June 2020 REDnews Magazine

JUNE 2020

THE TEXAS COMMERCIAL REAL ESTATE NEWS SOURCE

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IN THIS ISSUE 8

24

12

18

Market

Auction 23 Sales & Leases 1–2, 5, 9, 11

Scoop Events 28, 32

Features

Austin Office Market 8–9 Reach New Heights in Cedar Hill 12–14 Open Texas 16, 17

Services

Environmental 3, 7, 26, 31 1031 Exchange/DST 19

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Houston’s Industrial Sector 18–19 Future of Construction Industry 20, 21 Mitigating Business Insurance Claims 22, 23 Property Managers Time to Shine 24, 25

Letter from the Editor THE TEXAS COMMERCIAL REAL ESTATE NEWS SOURCE

Dear Readers,

A

NATIONAL PUBLISHER

s of this writing, Texas is just beginning to reopen.

My hopes are twofold: that the financial damage of the shutdown wasn’t too severe and there aren’t any major flare-ups of COVID-19. Neither our bodies nor our economy can withstand much more.

One of our features in this issue tackles that very topic— balancing the health risks of the pandemic with the need for businesses to return to form. As commercial spaces welcome guests and tenants back, what steps must property managers take to ensure the safety and opportunities for everyone involved? These are unprecedented times and they require careful planning.

We also take a look at the situation with the Austin office market. One of the fastest-growing metros in the U.S. over the past decade, developers have struggled to keep up with demand for office space. While things may have slowed down because of the pandemic, there aren’t many markets that will bounce back faster than Austin.

Additionally, the virus is having its impacts felt across Houston’s industrial sector. An aftershock to the pandemic is a drop in oil prices as stockpiles grow. Could that be enough to counter the gains that e-commerce-related industrial will see in the quarters ahead?

Yes, times are bleak but there are signs of hope as markets begin to reopen. Hopefully, we can get back quickly to a recovering economy without any more health emergencies. Thank you for reading, I hope you enjoy this issue!

Cheers,

Mark Menzies menzies@rejournals.com

EDITOR Matt Baker mbaker@rejournals.com

STAFF WRITERS Matt Baker mbaker@rejournals.com Ray Hankamer rhankamer@gmail.com Brandi Smith info@REDnews.com

MANAGING DIRECTOR Benton Mahaffey accounting@REDnews.com

EMARKETING DIRECTOR Sarah Evans Carter emarketing@REDnews.com

GRAPHIC DESIGN Corporate Imagination digital@REDnews.com

SALES Joni Margotta joni.margotta@rejournals.com Kelsey Ancelot kelsey.ancelot@rejournals.com Ginger Wheless ginger@REDnews.com

PRINT & DIGITAL DISTRIBUTION REDnews is directly mailed each month to commercial real estate brokers, investors and developers throughout Texas and the US.

Texas Brokers: 8,150 Texas Leasing/Tenant Rep: 6,232 Texas Investors: 4,979 Texas Developers: 4,710 Outside Texas Investors, Brokers, Developers etc: 26,387

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JUNE 2020

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Stonelake Capital Partners is developing Domain Tower 2, a 330,000-square-foot, 24-story office high-rise that will be The Domain’s tallest building when it is completed in fall 2021.

Can one of the fastest-growing office markets also see the quickest turnaround?

BY MATT BAKER Over the past twenty years, Austin’s population has exploded, growing more than 78 percent, with the MSA adding the equivalent of two Omahas in that time span. Concurrently, office development and investment just barely kept pace with staggering demand—a two-decade-long trend that skidded to a halt in March of this year.

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At the opening of 2020, Austin’s office market picked up right where 2019 left off, with strong leasing activity and an incredible development pipeline. The COVID-19 pandemic, however, has hit pause on much of this—leaving many to wonder how long until the city can get back to where it was.

“Austin has traditionally been such as a very strong, robust real estate market. We're confident it is going to find its way back, just as it did before with ’08 – ‘09,” said Ross Anders, general manager of Project Management Advisors (PMA) in Austin. PMA recently expanded its footprint to Austin with the acquisition of American Realty Project Management.

With a technology-heavy corporate base, the good news is that Austin will likely start to recover quicker than the more energy-dependent Houston and Dallas markets, for example, as the price of oil falls. According to Andrew Alizzi, associate in the capital markets group, investment sales in the Austin office of Avison Young, many of the landlords he has been in contact with are surveying tenants in their buildings to determine not only their immediate needs but if they anticipate any retrenchment of their future office use.

“The general consensus from other brokers, developers, economists and investors in the market is that Austin should start to pick back up by first quarter 2021,” Alizzi said.

Potent submarkets

Assuming that we are headed toward (or are already in) a recession, the three strongest Austin office submarkets going in—the CBD, The Domain and the East Side—will guide the resurgence coming out. That begins with the central business district.

“The CBD is going to lead us out of this with the technology, finance and legal clients that are all downtown in the capital area,” Anders said.

Arguably even stronger is Austin’s “second downtown,” The Domain.

According to Avison Young data, the submarket absorbed 497,113 square feet of Class A space in the first quarter—more than 10 times what the CBD experienced.

Developers have been trying to keep up with demand in this area. Stonelake Capital Partners, for example, broke ground last October on Domain Tower 2, which at 24 stories will be the submarket’s tallest building when it tops out.

The 330,000-square-foot project is due to be delivered in fall 2021.

Even with new developments popping up in The Domain, the vacancy rate among Class A space stood at a vanishingly small 1.12 percent last quarter.

The submarket is popular with technology clients, such as Embarcadero Technologies, which signed a 13,000-square-foot lease at Braker Pointe during Q1 2020.

Dialing back on development?

Six office buildings totaling 1.23 million square feet delivered to the Austin market during Q1 2020 according to the Avison Young report. Additionally, there were over 6 million square feet of office space under construction last

Continued on Page 10>

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Fastest-growing office markets < Continued from Page 9

3M signed the largest office lease of the first quarter in Austin, taking 204,399 square feet at Parmer 3.4, part of Karlin Real Estate’s Parmer Innovation Center.

quarter, with another 15.8 million square feet proposed. It’s unclear how much of that proposed space will be realized in the next few years.

At the moment, Anders reports that nearly all of their active projects, both ground up, and tenant improvement, are still moving forward, with a few deferrals into Q3 and Q4. For those projects that are in the pre-construction phase, little has changed. Most clients are pushing forward tweaking designs or seeking permits, confident that the turbulent seas will have calmed by the time they are ready to break ground. Most importantly, none of his clients have gone back to the drawing board to redesign a space due to COVID-19 jitters.

“It really is just too early in the grand scheme of things, even if we’ve been doing this for what feels like a lifetime,” said Anders. “These are very large and expensive capital decisions, and no one's been ready to pull that trigger yet.”

Investors remain cautiously optimistic

The largest lease of the first quarter was 3M’s deal for 204,399 square feet at Parmer 3.4. Located at 13011 McCallen Pass, the property is located in Parmer Innovation Center, owned by Karlin Real Estate and developed by Trammell Crow. Will it be a year or more before the Austin metro sees more office deals of this size?

According to Alizzi, he hasn’t seen many major rent dips or concessions. The pre-COVID-19 office market was highly favorable to owners with so much corporate demand for space. However, this new reality hasn’t upended the situation so badly that leasing teams are facing quieted phone lines.

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JUNE 2020

“The pandemic has kind of evened the scales a little bit,” said Alizzi. “If a tenant is negotiating for a new space or for a renewal, I would say that the landlord is going to be more receptive to those negotiations than they might have been in the past.”

The Austin tenant base is diverse, though laden with tech-focused users— an industry that is more resistant to a recession. The result is that any interruption caused by COVID-19 should be slight. A brief downturn might provide an advantage for opportunistic investors looking to acquire at a time when there may be limited competition.

Though the debt markets are very conservative currently, those looking to spend their built-up capital have plenty of dry powder and are still looking to play. Conventional wisdom holds that Austin’s office market should bounce back quickly, so investors are looking to lock deals in now for future development.

“They're scrutinizing deals, tenants and income a lot more, but there are groups that are out there that are that are still looking for deals,” Alizzi said.

“These investors know that they can acquire a piece of dirt and then have 18plus months to get a site permit there.” n

Outlook

COVID-19 has quickly injected significant uncertainty into the markets. The hope for Austin is that strong fundamentals—a highly educated workforce, inbound population and a diverse, tech-forward economic base—will leave it relatively insulated from the issues facing other metros over the next several quarters.

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Reach new heights in Cedar Hill: The greenest city in North Texas is prime for development

BY BRANDI SMITH

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JUNE 2020

Towering over the DFW Metroplex, Cedar Hill delivers the kind of live-work environment that is found nowhere else in North Texas. A place full of natural beauty and breathtaking views where business opportunities are as ready for discovery as new walking trails.

Cedar Hill is a perfect community for corporate headquarters, burgeoning entrepreneurs, small business owners, and a talented workforce to call home. The city deliberately fosters a careful balance between industry and nature.

As it grew from a population of 6,850 in 1980 to nearly 50,000 today, it is proud to have maintained the highest percentage of preserved open space of any Metroplex city. Tree-lined rolling hills and wide-open green space earn Cedar Hill the nickname ‘The Hill Country of the Metroplex.’

This community offers miles of hiking, biking, and running trails, some around the 2,000-acre Cedar Hill State Park. The park, which features more than 100 miles of shoreline around Joe Pool Lake, is one of the most visited state parks in Texas. Home to a variety of rare plants and animals, Dogwood Canyon Audubon Center is another popular destination, bringing visitors from the four counties surrounding Cedar Hill.

The Economic Development Corporation has been pivotal in the evolution of Cedar Hill and is making exciting plans for future growth.

This ability to enjoy work-life balance without even leaving the city limits has propelled Cedar Hill as a destination for young families. Thanks to an expansive set of educational choices — from the innovative curricula offered in the Cedar Hill Independent School District to a wide selection of charter and private schools — this hidden gem grows talented future workforce and business owners, too.

At this time, Cedar Hill is considered only 50 percent developed, which means there is ample opportunity for startups, expansions, and relocations. At the center of DFW, which is named year-after-year, one of the fastest-growing economies in the nation – Cedar Hill offers planning, support, stability, innovation, and livability in a way few other communities can.

The Economic Development Corporation has been pivotal in the evolution of Cedar Hill and is making exciting plans for future growth. Being one of the original communities in Dallas County dating Continued on Page 14> JUNE 2020

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Cedar Hill < Continued from Page 13

back to the 1840s, reuse and redevelopment are top priorities. A new downtown core resurgence includes a $4.4 million downtown complete streets infrastructure project as well as a Lake Moreno Partners, 5-acre mixed-use development. The public-private partnership will consist of a retailoffice and work-live concept capitalizing on the area’s distinct character and historical features.

These new initiatives are built upon a solid foundation of the existing 40+ businesses, including White Rhino Coffee House, Sly Cat Gallery, Décor on the Hill, and Sam’s Pizza, to name a few.

Big business is done in Cedar Hill, too. The Economic Development Corporation works with an impressive portfolio of prospects and existing companies to round out this diverse community.

Cedar Hill sets aside Type A sales tax grants for job training, relocation assistance, and infrastructure development to support growth and innovation. It can also tap into a variety of statewide incentives aimed at bolstering the Texas economy, including the Texas Enterprise Fund, the Skills Development Fund, and the Events Trust Fund.

Though its Downtown projects may garner the biggest headlines, the city’s 150-acre Cedar Hill Business Park is home to successful brands, including Dallas Aeronautical Services, Delta Steel, PepWear, Siddons Martin and TxDOT. Owned by the Cedar Hill Economic Development Corporation, the business park is part of contiguous industrial areas along U.S. Highway 67, a four-lane divided highway that merges with IH-35 to the north and south. IH-45 is nearby as well, and easy access to IH-20 provides a major east/west thoroughfare. The prime location and connectivity are ideal for manufacturing, office, distribution, or warehouse needs.

With Fort Worth and Dallas a short drive away, proximity to DFW Airport and Love Field, rail lines, and future Loop 9, Cedar Hill is open for business - but only to 80 percent build-out. The natural surroundings that make Cedar Hill truly unique are protected. The companies that choose this beautiful place as their scene can rest assured it will stay intact for future generations to experience and enjoy. n 14

JUNE 2020

Development opportunities are waiting for your company in Cedar Hill, Texas. Connect with an EDC team member by calling 972.291.5132, emailing chedc@cedarhilltx.com, or visiting CedarHillEDC.com today.

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Texas is open for business. Now what?

BY MATT BAKER

Over the final two weeks in May, Texas Governor Greg Abbott instituted a graduated opening of the state’s economy. But what does this look like on the ground? What are the prospects moving forward for the larger economic engine in the face of the COVID-19 pandemic?

NRG Park—the four-stadium, 350-acre property that hosts Texans games, the Houston Livestock Show and Rodeo and other live events—has joined a task force with other Houston arenas regarding the best practices for opening up their venues.

“Mixed in with the controversy that surrounds the reopening plans and whether it’s the right thing to do or not is that nobody really knows what’s next,” said Ryan Walsh, executive director, NRG Park. “All we can do is plan against the worst-case scenario.”

Following guidelines from the CDC and the White House about strict social distancing requirements would mean that NRG Stadium, for example, would only be able to fill 17 to 18 percent of the 72,000 seats for a Texans home game.

Walsh was part of a panel discussion that REDNews recently hosted to explore what the next steps are for Texas businesses and properties now that stay-at-home orders are lifting.

NRG Park has been in constant contact with their vendors and the NFL as to how they can safely reopen the stadium, but at the moment there are no set-in-stone plans. Walsh said that one frustration

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is the mercurial communication coming from various government agencies as to how to proceed.

“The guidelines change so frequently and so often,” Walsh said. “As we’re planning, it’s changing.”

When it comes to the health of specific commercial real estate sectors, Transwestern president – southwest, Kevin Roberts, parsed the issue in two different ways. Property owners should consider holding onto industrial and multifamily assets as the smart position. For those looking to acquire property, he recommends looking at office assets.

Office properties will likely trade at a discount to where they would have been priced during

Alvaro Bustillos

Jon Barela

Kevin Roberts

Ryan Walsh

the first quarter, due to (real or perceived) future lost income and shrinking leases. Roberts said that one initial concern—that rents would evaporate in March, April and May—has so far been unfounded with approximately 90 percent of office tenants meeting their rent obligations. Of that remaining 10 percent, many tenants have likely received deferrals, so landlords will eventually recoup some of those losses.

that the Mexican and U.S. government align their messaging and response to the pandemic.

On the industrial side, one long-range benefit may be a re-shoring of manufacturing jobs. According to Jon Barela, CEO, The Borderplex Alliance, Texas makes an ideal landing pad for many of those jobs.

Roberts relayed a statistic that 40 percent of the people that make $40,000 annually or less are currently either unemployed or are seeking unemployment.

A prolonged recovery would batter this segment of the workforce and ultimately mean fewer and fewer businesses remaining operational.

“Canada, the U.S. and Mexico will became become even more integrated, not just because of [the United States–Mexico–Canada Agreement], but because of the unpredictability of manufacturing in China,” said Barela. “That’s certainly what’s going on now with the Sino-U.S. relationship and many are saying we’re potentially entering into a new Cold War.” The Borderplex Alliance is the seventh largest manufacturing hub in North America, an economic development region centered on the crossborder cities of El Paso and Ciudad Juárez that employs more than 275,000 individuals. If American labor is too expensive for manufacturers to return home, Mexico is a closer, cheaper option that may benefit border communities like El Paso.

Alvaro Bustillos, president and CEO of Vaquero Trading, agrees that this cross-border relationship is strong and extremely beneficial to both countries.

His company is a livestock procurement and marketing company that imports Mexican cattle to a hungry U.S. market “The meatpacking plants went down, operating a couple of weeks without being able to slaughter any cattle,” Bustillos said, adding that total production dropped from 600,000 head of cattle per week to less than 400,000 head.

Just as Walsh pointed out the challenges inherent in receiving clear guidance and mandates from various U.S. jurisdictions, the obstacle only magnifies for international concerns. Bustillos said that it is important

Opening the economy is only half of the problem—keeping it open is just as imperative. “The only thing worse than what’s happening right now would be if it happened again,” Roberts said.

Following guidelines from the CDC and the White House about strict social distancing requirements would mean that NRG Stadium, for example, would only be able to fill 17 to 18 percent of the 72,000 seats for a Texans home game.

COVID-19 has infected more than 6 million people worldwide, but it has infected nearly everyone with something else: fear. The fear of interacting with others and contracting the disease. Barela believes that if we are able to quickly find a vaccine, those fears will dissipate and the economy should rebound quickly.

“People want to get out, they want to socialize, they want to have human interaction and one-on-one meetings,” Barela said. “It’s human nature to want to go out and be amongst our peers, so I expect a recovery to happen very quickly.” n JUNE 2020

17

Houston’s industrial sector girds for a post-pandemic resurgence

BY MATT BAKER

What impact will COVID-19, and fluctuating oil prices, have on Houston’s industrial market?

The Houston industrial market had some strong fundamentals during the first quarter, and others that were cause for concern. Since then, of course, there has really only been one concern—COVID-19. Will the pandemic drag down what had been a well-performing sector in a growing market?

One major issue facing Houston’s economy— equally as important as COVID-19 itself—is the effect that the pandemic is having on oil prices.

Stay-at-home orders around the country have decimated the need for oil, which will surely affect the energy-dependent Houston economy.

Texas’ year-over-year crude oil production dropped in March, according to data from the Railroad 18

JUNE 2020

Commission of Texas, from 128 million barrels in 2019 to 107 million barrels this year. However, early resistance from Saudi Arabia and Russia to cut production softened demand. Russia has also indicated that it will ramp up production in June.

is an outlier, expected to perform well during the crisis. E-commerce is the only way to access some items, bringing some late adopters on board and accelerating what had already been a dominant trend.

New data from Colliers International suggests that global land-based storage will top off in June and oil prices likely won’t rebound for at least 18 to 24 months. Energy firms, as well as the companies that support them, will look to cut costs in the next year with many filing for bankruptcy protection in the near term.

As a result, third-party logistics facilities will likely grow in demand over the next year.

Additionally, the logistics supply chain has become an integral part of delivering life-saving equipment in the fight against COVID-19, which only heightens the demand for these spaces.

The retail, office and, to a lesser extent, multifamily sectors have and will continue to suffer because of the pandemic. Industrial CRE

As COVID-19 has hobbled the airline industry, there will be reverberations felt in the air cargo sector. This will negatively influence many secondary and tertiary markets, which could

in fact be a boon to larger markets. Houston’s importance as a port city and as an epicenter of the regional economy means that more air cargo may shift toward the Houston metro.

Many experts believe that manufacturing jobs, which have migrated to sites in China over the past few decades, will begin to return to U.S. soil. This re-shoring would be due in part to corporate distrust of China, and to shorten the manufacturer-to-consumer supply chain. If this plays out as many hope, it could mean an additional 1 billion square feet of industrial real estate need—though it’s unclear how big of a slice the Houston area would get from that pie.

percent in Q1 2019 to 7.9 percent in Q1 2020—an increase of 180 basis points. The South Corridor was the tightest with a 5.0 vacancy rate in the first quarter, followed closely by the Inner Loop Corridor with 5.1 percent. No submarket had double-digit vacancy last quarter, with the highest being 9.5 percent in the North Corridor.

Overall, however, industrial leasing velocity slowed from the prior quarter—dropping from 6.7

million square feet in Q4 2019 to 5.5 million square feet in Q1 2020. Though there were several notable large leases like Amazon’s mega deal in the Hwy 290/Tomball Parkway Corridor, most activity involved leases for 50,000 square feet or less.

As the lead time for most leases is four to six months, the true impact of the pandemic won’t begin to be felt until late into the second quarter. n

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Before the pandemic, Houston’s industrial stock was close to overbuilt. Developers delivered 2.6 million square feet of industrial space in the first quarter, on top of the 3.6 million square feet that came to market in Q4 2019, according to Colliers data. There are currently an additional 13.7 million square feet of space under construction.

The largest of these are fully pre-leased or owner-occupied build-to-suits, such as the 2,165,000-square-foot facility that Ross Stores is building in Sugar Land. There are plenty of spec projects still in the pipeline, however. Stream Realty is erecting a 784,000-square-foot facility in Bay Area Business Park and Avera Companies is developing 644,000 square feet in Cedar Port Logistics. Both were seeking tenants at the time of the Colliers report.

The economic disruption brought about by the COVID-19 pandemic will likely halt any more spec inventory from entering the development pipeline for some time. This may actually allow the demand-supply scales to realign and aid with absorption of all this space.

Despite the new supply, the situation is not actually that dire. The Colliers report— comprising mostly pre-COVID-19 data— showed 3.2 million square feet of positive net absorption across the Houston industrial market. This 39.1 percent quarter-to-quarter increase was aided by relocations such as Home Depot’s move into 770,640 square feet in the Hwy 290/Tomball Parkway Corridor, as well as Sunbelt, which took 191,175 square feet in the North Inner Loop Corridor.

Year-over-year, the vacancy rate for industrial product in the Houston metro rose from 6.1

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JUNE 2020

19

If You Can’t Build It, They Won’t Come: What the Future Holds for the Construction Industry

BY BRANDI SMITH

Corbin Van Arsdale remembers early March vividly. A phone on each ear, important conference calls happening on each, the mayor of Austin suburb Cedar Park summarizes that time as “a little bit insane.”

“When [the COVID-19 pandemic] hit, it thrust the mayor, county judge and governor into these almost militaristic chain-of-command-type situations,” he 20

JUNE 2020

told those logged in to the May 21 REDnews webinar If You Can’t Build It, They Won’t Come.

“It really just turned life upside down,” he said of the pandemic’s impact.

Also president and general counsel for the Associated General Contractors - Texas Building Branch (AGCTBB), Van Arsdale was able to offer unique insight from the perspective of a decisionmaker, as well as genuine interest in the wellbeing of the construction industry.

While the first few weeks were “chaos,” according to Will Hodges, president of Cadence McShane Construction, the industry is finding its footing.

“We’ve settled into a bit of a rhythm and a bit of a routine, finding a new way of managing things,” said Hodges. “We were very blessed

Jess Corrigan

Mark Buskuhl

Mayor Corbin Van Arsdale

Tyler Earle

Will Hodges

that construction was deemed an essential business. While a lot of the country suffered being out of work and dealing with those issues, we didn’t. We kept moving.”

“Anything we can do to overcome our manpower shortage, that makes us more efficient, that reduces cost,” said Hodges. “It allows us to improve or maintain margin and pass that along to owners where possible.”

He said his company shifted toward working remotely, which is something employees had pushed for a while. Forced into the situation, Hodges said he’s been pleasantly surprised by how well his team has adapted, though he doesn’t know that it will be adopted long-term.

“We don’t have to have people walk jobs anymore,” added Corrigan. “We have someone from the construction company sending live videos and they can talk through it and look around. It’s been pretty effective.”

“If anything, our productivity feels like it’s gone up,” said Jess Corrigan, principal at HKS Architects, of employees working from home. “I think moving forward, we’ll do more of this, but a concern that I have is a lot of what we do is learned from people around us. Working from home, we’re going to miss that educational opportunity, especially for our younger staff, people just starting out.”

Not everyone working on a project is able to do so from home, however, which comes with significant challenges. For example, it’s difficult for electricians and plumbers, who often come with helpers, to always maintain six feet of separation.

“It’s being deliberate from a safety standpoint in how we approach all those tasks and making sure we’re placing the proper importance and protocols,” explained Tyler Earle, senior PM/PX at Cadence McShane Construction.

“Some studies came out that said construction sites were going to be similar to meat-packing plants and senior citizens centers. That’d they’d have these huge infection spikes and be hotbeds of infections,” Hodges said. “That just hasn’t happened. I think all construction companies and contractors have taken a very proactive approach to this.”

That includes finding new ways to deliver the product for clients, including leaning into technology more than ever before.

As well as the industry has adapted, it’s hard to ignore the long-term impact this will have. Hodges estimated most contractors have projects lined up for the next six to 12 months. Beyond that, he predicted a precipitous drop.

“I think 2021 is going to be pretty bleak for construction companies. I think we’re not going to see this rebound. It won’t be V-shaped in any way, shape or form. I think there’s a big disparity and a lot of question marks around money and developers,” he said. “Odds are, it’s going to be very competitive because there are so many new contractors and subcontractors.”

Van Arsdale suspected the number of public projects up for bid could also decrease. Factors such as a drop in sales tax revenues will have a significant impact on city budgets going forward, he said.

“You’re having to make decisions about your local budgets and tax rates based on what revenue you have available,” said Van Arsdale. “At the same time, you’re looking at how you’re going to cut the cost, how you’re going to handle the people part of the equation and whether you’re going to move projects around.”

Even so, these experts, many of whom have weathered the ups and downs of the Texas economy over the years, are optimistic about the future of construction in the Lone Star State.

“At the end of the day, we’re problem solvers in the construction world. All of us are,” said Earle. “It lends itself to us being successful and finding new ways to keep moving forward.” n

To join REDnews for upcoming events, check out our calendar of events on REDnews.com JUNE 2020

21

Navigating Current Business Insurance Claim Loss Strategies: A REDnews webinar

L

Bruce Smith

Scott Friedson

Nearly every business has incurred some kind of economic loss associated with the COVID-19 pandemic, which in some cases has proven to be as detrimental as damage caused by severe weather or a natural disaster.

“The ensuing result has been an extremely large economic loss to policyholders who have, in turn, looked to their insurance companies and said, ‘Hey, this should be covered, right?’” said Scott Friedson, CEO of Insurance Claim Recovery Support.

This is Friedson’s forte. As a public insurance adjuster, he’s authorized and licensed to negotiate insurance claims on behalf of policy holders, including business interruption loss claims.

“There have been a lot of disputes and interpretations going on as it surrounds this completely uncharted territory that we’ve entered into around COVID-19 insurance claims,” he said, 22

JUNE 2020

THE LOYD LAW FIRM

P.L.L.C.

Shannon Loyd

kicking off REDnews’ May 14 webinar Navigating Current Business Insurance Claim Loss Strategies.

Friedson, joined by attorney Shannon Loyd of The Loyd Law Firm and forensic accountant Bruce Smith of BDS Forensic Accounting, shared how policyholders can best navigate the uncharted territory in which businesses find themselves today.

the policy. He argued that the executive orders issued at the state and local level, not the virus itself, caused businesses to shut down.

“The virus didn’t write the orders. The virus didn’t stand in front of a restaurant and say, ‘You can’t come in here.’ The virus didn’t prevent people from leaving their houses,” Friedson said.

“I think the answer we all agree on is emphatically yes,” Friedson said.

“All the orders are different. There are state orders. There are county orders. In most situations businesses are shuttered because of both the state and local order,” echoed Loyd, who has specialized in insurance law for the past 15 years. “Some include language that the virus causes physical loss or damage and some of them do not. We maintain that that doesn’t matter.”

In all likelihood, that claim will initially be denied by the carrier. Most insurance companies, Friedson said, make the argument that COVID-19 caused the business losses and is therefore not covered under

She added that as early as February, she saw carriers doing a “full-court press” to try to convince businesses there is no coverage for their interruption because of COVID-19.

“Nobody knows exactly what’s going to happen or how this is all going to shake out,” said Friedson.

The most common question he said he’s received is whether a policyholder should file a business interruption claim.

“The whole point of this is to keep businesses from even making a claim,” she said. “Be prepared.

A lot of agents are giving pushback and trying to dissuade policyholders from even making a claim. If that happens to you, insist that the agent submit the claim. You have the duty to notify your carrier of a loss.”

endorsement to the policy. Examples of common language include “We do not insure … for any loss which would not have occurred in the absence of one or more of the following excluded events …” and “We will not pay for loss or damage caused by or resulting from any virus … that induces or is capable of inducing physical stress, illness or disease.”

When starting the process, Friedson advised reviewing your policy as the language is key and varies policy to policy, especially regarding physical loss.

While that may seem to draw a clear line in the sand, Loyd said that doesn’t end the analysis of whether a claim is valid.

“This is the key thing the carriers are focused on. That’s not the case with most policies, which are all-risk policies. They say ‘physical loss of or damage to the property.’ The word ‘or’ is very important,” said Loyd. “We argue there are two ways, not just one.”

That’s been backed up in past verdicts, including Trinity Industries, Inc. v. Insurance Co. of North America and Murray v. State Farm Fire & Cas. Co. Be on the lookout for virus exclusions listed within the policy either under Exclusions or added as an

“If the virus isn’t actually present at the property, it doesn’t actually apply,” she said. “Our argument for the carriers is that if they want to apply this virus exclusion, they need to prove that it’s actually at the premises.”

Another important factor in a claim is the calculation of business income loss. Smith, who has had experience working on a number of natural disasters dating back to Hurricane Andrew, said there are two ways to do it. Gross income takes any projected sales you lost and subtracts any expenses you’ve saved. The business income policy factors net income combined with continuing expenses.

“One’s starting at the top and going down. The other starts at the bottom and adds up. You end up in the same place,” he said.

At this point in time, Loyd and Friedson have not heard of a COVID-19-related business interruption claim being paid out. If yours is denied, Friedson suggested trying to settle the claim on your own by asking your insurance company for facts that support their position.

If settlement isn’t an option, it’s time to reach out to a public adjuster or attorney to take the next step. In the end, they agreed, it will be up to the courts to decide how carriers respond to these claims.n

For assistance navigating your claims, contact The Loyd Law Firm at (210) 775-1424, Insurance Claim Recovery Support at 832.725.2878 and BDS Forensic Accounting at 954.755.7981. To join REDnews for upcoming webinars & events, check out our calendar of events on REDnews.com

JUNE 2020

23

Property managers know—now is their time to shine

BY MATT BAKER

Shawn Harvey,

Hunter Lane

Robert Tyler

The pandemic shut down nearly all sectors of the economy but now, Texas has started to open back up. But it’s not like flipping a switch—there are countless property management considerations before, during and after the return of commercial tenants to their spaces.

REDnews recently hosted a webinar addressing this very topic, bringing together three strong Houston CRE voices. Participating in the webinar were 24

JUNE 2020

Shawn Harvey, managing director of integrated services at Lee & Associates; Hunter Lane, vice president of Lane Property Tax Advocates and Robert Tyler, CPM, senior general manager at JLL. The panelists dove right in discussing the early conversations they are having with clients who are unsure of how to proceed. Their initial concerns surrounded the health of the people coming to the building. After that,

unsurprisingly, is the current and future impacts to rental income.

“Early on we had a few tenants come in saying they were going to have difficulty paying rent,” said Harvey. “Once you start asking more in-depth questions, a lot of them backed off.”

Health experts have recommended a number of tactics to limit the spread of COVID-19, such as wearing masks, maintaining six-foot distances, washing hands and using sanitizer. But according to Tyler, it’s been a challenge to put building policies in place based on government guidelines.

“The county issued a requirement to wear masks but then the governor comes out and says it's not required,” Tyler said. “We're trying to figure out what kind of regulations we have to start policing in our buildings and every day it seems that it could change.”

This can be especially daunting in multi-tenant buildings. Putting up signage directing tenants on how to safely enter and use the building can be a challenge without unambiguous and invariable government mandates or guidelines. The frustration only trickles down, with tenants upset by a lack of solid information from their property manager.

The panelists discussed the important subject of sanitizing common areas and high-touch surfaces. Most janitorial companies are keeping an eye on CDC guidelines and they have access to foggers and sprays that claim to maintain disinfection for up to 90 days—though Harvey errs on the side of caution and repeats the process every 45 to 60 days.

“We are literally writing the book on how to deal with a pandemic right now,” Tyler said. If you don’t know the answer to a question, the best suggestion I can give is work with your team, reach out to your local BOMA and read CDC guidelines online.”

Some healthcare facilities have temperature checks at the entrances to prevent infected individuals from entering, but the panelists agreed that broadening that tactic to all commercial properties opens up owners and managers to too much liability. A better approach is to provide tenants with access to equipment and have them control their own spaces if they wish.

As we get deeper into the pandemic, property managers’ income statements deviate more and more away from the norm as revenue from rent decreases and operating expenses increase. Lane recommends keeping detailed logs of additional losses and expenses, to better appeal rising property taxes.

“I personally have been asking a lot of property owners to give us a detailed income statement of the first four months,” Lane said. “Compared to 2019, I can show local appraisal districts how a property is hurting.”

There have been attempts to provide relief to property owners—especially retail and hospitality facilities—by way of tax exemptions.

years but as the pandemic curtails site visits, it has grown in importance.

Similar to a Google street view, the technology allows a potential tenant to virtually walk through a space in 360 degrees. It even comes with digital measuring tools to see if existing furnishings will fit, for example. The camera and the software subscription aren’t cheap, but they can help put a property on a short list when companies are making a final decision about a relocation.

Harvey compared this emergency with past crises, pointing to the positive outcomes despite early pessimism. The 2008 housing crash brought with it declining oil prices; Hurricane Harvey

Virtually every project, from re-striping a parking lot to installing a new HVAC system, has been deferred until such time as rents are coming in at more reliable levels.

The state instituted similar legislation in the wake of Hurricane Harvey; however, Lane said that his discussions with the Attorney General’s office suggest that the economic, rather than physical, damage that these properties are suffering will likely not qualify for similar relief.

As for capital expenditures, everyone on the webinar seemed to agree that any projects that can be put on ice have been. Virtually every project, from re-striping a parking lot to installing a new HVAC system, has been deferred until such time as rents are coming in at more reliable levels.

“We’re trying to control the controllable expenses,” said Tyler. “That said, the engineers are still going in and maintaining the building.

Pipes only seem to burst when no one is there.”

Many property managers are coordinating with leasing teams to ramp up usage of virtual leasing tools. This technology has evolved over recent

caused $125 billion in damage and dozens of deaths. In both cases, he contended, Texas came through stronger and he expects the same to occur after the pandemic.

There very likely will be a (hopefully small) recession as a result of COVID-19. However, just as during past downturns, this instance provides an opportunity for property managers to shine.

“This is when owners look for property managers to save money on the expense side. I've expressed to my team that this is the time when we come out looking great,” Harvey said. “This is a time where owners and asset managers look to property managers and go, ‘wow, you guys really pulled us through this time.’ So, take advantage of the situation to make you and your team look good.” n Did you miss this webinar? You can rewatch all past webinars on our YouTube channel, www.rejournals.com/videos/ and be sure to check in on REDnews.com for any future events.

JUNE 2020

25

Newest Member of the REJournals Team

SCOOP Joni Margotta,

Senior Vice President, Southwest Market Leader

Phone: 469-569-0246 Email: joni.margotta@rejournals.com

BACREN – M ay

2020 Proper ty Marketing Exchange Group Virtua l Meeting

High performance Sales/Business Leader with a successful career executing marketing plans and sale strategies which result in deep relationships, closing new business, & achieving aggressive revenue goals while facilitating a high profile presence in both the private & public sectors regionally.

My established C-Suite relationships span across Commercial Real Estate, Economic Development, Healthcare, Office, Industrial and Mixed use.

ULI Advisory Board & PR Communications Chair, TREC, NAIOP, Real Estate Council Greater FTW, Native American Business Association (NABA)

Welcome Back Texas

Specialties: New Business Development & Relationship Management l Commercial Real Estate l Economic Development/ Municipal Planning Expertise l Private & Public Sectors tt Govenor Greg Abbo

Texas Hospitality

Ready to Serve

Working for all Te

xans

Connecting Developers, EDC’s, Brokers, and Capital sources for site assessments due diligence to move projects forward l Assembling Pursuit Teams l Go-ToMarket Strategies l Identifying & Monetizing New Revenue Channels l Executing Marketing Strategies JUNE 2020

27

www.rejournals.com/HoustonForecast2020

8:00 AM Key Note Post COVID-19 Economic Forecast Ted Jones, Chief Economist, Senior Vice President, Stewart Title Guaranty Company 9:00 AM Capital Markets Update 10:00 AM Break 10:10 AM Commercial Real Estate Forecast 11:00 AM Adjourn and Networking For Sponsorship Information: Joni Margotta

Ginger Wheless

469.569.0246

713.661.6350

joni.margotta@rejournals.com

Ginger@rednews.com

Briar Club Facilities will follow All CDC Guidelines 3 Hours of Real Estate Continuing Education Credits Has Been APPLIED for with the Texas Real Estate Commission TREC Provider # 10163 | TREC Instructor # 4153

NOVEMBER 2019

JANUARY 2020 JANUARY 2020

JANUARY 2020

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

Women in Real Estate: CRE Pros Expertise

Texas Industrial/Office Q3 CBRE MarketView

Blazing Trails:

Shops at Chisholm Trail

Capital Markets:

BoyarMiller Overview

Unique Opportunities in Seabrook

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

TEXAS RETAIL FOCUS

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How did $100M in commercial property damage insurance claims get settled faster & easier than using an attorney?

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NASA PARKWAY

For more information, see page 14.

Highway frontage (and more) opening up!

146

Breaking Ground and Reaching New Heights in Cedar Hill, Texas

SH

For more information, see page 14.

For more information, see page 24.

Nominate People, Projects & Companies

2020 REDNews Awards Houston www.rednews.com/awards FEBRUARY 2020

MARCH 2020

Insurance Companies have experts on their side, shouldn't you? Public Insurance Adjuster Scott Friedson is the policyholder's expert.

Cedar Hill EDC...............................................................................................1 Nominate People, Projects & Companies

2020 REDNews Awards Houston www.rednews.com/awards

For more information, see page 8.

APRIL 2020

DECEMBER 2019

REDnews & Awards Winners Announced Page 13

Groundbreaking Ceremony at Cedar Hill’s Future Aloft Hotel & Convention Center.

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Nominate People, Projects & Companies

Lease this entire building for $6/sf

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YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

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advertiser index

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Great residential / mixed use development opportunity Surrounds the private Bluejack National Golf Club

Nominate People, Projects & Companies

through For more information, see page 2 Towering above the Metroplex at 880 feet, Utilities Cedar available Hill is the highest Blake Tree MUD elevation from here to the Gulf of Mexico. Add this feature to the beautiful, rare environment and it’s the place businesses continue choosing to call home. A variety of companies are capturing strong dividends on opportunities throughout the city and partners in progress continue pioneering its future.

For more information, see page 19

City Management......................................................................................11

2020 REDNews Awards Houston • www.rednews.com/awards

Prime Development Opportunity in South Houston

Saddle up and let’s get started on your next big project.

C-J Auctions................................................................................................23

www.cedarhilledc.com

Located on FM 1486, just south of Jackson Rd in Montgomery, TX CaldwellCos.com (713) 690-0000

HOUSTON | AUSTIN | SAN ANTONIO

RESERVE YOUR SPACE! Summer Issue July/August 2020 Deadline: July 8, 2020

CRG Texas Environmental.......................................................................... 3

First Warranty Realty................................................................................11

Kay Properties & Investments............................................................... 19

La Marque EDC............................................................................................. 5

National Environmental...........................................................................31

Phase Engineering.....................................................................................26

RSB Environmental..................................................................................... 7

SparrowHawk.............................................................................................. 2

The Real Estate Council – Ft. Worth......................................................29

Better Together

Worth & Associates.....................................................................................9

The Real Estate Council of Greater Fort Worth We are Fort Worth and Tarrant County strong!

REC of GFW is working hard to support our first responders, our citizens and our businesses.

We are in this together!

Visit our website for more info: RECouncilgfw.com

JUNE 2020

29

30

JUNE 2020

A 360°APPROACH TO E N V I R O N M E N TA L S E R V I C E S STAY STRONG AND SAFE

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2020 2020

Texas Upcoming Upcoming Events Events Texas

POSTMASTER: PLEASE EXPEDITE TIME SENSITIVE MATERIAL 5909 West Loop South, Suite 2537 S. Gessner, Suite 135, Bellaire, TX 77401 Houston, TX 77063

PRSRT STD U.S. POSTAGE PAID PERMIT NO. 2436 DALLAS, TX

126

Address Service Requested

HOUSTONMARKET MARKET HOUSTON

If this person is no longer with your company, please notify subscriptions@ rednews.com or call 713-661-6300

TheBriar BriarClub, Club,2603 2603Timmons TimmonsLn,Ln,Houston HoustonTXTX The June24: 24: June

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July31: 31: July

HoustonCapital CapitalMarkets MarketsSummit Summit Houston

August20: 20: August

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Joni Margotta Ginger Wheless joni.margotta@rejournals.com ginger@rednews.com C o n t a c t u713-661-6350 s t o d a y t o l e a r n m o r e a b o u t w2537 h a t wS. e cGessner, a n d oFrank f o r Ste. yE.o uBiondo !126, Houston, TX 77063 469-569-0246

7 1 3 . 6 WORTH 6 1 . 1 5 MARKET 00 | DALLAS/FORT Brookhaven Country Club, 3333 Golfing Green Dr, Farmers Branch TX

713.661.6300 • www.rednews.com

a l r o s s s i g nfrank.biondo@rejournals.com group.com 248.670.2691