor. It means understanding your target resident or tenant demographics. In order to sustain your business plan, the rental pricing must provide good value and, most importantly, be considered affordable to an expanding group of renters.

By |2019-01-16T18:51:56+00:00January 16th, 2019|Uncategorized|0 Comments

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