Mentoring Pair:  Scott Welsh, Colliers International | Wisconsin and Andrew Schoene, M&I, a part of BMO Financial Group

Submitted by:  Andrew Schoene

I have had the pleasure of meeting with Scott twice since the initial kick off meeting for the mentor program.  The first meeting was over lunch at Mason Street Grill.  Our conversation was a good mix between business and personal interests.  I was very impressed by Scott’s thoughtful and genuine responses as I fired off questions about his career.  I was equally impressed by the level of interest he showed in my career and me personally.  I left the meeting feeling very fortunate to have been included in such a great program.

Our second meeting took place at the Inland Companies (now Colliers – Wisconsin) headquarters at the former Pabst Brewery site.  One of the topics that came up frequently in our first meeting was the role culture can play in success, and Scott offered me the opportunity to drop by the Inland/Colliers office to get a first hand look at their culture.  After touring what is undoubtedly the coolest office space I have seen to date (it was all the Pabst memorabilia that really won me over), we hung out in Scott’s office for a while and caught up.  Between the great working environment and the energy of all the employees, it was very apparent that Scott and his Partners at Inland/Colliers have created a culture that is geared for success.  I am excited for our relationship to continue to develop, and very grateful that Scott has been so willing to share his time and experience with me.

Over 100 were in attendance at the annual Capital Markets Update generously sponsored this year by US Bank.  US Bank experts from Milwaukee, Chicago, Minneapolis and St. Louis discussed current economic conditions, syndications, new market tax credits and activity in our local market. 

Stern Presentation               Sadler Presentation              Kramer Presentation           McGuire Presentation

Thank you again to US Bank and all attendees.

Construction spending on commercial real estate totaled $92.3 billion, a more than 12 percent increase over 2010.  This spending supported nearly 2 million jobs nationally.

The increases in construction spending and activity resulted in the building of 238.3 million square feet of new space, an increase of 2.5 percent from 2010.  This new space has the capacity to house 610,000 jobs with an annual payroll of $26.8 billion.

For more information and the access the full report, visit http://www.naiop.org/foundation/completedresearch.cfm

The report was produced using data provided by the Bureau of Economic Analysis, U.S. Department of Commerce, U.S. Census Bureau, McGraw Hill Construction and a NAIOP member survey. The NAIOP Research Foundation published four previous editions of this report in 2006, 2008, 2009 and 2010. ]]> http://naiop-wi.org/naiop-research-foundation-issues-report-on-commercial-real-estate-development-and-construction/feed/ 0 http://naiop-wi.org/naiop-national-forums-a-summary-of-the-dl-forum-by-lyle-landowski/ http://naiop-wi.org/naiop-national-forums-a-summary-of-the-dl-forum-by-lyle-landowski/#comments Thu, 03 May 2012 21:52:56 +0000 chris http://naiop-wi.org/?p=4633 Many of you may not know about NAIOP’s Forums.  NAIOP National Forums are special interest groups for NAIOP members that provide an opportunity for exclusive networking and experience exchange with peers.  Examples of some of the forums include Capital Markets, Sustainable Development, Urban Redevelopment, Investment Management, and Marketing and Leasing.  For a complete list of Forums or for more information, go to NAIOP National Forums link.

Board member and Developing Leader Lyle Landowski of Inland Companies just returned from the Forums Conference in Miami.  Read below about his experience on the newly created Developing Leader Forum.

NAIOP

Developing Leader Forum – Miami, FL

April 25-26, 2012

On April 25 and 26th I attended my second national Developing Leader Forum meeting, which is comprised of about 23 members throughout the country.  The forum format is guided by member presentations followed by dialogue across markets and disciplines.  We also have several guest speakers including nationally recognized developers, economists and lobbyists.  I have highlighted the trends and topics that were most discussed in our forum.

National Real Estate Trends

Trend - In the best primary markets (e.g. Manhattan), real estate values are higher today than they were in 2007.

Commentary – What makes this trend particularly interesting is the driver behind it.  Pre 2007 values were driven primarily by the economy and job growth.  Today the driver is mainly real estate investment and the incredible amount of capital chasing core assets in primary markets.  (Some of this can be accounted for by the irrational behavior of some REITs, which operate on a “use it or lose it” mentality when it comes to capital.) This has led many REITs and private investors to shift their focus to tertiary markets and other asset classes where they can underwrite higher yields (part of this strategy is a bet on the return of the CMBS market as an exit strategy). Yet other investors/developers without “constrained capital” are turning to spec buildings where there is still little competition.

Trend - The Fannie and Freddie effect. 

Commentary - More and more economists and investors are growing weary of what they call the Fannie and Freddie effect.  The main concern is that Fannie and Freddie, which account for approximately 60% of the apartment financing market, are lending based on treasury rates instead of real estate fundamentals.  By essentially offering free rates, they are hijacking loans from banks.

Trend – There is a migration to the CBD nationwide, with very few exceptions.

Commentary – This appears to be a very real trend and was reinforced in each represented market in our forum (with the exception of Dallas). This is forcing some investors to alter their investment strategies, and developers to reinvent themselves.  Class A office vacancies are 10% or less in most CBD’s.

Trend - There is a growing polarity in valuation between Class A and class B office properties.

Commentary – While institutional Class A assets are commanding record high prices, class B assets in many markets are seeing values decline significantly.  Many real estate investors nationwide have divested of their office product entirely in favor of multi-family and/or industrial.  One economist essentially reduced office investments (entirely) to a “timing play”.  Yet the flight from office by many investors has created opportunity for savvy value-add investors.

Trend – Green is here to stay.

Commentary – Several of the developers are delivering new Green (and in most cases LEED) facilities – apartments, offices and industrial.  That said, most still complain about the process and cost, particularly in industrial where they feel the requirements are not aligned well to the property class. 

Trend – Economic growth is primarily coming from two sectors, Energy and Tech.

Commentary – Houston has been a huge benefactor of the growth in energy, but they are not the only one. Oil companies are out buying real estate in several regions of the country.  On the Tech side, Apple, Google, Amazon and others are expanding their footprint throughout the country.

Trend – Incentives are a plenty.

Commentary – As states and municipalities vie for economic growth they have becoming increasingly aggressive in the incentives they offer.  Companies like Amazon and Google are taking advantage of this as they build data and distribution centers throughout the country.

Political Trivia

Question – How many national lobbyists are there for commercial real estate, and how does this compare to some other large industries (e.g. Pharmaceutical, Insurance, Utilities)?

Answer – Commercial real estate has 457 national lobbyists, compared to 1,183 for Pharmaceuticals, 919 for insurance and 891 for utilities. (Source: opensecrets.org)

Quotable

My favorite quotes came from a highly successful developer/investor in the Atlanta area.  First, in describing his attempt to start his own real estate firm earlier in his career, he commented:

“I confused understanding the process with ability to do it.”

In describing his most recent acquisition he corrected our terminology in regard to his vacant building, quipping:

“I prefer to say it is unencumbered by tenancy.”

From Mentor Paul Votto, Wimmer Brothers, NAIOP WI Past President 2007

Mike and I have met twice (not counting our initial get together at the formal NAIOP-WI mentoring kick-off). Once for a couple of hours over drinks (yes, I bought) and once at a recent NAIOP-WI event (where we each bought a round, demonstrating the impact I am already having on him). It is my goal that, at our final mentoring session, he picks up the entire tab. Then I will know I have truly succeeded with him.

 One of the interesting aspects of this mentoring thing is that it compels you as the “mentor” to think hard about what “wisdom” it is that you want to share. It forces you to look back on your own career and ask and answer the questions: What would I have wanted to know when I was first starting out? What lessons have I learned? I know in my case, most of the really “good” things I’ve learned have usually come from “bad” experiences – a project that didn’t turn out to be as successful as it looked like on the pro forma; a partnership that went sideways; and, more recently, an industry that went upside down.  I presume that this “learning from failure” phenomenon is something most of us share. I wish there was a better way; but I haven’t found it. Not to say I haven’t had my successes but I guess the only thing I’ve ever learned from success is that I want to repeat it!

 So if most of my learning is from “bad experiences” and I want to share the important things I’ve learned with Mike then I’ve got to share some of those things that didn’t work out so well. That’s a lot to ask for with someone who you just met and is compounded by the fear of sounding like an old guy just sharing war stories. But in event, pushing those fears aside, that’s what I’ve tried to do in my limited time with Mike: share the good and the bad; talk about some of the things not to do; talk about the importance of perseverance and the power of reputation. For his part, he’s been incredibly receptive and mature. He’s been around enough so that he gets it. He’s got enough enthusiasm balanced with some healthy pragmatism to lead me to believe he will do quite well in the future. It’s been a pleasure getting to know him and, I look forward, to staying abreast of his future accomplishments.

From Mentee Mike Riopel, Whyte Hirchboeck Dudek

I’ve had the opportunity to meet with my mentor Paul Votto twice so far and have thoroughly enjoyed each occurrence.  It has been a great opportunity to learn from his experience and Paul has provided an honest and insightful portrait of how his experiences (the good and the bad) have shaped his life.  Paul has been refreshingly candid about how some of the best and most valuable lessons in life can be taken from events or deals that did not always go exactly as planned. An insight I’m sure many in the real estate industry can relate to in facing the current economic recovery.

We had our first meeting over drinks at Blue Mound Country Club where Paul invited me as his guest. We discussed in more detail each of our own background and interests. Paul shared his unique journey of how he grew up in theMiamiarea and how he eventually made his way to sunnyMilwaukee. I shared about growing up in northern Wisconsin and how my interest in real estate has led me to law school at Marquette.  We are both examples how life does not always come with a map. 

Throughout our conversation Paul provided insightful stories and lessons. Particularly, Paul mentioned that many people can overlook how important preparation can be. Whether it’s for a networking event, a public speaking engagement or even the shortest of meetings; putting in the time to prepare beforehand can make the up most difference in making the most of your time in execution. Many times putting in the time to prepare can even be the more beneficial use of your time between the two.

Paul and I met again at the NAIOP Fantasy Masters Happy Hour. We discussed our approaches to picking fantasy golfers (I admit Paul’s approach was far more technical than my close my eyes and point technique). We had opportunity to discuss more current events in our own professional lives. Paul has been busy with his role at Wimmer Brothers and I have been busy finishing up law school preparing to move onto the next step. We plan to get together in the next few weeks for some golf. Again, nobody has handed us a mentorship instruction manual but if our experience thus far has been any indication, I’m excited to learn more and believe we’ve set the groundwork for an exciting and mutually beneficial experience.

Briefly tell us where you work and what you do.

As Lanser Public Affairs, I work directly with municipal officials and residents to secure approvals for large or potentially controversial development proposals. I am also an associate of Advisors, LLC, assisting MLG Commercial professionals with community outreach for their clients.

Why did you want to join the NAIOP Board of Directors?

I joined NAIOP to network with development professionals and to be current with the commercial real estate climate. Being on the Board ratchets this up, and I was eager to contribute my municipal and public affairs experience to assist the Board with upcoming strategic planning and branding initiatives.

What do you hope to get from your experience?

As a former mayor, I particularly want to increase NAIOP’s connections with mayors and village presidents. We should be a resource to them, and our members can be benefit from these relationships when proposing developments in their communities.

Tell us something that most people don’t know about you.

One thing most people don’t know about me is that I worked as a magician’s assistant – sawed in half, burned alive, levitated, impaled with knives, and vanished.

What are you reading?

I’m reading A Safeway in Arizona (because I’m interested in the history of development and politics in AZ).

Tom Larson, NAIOP WI Lobbyist

By Tom Larson, Lobbyist for NAIOP-WI

 Although November 6, 2012 is over six months away, election season has officially begun in Wisconsin due to the upcoming recall elections this spring.

 Governor Scott Walker, Lieutenant Governor Rebecca Kleefisch and four Republican Senators are being recalled this Spring because of their support for the changes to the collective bargaining laws in Wisconsin. The primary election will be held on May 8, 2012, while the general election will be held on June 5, 2012.

 Overview of Recall Elections

 In the high-profile effort to recall Governor Scott Walker, the Democratic challengers include Milwaukee Mayor Tom Barrett, former Dane County Executive Kathleen Falk, State Senator Kathleen Vinehout (D – Alma), and Secretary of State Doug LaFollette. Lieutenant Governor Rebecca Kleefisch will likely face Mahlon Mitchell, former President of the Professional Firefighters of Wisconsin.

 In the four Senate recall elections, Senator Majority Leader Scott Fitzgerald (R – Juneau) will likely face political newcomer and recall organizer Lori Compas. Senator Terry Moulton (R – Chippewa Falls) will likely face Kristin Dexter, a former Democratic state Representative from Eau Claire who was defeated in the 2010 election. Senator Van Wanggaard (R – Racine) will likely face John Lehmann, a former Democratic state Senator from Racine who was defeated by Senator Wangaard in 2010. The fourth Republican senator facing recall was Pam Galloway, but she resigned from office on March 16, 2012, citing a family health situation. As a result, this is now an open Senate seat and will be filled by one of two current state representatives (Rep. Jerry Petrowski (R – Marathon) or Rep. Donna Seidel (D – Wausau)) who will be squaring off against each other on June 5th.

 How the Senate Recall Elections Impact NAIOP-WI

 While the significance of Governor Walker’s recall is clear, the Senate recall elections are also of great importance to NAIOP-WI. Because of Senator Galloway’s early retirement, the Senate is now comprised of 16 Republicans and 16 Democrats, without either party having majority control over the house. As a result, if the Democrats win one of the Senate recall elections, they will be in control of the State Senate, at least until the elections in November.

 While controlling one house will not give Democrats the ability to pass new legislation into law or repeal existing laws, it will allow them to stop any Republican-backed initiatives that they do not support. Issues like wetland regulatory reform, tax reform measures, repeal of prevailing law changes, or other regulatory reform measures would likely have not become law if Democrats controlled the Senate.

 Voting Record on NAIOP-WI’s Issues

 While Governor Walker’s support for issues important to NAIOP-WI is more widely known by NAIOP-WI members and is evidenced by the fact that he signed into law all of our top legislative priorities that came to his desk, the three Republican Senators facing recall elections have equally impressive voting records on NAIOP-WI’s legislative priorities. Each of the Senators had a 100% voting record on our top legislative priorities, which were highlighted in the March 15 Legislative Update. As to the two candidates vying for the seat vacated by Senator Pam Galloway, Rep. Jerry Petrowski’s voting record in 100%, while Rep. Donna Seidel’s voting record in 50%.

 State Agencies Seek Input From NAIOP-WI For New Ideas to Promote Economic Development

 In preparation for the 2013-14 Wisconsin State Budget, state agencies are meeting with various stakeholders and interest groups to gather a list of ideas to create greater efficiencies, improve customer service and further stimulate job growth and economic development. NAIOP-WI was asked to provide suggestions to a number of state agencies, including the newly formed Wisconsin Economic Development Corporation.

 During a meeting with several organizations representing the economic development community, NAIOP-WI provided a number of suggestions in the areas of continued regulatory reform, greater collaboration with the commercial real estate industry, and more coordination with regional and local economic development authorities.

 Further discussions between NAIOP-WI representatives and state agency officials will occur throughout the upcoming months. To have a better understanding of what is needs to happen to improve the Wisconsin’s economic development climate, we will continue to emphasize the importance of obtaining input from economic development experts from the private sector.   If you have suggestions, please share send them to Tom Larson (tlarson@wra.org).

 ~Tom Larson

 Speaker Summary-Mark Fitzgerald, City Administrator, Menomonee Falls

 The NAIOP Public Affairs Committee met with Mark Fitzgerald, the Menomonee Falls Village Manager, on Tuesday, March 27, 2012, to discuss economic development in Menomonee Falls.  To answer your first question – No, he did not provide any new information about the Kohl’s corporate headquarters.  Mark did, however, give some insight into why Menomonee Falls is considered to be a developer-friendly community. 

 Menomonee Falls finds itself in the rather unique position of having more jobs than residents.  This shapes the Village’s stance towards economic development.  In a time when most communities are seeking new sources of jobs, Menomonee Falls focuses primarily on working with its current employers to assist them to expand.  This has resulted in Menomonee Falls having the third largest manufacturing tax base of any municipality in the State and being the home to such household names as Kohl’s, Eaton, Froedtert, Harley Davidson and Alto-Shaam, as well as some of Wisconsin’s other large manufacturers.  The Village has accomplished this feat by being open to creative ways to structure developments including, the extensive use of tax increment financing, the issuance of industrial revenue bonds, providing direct financing and using a host of other financing options.  One Menomonee Falls employer thought so much of the Village’s approach towards development that it asked the Village to administer its industrial revenue bonds in connection with a development in a neighboring community, which the Village agreed to do.

 The Village is currently working on a number of redevelopment projects.  While the most public project is probably the Village’s efforts to position itself to retain the Kohl’s headquarters, the Village is also working to redevelop one of its few blighted industrial areas.  When the redevelopment of this blighted area was first proposed, redevelopment costs were estimated at almost $600,000 per acre.  The Village recognized that no private developer would be willing to incur this expense and undertook its own redevelopment of the site.  Mark was pleased to tell us that the Village will be announcing the first two users for this site in the near future.

 Although the Village is not actively seeking new employers, Mark indicated that he is always willing to meet with developers and land users to discuss how the Village can assist with projects in Menomonee Falls.  If you have a potential project in Menomonee Falls, please contact him at 262-532-4200.

 ~Rob Habich, Reinhart Boerner Van Deuren

The Closing Bell: Legislature Passes NAIOP-WI’s Top Legislative Priorities

 On March 15, 2012, the Wisconsin Legislature concluded the 2011-12 legislative session, which will be regarded as “historic” for many reasons. While most people will remember this legislative session for resolving the state’s budget deficit or making major changes to the state’s collective bargaining law, this legislative session will be remembered also for the many changes benefitting the commercial real estate industry.

Tom Larson, NAIOP WI Lobbyist

 As reported in prior legislative updates, the legislature previously passed several of NAIOP-WI’s legislative priorities including prevailing wage law reform, elimination of the farmland conversion fee, freezing property taxes, and modifying the law regulating distressed tax increment districts. During the last few weeks, the legislature passed numerous other legislative priorities including:  

 Wetland Regulation Reform (SB 368) – Allows for greater utilization of wetland mitigation program by, among other things: (a) requiring mitigation to be considered at the beginning of the permit process so that the permit decision can be based upon the “net environmental benefit” after mitigation; and (b) limiting “practicable alternatives” analysis to substantially similar activities on the same or adjacent site (i.e., this would exclude “not doing the project”, “doing a similar project on a different site,” etc.). Signed into law on February 29, 2012.

 Presumptive Approval/Deadlines for DNR Permits (SB 326) — Creates greater certainty for property owners applying for permits near navigable waterways by (a) shortening the current permitting timelines by over 30 days, (b) giving the DNR 1 opportunity to request additional information from permit applicants, (c) deeming permits to be improved if the DNR does not make a decision within statutory timelines, (d) requiring the DNR to provide, in writing, reasons for denying permits, and (e) shifting the burden of proof in contested case hearings to the person challenging the DNR decision.

 Nonconforming Structures and Substandard Lots (SB 472) – Protects the ability of property owners to perform unlimited maintenance and repair on nonconforming homes and commercial buildings; Prohibits counties from enacting regulations that are more restrictive than the regulations found in NR 115 with respect to (a) expanding nonconforming structures, and (b) building on substandard lots.

 Development Moratoria Framework (SB 504) — Creates a regulatory framework for local development moratoria by establishing (a) who can enact moratoria (cities, villages and towns; not counties), (b) the purposes for which moratoria can be enacted (comprehensive planning, health, safety, and overburdening of public facilities), (c) the procedure that must be followed (public notice, hearing, and adopted by ordinance), and (e) allowable duration (maximum of 18 months).

 Variances (expiration date) (SB 300)–Establishes that variances do not expire unless an expiration date has been established by local ordinance or by the board of zoning appeals/adjustment at the time the variance was granted.

 Indirect Air Source Permits (SB 111) – Permanently suspends DNR’s administrative rules which required indirect source air permits for large commercial and mixed-use development projects that will attract a large number of automobiles (shopping malls, entertainment facilities, large employers, highways and roads, etc.). Signed into law on March 7, 2012.

 Finally, in addition to passing the above legislation, a numerous legislative proposals opposed by NAIOP-WI were successfully defeated, including SB 83, legislation that would have significantly reduced the ability to use eminent domain for economic development purposes by (1) narrowing the definition of “blighted property”, (2) requiring municipality to provide more written documentation that property is blighted, and (3) making it easier for property owners to challenge ED actions in court.

 ~Tom Larson

 Over 50 people participated in our Masters Fantasy Golf Tournament held on Thursday, April 5 at Swig.  The grand prize was the NAIOP version of the famous Green Jacket which proudly displays past winners of our tournament.  Fantasy tournament players picked 5 players and 1 alternate who they felt would finish highest in the tournament.  The winner this year was Dean Huber of Grandbridge Real Estate Capital with a winning team of Bubba Watson, Phil Mickelson, Adam Scott, Justin Rose and Steve Stricker.  Second place went to Tom Irgens of Irgens LLC and Glenn Roby of Kahler Slater Architects and Paul Koszarek of PSI USA tied for third. 

The event also featured a Silent Auction with five foursomes to private country clubs donated by our members.  The Silent Auction benefitted our Corporate Political Action Committee.  Together we raised almost $2,000 for the PAC.  Thank you to everyone that donated foursomes or purchased them as well as folks that made personal donations.