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Real estate shifts to a cash flow phase

 By Jim Fried

My past columns have profiled specific guests on my show, but this month, I wanted to write about the latest phase of the region’s real estate market. It’s based on ideas that many of my guests have expressed during the last few weeks, but sometimes only shared privately.

I have been in the real estate business for over 30 years and have been involved with more than $2 billion worth of real estate transactions. My expertise is creating real estate business deals, not just managing the marketing process.

During the current real estate cycle, I have helped many real estate investment groups capitalize development transactions and sell their urban land. Now, the market is shifting from a construction phase to one focused on cash flow. Investors and lenders are seeking high-quality, predictable cash flow that’s generated from multi-tenant and single-tenant properties.

More recently, the trend is moving toward identifying cash flowing properties for my clients to buy and then helping them to finance the deals.

Well-located, well-anchored retail space with a tenant mix that minimizes exposure to sales on the Internet will continue to be the darling of real estate investors in 2016 and 2017.

Other than retail, investors and institutions continue to chase the cash flow generated by apartment projects. This product type is considered a stable investment that is not subject to the swings of the economy. Capitalization (cap) rates continue to be driven down in this asset class even though people believe interest rates may rise later this year.

A number of the family offices and institutional investors with whom I work are seeking to expand their holdings of individual apartment projects and portfolios of apartment buildings. However, they’re finding it extremely difficult to identify assets in this genre that they can acquire at prices they believe are appropriate. One family has decided to sit on its cash until the market pricing becomes more attractive.

I regularly get calls from families located in cities such as Dallas, Houston, Chicago, Boston, New York and Atlanta looking to buy in Florida, and Florida families looking to buy outside of the state. More often than not, we end up putting two families together and they blend their portfolios, market concentrations and risk profiles. This is becoming an increasingly common solution as investors continue to chase yield.

The most important part of any of these combinations is who will operate the property. The high net worth investors and families with whom we work put the potential operating partner through very rigorous due diligence prior to investing. ¿

I’ve discussed this topic in the past on my show and I expect to have numerous episodes on this in the future. To hear the opinions my guests, you can go to the archives on our website, friedonbusiness.com. You can always hear news and information on our show, every Thursday from 6 to 7 p.m. on 880 AM in Miami.

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Drew Limsky

Drew Limsky

Editor-in-Chief

BIOGRAPHY

Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.