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THE TEXAS COMMERCIAL REAL ESTATE NEWS SOURCE | MAY 2021

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Features Who’s next? Amazon selects La Marque for delivery station Though perhaps not the first domino to fall for the La Marque Economic Development Corporation, Amazon’s announcement is certainly the largest in a few years and will trigger more growth and expansion for the city.

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Eyes on Austin: Texas’ capital city tops national lists for investors A number of national organizations say research points to Austin (and other Texas cities) as top markets for investors as they look to make up for a disappointing 2020.

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MAY 2021

Opportunity Update: As major deadlines in the Opportunity Zone program pass, we dive into the benefits that still exist What does the future hold for the Opportunity Zone program under a new administration?

Experts weigh in on what investors can expect.

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Towering Expectations: Subcarrier Communications maximizes profits from rooftop telecommunications Negotiating agreements for rooftop communication systems can be best be managed by hiring a rooftop manager. Subcarrier Communications has the knowledge and experience to properly and professionally manage the most complex rooftop sites.

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2021 Rio Grande Valley Economic Forecast & Market Incentives Recap A recap of the event.

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CCIM April meeting "Exiting the tunnel: the energy in a post-covid world” A recap of the event.

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CCIM Commercial Real Estate Competition A recap of the event.

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Scoop

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CRE Marketplace

Letter from the Editor THE TEXAS COMMERCIAL REAL ESTATE NEWS SOURCE

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The old saying, “April showers bring May flowers,” may have an entirely different meaning in 2021. Heading through April and into May, we’re seeing vaccination figures throughout the nation increasing at a fast pace and local governments easing up restrictions that have been in place for months on end. But there’s also hope and optimism for a quick economic recovery, and at least on the retail front, consumer demand and confidence appears to be rocketing back up.

Reports on retail, office, and industrial leasing throughout Texas offer some mixed signals, however. The office market in areas like Houston and Dallas are expected to struggle for a while, however, retail is plotting its comeback as industrial continues its march forward. A slew of big developments and high-rise towers throughout Texas push forward despite the pandemic and economic slowdown. And perhaps not surprisingly, Austin continues to be a top performer in the commercial space.

It may still be too early to count metro downtowns out.

The residual effects of the freak winter storm and ongoing power outages were a wakeup call to elected officials and business leaders that the Texas grid needs a closer look and some improvements if the Lone Star State is expected to continue its exponential growth at a sustainable pace. However, Texas can boast one of the most diversified power production networks, keeping it multiple steps ahead of other states that have set ambitious renewable energy goals.

Housing also remains a top issue, particularly in Austin, where demand has seen prices pushed higher and higher. Even billionaire industrialist Elon Musk is calling for more solutions to the city’s housing shortage. The flip side is that high demand and a quickly growing economy and population are good problems to have, it’s just a matter of making sure that everyone gets a fair shot — or perhaps two.

Texas Leasing/Tenant Rep: 6,232 Texas Investors: 4,979 Texas Developers: 4,710 Outside Texas Investors, Brokers,

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Who’s next? Amazon selects La Marque for delivery station

BY BRANDI SMITH

During a year that was a struggle for so many Texas communities, La Marque saw the light at the end of the tunnel earlier than most.

“We had quite a bit of behind-the-scenes work that happened, as you can imagine, before we could finally make the announcement,” says Alex Getty, Executive Director of the La Marque Economic Development Corporation.

That announcement? Amazon chose La Marque as the site of a 180,000-squarefoot delivery station, which will power the company’s last-mile capabilities to speed up deliveries for people in and around Galveston County.

“We know location is a very important factor when sites are selected for projects like this. Since La Marque is the hub of the mainland, I think it helped Amazon ultimately choose us,” Getty says.

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The facility is expected to directly contribute about 400 jobs, which pay a minimum of $15 per hour -- everything from drivers, to primary management positions, to team leads. But projects show it will also contribute to 150 more, such as janitorial suppliers or employees in restaurants built to accommodate the expanded workforce. Another 230 construction workers are needed just to get the building off the ground.

“We are excited to continue to invest in Texas with a new delivery station in La Marque that will create hundreds of new job opportunities and provide faster and more efficient delivery for customers," said Daniel Martin, a spokesman for Amazon. "We look forward to continuing our growth in Texas and want to thank local and state leaders for their support in making this project possible.”

The city’s real estate market was already heating up before the Amazon announcement.

Now it’s red hot.

“The phone rings all day almost every day. We’re answering questions from folks who have big ideas and small ideas. We’re here to talk to them about what our resources are and how we might help them through the process,” Getty says. “I think people are starting to recognize that La Marque really is the place to be if you want to live on the coast and have some protection. For corporations, this city is also where employees can take advantage of all the different assets in our region.”

In total, La Marque EDC anticipates the annual economic impact of Amazon’s facility to be more than $56 million to the region.

“I think La Marque was able to demonstrate that we are pro-business and will help navigate developmental challenges that arise during the process,” says Getty. “City staff can work through them efficiently and effectively.”

The EDC demonstrated its proactive efforts at the beginning of the pandemic, when it provided COVID-19 grants to 124 La Marque businesses via its Emergency Business Retention Program.

“That totaled almost $1 million, which was significant, but it helped save a lot of La Marque businesses,” Getty says. “La Marque did more per capita at the local level than any city I’m aware of.”

For those investors, developers and businesses interested in La Marque, the EDC is also unique in offering pre-development meetings. Bringing together Getty and city officials, such as the city attorney, engineer fire marshal, and code enforcement allows the group to run through ideas and what it will take to make them happen.

“That way, there are no surprises. When someone makes an investment in La Marque, we want them to know exactly what the process looks like so they can make a sound business decision,” says Getty. “Our pipeline is filling up. It’s a wonderful time to be working in La Marque.”

For more information about making the move to La Marque, call Alex Getty at (409) 938-9258.

Along with being responsive to the pandemic, the city also has protections in place for the severe weather for which the Texas Gulf Coast is known.

“The hurricane flood levee system is a huge asset for La Marque,” says Getty. “During Hurricane Ike, it kept the storm surge out. Then during Hurricane Harvey, the county pumped the rainwater to the bay side of the levee, so we didn’t have mass flooding.”

Another of La Marque’s assets is its freeway frontage, with large tracts available along I-45.

“If visibility matters to a corporation or company that is looking to relocate to our area, then La Marque is where it’s at,” adds Getty.

MAY 2021

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Eyes on Austin: Texas’ capital city tops national lists for investors

BY BRANDI SMITH

Russell Ingrum

Tore Steen

access to private equity opportunities in commercial real estate.

“Our online real estate investment marketplace is helping to create a community where individual accredited investors and experienced commercial real estate firms can work together to expand participation in real estate investing,” says Steen.

To date, thousands of CrowdStreet investors have contributed more than $1.7 billion in over 470 projects, receiving nearly $200 million in distributions, according to Steen.

When real estate investment platform CrowdStreet was weighing where to relocate its headquarters from Portland, Ore., its leaders considered a number of factors such as cost of living, the opportunity for growth, and access to a major research university. After some exploring, the choice was clear: Austin, Texas.

“We did a search to understand where a majority of the investors were based.

Texas came in at No. 2,” says CrowdStreet CEO and Co-Founder Tore Steen.

“When looking at all the projects in the marketplace over the past seven years, the state is number one.”

Steen adds that Austin also represents a diverse and highly educated population with a quality of life that is very similar to Portland, something that was important to the CrowdStreet team.

“I plan to be the first Portland-based employee to move,” Steen says. “All of our employees have been given an option to continue working with our hybrid model (either in-person or remote as it works for them) or make the move to Austin with the help of a relocation package.”

CrowdStreet was founded in 2013 to provide individual investors with better 8

MAY 2021

Early in 2021, CrowdStreet issued a report called The Best Places to Invest in 2021, which listed Austin as the second best location in the entire country. (RaleighDurham topped the list.)

“We’re taking our own advice and are excited to bring an office to a market with amazing growth potential, a large population of investors, and real estate opportunities,” says Steen.

CrowdStreet wasn’t the only national organization to recognize Austin as one of the most desirable places to invest. CBRE’s 2020 Investor Intentions Survey put the Texas capital city in the top spot.

Russell Ingrum, Vice Chairman and Senior Partner who leads the CBRE Texas Capital Markets Institutional Properties Team, says Austin has four unique attributes that helped it unseat Los Angeles: it’s a high-growth market, it has a heavy tech concentration, it has some restrictions on new supply, and it’s not a gateway city.

“For decades, investors have prioritized gateway cities for their investments -and for good reason, as they have been hubs of commerce. And while the trend of tenants migrating, in whole or in part, toward sunbelt markets existed before

“We’re taking our own advice and are excited to bring an office to a market with amazing growth potential, a large population of investors, and real estate opportunities.” the pandemic, the trend has certainly accelerated because of the pandemic,” Ingrum says. “Investors are not going to abandon gateway cities, but investors are underweighted in sunbelt markets and because of the attributes above, Austin is the favorite.”

It may be the favorite, but it has competition from its neighbor up I-35. Dallas grabbed the No. 2 spot for investors.

“CBRE’s perspective is that all of the Texas markets are well poised for continued growth and investor demand,” says Ingrum. “Because of the migration of people and jobs to the state, investments in Texas will outperform.”

CBRE’s survey also revealed 70 percent of investors want to make more buys in 2021. Ingrum says a number of factors are fueling that increased appetite, including what he calls the denominator effect.

“Because the stock market has increased so significantly over the last year,

portfolio managers have to allocate more capital to alternative investments (such as real estate) in order to maintain the same allocation percentage,” he explains.

Low yields are another contributing factor. Because they’re so low in fixedincome, Ingrum says investors are more amenable to additional risk in order to enhance their overall returns.

The final factor: 2020.

“Most investors were disappointed by the amount of capital they deployed in 2020 due to decreased deal flow and the difficulties the pandemic created for traveling and underwriting assets,” says Ingrum. ”So most investors are trying to ‘make up’ for last year’s anemic deployment.”

As they do, all eyes will be on Austin and Dallas, which analysts believe will be on a roll for years to come.

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Opportunity Update: As major deadlines in the Opportunity Zone program pass, we dive into the benefits that still exist

BY BRANDI SMITH

“These are uncertain times for any income tax laws. However, the OZ program was originally enacted with bipartisan support, and I'm not aware of any proposed discontinuation of the OZ program.

There has been Democratic interest in imposing more stringent reporting requirements for OZ investments, but it's not presently known what these more stringent requirements might be.” disruptions, such as natural disasters. The result is more than 8,700 qualified tracts scattered around the country, including hundreds in Texas.

Going into a new presidential administration, one of the big concerns in the investment community was the future of the Opportunity Zone (OZ) program. It was created by the 2017 Tax Cuts and Jobs Act, which was passed under a Republican administration.

“These are uncertain times for any income tax laws. However, the OZ program was originally enacted with bipartisan support, and I'm not aware of any proposed discontinuation of the OZ program,” said Chris Goodrich, partner at Houston-based law firm Crady Jewett McCully & Houren. “There has been Democratic interest in imposing more stringent reporting requirements for OZ investments, but it's not presently known what these more stringent requirements might be.” §§ 1400Z allows investors to defer, reduce, and in some cases, eliminate capital gains tax by investing in specified low-income areas designated as qualified Opportunity Zones (OZs). They must do so by reinvesting their capital gains in Qualified Opportunity Zone funds (QOFs).

State governors submitted their recommendations for OZ tracts, areas in need due to chronic unemployment, lower population density and economic 10

MAY 2021

A common question related to that list is whether it could change based on the results of the 2020 Census.

Chris Goodrich

“Technically, the designation of a census tract as an Opportunity Zone expires after 10 years,” said Goodrich. “But the final regulations provide that an investment in OZ property will retain its status through December 31, 2047, even though a census tract ceases to be classified as an OZ due to a future census.”

The OZ program has incurred some other minor tweaks since the last update to it. The most significant change came by way of the COVID-19 relief packages, which resulted in several extensions of deadlines for QOFs and their investors, according to Goodrich.

First, he says, the IRS issued Notice 2020-23 on April 6, 2020. It extended

some investment deadlines until July 15, 2020. President Trump’s declaring the COVID-19 pandemic a federal disaster also had an impact.

gain) before the ‘drop dead’ gain recognition date of December 31, 2026,” Goodrich said.

“This had the effect of placing the entire United States in a ‘federally declared disaster’ area and thereby extended the 31-month working capital safe harbor for QOF subsidiaries by up to an additional 24 months,” Goodrich explained.

Finally, if an electing taxpayer's holding period in his or her QOF interest reaches 10 years and that electing taxpayer so elects, the electing taxpayer is entitled to a permanent exclusion of any new gain.

The IRS announced still further extensions in IRS Notice 2021-10 and Notice 2021-39. Though one significant deadline related to OZs just passed on March 31, there are still a number of tax benefits available to investors.

“The first tax benefit is a temporary deferral of tax on present capital gain (including the 3.8 percent net-investment income tax) if an amount equal to that gain is timely reinvested into a QOF (so-called ‘deferred gain’),” said Goodrich. “This deferral lasts until the earlier of (i) an ‘inclusion event’ or (ii) December 31, 2026.”

The second tax benefit is a permanent 10 percent reduction in the rolled-over deferred gain if the electing taxpayer's holding period in their QOF reaches five years.

“Note that if an electing taxpayer fails to roll over his or initial gain into a QOF by December 31, 2021, that electing taxpayer will not be able to satisfy the five-year holding period (and thereby receive a 10 percent reduction in

“That means the gain in excess of the rolled-over deferred gain generated from the appreciation of the QOF investment, the ‘excluded gain,’” said Goodrich.

For those who have not yet taken advantage of the unique investment possibilities that OZs present, Goodrich noted a couple things to watch going forward.

The 10 percent reduction in deferred gain will be lost if a taxpayer doesn’t invest in an QOF by the end of 2021. Additionally, with each passing day, the first benefit (tax deferral on deferred gain) lessens.

Goodrich added that Democrats have expressed interest in increasing tax rates on long-term capital gains. “lf that happens, the first tax benefit noted above will become less valuable, but the third tax benefit noted above will become more valuable,” he said.

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Towering Expectations: Subcarrier Communications maximizes profits from rooftop telecommunications

BY BRANDI SMITH

Have you ever noticed the telecommunication antennas on the top of your city’s tallest buildings and wondered, “Who takes care of those?” In many cases, the answer is Subcarrier Communications, a leading tower site management and telecommunications infrastructure support company.

“We work with building owners and managers to plan for the efficient use of building rooftop space then leasing it to the telecommunications industry,” says Greg Weger, Operations Manager for the company’s Houston office. “We also handle the management of existing and future wireless infrastructure.”

An important feature of Subcarrier’s services is negotiating with telecom providers on behalf of property owners. An in-depth knowledge of PUC Rules and Regulations, Building Rules and Standards and industry standards are 12

MAY 2021

critical to protecting the properties while also recognizing the highest possible revenue.

There is an abundance of contractual process involved with many rooftop tenants and fiber providers. And even after agreements are reached, there are ongoing technical responsibilities and access issues at hand. There are renewals, there is expansion of equipment, and there are escalation clauses, as well as many other technical contractual clauses to be mindful of. We monitor and deal with all of these issues which allow property managers the time needed for a myriad of other crucial tasks.

Access is one of the primary issues Subcarrier addresses for property owners.

“Security and safety have always been paramount for property owners,

“We work with building owners and managers to plan for the efficient use of building rooftop space then leasing it to the telecommunications industry. We also handle the management of existing and future wireless infrastructure.” but in these turbulent times access control has become even more critical Subcarrier works with the property managers to develop critical access control procedures.”

“Security and safety have always been paramount for property owners, but in these turbulent times access control has become even more critical. Subcarrier works with the property managers to develop access control procedures to ensure that the personnel requesting entrance into properties are verified and have the proper insurance.” Weger explained.

Weger further adds, “Subcarrier provides telecommunications management support to more than 1000 properties around the country.”

Subcarrier doesn’t just step up to manage existing rooftops and fiber providers.

It’s best if the company is involved before construction even begins.

It helps that Subcarrier has a broad base of existing network users that have worked with the company for decades. They include data, wireless internet, PCS, microwave, broadcast, government, federal, state, and local business users.

While Subcarrier’s Houston office focuses on rooftop management, the company also builds and places antenna structures to promote wireless services for a diverse portfolio of institutions, including wireless carriers, military and assorted institutions requiring advanced telecommunication needs. Subcarrier owns more than 300 towers throughout the U.S. To learn more about Subcarrier Communications, visit Subcarrier.com, email greg@subcarrier.com or call 281-788-0741.

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2021 Rio Grande Valley Economic Forecast & Market Incentives Recap

BY RAY HANKAMER

EVENT MODERATOR: Todd Phillips-REDnews PANEL MODERATORS: Michael Blum-NAI RGV; Randy Summers-Davis Equity; Selene Guerrero-Harlingen Economic Development Corporation (EDC) Panel Speakers: Conrad Madsen, III-Paladin Partners; Josh Meija-Brownsville Community Improvement Corporation; Raudel Garza-Harlingen EDC; Carlo Molano-Forum Commercial Real Estate; Keith Patridge-McAllen EDC; Dr.Janna Arney-UTRGV; Teclo Garcia-EDC, City of Laredo; Matt Ruszczak-Rio South Texas Economic Council; Moi Mahoney-Freightwaves.com; Eduardo CampianoPort of Brownsville; Helen Ramirez- City of Brownsville; Marv Easterly-Valley International Airport; Linda Ufland-UTRGV; Walker Smith-Port of Harlingen; Sergio Contreras-RGV Partnership; Brian Reed-The Ryan and Brian Real Estate, Tierra Frontera, LLC Takeaway: The lower Rio Grande Valley is comprised of many cities and towns and taken together has 1.3 million population, greater than 11 states. Closely affiliated is Laredo, as are all the sister cities across the Rio Grande in Mexico, which share numerous and long-standing family, business, and historical relationships. This is a bi-national region with intricate economic cooperation going back centuries, with a large percentage of the population on the U.S. side sharing the culture and language of Mexico. The area is booming with its interlocked combination of land, sea-, and airports connecting the Gulf of Mexico, the U.S. heartland, and via a trans-Mexico highway, the Pacific Ocean. China trade is being diverted via the Panama Canal to Texas ports including Brownsville by highway, rail, and sea, and the RGV is seeing an industrial boom with warehouse vacancies only 1-2%.

The future looks very bright for the area, which includes Harlingen, Brownsville, Edinburg, Pharr, Laredo, Raymondville, McAllen, Roma, and Progreso, before starting to mention the sister cities across the Rio Grande.

Bullets: • Including the Mexican state of Tamaulipas, the RGV trade area is 10.3 million population; the RGV is further south than Miami; the Rio Grande Valley trade area is comprised of two nations • The inland port of Laredo surpasses Detroit for international trade; in last ten years freight train crossings are up 50% to 4,800 annual and trucks up 50% to 3.4 million; this drives need for infrastructure and logistics management, and this will only grow as supply chain returns to North America (MS & US) from Asia; the BNSF, Union Pacific, and Texas City Southern connect Pacific ports of MX with the vast consumer market in the US, crossing the Rio Grande via truck and train • The Interoceanic Highway connects the Mexican Pacific port of Mazatlan with Matamoros on the Gulf of Mexico, opposite Brownsville and near its deep water port; going north, I-35, I-69, and 281 connect the RGV with the heartland of America, with I-69 going to Detroit and its auto industry; 75% of U.S. population lives east of the Mississippi River; trade passes more or less equally between MX and the US, as MX is one of our largest trading partner 14

MAY 2021

• With the addition of the new Brownsville airport, there are now airports in McAllen, Harlingen, and of course Laredo-all with heavy air freight activity around the clock; Harlingen airport has non-stop flights to DFW, Houston, Chicago, Minneapolis, Denver, and other destinations; lots of shovel-ready sites available near these airports • Numerous area universities and trade schools offer training in all the disciplines, from medical doctor to welder; also liberal arts, research, technology, engineering, and business; the new Space Port has added aerospace to the industries in the RGV

• If it were its own country, the State of Texas would have the 9th largest GDP in the world — larger than Russia or Spain, and the RGV is an integral part of the state economy, with it role in near-shoring and on-shoring back to Mexico of many industries which are returning from Asia

• The area has a very young average age-30-compared to the U.S.- 40. Lots of energy and consumer buying power.

• The shallow draft barge port of Harlingen connects the region to the intracoastal waterway and its very low cost transport; one barge carries the same load of 70 semi-trucks or 16 rail cars; bulk cargoes include cotton, grain, fuels, sand, fertilizer, auto parts for the maquiladora plants in Mexico, and other commodities, and remember that the freight goes two ways-into and out of the region; containers are now being transported cheaply and efficiently on ocean and canal barges, taking heavy and polluting vehicles off the highways

• The international bridges at Pharr and Brownsville alone handle over $50 billion in trade a year in the Lower RGV, and in 2020 there were 2.3 million trucks crossing the river, compared to less than a million in California at the TijuanaSan Diego city pair; El Paso-Juarez by comparison sees fewer than 300,000 annual trucks; there is a major expansion of the bridge at Pharr, where avocados, oranges, grapefruit, peppers, and asparagus make up just a part of the vast agricultural cross-border trade

• Some of the northern MX factories were shut down in 2020 off and on due to Covid and to shortage of parts, namely computer chips

• China is the largest trading partner of the Port of Houston, but some of this China trade is making its way to Brownsville’s port and to the RGV by way of the Panama Canal and via Mazatlan and the Interoceanic Highway; the Port of Brownsville handles shipping of windmill components up to 250 ft. long, and well as other renewable energy cargoes • Space-X at Boca Chica near the mouth of the Rio Grande is providing an economic jolt to the area, with families moving in; aerospace manufacturing is big in MX as is production of auto parts for companies like BMW, Tesla, and many others

• Medical services including teaching facilities are expanding in the RGV in pace with the economy, and along with it come research and training of people; the region is working to replace vendors from outside the region with home-trained talent in the local workforce; as a result unemployment has fallen from 24% at one point to the single digits now; the region has a heavy emphasis on education and training; Covid hit the area hard, but it is rebounding now

• Numerous state, federal, and local programs are in place to fund/expedite new enterprise in the RGV, in all sectors of the economy; as a result, home sales are booming and 50% of area listings are currently under contract; there is an unmet demand for new homes, which is somewhat impeded by rising costs of materials; depending on the locality, appreciation in residential values has ranged from 6% to 10% in one year, in line with other parts of the state; there is a strong need for national homebuilders to put the RGV on their radar; during Covid and the joblessness that resulted, most homeowners worked with their mortgage holders to achieve forbearance or other forms of financial help; only about 15% remain in limbo

• There are some big box retail locations available, as retail sales have suffered from the pandemic; much shopping in the RGV is from residents in the sister cities in MX-the RGV is the shopping hub of NE MX; many programs are available to help rejuvenate the historic downtown areas of the towns and cities in the area, and development incentives also exist around the newer areas of the same townsthese include Opportunity Zones, SBA loans, Commerce Department grants, Workforce Programs, Texas Enterprise Funds, revenue bond financing, renewable energy incentives, and sales and use tax exemptions; ‘angel’ and venture capital is available through the economic development councils

• As can be taken from the above, the Rio Grande Valley is a business-friendly environment, as evidenced by the participants on this panel; area birthrate is 2.5 children per woman, vs. 1.7 in U.S.; this bodes well for consumer demand for years to come • The RGV desperately needs new warehouses to handle automotive, textiles, plastics, medical, battery, component recycling, cold storage of beef and other consumables, and much much more

• The Port of Brownsville connects with raw materials and finished products coming and going from the industrial city of Monterrey, including steel, diesel, fuels, and lubricants; the Port features a shipbuilding yard which also deconstructs retired ocean going vessels as well as decommissioned naval vessels as large as aircraft carriers; ocean going barges carry cargoes as far as Tampa, including new elongated containers as long as 53 ft.

• Laredo is “blessed by its location” between two major economies, and 40% of its trade is auto-related, with traffic using rail and auto bridges 24 hours a day; Mexico rivals Japan during some periods for number of autos exported to the U.S., and produce import volume from MX is huge as well; big amounts of candy, frozen and chilled beef, and Legos are imported from MX via Laredo, just to name a few imports. Many Fortune 500 companies have a presence in Laredo, with its close highway connections between MX and Austin, San Antonio, DFW, and Houston; the Laredo airport has 25-40 freight flights daily; there is a unique joint US-MX customs facility at the Laredo airport; more lanes are being added to the Laredo bridges; crude oil comes into US from MX and refined products go south

advertiser index Cushman & Wakefield....................................................................... Back Cover First Warranty Realty................................................................................... 9 Forum Commercial Real Estate.................................................................. 2 Harlingen Economic Development Corporation..................................... 3 Jacobs Properties.......................................................................................... 11 Lane Property Tax Advocates..................................................................... 17 Lincoln Property Company.......................................................................... 19 National Environmental Services, LLC...................................................... 23 Phase Engineering ........................................................................................ 20 Spear Minerals............................................................................................... 13 The Real Estate Council - Greater Ft. Worth........................................... 19 MAY 2021

15

CCIM April meeting "Exiting the tunnel: the energy in a post-covid world”

BY RAY HANKAMER

“ The 2020 power failure in Texas was due to a number of incremental failures, some of which came from lax enforcement of existing regulations, but the mail culprit was the cold itself.”

Speaker: Dr. Detlef Hallerman-Texas A&M University Legal Report: Focus of the Current Legislative Session in Austin-Reid WilsonWilson, Cribbs, & Goren

Legal Takeaway: Because of the delayed census data, there will be a special session of the legislature when the data is available. Republicans control the legislature, so Republican governance is expected for next ten years. Fiscal restraints will reign in this session due to reduced state tax revenues during 2020 from COVID. Some changes in various laws during the COVID year are likely to remain. Marijuana and gambling laws not expected to change dramatically but baby steps in the direction of eventual full approval may be approved and signed into law-tax revenues from them give the state an incentive. Focused on the power outage in February, a number of corrective proposals are pending in committee. No detrimental legislation to commercial real estate activities is predicted.

Post-Covid Energy Takeaway: Since production, processing, sale, and delivery of hydrocarbon products dominate Texas business, the transition to a Green Economy to fight climate change will be one of fits and starts. Reduced energy consumption and corresponding production during 2020 has returned to 90-95% of levels seen in 2019, with aviation fuel production seeing the main ongoing slowdown.

Bullets: • Rig counts and corresponding production bottomed out in mid-2020 and are on the rebound; this was a good winter for natural gas consumption

• Drilled but not completed wells which were on hold during 2020 are now being completed to bring crude oil to market, and new drilling is kicking in, with corresponding resumption of hiring in the oil patch

• As supply, demand, and refining of petroleum products work back toward equilibrium, we will see pricing fluctuation; at one point in 2020 when production continued while consumption plummeted, large tankers were hired to anchor offshore as floating storage facilities, and their rental rates skyrocketed • The rate at which people get vaccinated and are seen to stop wearing masks will be a good indicator of the direction of the economy and of demand for hydrocarbons

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• The large European oil companies have gotten strongly behind renewable energy such as wind and solar, as it begins to replace hydrocarbon use as fuel; research is going ahead in CO2 removal from atmosphere and storage

• To achieve needed goals to avoid climate catastrophe, we will need to see an accelerated conversion to renewable energy, and this could cause pain to the O & G industry if alternate non-polluting uses for its feedstocks are not developed; in the next 30 years the necessary goals will require available renewables going from about 5% today of our energy supply to about 50%; to reach this transition pace may require taxation strategies; transportation using crude oil based fuels is not confined to cars but includes buses, trucks, trains, ships, and air transportation, so the transition to electrical and other energy sources will be all-encompassing and will doubtless entail political headwinds and engineering challenges

• Government at all levels will be stressed from shrinking tax revenues on hydrocarbon, so their budgets will have to find other sources of taxation

• Solar panels for residences will drop dramatically in cost over the next 30 years; with the urgency of the transition to renewables will come the pains of adjusting away from coal and other hydrocarbons, although the fall from grace for coal is well underway

• The 2020 power failure in Texas was due to a number of incremental failures, some of which came from lax enforcement of existing regulations, but the mail culprit was the cold itself, such as forcing one nuclear power plant offline, and freezing other plant’s pipes which delivered natural gas for power production

• Corresponding with the accelerated conversion to renewable energy and the abandonment of older polluting ways is the ongoing strong influx of population to Texas, which will serve to concentrate our focus on achieving the transition with parallel growing demand for energy

• Growth of renewable energy sources such as solar arrays and more wind turbines will be concentrated on rural land and not urban land, although rooftop solar on all types of buildings should see strong growth in our cities

CCIM Commercial Real Estate Competition

BY RAY HANKAMER Mark Dotzour, PhD, Keynote Speaker Takeaway: “We are in choppy waters after the storm, but the storm will blow away.” There is enormous, once in a lifetime pent-up demand in the economy and lots of volatility coming, but Americans have saved heavily during the pandemic and they are ready to spend the money, and the recovery will be correlated to the speed of vaccinations. We will have temporary inflation for a year or so as prices, which were beat down by COVID, return to normal — then inflation will return to a low level.

Bullets: • People will be spending on clothes, networking, concerts, cinema, vacations, weddings, conventions, hair, etc.

• Texas is traditionally one of the top three states for in-migration as per U-Haul statistics for inbound rentals • Houston/Texas were hit by a double whammy: lower oil prices and COVID, but oil could return to $100+ • We have had kinks in the supply chain and shipping costs have gone up, and there have been delivery delays in essential components, such as microchips • Home prices have seen big inflation in past year-16%-and there is only a 1.6 month inventory of homes for sale-the home shortage is growing and will get worse due to increasing cost of building materials such as lumber, copper, steel, etc.

• Mortgage rates will trend a bit higher but not enough to stop home sales, and overall rates will stay very low for at least 2-4 more years thanks to the Fed • It was a tragic mistake to lock down the U.S. economy, but now a big recovery is coming; tax increases being discussed in Washington will not slow down the recovery; it is time to start paying our way in our economy with some new taxes and stop deficit spending • We have given away millions of American jobs to other countries over past years and we need to bring them back; we are still missing 9 million jobs due to COVID; more jobs lost to COVID than to recessions of ’81, ’02, or ’09

• Expectation for 2021 is continued negative absorption (1-3 million SF) and the same pain as in COVID; the burn-off in sub-lease space did not happen in 2020 as hoped for • Mergers and acquisitions in the Oil Patch and other industries have contributed to shrinking demand; we in Houston are the worst Sunbelt City in office due to our double whammy: oil and COVID • Owners hunkered down and tried to hang on by giving shorter lease extensions, spending money on patios and outside and inside amenities to entice workers to come to work; a lot of money has been spent on air filtering and circulation systems • Although some small companies continue to come to the office throughout the pandemic, most larger companies worked from home • Landlords have urged tenants to sub-lease their excess space themselves instead of turning it back over to the landlord in mid-lease; there is little demand for small SF sublease space • New tenants coming to the market are going to the much cheaper sub-lease space rather than go to a building owner to lease

DON’T STOP ‘TIL YOU

• There are huge amounts of ‘dry powder’ in the hands of opportunistic real estate investors and their funds • There is a movement away from living in dense urban areas, and if people reorganize their work lives to work two days from home and three from the office, perhaps they will not mind commuting 60 minutes instead of the current preferred limit of 45…this will push residential demand much farther out from the CBD • “Much more optimism for the American economy and the American people is warranted than that which we hear from the people on TV.”

OFFICE Moderator: Henry Hagendorf-Tanglewood Property Group Speakers: Ryan Clark-Mission Companies; Eric Siegrist-Parkway Property Investments Takeaway: 2020 was all-‘round terrible for this sector, with negative absorption, concessions, rent abatements and forgiveness, and a glut of sub-lease space

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Bullets: MAY 2021

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• Open concept ‘We-work’ space is trying to figure out where it is going; some operators of this type space are trying to make one single big lease instead of leasing to 15-20 small entities

• Every type of office lease involves major concessions of all types now, from free rent to expensive TI buildouts; rental face rates are down up to 10% before any concessions; lease negotiations are ‘all over the place’

• Tenants like outside spaces with wifi, and are often seen working in patios

• Clear Lake and Westchase are seen as hottest markets for 2021 leasing

• Investors are waiting on the sidelines for distressed ‘buy’ opportunities

Land Moderator: Ed Taravella, Taracorp Speakers: Dave Ramsey-Newquest Properties; Simmi Jaggi, JLL Takeaway: “We will follow one great year with another!” There is a lot of money chasing deals, but it is hard to find a site that ‘does not have a lot of hair on it’.

Bullets: • With consumer confidence returning and the decline of COVID, 2021 is ready to blast off

• 2020 saw consumers getting government money and they are now ready to spend it, driving industrial growth and suburban housing, although infill growth will be slow due to detention requirements and aversion to dense living after COVID scare; new detention rules are very restrictive although still evolving

• People will be willing to commute farther from CBD, and there is a strong interest in farsuburban multi-family sites, with ‘master-planned communities being the name of the game’, including those developers who want to build next to them

• Land is being sold to developers and not to investors; there have been some distressed (and distraught) sales by land owners in 2020 who were pressured by COVID-inspired slack demand

• Midtown sites are going for $150 SF while tracts are still available ‘by the acre’ beyond suburbs; a Montrose site recently sold for above $200 SF; developers have more options with tracts in far suburbs; housing market is driven by land costs

• There were record home sales in 2020, but unclear if low interest rates were the only reason

• One of most attractive submarkets in 2021 will be Conroe

Medical Property Moderator: Beth Young-Colliers International Speakers: Brandy Bellows Spinks-CBRE; Ashley Cassel, Transwestern Takeaway: Most of the major players are expanding, both in the Texas Medical Center (TMC) area and in the various satellite locations where they can be closer to the patients they serve. There is some consolidation going on among independent practitioners as they seek economies while maintaining a top image for their patients.

Bullets:

• TMC-affiliated institutions are restricted to ‘not for profit’; they serve 10 million patients per year; there is 85% average occupancy within the TMC • The Woodlands, Clear Lake, and Pearland are projected to be strongest sub-markets for 2021 • The Woodlands and Pearland market have the highest rents, in the satellite areas

• Office tenants don’t like to mingle with medical tenants, in general; the m edical office sector has weathered the COVID scare well, after an initial scare when patients and doctors alike were afraid of getting together

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• The slowdown in elective procedures hurt some medical office tenants at first; ‘telehealth’ helped get revenues flowing back to doctors in their offices, and facilitated their survival during the early stages of the pandemic

• Most of the major institutional players are steadily growing, including Baylor, HCA, Memorial Hermann, MD Anderson, etc.-there was a pause in 2020 but now heading back to normal

• Houston ranked in the top cities in the nation in 2020 for investment sales of medical office with $378 million and cap rates are just below 6%

Industrial Moderator: Jane Nodskov, ICO Commercial Speakers: Rob Stillwell-Newmark; Wesley Williams-Boyd Commercial Takeaway: E-Commerce blew up in 2020 beyond what was thought was possible, advancing by 30%. Q1 started slow but by the end of the year there was huge momentum. Industrial space is now much more varied and specialized than ever before.

Bullets: • Much more demand for employee and trailer parking and site circulation for big rigs

• Cold storage demand is increasing as more people want home delivery of groceries

• Land costs are increasing due to detention requirements, but compressed cap rates on sale can make up for higher front end costs; construction material inflation is adding to cost to deliver new facilities; construction costs are changing so fast it is difficult to give a hard quote to prospective tenants

• Harder to find developable sites; securing permits and entitlements is a much longer process now

• Overall mobility to and from sites is key, as is proximity to consumers

• Higher ceiling heights required by taller rack storage is dictating more expensive but more efficient buildings

• The north Houston market is somewhat soft but should not remain soft for long; the SE has lots of product near the Port but the Port continues to expand, and plastics production is expanding there as well • Cap rates are south of 5% and wealthy families from S. and Central America are among most aggressive investors; it is a good time to sell industrial product in Houston

• Industrial occupancy is around 90%

• Traditionally Dallas received goods by rail from West Coast ports and was the distribution center for Houston area, and now that role is reversing with ships coming direct to Houston via Panama; Houston is supplying Dallas

Multi-Family Moderator: David Schwarz, Newmark Speakers: Blake Willeford-Greystone; Joseph Bramante-TriARC Real Estate Partners Takeaway: In 2020 multi-family (M-F) was not too far behind industrial in market strength. There was a ‘wildfire’ of refinancing at historically low rates. Houston occupancy was hit by oil problems and COVID but overall has fared pretty well.

Bullets: • Unit managers did a good job cementing relationships with tenants during 2020, and 85% of those tenants receiving rent relief did spend it on paying their rent • Lean operations helped landlords get through the year, so that M-F was ok • A lot of new supply came online in 2020, but rent collections were ok, in spite of the stresses on tenants from the pandemic • Lenders are working overall with M-F borrowers where forbearance was needed, and lender-required reserves for interest are slowly decreasing

• Potential capital gains tax rates will have some effect on M-F investment sales • Government programs have been focused on helping tenants but not so much landlords • Rising construction costs will translate into higher rents for new projects, but landlords are urged by prospective tenants not to cut amenities to compensate

• COVID is pushing living to the suburbs and down ‘a half a class in M-F rentals’

• Occupancy will be in 82% range for Class A and 92% for Class B in 2021

Retail Moderator: Josh Jacobs, The Blue Ox Group Speakers: Tenel H. Taylor-Fifth Corner; Richard Buxbaum-Radius Realty Takeaway: E-Commerce jumped to 16% mid-COVID but is now retreating down to the 14% range.

Bullets: • There will always be categories of retail which will survive in bricks and mortar locations, including (of course) service-oriented businesses

• Irreplaceable corners serving communities are the key to successful stores and shopping centers

• Retail occupancy is about 94% going into 2021 and there will be positive ab sorption

• Landlords and tenants must be creative in finding new ways to ‘attract spending’

• Many tenants who survived COVID months are now cash-strapped and will take time to regain their financial strength; landlords need to think in terms of being partners with tenants so both of them survive and get strong together; how to work together for tenants’ success?

• Mom and pop tenants have entirely different issues than national tenants

• Many landlords have followed the trend to ‘outside’ and have created exterior lighting and patio seating to satisfy shoppers wishes

• Goal is to create customer attractions so they will return to shopping after Covid is gone

• Most landlords have stepped up with rent deferrals and abatements on a case by case basis

• Tenants such as bars which were completely shut down during part of 2020 need different ‘care’ from landlords than tenants who struggled but still managed to stay open; the smart landlords figure out how to save valuable tenants

• New supply of retail space dropped off in 2020, keeping a relative absorption balance; new space delivery is expected to pick up by the end of this year

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MAY 2021

19

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Golden Brings Vertical Investment Strategy to Austin-Headquartered Real Estate Investment Firm as it Targets Sun Belt and Domestic Growth

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Rastegar Property Company, a vertically integrated private real estate investment firm focused on multifamily, office, retail, and industrial asset classes throughout the United States’ Sun Belt region, today announced Neal Golden as the organization’s President. Golden joins Rastegar to focus on the company’s real estate platforms and develop its vertical investment strategy across all business lines. Golden’s extensive experience expanding into and working within the Sun Belt will be crucial to Rastegar.

Golden joins Rastegar with three decades of experience building global and domestic real estate businesses at some of the most prominent firms in the U.S. Throughout his career, Golden has lived and worked in various Sun Belt cities, including Atlanta, Miami, Houston and Dallas, enabling him to bring a nuanced level of market and industry expertise to Rastegar. “Joining Rastegar–an emerging industry player gaining national prominence–is a great opportunity and I look forward to further enhancing Rastegar’s domestic strategy,” said Golden.

“Thanks to the foundation built by Ari and his team, Rastegar has experienced tremendous growth over the past five years, especially in property acquisitions. We will continue to target vintage assets that can be brought to market.” Golden, a Dallas native and graduate of the University of Texas at Austin, will be working from Rastegar’s Austin headquarters. In his role as President, Golden will work with Rastegar’s Founder and CEO, Ari Rastegar, to manage day-to-day operations and implement strategies to achieve and sustain growth as the firm continues to develop and bring to market next-generation properties.

“Rastegar has hit an inflection point, so the timing is ideal to bring in Neal, a close friend and brilliant man of integrity who I’ve been friends with for almost a decade,” said Rastegar.

“Neal has a proven track record of building multi-billion dollar real estate brands. He has been successful in Austin and has worked throughout the Sun Belt, making him a perfect fit as we continue to innovate, evolve and scale the firm.” Professionally, Golden is a twelve-time Deal of the Year award winner from various publications for transactions across the United States and has built and invested in over three thousand multifamily housing units across the southeast and mid-Atlantic. He has contributed industry expertise to publications such as GlobeSt. (Real Estate Forum), Grid Magazine and Commercial Property Executive. Golden is a featured speaker and guest lecturer for organizations around the country, including National Real Estate Investor, ALA, Lex Mundi, Group of Ten and the U.S. Law Firm Group.

CCIM Gulf Coast Chapter March event Lindsey Lee Anita Amin from Blue Ox Group and Scott Carson, Neal Stephenson and Richard Buxbaum from First American Title.

2 Several new and long-time Houston IREM members mingling over drinks.

3 IREM Houston March Happy Hour Andi Perry with Transwestern and Marissa Virgadamo with NAI Partners.

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IREM Houston March Happy Hour Industry Partner Eric Hancock and Greg Sherman, CPM with Brookfield Properties.

MAY 2021

21

CRE MARKETPLACE ASSET/PROPERTY MANAGEMENT FIRMS

CENTERPOINT PROPERTIES 800 Town and Country Blvd., Suite 500 Houston, TX 77024 Website: centerpoint.com Key Contacts: Danielle Radtke, dradtke@centerpoint.com Services Provided: CenterPoint Properties is an innovator in the investment, development and management of industrial real estate and multimodal transportation infrastructure. CenterPoint acquires, develops, redevelops, manages, leases and sells state-of-the-art warehouse, distribution and manufacturing facilities near major transportation nodes. Our experts focus on large rail, port and trucking infrastructure assets.

Company Profile: CenterPoint Properties continuously reimagines what’s possible by creating ingenious solutions to the most complex industrial property, logistics and supply chain problems.

With an agile team, substantial access to capital and industry-leading expertise, we provide our customers with a competitive edge and ensure their success—no matter how great the challenge.

BROKERAGE FIRMS FRANKEL DEVELOPMENT GROUP 5311 Kirby Drive, Suite 104 Houston, TX 77005 P: 713.661.0440 Website: Under Construction Key Contact: Bruce W. Frankel, President, brankel@frankeldev.com Services Provided: Frankel Development Group offers over 33 years of experience and expertise in the retail real estate business. Services include tenant representation, shopping center/project leasing, investment sales, land sales, and development services.

Company Profile: Headquartered in Houston, Frankel Development Group provides comprehensive brokerage services for its clients throughout Texas with an emphasis on the Houston MSA. The company represents over 25 "best-in-class" retailers and restaurants, 15 property owners, and possesses a skillset and depth of experience unmatched in the marketplace.

Notable Clients/Transactions: Notable retailers include Orangetheory Fitness, Burkes Outlet Stores, UBREAKIFIX, Escalante's Fine Tex-Mex & Tequila, Three Dog Bakery, Fred Astaire Dance Studios, Pump it Up, WaveMax Laundry, and Rush Cycles.

FRIEDMAN REAL ESTATE 34975 W. Twelve Mile Road Farmington Hills, MI 48331 P: 888.848.1671 Website: friedmanrealestate.com Key Contacts: David B. Friedman, President/CEO; Gary Goodman, Sr. Managing Director-Brokerage Services Services Provided: Friedman offers a full range of real estate services including commercial and multifamily property and asset management, tenant and landlord representation, investment and loan sale advisory, space planning, design and construction and a unique platform of lender-focused bankruptcy, receivership and distressed asset services. All services are provided in-house, though a single point of contact, which guarantees that clients receive the most timely and efficient service available in the marketplace.

Company Profile: Founded in 1987, Friedman Real Estate is one of the largest privately held commercial real estate organizations in the nation; currently managing over 16M square feet of commercial space and more than 21,000 apartment homes located throughout the country.

Friedman’s commercial brokerage team has over 800 current listings with $20 billion in closed transactions.

Recent Transactions: Friedman Real Estate recently sold the 2,953 square foot retail-restaurant space on Imperial Valley Drive in Houston Texas. Friedman’s Neha Abassi advised the seller in the transaction.

For advertising opportunities in this section, please contact Susan Mickey at smickey@REDnews.com or 773.575.9030

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MAY 2021

CONSTRUCTION COMPANIES/GENERAL CONTRACTORS ALSTON CONSTRUCTION COMPANY 1300 W Sam Houston Pkwy S, Suite 225 Houston, TX 77042 P: 713.904.2899 10440 North Central Expressway, Suite 720 Dallas, TX 75231 P: 214.363.0551 Website: alstonco.com Key Contact: (Houston) Nick Dwyer, Director of Business Development, ndwyer@alstonco.com (Dallas) Brittany Schneider, Director of Business Development, bschneider@alstonco.com Services Provided: Alston offers a diverse background of design-build experience, general contracting and construction management of industrial, commercial, healthcare, retail, and municipal projects.

Company Profile: Alston Construction is celebrating 35 years of excellence in 2021, and we believe our success comes from being a true partner. With 21 offices nationwide, we have market knowledge throughout the country, which provides clients with the best building methods and materials available. Our goal is to provide quality, cost efficient projects that leave a positive experience for our clients and their communities.

Notable/Recent Projects: Park 249 - 817,920 square feet LEED tilt-wall warehouse facility park including interior finishes for Amazon in Houston, TX; McKinney National Business Park – 150,000 square feet warehouse/distribution tilt-wall facilities in McKinney, TX; Restaurant Depot – 59,565 square feet pre-engineered metal retail building with cold storage in Pasadena, TX; Valley View Lane Warehouse – 160,000 square feet warehouse/distribution facility in Farmers Branch, TX

CADENCE MCSHANE CONSTRUCTION 5057 Keller Springs Road Suite 500 Addison, TX 75001 P: 972.239.2336 F: 972.239.1214 Website: cadencemcshane.com Key Contact: Will Hodges, President, whodges@cadencemcshane.com Services Provided: Cadence McShane Construction Company offers over 30 years of experience providing design-build, construction management at risk, preconstruction and general construction services on a national basis. The rm’s diverse expertise includes specializing in the Education, Multifamily, Senior Living, Commercial and Industrial market sectors.

Company Profile: Headquartered in Dallas, Texas with regional offices in Austin, Texas, Houston Texas, and San Antonio, Texas, Cadence McShane Construction Company provides comprehensive construction services on a local, regional and national basis for a wide variety of market segments.

The firm is the builder of choice in the state of Texas and its surrounding region as it deploys a culture of relentless service with an entrepreneurial spirit that originates from inside of each individual and helps constantly deliver reliable results of excellence.

Notable/Recent Projects: Hermosa Village Apartments –Leander, TX – 238 modern farmhouse inspired garden-style units, offering one- two- and three- bedroom options.

DEVELOPERS PROLOGIS 2021 McKinney Ave., Suite 1050 Dallas, TX 75201 P: 847.420.8321 Website: prologis.com Key Contact: Kate Rutherford, Regional VP, krutherf@prologis.com Services Provided: Prologis provides approximately 1,600 real estate professionals worldwide with extensive local market knowledge and development expertise to meet complex logistics and distribution requirements. Customers include third-party logistics providers, transportation companies, retailers and manufacturers.

Company Profile: Prologis, Inc. is the global leader in logistics real estate with a focus on highbarrier, high-growth markets. As of September 30, 2019, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 797 million square feet (74 million square meters) in 19 countries.

Prologis leases modern logistics facilities to a diverse base of approximately 5,100 customers principally across two major categories: business-to-business and retail/online fulfillment.

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Tract 1 (north)

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43,107 sf.

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Tract 2 (south) 43,759 sf.

Unrestricted, may be sold together or separately Contact broker for details