MIDTOWN SOUTH OFFICE MARKET REPORT Q2-2017

Since the end of the financial crisis, Midtown South has been one of the fastest growing sub-markets in Manhattan due to the large influx of Technology, Advertising, Media, and Information (TAMI) tenants migrating to the market. Silicon Alley, New York’s version of Silicon Valley, is the area just north of Union Square renown for its concentration of TAMI tenants. As tenants continue to relocate to Midtown South, Silicon Alley continues to grow. There has been a 75.5% increase in tech jobs from 2001 to 2015. In fact, the overall tech industry accounts for more than 291,000 jobs and produces more than $124.7 billion in economic output according to New York City’s Economic Development Corporation. Venture capital funding for tech has begun to taper due to growing economic and political uncertainty causing funding to focus on later stage tech companies, many of which are located in the Midtown South market.(1)

Office leasing activity in the area has gained momentum in the first quarter of 2017, reaching pre-recession levels of 1.32 million square feet. Developers have delivered more than 600,000 square feet of new development to the submarket’s inventory, causing net absorption of -16,000 square feet. The predominant Midtown South office inventory tends to be located in pre-war buildings, often with loft or open-space features, a hodge-podge of HVAC systems and less than optimal power/connectivity. As such, the submarket should quickly absorb the abundant amount of space coming online within the next few quarters as the demand for Class A or B “technologically sufficient” space grows.(2)

Union Square has managed to capture more than 50% of all Manhattan tech leasing for the sixth consecutive year, according to Colliers International. Most notably, WeWork has signed three leases in the area with the capacity to host almost 3,000 co- working members. IBM signed a landmark membership deal for the entire WeWork building at 88 University, a transaction financed by Mission Capital in 2016. The co-working space is roughly 70,000 SF across 8 floors and will support nearly 600 IBM employees.

(1) JLL US Technology Office Outlook
(2) CBRE Midtown South Manhattan Office, Q1 2017

In combination with the private sector, local government support from Mayor Bill de Blasio has also played a crucial role towards the explosive growth of the Midtown South submarket, as the city has committed $250 million towards a new hub to support the area’s thriving tech and innovative start-up scene. The anchor tenant to the project will be Civic Hall and will include a collaborative work and event space that will be used for the advancement of technology for the public. The facility is estimated to create 600 tech jobs and host digital trainings for thousands of New Yorkers.(1)

Recent Leases (2)

Date Type Tenant Size (SF) Address
Q2 2016 New Facebook 200,000 225 Park Ave. South
Q2 2017 Expansion Compass 115,000 90 5th
Q3 2015 Expansion Pandora 104,000 125 Park Ave. South
Q1 2017 New Live Nation 99,588 430 West 15th St.
Q3 2016 New WeWork 96,000 33 Irving Place
Q2 2017 New WeWork 94,740 205 Hudson St.
Q2 2017 New MAC Cosmetics 86,524 233 Spring St.
Q3 2015 New WeWork 82,000 88 University Place
Q3 2016 New Capital One 78,000 11 West 19th St.
Q1 2016 Renewal Perkins Eastman 77,000 115 5th Ave.
Q4 2015 Ren. & Exp. L’Oreal USA, Inc. 59,345 261 Eleventh Ave.
Q3 2015 New One Kings Lane 51,576 315 Hudson St.
Q2 2017 New Argo Group US 46,530 431 West 14th St.
Q2 2016 New Casper 32,300 230 Park Ave. South
Q1 2017 New Teacher Synergy 27,000 111 East 18th St.
Q2 2017 New Glossier 26,164 161 Avenue of the Americas
Q1 2017 New Pentagram 24,000 204 5th Ave.
Q2 2015 New Regus 23,000 112 West 20th St.
Q1 2016 Renewal DeVito Verdi 22,000 100 5th Ave.
Q2 2016 New Verve 21,500 79 5th Ave.
Q1 2017 New Cosnova, Inc. 11,913 55 5th Ave.
Q2 2017 New Ceros, Inc. 11,000 40 West 25th St.
Q3 2017 Renewal DataMinr 8,264 99 Madison Ave.

Midtown South is the top performing market in Manhattan for condo sales in Q1 2017 by median price and average price per square foot; however, overall performance still trails previous years. In the first quarter, Midtown South closed 913 sales with a median price of $1.6M and an average price of $2,340 PSF. There were 1,788 new condos that came online, a 25% increase from last year. The 4% decrease in number of condo sales coupled with the increase of inventory from last year has increased supply and average time on the market. Although the average number of days on the market (98 days) increased, Midtown South is still the most competitive location for buyers as it has the best absorption rate of any submarket in Manhattan.(3) Mission successful executed condo construction loans for Walker Tower and 10 Sullivan Street. At the time, Walker Tower Penthouse was the most expensive condo sold in Midtown South for $50.9 million. 10 Sullivan was the tallest condo building in SoHo and is a landmark building known for its unique design and excellent location.

Midtown South Q1 2017 Condo Overview (3)

Annual Change
 Sales  913    -4%
 Inventory  1788    25%
 Months of Supply  5.1    18%
 Days on Market  98   20%
 Median Price  $1.6M    -6%
 Average PPSF  $2,340  10%
(1) The Villager: Union Square Tech Firms are Driving Areas Commercial Growth
(2) CBRE, The Real Deal, Commercial Observer
(3) The Corcoran Report 1Q17 Manhattan

MIDTOWN SOUTH OFFICE MARKET REPORT Q2-2017

“In the last few years there has been a lot of renovation and new construction… While the expansion of Manhattan’s tech industry is responsible for much of the gain, newer and updated product has also driven rents higher.” – Tristan Ashby, JLL director of New York Research

“What you’re seeing is just a more diversified market… The future of the world is everything is going to have a tech component. There’s a premium people are willing to pay to be there.”
– Mike Mathias, a leasing broker with Savills Studley Inc.

“A sign of a healthy city is activity in strong growth industries — and New York’s tech industry is certainly alive, well and growing in Union Square. With the area’s unrivaled transportation access and its vibrant mix of shops, restaurants, fitness studios and other amenities around Union Square Park, the district holds a lot of appeal for individuals who work in tech and creative industries… As Union Square’s community of tech, advertising, media and information companies has continued to grow, the district is leading the way in driving 21st-century job creation for New Yorkers.” – Jennifer Falk, executive director of the Union Square Partnership Business Improvement District.

“There are 60,000 people a day who cross Madison Square Park. I think that the renaissance of the park has been significant to this neighborhood.” – Brooke Kamin Rapaport, the senior curator at the Madison Square Park Conservancy

“Since its beginning, Union Square has offered New Yorkers a crossroads not only for transportation, culture, business and health but also for political discourse and free speech… Now with the planned new Civic Hall, Union Square will be able to also offer every New Yorker, regardless of background, gender, age, race or physical ability, access to digital skills, jobs and a renewed sense of civic engagement in the 21st century.”
– Andrew Rasiej, founder and C.E.O. of Civic Hall.

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Source: Connect Media
Michael Britvan is Managing Director of the Loan Sales and Real Estate Sales team at Mission Capital.

Congratulations to our very own Michael Britvan!

Michael Britvan of our Loan Sales and Real Estate Sales team has received Connect Media’s Next Generation award for the New York area. We’re very pleased!

Get in touch with Mr. Britvan now to learn about new opportunities. You can reach Michael Britvan directly through his team page.

 

More information is available at Connect Media here.

[Published by Connect Media:]
Connect Media is pleased to announce the winners of our first annual Next Generation Awards.

We chose 25 young leaders throughout the U.S. who are already making big contributions and are likely to be influential in our industry for a long time — because of their talent, drive and fresh ideas. We picked these winners from more than 150 nominations sent in by our readers from all parts of the country and from all sectors of the commercial real estate industry — from architecture to development to finance and property sales.

After careful consideration (and some spirited deliberations), we recognized five young leaders from each of the three areas covered by our regional newsletters: California, Texas and New York. We chose another 10 National winners covering the rest of the country.

Come see our honorees accept their awards at:
Connect New York on Sept. 19 2017 at The Underground, Rockefeller Center
Connect Apartments on September 28, 2017 at the InterContinental Los Angeles Downtown
Connect Houston on November 2, 2017 at Station 3
– Connect Westside L.A. – December 2017, location to be determined

Once again, congratulations to Connect Media’s 2017 Next Generation Awards winners.

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By Jillian Mariutti, Director at Mission Capital

As we pass the year’s halfway mark, it’s an excellent time for real estate professionals across the industry to take stock of where we stand. I recently attended Bisnow’s National Finance Summit, where a host of industry experts — including developers and lenders — discussed some of the most important trends in today’s CRE capital markets.

One movement that’s hard to miss is that investment sales have slowed down significantly in New York City, and as James Nelson of Cushman and Wakefield noted, there have now been significant year-over-year declines in both 2016 and 2017. That said, as other panelists pointed out, the tremendous transactional volume of 2015 was an outlier. While there have been notable declines in successive years, we are still trending toward historical norms, and the market is fairly healthy overall.

In a panel on “Alternative Sources of Capital,” much of the discussion focused on debt funds. While borrowers once looked at borrowing from debt funds as a last resort, Jeff DiModica of Starwood pointed out that these funds have really established themselves as mainstream sources of capital. Debt funds are particularly attractive for borrowers seeking higher leverage than banks are willing to offer.

While debt funds are in ascendance, CMBS’ market share is in sharp decline, as the portion of commercial loans that will get securitized has dropped markedly in the last decade. While CMBS comprised 50 percent of debt volume in 2007, it’s just 10 percent of the market today.

Not surprisingly, most lenders are bullish on gateway cities, as compared with secondary and tertiary markets. But Raphael Fishbach of Mesa West noted that developments in non-primary markets are not doomed to fail in their quest for capital. Specifically, Mesa West is comfortable lending on deals with experienced sponsors who really know the local market — whatever its location.

One of the most important things to be aware of when considering real estate financing is how quickly the industry changes. As Drew Fletcher of Greystone Bassuk pointed out, today’s hot discussion topics within real estate are retail, co-working and transaction volume, none of which was considered a particularly important issue a year ago.

In discussing the current state of the market, David Brickman (the head of Multifamily at Freddie Mac) noted how healthy the multifamily sector is doing and how strong lending conditions are in that space. Michael May of CCRE mentioned how strong mezzanine financing is, referencing one recent 10-year mezz deal he structured at sub-5-percent rates.

Of course, despite the market strength, the panel agreed about the importance of having a strong intermediary to gather the information about the deal and help usher it to closing — and this is especially true for asset classes that have had struggles (such as retail). Similarly, Warren de Haan of ACORE Capital talked about the strength of transitional assets with a good business plan. With an able broker serving as an intermediary, these sorts of properties are increasingly able to secure capital at very strong rates.

The real estate world and capital markets both move very rapidly, and the space would be nearly unrecognizable from a vantage point just five or ten years in the past. From the challenges of the retail sector to the emergence of debt funds to the rise of a host of strong secondary and tertiary markets, CRE is evolving, and lenders are monitoring these changes as closely as anyone. Across the board, the most important thing for any borrower is a strong business plan and a forward-thinking approach that will enable them to adapt to changes in the market. With those prerequisites — and an experienced broker — any strong deal across the country should be able to get financing.

 

Click here to learn more about Mission Capital’s Debt & Equity Finance team

Investors in residential loan portfolios routinely engage third-party experts during the bidding and acquisition process to analyze risk, data capture / validation and compliance testing.  However, the most successful investors realize that Servicing Surveillance and Servicer Reviews are critical for risk management and simultaneously enhance portfolio performance.

While loan servicing has been big business for many decades, the basics have changed little over the years.  Payments are received and processed; escrow accounts are monitored and managed for payment of real estate taxes and hazard insurance premiums; investor remittances are tracked and paid; and late payments are chased.  What has changed is the complexity of state and federal laws and regulations, the emergence of debtor friendly courts and litigious borrowers.  These factors have exponentially increased the complexity and inherent risk of debt collection procedures, which directly affect investor risk.

Debt collection and delinquency control is not what it used to be.  Servicers must ensure their collections, loss mitigation and foreclosure departments are fully trained in the ever changing landscape of local legal requirements at the municipality, county and state level.  This training includes proper procedures for collection calls, required letters and notifications pertaining to servicing transfers, delinquency resolution, foreclosure / bankruptcy steps and timeline management.  Federal laws and regulations also have overhanging risks of borrower litigated disputes, contested foreclosures and regulatory audit.

The result of this expansion in risk is the growth and importance of servicer oversight, audit and review.  Servicing surveillance creates a liaison between an investor and their servicer, providing important risk management and servicing remediation information to a broad set of stakeholders.  These include major domestic and international banks and investors, private hedge funds, legal and consulting firms, as well as both large corporate and specialized boutique servicers.

Servicing Surveillance and Servicer Reviews are not only critical for regulatory responsibilities but are also important for investment performance and measuring counter-party risk.  Best practices in the field of Servicing Surveillance and Servicer Reviews include the following:

Policy and Procedures (“P&P”) Reviews: Confirmation that servicers’ published P&Ps are revised and updated regularly to reflect changes in current industry standards, newly enacted legal requirements and published industry best practices.

Servicer Operational Reviews: Assessment of servicer’s performance and adherence to their internal P&Ps, stand-alone Servicing Agreements and/or Pooling and Servicing Agreements.

Servicer Oversight: Ongoing identification of loan level systemic servicing issues needing resolution to increase loan performance and decrease loss severity.

Asset Management: Analysis of Collection and Loss Mitigation activity, for both whole loan and securitized mortgage portfolios, including loan level reviews, foreclosure and bankruptcy timeline management, and delinquency cure methods on Client-selected loan populations.

Reps and Warrants Examination: Forensic loan level review identifying possible breaches in loan seller’s representation and warrants, and highlighting non-compliance issues affecting investor recovery opportunities.

MERS Third Party Attestation: Third party review and validation of the accuracy of MERSCORP members required portfolio policy and procedures documentation and portfolio monthly self-audit and reconciliation process.

Securities Surveillance Identification and monitoring pool asset trending and stratification, providing the investor with the benefit of early identification of potential or existing problems, and recommendations for remedying any discovered issues before they affect asset quality.

Servicing Transfer QC:  Boarding oversight and critical balance reconciliations to ensure accuracy and seamless servicer-to-servicer transfer for an uninterrupted flow of servicing activities.

 

 

Mission Global delivers custom solutions to our clients for Servicing Surveillance and Servicer Reviews by leveraging our deep transactional experience, proprietary technology, subject matter expertise and best-in-class talent.  Click here to learn more.

A slower than expected condo sales market, an abundance of bridge capital, and a belief in a fundamental value level in the market has made condo inventory financing available again. Financing is available from a variety of capital sources. Loans can be non-recourse. Leverage and rate largely depend on the size and location of the project.

  • Pricing for non-recourse condo inventory loans greater than $25 million can be as low to mid-single digits at lower leverage levels
  • Pricing for loans less than $25 million will yield high single digit interest rates in major markets.
  • Loan term may vary but is usually in the 12-24 month range with extension options.
  • Varying levels of prepayment penalty.

 

Leverage is generally capped at 60%-70% of bulk sellout value. The lender will establish value based on a combination of an appraisal, the sponsor’s estimated sellout value, broker conversations, and, most importantly, other condo sales within the building and competitive properties.

The lender will establish minimum release prices on an individual unit or $/SF basis to make sure that sufficient value remains in the unsold condos as each condo is sold off. Cash flow leakage from sales can be negotiated and allows some portion of the net sales proceeds from individual unit sales to be returned to the borrower leaving a portion of the inventory loan outstanding. That structure is a win-win situation for the lender and borrower. It allows the lender to keep capital out longer and increases the borrower’s leveraged IRR by having equity returned earlier. Lenders care about the use of proceeds for the loan. They are more favorable to taking out an existing loan versus a pure repatriation of sponsor equity late in the sales process when the remaining collateral will usually consist of the least desirable units at the property.

Offers vary greatly from lender to lender so it is important to broadly survey the capital markets to create competition and get the best loan for the sponsor.

 

Click here to learn more about Mission Capital’s Debt & Equity team

Source: Various

Mission Capital Adds Jillian Mariutti as Director

Mission Capital Advisors has hired Jillian Mariutti as director in its debt and equity group, where she will focus on originating and structuring real estate capital for the nation’s premier owners, investors, and developers. Prior to Mission Capital, Jillian worked at JCRA Financial LLC as the Head of Real Estate North America and was responsible for providing foreign exchange and interest rate risk management services to Real Estate clients.
Continue reading about Jillian in her bio

Follow this story at the following outlets:
CRE Direct [PDF Download]
GlobeSt.com [PDF Download]

Tuesday, 07 February 2017

Mission Capital Adds Jillian Mariutti as Director

Mission Capital Advisors has hired Jillian Mariutti as director in its debt and equity group, where she’ll help arrange a variety of capital for the firm’s property-owning clients.

Mariutti most recently was the head of real estate in North America for JCRA Financial, a derivatives advisory firm. In that role, she provided foreign exchange and interest-rate risk management services to the company’s real estate-owning clients.

Before that, she was with Wells Fargo Securities, where she marketed and structured interest-rate management services to REITs and other property owners.

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Source: New York Real Estate Journal
Shown (from left) are: Joe Runk, Mission Capital; Dwight Bostic, Mission Capital; Dennis Zenhle, Mission Global; and Trenton Stanley, Mission Global

Mission Capital Advisors, a national, diversified advisory and brokerage firm that specializes in arranging real estate capital, held its annual holiday bash at the Top of the Standard.   Read the full story here. [Download PDF of story]

IN PICTURES: Mission Capital holds its holiday party

BY REW • DECEMBER 21, 2016

Mission Capital Advisors, a national, diversified advisory and brokerage firm that specializes in arranging real estate capital, held its annual holiday bash at the Top of the Standard.

Photos by Jesse Hsu Photography.

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Source: American Banker

Mission Capital’s David Tobin comments for how analytics are to be most effective, banks need a plan on how to use them.

Why Small Banks Need Big Data

By Bryan Yurcan

September 6, 2016

Attention community bankers: it is time to dip your toes in the sea of data if you're not doing so already.
More than ever, banking is as much an information business as it is a financial business. With the vast amount of data banks have on customers and transactions and spending habits, those that aren't effectively mining this data risk falling into irrelevance.
For some small banks, investing in data analytics remains a tough call. Margins are already thin from the operating
environment. Tech budgets are consumed with bridging the gap between running legacy technology and offering digital products. Perhaps rightly so, they are afraid to sink money into a solution without fully understanding the problem they are trying to solve.
But it is a jump they must take in order to maintain their edge with customers.
"The reason [small banks] need to budget for this is because bigger banks are absolutely budgeting for this," said Karan Bhalla, managing director at IQR Consulting, which provides analytics and statistical modeling consulting services. "The rate of data being gathered now is huge and knowing things like how often customers log in to mobile banking … is redefining what loyalty is. If you don't understand that, then some other institution will and will take away customers.

Impactful Insights

Data analytics has become the Swiss Army knife of banking.
From customer marketing to regulatory compliance, from fraud detection to cybersecurity, data plays an integral role in banks' daily operations.
Take, for instance, compliance functions. In the past, banks typically had one group of people working on anti-money-laundering compliance and other groups working on different other types
of fraud. But banks now are seeking an enterprise-wide view of risk, and investing in analytics to get it.
"If you can pull all the data together, and use things like predictive analytics or machine learning to identify hotspots and where there might be potential trouble, you can fight fraud more effectively" said David Wallace, global financial services marketing manager at analytics technology provider SAS.
Indeed, analytics tools for compliance purposes, risk management and fraud prevention are among the most popular, Wallace said.
"When it comes to fighting fraud and financial crimes, and risk management, ultimately they are regulatory compliance activities, so it's all tied together," Wallace said. "All these things are prescribed by regulators, but banks need to do them to protect customers."
Wallace added that analytics can help banks identify and combat breaches and strengthen cybersecurity. Often, if there is a data breach it might take an institution "many months to figure out what's going on," he said. Deployed in a real-time streaming environment, advanced analytics can look inside a bank's network and find anomalies that previously may have gone undetected for lengthy periods of time, Wallace claim ed. For example, such analytics could spot systems interacting in atypical ways, such as a customer service system accessing a function that supervises the general ledger, he said.

Putting the 'Big' in Big Data

It is perhaps difficult for community bank executives to see how they can effectively use data analytics when they see what some of the larger banks are doing.
Consider the $251 billion-asset State Street's Global Exchange, a unit the bank created in 2010 dedicated to data and analytics. It has 700 employees.
As a custodian bank, State Street's clients are constantly asking for access to more data to help them operate more effectively, said Jessica Donohue, chief innovation officer of the division. Especially for regulatory compliance, and things like anti-money laundering and know-your- customer efforts, data analytics are essential.
"Analytics helps us provide our clients with a clean and clear view of risk across a complex portfolio," Donohue said. "A large asset owner, or a client with a complex banking book, needs to be able to look at risk holistically across their entire portfolio or book of business."
Those are services the bank wouldn't be able to provide effectively without analytics.
"Data does not start out being easy to use; it comes from a lot of different sources and the amount of it is very large. You need good analytics tools to bring that all together and serve up usable data."
Community banks might find comfort in knowing that Donohue thinks the industry has only scratched the surface of how it can improve through analytics tools designed to make sense of a seemingly infinite amount of data.
"I feel we are still at the beginning of this space," she said. "You're seeing a lot of the attention focus now on machine learning. The technologies that are being developed allow you to work with much larger databases in much less time. That wasn't possible even five years ago."
And the proliferation of analytics technology in recent years makes it easier for even small banks to start down this path, said Bhalla,
"Analytics tools are constantly being refined to mine more and more data in a more effective manner," he said. "For smaller institutions, it's much easier now to take that first step and invest in something that will give you basic intelligence. Then you can go from there and look at ROI and decide if you want to invest more, or hire quants or whatever. But there are many tools that run the gamut of varying cost, so it has to be a part of your budget, even a small part."

Don't Forget the Human Touch

Analytics tools need to be combined with expert human analysis to be most effective, said Todd
Hammond, head of commercial underwriting at Cleveland-based KeyBank.
When making credit decisions, generally the complexity and size of the loan will dictate how much the bank will rely on analytics.
"Analytics definitely plays a huge role, but reliance on it depends on the complexity of the deal," Hammond said. "Certain small-business loans can be largely data-driven. When you move up in the commitment spectrum, we'll still use analytics but there's also a human element, such as our interactions with the client and understanding of their standing in the market."
Human reasoning is also needed to make sure Key doesn't get in trouble for who it lends to. "We definitely have people looking at reputational risk, of who we can and can't lend to," such
as legal marijuana businesses, he said.
Still, Hammond said financial institutions will continue to do more with analytics as data becomes more large and complex.
"We want to know as much about our clients so we can sell them the right products," he said. "And it's also effective for not only helping us make credit decisions, but for monitoring the effectiveness of our lending strategy."

High Stakes

For analytics to be the most effective, banks need a plan for how to use them, said David Tobin, principal of Mission Capital Advisors.
"There's a huge amount of data that can be mined. You have to decide what you are mining for," he said. "The first thing banks really need to do is to need to establish a plan of action. Such as, 'what data from a regulatory requirement perspective do we need? What data could we mine for marketing purposes?' Then you go from there and rank all the opportunities and figure out how much you can do and how much it will cost for the right analytics tools."
This is particularly important for smaller banks that likely do not have large technology budgets. But even if the bank determines it can only spend a small amount, that's better than doing nothing.
"The pitfalls of not investing in your future as a bank far outweigh any benefits you might get in money saved from not investing," Tobin said.

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Source: Globe Street

Mission Capital’s David Tobin comments on the use of big data in the industry.

Big Data Alone Is Not Enough

AUGUST 19, 2016 | BY CARRIE ROSSENFELD

IRVINE, CA—Big data is not, by itself, inherently useful; information is only as valuable as its fusion with industry experience, Ten-X’s Sheridan Hitchens tells GlobeSt.com in this EXCLUSIVE roundtable about big data and the real estate industry.


IRVINE, CA—Big data is not, by itself, inherently useful; information is only as valuable as its fusion with industry experience, Ten-X’s VP of data products Sheridan Hitchens tells GlobeSt.com. We spoke
exclusively with Hitchens, along with Morgan Stewart, an attorney with Manly, Stewart &

Finaldi; Elliot Vermes, CEO of ResiModel; Joe Derhake, CEO of Partner Engineering & Science; Norm Miller, Hahn Chair of real estate finance at

the Burnham-Moores Center for

Real Estate, within the School of Business at the University of San Diego; and David Tobin,

founder of Mission Capital Advisors, about their overall assessment of big data in the real estate industry. Stay tuned for a more in-depth feature on the subject in the July/August issue of Real Estate Forum.

GlobeSt.com: What should our readers know about big data and real estate?

Hitchens: Big data is not, by itself, inherently useful. Information is only as valuable as its fusion

with industry experience. It’s not the data itself that provides value, but the application of that
data. In order to find actionable statistics, you need to analyze and curate specific insights from oftentimes oversized data sets.
At Ten-X, as an online marketplace, we’ve been able to utilize data to provide global-marketing reach, allowing for more tailored and targeted marketing on specific assets. The ability to appeal to a subset of buyers and sellers that, according to the data, may be more interested in a
specific asset helps us to create a more efficient marketplace for both buyers and sellers. In conjunction with a local investment broker, we ensure that potential buyers who are around the corner and around the world are covered.
Due to our position at point-of-sale, as well as our partnership with Google and leading industry data providers, we will be able to provide customers with real-time, actionable data. The value
of any data changes with time—a lease comp from three years ago probably isn’t very helpful
today. So if we can provide relevant, verified data at the exact moment someone is looking to transact, we will remove risk and add liquidity to the market.
Stewart: The attack on Essex serves as a warning to all real estate companies that collect and store information on behalf of renters, tenants, vendors, consultants and buyers. Multifamily property owners, management firms and related interests, however, are at particular risk due to the high-level of personal information, including banking, social security, driver’s license numbers and employment, collected on consumers during the rental process.
Property managers should also be aware that they fall under both FTC rules. Since property
managers provide a financial service for landlords they fall into the category of financial institution under the Safeguard Rule, and because they use credit reports to screen tenants, they are also subject to the Disposal Rule.

Vermes: One thing that goes hand-in-hand with big data is data visualization—charts and other graphic tools that make it much easier to grasp where things stand and when trends are in motion. Whether you’re analyzing rent revenues at your multifamily property or energy

expenses at a commercial building, the human mind is much more effective at understanding
information in a visual format rather than solely comprising a list of numbers.
In order to be able to analyze and visualize data, it first has to be in a usable format. While you may be bombarded by massive amounts of data, it is often useless without an enormous amount of time-consuming manual conversion from a yellow pad (or other non-digital
equivalents) into a standardized format. As compared with most sophisticated trillion-dollar industries, real estate has a surprisingly high number of “yellow pads.” In the multifamily space, people frequently receive rent-roll data in PDF or other difficult-to-analyze and database
formats. As a result, the data is often not analyzed as comprehensively as it could be, and those
who do analyze it face the arduous task of first getting the data in their own Excel templates prior to being able to analyze it. One of ResiModel’s most popular features is our data-capturing capability, which extracts the data out of the property management reports that you receive in PDF and Excel formats and converts it to a format that can instantly be analyzed and mined. Digitizing and standardizing information is the prerequisite to big data.

Derhake: It’s important to realize that big data creates a competitive advantage not only in terms of CRE investment and lending, but also for better-managed and -operated—and therefore more valuable–assets. Collecting data from smart building systems, tenant smart- phone usage, tenant management systems, etc., to gain a better understanding of how buildings are used allows property owners and operators to improve facility

management and capital planning. For example, building energy efficiency can be improved by adjusting building systems to more efficiently meet user demand. Better-operated buildings yield better returns, and in in this way big data has the potential to increase significantly the marketability and value of commercial real estate assets.

Miller: Technological innovation and the use of new data sources is not as easy as monitoring Google searches for your office building or other social media, although those can help manage branding. It is an experimental and labor-intensive process, which is why it will take some time

to fully implement and utilize all the new data exploding from connecting everything. The result, however, will be safer, more-efficient and better-managed real estate; faster and more efficient valuation; and speedier due diligence. Don’t expect this to happen tomorrow, yet it is very exciting to see what is possible, and that is what we are learning now.

Tobin: Extensive property-level information is readily available online today, particularly in the real estate sector. While there are many benefits to this “open-source” information, some find it disconcerting that their mortgage documents and personal information relating to their home are available online. This proliferation of data has a distinctly positive impact on real estate, bringing more lenders and capital and lower interest rates to the space, because open information

mitigates risk for lenders. I am personally a big advocate of technology and information and truly believe that the benefits of big data outweigh many, but not all, concerns.

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Source: Globe Street

Mission Capital’s David Tobin discusses the use of cybersecurity in the industry.

How Should The Industry Approach Cybersecurity?

AUGUST 16, 2016 | BY CARRIE ROSSENFELD

IRVINE, CA—The best defense against a security breach is prevention, which starts with eliminating your business as a target by controlling access to sensitive information, Manly, Stewart & Finaldi’s Morgan Stewart tells GlobeSt.com in this EXCLUSIVE story.


IRVINE, CA—Security-breach prevention starts with eliminating your business as a target by controlling access to sensitive information, Manly, Stewart & Finaldi partner Morgan Stewart tells GlobeSt.com. We spoke with Stewart, along with Elliot Vermes, CEO of ResiModel; Norm Miller, Hahn Chair of real estate finance at the Burnham-Moores Center for Real Estate
within the School of Business at the University of San Diego; David Tobin, founder
of Mission Capital Advisors; Charles Clinton, CEO of EquityMultiple; Michelle Schaap, a member of Chiesa Shahinian and Giantomasi’s media and technology, construction and
corporate and security practices; and Jorge Rey, director of information security and compliance for CPA firm Kaufman Rossin, about how the industry should cybersecurity. Stay tuned for a more in-depth treatment of cybersecurity and big data in real estate in the July/August issue of Real Estate Forum.

GlobeSt.com: How should the industry approach cybersecurity when more and more of our industry is embracing technology and therefore open to risk?

Stewart: The best defense against a security breach is prevention, which starts with eliminating your business as a target by controlling access to sensitive information. Strategies might include holding sensitive materials in a separate, non-networked database; limiting employee access to sensitive information; disallowing the transmittal of sensitive information over electronic communications; and creating an employee manual that details the use, possession and protection of sensitive information.

There are many ways to control access to electronic information, eliminate risk and prevent a security breach. Computer hacker Kevin Mitnick, in his book Ghost in the Wires, offers these tips.

Make the right IT investments to protect information, including firewall, virus protection and monitoring software.

Update apps regularly.

Secure laptops, mobile phones, tablets and other mobile technology with encryption software.

Enable remote wiping, which allows your provider to erase information on mobile devices when lost or stolen.

Establish strong passwords.

Backup regularly to an external drive.

Be smart when surfing the Web and downloading information: every “warning box” that appears should be taken seriously, and understand that every new piece of software comes with its own set of security vulnerabilities.

Educate employees. They need to understand the importance of your company’s data and consequences of a breach, measures they can take to protect it and what they may be doing that is dangerous.

“One of the most difficult things to do is protect end users against themselves,” Watchinski
concluded, “but ultimately, prevention is the best approach to handling your data security.”

Hitchens: Companies need to understand that cybersecurity is a core component of the implementation of new technology. If you’re employing technologies as a central component of your business, then you are, for all intents and purposes, a technology company. As a result, businesses should specifically seek out and hire technology professionals that focus on keeping information safe and secure.

Vermes: One thing that is important to remember is that it is not only online applications that

are at risk. Unless your computers are literally off the grid and completely disconnected from the Internet, your files are always vulnerable to hackers. It is extremely easy (and common) for hackers to send malware to PCs. The reality is that your data is much safer stored in a responsible SaaS application that is serious about security than it is when stored locally.
Miller: There are several firms in Israel that have proven to be great at countering cyber- attacks, and there are a few in the U. such as McAfee. I suspect we will need to have numerous layers of safeguards and security to run the systems of the future. Many new firms will likely emerge to provide cyber safeguards and users will need to perform due diligence to determine which one to use.
Tobin: Going forward, I think the standard for access to smartphones, laptops and desktop systems should be biometric, and we will likely see more fingerprint and retina logins. Similarly, transaction security will be enhanced with technologies such as blockchain. Systems are only as safe as the weakest link, and passwords are a weak link for a variety of reasons: written on paper, stored in an unsecure password manager or simply too simple and easily figured out.
You cannot, however, steal someone’s fingerprint or eyeball! Substantial resources have been dedicated to developing these technologies, and we’ll likely see more implementation of these innovative approaches to cybersecurity in the near future.

Clinton: Adopting something new always involve some level of risk; the question is whether the

pros outweigh the cons. I don’t think anyone is questioning the huge benefits that technology
will bring to the industry. The necessity for cybersecurity will vary from business to business, but for those portions of the industry that hold valuable proprietary data, the first step is recognizing the value of that data and then taking the necessary steps to protect it. Luckily, there’s already an entire industry dedicated to cybersecurity, so the infrastructure is already there. One very small example is web hosting—our platform is hosted by Heroku withinAmazon’s secure data
centers. Amazon has a level of security in their data centers that very few companies could hope to replicate, so leveraging their infrastructure is an enormous advantage.
Rey: As the commercial real estate industry increases its reliance on technology, companies should start incorporating cyber security risk within their risk-management framework. For example, companies should consider the potential impact of sensitive information being stolen, whether it is tenant information or other sensitive information such as investment strategies, business plans, current or future investors lists and engineering drawings. The industry should start look to best practices from industries such as financial services and healthcare that have long been addressing cyber security. Best practices may include periodic risk assessment s, vulnerability assessments, employee training and information-security programs tailored to the risks facing each company and the information they want to protect.

Schaap: It goes without saying that any responsible company should (and, by law, is required to in many cases) implement appropriate security procedures —including both cyber- and physical security measures. Companies should ensure that they not only have firewalls and antivirus software, which offer protection against certain types of threats, but also that they have their sensitive data encrypted both at rest and in transit. Companies should audit their existing systems with qualified, outside vendors—not the personnel or vendors that designed the subject systems—to understand what sensitive data the company has, where it resides—physically and electronically—and how it is stored in relation to other company systems. Such outside vendors

should also ensure that there is not already an undetected “presence” in the company’s systems. Once tested (and redesigned, if appropriate), systems should be tested regularly (by “white hat” hackers) to test vulnerabilities. Where vulnerabilities are detected, measures must then be taken to redress them (consider the Target losses due to Target’s failure to respond to its own notices that its systems are vulnerable).
Security efforts should also include people: Personnel must be trained to
recognize phishing,spearfishing, and other improper efforts to gain unauthorized access to a company’s systems. Employees should not be permitted to use unsecure devices (e.g. cellphones, PDAs and/or tablets) to transmit information of a sensitive nature. Proper personnel training on these critical security issues will thwart many bad actors’ efforts to access company records and systems. Vendors that service a company must also be carefully vetted to ensure that, to the extent such vendors have access to company systems and confidential information,
they, too, take appropriate security measures. If companies use “data rooms” and data- sharing cloud providers to facilitate the exchange of documents in due diligence, they must carefully review the terms and conditions of the sites and systems used to make sure that security is assured and that the company will remain the owner of its data at all times. Companies should also ensure that information is fully backed up, stored and quickly retrievable. If a company is hacked, or the subject of a ransomware attack, it must be able to restore business records and resume “business as usual” quickly. Absent such measures,
companies may find themselves compelled to pay ransom to regain access to their valued data.
Additionally, companies should invest in cyber insurance. But purchasing insurance without understanding the coverage and exclusions may leave the company unprotected—or without the level of protection it thought it had. Business-interruption coverage that is not part of a cyber-risk policy may not cover the losses incurred in a cyber-attack.
Companies must have an action plan for the “when” (and not the “if”). If a cyber-attack occurs, the date the attack is discovered is not the time to develop a plan of response. A comprehensive response plan should clearly identify all the necessary players, escalation procedures and outside parties—including law enforcement, insurance carriers, legal professionals and technology/forensic experts—so that the company can react immediately and responsibly. Having proper procedures, protections and action plans in place in advance can protect the company from a world of hurt. The last thing a company executive wants to explain is why the proceeds from a multi-million-dollar transaction have just been wired to an untraceable account
in Russia

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