Blog Assignment #8

Property values in Boston have reached record highs over the past few years. The total assessed value of the city’s property surpassed $100 billion for the first time ever, and development in the city is moving quickly  to meet current demand. This rapid increase in property value is reflecting in the expected tax bill these residents face, as the small businesses who reside in these areas are having an increasingly difficult time keeping up. Multiple bar and restaurant owners, all local establishments, state that if the current trend continues they won’t be able to exist in their current locations.

What we’re seeing here is effectively the gentrification of the small local business out of these large urban environments. Many people are upset about the cultural changes that will come as a result, but is that such a bad thing? Cultural change is a part of life, as as Boston grows into a more luxury environment, wouldn’t it make sense that it would also lose some of the more quaint local establishments that provide the current homey character it feels right now? Good, bad, or indifferent, times are changing in the Boston area, and the real estate market is the driving force behind it.

http://www.bostonglobe.com/business/2014/12/12/boston-real-estate-assessments-eclipse-billion-for-first-time/2ySIkD9WUF1wKYuhBwkBZJ/story.html

Blog Assignment #6

This article discusses a new method for real estate projects to receive funding, and it could have some pretty far reaching potential for change in the way real estate business is currently done. The article focuses around a company called EquityNet, an online business which allows individual investors to fund various business ventures through a process known as “crowd funding”. EquityNet just recently opened up the process to real estate projects, and the change has been met with relative success.

EquityNet does well with establishing a network where accredited investors can view a variety of potential investments and pick and choose the ones they see the most upside in. This platform seems to provide significant opportunity to real estate projects because a majority of the investments available on crowd funding sites are very intangible in nature; they consist mainly of technology and service-oriented firms which can be very difficult to understand and offer investors very little security in their investment. Real estate, however, is backed by hard assets. The cash flow is relatively easy to understand, and the projects, although they require large amounts of capital, are somewhat more secure than most other crowd funding opportunities.

I look forward to see what the future holds for crowd funding technology. I think real estate is just one of many ways we will see this new marketplace expand over the coming years.

http://www.forbes.com/sites/devinthorpe/2014/12/03/equity-crowdfunding-site-embraces-real-estate/

Blog Assignment #5

The recent legalization of marijuana in some states has had consequences that are more far reaching than I think anyone could have predicted. One such extension of these consequences is in the realm of real estate. This article articulates several ways in which the real estate market was affected by the production and sale of marijuana.

1) The number of industrial explosions has increased dramatically in states where marijuana has been legalized. Hash oil, a popular marijuana based product, requires the use of butane in its production, which has led to several explosions. Industrial property owners are becoming increasingly hesitant to lease their buildings to hash oil manufacturers.

2) Even though certain states have deemed marijuana to be a legal substance, federal law still prohibits the use, possession or sale of all marijuana. For this reason, many shopping center owners are wary of the possibility of civil asset forfeitures which could occur if the federal government decided that illegal business was being conducted there. It remains unclear just how the federal government will eventually respond to the increasingly popular sentiment that marijuana should be made legal.

3) Another repercussion of the federal government’s stance on the issue is that banks, which are regulated by the federal government, are refusing to give mortgages to businesses who produce or distribute marijuana products. These businesses have largely required private funding as a result.

4) Furthermore, marijuana production requires a significant amount of water, which has led to serious mold issues in a variety of businesses and residences where marijuana is grown. Another concern is the smell, which can soak into the drywall and become very hard to remove. For these reasons, homes and businesses where marijuana products were produced  are very difficult to sell.

5) Finally, marijuana has a stigma. Whether it’s a business or a residence, nobody wants neighbors who grow or distribute marijuana. In the same way nobody want to reside next to a liquor store, property values are simply not helped by close proximity to distributor of marijuana.

http://www.marketwatch.com/story/5-ways-marijuana-legalization-affects-real-estate-2014-11-25?page=1

Blog Assignment #4

Sears is a company that has struggled for years to turn a profit. They’ve faced almost a decade of declining sales and margins, and have recorded losses for nine straight quarters. Thus, in what appears to be a last-ditch effort to stay afloat through the 2014 holiday season, the company is considering the conversion of 200-300 of its stores into a REIT which would be offered to shareholders through a rights offering to raise capital for the fading giant.

I can’t imagine how this strategy is going to work to bring about long-term success for the company, but then perhaps that’s not what this is about. Sears is clearly on its last leg. Surviving, in any sort of capacity, would provide some easement to the losses the company is surely facing this year, any maybe that’s the best that management can hope for at this stage in the game.

It’s sad to see a giant corporation take such desperate measures. I’d imagine it’s only a matter of time before Sears joins the ranks of Blockbuster and Kodak as quality companies who failed to innovate and move with the trends, and were left behind as a result.

http://www.cnbc.com/id/102163963

Blog Assignment #3

According to a CNBC article I just read, the luxury apartment building One57, which was the tallest residential tower in New York until just recently, is having a difficult time selling it’s rooms. Standing an impressive 1,004 feet tall, the apartment tower has sold about 75% of its 92 units, but concerns were raised when it managed to only sell 2 additional units in the first half of 2014. According to projections it could take as many as 6 additional years to sell the remaining units.

This slowing of demand is the result of several factors. Primarily, the wealthy over-seas individuals whom are generally regarded as the target customers for these projects have been significantly affected by weakening economic growth in China, Russia, and Latin America. Additionally, the current inventory of these luxury towers has doubled over the past year. What you have now is a situation where a growing number of apartment towers are fighting over a shrinking number of interested customers, and it doesn’t bode well for the development companies in charge of these buildings.

http://www.cnbc.com/id/102125745

Blog Assignment #2

My hometown, Plano, has experience an enormous amount of growth since my family moved there when I was 3-years-old. Even 20 years ago it was largely an agricultural community. A more rural suburb of Dallas, I remember as a kid I would walk outside and feed the sheep that grazed in the field less than 100 yards from my house. Now the sheep field is a bustling suburban neighborhood, and Plano has transitioned from a small agricultural community to a large suburban area with rising urban development. Currently, almost 40% of the citizens are under the age of 32. The preference is beginning to switch from detached single homes to large high-rise “live-work-play” environments.

Chapter 3 of Investment Analysis for Real Estate Decisions discusses the concept of the “100 percent” location. It describes this location as the center of development activity, where land is most intensely utilized. In Plano there are probably many intersections that fit this description, but one in particular that comes to mind is the intersection of Parker and Custer. This intersection of two heavily-trafficked streets is the site of constant development and improvement with large shopping strips, restaurants, and multiple anchor tenants at every corner.

Blog Assignment #1

Task #1:

My name is Brad Baxter, I’m a senior Finance major at Texas A&M and I’m originally from Plano Tx. I play soccer and the saxophone, and I scuba dive. In my FINC 475 class I’m most interested in learning about REITs and how to analyze them. I’ll start a career as a financial adviser in January, working for a small private firm called Sound Financial Solutions. For the next few years I’ll be learning the trade and gathering licenses and designations, and hopefully this will be the start of a long and successful career as a financial adviser. My scuba diving is one of my more unique hobbies. I’ll be flying to Belize in January with some friends to dive the Blue Hole and some surrounding reefs. My bucket list would have to include eventually learning to hang glide and owning a house on an exotic private beach.

Task #2:

To me the most interesting parcel of real estate is Edgar J. Kaufmann’s famous home, Falling Water. It was designed in 1935 by Frank Lloyd Wright and it stands as a fascinating example of how smoothly architecture can blend with and compliment the beauty of the nature it’s surrounded by. The history of it and the exemplary achievement in architecture that it is have fascinated me for many years.