Guest Feature

 

Pearls of Wisdom

By Matt Quinn and Briana Wright

Matt QuinnBriana Wright

Over the past decade, we have learned plenty from our operating partners, property managers and market experts about the intricacies of their cities and preferences of their residents. We’ve picked the brains of some of our business partners and summarized their views below.



Mike

Mike Kootchick (MK)
Developer / Property Manager
Lanshire Housing Partners
S.O.S. Property Management

San Diego, CA
Tim

Tim Craft (TC)
Developer / Investor
Craft Companies, LLC
Denver, CO
 
Randy

Randy Char (RC)
Broker / Investor
Char Luxury
Las Vegas, NV
 

Jeff Passadore (JP)
Property Manager / Investor
Cambridge Real Estate Services
Portland, OR
 

What real estate trends are popular in your city and how might this change or evolve over the next several years?

RC (Las Vegas): “There’s a huge movement toward more modern design elements in residential developments. I’m seeing trends like modernization of kitchens, more lighting, fewer doors and windows and cool glass panels. Cleaner lines and grayscales are coming back. Standard pools, grottos and rock formations are becoming a thing of the past as everyone wants sleeker, modern pools. I’m seeing more linear fireplaces and movement away from the ‘old world’ feel of heavy dark wood and towards more grays, soft golds and browns.”

JP (Portland): “For new development, our city is focusing on urban areas and redevelopment of under-utilized urban locations and that tends to mean significant density changes. In Portland it’s common to tear down single family houses to build mid-rises. We’re also seeing parking eliminated altogether from urban developments as people increasingly use alternative forms of transportation. Our city plan encourages this type of development and because of our unique urban growth boundary, it’s really the only viable development activity taking place because we are – for the most part – out of vacant developable land.

What real estate development trends currently excite you?

MK (San Diego): “In the past several years, it’s been more cost-effective to build new in San Diego than it has been to buy an older property and renovate. I would much rather own new than have to address deferred maintenance and other issues with older properties. Brand new rental properties come with warranties and the ability to bill back utility expenses to tenants through sub-metering and can command higher rents.”

JP (Portland): “It’s exciting to see urban neighborhoods revitalized with new and more diverse populations and retail and commercial services. A really well-conceived urban redevelopment can energize an entire neighborhood and we’ve seen that happen in several neighborhoods that were previously stagnating. It tends to refocus people on the quality of schools and the other amenities in the neighborhood. We’re seeing private development lead to a public park being renovated because suddenly there’s more attention being devoted to a neighborhood as families move in.”

RC (Las Vegas): “We’re seeing more nontraditional homes that have more of a loft and ‘green’ home feel. In the luxury market, people are not as concerned with square footage, but are more concerned with design and functionality. It’s becoming less about who can build the biggest home and more about who can provide the best lifestyle. If you’re a wine collector, you want to display your wine in glass cases instead of hiding it behind closed doors. Vegas has a lot of exciting things happening including The Summit development which will raise the high-end $5 million+ market.”

What do you believe will be the profitable real estate investment strategies for 2016-2017?

TC (Denver): “We like for-sale detached residential as well as select office space. We think that apartments are late in the lifecycle and condominiums are difficult to build, a lot of that is driven by onerous construction defect laws in Colorado. Even with the downturn in oil and gas, these businesses take up a relatively small portion of the office market in Colorado. Even if they vacated 100% of their space in downtown Denver, that would only increase the vacancy meter by 10-12%. With substantial growth in the other industries, we see more pressure on the already tight office market.”

JP (Portland): “The profitable strategies are going to hinge on the ability to understand a given market on a micro basis. I think the idea of understanding a city as a whole or understanding a suburb of a city worked before, but our profitable executions today will literally depend on being in the right block in a gentrifying neighborhood and being able to find a micro-market that you can make the most out of. Land costs have reached the point where reuse and adapting existing buildings to appeal to a different demographic is more profitable.”

RC (Las Vegas): “Cities that haven’t been so overheated but have had a slower recovery have the greatest potential in the next two years. Places like Vegas have less risk.”
In which submarkets do you see the greatest opportunities for growth?

MK (San Diego): “I try to be a trailblazer. I tend to invest in markets that have traditionally not held much interest from others. Submarkets in the outlying areas of San Diego like South Bay and East County, San Ysidro and San Marcos have some great investment opportunities as opposed to the coastal and central submarkets, which are very built out. I see the greatest opportunities in markets that are overlooked or haven’t been completely overrun with developments.”

TC (Denver): “Any place where you can find affordable for-sale product or deliver affordable for-sale product. Generally, that takes you to the southeast and north sides of Denver. On the western side you have – not unlike California – a hard stop, which causes prices to increase and on top of that, it’s largely built out. Another factor that comes into play there is water, a major issue in Colorado. Water prices in northern Colorado have jumped dramatically over the last 7-10 years. For the right to build a for-sale unit in northern Colorado, you’re typically at $25,000 just for the water-right, which means affordability in that corridor is getting squeezed.”

RC (Las Vegas): “I think the greatest opportunity in Vegas is in quality master planned communities, again because of lifestyle. High-rises, too, which are selling far below replacement cost. We still have people moving to Vegas as a tax haven, so they’re not necessarily looking for another home with a big backyard, but something a little easier, something that affords them the ability to enjoy the lifestyle more.”

Can you share a golden nugget of your personal real estate wisdom?

MK (San Diego): “Stick to what you know and are good at and don’t be afraid to hire experts for things you don’t know. And don’t be afraid to admit you don’t know everything.”

TC (Denver): “Embed ourselves within communities where we have projects. So, learn everything from the politics of the staff and commissioners, make sure we know the neighbors, the neighborhood associations and really ‘dork-out’ and read the law on the district and study the land. We do our best to get to know the communities we invest in better than our competitors.”

JP (Portland): “Find the type of real estate that the end user is going to want. We can spend all kinds of time developing pro formas and our own opinions but we have to make sure we don’t forget who the end user is and make sure that user is excited about our next project.”

RC (Las Vegas): “My goal is always to fully understand how people live rather than merely trying to understand their requirements of living.”

Matt Quinn is Vice President and focusing on asset management activities. Prior to joining Pathfinder in 2009, Matt worked with a San Diego-based firm which consulted on mergers and acquisitions and with the wealth management division of a California regional bank. He can be reached at mquinn@pathfinderfunds.com.

Briana Wright is an Associate in Pathfinder’s Asset Management department. She can be reached at
bwright@pathfinderfunds.com.