CRE News Hour 8/16/2019
From the business desk at st broadcast news this is the c. arena news hour. I'm steve lubeck. It's friday august sixteenth two thousand nineteen on this week's edition of the sierra news hour. We'll have part part. One of a two part conversation with attorney. Brad mowatt ski a leading expert on the federal opportunities zones program. We'll have a conversation with mark rose the the chief executive officer of global real estate firm avis young which is expanding dramatically in twenty countries around the globe and a look at how investors investor's bank a regional bank in new jersey is growing. It's commercial real estate lending portfolio as a balance sheet lender. We'll talk to their chief lending officer rich spangler. You're we'll be back with the top news stories right after these messages turn earn your podcasting passion into profits the book the business of podcasting describes the business side of podcasting including how to become a professional national podcast. You'll learn about position your clients expertise who podcasting to plus the best business models how to find clients and much more visit the the business of podcasting dot com today. You can't wait for the media to cover your company buzney. You have to be the media. Take advantage of the power of audio and video. It's the best way to showcase your expertise to prospective customers. Let the lupatkin you bet can media companies handled the technical side. We're award winning audio and video producers. We can help you produce podcasts and video programs remotely or in our fully fully equipped studio in cherry hill visit being the media dot com for more information. Thanks for joining us on the c. r. e. news hour. We just like to make note of a new option on the show page for this episode. You can click on the purple. Take the survey button right below the podcast player and share some information that will help us get to know our audience better. We'd also appreciate your considering financial support for the sierra. News hour by visiting our are patrick link and becoming a show supporter now. Let's take a look at some of the stories that are moving sierra markets across the country fannie. Mae economists say a stronger than expected acted. First half of the year pushed its forecast for full year. Twenty nineteen headline growth up slightly to two point two percent. That's despite the escalating trade conflict end the associated risks of financial market volatility labor market weakness and loss of consumer resiliency fannie maes economist groups also updated its domestic monetary policy expectations and it's calling for two more quarter point interest rate cuts by the federal reserve in two thousand nineteen one in september and another in december consumer spending continues to be the primary driver of growth increasing in the second quarter at its strongest pace since the end of two thousand seventeen while a surgeon government nondefense spending nick mainly due to the resumption of uninterrupted employee compensation following the government shutdown also contributed to strong growth in the first half by contrast. I residential fixed investment dragged in the sixth consecutive quarter while business investment turn negative in the face of increasing trade and geopolitical uncertainty rent cafe. They says average rents in and around philadelphia have seen minimal changes compared to june and in some cases the rents decreased slightly. The pace is consistent with the national trend as the u._s. Average rent grew by three dollars compared to the previous month and now reached fourteen hundred sixty nine dollars in philadelphia average apartment rents reached sixteen hundred twenty four dollars. It was in july. That's a two dollar increase compared to last month. The highest rents in the area are in king of prussia where the average is sixteen sixty nine lower by two dollars compared to june c._b._r._e. Arranged twenty million dollars sale of the bergen medical center in paramus new jersey the buyers a private investor and acquired the seventy five thousand square foot medical office property from the eye institute of new jersey built in nineteen eighty eight bergen medical center is on approximately five acres was in one of the county's healthcare arteries of route seventeen the properties near valley medical center bergen regional medical center and hackensack university medical center c._b._r._e. Sorry also arranged for fashion file and online fashion resale website where consumers can buy and sell used women's luxury designer handbags and jewelry. They're gonna lisa hundred five thousand square feet in munochiveyi new jersey ever west real estate investors redeveloping the building which firm purchasing august two thousand seventeen accounting accounting firm eisneramper signed a fifteen year lease four hundred twenty five thousand square feet on the sixth through ninth and tenth floors of seven hundred thirty three third avenue in new york city also included in the deal is eleven hundred square feet on the building's ground floor for a private entrance area lobby and hospitality area for eisner employees in their guests and a twenty one hundred square-foot outdoor terrace on the seventh floor seven thirty three third avenues owned by the durst organization is on the southeast corner of third avenue and east forty sixth street. It's leed gold certified eleven buildings that comprise what is known as the post office and warehouse district at the decommissioned fort monmouth new jersey are under contract for purchase for redevelopment port partners a company owned by denholm properties scoring to replace the existing buildings with three class. A office buildings wchs for a total of eighty six thousand square feet. They'll be targeting medical biotech and technology companies. Everest rehabilitation hospitals is putting up a sixth sixth physical rehab hospital in the liberty township section near north cincinnati ohio everest modern comprehensive medical rehabilitation hospital will be constructed on a little over five acres just north of cincinnati the sites located at the northeast corner of interstate seventy five and bethany road in liberty township and some executive -secutive moves of note. C._b._r._e.'s appointed john pool is to head its healthcare practice delivering clients solutions in the areas of compliance facilities management project management advisory and transaction and consulting services to healthcare systems throughout the country c._b._r._e. Healthcare's dedicated business group within the company focused exclusively exclusively on partnering with healthcare providers to deliver total life cycle real estate facility and capital solutions based in cleveland polos. I join c._b._r._e. Ory in nineteen ninety seven cushman and wakefield veteran thomas collinses joining iverson young as a principal and he'll be managing director of the company's new england england region. He'll manage day to day. Operations davison young's boston and hartford office. He most recently operated collins strategies a consulting firm providing coaching thing in mentoring services for real estate companies and professionals and ratliff companies a hard scape construction and real estate development company near dallas has named brian robertson and his chief executive officer robertson steps into the ceo role after leading the company as president since twenty eight and acquiring the company in twenty twelve ratliff offers general construction concrete and masonry services for all civil and hard scape projects including single family multifamily commercial municipal and oil and i guess you're listening to the c._r._m. News hour. I'm steve labatt. Can't the federal opportunities zone program is being being implemented differently in almost every state some states offer additional incentives or creative ways for developers to partner with state and municipal governments mints to take advantage of the federal o._c. Tax credits on projects that also serve the public good one of the leading experts on the opportunities own program is bred melotsky's breads co head of the opportunities zones practice group at the philadelphia based law firm of twain morris breads primary practice is focused in the areas of opportunities own fund creation and fund deployment financing public private partnership which you sometimes here called p p p or p three real real estate joint ventures and commercial leasing including a focus in cannabis leasing and we'll have to have him back on the program to discuss cannabis in greater detail at a later date before joining duane morris bread was on the big development company side of things he spent two decades as executive vice president general counsel and corporate secretary of brandy wine realty trust where sure he oversaw the real estate investment trusts legal operations acquisitions and divestitures financing joint ventures board matters insurance procurement litigation oversight oversight s._e._c. filings and the legal aspects of capital raising brad's office just about ten minutes from our studios so he dropped into state broadcast news to talk about opportunity zones brad. Thanks for joining us on the program pleasure so you are heavily into monitoring the opportunities zone on programs around the country and there've been a couple of changes recently that you are updating your clients and prospects on talk a little bit about the f._h._a. Vijay program for financing. I so there's a recent <hes> f._h._a. Announcement last week whereby they took more of their programs section two oh two program i am which is a loan program for certain types of housing in certain particular locations and they essentially attached to the opportunity zone saying that if you who did an ots z deal with a two oh two loan they were providing additional incentives <hes> which is a nice way of underlining underlining reiterating that the opportunity zone program is a stackable benefits program meaning. It's not us one benefit or another it layers nicely on on top of or alongside of any number of other tax credit and door other loan programs in the federal government so historic tax credits film own credits new markets credits all work with or can work with opportunities zone equity and so would would the f._h._a. Was saying in this instance hood kind of expanded. Its programming to say hey if into the extent you are doing an opportunity zone deal all in one of our you know kind of locations that qualify for this program other two zero two. We're going to sort of put you to the top of the line topline frontline and so that's a for a developer kind of the ability to not have to wait to know whether you're in her out is a benefit at time is it's kind of a bit of a killer in some of these instances so it's nice to see the federal government looking to align programming with the opportunity zone program which will provide additional incentive two and or push for folks to utilize the program as you mentioned the stackable nature of the opportunity sounded a lot of the other folks. We've had on the the program. Talking about ozzy's have made the point that you structure the investment to be a good investment. I and then the opportunity zone is is sort of like the icing on the cake or the gravy icing on the cake exactly and i think that's spot on the the real estate transaction. If you're going down that path you could go down the business path but the real estate transaction needs to make sense on its own. You know the tax benefit does not make it make sense so if the real estate deal pencils and it's a good deal this provides additional additional kind of sizzle to that transaction. It's already a good transaction so one of the things you've done you you share with your <hes> network of interested parties a long list of all the different changes in features on a state by state basis. What some of the interesting things that are happening on the state level level. Yes i'll never shrivenham. That's up steve but i do pass along and <hes> occasionally get some feedback that people appreciate it and the it's it's hard to tell it's almost like when you go into a room and you're meeting people most real estate folks. Many business people have heard about the opportunities program with some have have delved into it some of read an article some kind of listened and the stuff. It's not that hard. There's only like three basic benefits and three basic rules but but then there's a lot of nuance below the surface and so i'm never sure whether the person we're talking to is kind of a one oh one learner of two zero one three one and so it's the ability to share information nation of bill can digest at their leisure and so the thing you're alluding to that i passed out was from a piece from nova graddick addict which is again an online resource they provide accounting services. They do webinars and seminars and stuff and they tend to have a very good warehouse house of information. That's available in different formats and so one of their authors had put forth a discussion about the different states in china unaware. They're at so some states. <hes> are very much out of the curve. South carolina has its own <hes> o._c. Person that's in charge of their program program and that person is out and about and talking to communities and thinking about kind of what should go on and should we can we use for instance opportunity zone money money to create interest in building schools in areas where we can't afford to do and so he's thinking about macro-level building thirty schools well. Let's say couple hundred million dollars so can he attract equity capital at a decent rate relative to utilizing <hes> opportunities on capital gains put them into a fund or have somebody put them into a fund used the that fund to finance these buildings that the school districts can't afford that's what's fascinating and so kind of marrying p. three public private partnerships with opportunities on equity to show kind of a return have that lease payment backed up by either a state agency or county agency of school and execute on infrastructure is kind of fascinating so the different states are taking different approaches some of them <hes> big picture so the federal program is a federal program and essentially when you sell will there are certain ramifications from the sale of its after ten years. It's federally capital gains tax free on the appreciated value at this point as of two three ago. There were thirty eight states that had followed federal form in english. They said hey if you come to our state and you build or deadly reuse or create a business or real estate in in our state we too so long as you follow the federal rules we too will wave off on our state. Capital gains so thirty eight states states out of fifty have done that and that's meaningful in certain states like for instance new york. That's like eleven point two percent additional benefit in new jersey. It's like eight point six four percent so so in addition to the federal non-payment after ten years on the sale. These states have also said hey. If you do it here we too and so how no one uses that either straight up or you start to attack benefits along with that so some states are looking at. How do we incent rural development of you do that. We're gonna give you a state benefit. How do you focus on <hes> larger cities in some states so if you do it in a city. You're going to get certain benefits. Others <music> are like ohio early on came out with a job credit so if you created jobs you're going to get additional benefits under the day so the osy doesn't require wire federally you to create jobs in ohio. They were trying to incent the jobs until he said if you create jobs in our opportunities zone we will give certain additional things and so the states acer kinda taking different tax different approaches based on what they're looking to incent behavior wise in order to attract that kind of capital and get that type of adaptive reuse others are taking a look end saying hey we have a bunch of vacant buildings and so we want you to focus on building. Let me do an adaptive reuse of vacant building. We'll give you an added state state tax benefit so again there are these thirty eight states and there's a variety of states alabama california connecticut kentucky louisiana maryland the rasco with home a rhode island texas that are kind of doing different things to create energy and interest in the development unique to come to their their state and to invest capital in their state in either create a business or build a building or definitely reusability now. Isn't there a bit of a rush for people to who do their projects or the projects on at least in the pipeline because there's a time constraint. A lot of people are under the misperception that the program ends after this year that is not true not what the rush to judgment is. This year is the benefits. One of the benefits of the three benefits are deferral pay-later reduction. If you're in the program for five years you get to reduce by ten percent seven years he gets reduced by fifteen percent and then if you stay in the program for ten years appreciated value and you sell before twenty forty seven twelve thirty one twenty four seven that sales price on the <unk> value is not federally tax so to go back back to your question when we say five years in the program seven years in the program the deferral in the program is till twenty twenty six and so if you count backwards backwards seven years from twenty twenty six that puts us squarely into two thousand nineteen which is this year and so if one has capital gains and one puts those capital gains into a fund qualify opportunity fund by twelve thirty one of this year so twelve thirty one nineteen those dollars are eligible for a fifteen percent reduction because they have seven years until the end of twenty twenty six if you miss this year and you happen to do that on january second of twenty twenty twenty the sky does not fall however you're not eligible for the fifteen percent reduction. You're eligible for deferral. I benefit till twenty twenty six. You're also eligible bowl for a ten percent reduction because there's enough time five years to get to twenty twenty six and so if you did it in two thousand nineteen you'd be able to fifteen percent if you didn't in twenty twenty or twenty twenty one. You're eligible for ten percent reduction if you don't do it in either of those two years the skies involved <hes> again. You're just not eligible for as much deferral and you don't get any reduction but you're still eligible for if you stay in the zone for ten years and thereafter sell before the end of twenty forty seven you still get the benefit of the sales price appreciation <hes> not being sub federal capital-gains. Is that one of the most difficult things for people to understand about the program or what are the questions you get from people asking about the nuances of it so the questions are there is not one question <hes> i'm on the phone to three or four times a day with different people that look and want to engage in the conversation of what we're doing what we're talking about now and so they some of them are beginners. Some of them are intermediates and some of them are extremely events and so depending on where you're out on the space time continuum there or the continuing their questions are all different so some people wanna talk about businesses in what can what kind of business and when could i incorporate in. What state should i be incorporated other. People wanna talk about while. I want to build real estate and i own the property already. So how do i do that so that's a whole different set of related party rules. Are you willing to sell and then reinvest in the property. Still others wanna understand about refinancing or they have land or they won't have vacant buildings or what's this original use thing and so those the questions run the gamut so yesterday's question was i you know i want to build a distillery. Can i do that. Well one of the sin kanye <unk> question so one of the sin businesses. You can't sell liquor so there's like six in businesses or seven so it's no golf course no gambling no sell liquor nova sasha parlor no tanning salon <hes> a no horse racing those the sin businesses come from uh-huh and have their underpinning in the new markets tax credits world which is like ten fifteen years so somebody says well. I want to create a distillery so i said okay okay. Let's talk about that. Are you talking about the business or you're talking about the real estate either or both okay. Let's talk about the business so your business is going to be buying product walked putting it into a tank for all intents and purposes and creating something spirit or beer widower yes okay. You're going to sell it to a third party. Yes if we're gonna sell it to stores to sell okay so far so good. There's no you're not selling liquor for consumption by an individual that's kind of where they don't want the difference between a bar car and a manufacturing. Yes at a little bit but it's not clear and so it's kind of like well. Distribution versus sailed individual for drinking game. Okay well then fine. You're signed to a third party. Let's then slice the on your little thinner. What about if you're selling <unk>. Tasting room was a free or are. Are you giving away <unk> giving away or selling. Will i don't know okay. Let's assume you're selling well. Is that the sale of liquor that is what's prohibited it. What if that sale of liquor was a thousand dollars of value versus the sale of the product which is a million dollars. She had like you know point. Oh one percent of your value. Oh you was in the sale of liquor would that be enough and the i._r._s. Is unclear on this point. What if you sold food and liquor was an incidental part of it so to your point what it's a what's the difference between a restaurant and bar or bar and liquor packaging story in new jersey now with the microbreweries have people going for tastings hastings in there are specific rules about how many times a year they can do events right what you can give <unk> right right and so part of that has nothing to do with this but but there's a whole kind of lure around liquor distillery and brewery and kind of food and beverage intersection so different concerns are lobbying interested as to one being the other and if you're in the business of stealing you're not supposed to be in the business of selling food and so the bars were kind of taking a position there so that all blaze into this question of this person wants to spend a bunch of money create the distillery essentially sell product with party but you know as nance larry side business they would have a tasting to bring people in to learn about the thing and so i said look at that should work but it's not totally clear and again if that tasting and that on site consumption action and walkout business all the sun became material that becomes more problematic because then starts to look more like a liquor store which is bad versus knocks the story. That'd be fine. Take the same point for casino so gambling not okay so talk to a bunch of casinos. Couple of casinos are bunch couple of casinos. About what have you paid attention to this and the answer no not really because we're a sin business well. That's true but what if think about <hes> pick your favorite casino if you walk casinos not just gambling. There's a hotel piece. There's a recreational piece. There's pool. There's parking and it's a hotel and then then there's the gambling floor so if one was able to legally separate those pieces why wouldn't the opportunities zone investment applied to the pieces that were non gambling and the answer is they they will and so if you created legal separation through like a condominium structure and you put the gambling floor in one condominium unit and you put the other pieces in another unit or five those units that were non-gambling would be eligible for opportunities investment or would you have like casino parking deck l._l. Sake floor l._l._c. put to the side that would not be eligible for the dollar investments or four kind of the benefits but if you got capital investment in the other pieces would be eligible. Bread milososki is co head of the opportunity zones practice. The philadelphia based law firm of duane morris brad. We'll be back with the second part of this conversation about opportunity zones in next week's sierra news hour. We'll have a link to his contact information in in the show notes for this episode. You're listening to the c._r._a. News hour from st state broadcast news dot com toronto-based avis in young has been consistently named one of canada's best managed companies for the past eight years in a row and in two thousand eighteen. The firm achieved platinum status in the survey conducted by accounting firm deloitte. The company's experienced rapid growth over the past decade particularly in recent recent years. Mark rose chief executive officer of avis in young is joining us to talk about the company's culture growth strategy and his outlook for the sierra theory markets worldwide in eleven years with toronto based firm marks overseen growth from two hundred ninety real estate professionals in just eleven evan offices in canada to about five thousand professionals in one hundred twenty offices in twenty countries mark. Thanks for joining us on the sierra news hour my pleasure. Thanks for inviting me so tell us a little bit about what's going on with ableson young. You have been expanding rather dramatically over the past year or so <hes> what what is your approach and how do you think things are changing in the commercial real estate industry. You know in terms of what we're doing. It really has to do with an environment. That's changing a an industry. That's changing and not having the legacy platform <hes> to have to deal with. We have a ten year old company. <hes> that that it systems are all cloud based and people were brought on with the understanding that in a changing environment that we want to settle on a couple of core beliefs and this core beliefs are around culture honesty and integrity can't just be words they are the driving force of what what we do but what goes along with that is a collaboration and communication engaging diverse opinions carrying about inclusion rather than excluding opinion and so when you build a company of that sort it takes on a very different structure and and a very different set of rules for example. We have the n. a. r. which with no smirk intended. It's the no asshole rule and it's been a part of our thesis from the very beginning that service companies are here to service their clients and we cannot afford to have a a difficult personalities or individuals. I think about themselves before they think about their clients or the people who work with them and so <unk> indirect answer to your question because where we've seen so much change in the industry and how we serve as clients and because there is much much more coming rapid change it's being driven by maturity of the industry the changing of the guard in terms of owners real estate and folks that service them and obviously when artificial intelligence and certain technologies actually work israel things that that will change how we do business and you have to have the organization. That's prepared for it so for for us. Avis neon young growth is been quite methodical. You know the strategy was written and finished from two thousand seven two thousand eight eight two thousand eight. We took a document and we launched accompany. The davis company was the company that we started with but it was actually not a document i and what the document was was. Let's headquarter company outside the u._s. Because we want to demonstrate global nothing to do with you know any issues with the u._s. Just the competitive set are headquartered there and let's build something that that will hold a world series and actually invite the world and then we're going to do it with a private partnership and we're we're gonna structure the company that clients come first and i say this not because our competitors bad actually you know. They're quite good but the structures of these companies. If you're a public company you are beholden to public shareholders and you have a fiduciary legal responsibility to drive and solve the the needs of only one stakeholder and that is the public chapels and therefore you have to structure the company accordingly and it's only off the backs of top talent and good management teams that you expand past structure to deliver services. I will the davison young. We are not beholden to the hub shareholder. We are completely beholden to the clients and to the partners and the people who work here and so we have methodically gone out over the last ten years and rounded up individuals. I i in a canada then in the u._s. than in the u._k. Germany now expanding into to places like italy and ireland and spain and hong kong and moscow and austria came as part of the g._o._p. Worldwide network and so this eleven company. She's me eleven office canadian company <music> with two hundred ninety. Three people in forty million in revenue are now is now in one hundred twenty offices in twenty countries around the world old with five thousand people at over a billion dollars of revenue and there's much much more to go. I it's an incredible story of rapid rapid growth and i wonder as you've been on that journey how the company deals with that kind of growth on on such a short time frame. It's you know it's a couple of orders of magnitude bigger than it was when you started that eleven year journey yet it's one of the two thousand five times that size right now which is is pretty well. We're proud of it but everything is based on culture so for example. We just effectively acquired a company company in washington d._c. Called the ezra company and we worked it out that we took nine of the fifty employees -ployees and we didn't take the other forty one just because they didn't fit it end. It's not that they're bad people. They just didn't fit with what we were trying to do. And when you focus in on the human element and the type of people who you want around the table we saw the brand elevating top talent being vested in nine and we had no issues with saying the other forty one should probably go and do other things and that's not the first time that we've done this. We handpicked the individuals who who come in and at the moment i'm i'm looking between individuals teams and and companies who are engaged h with us right now we are actively reviewing over two billion dollars of run revenue of people who would like to join davis yeah that says an addition to what we have. That's enormous. I mean how do you. How do you ensure that. Everything remains consistent. It must take a long time to you. Integrate those those properties when people come aboard had. How do you keep that straight. You know perfect example the acquisition of g._p._a. T._v. a on february first of this year almost double the size of the company. So what did we do. I moved moved to london. I'm i'm here with the team and other parts of the management executive been here to make sure your that we are properly integrating the organization and making sure because it's never perfect but making sure that the needs of everyone from one culture altered to another culture are put together as best as we can and so you take you you just take the time and and and you focus in on how do we build the best company with this umbrella belief system of getting people to work together and collaborating and communicating indicating fully understanding that as you go country to country there are different subcultures so put the swat teams on from the strategy teams to the new teams to the specific merger integration teams we opened up a project management office and all of this work doc is being done humans talking to other humans and making very tough decisions when we need to you know to grow the organization administration and it's going really well and you'll continue to see this back in the early days if we opened up a city in the u._s. Partners from from canada and initial u._s. offices would come and integrate the team and then it's more more offices opened in the u._s. More u._s. offices offices were able to integrate teams and now with international expansion senior leadership integrates the you know the acquisitions. You can't just hold these pieces together and expect them to work. You need to make sure that you're talking to the individuals and and getting the belief system down after that everything works. Do you spend a an enormous amount of your time on the road. You said you you move to london to to help with with that integration to you when you're not you know sitting in the office four and integration of new member company company or partnership. Are you traveling. A lot will let you say this before the the acquisition earlier this year last year. I flew every other day so you see a lot of airports is an awful lot of airports but you know what what this business our clients a demand and quite frankly did they deserve being across the table and our people equally it should be with the leadership team not just hear them on the telephone and the first thing i do you know when i walk into any office i will walk around to every desk and say hi to every single person because people are not fungible you know and they're an integral part of the organization and want to make sure everybody understands that they are respected and they add to the performance of the organization. So what are the changes. You've seen in this eleven year journey <hes> in terms of what customers clients expect from john young and what you feel you. We need to deliver to be a distinctive and unique in the marketplace. You know what i think. How hauer executing is the difference. The change i think as an industry issue the change is clients value value over commodity and and it's you know it's an awkward thing to say what we do for a living is not going to vote but you're clearly take the commodity nature of what we do whether that is processing a transaction project management property management where there's a commodity modesty process at the core of what we're doing financing that's fine but it's going to be viewed in paid at that level what clients are looking for and what they're happy to pay for. This is always the case with any service vertical is value and so any company who isn't changing how they go about their business and focusing on the value added service delivery to the client they are missing now or they're doing that at their own peril and we're starting to see things that quite frankly are worrying me a little bit that we're using technology legit a crutch and quite frankly the technology that exists in our space in many other spaces especially. If you hear artificial intelligence virtual reality it's coming. It's going to be awesome doesn't really work today and and i think that we're throwing some things whether it's holograms whether we're talking about big data it is important summits here but some of its take three four five more years to work and all in all what innocent young is focused on is what we can deliver really well to the client and keep investing in the things is that we need that will work in the future. Have you found some cases where there was a technology solution quote unquote to some problem when you were trying to deal with for a client but your gut told you that there was a face to face need that was more important than just using the technology which might have been easier. Let me just approach that question just a tweak different. I believe that human beings using grape technology to either automate or mechanize process is what delivers value to clients and kind of the age old conversation <unk> service verticals clearly for the real estate industry our c._r._m. System so client relationship management the technology is where or the power is. It's the behavior in the usage of the technology while it's no different <unk> as to how servicing clients right now and the human beings the top talent the value added provider who employs technology to deliver service solution that that is valuable that is what clients are looking for today and unfortunately there are some pieces of technology that have come out and they're already four or five <hes> <hes> layers back in terms of their ability the to really deliver <hes> an and clients and door signed up to something that is already a product or a piece of technology. That's you know that's much better and so that there is a you know a natural tension attention at the moment in terms of what's going to be here today. Which is the best in class and what's coming and what's coming. I think is awesome but you just have to wait a few more years for it because it's not quite here yet artificial intelligence you know if you talk to to medical providers. They know it's the future. They know that they're going to be able to diagnose. Maybe even had surgery implemented through the use of artificial intelligence problem is you can't use it. If it doesn't work. You're dealing with a person's life a little different friend. We're not dealing with anybody's life but we're dealing with people's a financial being. There are pieces of technology that were better than others right now. The great news is it's all what are the markets that you see as the strongest ones in terms of opportunities for avon young and where are you seeing weakness in keeping an eye on things to make sure that you're positioned if the markets turn. We are looking at the u._s. Of course is you know. It's still a dominant player in the real estate services field the u._k. Germany france china obviously obviously in hong kong starts but japan india <hes> singapore but all of a sudden south korea is is a dominant force capital flows that are moving out of south korea all across the globe clearly into the u._s. Clearly into canada clearly into the u._k. Is now coming from places like south korea. So where are you look at the engines of growth where you have population poppulation where you have the headquarters of businesses. These are the places that real estate thrives you know a little known fact act is you look at canada with all the money and it is an amazing place. We are so proud to be a canadian company and we proudly sadly show the maple leaf everywhere but you do also have to understand that all office space in the entire country fits in new york so it's always a matter a relative size it are those capital flows that are coming from south korea because of oportunities that those companies see elsewhere in the world or is it is it because of concerns over stability in that region both and you you know you know. We saw this with russia at some point. We saw this with china at some point. We've seen this with the south american countries. It's both but you're <music> absolutely seeing some pretty mature astute investors who see opportunity in north america and they are putting their money tour when you are keeping your eye on things that might <hes> be indicators of the market market going south in some geographic area or in some asset class of what are the things that you particularly liked to look at. You know what you have to go. Oh <unk> asset by asset class by class very very differently okay so let's talk product types if you didn't have g._d._p. Growth or g._d._p. Stability i'd worry about all of them from office perspective. If you didn't see employment growth can you. You'd be a little worried but i'm going to pause for a second and just say i think it's also overlooked that you're talking about a planet of seven billion people. Most sources will tell you in the next fifty years. This is going to be a planet of ten billion people. Now you would expect that the that the population growth to be in some of the countries that housed largest populations in the first place make some sense a when you add three billion people some of what's being thrown around from some of the major sources of information say for example that in order to put three billion people more on this planet that you have to start building a million in square feet of housing per day every day so i think that there's a macro trend and specifically. We are bullish on the acquisition that we've made a g._p._a. Because we think that everyone is looking at brexit as a long term problem when we know that brexit is a problem but as a short term problem. We've launched this company into the teeth of the middle of two thousand eight. The world was falling falling apart. That's exactly when we wanted to merge this company and start to grow and so do the downside in in our industry. Our interest rates skyrocketing well. It looked like they were going to but they're not they're going down. There's <music> g._d._p. Stability employment growth or stability things are actually pretty good out there now if you're a retailer your suffering from the amazon effect and we had too much retail property in the u._s. Canada has less of a problem with that the u._k. Has slightly less problem with that but we have macro trends that very simply tell you where you should worry and then you have more of the micro influences like a change in logistics and distribution that has changed kind of the retail community but that also gave birth earth to a white hot industrial sector people are worried about shrinking space in office and all of a sudden the flex office providers riders stepped up so there's more to come here. You know in terms of dissecting the data in front of you. I am extremely extremely bullish. I would love for there to be a correction in terms of pricing because i don't think it's a stable for cap rates as low as they are but with that said i've never seen in my thirty five years. I have never seen the amount of capital out there to be put to work work in debt and equity. I've never seen this amount and that bodes really really well for our industry. So you said earlier that you have a pipeline of. I think he said two billion dollars worth of business that you're looking at bringing into the company from other companies <hes> in acquisitions what areas of the world are are you looking to expand to next well. You know it's obvious if you take a look eh our platform we have affiliates in certain countries that that we want to either acquire or acquire or acquire companies in those countries india is a place that we wanna open up offices. Yes <hes> <hes>. Australia is the place that we want to open up offices. We still haven't quite filled in a seattle for ourselves. Were pretty you. You know we're pretty good you know in canada. Were one of the top three there are. We've had five offices open germany. You'll see something out of a soon for the netherlands. The runs but again going back to it. If you think of a major market where real estate inventory and decision makers sit those are the geographies that we want to be in and then you look at what type of property is the focus whether it's going to be retail industrial office multifamily our hospitality and we will put the combination of what we call the two by five by five the two clients sets owners owners knock you pires the five service lines that each of them need and are five core product types and those are the places that that we look to invest more rose is chief executive officer of avis in young the full service global commercial real estate company based in toronto. Thank you you for being with us on the podcast today my absolute pleasure. Thanks for making it available. We'll be back in a minute. This is rabbi richard address join us for our podcast series from jewish sacred aging entitled seekers of meeting will explore some of the issues and events that impact ourselves our families and our jewish world eldest large in light of the current revolution in eighty the secrets of meaning podcast airs every friday morning at eight a._m. At jewish sacred aging dot com take today. You can't wait for the media to cover your company. You have to to be the media. Take advantage of the power of audio and video. It's the best way to showcase your expertise to perspective customers. Let the lubec in media accompanies handle the technical side. We're award winning audio and video producers. We can help you produce podcasts video programs remotely or in our fully equipped studio uh-huh in cherry hill visit being the media dot com for more information investors bank bank headquartered in short hills. New jersey is a full service community bank serving customers. Since one thousand nine hundred twenty six investors recently originated eleven eleven larger commercial real estate financing transactions valued at about one hundred and seventy one million dollars. The commercial mortgage loans were primarily used to refinance. It's existing credits on multifamily housing complexes office structures and cooperative apartment buildings the banks c._r._a. Lenders also negotiated construction loans owns and completed various lending contracts in the one million to three million dollar range. The bank takes a balance sheet lending approach to its commercial real estate portfolio eleo that means the bank keeps the loans in house and works closely with its borrower customer on keeping the loans performing properly the banks commercial lending portfolio also also includes more than two point six billion dollars in commercial and industrial loans in recent years. The bank is diversified portfolio to include more loans to owners of commercial mersal office buildings industrial warehouses distribution facilities and retail shopping malls as well as healthcare facilities joining us to talk about investors approaches coaches richard spangler executive vice president and chief lending officer of investors bank under rich spangler leadership investors commercial real estate portfolio has grown from <hes> <hes> less than eighty million dollars in two thousand five to more than thirteen billion dollars at the end of june rich. Thanks for joining us on the sierra news our good afternoon senate steve so you folks at investors bank. <hes> just booked eleven larger <hes> commercial real estate finance transactions about one hundred seventy one million dollars. You're growing your c._r._e. Portfolio <hes> what's the current value and what's making grow currently early on a twenty two billion dollar loan portfolio. We've got about fourteen billion of it out in c._r._a. And that's comprised of just under nine billion dollars offers of multifamily and just under five billion dollars of traditional commercial real estate <hes> we're seeing all different sectors of the marketplace so there's really not a concentration in any one area and it's been something we've been emphasizing here at the bank since two thousand and six two thousand seven. What are some of the factors that are driving the growth. <hes> is it any particular economic trend or is it the way developers are working. What's going on overall. It's been a very active market. It's been a busy market. It's been a great run post-recession. <hes> we decided i did in two thousand and nine. We really wanted to be in the multifamily space. We got heavy into multifamily is two thousand ten two thousand eleven. We've diversified a little the last couple of years i would say seventeen eighteen and now in nineteen. We've got a bigger emphasis on the commercial side just due to our concentration of multifamily so we're would probably doing more in the industrial office type sector than we are in the multi <hes> and it's it's an overall asset class. That is very busy right now. With the exception of new york multi which of course student in new rent regulations is in somewhat of a state of flux. How much of a role is the interest in the urban core. We're playing in the portfolio building that you're seeing are are you folks. Working in the urban settings. Were a lot of the multifamily. Luxury development is is going on like jersey city and those places yeah. That's what we're seeing. Most of. It is all transit based most of the multifamily growth whether it's new construction whether it's rehab renovation it seems to be centered around those urban centers around the transit village concept type so it's whether it's off of you know one rail line or another. There always seems to be a connection to some type of mass transit. You've indicated that investors. Bank is a balance sheet lender. Can you explain the advantages of a a balance sheet lender versus competitors who might be doing structured deals sure on the balance sheet side. You know basically what we commit to what we term. Term sheet or quote is basically going into our portfolio. It allows us greater latitude greater decision-making <hes> as far as things that are going to happen prior to closing as well was after closing a lot of other lenders are not balance-sheet they're selling off the product and the secondary market post closing and there's somewhat limited by third parties business to what they can promise what they can do and what they can't do so we're finding that because it's going on our balance sheet <hes> we have greater interaction with the borrower we to make more of our own decisions <hes> we we participate in a lot of different asset classes we offer a lot of different loan types and those are all things at the bar was really seemed to like. There's some value to stay in close to the borrower and being actively involved in a relationship with them yeah well we some. Most of our loan transactions are not standalone single transactions. We alone in for approval. You know daily and weekly basis when we look at it most. Everyone is a repeat customer for five six loans here. <hes> we offer a lot of different types of loans. We do five seven ten fifteen year loans. We do recourse non-recourse. Burn off recourse. We do owner-occupied keep hide. We do investment you know we do. The owners are residential homes for people when they buy them so we kind of cover the full gamut of different types of loans many of those other blenders specialize in one area you know c._b._s. Shop will be a great shop for you know a very high leveraged but a non-recourse type of transaction so when a borrower needs recourse. They can't go that route. You know life company. Maybe something entirely different with a very low leverage low l._t._v. but a great interest rate. We're kind of in in between you know we do. Construction loans do non-recourse. You know aaa type properties. We do bridge loans on transitions so we offer a full gamut gamut which you know with the real estate community. I think they like knowing that they can go back to the same institution. No matter what the asset type is so as you look ahead over the third and fourth quarter. What are you forecasting in terms of sierra loan production all right. I'll forecast that if you can forecast for me steve where the long bond is going to them looking at it today with a one fifty nine right to list sure where yeah i'm not sure any of it is going you know unfortunately you know we we lend off off of a long-term rate and we raise deposits off of short-term rate so it's a very challenging market. It's been challenging you know the past few months and even the past couple of weeks of gotten more challenging you know our cost of funds not dropping as fast as our <hes> cost of loans and so the interest rates on loans have more pressure on them than interest rates on deposits house. It's and you know there is an implied floor that we can only take a loan down so far so that is our biggest challenge right now. <hes> is actually being able to price loans competitive competitive relative to our deposits so depending on how that shakes out for the rest of the year that that is my biggest concern. Life companies do not offer deposits. They have a different source of funding and <hes> when rates go up. We tend to be more competitive. Instantaneous rate shocks. A lot of other people move their cost the money very quickly they moved their interest rates very quickly so when a quick quick upmarket we have a big advantage over the same token in a quick downmarket. You know we don't replace cds or money markets. You know instantaneously. You have a c._d. With us that's a six months today that rates not changing for six months. Investors bank is <hes> a regional bank twenty seven billion in assets or thereabouts outside. How do you compete with the larger banks that are very active in the new jersey new york metro market <hes> what is there is his secret sauce that you guys use <hes> that makes you different once again. I'd say it's because we cover so many different facets. You know once again a lot of other banks. Thanks i have different departments different areas. Maybe they only do certain types of loans because we do a broad base of a lot of different types of loans <hes>. I think that's something that gets us out there in front of everyone. I think the the fact that we're located here new jersey new york a couple of headquarters right here in short hills and new york city access to people is very good that we say that the people you know you're much much quicker. You're going to get our president and our c._e._o. At their for visit then you're gonna you know one of the large orange institutional banks that are nationwide rich spangler is the executive vice president and chief lending officer of investors bank which is headquartered in short hills is new jersey rich. Thanks for taking the time to be with us on the podcast today and that'll do it for for this. Week's addition of the sierra news hour don't forget to check out our audience survey by clicking on the purple. Take the survey button below the podcast player on the show page for this episode and please consider becoming financial supporter of our podcast by clicking the patrie on but if you have comments about our program or a story idea that you'd like to see us discover send me an email addresses steve at st broadcast news dot com you can also leave us an audio comment by using the voicemail feature on the right side it bar of our website at st broadcast news dot com. We take the show every week in our studios in cherry hill new jersey for everyone at the c. r. e. news news hour and state broadcast news. This is steve lubeck. Thanks for listening and we'll see you out there on the net. Take good care.