Is More Real Estate The Key To Succeed?

Doing business in real estate has become harder since the last crisis hit. In the middle of all the benefits and downsides of this industry, government-leased buildings did not stop. Yes, even the governments can lease their buildings. That’s precisely the kind of market that Government Properties Income Trust (NYSE:GOV) is targeting with its services. This is why I find the stock relatively attractive. What better tenant than the government itself! In addition, the company also announced a merger with Select Income (NYSE:SIR), another REIT business, in which it owns 28% in mid-2018. Following quarters will need to be monitored as synergies might start to sprout and so are the expected distributions.

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Understanding the Business

Government Properties Income Trust is an office REIT that primarily owns and leases offices to government tenants. Owned offices are located throughout United States; 213 offices in 38 states to be exact. It has a high occupancy rate and continuous lease sustained operations since its founding in 2009. In 2017, consolidated leased percentage was just shy above the 94% mark, which is quite impressive considering the number of buildings owned.

GOV does not have employees as every other business has. The company uses a service provided by RMR LLC. The 550 employees working for the latter help in running operations smoothly and manage some other aspects of the leasing agreements. GOV’s operations rely primarily on rental income for their main cash inflows. But these operations also include a disposition plan, which allows GOV to a certain rotation in its main balance sheet assets.

On a side note, the company is now in its fourth consecutive year of Green Lease Leader, an award handed to real estate practitioners that show energy efficiency and sustainability through their operations.


My front row seat to the future of real estate

My front row seat to the future of real estate

As agents, we have a problem.

Over the last decade, we willingly invited “disruptive” software and solution providers into our businesses – and our data. Many of us (yes, I am included) have multiple CRM platforms, different lead gen and lead management systems, transaction management systems, our websites, and post-close client management workflows managed by yet another system or service. Yet, many of us also still rely on Excel spreadsheets because none of these disparate systems are tied together.

The data to create on-demand, personalized market and client insights is being generated; however, it’s sitting untapped in silos that we don’t own.

So, how are we going to solve the problem of having lots of technology that doesn’t help grow our businesses and costs us money?

Paving the way for the tech-enabled agent

Let me be frank. I don’t have the resources to build new technology that harnesses the power of big data myself and neither do you. However, my company does. In fact, Keller Williams has built the proprietary technology tools that allow me to harness data and insights from 186,000 fellow agents – and that is data we own.

This distinction is really important. Before I became an agent, I spent 12 years working for a Fortune 50 technology company. That experience taught me that it matters who owns the technology and the data because that ownership leads to relationships. And relationships will always be the lifeblood of our business.

But think about how powerful those relationships can be when we have the right technology to amplify them.

To help ensure we’re creating technology that will truly enable agents, I make several trips a year to KWRI headquarters in Austin to participate first-hand in what we call KW Labs. In these interactive, hands-on Labs, I mastermind on solutions, give design feedback, and build out agent and user workflows with other agents and the tech team. I am using the technology, and I am constantly providing feedback to make it better.

At the same time, Keller Williams hosts consumer labs that place buyers and sellers in the driver’s seat of their technology. This technologist/consumer collaboration is fast-tracking our success and moving us closer to an end-to-end consumer experience. It is amazing to see what can be accomplished when we work together.

Over the last three years, we’ve developed real estate’s first industry-specific cloud platform and artificial intelligence that provides agents with instantaneous insights for our clients. And this is just the beginning. I’m currently working on new products and services to help manage business areas such as lead management, marketing, and referrals.

These tools are available at no additional cost to the agent, so we can reduce operating costs and invest that money in lead generation and other ways to grow our business.

Last year, our Portland-based team sold $78 million in real estate, helping more than 144 clients with their home purchase or sale. With the full suite of KW technology, we expect to save nearly $50,000 per year. That’s money that goes straight to the bottom line. We can recognize it as profit, reinvest it in growth or offer unique services our competition can’t afford.

And that doesn’t even count the money and time saved not having to manage the spreadsheets that bridged all our past tech silos.

Focus on the client experience

You might get the impression that our technology investments are solely for agents, but that couldn’t be farther from the truth. We recognize our ultimate responsibility is to our clients.
I’ve personally sat across the table from hundreds of clients through some of the most emotional, most stressful times of their lives, and I can confidently say they want a human being and not a chatbot, guiding them through the purchase or sale of their home. They will always want an advocate who can help them with aspects like home financing or negotiations with sellers, to name a few examples.

While we can’t predict the future, we can see the changes happening now and prepare ourselves — which is exactly what we’re doing here at Keller Williams. It’s why I, my fellow agents, and our leadership are betting big on the technology that will not only help us strengthen the agent-client relationship, but also keep us competitive in the years ahead.

Sarita Dua runs a Mega Agent team in Portland, Oregon, and has been at Keller Williams since 2010. An Electrical Engineer with an MBA, she spent the first 12 years of her career in high tech sales and marketing. Sarita enjoys training, coaching, and is an industry speaker at KW and industry events alike. She loves the intersection of technology and real estate and has enjoyed immersing herself fully in KW Labs this year. In addition, Sarita is pursuing an Executive MBA at MIT (class of 2020). And when she isn’t selling houses, teaching, speaking or studying, Sarita is an avid traveler, having crossed the seventh continent off her bucket list earlier this year.


Trading In Tokens: How Blockchain Technology Promises To Make Real Estate Affordable, Liquid For More Investors

For Stephane De Baets, placing a percentage of the St. Regis Aspen luxury resort on the blockchain is an experimental gamble into the future.

“We wanted to be one of the first to go through the motions because you learn so much,” De Baets said. “We see [blockchain] as an opportunity if you do it right.”

It is always risky to walk out on the bleeding edge of a new trend — and blockchain-fueled investments are one of the hottest trends to hit the commercial real estate market in a long time.

Courtesy of Elevated Returns

The St. Regis Aspen luxury resort

If the tokenization of real estate through the blockchain — dividing a property into shares that are represented by virtual tokens for the value of that share of the property — takes off as expected, it could completely disrupt the commercial real estate industry by opening it up to more potential investors. Tokenization takes what is mostly a manual, paper-based process and digitizes it. Minimum costs to get into a property would drop by allowing for fractional ownership. In addition, the instantaneous sale and trading of those ownership shares could happen without having to wait on the sale of the property, setting this democratization of real estate investment apart from typical crowdfunding models.

“Private investments are illiquid today because there are complex rules and regulations governing the resale of private securities, and violations can result in severe penalties,” Harbor Director of Communications Kevin Young said.

Harbor, a compliance platform for tokenizing private securities, unlocks the potential for liquidity through its blockchain-based investment tool, which is designed to keep investors in compliance, Young said.

“This allows fund managers to relax the transfer restrictions and let qualified investors trade in and out of the investment without a middleman,” he said. “This potential liquidity can unlock value for both the asset owner and the investors.”

The plan looks good on paper. But how will this all play out? For De Baets and a handful of others, only time will tell, but they are willing to take the risks for the technology’s promised return.

Courtesy of Elevated Returns

Elevated Returns CEO Stephane De Baets

Unlocking Value

De Baets’ company recently closed $18M of Aspen Digital Inc., a tokenized real estate asset offering tied to The St. Regis Aspen, a 179-room luxury hotel in Colorado. The $18M represented 18% of the property’s valuation. It was the maximum amount that the limited partners wanted to sell, just high enough to whet the investors’ appetites and low enough to minimize the risk, De Baets said.

“If you go Google the word ‘real estate tokenization’ you will probably find 100 or 200 companies and that is their business plan and [they’re] trying to raise money,” De Baets said. “But no one had truly gone through the exercise of taking a real life product, going through the motions — what does it mean from a structural and regulatory perspective to tokenize an asset — and then go ahead and offer it to people.”

Meridio, a Brooklyn, New York-based company, recently experimented with a property at 304 Troutman St. in the Bushwick neighborhood of Brooklyn in a different way. Meridio is familiarizing its current investors with this technology, starting by giving all eight owners of the property cryptocurrency tokens to represent their shares. Those tokens can be traded with other approved investors. The tokens are guarded by a crypto-protected database. In theory, the crypto protections will make the blockchain difficult to hack.

Meridio, which creates, manages and transfers fractional ownership of real estate assets, was one of the first to sell shares of a property using blockchain technology to facilitate the deal.

One of the benefits of this system is that it may allow real estate assets to trade at rates closer to the real price, Meridio analyst Connor O’Day said. In the current market, the small pool of investors and the fact that the asset will remain frozen for years puts a damper on share prices.

“Fractional ownership can unlock a lot of value,” O’Day said. “We can’t promise it because it’s still an experiment, but typically from what we’ve seen from our research, the ability to trade the assets and get in and out of them should bring about a value much closer to the actual asset value.”

Unsplash/Markus Spiske

Writing In The Rules

Real estate transaction regulations are thick and this technology attempts to make them easier, while still working within the set system.

“All of the rules get written into the blockchain, then you can do it like a REIT or say, ‘Here’s an investment contract, you’re going to get money,’” Indeco CEO David Levine said. “It’s a way to create an almost infinitely flexible range of securities that can match the individual property type and what investors are looking for.”

Indeco is a platform for security token issuers and investors.

Levine said the securitized tokens will have value in the secondary market as determined by how the project performs. So the trade value of the token will go up if the project is delivering the projected cash flow.

The benefit ends up being that real estate assets now have more potential investors, and investors are able to further diversify their portfolios. Those potential investors include foreign buyers, for which blockchain-based platforms can streamline the process.

RealBlocks signed a deal with New York-based investment firm Colony SK2 Holdings in October to offer investors a way to purchase part of $12B worth of previously nontraded REITs, such as ski resorts, Marketing Manager Matt Jago said.

RealBlocks handles the regulation side by making sure the investors pass an accreditation check and that foreign investors are following the specific laws pertaining to their countries. It opens the U.S. real estate investment market to the rest of the world.

“These are pretty desirable investments,” Jago said. “Because they are now on the blockchain, they can tap into money from Hong Kong or Singapore.”

Courtesy of Harbor

Harbor’s Kevin Young

Challenges And Concerns

But there are concerns — some driven by whether negative perceptions will slow adoption of trading property using blockchain and others about inherent challenges in the use of the technology itself.

Many older investors are wary of cryptocurrencies, such as bitcoin. Cryptocurrencies are the most well-known use of blockchain technology, but have been extremely volatile.

The cryptocurrency market grew rapidly in 2017, but as of September, it had lost 80% of its value. Bitcoin, the most popular cryptocurrency, went from trading close to $20K a coin in 2017 to about $6,400. That is a 68% drop.

StraightUp co-founder and Chief Operating Officer Omer Amsel said educating investors to differentiate between the blockchain world and the cryptocurrency world is key to making the new technology acceptable.

StraightUp — a real estate-focused crowdfunding platform incubated within New York City development company HAP Ventures — and Slice, a nontraded REIT, have partnered to offer tokenized real estate investment options.

“Traditional investors when they hear blockchain they hear a mixture of bitcoin, etc.,” Amsel said. “They find it hard to settle between the two worlds and it bothers them. Blockchain is a technology — it doesn’t have inherent volatility and inherent flaws that cause it to be fraudulent.”

That separation of the underlying technology and how it is used means it is unlikely the volatility of cryptocurrencies will have an effect on real estate investment.

“I doubt it will have much impact on the commercial real estate blockchain trend,” Benjamin N. Cardoza School of Law professor Aaron Wright said. “The real estate use cases of blockchains are applications that sit on top of popular blockchains.”

Harbor’s Young acknowledges most investors are older and have less faith in newer technology when it comes to their money. To assuage fears, he uses this analogy: “Think of bitcoin as an application and blockchain is the internet.”

This emerging investment platform is just a new method, he said. It is like background noise.

“Investors won’t even know that blockchain is involved,” Young said.

The technology is not completely fraud-free. Wright is concerned about other risks that could come up with the use of blockchain.

While blockchain technology may help prevent fraud, if fraudulent activity does make it into the system there are no safeguards in place to stop it. That threat could bog down trust in this new system, he said.

Still, Young assures potential investors that tokenized securities are safe because of the underlying value of the building that the investors own shares in.

“If someone hacks into your shares of your building, you still have all the assets of that building,” he said.

Unlike other forms of currency on the blockchain, real estate investments can’t be wiped out because, in the end, the building will still exist.


UAE eyes flexible approach to banks’ real estate exposure limits

UAE eyes flexible approach to banks' real estate exposure limits
“Flexibility is now with the Central Bank and it may come back and change [the cap limits] from year to year depending on the performance of real estate,” Al Ghurair is quoted as saying by Reuters.

The UAE Central Bank can now set new exposure limits for banks to the real estate sector and amend them to reflect market performance, according to media reports.

Last month, the UAE introduced a law eliminating a cap established in 1980 that restricted bank’s lending to the real estate and construction sectors to a maximum of 20 percent of total deposits.

According to Reuters, UAE Banks Federation chairman Abdul Aziz Al Ghurair has said that the federation is working with the Central Bank to properly define real estate – which may mean that a new cap may be imminent.

“Flexibility is now with the Central Bank and it may come back and change [the cap limits] from year to year depending on the performance of real estate,” Al Ghurair is quoted as saying by Reuters. “Now that [cap] is lifted the Central Bank may say 10 percent or 20 percent or 30 percent.”

According to the Knight Frank Global Residential Cities Index, residential prices in Dubai and Abu Dhabi fell by 6.5 percent and 6.9 percent in Q2, respectively.

Ghurair added that the UAE’s banks have provided the Central Bank with recommendations on what should be defined as real estate under any new restrictions, which will then allow the regulator to decide what limits to impose.


The Cayman Islands Has a Major New Real Estate Project

cayman islands real estate

There’s a major new real estate project coming to Grand Cayman: and it’s being dubbed the most luxurious development in the history of the Cayman Islands.

This is the new $500 million WaterMark, a collection of 54 beachfront units set on Grand Cayman’s world-famous Seven Mile Beach.

The new project “will be far beyond any other property ever developed in the Cayman Islands and very likely the Caribbean,” listing broker Kim Lund tells Caribbean Journal, pointing to the combination of “cutting-edge design, ultra-premium quality, prestigious amenities and facilities and privacy.”

cayman islands real estate

Indeed, the residences will range from a minimum of 3,900 square feet — with a starting price of $5.6 million — to 11,900 square feet for a penthouse, with the latter starting at $24 million.

That’s a pricing echelon unmatched for a development of this size in the Caribbean.

WaterMark will have a broad range of amenities, including 12 swimming pools; a spa; a fitness studio; a screening room; a library; an oceanfront conservatory with a chef’s kitchen; a fine-dining restaurant and even bespoke concierge service, among other offerings.

cayman islands real estate

While the residences themselves will be right on the beach, several amenities will extend across Grand Cayman’s West Bay Road, including the spa, the eatery and a collection of guest suites for owners.

It’s yet another sign of the Cayman Islands’ growing position as a luxury real estate Mecca in the Caribbean, from its new Residences at Seafire (set at Kimpton’s first-ever Caribbean hotel) to the recently-launched Grand Hyatt Grand Cayman Residences.

Lund, owner-broker at RE/MAX Cayman Islands, told Caribbean Journal that the project is already at 65 percent sold after three months.

Construction is slated to launch in the spring of 2019.