Nation’s CEOs Choose Florida as Top State to do Business

The nation’s CEOs once again selected Florida the second-best state in the U.S. to do business, according to results from a new report released by Chief Executive magazine. Southeast states, with their ocean ports and transportation options, dominated the top five rankings.Texas was ranked No. 1 for the second year in a row, followed by Florida. North Carolina, Tennessee and Georgia rounding out the top five.

The magazine surveyed 511 CEOs on states with which they were familiar, rating each one on taxes and regulations, quality of the workforce and living environment. CEOs surveyed favored pro-growth, low-tax states in ranking states as “best” for doing business. Craig Barrett, founder of NBI Properties, said that the many investors he deals with would say Florida ranks first as the best state for business.

“CEOs and investors know that Florida is pro-business,” he said. “Here on the Emerald Coast, we see that many businesses and industrial development are helping to diversify the economy. The investors we work with are well aware that Florida is not just about tourism anymore.”

For the 10th year in a row, California was ranked the “worst state for business” with CEOs commenting that the state is “anti-business” and has an unfriendly regulatory and tax environment. State governments use the annual survey findings to help determine how to improve their regulatory environment to attract new businesses, while corporations use the data to determine where to build offices and other operations.

Demand for Senior Healthcare Facilities Lures Investors

Investors are taking a closer look at healthcare properties, a class of commercial real estate that has been outperforming most others since the Great Recession. A burgeoning population of senior Americans is boosting confidence in the sector’s long-term viability and attracting investor interest nationwide. As a result, development of assisted-living developments in the United States has increased considerably over the last four years as the construction rate of new units doubled.

Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, said his firm has been busy fielding inquiries from investors interested in everything from nursing homes to assisted living facilities and hospice care.

“We have been leasing cancer centers, medical buildings, and professional buildings with offices that cater to seniors,” he said. “Medical offices are great for investors because tenants are far less likely to move or go out of business.”

Contributing in part to the surge in medical office building leasing and construction is the trend of moving medical procedures out of hospitals. Sales of medical office buildings tallied nearly $5 billion in 2014 alone, and experts say medical offices are more stable than other property sectors.These trends in healthcare aren’t likely to go away any time soon considering the number of Americans aged 65 and older is on pace to nearly double by 2050.

CRE Lending Sparks Controversy

As property prices climb continue to increase and surpass their pre-recession peaks, investing and refinancing activity has followed suit as well, fueling brisk borrowing demand in the financial marketplace. The increased CRE financing activity has ignited intense competition among lenders, resulting in great deals for borrowers. However, some banks are expressing concern about pricing and profitability models while others are pulling back from some markets and trying to gain their share of the hyper demand in the marketplace.

“Just as many investors have had to stretch their investment criteria to secondary markets and property types, banks have been forced to expand their lending criteria,” said Craig Barrett, co-founder of NBI Properties in Fort Walton Beach. “In our area, banks were cautious during the recession and holding back on lending, but thankfully for investors that is no longer the case.”

In the last quarter, several top bankers said they were beginning to pull back from deals in some markets and property types. Terms available for multifamily lending were noted as a particular concern. Some banks were also beginning to reconsider the Houston market over energy-related concerns and the San Francisco Bay market with its heady tech-fueled property pricing.

“There is a lot of other people’s money flying into the market and they’re doing things [from the perspective of] cap rates that don’t make a lot of sense to us. It trips our own (lending) policy and our profitability model,” Edward Wehmer, president and CEO of Chicago-based Wintrust Financial, told financial analysts this month. “There are a couple of areas where the circuit breakers have tripped; one is in multifamily, especially (for properties) close to Chicago.”

Poll Shows Real Estate is the Top Investment Choice

For the second year in a row, the largest percentage of Americans surveyed by Gallup (31 percent) cited real estate as the top long-term investment – a sign of mounting confidence in the housing recovery and a rosy outlook for commercial real estate as well. Real estate beat out other long-term investment options, including stocks/mutual funds (25 percent rated it tops), gold (25 percent), savings accounts/CDs (19 percent) and bonds (6 percent).

“Investors are no longer in a cautious or conservative mode,” said Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, Florida. “Many were forced to sit on the sidelines and play it safe during the recession, but now they are ready to get back in the game and look for the highest yields available. While financial security was a top concern for the past several years, investors are now tapping into funds they had tucked away in savings accounts and CDs.”

According to the Gallup poll, Americans’ attitudes about real estate as a long-term investment started to show up in last year’s annual survey, and “continued strength this year indicates it was no fluke.”

“Real estate is historically a sound investment because investors can take their cues from the economy, interest rates, and supply and demand,” Barrett added. “And when it comes right down to it, many people would rather invest in a tangible property than investments they never see on paper.”

Foreign Investors Driving CRE Property Price Increases

Recent reports show that foreign investors are continuing to increase their investments in commercial U.S. properties, resulting in property values increasing at a much faster pace than if the same or similar properties were bought by local investors. The trend has been a boon to real estate markets in many parts of the country, including Northwest Florida and the Emerald Coast.

“Foreign investors are definitely targeting big cities, but we are also noticing the trend here in Fort Walton Beach, Destin, Crestview and other areas in our region,” said Craig Barrett, co-founder of NBI Properties. “Low interest rates, economic development, and more opportunities for raising capital are all contributing to the surge of interest from overseas buyers.”

Foreign investment in U.S. commercial real estate has been growing consistently over the last six years, according to real estate analysts. The volume of deals last year topped $49 billion, surpassing the 2007 peak investment level of $47 billion. Canada was the leading global buyer of U.S. real estate last year with $9.7 billion of direct foreign investment. And before January 2015 was even over, Canadian investors transacted a significant $2.75 billion in U.S. real estate deals.

Barrett said he was not surprised by the strong influx of dollars from Canadian investors. “Florida has always been a hot spot for Canadians,” he noted. “They are interested in everything from vacation homes to commercial properties.”

Analysts believe the appetite for global real estate investment is also increasing as a result of more investors intending to deploy capital outside of their own region this year. Many brokers are predicting investors will move outside the risk curve in search of higher yields, a resulting in a stronger focus on value-add and opportunistic investments.

Spring is the Best Time for Real Estate Investments

In addition to the perfect weather on the Emerald Coast this time of year, we’re noticing that investors are actively combing local listings and striking while the iron is hot! According to NBI Properties co-founder Craig Barrett, buyer confidence is up and more people than ever are looking to make moves and investments.

“Spring is the best time of the year to make moves in real estate,” said Barrett. Prices are up a bit, but more importantly, buyer confidence is also up. We’re working with clients looking to buy now and they’re interested in commercial and residential properties for sale.”

Barrett added that many clients are interested in apartment complexes and condominiums because demand for rentals is skyrocketing. According to the U.S. Census Bureau, homeownership is rising but is still currently at the lowest level since 1996. Compounding this with the annual average rent increase of 8.89% makes renting a lucrative real estate investment for first-time or experienced landlords.

“Apartments and condos are great investments because the tenant makes the mortgage payment while the investor keeps the appreciated value and pockets a monthly profit,” said Barrett. “Investors realize there’s a low vacancy rate in this area and they are eager to take advantage of the opportunities.”

In addition to rental properties, Barrett said that flipping houses is making a comeback and especially in middle class neighborhoods. Investors interested in quick profits are researching Emerald Cost neighborhoods with the fastest appreciating prices as well as ugly duckling homes and fixer-uppers that need repairs. He added that flipping houses is best left to experienced investors who can predict the value of a home after renovations and who have the knowledge and capital to invest in improvements.”

“Flipping houses looks good on paper, but in reality there are many people who get burned doing this or stuck too long with properties they can’t afford.”

NBI Properties Sponsors 8th Annual YOLO Board Relay Series

NBI Properties is a proud sponsor of the 8th annual YOLO Board Relay Series to be held at the Bay Restaurant in Santa Rosa Beach. We are so excited to once again be a part of this event with our friends at YOLO Board because every year it’s a true wonderful celebration of community, family and friends.

Event dates for this year’s Relay Series are May 28, June 18 and July 16. Come out and support the teams or call 850-622-0812 to sign up your own three-member team. Hats off to YOLO Board’s Jeff and Mitzi Archer for making this a great event year after year!

Additional sponsors for the Relay Series are: Garden of Life, 30A.com, Coastal Skin Surgery and Dermatology, Grayton Beer, The Bay Restaurant, Ocean Reef Resorts, Bud and Alleys, Hinano, PT Solutions, 30A Radio, Beach Ready Spa, Thirty A Review, StandUp Paddle Magazine, Copy Systems, and Health Source Chiropractic. We hope to see you there!

Investors Flip Over Crowdfunding

Flipping homes has gotten a lot more sophisticated than the days when casual investors placed “We Buy Ugly Houses” ads online to pick up a few projects. These days, with home prices rising, investors are once again looking to cash in by flipping properties – but many are now using online crowdfunding sites to fund these flips.

Unlike the housing boom days when loan approvals were quick and relatively easy, lenders are currently showing more caution in granting financing to buyers who want to quickly spruce up properties and sell them for a profit. As a result, investors are turning to other financing avenues to fund their flips. In addition, a growing number of online crowdfunding sites offer some financial aid for housing flips.

“It used to be that house flipping was more of a hobby for some people than a serious investment, but then people learned there were quick profits to be made in some areas and it became more popular,” Barrett said.

With crowdfunding, the interest charged is much higher than conventional financing. However, loans backed by Fannie Mae and Freddie Mac are in the 4 percent range while crowdfunding interest rates can average about 11 percent. The higher interest rate isn’t a problem if a home won’t be held for long before the resale. Most investors involved in flipping say they plan to flip houses in three months or less so they only pay the higher rate a short time before paying off the full loan.

“Crowdfunding picked up the slack left by banks and lenders who are slow to approve loans for flipping houses,” said Barrett. “Investors are turning to crowdfunding for,this purposes so that paperwork can be handled with speed and efficiency since time is of the essence when flipping houses.”

CRE Investors Scurrying for Best Interest Rates

The U.S.dollar is soaring and interest rates may soon be skyrocketing along with it. What do commercial real estate investors think about these developments? Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, said that investors on the Emerald Coast are paying close attention to interest rates and recognizing that opportunities in 2015 may look a lot different than those in 2014.

“Last year we saw an increase in CMBS availabilities,” said Barrett. “Interest rates and cap rates remained low in 2014, but almost everyone expects this will come to a halt this year when the Fed decides to raise rates again. We don’t have any indication of when this will happen, but investors are expecting it and are structuring deals accordingly.”

Barrett added that cap rates normally follow interest rates, holding all else constant, and as rates rise that will have the effect of reducing values on “flat” rental stream assets such as single tenant credit retail leases with no rent increases.

“We’ve had more closings in February and March this year than ever before,” Barrett added. “Investors are moving ahead with deals so they can take advantage of the best rates possible.”

 

Mini Apartment Complexes Lure Investors and Developers

Bigger is not always better, at least not according to some budget-strapped millennials looking for affordable housing solutions. As a result, the demand for smaller, micro-unit apartments, lofts, and studio rentals is attracting new developers and investors.

Although new housing construction has not recovered since the recession, in 2013 and 2014 developers built about 1,000 micro units with roughly 2,200 more either under construction or proposed. The tiny apartments are especially popular in large technology or media-focused markets with high housing costs, such as Seattle, New York, San Francisco and Washington, D.C., although several sources and analysts say the trend is spreading to smaller metro areas as well. Experts say it’s too early to surmise if the mini-studio concept will be a flash-in-the-pan development fad or if it will catch on in other markets.

Craig Barrett, co-founder of NBI Properties, said that although the mini apartment craze is not prevalent on the Emerald Coast, commercial real estate investors are always considering new projects involving housing for local military families and retail businesses scaling back on showrooms or floor space.

“The popularity of micro units concept will grow as we discover new ways of making small spaces more attractive and efficient,” Barrett said. “Some furniture manufacturers are addressing the trend by offering retractable Murphy beds, convertible sofas, and other furnishings that will make interior spaces and storage more efficient. These features and the ability to retain tenants are making the projects more attractive to commercial developers.”

Developers are typically attracted to rent premiums they can charge on a per square foot basis. A comparison between micro dwellings and standard studio apartments shows that building a denser concentration of tiny studio units on dwindling patches of available land makes better economic sense in many cases. Overall, the apartment market overall is shifting toward a greater mix of smaller studio and one-bedroom units being included in traditional apartment communities, as well as more construction of micro-unit communities, according to a report earlier this year from the Urban Land Institute (ULI).