Real Estate Management News - 05/24/2017

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May 24, 2017
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IREM® HEADLINES
Talent Management: Creating a Leadership Culture
Workplace Environment: Employee and Leadership Development
IREM Student Competitions – Deadlines Approaching
Technology Strategies to Recruit and Retain Tenants: CPE Poll

INDUSTRY HEADLINES
Mall Owners Flex Hidden Muscles Over Lenders
The Case for Office Buildings With Windows That Open
Promoting From Within: Learning Management Meets Talent Management
Why Location Matters Even More as Retail Transforms
Alexa in Apartments?
Lowe’s Diversifies With $500 Million Purchase of Two Building-Management Firms
Multi-Family: It's Time to Go Mobile
How Retail Landlords Could Benefit from Bebe Stores' Closings
Energy-Efficiency Upgrades Worth $11.3M Underway Citywide
Why You Need to Create and Enforce Workplace Visitor Policies
Investor Sues Taubman Centers in Ongoing Proxy Fight
A Diverse Tenant Mix Is Key to Shopping Center Success
Rue21 Files for Chapter 11 Bankruptcy as Shopping Mall Stores Suffer


 
 

IREM Headlines


Talent Management: Creating a Leadership Culture

Developing leaders at all levels is a top talent management need for most companies. But, even the best designed leader development program can fail if a company’s culture does not embrace the leadership goals or support the development efforts. Developing this type of culture starts from the top. If the CEO and/or top executives don’t buy into the program it is ripe for failure. However, it takes more than the top executives supporting development; a company must also ensure that commitment filters down to all levels of the organization. Some of the elements needed to ensure a leader development culture include:
  1. Top Management Support – demonstrating a commitment to development that permeates down throughout the ranks
  2. Communication – laying out the vision, expectations, available resources, and how the leader development system works and how it benefits all employees
  3. Recognition – rewarding good leadership practices and individual performance in a way that highlights the value of leaders within the organization
  4. Hiring, Promoting, and Onboarding – incorporating competency models and leadership expectations in job descriptions, behavioral interview questions, employee orientation programs, and career development resources
  5. Leadership Metrics – knowing that leadership related measurements are part of the key performance indicators of the company, and something that will be looked at during performance reviews, will certainly highlight the value of leadership within the organization
  6. Change Management – being okay with, and embracing change. Development plan, growth goals, and strategic plans should not be static and mostly likely will change as times change
For more information on diagnosing both organizational and individual leadership development needs, check out IREM’s Leadership Handbook for Real Estate Professionals.
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Workplace Environment: Employee and Leadership Development

The “Collaborative Company” is a term used to describe the series of initiatives launched by Veritas Investments. Their goal has been to enhance teamwork across department and company lines, improve customer service and performance with residents and the community, and provide employees with a greater sense of workplace empowerment and inclusiveness. It’s also the set of initiatives that made Veritas the 2016 winner of the IREM REME Award for Employee and Leadership Development.

CEO Yat-Pang Au instilled many of these principles while building the firm, and the “collaborative company” was formalized in 2014 as the firm experienced rapid growth. The objective was to maintain the crucial ‘small company’ atmosphere of dedication to client service and focus on innovation amid an increasingly competitive environment for talent in the high-growth San Francisco Bay Area.

The Collaborative Company initiative instilled a firm-wide focus on ‘experience’ on both sides of the business—from the employee and internal operations, to the resident, tenant and external customer service. This approach was meant to build a workforce that fully understands its diverse customers and enables innovation and problem solving to stay highly competitive.

The differentiators used to drive ‘the collaborative company’ were:
• Institutionalize a culture of teamwork and collaboration
• View every constituent as a customer
• Welcome new ideas, innovation, and technology

The direct and indirect results of the Collaborative Company have been significant for employees, for the company and for its clients and constituents. Company turnover has remained stable at less than 15 percent despite significant increases in real estate industry turnover rates, and the overall dramatic increase in hiring amid a booming Bay Area economy. Indirect benefits contributed to a number of company milestones: Customer inquiries and lease transactions increased by 20 percent, while customer complaints actually dropped as reflected in the improved Yelp score for RentSFNow of 4.5 out of 5; Veritas added new investment partners and reporting requirements with no drop off in performance or quality; and employee evaluations and exit interviews demonstrated that the firm remained a highly desirable place to work.

Check out the full story in the May/June edition of JPM. You can also learn more about Veritas Investments at veritasinvestments.com.
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IREM Student Competitions – Deadlines Approaching

IREM is seeking qualified applicants for its 2017 Student of the Year Scholarship and Student Essay Contest. Sponsored by IREM and the IREM® Foundation, both opportunities recognize a college/university student who has shown academic achievement and an interest in pursuing a career in real estate management.

Application deadlines for these two programs are fast approaching: Student of the Year Scholarship applications must be submitted by June 1, 2017, and the Student Essay Contest deadline is June 30, 2017.

The Student of the Year Scholarship recipient will receive a complimentary registration and all expenses to attend IREM’s 2017 Global Summit in Chicago, IL on October 10-13, 2017, and will be recognized at the Awards Gala held during the conference. A letter of recommendation from a faculty member, school advisor, or IREM member must accompany the completed application. Check out the Student of the Year Scholarship application, along with additional submission details.

The Student Essay Contest winner will also receive a complimentary registration and all expenses to attend IREM’s 2017 Global Summit, as well as a cash award of $500 and a recognition at the Awards Gala. Check out the Student Essay Contest application, along with additional submission details.
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Technology Strategies to Recruit and Retain Tenants: CPE Poll

Commercial Property Executive (CPE) is conducting an online poll asking property managers:

“As technology advances, what strategies are you implementing to recruit and retain tenants?”

Answer the poll now, and see what your peers are saying.
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Industry Headlines


Mall Owners Flex Hidden Muscles Over Lenders
Wall Street Journal (05/16/17) Fung, Esther

Landlords who owe millions of dollars on struggling shopping malls are discovering that they have some serious bargaining power. At a time when retailers are closing thousands of stores nationwide, some lenders are opting to renegotiate loans backing malls instead of running the risk of being stuck owning or operating the retail centers themselves. Washington Prime Group last summer defaulted on an $87.3 million loan backing Mesa Mall in Colorado and turned the keys over to creditors. Rather than run the mall, the creditors quickly sold the mall right back to Washington Prime at a lower price. In April, Washington Prime told investors it had repurchased the mall and secured a discounted payoff of the original loan for $63 million. While the creditors took a write-down of $24.3 million, they avoided having to own or operate the property themselves.

Over the past two years, the Ohio-based REIT has returned the keys of at least three malls to lenders, mostly bondholders who hold the mortgages that have been bundled into securities. The Mesa Mall deal is among the first known instances of mall landlords securing discounted payoffs instead of walking away entirely. Now, more such deals appear to be in the offing. In some instance, landlords have bargained for concessions on their loans. In recent months, the owners of Greenbrier Mall in Virginia, the Algonquin Center in Illinois, and the Alpine Commons Shopping Center in New York have all obtained extensions on their debt repayments. Many malls with otherwise viable business operations are still carrying debts made during the boom years of 2006 and 2007 and often at inflated valuations. “We expect that when landlords own productive, albeit overleveraged assets, the property owner and creditor will arrive at reasonable business terms," concluded Steven Marks, who heads Fitch Ratings' U.S. REIT group.
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The Case for Office Buildings With Windows That Open
GreenBiz.com (05/18/17) Kapoor, Prashant

Over the last two decades, office buildings worldwide have changed from offering windows that open to air-tight spaces that are fully air conditioned. "Because openable windows curb energy consumption," the article's author writes, "why don't we design skyscrapers with windows that open?" There are numerous reasons why it is assumed that openable windows in an office building are a bad idea, chiefly that they allow conditioned air to escape and unfiltered air (as well as noise, rain, and insects) to enter. In actuality, well-designed and naturally ventilated buildings can reduce the energy of air-conditioned buildings by as much as 50 percent, as they don't suffer from energy-intensive heating, ventilation and air-conditioning (HVAC) systems.

Access to fresh air has also been proven to result in better employee outputs, evidence that the profitability of a building's design can be tied to the workforce. In addition to increased productivity, employees in naturally ventilated buildings are generally healthier. There are several practical technologies that can be applied to almost any office building in this regard, starting with window switches -- inexpensive devices are integrated into the HVAC system, preventing wasted energy from occupants opening windows at inopportune times. Powered window actuators are another option. "We have them in cars, so why not in buildings?" the article's author asks. Finally, there is night ventilation cooling, which uses outside air to cool down the heat accumulated in the exposed building structure.
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Promoting From Within: Learning Management Meets Talent Management
Property Management Insider (05/18/17) Lyman, Guy

Apartment owners and operators should know that a solid learning management system is key to increasing the value of their greatest asset: their staff. This system should make it easy for them to access and pursue their learning, and for property managers to monitor who's doing what. This helps when looking to promote from within. The advantages are obvious, and owners and managers should be helping their employees up the ladder of their careers and not just making them better at what they already do. In other words, be in both the career management and the learning management business.

The ideal talent management/employee development solution should include a learning management component to motivate, manage, and monitor the learning related to employees' current jobs. It should also feature an integrated performance review component, which enables operators to manage self-assessments, management reviews, and goal-setting. Also critical is a career pathway component, which lets employees target a job they want, access the necessary learning, and track their progress. Dashboards for employees to see where they stand are always desirable, too. In summary, a consolidated talent management solution empowers staffers in furthering their careers and enables managers to more easily nurture and monitor the upward paths of the people they are employing.
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Why Location Matters Even More as Retail Transforms
GlobeSt.com (05/16/17) Rossenfeld, Carrie

As store size and shopping centers change, location is becoming an increasingly important factor in retailers' success. GlobeSt.com interviewed Westwood Financial CEO Randy Banchik for his thoughts on the ins and outs of store location. Among the most pressing questions posed to him: What should retail developers keep in mind when regarding location that perhaps was not an issue several years ago? "The most effective developments will serve demographically robust, dense locations in both urban and stable suburban markets and have uniqueness in tenancy, design and social spaces," he replied. "They will be adaptable and flexible and will serve increasingly more technology-savvy consumers by incorporating conveniences and technologies that support the innovations of delivery necessary for evolutionary tenants to thrive."

Westwood Financial targets highly dense areas with quality demographics in urban-core and stable suburban markets for its retail expansions. Such locales continue to be in high demand regardless of e-commerce, shifts in economic pressures, and changes within the commercial real estate sector. In addition, these sites provide significant value to retail owners because of the real estate itself. Banchik concluded, "Shopping centers must accommodate the most-effective store formats, layouts and sizes in the most effective locations for provision of goods and services to the largest number of consumers with speed and convenience."
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Alexa in Apartments?
Multi-Housing News (05/16/17) Fiur, Jessica

Virtual assistants, such as Amazon's Alexa and Google Assistant, are becoming increasingly popular and could soon be finding their way into apartment property management and leasing. A 2016 Business Wire article estimated that approximately 1.6 households have one, and that total has almost certainly grown since. Such devices can look up information, play music, order food, and much more. They can even control the lights and heating and air conditioning in a home if the occupant has smart technology installed.

Considering how tech-savvy today's apartments renter are, these systems could be considered a real value-add. "The price to first install them, as well as any other smart technology to be used in concert with the virtual assistants, might seem high," the article's author concedes. "However, if it gets a vacant unit rented right away, and is a reason the resident renews, the ROI might make up for the initial cost." The addition of such technology might also lead to more positive word of mouth about your apartment community. The risk is that virtual assistants may be just a fad and not worth investing in. But if this isn't something apartment hunters are already looking for, it might be the factor that sways some to rent with you as opposed to a rival community.
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Lowe’s Diversifies With $500 Million Purchase of Two Building-Management Firms
MarketWatch (05/18/17) Nassauer, Sarah

Lowe’s Cos. has agreed to acquire two companies that sell products to apartment-building owners and managers in deals worth more than $500 million. The purchases are aimed at diversifying the home-improvement retailer's business beyond do-it-yourself homeowners. Lowe's said it would pay $512 million for Houston-based Maintenance Supply Headquarters, which specializes in selling appliances, flooring, and other supplies primarily to apartment communities in the southern and western United States. The deal is on track to close in the coming months. Additionally, Lowe's confirmed that it acquired Central Wholesalers Inc., an apartment supplier with business in the mid-Atlantic and northeast regions, late last year. Terms of the deal were not disclosed. Richard Maltsbarger, Lowe's chief development officer, says "the combo of these two give us the right play for a nationwide presence."
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Multi-Family: It's Time to Go Mobile
Multifamily Executive (05/01/17)

Today, it is fairly uncommon if a property development brand does not have a website or has set aside some -- if not most -- of its advertising budget for digital or online marketing. However, too often, businesses overlook or simply underestimate the role mobile devices play in current digital trends. More and more, integrating mobile into marketing, operational, and revenue strategies is becoming mission-critical especially considering how so much of the population is becoming dependent on smartphones and tablets to stay informed and connected to work, home, and theor personal life. Apartment owners, managers, and developers are in a unique position to leverage emerging technology for a whole slew of benefits. In fact, integrating a mobile application for an apartment building is an excellent way to delight residents, streamline operations, and boost the property's bottom line.

The key is to give apartment residents an easy to way to schedule service appointments for unit repairs, explore on-site amenities, or contact the front desk --
all from a single mobile app. A mobile app also gives building management a powerful tool to reach all residents with mass communications or target certain residents with specific messaging. A mobile app can let a residents know when his/her package has arrive or when to expect someone to fix an appliance within the unit. Perhaps best of all for apartment owners, the data and analytics from your mobile app can improve your business operations, too. Integrating a mobile app experience for your multifamily housing property sooner rather than later will distinguish a community or single building from the competition.
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How Retail Landlords Could Benefit from Bebe Stores' Closings
National Real Estate Investor (05/18/17) Mitchell, Donna

Bebe Stores leased space in coveted "inline" spaces in many of the nation's most successful malls. By the end of last year, the California-based retailer was operating about 180 stores. But competition from others in its segment couplded with the ongoing rise of e-commerce prompted the company to announce earlier this year that it was closing all of its brick-and-mortar stores to operate as an online fashion retailer. The article's author interviews an expert in retail property dispositions, Levin Management President Matthew Harding, to explain the significance of Bebe Stores' deals with landlords. To be sure, Bebe Stores' brick and mortar liquidation strategy still needed the participation of shopping-mall landlords to be successful. So, how will these owners benefit from this arrangement? Harding answered, "Bebe was not as financially stressed as some other retailers that have filed for bankruptcy. The company had more to offer landlords when effectively buying out their leases; by saying, 'Hey, if we go through bankruptcy you may just get pennies on the dollar. If we work out a deal you'll get something more than that.'"

Some believe it is likely that the industry will see this type of arrangement more often, possibly as an alternative to bankruptcy proceedings. Harding does note agree. "I think it is going to be relatively infrequent," he stated. "You have to have a number of things in alignment here." For one, Bebe Stores was in a position to make settlements with landlords. Their total store count was not too many to become unwieldy to negotiate with. Bankruptcy is such an involved process that most retailers would just opt for the bankruptcy route. Harding concluded, "We've seen a lot of bankruptcies --
single stores, multiple stores, and chains. It can help a landlord balance the varying factors and what is important in getting a store back and work with a retailer to keep them going."
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Energy-Efficiency Upgrades Worth $11.3M Underway Citywide
Lawrence Journal-World (KS) (05/16/17) Valverde, Rochelle

Lawrence, Kan., has launched a new energy conservation program that calls for spending more than $11 million on 30 energy-efficiency improvement projects. Projects to weatherize city buildings and install new windows at City Hall have already begun. The lights, heating, and cooling systems of various city buildings will be replaced throughout the summer and early fall. About 40 percent of the improvements will involve LED lights. In fact, nearly all of the city's 40-plus buildings will have LED lights installed. “Overall, these lights are going to be using significantly less energy while providing a better light output,” says Justin Pape, construction project manager at 360 Energy Engineers, the general contractor for the project. After all the improvements have been completed, engineers will inspect and fine-tune the projects and ensure the building upgrades are paying off. The energy and maintenance savings are expected to cover the cost of the projects after about 19 years.
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Why You Need to Create and Enforce Workplace Visitor Policies
The Business Journals (05/10/17) Close, Kathy

Organizations must be aware that any visitor who enters their facility on a temporary basis has the potential to be both a safety and security risk. Drafting clear policies, communicating these expectations, and enforcing them consistently can help protect both staff and visitors to the building. One area to address is access control. Even small operations should develop and enforce a restricted visitation policy. All visitors should be required to register at a designated visitor entrance before being allowed to move about the facility.

Maintaining a visitor's log, which includes information such as the name of each visitor and who he or she represents, arrival and departure times, and who he or she is seeing or the purpose of the visit, could be useful. All visitors pose a security risk, whether familiar to staff or not. For example, a vendor who regularly fills vending machines could act on an impulse and walk off with either company or employee property. Or, someone who has come onsite to repair equipment could be left unattended, leading them to wander over to an unoccupied desk and see confidential information on a computer that has not been locked.
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Investor Sues Taubman Centers in Ongoing Proxy Fight
Crain's Detroit Business (05/17/17) Walsh, Dustin

On May 17, Jonathan Litt's Land & Buildings Investment Management LLC filed suit against Taubman Centers Inc. in U.S. District Court for the Eastern District of Ann Arbor, challenging the Taubman family's control of the board. The suit is part of an ongoing proxy fight at the shopping mall operator and marks the latest attempt by Land & Buildings to shake up Taubman's boardroom. The investor alleges that the family's ownership of the company's preferred shares, or voting shares, violates the ownership guidelines set in the company's charter and that the company's proxy materials contain materially false and misleading statements about the ownership and voting power of the Taubmans.

According to the suit, the family owns 29.3 percent of voting shares, while the charter restricts ownership to 8.23 percent. The suit seeks to limit the Taubman family's role in the company, blaming its "poor performance" on the family's dominance of the board. Litt started a proxy battle in April to oust Chairman, CEO, and President Robert Taubman and Myron Ullman III from the board. Both are up for re-election during the June 1 annual shareholder meeting. Litt seeks board seats for himself and Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
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A Diverse Tenant Mix Is Key to Shopping Center Success
Pittsburgh Post-Gazette (05/16/17) Ludovici, Emily

Among the keys to running a successful shopping center include embracing new and changing customer needs, re-purposing vacant store space, and appealing to as wide a range of demographics as possible. This is particularly relevant in local markets, where regional shopping centers and national department stores have historically struggled to remain in operation. In the Pittsburgh metro area, some local brick-and-mortar centers have worked to determine the appropriate mix of local, regional, and national stores and eateries to keep shoppers engaged. The article's author details three reasons why local shopping centers should consider sourcing a diverse tenant mix as part of an overall market strategy.

First and foremost, "demographics matter." Unlike individual retailers, shopping centers must appeal to a broad array of shoppers with their store offerings. For example, though a Generation Y crowd might be satisfied with trendy restaurants and local merchants, Baby Boomers might prefer chain favorites and big-box stores. Second, "more options mean more profits." Providing customers with more options typically extends their total shopping time and leads to higher sales and a more profitable center in general. Finally, "your community is important." Shoppers of most ages appreciate seeing local retailers as part of the tenant mix because it offers a community feel that cannot be duplicated elsewhere.
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Rue21 Files for Chapter 11 Bankruptcy as Shopping Mall Stores Suffer
USA Today (05/16/17) Bomey, Nathan

Rue21 has filed for Chapter 11 bankruptcy protection after its budget-conscious customers migrated to fast-fashion rivals and nimbler Web-based sellers -- a trend that mirrors the struggles of other shopping-mall chains. The fashion and accessories retailer had already begun closing around 400 of its 1,179 stores in 48 states and cautioned Tuesday in a court filing that it may permanently shutter additional locations in order to shore up its finances. The good news is the privately held retailer is not "bleeding cash." In addition, it has secured support for its debt-reducing plan from several key creditors. Those factors have led ost retail analysts to believe that Rue21 may avoid liquidation, a fate that has recently befallen such other mall clothing store chains as Bebe, The Limited, and Wet Seal.
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