6A — December 18 - January 14, 2020 — M id A tlantic Real Estate Journal
www.marej.com
M id A tlantic R eal E state J ournal
continued from page 2A What will the AEC . . .
AGB conducts webinar A&G executives: ‘NewNormal’ spurs schools to rethink their real estate M ELVILLE, NY — Trustees are scru- tinizing real estate
in target niches and seg- ments to build competitive advantages. They will work to achieve a compelling brand that represents an organiza- tion’s distinctive attributes and values that will take on added importance. Sustainability already is an important decision factor. The reality is that we are at the beginning of increas- ingly rapid development. In 2021, companies will need to: consider the environmental impact when sourcing ma- terials; make manufactur- ing more sustainable and optimize supply chains for sustainability as well as re- silience. The possibility of future lockdowns is a real “wild card” for 2021. For example, if positive things happen, construction activity could be back to pre-crisis levels by early 2021. But longer-term lockdowns could mean that it takes more than 3 years to recover. Previous crises have had an accelerative effect on trends, and this pandemic is also expected to trigger last- ing change that will impact the use of the built environ- ment. Survival and sustainability of AEC firms in 2021 will require the development of effective strategies to deal with the disruption that lies ahead. AEC firms must act now to define the vertical markets and segments of those markets, size and type of projects and geographic footprint they will pursue and then determine how to develop and execute their business development and marketing plans. The planning process is critical whether an AEC firm decides to continue only in their core business and ad- just or reinvent themselves to respond to the changing market environment. One of the most critical success factors for 2021 is business agility, which means rapid, continuous, and systematic evolutionary adaptation and entrepreneurial innovation directed at gaining and main- taining competitive advan- tage. How critical is business agility? Bill Gates provides a great answer when he said, “Success today requires the agility and drive to con- stantly rethink, reinvigorate, react and reinvent.” Glenn Ebersole is ex- ecutive director, strategic business development/ marketing at RCS Con- struction. MAREJ
emerging trend of movement to suburban and rural ar- eas are a combination that is providing confidence in this type of housing market. Therefore, AEC firms will see some growth opportunities in this market. Federal markets are differ- ent than the state and local government markets pri- marily because they are not required to have a balanced budget. Purchasing of AEC services at the federal level will continue but spending priorities will change with a new administration. Ac- cess to the federal market may remain focused toward the largest industry players, firms with specialized exper - tise, or those with special designations and security clearances. A very strong market for 2021 and beyond is life sci- ences. Billions of dollars are being invested in this sector in cities and on university campuses and the invest- ment will continue for many years. This is an especially attractive market for AEC firms that provide services to meet the demands of this industry. The industrial market is another very strong market going into 2021. Increased demand for warehouses and distribution centers will con- tinue because of the accelera- tion of e-commerce due to shop- ping behavior changes caused by the pandemic. One exam- ple is the continued opening of distribution centers at a rate of more than 100 in one month by one of the major players. On-line retailers will drive strong demand for AEC services in this sector and associated cargo facilities at airports through 2021 across North America. Data centers will be a strong market because of the increased need to sup- port growing technology. The exponential acceleration of e-commerce and technology drives the need for increases in the extraordinary power needed to process all the data necessary for its success. The prospects of govern- ment privatization and out- sourcing are expected to rise due to budget shortfalls. The budget shortfalls will create incentives for state and lo- cal governments to privatize and outsource services. This trend will create growth op- portunities for AEC firms. Some construction compa- nies may decide to specialize
property.” Latimer, the former CNR president, underscored the importance of defining timely strategies alongside the need to have a plan that maximizes in- vestment resulting from better leveraging of real estate. In other A&G Real Estate Partners news, the company has formally announced the creation of a dedicated Financial Report- ing & Property Analysis Group serving stakeholders across all sectors of real estate. Led by senior managing di- rector Douglas Bennett —for- merly vice president of business analytics and strategy at global retailer Ashley Furniture In- dustries—the five-person team combines years of experience in financial analysis, data sci - ence and real estate strategy, said Emilio Amendola , co- president of A&G. “A&G has had analytics ca- pability for some time, but we sharpened our focus on it this spring when the extraordinary need for portfolio-optimization became apparent across mul- tiple sectors of real estate,” he said. “As part of that process, we have brought on board ev- eryone from former retail VPs with decades of experience in data-driven approaches, to tech-savvy analysts schooled in data analytics software and programming languages. Im- portantly, this group expands our ability to rapidly service clients in distressed situations as well as handle the needs of expansion-minded small and mid-sized companies looking to outsource all or parts of their real estate functions.” In addition to consulting on big-picture strategy, the new team integrates data from site- selection and demographics services, proprietary databases, lease documentation, and a raft of other sources to create visu- ally compelling dashboards and automated reports for use by A&G and its clients. Graiser, who like Amendola, has decades of experience in real estate portfolio strategy, said the move comes at a time of unprecedented need for efficient approaches to real estate. “This year alone, our firm has handled lease restructurings, occupancy cost reductions and lease terminations onmore than 11,000 locations across North America on behalf of various clients in the retail, restaurant, supermarket, entertainment, education, health and fitness, office and industrial sectors,” he said. MAREJ
with Mercy College and sub- sequent structured sale of the main campus. This followed earlier real estate moves de- signed to “build runway” that included a structured sale of non-core assets located near the school and a sale-leaseback of its Bronx satellite campus. “In the wake of the Covid-19 Pandemic,” Latimer said, “col- leges and universities need to formulate a top-to-bottom adaptive strategy that optimiz- es all facets of operations. That includes looking closely at real estate—how it is collateralized, what the interest rate was when originally financed, and how much time is left to go.” Panelist Laws also pointed to a shift in thinking. “What we continue to see is more of this increased appetite for trans- formational changes,” he said. “How do we really bend the cost curve of an institution?” From a real estate stand- point, Graiser said, it all starts with a comprehensive review of owned and leased properties. “You need to drill into the nuances of your leases, both financial and non-financial clauses,” he explained. “You want to understand your lever- age and scrutinize all of the pros and cons—including the community impact—of any real estate decisions. The portfolio review rolls up into a realistic ‘ask’ of your landlords with respect to rent-reduction; the key is to be transparent.” In the case of owned proper- ties, Hubbard noted, institu- tions can bolster liquidity in two ways: structured sales of non-core properties, and sale- leasebacks of core properties for which the school wants to retain control. A national ly recognized expert on structured sales, Hubbard explained how this approach allows colleges and universities to rapidly execute real estate sales in anywhere from 60 to 120 days, with none of the contingencies that often kill real estate deals late in the game. “CNR, for one, looked at their portfolio, identified places where they could generate im- mediate cash, and, through a structured sale process, got it all done in the timeframe they needed,” Hubbard said. “We ran a competitive process to sell the main campus for $32 million, with three bidders that all came in with bids of between $31 million and $32 million. It was a clear demonstration of the market value of that
holdings in education as never before, n o t e d t w o e x e c u t i v e s f r om A&G Real Estate Partners in a webinar con- ducted by The Assoc iat i on o f Go v e r n - ing Boards of Universities and Colleges (AGB). “The pan- demic is fast- f o rwa r d i ng business mod-
Jeff Hubbard
Andy Graiser
els that were already pivoting to take into account declining enrollments, reductions in state funding, higher debt loads and more distance learning,” said Andy Graiser , co-president of A&G. “At the board level, there’s a growing focus on ramping up the efficiency of real estate.” The Oct. 22 webinar (“Bolster- ing Liquidity by Optimizing Real Estate”) drew more than 70 AGB members. Graiser was joined by Jeff Hubbard , a se- nior managing director in A&G’s Structured real estate sales division, as well as panelists Dr. William W. Latimer, vice president of the Bronx Campus of Mercy College, and Andrew Laws , managing director of the education practice at Huron Consulting Group . Graiser, a 28 year veteran of lease restructuring and disposi- tion, noted that A&G’s Educa- tion Services group has helped the likes of Dowling College, The College of New Rochelle (CNR), Career Education Corp., and Kaplan University reduce their occupancy costs through strat- egies such as restructuring or terminating leases, and boost li- quidity through structured sales and sale-leaseback transactions. Panelist Latimer shared his experience in working with A&G on such a strategy at CNR, where he was brought in as president in 2018 in the wake of a financial crisis dat - ing to 2016 that caused the college’s debt service to swell and required the time needed to broker a partnership. With A&G’s help alongside a deliberate plan that sustained the college’s solvency during negotiations, CNR avoided a precipitous shutdown while the school negotiated an interim campus leasing agreement
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