I think it is fair to say that a CFO and other accountant types do not look at the real estate market the same way that brokers do. They have different concerns and focus on different issues.
David Kessler, a partner in the firm of Cohn Reznick and their Commercial Real Estate Industry National Director met with me at the IMN General Counsel and CFO Forum in New York City in September 2014 at which time we discussed what keeps CFO’s of commercial real estate and finance companies awake at night.
According to David, in the fall of 2014, those things that keep CFOs awake include:
1. Capital: Where is it going to come from;
2. Finding deals;
3. Technology Solutions; and
David indicates that it is not as easy to find capital as it once was and feels that some companies are considering bringing the money people or those that can find money, in-house. Because it is not as easy to get funds and you have to look at many somewhat untraditional sources real estate funds might need the dedicated time and efforts that they would get form in-house staff.On the issue of technology, David focuses on the “highest and best” use of technology for each firm.
“There are so many tools out there now. Everyone has a baseline property management system,” but with big data available, the issue is now how well each disparate system integrates so that the whole is greater than the sum of its parts. It seems that it is time now to go outside of an Excel based system.
“Often times, we seem billion dollar investment funds operating off of Excel and Quickbooks.”
“It is very difficult to find good deals that work, now-a-days.” A lot of companies are going into secondary and tertiary markets and finding “C” quality, value added propositions. Just a few years ago, this was atypical of institutional investors and real estate companies.
At least as of September 2014, some of the markets with the highest job growth are not the gateway markets. David cites, San Jose, Austin and Raleigh as locations that you don’t find the typical institutional investor but are now becoming attractive to them.
According to David, the vertical markets to follow are technology, healthcare, energy and education, although we didn’t have to the foresight at the time to consider the significant drop in oil prices that soon followed our discussion. I wonder what David’s thoughts are regarding investing in real estate in a heavily energy dependent locale, such as Houston. I, on the other hand, consider investing in education related properties to be a short-sighted investment since I see a bust in college expansion due to the high cost of education in the United States.
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