CRE News Hour 7/26/2019
From the business desk at st broadcast news this is the c. arina news hour. I'm steve lubeck. It's friday july twenty sixth twenty nineteen in this week's edition of the sierra theory news hour. We'll go very deep into the tax implications of the federal opportunities zone program with tax lawyer michael sanders of blank rome. We'll talk to some chicago brokers about how east coast money is making its way into projects in the windy city. Learn about an israeli artificial intelligence companies these efforts to help the c._r._o. Industry analyze big data and kevin havens of design and delivery firm white and company will tell us about how joliet illinois redeveloped its downtown with an unusual project as the anchor a new courthouse and legal complex will be back with this week's news and headlines right after do these messages turn your podcasting passion into profits profits the book the business of podcasting describes the business side of podcasting including how to become a professional podcast. You'll learn about positioning in your clients expertise through podcasting to plus the best business models how to find clients and much more visit the business of podcasting dot com <music> today. You can't wait for the media to cover your company. You have to be the media. Take take advantage of the power of audio and video. It's the best way to showcase your expertise to prospective customers. Let the lubec in media companies handle the technical side god. We're award winning audio and video producers. We can help you produced podcasts and video programs remotely or in our fully equipped studio in cherry hill visit visit being the media dot com for more information and now let's get started with our are roundup of the stories making news and commercial real estate this week beauty company kiss products is purchase of four hundred seventy thousand square foot distribution russian building for sixty six million dollars from the rockefeller group in its joint venture partner p. c. c. p. It's at the rockefeller group logistic center in piscataway scott away new jersey the global beauty company will occupy the property this summer and kiss expect it will create more than two hundred fifty jobs in piscataway written has realty advisors visors arranged the twenty one point four million dollars sale of a student housing portfolio serving the students of lehigh university in bethlehem pennsylvania. The portfolio includes includes forty four properties totaling two hundred nineteen bedrooms and yes. They're all legally zoned and approved by the city of bethlehem. Lehigh university's had major expansions is planned for the next ten years including increasing enrollment and opening a college of health eastern union arranged financing for eighteen million dollars sale of a six hundred thousand square-foot magna international portfolio. It's a group of four automobile parts manufacturing facilities in multiple locations in iowa eastern union and delivered loans facilitating the sale of the properties by toronto based granite read america to bow pair real estate of elmsford new york. The buyer was facing the imminent expiration. One of capital gains tax benefits associated with a section ten thirty one exchange and the eastern union folks arranged the approval within a fast three and a half week period jaylo. L. closed a recent sale. It was nineteen shape and road of four building core plus light industrial portfolio totalling about four hundred twenty nine thousand square feet in the morris county community of montville township new jersey jail. L. marketed the property on behalf of a joint venture of campbell real estate partners and advanced realty not investors a partnership of coen asset management and intercontinental real estate corp purchased the property. I washington realty acquired five properties totaling eight hundred thousand square feet in the washington d._c. Metro area the purchase includes bradley shopping centre shops at fox chase gateway overlook only village center and and wheaton park shopping centre. Lincoln property company says it's finalized entitlements and special permitting for a new life sciences building three hundred third avenue. That's planned for route. One twenty eight in waltham massachusetts the projects featuring flexible and customized office and laboratory space. It's expected to be completed in twenty twenty one. It'll it'll have four stories of laboratory space and a public private partnership between real estate developer rb age group and real estate investment firm paramount assets with the city. The of newark are bringing mural arts to newark with a project called four corners public arts the initiatives first phase taking place. This full will use murals to bring to life more than twenty facades and surfaces in the city's downtown district. A request for mural proposals is open to the public through september third artists artists are invited to propose concept centered around the histories of these activation sites. You can get more details at four corner. Public arts dot o._r._g. <music> the city of joliet illinois is staking its downtown redevelopment plans not on retail condominiums or office projects. There's taking it on a courthouse. Chicago-based white in companies designed an open complex for for a new courthouse that includes thirty eight modern courtrooms and a ten story office tower enclosing a public space. The city hopes will be the anchor for re-energizing sizing the downtown business district. The white company courthouse designed has been recognized by the american institute of architects academy of architecture for justice. It's one of fifteen recipients nationally of the two thousand eighteen justice facilities review awards and only one of four to win a citation the highest honor to get a sense of what's is going on with the courthouse in joliet. We talked with kevin havens. Who's the executive vice. President and director of design at white and company about the new courthouse has project joliet illinois which doesn't get a whole lot of attention right. There's a new development there. It's costing a lot of money but it's not a live work play way. It's a coordinator. Tell us a little bit about how that happened. Well yeah. This was an exciting opportunity. <hes> the <hes> how many board lord of real county which resides juliet made a big decision and that was to not just provide new facilities for the the county court <hes> establishment but actually have it as an opportunity we think how development in downtown joliet my take place and what's kind of radical about that is typically <hes> it's commercial type projects or new businesses or residences that are kind of the <hes> <hes> the lead in converting old tire downtown's but in this case they actually had the vision that a civic building <hes> um my down payment if you will on changing of the entire urban experience so that was a great challenge should take on as we began. The project talk local little bit about the building. It's a modern courtrooms a ten story tower and a lot of public space <hes> how how is that going to help in in in the downtown area well <hes> it precepts the project was replacing an adjacent old courthouse from eighteen sixties this building sadly it was kind of <hes> you know. The poster child of everything gone wrong building designed its peak. It has kind of a punitive venture about it's <hes> there's really nothing transparent about the you know action of justice <hes> the new courthouse we asked by the judiciary duleep league's exactly the opposite. They wanted to have a very transparent expression <hes> that justice is equal access to it. It's on display and to make it a very friendly biting place rather than a very cold and off putting building so this building actually <hes> has been has been developed vertically article ten stories <hes> it's <hes> <hes> nearly three hundred seventy thousand square feet with thirty four rooms and what it does is it actually cre- green the public square <hes> in in front of the building kind of sheltered l shaped configuration of the building design and this is a square there really it's open for anyone isn't it so heavily landscaped with trees benches <hes> it's beautifully luminated and wants to be an attractor actor for people not something you want to stay away from whether we have porn business or not <hes> the urban square something that they wanted people to be attracted to and therefore for being the tractor for businesses restaurants shops to start develop kind of like <hes> you know radiating from the courthouse property <hes> the main lobby to the building is entirely sheets glasses two stories and it's kind of counterintuitive for secure building which actually it is very secure opera enjoy roy <hes> you can see inside and <hes> waiting there. You're waiting for an elevator up to a floor there as perspective juror lychee the jury assembly area or business with the court clerk. All these things are very open and an aunt display if you will nothing's really hidden behind closed doors. Even the vertical floors where the courts are staff <hes> the public waiting area enjoys a beautiful panorama looking looking north into downtown. You know you got to where they can relax and take a breather decompress with it before an xy the courthouse <hes> so this is a different way of thinking about about justice and it was very much based on the community perception of what this new place would be one and so <hes> how is it going <hes> i is the building up or when you project completion well it's in profit topped out at ten stories now under starting to sheet glass curtain wall and stone materials and it'll be opened <hes> at the end of twenty twenty open for business. It's projected rejected that they'll have over three thousand visitors per day. <hes> it's a lot but there's a lot of courtrooms of a lot of other agency business is to be done there with public defenders states attorneys and mention the county court clerk <hes> so there's a lot of all the agencies associated with the court administration administration for turnout scattered around downtown show we'll coalesce imbuing this singular structure and generates a lot of efficiency it does indeed and it also integrates a lot of potential business outside of the courthouse. These people need to eat <hes> they need transportation tation <hes> they might need access <hes> other offices for a private attorney somewhere in the area so it really becomes kind of injection life you've at least this is the vision of the county board into the downtown area so it's quite exciting. It's gonna ask you about <hes>. The the impact on local retail all is <hes> downtown joliet. <hes> thriving or is it. Has it been struggling economically. It's been sputtering. There's been some some attempts is to <hes> to get some things going <hes> they. They have a relatively new public library. That's been joliet. Junior college has actually open the culinary institute in downtown areas so there's kind of some small. It's you samples of the things that have been happening downtown to start to to spark <hes> of that return of retail and restaurant tourist. The courthouse project is clearly the biggest and we're hoping that it could be just enough to get things going wait and company was actually involved with an unrelated project. It's about two blocks away from the courthouse that actually actually it's an idiot affect on the downtown and that was an expansion to the old stork joliet central high school <hes> we put on a few years ago kgo eight <hes> the new students <hes> activity center and <hes> a component of that project was an atrium that connected the old historic landmark mark building to a new dining facility and kind of the unexpected result of that is that the space now is being rented almost every weekend by one community <hes> group after another told certain events and it's a splendid thing. A lot of people enjoy yet go to high school there. They really don't move away staying with them to to think about pedal. High school is actually being a magnet for their continued life. After after <hes> after congratulations really marvelous so these ingredients do in a very stealthy way i think the things that traditional mission of development of of of of retail and housing <hes> typically doesn't announce that these cultural institutions be ah education or in this case civic courthouse are also doing from a completely different direction. It's exciting to see that <hes> that <hes> that <music> synergy come together you know when the courthouse was completed others vision and these are not confirmed plans to the hope is that <hes> more consolidation consolidation will take place so there might be a new county governments that are <hes> that might even combine <hes> with the city government which right now are two different entities <hes> to actually take the place adjacent to the <hes> to the new courthouse by demolishing little courthouse and so it's fun to see at least the intent or the vision to not stop when this is done but to keep it rolling and to <hes> to keep injecting <hes> this kind of energy into the downtown area kevin havens is the executive vice president and director of design for white and company. He joined us from his office in chicago ago kevin. Thanks very much for taking the time to chat with us. Thank you so much pleasure. You're listening to the c._r._a. News hour from from state broadcast news dot com opportunity zone investments continued to be one of the most sought after sure topics in the commercial real estate world for information and you're about to get a masters level course in some of the tax issues surrounding opportunities zones from michael sanders. Michael is blank rome's lead partner in the firm's washington d._c. Office tax group he focuses focuses practice in the areas of taxation offering particular knowledge in matters affecting partnerships limited liability companies s. corporations real real estate and estate planning michaels a frequent speaker on opportunity fund legislation. He advises fund investors and real estate companies on the program requirements requirements and in this segment he provides some up-to-date guidance on some of the tax implications for partnerships planning to invest in opportunities zones michael. You are the lead partner for blank rome's tax group in the washington office and from your perspective there are a number of open tax issues with respect respect opportunity zones talk a little bit about what these are and what you think needs to be done to <hes> to fix these issues. <hes> thank you very much much. <hes> there are about four or five six really important issues <hes> that i wanna just touch on i <hes> <hes> the question of eligible gains <hes> and the regulations say eligible gains generally are capital game which is long long and short term gain short-term is pretty advantageous because otherwise it'd be taxable as ordinary income from actual ordine sailors change or any other gain that is required to be included in the taxpayers computation of capitol gain so you need to look at the k. one she received from the partnership and one of the items listed is unreal captured twelve fifty gain <hes> which relates to depreciation recapture and that is not ordinary income should not be ordinary ordinary income although it's not clear under the regulations on recaptured twelve fifteen is taxed at twenty five percent maximum capital gain in rate <hes> and so i would take a position that is ineligible game for purposes of taking advantage of how's the opportunities zone fund <hes> provision sort of related to that is these section twelve thirty one issue. Uh netting is required under the second trench netting that is of gains and losses che's and the determination of whether you have a net twelve thirty one gain is on the last day of the taxable year here so in effect it puts the taxpayer in the penalty box <hes> humorous reference <hes> wish because you have to wait till the end of the year to be able to take advantage of the opportunities zone provisions josh and this appears to apply to the partners individually but not at the partnership level so a determination maybe made on the last day as a taxable year which would trigger not hundred navy day period to invest <hes> and by the way that may impact on the seven year holding period in twenty nineteen because you're not going to be able unless you do it on december thirty first <hes> <hes> to take advantage of that seven year period of deferral <hes>. There's no optionality -ality here. You don't have a choice so let's say you <hes> <hes> major sale at the partnership level of a shopping center in april april of this year so you would like to reinvest but according to the regulations hundred eighty days won't start start you won't you'll have to wait until the netting can take place <hes> have to receive all your k- ones from other partnerships as well as your personal twelve thirty one games and you might not receive them until next april or may so so reinvestment maybe stalled <hes> which is not a good result and i would expect treasury to focus kosonen this at some point the thirty issue <hes> one that we need to look at today is the inconsistent treatment of gain after ten year period because it affects how we draft our documents <hes> the <hes> the real benefit benefit to an equity investor is when they sell their qualified opportunity fund interest directly so investor investor a. q. o f <hes> as taxes a partnership for example <hes> it's if he makes the same market value election upon the sale of the cool f- interest after ten years the effect will be to eliminate nate any gain upon the investors sailors change of a qualifying investment regardless of whether the investors used i <hes> the losses that had been generated due to depreciation and whether the investor receives leverage distributions from the during that ten year period that's great result but under these regulations second trench if the cure f- sells the assets <hes> then in determining <hes> as to which challengeable sheriff capital gain it has to look at schedule k one <hes> make sure that the disposition occurs after after the investor it's ten year holding period expires. This election will then only apply to capital gains allocated and not to amounts characterized as ordinary income such as depreciation recapture of twelve forty five assets fits <hes> so there's a difference and finally it appears that this election will only apply to gain from dispositions of assets by the q. o. f. itself and won't technically apply to gains recognized is by a q. Oh be qualified opportunities on business and it's unclear as to whether this is intentional but today that's the result another problem <hes> i also would like to take a minute or two to talk about planning purposes they comparison of ken thirty one <hes> treatment to opportunities zone tax benefits <hes> qualified opportunities zone property investments are not restricted to real estate. They're available to other businesses hedge funds for example. What ten thirty one <hes> is so limited. Pretend thirty one deferral can be permanent 'cause as a basis step up at the death while opportunities zones allow permanent step up that need to die if hell for ten years so there's a different sprint twist here <hes> there's also the opportunities zone option available for a busted ten thirty one transaction which itself would require an hour of discussion and opportunity zones may do a ten thirty one roll all over itself during the ten year period but the technical substantial improvement test would likely need to be satisfied based upon the property purchased <hes> why don't i take a few minutes and talk about the advantages of of leasing properties which ultimately benefit can benefit related parties. <hes> the least tangible property must be acquired under release after seven thirty. I twenty seven teens so it's a new lease. The lease is property does not need to meet that original use test or substantial improvement requirements but must be a market rate lease <hes> as related party <hes> which canal be <hes> treated favourably under these rules. It's a big set. No prepayments are allowed for more than twelve month period also <hes>. It's important to examine the terms of the lease. It's a term of the lease is too long. In that exceeds the useful life of the building it may be considered a purchase under the tax rules thereby triggering this substantial improvement requirement in order to be a curios ep or treaters sale between related parties and fail uh as to those assets be the an issue under these seventy percent test <hes> substantial test <hes> but keep in mind fine the longer the term of the lease the greater the value of the property which we focus on the potential appreciation which would be excluded from tax after the ten year hold anyhow <hes> it's important that improvements made by the seles see to the least tangible property should satisfy the original us test be be favorable purposes seventy percent test <hes> the improvements will revert to the feeless or at the end of the lease term <hes> active business talk about the triple net lease in land banking limitation <hes> the regulations provide that leasing real property used attractive is is treated as the act of conduct of a traitor your business but stipulate that it merely entering into where triple net lease is not considered an active trader business finishes potentially a problem because many industrial leases are triple net so the the you need leasing leasing activity that rises above what is merely a triple net lease you need advertising management operation <hes> in the new market tax credit area there there are favorable rules on generating gross income within three years but we don't have that here so <hes> you know you're going to meaningfully participate as some good language in the go zone on area notice two thousand six this seventy seven which should be helpful here <hes> as to the treatment of unimproved vacant land. Let me just say <hes> the the timing generally <hes> regarding original us turn some win. Depreciation begins when i placed in service <hes> one of the concerns in the regulations is requires an asset by acid determination as to <hes> <hes> substantial improvement not on an aggregate basis disappoint which <hes> can create problems but there is a favorable <hes> language that <hes> properties unused for an interrupted period say five years we'll be considered original us when acquired by the q._o._s. would be which is really favorable but but you gotta focus on land banking because that's a potential abuse i mean they don't want <hes> the basically property to be acquired and accumulated and held <hes> for development down the road <hes> so if the land is acquired with the expectation intention or view you not to improve by more than an insubstantial amount within thirty months there'll be a problem and they have not defined insubstantial stanchov another area i want to touch on is the <hes> kilos e b advantages of the two tier structure and taking advantage of the <hes> working capital safe harbor <hes> it it may be advantageous the cure west instead of investing in property itself to invest through a second tier kua z. He be subsidiary which may not be disregarded today and in that regard they can get the benefit of sixty fifty three percent qualifying acid rule as compared to the ninety percent cure us here and they it can take advantage of the thirty one month safe harbor which is a very attractive and now it's been expanded under these regulations sion's to include the development of trade or business in a qualified opportunity zone as well as the acquisition construction andrew into a substantial improvement of tangible property. It'll cover payroll inventory occupancy and so on secondly early exceeding thirty one month rule does not violate safe harbor if the delays attributable to waiting for government action shen <hes> which is not completed within the thirty one month period and the regulations also provide clarity a business may benefit for multiple overlapping with sequential applications of the working capital safe harbor so those are key issues that i see and i just wanted to summarize them for you michael what <hes> what's your sense about the <hes> open tax issues. Are they going to be resolved by a treasury or the i._r._s. Or how is that. How does that mechanism work. And what do you think think the outcome is going to be well. I don't expect that we're gonna see <hes> a third trunch of regulations. I think treasury has already pretty indicated that and it may be that after hearings and the receipt of comments that they finalize all of them at the same time. Hopefully they'll clean up out of these issues interesting. It's interesting to me that every time <hes> <hes> they publish <hes> what we see a more issues raised and as i've said a number of time it's at these he's tax conferences. The the brighter the more knowledgeable the tax lawyer is the more issues <hes> they they you see and create <hes> and so that's potentially a problem for the let's say the developer the businessman and <hes> the private equity fund they want answers so they can make some decisions and invest and it's slowing down because of the very issue so <hes> what what's the best advice that you're giving your clients about positioning themselves to to be on the right side of the regulations as they exist today. What i'm what i'm advising clients is. You can't wait for absolute clarity. <hes> i feel that if you're in good faith and and it will be anti-abuse royals at some point put if you're in good faith and <hes> don't try to game the system you can move so it <hes> and don't wait because it's critical to acquire the properties <hes> or <music> sensually moves the business sooner rather than later you wanna take advantage of those attractive properties located has resonated zones so we're gonna wait for perfection. You may never get there because the competition is going to be true so you got to be willing to step a poet and and also in advantage this point to do it in twenty nineteen to get the full seven year deferral michael sanders offers is the partner in charge of the taxation group at blank rome's blow offices in washington d._c. Michael thanks for taking the time thank you. We'll be back in a minute. Show on this is rabbi. Richard address join us for our podcast series from jewish sacred aging entitled seekers of of meeting will explore some of the issues in events that impact ourselves our families and our jewish world at large in light of the current revolution in aging the secrets of meaning podcast last airs every friday morning at eight a._m. At jewish sacred aging dot com <music> today. You can't wait for the media to cover your company. You have to be the media. Take advantage of the power of audio and video. It's it's the best way to showcase your expertise to perspective customers. Let the lubec in media companies handle the technical side. We're award winning audio and video producers. There's we can help you produce podcasts video programs remotely or in our fully equipped studio in cherry hill visit being the media dot com for more information u._s. Apartment building sales reached a record high last year according to a recent report word from jones lang lasalle in chicago. The properties trading hands aren't just located downtown. Some of the hottest markets for multifamily sales are south side neighborhoods like washington park south shore and hyde park according to chicago based in terror realty driving. Some of the demand is what enteric enteric goals coastal cash. That's east coast investors who are snapping up value add properties with cap rates that are in some cases double what they'd find in the new york <unk> area. We wanted to find out more about this so we got on the phone with jon. Morgan and david goss the co founders in partners in in tara to talk about what's going on in chicago in terms of the east coast investment so one of the things that you're seeing <hes> seems to be this phenomenon. You're calling coastal cash <hes> money from east coast investors who were looking at value add properties in chicago that offer them. Maybe a better opportunity than what they might find in the new york area. Tell us a little bit about what's going on the phenomenon. We've kind of seen over the last twenty four months is really been a change in our local local markets where most of the local buyers have been getting priced out whether you know east coast west coast money frankly out of the country <hes> money and invest awesome started flooding the chicago market and we've seen it kind of across all geographic locations in and around our marketplace so i would say in the last eighteen months months <hes> specifically i mean we have had competitive party's bidding against each other all frankly out of state <hes> investors that had have been previously transacted in the chicago land area and you know i think we don't see that continuing to slow anytime soon. It's really just about chasing yield up or otherwise the rising able to achieve in their current marketplace. So what are we talking about the indications. Are you talking about cap rates that are double what they might get new york correct. Yeah i mean that's naturally ben heck. I mean essentially what we continue to hear from them is <hes> you know the economics and the demographics the markets within all brooklyn bronx you know all of those markets or similar demographics and economics <hes> within the chicago land area. It's truly that they're buying at the cafes uh-huh generally above what they can cheat on in their local markets today so it's really driven cash from the lenders and from about indoor mark art what are some of the factors that make chicago first of all attractive to these investors besides the cap rates. It's an and secondly <hes>. What are some of the things that you're telling people to look for when they go into this market. I think one of the one of the big drivers has been you know. There's event some early on money again. Coming in from new york specifically mad they start chatting they start talking about what it's like to operate an apartment building no different than what they experienced ends ten fifteen years ago in their marketplace so as they start to hear that from other local about certain within new york based starts to chase and we have <hes> an time when you're selling and we had to new york family that kinda cross that one party saw that the other who ran across each other's house in their own marketplace they've started to wanna you know immediately. Try to get their offer and i try to lock down the properties and i think a lot of that has just it's been. It's been driven by their price out of their markets. You know there's just it's gotten so competitive within their as that's there is no necessary return. They're only taming appreciation in that market whereas here you know you can still achieve some cash flow and you got appreciation in our marketplace though so i think those two lineup to where investors are looking to come here rather than solely by an an appreciation basis within their marketplace today one of the things we're seeing a lot of there's almost a herd mentality taliban and you know pushed a little bit buy why proper marketing but like jon said the last building. We were selling two hundred and thirty a unit. We had several families from new york and they you know it's just like anything else. One hair is it and they all start following so it's kind of like a train and and you know we we articulate listening that john was talking about with san francisco buyer. We have several new york buyers. They just kinda follow each other and isreaeli israeli. We had an israeli right and i think one of the things you would ask john like what were one of the things that is bringing people to chicago his is i mean you hear all the negative stuff on the news but <hes> it's on the secondary because everybody that's in every city but one thing chicago has a lot of other cities don't have it the huge migration of younger people in <hes> we are losing population of older people but they're professional national young people with a lot of money. There's so many people moving in and whether it's just it turns people so the new people are coming in for the credit day. Okay stop in center city a push everybody else so there's just an increase the man arben all about the city. It's it's very similar to what we saw within the last last year new york people pushing further west into new jersey and now it seems like they're pushing really far west with what you're saying yeah yeah. The city is just getting filled and filled. <hes> you know the suburbs may be suffering somewhat but <hes> you know everybody just shifts over as a you know a constant stream of gentrification moving <hes> so everything but but everything even the bottom donovan being lifted up so that we don't really have as many like this seriously distress neighborhoods as we used to because there's a lot of money going in there and pick them up so especially see a benefit to video as a home yeah and again most of the neighborhoods where we're seeing this money come into their just outside of the central business attorney so i mean the reality of it you know you're coming from out of state or your proximity as you look kinda weird coming from on a live they wanna live in an affordable area just outside of this t._v._d. You know that's within driving distance of ten fifteen minutes left and i think that's really where we've seen. The focus and you know obviously as chicago continues to grow. Oh maybe not at the pace of the new york. It's still going to grow overtime so given the fact that there's all this interest now. How long do you think it's going to be before things sort of calm tom down or is it got a ways to go to run itself out yet. I think i think we have we have quite a ways to go. I mean if you look at where we are what previously had happened with relation to banks and lending. You know you're not seeing crazy. Lending people are coming in real money down real equity at the table not structured finance that otherwise or elaborate though darn corinne in the current cycle so based on what we're seeing you know. There's a a an abundance of senior in the marketplace what we're starting to see them. Both locally and nationally as all of the banks are actually taking the term of their their you know long doubts like a traditional local under might have done three three or five your money now those same lenders are offering five to ten year money which previously had to go to fannie freddie and other agencies to get but now it's available on a local bank base insult to me by that occurring in itself that stretches out the duration of the next cycle. I think we have several years of runway la before you start you don't frankly even a a flattening of the market and then you know i you know i think we're we're well away from any potential crash in the market cycle so <hes> some economists are seeing a bit of a slowdown across the overall economy over the next year or so <hes>. Do you have have any sense of whether your market is going to slow down or what are the things that concern you that you're keeping an eye on about the possibility of a slowdown that we always look at first absorption. I mean in chicagoland market. Absorption really haven't played a impact on the moore neighborhood areas where we do a lot m._r. brokerage <hes>. I think there's you know there's concerns over over some live classic kind of directly in the c._d. But at the same time i mean that product has been getting absorbed from salt. Concessions are still record lows in the chicago land area. We haven't started to see a whole lot of crete there. <hes> and i think the reality of it. Is you know these aged. These tertiary areas outside of the c._d. I mean ultimately. They can see their extremely low. The rents are still affordable and they're still the ability to get ranked rogue <hes> so i think a lot of those have lined up to where it their concerns haven't been there in our space and and i usually see that i mean the markets we have seen very andraos them <hes> senior that at this point that's has continued to keep kind of our industries. You've had a good values fan. Jon morgan and david goss our the founders and principals of inteiror realty in chicago. They he joined us from their car somewhere on a freeway in the windy city jonah david. Thanks for taking the time. We appreciate your perspective on the market. Thank you thank you thank you for the time appreciate thanks. You're listening to the cr news hour. I'm steve lebron. Artificial intelligence agents is starting to move into the commercial real estate industry and one of the leaders in the field is an israeli company called okapi spelled o k a._p._i. Okapi has a machine learning platform that helps major landlords think twenty five plus million square foot portfolios leo improve their net operating income by analyzing massive diverse sets of data and identifying operational improvements that generate revenue bolster stor leasing activity improve the tenant experience and reduce costs okapi is an israeli company and we spoke with maya gal who's a co founder and chief chief revenue officer of the company. She and her partner iris c don have expanded the company's work in the real estate industry into canada and the u._s. My thanks for joining us on the news hour very happy to be here so tell us a little bit about how you got started with okapi. You've got a an artificial intelligence platform that has the potential to help landlords improve their operating income and their overall tenant experience dance by looking at big data. How did you get started. And how did you move into commercial real estate with it. Actually ireson. I co-founded okapi. Our background was sanal business intelligence. We worked in that sphere for many many years. Bringing a visualization of data and we found that there is a very big <hes> lag in the way the current tools today they allow you to see what happened in the past but they don't support collective actions <hes> and there's really a very big <hes> abyss of data where organizations accumulate a large large amounts of data at early basis while we're speaking right now date has been through through accumulated in created but most of that data is just being thrown away <hes> it's <hes> rotting away in some in some warehouse or in some files and it's not being being put to good use and the seeing that gap we co. We thought what is the value that <unk> kathy can bring to the world and we actually started implementing okapi in manufacturing manufacturing area where there's a lot of data data coming in from sensors from sheen's data's coming in from sensors <hes> <hes> from from a lot of different parameters in the manufacturing and data existing i._t. Systems and we had a lot of success there <hes> and we started to think of what other other applications this could have an we learnt came across the sierra business that was about three years ago and we fell in love with it <hes> <hes> a huge problem of data lots of exists landlords store lot lot of data but they don't use it in order to create a proactive notifications occasions and our first customer quadrille which which kind of <hes> explained to us that manufacturing in real estate are not that different <hes>. There's there's a large operation. There's a lot of data a lot of people in the field making day to day alien decisions without any support of any systems and joined during that application efforts application saw great fit and we've been enjoying great success ever since so how does it work with real estate data what kinds of of inputs are you using and what kinds of analysis do you deliver to clients <hes> and how does that help them and while a lot of organizations as i said collect the data the data could either be data coming in from business systems like m._r._i. B._t._s. yard ciardi lots of different i._t. Systems <hes> data could be coming in from sensors. We check sensors occupancy sensors different types of sensors the building <hes> and data could be external data it could be whether data could be market data location based data. <hes> there are a lot of types of data sources that can help l. A. landlords understand how they can improve their and why in okapi is able to connect to those data sources run very complex algorithms rhythms in the back end and then in the front and create simple notifications that are sent to asset management groups property management groups engineering teams with proactive notifications that incites the letting them know how they can improve the bottom line so for example if you're gathering data from <hes> h vac sensors building <hes> monitoring <hes> or the algorithms already built or do you have to customize them for each client so in okapis algorithms are already redeveloped. We have a very strong engine. The knows how to connect to different types of sources that they could be leasing data in b._t._s. It could be a work order system. They are in an angus or it could be a financial data could be censor data a we are agnostic of this system or algorithms are able to run through that data on and find in improvements in real time and create those into implications the algorithms algorithms look for anomalies in the data they look for root causes for problems. They look for predictions and they really helped uncover. What is an activist action that i can take in order for this not to be like a very theoretical statement. I can give some examples will become more practical. Please so our customers are looking for a way to increase income from there just in assets they have a lot of different tenants and they won't understand what what are the opportunities for them to get to increase the income from those tenants so <hes> okapi might be running the different system than find for example a potential to offer a larger space for ten due to higher occupancy. They could be found from understanding the number of people that actually walked the carousel every morning. <hes> could be understood from external data could be collected about that tenant or even <hes> from sensor data that we have <hes> or for work order just later so it doesn't really matter what type of sources you have okapis able to into them and find in that data and opportunity to increase a <hes> to increase the income another example might be finding an anomaly in the way that your tenants by parking and and find offers or places where you can offer your tenants more parking spaces so there was a lot of hidden opportunities inside the data to increase the income. What okapi desert has it crunches. Very large data sets that already existed already have on and creates. Those are the foundations in playtex where people were not. They assigned but they need to know what they need to do. So in the commercial real estate sector you launched initially in canada and you're now moving into the u._s. What kinds of for feedback are you hearing from commercial real estate clients or prospective clients in the us about using the service well as you <unk> said when you started in <hes> canada we actually started with some large landlords that have portfolios both in canada and in the states so we're not brand new due to the states working with customers like oxford properties were mental reno who have presence in both canada and nited states <hes> currently <hes> starting our work secured new york. We're focused on finding the large landlords who can value from okapi. We already have a few of them that we've started piloting our platform. We're getting great the feedback for the value that the system can bring because i think there's a lot of noise in the proper cloth seen there's a lot of startups out there but most of them are focused his either on the investment side or on solving very specific questions landlords have do i use my energy to the best possible way that is a silent solution but they're not a lot of solutions where we haven't run into solutions that are focused on. How do i do it improvement of the n._y. Across the board how do i operate my buildings better header increase attendance experience while increasing income and reducing the costs so in that sphere in that <hes> area we were getting a good feedback that we're very are you now in the in the output that you deliver to clients as it in a form of a dashboard or is it a report. How do they look at the analysis that to provide. That's a great question. Our customers are the front line employees. They're not people sitting behind a desk and analyzing data on people people who are running asset management teams people running problems propertymanagement buildings people giving the day to day service so these people are on the ground they will consume okapi notifications even through a mobile app that will click and they will say having you notification they will that notification and they will get something that they need to do right now that will help them know more about the tenant about the team about a specific asset that is on the ground that they can improve on so most of our customers use okapi through them allow up there is of course a web version where i can see accumulation of all indications are received in trends over time and other things. He's like that's <hes> but he kept he really meant to be a real time solution requirement it used by people as they're doing their day to day job. My goal is is the co founder and chief revenue officer of oh copy. You can get more information at their website. O k a p. I dot a. i. Maya thanks for joining us today. Thank you very much and that'll wrap things up for this edition of the c._r._m. C. r. e. news hour. You can send your comments suggestions story ideas to steve at st broadcast news dot com or you can leave an audio audio comment for us using the voicemail icon on the homepage at st broadcast news dot com. We take this program in studio. A at st broadcast news news in cherry hill new jersey join us again for the next episode of the c._r._m. News our next friday at eight a._m. Eastern time at st broadcast news dot com or wherever you get your podcasts. This is steve lou beckon. We'll see you out there on the net. Take good care <music>.