Category Archive for: ‘Basics’

  • Anchoring and Priming in Commercial Real Estate


    He’s contemplating anchoring and priming

    After reading Thinking Fast & Slow, I was struck by two interesting concepts: anchoring and priming.

    Anchoring is the psychological concept of mentally attaching to an initial value. The most understandable example is retail discounts. Retailers will advertize the price of a good as steeply discounted from the original price in order to distract the buyer from the actual value of the product.

    For example, Bloomingdale’s will sell you a plate for $200, but will advertize it as “Originally $300”. That way, you focus on the fact that you are getting $100 and 33% off the original price rather than trying to determine whether or not the plate is actually worth $200.

    In the example, you as the consumer are anchored to the original “value” of $300 and ignore the intrinsic value of what you are buying.

    Priming is the idea that someone can affect your actions by conditioning your subconscious. Put another way, your conscious self can be motivated by your subconscious self.

    The classic experiment to demonstrate the phenomenon of priming is the word jumble experiment. In the experiment, people would be given 5 jumbled words and asked to make a four word sentence.

    An example would be: Happy, Men, Women, Make, Bingo

    Depending on your opinion, the sentence would be “Men make women happy” or Women make men happy.” The actual sentence is irrelevant. The “outlier” word is important. In this case it is “bingo” and in the experiment, all of the words were associated with old age. So they would give obvious 4-word sentences and then include words like Florida, Retire, Grey, Wrinkle, etc.

    The key part of the experiment was what the subjects would do after the word jumble. They were asked to walk down the hall to another room and those running the experiment would time that walk. They found that the walk down the hall after the word jumble was twice as slow as the walk before the jumble.

    The punchline is that the subjects’ subconscious had been primed to think about elderly people and the body then began behaving like an elderly person (walking much slower than normal).

    Kahneman gives several other examples that ring true and drive home the point, but let’s assume that I have convinced you that priming is a real phenomenon where your subconscious will cause you to do things your conscious mind might not be fully aware of and we can manipulate that subconscious.

    Big friggin’ deal, you say. What does it have to do with commercial real estate in Atlanta?

    Well, curious youngster, both have profound effects on our business and will be worth millions of dollars to you over the course of your career.

    I would argue that anchoring is one of the fundamental aspects of negotiation and pricing and priming might be one of the single most important considerations for developers, architects, and landscape architects.

    For the anchoring argument, let’s assume you are negotiating either the sale of a property or a lease of some of its space. You do your homework, figure out a realistic value range for the property and then need to advertize your price to the market. That initial advertized number is your “anchor” and you must choose it wisely. All ensuing negotiations and price discussions will be based upon a relationship to that number.

    If you advertize Midtown office space at $33 psf, then the tenant will probably want to settle at $26 or $27 psf. It doesn’t matter to them that Midtown office space is only worth $23 psf. They feel like they got a deal. Just like the Bloomingdale’s example above, they see only the discount to the original $33 psf rather than objectively analyzing the value of the space. Everyone wants to feel like they got a deal and if you wisely choose your original price anchor both parties will come out feeling like they had the better end of the deal.

    (*Note* – Of course, there is a limit to this effect. If you try to anchor at $55 psf in the example above, clients will ignore you and pass you off as ridiculous. But, done well, anchoring can serve you very well in your negotiations.)

     For priming, I would argue that developers, architects, interior designers, landscape architects, and any other “space creators” are in the business of first impressions and must understand priming. Bob Lutz of General Motors famously said that they were in the “arts and entertainment business” because he understood the value of consumer impressions. If he could position his cars as “works of art” and mobile entertainment centers, they would transcend the mundane Point-A to-Point-B machine that cars had symbolized for many of us.

    The exact same concept applies to commercial property. If you can convince tenants that this is a safe, relaxing, a beautiful place to conduct business or live (for apartments), I bet they will be interested in leasing your space. If you can convince buyers that this industrial park is well-maintained, clean, and efficient, I would be surprised if they didn’t put an offer on the table to buy the property. You can use the subtle effects of priming to make leasing and selling your buildings much smoother.

    If you can use things like beautiful landscaping, water features, clean hallways, organized parking, and other small features to “prime” your investor/client/tenant to think that this is a great property, then 95% of your job is done. Because in the end, almost all of us are selling the same thing:

    This is a great property and you want to be involved here.

    So, if that is what we are selling, then we should all be using subtle priming methods to convince others that this is first class and well done. We can dig into more of the details of this later, but suffice it to say that everything from the way you dress to the way you shake hands to the way you smile when you talk will affect the subconscious of the buyer or renter.

    So you want to “prime” people to buy what you are selling, no matter what it is. That’s why they tell telemarketers and phone sales professionals to smile when they talk on the phone. It makes them seem happy and we consumers like to buy from happy (friendly) people.


    Hopefully you can see that the subtle effects of anchoring and priming can have profound effects over the course of a career. If you can get an extra 5% pricing on your deals because you anchor well or you can close an extra 4% of deals because you prime buyers well, and then compound that over a 40 year career, look out. You can waive at me from your Maserati.

    I exaggerate a little, but please don’t miss the point. In this highly competitive business, you need to use every small psychological advantage you can over your competition.

    To bring it home, when was the last time you refused a deal you wanted where the salesman warmly smiled at you and offered you an immediate 20% discount off the asking price?

    See my point?

    – Duke

  • Lessons from My First Foreclosure Auction

    On Tuesday of this week I was lucky enough to be able to attend a foreclosure auction on the courthouse steps. Actually, I had enough time to maker two auctions: Cherokee and Dekalb.

    For those of you who don’t know, every state has different foreclosure proceedings and the state of Georgia has its foreclosure auction on the first Tuesday of every month. They are located on the steps of the county courthouse in the county where the mortgaged property is located.

    So, I was there on Tuesday participating in these auctions. Here is what I noticed:

    There are good attorneys and . . . less good attorneys.

    Most of the people reading out the legal descriptions and conducting the auctions are attorneys employed by the lender. Some of them are patient, articulate, and conducive to a great auction. Others mumble, are impatient, and just want to leave. The good ones tend to get higher prices. The bad ones just annoy everyone.


    Most of the buyers that have success are institutional.

    You can tell after about 2 minutes that most of the major bidders are large equity funds from out of state. They put down their cell phone numbers when they win a bid, and you see mostly LA and NYC area codes. That would be discouraging to me if I were a small town, local bidder.


    Most of the work happens before the auction.

    All you get from the attorney is the legal description of the property, its address, a description of the mortgage, and some legal jargon about the nature of the auction. You have to know a ton about the property before you ever step foot on the courthouse steps. Otherwise you will have no idea what you are bidding on or what is a fair price. You may have thought this auction was a single day of work. No sir. It’s weeks of homework and research.


    There is a price-ceiling for most buyers.

    I didn’t hear much action above a certain level. That price “ceiling” is different for every county, but once you go above it there are zero bidders. For example, let’s say the ceiling is $300,000 in Forsyth County. If the lender has an opening bid of $350,000 on the property, I would anticipate ZERO competing bids. Maybe the ceiling is $350k or $200k in Fulton. I don’t know. What I do know is that there is a ceiling in every county and it would be interesting to analyze what those numbers are . . .


    Many of the bidders have rules.

    After the first bid, you will figure out that many of the institutional bidders have limits and thresholds to what they are permitted to do. Some are only allowed to increase the bid $100 at a time and ALL of them have specified max bids that they aren’t allowed exceed. It’s actually kinda annoying, but if you can figure out who they are and what rules they have to follow, you can probably run circles around them.



    Quite an interesting process. It’s incredibly inefficient and confusing, especially compared to Florida (who uses an online auction like eBay), but it is certainly interesting.

    If you ever go, drop me an email at Duke(at) and I will give you a few tips that I can’t share with the world right now. I am always happy to help (as long as you aren’t bidding against me!).

    Happy hunting!

    – Duke

  • CRE Sites: Finding Images

    Everyone loves a striking image

    If you follow web publishing and copy-writing, or if you surf the internet, you’ve probably noticed that most major online sites, blogs, and e-zines have high-quality images in their articles. Actually, an entire segment of the web is dedicated to great images, graphics, icons, and other visual displays. (Think Pinterest.)

    So, if your site is going to be successful, you probably need to have some evocative and interesting images on your site and throughout your blog posts. But unless you are an amateur photographer, you probably don’t have a library of thousands of license-free images stored on your computer.

    So, this article will help you find the images you need to make your commercial real estate website flourish under an array of great images.

    Let’s start with the basics –

    You  MUST credit any photo that you use that isn’t yours.  I can’t stress this enough. Some photographer somewhere created that beautiful/intriguing/amazing image and you need to give them credit.

    You can put a small comment at the end of your article or directly under the image itself (i.e. image courtesy Flickr user ABCDE), but whatever you do, make sure you credit the rightful owner of that image.

    Many images are not allowed to be reused for commercial use. You want to look for images that are published under a “creative commons” license. That basically means that you may use the image as long as you credit its original owner. Several sites will allow you to sort by license type and will save you the time of sorting through thousands of useless images looking for that creative commons license.

    Where to find these images, you ask? Well . . .


    Sites for Free Images

     Searches – Google, Bing, and other Search Engines

    Good place to start

    Probably the simplest way to find images for an article is to Google them. Unless you live in a cave, you probably know that Google will allow you to search for images the same way you search for websites or articles. Simply type in what you are looking for under the “Images” tab, sort through the results, find an image with a creative commons license, and you’re good to go.



    Be sure to look for “creative commons”

    Yes, there are other photo-sharing sites on the internet. But Flickr is still king of the castle as far as I’m concerned. Flickr has millions of great images from millions of unique users and the great thing about Flickr is its searchability. It will allow you to search images by keywords and then filter the results by those with a creative commons license. Very easy and effective and one of my favorite ways to get images on the cheap ( . . . free).


    My favorite site for “free” images

    These are two sites that have royalty-free and creative commons images that you can download. As I said before, you still need to credit the user that uploaded the image (i.e. its owner), but there are thousands of high-quality images here. I tend to use SXC more than MorgueFile, but both have plenty of great images that are available. Be sure to pay attention to the fine print to the side of the image you find for attribution and  credit.


    Sites for Paid Images

     Getty Images

    If you can afford it, it’s the best

    The creme-de-la-creme of image sites. This is where the pros shop. Pretty much all of the greatest photographs and images on the planet are here. But be warned, you’re gonna pay for them. There are millions of the best images ever created or captured, but expect to pay $50 minimum for a decent-sized image. For promotional materials and game-changing publications it is probably worth getting a Rolls-Royce quality image. This is the place to do that.


    iStockphoto, Shutterstock, Dreamstime

    The affordable version

    These are just three of the other paid-image sites and three that I have used before. I prefer Dreamstime because they seem a little cheaper than the other two, but you really can’t go wrong with any of these three options. They are much cheaper than Getty, but will not have the quantity or quality of Getty either. One observation, several of these sites tend to use points instead of dollars. That is, you pay $10 for 15 points and then Dreamstime charges you 12 points per image of a certain size. Maybe they think you are more open to spending points than dollars, but it all seems the same to me.


    Other Resources


    Best screenshot tool I have found

    One of my favorite free resources in called Jing. Jing is a screen-capture and video software that is free. The cool thing about Jing is that it is quick and easy to use. You just click the Jing button, drag across the image you want to capture, save it, then use it. Piece of cake. And it’s free! Give it a try and see if I’m lying.


    Those are the resources that we at the APJ have been using. Have you found any more? Please let us know in the comments and we will update this list as we get feedback from our readers!

    – Duke

  • Writing for CRE – The APJ’s Editorial Guide

    As you begin to build your writing toolkit, it may help to have a guide on writing articles catered to a CRE audience. What follows is the APJ Editorial Guide that serves as a kind of checklist for writing articles that fit well with the content guidelines and format of this site and many other CRE-specific sites.

    I would argue that most of these points are universal to blogging in general. In fact, this entire guide was paraphrased and tweaked from Michael Steltzer’s (Be sure to check them out for cutting edge social media news and tips!)

    Audience Profile – Commercial Real Estate professionals in Atlanta. This group includes 19-year-old interns and 70-year-old chairmen. So be basic enough for beginners to follow, but not so simplistic that you’re boring or condescending.

    Article Length – Depends on the article subject. If you’re writing a quick note or observation on breaking news, keep it 200 words or less. If you’re writing a comprehensive guide to retail tenants in Buckhead, you may need a couple thousand words. Err on the side of brevity, but fully explain and defend your points.

    Use Short Sentences – Again, brevity is key. Readers want color and description in novels. They want facts and pithy anecdotes online. Keep it short and sweet.

    Add Plenty of SubHeaders – This is a great way of breaking up long lines of text. Most experts suggest a new header every couple paragraphs. Use you judgment here because you don’t want to split up a great point just for the sake of breaking up the page, but this practice will help keep your points succinct.

    Highlight Key Text – There are usually one or two sentences that contain the main thrust of your article. Highlight or bold them. This will help drive your point home and give it the visual pop to stick in your reader’s mind as he or she glides through your text.

    Link to as Many Sources as Possible – This is a great way to integrate with the web and add substantial value to your reader. If you can aggregate all of the supporting and exemplary articles that coincide with yours, you will save your reader the time and hassle of doing so. Plus, for whatever reason, linking to articles that support your point of view or act as poignant examples seems to give you more credibility. It’s almost like saying “I’m not the only one who feels this way.”

    Use Internal Linking – This is a great way to improve the flow of your site. Interconnecting articles with others will allow readers to have a better and more thorough experience on your topic and it will encourage readers to click around in your archives (almost always a good thing).

    Try to Quote People – Just like the links, this seems to lend credence to your view. If a smart, well-known person shares your opinion you look smart. It’s the halo effect. Readers are impressed by the smart person who agrees with you and therefore become impressed with you. Support yourself and gain readers with good external linking.

    Include at least One Image – How often do you read a blog or site that is 100% text? Almost never, right? That’s because web designers and marketers have figured out that images catch eyes, not poignant articles. If you want to catch someone’s eye in the middle of the “information onslaught” that is web surfing, you have to have something visually appealing to catch it.

    Use Video When You Can – An under-utilized medium. It’s actually very easy to record yourself saying something interesting or insightful and can be much quicker than writing an article. Check out our Image guide for a few tips on capturing videos of your screen or yourself. You can also drop in something from YouTube or Vimeo to add color to a point or illustrate a new project.

    End Your Article with Engaging Questions or Action Requests – You want readers to comment on your post or go do something. This is your call to action and it is where you will move readers from being passive observers to active participants. So take some time to think about your last statement or question and how you want your reader to respond to what you just wrote.


    That’s the basic Editorial Guide for the APJ and hopefully a decent template for articles written on commercial real estate in general. Can you think of anything we missed? Have you found any other tips or tricks that you like? Please share them in the comments!

    – APJ Staff

  • When I grow up, I want to be Jordyn Wieber

     “It’s not how far you fall but how high you bounce that counts” -Zig Ziglar

    Fine. I’ll admit it. I’m addicted to the Olympics.

    I LOVE watching our country compete in anything and the Olympics create this unique, high-tension environment where everyone is watching and Gold is on the line.

    Say what you want abut NBC, they are dominating my DVR right now. (I recorded the weight-lifting championships yesterday!)

    I even get into Women’s Gymnastics.


    I’m a 27-year-old, testosterone-filled meat-head and I like watching our girls flip around on balance beam, uneven bars, vault, and floor routine. Don’t judge me. Blame it on Kerri Strugg. I was 12 when she stuck that vault in ’96 a few miles away from where I was sitting. I’ve watched ever since.

    So, it should come as no surprise that I was watching this past weekend and I was watching last night when our girls, the so-called Fab Five, were competing. I’m not a sports reporter and I know a little-more-than-nothing about Gymnastics (I’m 6 foot freaking 7), so I will leave the details and superlatives to the experts.

    What I do know is courage and toughness.

    It’s the double-edged sword of sports that we can see the best and worst about us. You can know some of the most extreme highs and intense lows through competition, and sometimes they happen in the same week.

    Enter Jordyn Wieber.

    Wieber, as I am told, is the defending world champion in the individual competition. In my basic understanding of the sport, that means she is the best all-around gymnast on the planet.

    In the Olympics, girls compete on the team level and individual level. Their qualifying scores from this weekend determined who would qualify for the individual finals and which teams would qualify for the team finals. Through a quirk of the Olympic rules, only two girls from any one country can qualify for the individual finals. So, even if the U.S. has 4 of the top 5 gymnasts on the planet (which I am told is true this year) only two of the four can qualify for the individual finals in the Olympics.

    Again, I will leave the drama and sportscasting to the pros, but Wieber ended up placing third or fourth of all girls and two other Americans placed ahead of her.

    The reigning world champion did not qualify for the individual finals.

    NBC made sure to get a ton of close-ups of her sobbing into her hands as soon as she learned she wouldn’t qualify and in one particularly torturous shot they showed the U.S. teammate that beat her in the foreground as she was crying in the background. (Sometimes I think you have no soul, NBC.)

    But Wieber’s Olympics weren’t over. She still needed to compete for the team title for the U.S.

    Long story short, she did so last night and led our girls to their first gold medal since the aforementioned Strugg killed it in ’96. She was terrific. She was the team leader and maybe the best performer in the gym last night in London. Knowing that all personal accolades were gone and any individual medals were hopeless, she still went out and crushed it and led our country to a gold medal.

    Cool story. Queue the epic music. Wave the flag. And so on.

    Yeah, I was proud of her and proud of my country. But more than that, I was motivated. Whatever Wieber has inside of her, I want that.

    You may wonder what Olympics gymnastics has to do with commercial property in Atlanta.

    Well, you may have noticed that the last 5 or so years in our economy haven’t been so great. We aren’t exactly sailing smoothly. Some of the greatest names in our business in the last 20 years have retired, gone bankrupt, or just folded and drifted away.

    We are an industry that literally built the city of Atlanta. Yeah, we have Coke, Home Depot, UPS, and some other cool businesses here. But, at our heart, we are a commercial real estate city. We led all major U.S. cities in growth over the last 10 years (prior to ’08-’09).

    Our industry was home to the leaders and innovators in a great city heading for great things.

    Then 2008 came along. We got hit. We got black eyes. We lost momentum, time, and money.We lost chances at greatness. No doubt about it.

    But if little Jordyn Wieber can find the strength and courage to do what she did last night, why can’t we?

    Ours is a city filled with brilliant and talented people who have all been hurt by this Great Recession. Some of us have wanted to sulk into a corner and cry (and some of us have).

    But, you know what?

    The sun came up this morning. Today is a new day. Tomorrow is full of promise.

    And we still have something worth fighting for.

    This is a great city with a bright future and I’m excited to see where we can go. We have our issues to work out and demons to overcome, but we can be great and we just need another chance to show it.

    Maybe you went bankrupt. Maybe you damaged your reputation. Maybe some great relationships have come to an end. Maybe you lost your life savings. Maybe some dreams died.

    Cry. Get upset. Get angry.

    And then move on.

    We have some great things we still need to do around here, and our teammates need us to step up.

    So, here is a toast to Jordyn Wieber and a toast to all of us. She showed us what we all need to do after a crushing blow. Move on, keep competing, and act like the best.

    Do that . . . and greatness will never be far away.

    Thanks Jordyn.

    – Duke

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  • TSPLOST Videos

    In case you’re late to the polls today (polling ends at 7pm in most areas), here are a few more opinions via videos on TSPLOST –

  • T-SPLOST Vote is Tomorrow, How Will You Be Voting?

    For those in the Atlanta area, there may not be a single issue more important than the T-SPLOST vote on tomorrow’s ballot. Here are some great links to help you decide how you will be voting.

    Both sides weigh in on this AJC blog.

    Here are the facts as laid out on the T-SPLOST website.

    Those that oppose T-SPLOST have a very detailed blog that will include updates on voting throughout the day. Visit them for info on why they say to vote NO!

    Here are some of the T-SPLOST claims and why this writer thinks they are unfounded.

    T-SPLOST pros and cons is a quick overview of both sides of the fence.

    Untie Atlanta wants voters to vote YES to T-Splost!

    Creative Loafing shares pros and cons on the proposed tax.

    And of course, our own Atlanta Property Journal has been on the T-SPLOST debate for a while now. Take a look at these past posts for some helpful info:

    Can We Trust the DOT?

    Rounding Up T-SPLOST

    Questions on T-SPLOST

    APJ Quick Guide To T-SPLOST






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  • TSPLOST – Can We Trust the DOT?

    Gotta get downtown . . . .

    Our second question about TSPLOST is whether the DOT can get the job done on time and on budget.

    If I were hiring a contractor for a job, I would obviously want to do some background checking, get references, and see past work. If I am going to decide that Atlanta should spend several billion dollars on 150 projects around the city, I want to do the same diligence on the Department of Transportation.

    Is the DOT going to get job done on time and on budget?

    Well, I have watched this project improving the Peachtree Rd corridor from Piedmont to Peachtree Dunwoody. They seem to be doing fine, but doesn’t it seem like it has taken about twice as long as it should? I don’t remember the exact timeline for the project, but it has been several years to add a simple median with some plants.

    I also remember the project at Roxboro and E Paces. What did that take? Like 10 years?

    Or the widening of Abernathy from Roswell to Johnson Ferry? That’s been about 5 years and I still see orange cones.

    400 was supposed to stop tolling me when it was paid for. It got paid off a couple years ago . . . . I still pay. (I know Governor Deal claimed this would stop at the end of next year, but I am still paying right now.)

    I guess the moral is that I trust the DOT about as far as I can throw them. I know there are thousands of reasons for delays, setbacks, and cost overruns and maybe my expectations are too high. But I work in the CRE business. Construction is a little hobby of mine. We seem to get our stuff done on time and on budget.

    Having said all that, this TSPLOST vote is supposed to keep the money with the Georgia State Financing and Investment Commission and is also requiring the creation of a Citizen Review Panel to oversee progress of the projects. (Scott Selig wrote a decent article including these two entities here.) I have no idea who is selected to be on these two special groups or what “power” they will have.

    For example, if the DOT runs late on improving the 400 and 285 interchange, what will the Citizen Review Panel do about it? Will they write scathing letter?

    Good . . . now I feel better about the hundreds of millions of dollars we allocated there.

    Do you see what I’m getting at?

    The DOT’s track record is against it.

    Fine, then they are doing something to increase the accountability.

    Good idea. Did they go far enough?

    Meh . . . . maybe.

    I’d call this one a wash. I think they are trying to do more to hold the DOT to budgets and timelines, but decades of history are working against them.

    So let’s call this is solid “Maybe”.

    On to our final thoughts on TSPLOST Monday before the big vote Tuesday.

    – Duke

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  • Bisnow Capital Markets Summit

    I think they put on a pretty solid event.

    Just got back from the Bisnow Capital Markets Summit at the Westin in Buckhead.

    Say what you will about the Bisnow guys, they can get a crowd together. All in all, I thought it was an interesting session with more optimism from the equity panel than the debt panel (surprise!!!). Bronfman of Jamestown had some interesting comments on the traditional fund model and I was surprised how much deal flow Cantor Fitzgerald claims to have closed.

    My quick and dirty notes are below. Feel free to add anything you noticed in the comments below.

    If you want to go to the next Bisnow event or subscribe to their newsletter (which I do), then check them out at

    – Duke


    Brad Watkins of State Bank
    Can look at recourse and non-recourse. Can go as high as 85% of cost if the cash flow validates it. Just closed on 3rd Whole Foods-anchored development. Also closed on the Hyatt deal in Midtown. May help a borrower look for capital partners on refinancing if property is under-water. Don’t see anything to give a significant uplift to the CRE community. Big concern about Atlanta is job growth.

    Melissa Frawley of Wells Fargo
    Banks have adjusted loan terms from the typical 5 year term to 10 years. working on balance sheet debt and have provided construction debt on multifamily. Can do recourse and non-recourse. Average deal is $15 – $20 M but can go as high as $100. Rates have been LIBOR plus 3%. Banks are coming back into thee market and are able to pick up some of the refinancings coming to market. Market feels choppy and sentiment can change from week to week. South Florida has shown better activity. Hot markets in the southeast are Nashville, Raleigh, and Charlotte. Borrowers need to tell a compelling story and be transparent about deal and deal structure. No surprises! Keep your bankers close.

    Sam Kupersmith of Cantor Fitzgerald
    CMBS rates are 4.5-5.0%. Closing loans between $1.8M – $230M. T12 numbers in multifamily are going up across the board. CF has the flexibility to do deals that the agencies and life companies can’t do. Has even closed on 60% occupied retail deal in Cumming. Prefer non-recourse. Closed a loan with a borrower with 16 defaulted or foreclosed debt. Just because rates are low doesn’t mean values are just as high. Cap rates are compressing, but appraiser are struggling to get to the value necessary for some of these deals.

    John Beam of Centerline
    Agency lender. 85% of deal flow last year was acquisitions. With low rates in the market, refinancing is popular. Average deal is $10 Million. Freddie did $20B in deals last year and Fannie did $25B. They have staffed up and seem poised to grow business this year. 10 year rates are at 3.5%. FHA mortgages are as low as 2.24%. Loans are required to have at least 5 years of amortization to have interest-only. Good developers who have weathered the storm have been coming back to the table for debt financing. Agencies have begun to look at equity sponsors with an open mind. Need to see that the borrower “did the right thing.” when looking for debt, you have to address everything upfront. No one is lending on trending or projections. What is the cash flow today?

    Rick Booth of First Fidelity
    Provided ground-up construction-perm. Primary focus is hospitality. Closed $240M retail deal. Office, Retail, and hospitality are well-received in LifeCos. LifeCos are being selective in their deals because of their competitiveness on rates.


    Matt Bronfman of Jamestown
    US benefits from being one of the taller midgets in the circus. Still a better place to invest than most places in the world. Certain markets are more favored than others, DC, San Fran, and NYC. San Fran is the hottest office market right now. Since they raise foreign capital, they are highly sensitive to ForEx rates. Tend to look at core with 10% IRR and opportunity deals in the mid-teens. Unique properties in unique locations have really weathered the storm better than almost anything else.

    Jim Shelton of Carter
    Value-add office seems appealing in most SE markets other than south FL. Approach is generally price per pound rather than a direct cap. Only significant office acquisition has been a FCL of the old Silverton building. Capital has high expectations with returns looking in the low-20s. LPs are looking for returns in the 20s as well. Eternal hunt for cheaper capital. Debt community has adjusted to new criteria and underwriting and have done a good job of staying in the market.

    Andrew Trotter with Centennial Holding
    Uncertainty abroad and in the election does affect each property type. It affects the overall prognosis of the economy, but apartment demand has been high because the supply was so low. They have experienced 4.5% rent growth and have trouble believing that there has been NO job growth. When cap rates start dropping, seasoned acquisition guys have to start looking for other metrics to value and justify purchases. Because of cheap debt, buyers can pay much lower cap rates and still hit the double-digit returns required by investors.
    Acquire on a fund model rather than deal-by-deal basis. Tend to look for core deals rather value-add or opportunity.

    Tim Perry of NAP
    NAP is in many of the same markets as Carter, but return on costs are at least in the double-digits. NAP is not in the fund model. So needs to finance each deal individually. Plays exclusively in the opportunistic space looking for returns in the 20s plus. The most difficult piece of the capital stack is the construction lender.

  • Rounding Up TSPLOST

    I guess this is what rush hour will look like if we pass TSPLOST . . .

    As part of our ongoing discussion on the Transportation Special Purpose Local-Option Sales Tax, or TSPLOST, referendum up for vote on July 31, let’s take a minuet to dig a little deeper into these projects on the proposed list.

    We previously looked at a list of the projects proposed based on a map found at Using that map, I counted 147 projects (some of the literature claims 157, but we are cloe enough to make some generalizations) spread across 10 metro counties. I am fully admitting that I may not have ALL of the information on this referendum, but I think I have MOST of it and that should be good enough to get a general sense of what is being proposed. If anyone knows of a more comprehensive or accurate resource than the ones I have used for my data-gathering, please let me know in the comments and I can update!

    So, as we are trying to figure out whether this initiative will actually alleviate some of the traffic burdens of the metro area, let’s take a deeper look at the projects, their budgets, and noticeable trends.


    The firs thing I notice is how spread out these projects are. I was under the impression that this was an Atlanta initiative. This looks more to me like an Atlanta MSA initiative with projects in every major suburban area (except the Panthersville/SE Atlanta corridor, interestingly).

    This handy pdf from Georgia Trend shows a quick breakout of the projects by region as follows:

    North Fulton – $384,900,000

    Northeast – $898,950,000

    East – $67,300,000

    Henry County & Southeast – $213,000,000

    Clayton County & South – $313,170,000

    Southwest – $196,860,000

    Douglas & Westside – $332,860,000

    Downtown & Midtown – $601,892,477

    City of Atlanta – $134,332,592

    Dekalb Projects – $185,250,000

    Total – $3,328,515,069


    A few things that stand out when looking at these numbers.

    The City of Atlanta is getting about $740 Million. That’s about $140 Million less than Gwinnett County.

    Is anyone else surprised that the largest number is going to Gwinnett? What does that say about our transportation priorities?

    Having said that, our last post had $112 Million going toward improving MARTA, so I suppose that could be counted toward in-town funds. But that is STILL less than is being spent in Gwinnett.

    Gimme more stop lights!

    While we are on the topic, why am I paying for upgrades to MARTA? I don’t see any new branches being developed or neighborhoods being reached by our rapid transit. So why am I sending money to MARTA to update their elevators, ventilation , passenger notifications, etc? Doesn’t MARTA have it’s own budget?

    Am I paying to bail out MARTA?

    As far as the in-town stuff goes, you know I love the Beltline and think it’s a great draw for bringing people to the city.

    I notice we are fixing some bridges downtown. Hmmmm. I also notice that our road projects in town seem to be cheaper than the suburban surface road improvements. Maybe that’s because some of those suburban improvements are widenings, but it seems odd that most of our road improvements are a couple hundred thousand dollars and most of the suburban deals are a couple million.

    From my list, I counted a total of 82 projects that I opposed and 65 projects that I supported. That’s closer than I expected, but I still oppose more than I support.

    All told, we are proposing to spend approximately $2,407,040,000 in the suburbs and $1,033,475,069 in town (I am including the Dekalb and MARTA stuff as in town).

    So, in a city whose culture has been decimated by sprawl, we are proposing to fix our transportation issues by spending more than twice as much money on suburban projects as in town projects?

    Hmmmmm . . . . maybe I am missing something.


    What else did you readers notice? Any trends or special projects of interest that stood out as you were trying to wrap your head around this massive proposition?

    Now that we have gone through what is in this deal, check back this week for an analysis of whether the DOT can pull this off.

    – Duke

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