Juniper Square’s Strategic Account Directors, Carrie Frugé and Jennifer Sutherland, spoke to three leading commercial real estate investors in Florida on June 24, 2020: Matt Adler, Founder and Managing Principal at Adler Partners; Daryl Shevin, CFO and Principal at 13th Floor Investments; and Neil Merin, Chairman at NAI/Merin Hunter Codman.
Proceeding with caution in uncertain times
Although the panel agreed that the Florida market has a bright future despite unknowns, they acknowledged near term market dislocations.
Merin stated, “The buyers and 90% of the capital that’s out there are looking to see how cheap they can buy things. And that’s freaking sellers out. So sellers aren’t putting properties on the market.”
Buyers feel this is a huge bargain moment. “The way I see it, sellers think it’s January and buyers think it’s July,” said Shevin.
Getting through the current market environment
Merin said the “new normal” requires viewing tenant evaluations through a different lens. “Unless your tenant’s in the PPE supply business, they may not be your tenant next week. Underwriting is going to be a little different now, during this pandemic period. As we consider properties, we’re not just going to look at their financial statement. We want to understand—is this a business that holds up? In retail, six months ago, we used to look for Amazon-proof properties. Now we have to look for COVID-proof tenants.”
Another important tactic mentioned for getting through the downturn is frequent, detailed communication with investors to keep them informed and gauge their needs.
For Merin and his team, technology enables this. “Our primary tool of communication with our investors is Juniper Square. We bring everything into the portal. This allows us to pay monthly to our investors, and report monthly along with the return.”
Being proactive is the key, according to Adler. “You don’t want to be an event communicator. Regularly reporting makes you focused on being very transparent on what the facts are, and not just on waiting for something to happen. That’s a very dangerous game, if you’re waiting for that lease to be signed or that deal to close.”
Looking forward to what lies ahead
As America continues adjusting to life and business during the pandemic, Merin, Adler, and Shevin are rethinking how they approach building management. In addition to protocols such as social distancing, masks, and having ample supplies of hand sanitizer available, Merin cautioned to keep things in perspective.
“At some point, the pandemic will become a distant memory and we won’t have the same fears we do now. In the meantime, you have to observe the fear of the people who work for you, and the people you’re serving as your tenants. You need to be responsive.”
Shevin offered examples of how his business is shifting its residential staging model. “We converted one of our model homes so that the den had a home office. It’s very easy to tell someone, ‘You can make that area a home office.’ But when they walk in and they see the home office, and they see it all set up, it tells a different story.”
Many people love working from home, which is driving relocation from cities like New York to Florida. Merin expects this to continue as workers escape long and crowded commutes, high costs of living, and cold weather.
Merin also predicted that interest rates will continue to stay low, it’ll be easier to borrow money, and the trillions of dollars the government has pumped into the industry will ensure liquidity for the foreseeable future.
As Adler stated, “In 2008 real estate and banks were the catalyst of the financial crisis. This time, banks are part of the solution.”