Raleigh-Durham Poised for Another Year of Strong Growth

Economic momentum continues to build throughout the Raleigh-Durham region. Even as growth has ramped up nationwide, the Triangle region remains one of the fastest-growing areas in the country. National real GDP growth will likely end 2018 at 2.9%, backed by robust consumer spending and fiscal stimulus. We anticipate growth to moderate slightly to a still-solid 2.6% rate in 2019, as some of these tailwinds fade. The Raleigh-Durham area will continue to play a starring role in the national economic growth story, given the area’s booming tech and life sciences clusters which continue to attract new businesses and residents to the area. Raleigh ranks as the 8th fastest growing major metropolitan area in terms of real GDP growth from 2011 to 2017. The combined statistical area has added 240,000 residents during this period, lifting its population to 2.2 million. The region’s economic success is most clearly evident in the Triangle’s labor market. Both the Raleigh-Cary and Durham-Chapel Hill metro areas have seen their unemployment rates fall over the course of the past year and now sit well below the national rate at 3.1% and 3.2%, respectively. This comes as no surprise as the region has also been adding jobs at a pace well above the rest of the country. As of November, Raleigh payrolls have surged 3.2% year-over-year, propelled in large part by a booming tech industry. Job growth in Durham was slightly more moderate, but still grew 2.0%, which is ahead of the 1.7% growth seen nationwide. We suspect Durham’s slightly more modest expansion may also be underestimating growth. The Quarterly Census of Employment and Wages, which is a more complete accounting of payrolls and lags the monthly survey data by six months, shows significantly stronger job growth in Durham’s key education & health and professional & business services sectors, suggesting the preliminary estimates of job growth will be revised higher to a rate more consistent with neighboring Raleigh. Furthermore, overall employment growth in both metro areas has accelerated more recently, making the prospects for growth throughout 2019 increasingly bright.

Full PDF HERE

Source: Wells Fargo Economics Group

Charlotte job growth continues it’s growth trajectory

CHARLOTTE — Amazon nixed Charlotte’s $270 million economic incentives package, snubbing the Queen City in the process.  But with the announcement of four major economic development initiatives in the past four weeks that are set to add as many as 2,715 good paying jobs to the economy, the Queen City intends to cultivate a strong workforce to attract and retain companies and skilled individuals.

Companies expand in locations where they can either find talent or attract talent to join the region, said Tracy Dodson, assistant city manager for the City of Charlotte.

“If you build a great city, and you build a great region, you attract the talent and you retain the talent,” said Dodson.  “When there’s a city within a region where people want to live, companies can thrive, and their employees can thrive.”

And Charlotte appears to be attracting and retaining talent, with the region growing at nearly 14 percent since 2010, ranking among the top 35 fastest-growing cities by population in 2017 by the U.S. Census Bureau.

That’s more than 300,000 people that have relocated to Charlotte in seven years, and the Queen City nets roughly 60 new residents per day.  And that’s good for Charlotte, said Dodson, and good for companies that are expanding or looking to relocate to the region.

“People want to be here,” said Dodson.  “We’re trying to leverage that with companies.”

Full article HERE

Source: WRAL Tech Wire

Demand for apartment rentals surges unexpectedly as home sales slump

Surging demand and strong occupancy in the nation’s apartment market is “surprising” experts who say the continued strength is “unexpected.”

Just a year ago, as dozens of cranes swarmed over major U.S. cities, there was concern that the rental apartment market was overheated and overbuilt.

Apartment absorption, which is the rate at which new units are rented out, is now at the highest level in three years, according to the U.S. Census. Apartment construction took off in 2012 and reached a 20-year high in 2017. It remained elevated this year, despite warnings that demand would slow as more millennials aged into their homebuying years.

And while buyer demand did surge, sales were thwarted by tight supply that has pushed prices higher in the past few years, weakening affordability. When mortgage rates surged this year, even fewer people were left with the means to buy a home.

“People underestimate how far away from homeownership a lot of renters across the country, even in luxury apartment buildings, are,” said John Pawlowski, residential sector head at Green Street Advisors. “The demand has been better than expected. It’s been a stickier tenant base and pricing power at that tenant base, again in the face of elevated supply, has simply surprised us.”

Full article HERE

Source: CNBC.com

Surprise: This Southern Hub Might Have the Best Talent Pipeline in Tech

North Carolina is home to a bustling epicenter for tech startups, brainy talent, and killer barbecue.

A hyper-educated workforce means the Research Triangle, the North Carolina region comprising Chapel Hill, Durham, and Raleigh--Inc.'s No. 3 Surge City--has a booming and brainy startup scene. Once known for tobacco and textiles, the area has reinvented itself as a hub equally well-versed in tech and food.

Startup Neighborhoods

Most residents never thought they'd see the day, but downtown Durham is now a cultural and entrepreneurial hotbed. American Tobacco Campus, once a crime-ridden stretch of abandoned cigarette factories, is now a sprawling expanse of outdoor cafés, green space, and startup offices. Sports-scheduling app maker Teamworks is around the corner from the massive American Underground co-working space, which houses more than 80 companies, including fintech startup LoanWell.

Raleigh's Warehouse District, another recently revitalized precinct, is home to Videri Chocolate Factory, as well as HQ Raleigh's 20,000-square-foot flagship co-working space. Lunchgoers hit the original Happy + Hale for ahi poke bowls and cold-pressed juices.

$96,173

Average salary of a software engineer here --17 percent below the national average.

Source: Glassdoor

$1.1 billion

Funding raised by North Carolina startups in 2017, up 36 percent from the previous year.

Source: Council for Entrepreneurial Development

$25.23

The average annual asking office rent per square foot.

Source: JLL's Q2 2018 Office Insight report on the Raleigh-Durham market

47 percent

Portion of the local talent pool with a bachelor's or higher degree.

Source: JLL's Q2 2018 Office Insight report on the Raleigh-Durham market

The Downtown Chapel Hill area, located at the northwest corner of the UNC campus, is home to a Google outpost and a handful of co-working spaces.

Talent Pipeline

The home to Duke, the University of North Carolina at Chapel Hill, and NC State offers a hyper-educated workforce (ahead of San Francisco, according to NerdWallet). All three schools have well-regarded entrepreneurship programs, as well as angel funds through which alumni can invest in current students' ventures. The area's startups are software-heavy, thanks in part to the schools' strong engineering and computer science studies, but there are plenty of exceptions, like beekeeping startup Bee Downtown, which Leigh- Kathryn Bonner founded while at NC State.

UNC-backed Launch Chapel Hill offers a 22-week accelerator program that accepts eight to 12 startups. Graduates include Seal the Seasons, which freezes and distributes farmers' crops.

Full Article HERE

Source: Inc.com

Raleigh ranked #2 iN "Top Ten Places to Live" by Time

You don’t have to empty your savings account to afford city living in America—at least not in these locations.

Urban areas offer a gateway to culture or a medley of activities, but they typically come with a high price tag. That’s why MONEY crunched the numbers to find big cities—those with a population of 300,000 or more—with the best of all worlds: attractions, iconic neighborhoods, a relatively low cost of living, and promising job growth.

Here are our top 10 picks for best big cities to live in. (See MONEY’s full 2018 ranking of the Best Places to Live in America.)

#2: RALEIGH, NC

Average Family Income: $82,021

  • Median Home Price: $263,000

  • Projected Job Growth (2017-2022): 9.6%

Part of North Carolina’s tri-city university hub, called the Triangle, along with Durham and Chapel Hill, Raleigh is home to a relatively young, diverse, and educated population.

Like Austin, Raleigh is a hotspot for employment seekers: Moody’s Analytics projects the area’s jobs will grow 9.6% by 2022. Forbes this year ranked Raleigh among the top 10 cities for jobs, owing in part to its 17.25% job growth over the past five years. And people are listening: There’s been a 13% increase in population since 2010, according to MONEY’s Best Places to Live database.

Your wallet will feel the benefits too: With an average sales tax of about 7.25% and average property taxes at $2,632, the city’s cost of living is relatively low compared with our other big cities.

As the historically significant birthplace of Andrew Johnson, Raleigh is host to dozens of museums, earning it the nickname Smithsonian of the South. The North Carolina Museum of History reaches back 14,000 years into the state’s past, and at the massive North Carolina Museum of Natural Sciences, general admission is free.

There’s a strong sense of community as well. Every fall, the North Carolina State Fair draws 1 million visitors to Raleigh for a 10-day festival featuring rides, music, games, and crafts from local artists. Tickets cost about $10 for adults and $5 for children.

Source: Time

Full article HERE

Strong economy expected to lift all commercial real estate sectors in 2019

Sustained momentum from the U.S. economy’s extended economic expansion bodes well for major commercial real estate asset classes in 2019, promising additional allocation from institutional and international investors, a hunt for opportunities in secondary markets, and robust construction completions in sectors such as office and multifamily, according to a new report from CBRE, 2019 U.S. Real Estate Market Outlook.CBRE’s outlook report anticipates that absent economic shocks such as sharply rising inflation and import costs, the U.S. economy will generate solid growth amounting to a 2.7 percent gain in gross domestic product and benefiting all sectors. That, in turn, will contribute to stable capitalization rates for the market as a whole, a 10th consecutive year of positive net absorption in the office market, and support for redevelopment and re-tenanting in the retail market.

“Continued economic growth bodes well for all sectors, sustaining job growth for the office market, consumer confidence for retail and industrial, and entity-level, mergers-and-acquisition activity for the capital markets sector,” said Richard Barkham, global chief economist and global head of research, CBRE. “We foresee compelling opportunities in secondary markets, given that we haven’t experienced cap-rate convergence in those markets or even in many of the crowded primary markets.”

CBRE’s 2019 Outlook dives deeper into six topics for the coming year. In regards to the U.S. economy, CBRE sees “confidence and momentum driving consumer spending and business investment in 2019. Growth might be less than in 2018, given the potential drags of inflation and the slowing single-family housing market, but we predict healthy GDP growth of 2.7 percent,” said Barkham.

As for capital markets, robust investment volume in 2019, including entity-level deals, should match the strong transaction levels of 2018. M&A momentum should carry into 2019, especially since individual assets are in limited supply and generally priced at a premium. Borrowing costs may ease up, due to slowly rising bonds rates, but the amount of equity available for investment in real estate should support transaction volume and keep cap rates low in some cases. Specifically, various secondary markets may register cap-rate decreases in 2019.

Source: CBRE and Institutional Real Estate

Full article HERE

Charlotte (#1) and Raleigh(#2) Top list of cities where demand for tech workers is greatest.

Based on job posting data over a 12-month period (August 2017-July 2018), CompTIA looked at 20 metropolitan areas with populations greater than 250,000, where demand for tech workers is greatest. The cities were then ranked based on cost of living, number of open IT positions, and projected job growth over the next 12 months and the next 5 years.

The result? A geographically diverse list that shows Tech Towns are flourishing across the nation and in areas that extend far beyond the traditional coastal tech hubs.

North Carolina was a major stand-out, with Charlotte earning the no. 1 spot and Raleigh just behind at no. 2. Southern hotbeds like Austin, Dallas, Atlanta and Huntsville, Alabama also made the top 10.

Source: CompTIA

Full Article HERE

Raleigh (#3), Charlotte (#13), and Durham (#16) rank in the top 35 largest metro cities with most job opportunities

35 Fast Growing Cities With the Most Job Opportunities

People are flocking to these booming cities.

If you're looking for an up-and-coming city with a growing business scene, you won't find popular destinations like New York City or Los Angeles on any list.

Rather, Texas and parts of the Mountain region are taking over and considered the "biggest boomtowns" in America.

That's according to MagnifyMoney, which looked at the 100 largest metropolitan areas around the US and their change from 2011-2016 to determine which cities have the biggest influx of people, most work opportunities, and biggest business growth based on US Census data.

To calculate the ranking, every metro was scored on a scale of 100 in three categories:

  • People and housing: How many people are flocking to the area and is the metro keeping up, considering total population and housing units.

  • Workforce and employment opportunities: Unemployment rates, civilian labor force, and median earnings.

  • Growing industry: Rate of business and industry growth, including number of establishments and paid employees per paid period.

Each category was scored relative to other metros and looking at positive and negative changes in the area. The biggest positive change scores a 100, except unemployment rate, which was reversed in respect to the scale.

Below are the top 35 metros that showed the most people, business, and opportunity growth over a five-year period.

Source: Inc.com

Full List HERE

Blue Heron Commences Construction on Foster on the Park

Blue Heron Commences Construction on Foster on the Park

The 164-unit community will rise next to Durham Central Park, replacing a functionally obsolete and underutilized building

Durham, North Carolina - Blue Heron Asset Management, a leading private equity real estate investment and development firm based in Raleigh, has closed a construction loan with First National Bank, for Foster on the Park, a boutique multifamily and retail project adjacent to Central Park in Durham, North Carolina. Foster on the Park will be a 164-unit apartment community with ground floor retail/restaurant space overlooking Central Park - the city's main urban park which hosts a Farmers Market, food truck rodeos, and community and social events. The development is adjacent to the 1.7 million square foot Durham Innovation District as well as the Historic Durham Athletic Park, the original home of the Durham Bulls. Demolition and site work commenced on May 14th.

“We’re extremely excited to close our financing with FNB, begin the construction of Foster on the Park and see our collective vision head towards reality. Our entire team has worked diligently over the last few years to collaborate with the City, Durham Central Park, Downtown Durham Inc., and other local stakeholders. Our focus has been on thoughtful place-making and trying to create a vibrant community with great walkability and access to downtown Durham’s growing job base, renowned dining, and its many lifestyle, recreation, and entertainment amenities. Foster on the Park represents the types of infill redevelopment opportunities that we hope to continue to pursue and invest in,” said Benjamin Grinnell, project lead, and partner at Blue Heron Asset Management.

 

Chris Moore, President of FNB’s Raleigh-Durham Region, added, “We are pleased to provide the financing for Foster on the Park under the experienced leadership of Lewis Bass, our Regional Manager of Investment Real Estate Banking. Contributing to our communities is part of our mission at FNB, and it is a privilege to partner in a project that builds on downtown Durham’s momentum as a thriving destination for residents, businesses and visitors alike.”

The financing was arranged by the HFF team of Roger Edwards, Justin Good, and Henry Sisson. “Blue Heron secured one of the best sites in downtown Durham and have created an amazing project that we expect will be hugely successful. We are excited to be a part of the team and contribute to making this great project a reality,” said Roger Edwards. In addition to Blue Heron Asset Management, FNB, and HFF other team members include Resolute Building Company as the general contractor, Cline Design Associates as the architect, Coulter Jewell Thames as the civil engineer, JLL as the owner’s representative and Bell Partners as the property manager.

The project, located at 545 Foster Street, is slated for completion in the first quarter of 2020.

Blue Heron Closes Construction Loan for NC Property

Raleigh, N.C.-based private equity real estate investment and development firm Blue Heron Asset Management has closed a construction loan for Foster on the Park, a boutique mixed-use project to be developed in Durham, N.C. The loan was closed with First National Bank, the largest subsidiary of FNB Corporation.

Adjacent to Durham’s Central Park, Foster on the Park will be a 164-unit apartment community featuring ground-floor retail and restaurant space overlooking the park. The site is adjacent to the 1.7-million-square-foot Durham Innovation District. It is also situated steps from the Historic Durham Athletic Park, for decades the home of Minor League Baseball’s Durham Bulls and the filming location for the movie Bull Durham.

The existing building on site is functionally obsolete and underutilized and we didn’t see a whole lot of minuses pertaining to the redevelopment,” Blue Heron Asset Management partner Benjamin Grinnell told MHN.

The original plan was for an urban condominium project . . . While we believed in the urban living, for-sale thesis in Durham, there were some challenges in terms of certain pre-sale requirements, especially for a larger-scale condo project in the Durham market. Once we decided to switch o a mixed use—apartments and ground floor retail—project, the financing markets were much more receptive.”

Grinnell added that the entire Blue Heron Asset Management team worked diligently over several years to collaborate with the City of Durham, Durham Central Park, Downtown Durham Inc. and other local stakeholders.

Our focus has been on thoughtful place-making and trying to create a vibrant community with great walkability and access to downtown Durham’s growing job base, renowned dining, and its many lifestyle, recreation and entertainment amenities,” Grinnell reported. “Foster on the Park represents the types of infill re-development opportunities that we hope to continue to pursue and invest in.”

THRIVING DESTINATION

Added Chris Moore, president of FNB’s Raleigh-Durham Region: “We are pleased to provide the financing for Foster on the Park under the experienced leadership of Lewis Bass, our regional manager of investment real estate banking.

Contributing to our communities is part of our mission at FNB, and it is a privilege to partner in a project that builds on downtown Durham’s momentum as a thriving destination for residents, businesses and visitors alike.”

Financing was arranged by the HFF team of Roger Edwards, Justin Good and Henry Sisson. “Blue Heron secured one of the best sites in downtown Durham and [has] created an amazing project that we expect will be hugely successful,” Edwards said

We are excited to be a part of the team and contribute to making this great project a reality.”

Full article HERE

Source: Multi-housing News

North Carolina, Apple negotiating deal on Triangle campus

RALEIGH, N.C. — Apple is close to announcing a deal that would bring as many as 10,000 jobs to North Carolina, including a major investment in the Research Triangle Park, according to multiple sources with knowledge of the deal.

The investment would be between $1.5 billion and $2 billion, and the jobs would pay on average around $130,000 a year. Many of the jobs would be high-tech research and development jobs. One government source said this is "by far the biggest project this state's ever seen as far as average salaries, number of jobs."

Republican legislators planned to meet Wednesday afternoon to hear details of a state incentives package that would allow Apple to hold onto a portion of the taxes generated by the project.

"It's a done deal," one source said, "as soon as we pass this bill."

Full article HERE

Source: WRAL news

 

Real Estate has Lower Leverage, Despite Rising Global Debt Levels

Executive Summary:

  • Unlike the previous cycle, U.S. commercial real estate is not over-leveraged.
     
  • This suggests that real estate may offer a defensive strategy in coming years.
     
  • CBRE’s house view is expressed despite the recent International Monetary Fund (IMF) warning on debt levels in the global economy.

The build-up in U.S. commercial real estate debt levels has been much more measured than in previous cycles, in particular prior to the Great Financial Crisis (GFC). Figure 1 shows that real estate debt as a percentage of U.S. GDP reached a peak of 23.1% in 2009. After the GFC, commercial real estate de-levered, with the ratio of commercial real estate debt to GDP falling to 19.1% in 2013. While overall asset values in the U.S. are now substantially above their previous pre-recession peak, debt accumulation has lagged. As of 2017, the ratio of commercial real estate debt to GDP (20.9%) remains more than 2.2 percentage points below its previous peak. This contrasts with the expansion of private and sovereign debt levels globally, which is of concern to the IMF. While current commercial real estate debt levels are above the long-run average of 17.9% since 1990, we think they are sustainable in a continued low-inflation and low-interest-rate environment.

Full Article HERE

Source: CBRE Capital Markets

Millennials ISO Affordable And Established Tech Hubs

The “flight to suburb metros” are in such cities as San Francisco, Los Angeles and New York. These areas will attract primarily older Millennials looking to establish households; they will want to stay close to urban centers, preferring areas with short commutes and urban amenities, according to TH Real Estate. This group will potentially give a boost to suburban office properties and well-located lifestyle shopping centers.

“Millennial Magnets” such as Chicago, Salt Lake City, Phoenix, Austin, Orlando, Charlestonand Raleigh will be the preference of younger Millennials, who want to work in the technology sector, and in communities with a lower cost of living compared to other big cities.

Full Article HERE

Source: Globest.com

2018 will be one of the Triangle's busiest years for builders. Here's what's coming.

The Triangle is a “huge, growing market,” said Ashley Rogers, JLL’s senior research analyst in Raleigh. “What is driving that is tenants attracted to talent in the area where 47 percent of the millennials have a bachelor degree or higher. As tech and life science (companies) are looking at the markets with affordability — not everyone can afford the Silicon Valleys of the world — Raleigh-Durham is a good entry point.”

Full Article HERE

Source: Triangle Business Journal

Higher Interest Rates Mean More Renters for Apartment Sector

The steady rise of mortgage rates presents a good-news/bad-news situation for the multifamily property sector, according to CoStar research. 

While any bump in interest rates increases borrowing costs for apartment developers and other commercial real estate projects, it also makes it harder for would-be homeowners to qualify for mortgages, which results in more demand for apartments. 

Recent research from CoStar posits that for every rise in home mortgage interest rates, thousands of renters who may be looking to buy homes are priced out of qualifying for a mortgage - thereby remaining in the pool of renters. 

On the other hand, this group of renters is more likely focused on affordable and mid-priced rentals rather than the most expensive luxury units that most developers are building. 

CoStar’s analysis weighs a number of factors in determining the reduction in potential new homeowners resulting from interest rate increases - including a market’s median income, the market’s average home prices, and other factors.  

"Assuming that up to 30 percent of a household’s income can be designated for monthly mortgage payments [under commonly accepted mortgage qualification guidelines], a 100-basis-point increase in the 30-year fixed rate would reduce the nation’s potential homebuyer pool by approximately 4.2 percent, or 5.3 million households," according to a report authored by Boston-based managing consultant Jeff Myers, of CoStar Portfolio Strategy.

Full Article HERE

Source: CoStar

North Carolina’s Research Triangle Tops Our 2018 List Of The Best Places To Rent

Home to UNC Chapel Hill, N.C. State and Duke University, North Carolina’s Research Triangle region—including the cities of Raleigh, Durham and Chapel Hill—is best known for top notch universities, but students would be wise to consider sticking around after graduation. Reasonably priced apartments, coupled with strong population growth and ample employment opportunities, earn the area the top spot on our 2018 list of the best places to be a renter this year. 

Full Article HERE

Source: Forbes

Prices Keep Rising for Apartment Properties, Forcing Investors into Smaller Markets

Investors keep looking for apartment buildings to buy at good prices. The search is leading them to smaller properties in smaller markets.

“Things continue to be very good in multifamily,” says John Sebree, national director of the national multi housing group with brokerage firm Marcus & Millichap.

The amount of money multifamily investors are spending has stabilized at a high level. Investors continue to accept relatively low yields on their acquisitions, even though interest rates rose substantially in 2017 and are expected to rise further. Part of the reason is that apartment rents continue to rise across the country, attracting investors to bid for new properties.

Full article HERE

Source: National Real Estate Investor

 

Are Commercial Real Estate Prices on Shaky Ground?

The sustained rise in prices of commercial real estate over the past seven years has prompted questions whether valuations may be getting ahead of themselves. Most recently, the Federal Reserve warned in its latest Monetary Policy Report of valuation pressures in commercial real estate markets.

Let’s take a look at four measures of valuations in commercial real estate:

  • Cap rates and cap rate spreads to yields on Treasury securities;
  • Price gains, and whether such gains are driven by rising net operating income (NOI) or declining cap rates;
  • Economic fundamentals, including occupancy rates and growth of demand; and
  • Leverage and debt growth.

None of these measures is flashing a warning signal, suggesting that commercial real estate prices remain on solid ground.

Full article HERE

Source: NAREIT

Managing Partner, Maurice Malfatti, Interviewed by NYC Accounting, Audit, Tax, and Advisory Firm, EisnerAmper on Private Equity Real Estate Trends

We recently spoke with Maurice Malfatti, managing partner at Blue Heron Asset Management LLC, regarding the latest trends in real estate private equity as well as his outlook for the future.

Mr. Malfatti began by discussing the change in underwriting trends from the recession to today. He noted that six to eight years ago, investment returns were able to be generated simply by buying deeply discounted assets. Lenders were required to shed assets; therefore, buying well-located assets at wholesale prices and then selling at retail prices had the ability to produce favorable returns. Price appreciation was also driven in part by yield compression as the economy stabilized. Today, it’s a little more complex and relies upon operational expertise. Underwriting needs to carefully consider and build a value-creation plan, and good asset management requires diligent execution of that business plan. At Mr. Malfatti’s funds, which focus on multi-family as a property type, the underwriting consists of a target maximum level of debt of 65% at the portfolio level and requires strong property level fundamentals. The belief is that prudent leverage and sufficient capital to weather any future downturns will provide cushion and adequate runway to preserve value and generate returns in the long-term.

In real estate, the common notion is “location, location, location.” Blue Heron focuses on areas such as Raleigh, Charlotte, and Nashville, which over the past 10-15 years have shifted from 12-hour to 18-hour cities. Mr. Malfatti noted that while capital from institutional and foreign sources will always flow into primary gateway markets such as New York due to the liquidity and safety associated with those locations, “secondary” markets are increasingly drawing the attention of institutional investors, as evidenced by two recent multi-family sales by Blue Heron, each of which was purchased by a Canadian REIT. Mr. Malfatti, a former New Yorker, provided some examples of the changes he has seen in these markets, such as the transformation of downtowns to include shopping, entertainment, transportation, and other cultural aspects that have caused areas in Raleigh, Charlotte, Nashville, etc. to be compared with Brooklyn. Mr. Malfatti stated that while some people will still want to be in Brooklyn regardless of the cost, more and more employers and employees are finding the reduced cost of doing business and living, respectively, are very attractive in select secondary markets. 

Mr. Malfatti also touched on instances where Blue Heron has participated in competitive bidding for deals. He talked about the possibility of up to 30 bidders during the process and how, with the competitive nature in mind, 90% of his funds’ deals have been cultivated through Blue Heron’s relationships. He stressed the importance of ‘doing the right things’ – being responsive and thoughtful, sharing knowledge, and providing meaningful feedback. He strives to educate his relationships on his firm’s multi-family focus and investment philosophy. Mr. Malfatti stated it is crucial to “be the person others think of when deals come to their desks.” He stressed that even in the event of a recession, a good reputation and the resulting relationships will help keep a firm strong.

A common theme/question at real estate events is “which inning we are in” relative to the current real estate cycle. Mr. Malfatti and his team at Blue Heron are currently in the process of starting their third fund. He said regardless of what inning we are in, if underwriting is conservative, the asset-level business plan is well structured and executed to unlock/create value, and prudent leverage is used, there will be ample opportunities for good investments.

Full Blog Post HERE

Source: EisnerAmper