NEWS FRONT
In Competitive Climate, Services Firms Boost Their Offerings
NEW YORK CITY—Changing times demand
changes in strategy, and two of the industry’s leading service firms have been doing
just that lately, with one revamping its organizational structure and another growing
its service platform. Locally based Cushman
& Wakefield’s new CEO, Glenn
Rufrano, has made a series of
moves to align the company’s
business lines globally, while
across the continent, the newly
rebranded Colliers International
has sought to expand its reach by
enlarging its broker network and
adding service lines.
“We think it’s important to
coordinate not only the geographies but
also the business lines,” Rufrano says. The
first move in that direction was promoting
C&W veteran John Santora to the newly cre-
ated position of CEO of client solutions,
overseeing the firm’s largest operating unit.
Rufrano will be taking similar steps with the
valuations and capital markets lines.
“It’s important to coordinate
not only the geographies but
also the business lines.”
“to lead this global group and take it to the
next level of performance, integration and
service delivery. This is an important part of
our everyday business and our core compe-
tencies. Under the new structure, it has what
it deserves: a seat at the table.”
Though comparable valuation
and capital markets czars haven’t
been named yet, C&W has sought to
bolster both platforms. In July, it
expanded its capital markets prac-
tice with a group that will advise cli-
ents on the disposition of corporate
property across the US. Heading the
new practice will be Richard Ingwers,
recently named vice chairman.
Ingwers will supervise a national team
that will include vice chairman Andrew
Merin and Brad Rogers, an executive director in C&W’s capital markets group.
GLENN RUFRANO, Cushman & Wakefield
piers and institutional investors, employs
more than 7,000 globally and manages about
600 million square feet of commercial space.
He tells Real Estate Forum his new role is
True Distressed Deals Aren’t Always Pretty
As with many others in the real estate industry, we’ve noticed an
influx of buyers looking for distressed assets. However, they often
look for assets that are in well-located, strong markets and are of
high-quality construction, inside and out. Those properties are
easy to fix and have a strong potential to increase in value fairly
quickly, so investors are actively pursuing them.
However, investors often overlook what is more available:
properties often called junk. A junk asset is not necessarily bad
real estate, but it may be poorly located or
suffer with obsolete finishes and exterior,
or exist in secondary or tertiary markets.
What will
happen with the
junk? Maybe
the asset is labeled junk because it is not situ-
ated in the right location. Perhaps it is a retail
property in a location better suited for office,
industrial or housing. In one retail assign-
ment, we priced the property more than 50% below its loan value.
When a NorthMarq-sourced investor decided to meet the market
on price, the property closed in less than 30 days in an as-is condition. The new owner is currently transforming the retail asset into
a charter school. In certain cases, a better use may require demolition of the existing property, although lenders holding these properties often agonize over this tough choice.
Next, consider the functionality of the building. Many assets
considered obsolete have problems with traffic flow through
the building or from loading docks to office or storage space.
Gutting the interior often helps solve that problem, and that’s
where an architect can help. When evaluating functionality,
owners of distressed properties should evaluate the potential for
reuse as a new property type or the potential for rearranging
By Andy Sundgaard
current tenants to improve traffic flow and usability throughout
the building.
Finally, consider the market and submarket. Junk may not be
junk in every market, but it’s important to understand the competitive situation of the locale, the nature of investor demand
and the willingness of lenders to loan into a given market, giving
owners of distressed assets even fewer options for repositioning
or renovating. In the cases where the asset is written down or off
a lender’s books, the surrounding market will still have to deal
with the poorly positioned real estate. Generally, the sooner the
problem is identified, the better the outcome. Otherwise, the
reduction in value will likely continue.
To really understand the asset’s value, lenders should also consider requesting a broker’s opinion of value and be prepared for a
current market value that may not reflect the loan balance or the
most recent sales comparables. A BOV provides an estimation of
value based on current and projected market conditions and typically includes both the as-is and stabilized value. The broker can
help the investor evaluate the difference between the two, to determine if the additional cost of lease-up and repair can be recouped
within the hold-period defined by the investor.
A BOV is more forward-looking rather than a typical historical
appraisal and will likely provide a better assessment than any transaction from two to three years ago when the market skyrocketed
uncontrollably to valuations never before seen. Ultimately, the real
estate that most observers call junk doesn’t have to stay junk. Yet in
every situation, the options are not easy, pretty or fun to resolve.
Andy Sundgaard is a senior vice president in the property management
group and a leader of the NorthMarq special assets team in Minneapolis.
He may be contacted at andy.sundgaard@northmarq.com. The views
expressed here are the author’s own.
