Attendees: Eric Odum and Brenda Dohring-Hicks, CEO The Dohring Group and Listing Broker for ENCORE!

Date: July 15, 2010

Subject: Downtown Tampa: ENCORE! Project

A 40+ acre mixed use redevelopment district in Downtown Tampa. ENCORE!’s city within a city concept unites the central business district with Ybor City, Tampa Heights and other neighborhoods.

EO: Good afternoon and welcome to another Market Report from Net Lease Commercial Advisory.  I’m Eric Odum, the principal and broker for Net Least Commercial Advisory in Tampa, FL, and today we have with us Brenda Dohring-Hicks for the Dohring Group.  Welcome Brenda.

BDH: Thanks Eric.

EO: Thank you very much for joining us.  Big news recently.

BDH: Big News!

EO: We have big news that the ENCORE! Project was approved recently and commercial real estate people got very excited, and the city got very excited, but a lot of the city of Tampa didn’t know what it was. Why don’t you just start from the beginning and tell us what the ENCORE! project is.

BDH: ENCORE! Is a brand new mixed use project….probably heard about it in the news the past couple of years as it was being formulated.  We’re going to end up with somewhere in the neighborhood of about 900 residences, residential units in the project, but it’s a mixed use project.  So it has commercial uses, there’s a site for a hotel; there’s a site for an office building, a couple of other commercial sites, one that we have ear-marked for a grocer.

EO: The entire project is on the East side of Downtown Tampa, correct?

BDH: That’s a good way to describe it – it’s on the NE side of Downtown.

EO: The NE side.

BDH: Yeah, people have been looking at maps lately to see where rail is coming in.  That’s where it is.  It’s on the NE side (of Downtown).

EO: Now, your involvement in the project is what?

BDH: We’re the broker responsible with our broker partner, Bill Eshenbaugh.

EO: So, Bill Eshenbaugh, the Dirt Dog.

BDH: The Dirt Dog. So the Dohring Group

EO: Ok

BDH: And as a brokerage firm, we specialize just in urban locations.  So this is what we do.

EO: Got it.

BDH: We reached out to Bill Eshenbaugh because he’s so good at land, and let’s face it, when you’re an urban broker not many opportunities you get to do 40 acres of land in an urban location, so we brought Bill on board and the 2 of us work as brokers.  We co-broke the entire thing.  There are opportunities for other brokers, because we have two things to sell right now.

Number 1, the grocer – we really want to get that grocer in.

Number 2, there was a site that was set up for the Housing Authority for an office building for their use. They have decided to go ahead and put that one up for other commercial use, because we believe the community needs it.

EO: In getting back to the terms of the players – you’ve got Bank of America, who really heads the project. You’re the broker. Who’s the contractor on the deal?

BDH: The contractor is ZMG Construction.  They are out of the Orlando area by home-base. It’s about a 1200 person National, and now International. They just got invited to go down to do some work in Haiti.  They have formed a partnership with Malphus & Son who is a local Tampa contractor.  So, the two of them now have a partnership – ZMG-Malphus.  They are on the street as the contractor which is responsible for hiring all of the subs.

EO: Ok, so you have an external, larger contractor and a local contractor.  And, of course, you and the Dirt Dog are the brokers and the Bank of America is the organizing entity, the driving force.

BDH: Yes, there’s a partnership between Bank of America and the Housing Authority. Bank of America is the managing member of that, but it is a partnership, ok?

EO: Ok, so between the Housing Authority and Bank of America. I heard you mention about multi family. You and I have talked about this in the past. I think a lot of people will be surprised, but there’s no a lot of discussion about….well there are all these towers that don’t have any people in them.  Let’s talk about that a little bit.  Because just north of us two blocks, we have two projects that everybody thinks are completely empty. So, let’s talk about housing in the downtown core.

BDH: Ok, well now, you know, those projects came out….. thank goodness they’re here.  Skypoint 100% sold out, and well occupied.  So, it’s not just sold out to the investors and nobody is living in them.  Many of those investors if they didn’t want to be in this themselves, at least have the spaces leased…The Element was built as a condo project, but luckily was able to go rent them before they sold any.  Its occupancy level is up in the low 80’s.

EO: Low 80’s – not bad for starving.  They’ve only been less than a year on the Certificate of Occupancy.  That’s not bad at all.  A lot of people were surprised to hear that because they just assume that you’ve got vacant buildings downtown and it’s really not true.  So there’s a need for this additional multi family in the ENCORE! Project.

BDH: There’s definitely a need.  The problem in the downtown area is finding affordable housing because it comes very expensive.  As we all know, the land or lack thereof, makes it very pricey.  By this project coming on board and the partnership and because of the basis on how they were able to acquire this land, get grant funding, get very creative funding from different, from the neighborhood stabilization funding, their basis is lower.  So, because of that strength from the financing, they can provide affordable housing.  And that’s going to make them a different player than a Skypoint or an Element is going to be.  So they are going to fill the niche because there are a lot of workers in Downtown, Tampa.  Everybody isn’t an attorney. I know you might find that difficult to believe.

EO: It is hard to believe, most of my office tenants, or clients are attorneys. But, there are other people besides attorneys in Downtown Tampa.  Talk about the transportation situation a little bit.

BDH: They always looked at transportation as an important piece as we started developing this property.  Let’s face it. It has entrance and exits to the Interstate right where it is.  So if nothing else had happened, it would still be good.  The Project is close to bus routes, and its walk able.  There’s no reason – I walk from my office which is what we call down in the core, up to this project all the time.  I don’t like to do it in 95 degree weather, but nonetheless, it’s walk able.  With the high speed rail that is coming in, it’s coming in due East one block from this property.  So, with that high speed rail that comes, what we’re all looking at now is the intermodal transportation piece that will be for Hillsborough County, and connecting….. is your improved bus service, your improved taxi service, your improved walkability to have people have pedestrian access back and forth.

EO: And the agenda that’s coming down the pike with the light rail, that’s going to be on the agenda for the transportation initiative, coming up at the end of the year, correct?

BDH: Correct.

EO: So you’ve got light rail, high speed rail, the regular rubber on road transportation which is all within very short distance from this new…

BDH: Less than a block

EO: Less than a block, so it’s going to be the center of the universe really in terms of Tampa.

BDH: It’s the center. Right now it’s the terminus for the high speed rail, and so everything else is going to emit from it.  So as we walk now.  A big part of this project is the park that has always been there.  There’s a linear park that has always been there.  Affectionately referred to as the “Bro Bowl”… this was the skate park that became very, very famous.  That park is going to be completely redone, so that will remain.  It will be a really nice park.  To the North of that, we’re putting in a Middle School.  This area, when we looked at what it needed, it needed a middle school.  Elementary schools are covered; everything is good, so now we’re going to have a middle school there.  The primary boulevard coming through the project,….. you know, “encore” means ‘yes, let’s do it again, bring back more,’….. The whole project is bringing back Central Park Village, which was a very vibrant part of North Downtown in years past, so we’re bringing that back.  Ray Charles Boulevard is the primary boulevard coming through the place, and the buildings are named things like “The Ella,” “The Fitzgerald,” you know those kinds of names….. “The Trio,” …..So, it’s really going to be the first time we’re going to have what we can call,  “a city inside of a city.”  We’re not alone. There are other cities that were able, but usually it’s something like we saw develop in Channelside, where there was an old industrial sector, and so it’s close enough to the city to be called a city.  But, Channelside has a distinct personality to downtown.  This is DOWNTOWN!

EO: Absolutely.  Now let’s talk about it from the broker standpoint.  Why should brokers pay attention to this project? Is there anything for the local broker community? Is there any way for them to participate?

BDH: Participate by bringing buyers for these parcels, typically about an acre in size, to put up multi family, put up an office, to find that grocer, to find that commercial piece – the new commercial piece is very excited to us because now we don’t have to put a corporate office there. Now we can put something that could be the likes of a drug store, a branch bank, coffee, fast food. There’s a prime opportunity.  Again, bring it back to where the rail is, as well.  So, some of those uses that might not have seemed to fit before because they were on the outskirts of downtown and now are at the epicenter of where all the people are going to be.

EO: In time frame, is this going to be 10 years out, 5 years out, what’s your timeframe for sinking the shovel?

BDH: Well, we’ve already started clearing, so we’re doing the entire infrastructure, and it’s a complete self contained.  This will be a (LEED) Gold status from the infrastructure.  I don’t think that’s been (LEED Gold) from an infrastructure standpoint. So, they’ve got their own water treatment plant, etc., etc.  All of that will be in the ground.  We must, by directive of the funding that we have, have more than 300 to 350 people living in units within 15 months now.

EO: 15 months! WOW! So you’re on roller skates…

BDH: There are a lot of people crawling all over that site right now. And with that, remember, these are mixed use buildings. So, it will be ground level retail. There are anywhere in the neighborhood of about 10,000 square feet per building that will be up and ready for someone to go into with some ready population within the next 15 months.

EO: That’s awesome.  I mean it’s really good for us to see some activity.  The last couple years, commercial real estate’s been tough, and so when  you start to see some new initiatives start to roll around, you start to get the feel that maybe we’re starting to pick up a little bit…. things are starting to move forward in the right direction.

Brenda, I’d really like to thank you for being with me today to explain the ENCORE! Project and hopefully our viewers had a chance to watch and get something out of it.  And, if somebody would like to get in touch, there’s an Encore site and I believe also your website, if you’d like to give us real quick idea how people can get in touch with you about the project.

BDH: Absolutely.  There’s a couple ways to do it.  http://www.DohringGroup.com. You can get a link there, but the best place to go is http://www.EncoreTampa.com.  All the info that I might have in front of me as I’m referring and taking a look is out there.  Information on how to get in touch with us direction is absolutely the best way.

EO: Brenda, thanks again so much, I appreciate you giving me the time.

BDH: You got it.

ERIC ODUM

www.FloridaTripleNet.com

813-514-1070

BRENDA DOHRING-HICKS

www.DohringGroup.com

www.EncoreTampa.com

I attended the recent OPP LIVE conference in London, UK this past October and was asked repeatedly about the process of acquiring a visa by those interested in managing distressed properties in Florida or buying investment properties to manage.  With the  currently weak  dollar and the depressed real estate prices  in the State of Florida, I certainly understand why there was such keen interest.

While this interview focuses on commercial real estate investment, many of the points Mr. Perez covers can be utlized for other purposes, such as buying or starting a business in the US, or a buying a beach vacation home.  The important point I took from our discussion is the US is open for business  and investment from foreign investors, but one needs to understand the visa laws and work with a professional that can help them guide the way.

Mr. Perez’ website is a  wealth of information about visa requirements.  Click here for more information.

Full Transcript

INTERVIEWER:       Eric W. Odum, Lic. Real Estate Broker,  Net Lease Commercial Advisory, Inc.

INTERVIEWEE:       Fernando Perez, ESQ.

Eric:    Hello, and welcome to another series from Net Lease Commercial Advisory.  Today we have with us Fernando Perez.  Thank you very much for joining us Fernando.

Fernando: My pleasure.

Eric: Fernando is an attorney that has been specializing in immigration law over the past 27 years.  We’re very fortunate to have him sit down with us today to talk a little bit about some of the investment and visa requirements for investments, primarily with real estate, but also in covering a wide range of other types of activities in terms of buying business and whatnot.

Fernando has been a consultant in both the State Department and Congress, and he also has a face for television.  We know he’s been on FOX news and Univision, in terms of consulting on immigration matters, and so we’re very fortunate to have him with us today.

So hopefully you will be able to get a lot out of this and it will be able to help you make some decisions.  Thanks again Fernando.

Fernando: My pleasure.

Eric: Let’s talk a little bit about the immigration visa.  Typically, what people understand is that to get into the United States when you’re buying real estate or a business, you’re going to have to put down a million dollars—invest a million dollars, and hire 10 employees.  When I go out and I speak to people, that is the common perception, is that really accurate?

Fernando: Well it depends, which is a great lawyer answer.  What happens, Eric, is that there are two separate investment visa categories under the immigration laws, and people tend to confuse the two.  Now, there is a visa category which is called the EB-5.  It’s also been referred to as the Employment-Creation Visa or the Immigrant Investor Visa.  Now, the characteristics of that are that persons from any country can qualify, but it does require in most instances, an investment of at least a million dollars in a US business, and as a result of that investment, 10 jobs for US workers have to be created.

Eric: Okay.

Fernando: Now, while we’re talking—

Eric: Which is not really ideal for a real estate investor—

Fernando: Exactly.  It’s not going to be feasible in a lot of situations.  Now, there is a new variation that I will touch on with the EB-5 before I get into the Treaty Investor category.  There is a variation of the EB-5 that is an investment in something called a regional center.  Those are areas of the United States that have been designated by the government as distressed.  Now, if somebody makes an investment in a regional center, the investment amount is reduced to $500,000 and there is no requirement that you create employment because the investment itself, which has been pre-qualified, is already structured to create employment in the local community.  So that’s the EB-5.

The other investment category, and this is the one that really is the most practical to most individuals, is what’s called the Treaty Investor Visa or the E-2.  The differences are that the E-2 is only available to nationals of countries with which the United States has a qualifying treaty.

Eric: Generally, what kind of countries are they?  How many are there, do you know?

Fernando: There’s probably, off the top of my head, over 50 or 60.

Eric: It’s a lot, close to half of—

Fernando: It’s a lot.  Most of Europe qualifies.  England, Spain, France, Italy; all those countries qualify.  Canada and Mexico qualify.

Eric: Those are the big three that are investing in the United States.  It’s the UK, Canada, and Germany.

Fernando: Columbia, Australia; they are all over the world.  So, for somebody like that who is interested in doing something like that, just basically contacting someone like me and saying, I’m from such-and-such country, is there a qualifying treaty?  And we can tell them right away, yes there is.

So, assuming there’s a qualifying treaty, the next thing—and this is the thing that’s really important—is that when you’re dealing with the E-2, there is no minimum investment required.

Eric: A big difference from the E-5, which is a million dollars to $500,000.

Fernando: Huge difference.

Eric: I mean, really, no minimum amount.

Fernando: Exactly.  And if the investment is packaged correctly, for example, I’ve had investments qualify with an investment of $7000.  Now, that’s rare and there were a lot of other factors involved, but the point that someone needs to take away from this conversation is, don’t think that you have to have a certain sum of money ready to invest to be able to qualify for the E-2.  That’s the biggest difference between the E-2 and the EB-5.

The second thing is that with the Treaty Investor category, there is no requirement that you have employees.  If the investment in the United States, is able to generate enough income to support the investor and their family, there is no requirement to have employees.

Eric: Wow.  That’s another big difference.

Fernando: Huge difference.  Let’s just use a real example.  Let’s say that you have a British family that comes over here and buys a strip center.  It’s a commercial investment because their job is that they are renting this.  That clearly qualifies for E-2 treatment.

Now, the only “employees” they may have may be independent contractors.  Maybe they hire a company to mow the lawn to keep up the landscaping and somebody else to do repairs every now and then, but they don’t really have to have any internal employees that they, themselves, are supervising.  That’s perfectly fine.  As long as that investment generates enough money to support that family in the United States, then they are good to go.

Now, when somebody comes here in E-2, the spouse can get permission to work in the United States and the children are automatically authorized to go to school.  The children don’t have to qualify for a separate student visa, the wife doesn’t have to qualify for some separate type—it’s automatic.  Obviously there is a paper process, but it’s not going to be denied.

Eric: So let’s talk a little bit about the types of investments you can do.  If I wanted to buy a residential property down the street, am I able to do that?

Fernando: Well, yes, you can do that.  There’s nothing stopping you.  This is nothing to do with investments per say, but this is something that’s also misunderstood, and unfortunately it’s also misunderstood by immigration sometimes.

If somebody is here as a visitor, which is a B1, B2—or for a lot of Brits and people from European countries, they can come in under the Visa Waiver Program, which allows them to be here for 90 days without a visa.  Persons like that, it’s perfectly legal for them to buy a residence in the United States.  They don’t need any special permit, they don’t need to change their classification to buy that residence.

So if they want to come here and, for example, buy a vacation home, and they want to rent it out for part of the year and come back and live in it part of the year, that’s perfectly fine.  They don’t need a special category for that.  On the other hand, if they want to really use this as an investment that will allow them to live in the United States on a longer term, then simply buying a residence won’t do it.

Eric: Essentially, we talked about four options for them today.  So why don’t you go ahead and quickly summarize for our audience what those four options that we discussed—actually there are a lot of different options, but why don’t we talk about those four that we discussed, again, just to summarize things for our viewers.

Fernando: In the area of investment, and particularly in investment that’s real estate related, the four options are these:

The Treaty Investor category, which, as I mentioned before, is available to nationals of countries with which we have a qualifying treaty, requires no minimum investment amount, does not require any number of employees, and does not require the day-to-day management of the investor.

Then we have the EB-5 category in it’s purest sense, which does require a million dollar investment and does require the creation of jobs for 10 US workers.  When it is a million dollar investment, it does require the active management of the investor, it does result in a green card, and it’s available to people from any country in the world.  There is no qualifying treaty that precedes that.

A subset of the EB-5 is investment in a regional center.  The similarities are that it’s available to anyone and it still results in a green card, but if you’re investing in a regional center, the investment amount is $500,000, you do not have to create any jobs, and you’re not going to be actively involved in operation of the business.

The last area that we talked about is if somebody just wants to come here and buy a vacation home that they are going to use three to six months out of the year, even if they are going to rent it the rest of the time or just leave it closed the rest of the time.  It’s perfectly legal for someone to do that while they’re in the United States and simply a visitor for business or pleasure status, which can be someone who enters with a natural B1 or B2 visa, or somebody who enters under the Visa Waiver Program without a visa.

Eric: Perfect.  So that summarizes, essentially, the four options that we have   for real estate investors to get involved in the United States.  Certainly, Fernando, as an attorney, has a considerable amount of experience in this area.  We’re very thankful he was able to join us today.  So Fernando, again, I appreciate your time, and hopefully our viewers got something out of it.  I’m sure they did.

Fernando: My Pleasure Eric.

Eric: Maybe it will help some people in the future.  Thank you very much.

Fernando: Thank you.

Eric: All right, take care.  Bye-bye.

Comment:  In a recent interview, Steve Hagenbuckle, Managing Director of TerraCap Partners states that Florida real estate, one of the hardest hit markets in the country will be one of the first to emerge.  Foreign buyers from Germany, Canada, UK and China, among a host of others are beginning to descend on Florida to scoff up deals on real estate that have not been seen in years.  While residential real estate is probably going to be the most significant beneficiary of the activity, commercial properties are also attractive, because of the weak US dollar against much of the world’s currencies.  I would expect that most of the international buying activity in our area will be centered on coastal residential real estate in Sarasota, Manatee and Pinellas Counties, but there are increasingly compelling arguments for international buyers to consider commercial real estate, as well.  Net lease properties with credit rated tenants are at their highest CAP rates in years and could offer outstanding value.

Excerpts:

(3:25 min mark)

Steve HagenBuckle (SH): “ …as we talked before, the southeast, right now as far as in the last 12 months,  has seen 47% of all international investing has been in the southeast on the residential side.  The State of Florida has taken on 26% of all international investing on the residential home side.  So, Over 1 out of every 4 homes bought by international investors (in the US) is bought in the State of Florida. “

Bloomberg TV (BT) :  “Where is the money coming from ,  you mention Canada, …we talked a little bit about China, what about for example the UK?  Are these people actually coming to use the property?”

SH:  Yes, they are vacation homes as well as investments….mostly vacation homes.  They are seeing that there is so much affordability that they may not see this opportunity for a long, long time.  So, they are viewing it as “now is the time.” We have a currency that is strong than the dollar currency. And, we feel that if the dollar is weakening or has the chance to do so, now is the time to move.  We are seeing a lot of interest from Latin American countries.  54% of Germans, when they buy real estate in the US, they buy in Florida. And 37% of the folks from Canada when they buy real estate in the US, they buy real estate in Florida.

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Average Daily Traffic Count per the Florida DOT site #5204 is 62000 (Reference Fl DOT)

For More information contact 813-514-1070

Eric Odum, Lic. Real Estate Broker

Retail Properties for Rent in North Tampa Area

Host: Eric Odum, Net Lease Commercial Advisory
Guest: Architect, Michael Carlson, Michael R. Carlson, AIA, NCARB, LEED AP

Eric Odum: I am Eric Odum from Net Lease Commercial Advisory. Today we have with us is Michael Carlson of Carlson Studio Architecture. Thank you so much for joining us today, Michael.

Michael Carlson: Thank you, Eric.

Eric: Today we are going to talk a little bit about LEED certification. Anybody that is in the commercial real estate game has been to the conferences, has been to various meetings, and has learned about LEED. But they aren’t really sure what LEED is. So, Michael, why don’t you take a little time to explain just exactly what LEED is and why it’s important to know.

Michael: Sure. LEED stands for Leadership Energy Environmental Design. It is a program put out by the US Green Building Counsel, so it is a nationwide program. Anyone can use it throughout the country. It is the same system everywhere. It is third party verified system, third party certification. So what it does is it is a system that you run through that proves that your building is a green building. There is a lot of talk out there in the marketplace about green buildings and you really need a third party certification system to prove that you’re doing what you’re saying you’re doing.

Eric: Absolutely. I understand that you had the highest or longest running LEED building in the State of Florida. Is that accurate?

Michael: We did. We had highest scoring LEED building in the State of Florida from 2005 through a couple of weeks ago in 2009.

Eric: Who knocked you off? You don’t want to say, huh!?

Michael: Uhhh….Willis Smith Construction here in Sarasota knocked us off!!

Eric: Okay, which building was it, by the way?

Michael: The Twin Lakes Office Complex is one of the first projects in the State of Florida to get certified. It got gold certification.

Eric: In Sarasota (Florida)?

Michael: In Sarasota (Florida).

Eric: Okay, very good. In terms of when we are talking about LEED, does this apply to an old building, a new building? If I am a current building owner, does this have any significance to me at all?

Michael: It does, actually. LEED has a lot of significance in the whole built environment so if you are building a new building, you use LEED for new construction. If you have an existing building, an existing commercial building, you use LEED for existing buildings. There is a whole system in place just to help you make your existing building healthier, more energy efficient, and more water efficient. There is also, if you are a tenant, you can use LEED for commercial interior. So, you if are just building out a space inside of another building, use the LEED CI system. There is even a LEED for home system so if you are working on a single family residence, you can do your home as a green home.

Eric: Let’s talk about this because obviously in commercial real estate, everybody wants to be environmentally conscious but it always comes with a cost. What are some of the benefits, some of the savings perhaps, or let’s talk about benefits that if you are getting a LEED certification that an owner, investor or tenant that is a LEED building that might be important to them.

Michael: Sure. There is a McGraw Hill study out now that talks about increased property values and certified buildings are showing an increase in property values from around 3% to 10% higher than comparable buildings in the same market place that aren’t green. Also, for tenant rates, if you are a landlord and you’re trying to keep tenant spaces filled, green buildings have about a 3.5% increase in tenant space occupancy rates.

Eric: And I suppose there are some savings there too and perhaps there an opportunity, depending on who is paying for the electricity – whether it is the tenant or landlord – in terms of energy savings. So what exactly have we found in terms of energy savings with LEED buildings?

Michael: Energy savings is the biggest thing. It really is the thing for buildings. They use a lot of energy; they need to save a lot of energy. LEED requires you to use 15% less energy than a standard building, a standard brand new co-compliance building. But we are seeing energy savings around 30%-40% is really typical for a typical certified building. You can push that up to 50-60-70% if you use some solar panels and do some other things.

Eric: And possibly even 100% I guess if you really wanted to go crazy on it, right?

Michael: You can absolutely get a net zero – that is the term, net zero building that doesn’t use any electricity.

Eric: But the reality is that it is around 30-40% and that in the State of Florida I think we run an average of about $1.50/sf (electric costs per square foot of office space). So we’re talking about a $.50/sf savings off the cost of running the building.

Michael: All the time, month after month, year after year.

Eric: What do you think in terms of…. let’s get into some specific things . Because I know solar, for instance, is an item that not only are we getting savings from, but we are getting tax credits from using solar. I understand that it’s both state and federal – is that true?

Michael: There is; solar power, solar panels, solar voltaic we call them, haven’t had a good return on their investment in the last 20 years. But now there are a couple of state grant programs where you actually get money back from the State of Florida and there is a 30% federal tax credit this year and next year to put solar panels on your project.

Eric: So that is a credit, not a deduction? It is writing it straight off your income tax. Right?

Michael: That is correct.

Eric: Wow! That’s a lot.

Michael: That translates into a return on investment now on solar panels of about 4-5 years. You get all of your money back from your initial investment.

Eric: So your return on capital is essentially a 4-5 year payback period on solar investment.

Michael: Right and those systems are going to last 20-25 years so you’re going to be making a lot of money on those last 15 years.

Eric: Obviously there are some benefits to the tenants as well. We were talking a little bit before, earlier in the day, about productivity gains for the people working inside the buildings.

Michael: There is. In addition to the energy savings and water savings that green buildings have, there’s the idea of having a real healthy interior environment. Green buildings use natural day lighting which really affects how people work and how they perform, how long they can do tasks and all those sorts of things. Productivity is a big thing. You can increase productivity from 5-15% in green buildings and when you take all the salaries of all the people in the building and you can increase their productivity by 10%. That is a huge annual figure.

Eric: You’re saying that natural light is the primary reason behind that? That natural light actually makes people feel better about wanting to stay and work and it makes them healthier? Is that true?

Michael: It does. There are lots of studies on natural light and the positive impact it has. It shortens hospital stays, it does all kinds of great stuff for people that are exposed to natural light. Now, you don’t want the glare and direct sunshine on your desk. It’s not like that. It’s the diffused, natural light that makes you feel better.

Eric: How long have you been dealing with the LEED and the green architectural type of work?

Michael: We’ve been doing it since 2000. When LEED Version 2.0 came out in 2000 we’ve been working with it and we’ve been working with it ever since. We’ve got LEED silver, gold and platinum certified projects and we’ve got many more in the pipeline ready to be certified. So we’ve been doing it a long time.

Eric: Awesome. Let’s try to summarize for people some of the advantages of LEED. We’ve got energy savings which is probably the first and foremost.

Michael: It is…it does a lot for you. It saves you money. Bottom line it saves you money every month.

Eric: So you’re saving money and it’s somewhere between 30-40% (of electric costs). There are tax credits for when we talk about solar. I think there is wind, but maybe in the State of Florida wind’s not a good example.

Michael: Wind isn’t very viable in Florida but in other states, tax credits apply to wind and to any renewable energy source; whether it’s solar, wind or geothermal. Solar hot water is another good thing in Florida that we can use.

Eric: We’ve got tax credits and you also talked about productivity. So we’ve got energy savings, tax credits and productivity. So when you are trying to make a determination whether you are going to do a LEED project, it really comes down to, and this is where most real estate folks are going to put the pencil to the paper and see if it really makes sense. There are definitely some compelling arguments where it makes sense to me that maybe a building owner, whether they have a new building or they are renovating a building, should at least sit down and consider some of these items.

Michael: They should because you should really consider what things cost you and sophisticated developers understand that. It may make sense to spend 2, 3, 4, or 5% more in construction because the payback is much, much greater than that. So you look at the life cycle cost analysis. You get a good design team involved and you look at the real cost of things over time – not just the first cost of things.

Eric: Terrific. Well, Michael, thanks so much for coming today. We really appreciate you and your input. Hopefully you will continue to have great success in the field. I know you have won a ton of awards and it sounds like you are in position for the next generation. We really appreciate your time today. Thank you very much.

Michael: Thank you.

For More Information:
Michael Carlson
www.carlsonstudio.org
941.362.4312

or

Eric W Odum
www.floridatriplenet.com
813.514.1070

Commercial Real Estate Opinions

This is an interesting piece on the equity markets from today.  Tony Dwyer of FTN Equity Capital and Lee Munson of Portfolio Asset Management finished their interview talking about the commercial real estate market.  Granted, they were discussing the equity market surrounding REIT’s, which usually leads market fundamentals.  Regardless, the two made points about the market that we have discussed in this forum.  In a nutshell, here were their thoughts (you can click on the picture to watch the entire piece.  They begin the meat of the real estate discussion at the 3:20 mark of the video):

• REITs and Institutional buyers make up a significant portion of all real estate in the market
• Yes, refinancing with banks is a challenge….BUT, the REIT’s don’t necessarily have to worry about refinancing.  Their stock prices have risen quite a bit and they can access equity through the markets to re-balance their debt to equity ratios.
• The two analysts cited Boston Properties as a REIT that took advantage of the current market price to recently access more capital.
• The negativity is already priced in to the market
• The US Government has said that it will intervene in markets that are not functioning properly.  The government will not allow the Commercial Real Estate market to take the banking system down.

I would add to their argument that institutional buyers have written down their fee simple real estate assets substantially and with the rise in the stock market are potentially significantly underweight real estate according to their investment policies.  They could very well be looking to increase their real estate holdings in the near term.

In the end,  the market is profoundly complex and resilient. In spite of all the negative press surrounding commercial real estate of late, this market may not behave they way many of the pundits are predicting, with a massive crash that jeopardizes the foundation of our financial system.

What do you say?

Eric W Odum
Lic. Real Estate Broker
813-514-1070

Eric Odum

Lic. Florida Real Estate Broker

813-514-1070