written by
Natalie Baylon

Intersection is proud to announce its new offering, R&M Services

 

An Essential part of Intersection’s real estate platform in providing a vertically integrated operation is the Repair and Maintenance (R&M) Services division. The R&M Services division offers facilities solutions beyond the ordinary. Delivering an array of services to Intersection’s portfolio of properties, in addition to servicing the greater San Diego area. 

The division ensures that tenant satisfaction, asset preservation, safety, and curb appeal are top priorities. Intersection’s R&M technicians collaborate with property managers, brokers, and owners alike to gain a better understanding of the client’s assets. Consequently, this relationship management leads to increased efficiency and reduced risk.

Intersection R&M technicians are exemplary of the company’s core values and always Driven by Integrity. The team maintains the highest level of professionalism and takes pride in the properties they service. 

Offerings range from more specialty services like flooring, lighting, and concrete treatment to turnover repair for vacant units including patching, painting, window treatment install. R&M Services also has the ability to operate for recurring services like gardening, inspection, vandalism repair, and day porter services. 

At Intersection, we look forward to being able to offer more solutions and expand these services to the relationships we are so proud to have built. 

 

For more information regarding repair and maintenance services with Intersection, please contact Elaine Wolgast at 619.314.7200

written by
Natalie Baylon

COVID-19: Redefining Our Why

At Intersection, we play dual roles as Property Manager and Asset Manager for the portfolio of properties we manage. Our funds own four properties and we have a very important role as stewards for our investors. However, we also have an equally important role as service provider to our third-party clients. Whether an owner or a manager, COVID-19 has challenged us in ways we could not have imagined.

Back in February, when COVID-19 was peaking in China, we realized that we needed to be prepared for the eventuality that it would find its way to the United States. So, we began the process of evaluating and creating an emergency plan should our people need to work from home. Fortunately, we became a paperless company three-years ago, and have been supplying each of our employees with laptop computers since their onboarding. With this, Intersection was already equipped to make the transition from working in office to working remote. Three weeks from that initial discussion with COVID-19 cases multiplying rapidly, we offered our entire work force voluntary work from home status. Another week later, on March 19th, California mandated shelter in place and only essential businesses could remain open. Other than a core team of people, our entire work force was working remotely. Things can happen fast, but usually not this fast!

It is now April 13th, and we are in a different world from where we were in February. I joke that each day feels like a dog year because so much changes in 24 hours. Our team is working almost seamlessly from home, and our owned and managed properties are operating efficiently. The effort we put into our planning, technology, and in the quality of the people in our organization allowed us to adapt this incredible change.

The story does not end there. In the past few weeks the real work has begun as we deal with several tenants whose businesses have been literally shut down. How can you pay the mortgage and operating expenses when your property depends on rent from businesses that have been forced to close? Even though we were getting our jobs done each day, we had to figure out ways to help our clients and investors maintain  the value of their investments.

We were equally concerned about our own business. Intersection is a small business and a crisis like this one would certainly impact us as well. As such, we closely monitored stimulus activities instituted by the Federal Government. The $2.3 trillion Coronavirus Aid, Relief and Economic Security act (CARES) includes $349 billion in forgivable loans for small businesses to support payroll, rent and cover certain utility expenses. This is the Payroll Protection Provision (PPP) of the act that is focused upon supporting small businesses. This program would be a key element of our company’s plan to retain people and address major corporate expenses over the next few months.

However, the process of applying for PPP was not simple.  I am so grateful that we have the systems and team to compile the information needed for our lender as we prepared our application.  Through our own application for PPP, we realized that less sophisticated tenants could find the application process challenging. We learned that it is also important to have a banking relationship that has the ability to do SBA loans in order to participate. Many of our tenants who have been shut down did not have these banking relationships nor the resources to get the help they needed. Our unique insight as a small business inspired the empathy to help. Furthermore, we knew our experience could make a difference.

Our team mobilized quickly and put together a COVID-19 Tenant Resource Guide which lists all resources available to our small business tenants (Disaster Relief Direct from the SBA in addition to CARES PPP and other local resources). The two-page package is both simple and useful, and our efforts have not ended there. We have dedicated a team to become experts on CARES PPP and have built a proprietary list of banking relationships that are ready to help.  Although April has been a tough month, we have actually collected more rent than expected. But with so many of our tenants closed for business, we know that May is going to be our most difficult month.  Our CARES team has already put a number of our tenants in touch with SBA lenders and hopefully many of them will get inexpensive, forgivable financing to keep their businesses alive while paying rent, and retaining valuable employees.

It is really difficult to understand what the world will look like when we start to get back to work and social gatherings are allowed again. We can’t control when that will happen, but we can control what we do each day to enhance the lives of those we serve. COVID-19 and the social distancing measures taken to defeat it will never be forgotten. At Intersection, we will remember this point in time when being a small business was a competitive advantage. Our passion for the small businesses that make up our portfolio runs deep and the impact of our values as we support our tenants will be a proud moment in our company’s history. When it is all over and we are in our new normal, our values won’t have changed and the measures we have taken will be remembered. Hopefully, the relationships we care so very much about will be even stronger.

Stay healthy.

written by
Natalie Baylon

Don’t let the advancement of today’s technologies and information make you lose sight of why we hire professional services in the first place. At your fingertips, you can file your taxes, design your living room, trade stocks, order groceries or book a vacation all from your smartphone.

Due to the digital convenience of these technological advancements, there has been an influx of DIY-ers within the residential markets – consumers are hunting for their next home virtually. That doesn’t mean you should take all Real Estate matters into your own hands, especially when it comes to securing a location for your new or growing business. Sure, you can find commercial space on Craigslist and a plethora of other sites, in which landlords and their representatives post available space. However, getting through to the correct broker, scheduling a tour and negotiating a lease is where you might run into problems. Additionally, a tenant representative may know of space that hasn’t been made public, otherwise known as “off-market”. They will be familiar with the market conditions, market rental rates, the right questions to ask, and most importantly they will be in your corner.

Not only can using a tenant rep broker save you money, it will also save that one precious commodity that we never have quite enough of, and we can never get back —time.

As an entrepreneur looking to set up shop or a current business owner looking to expand, you have probably made a few savvy money-saving-moves that have helped you get to where you are. Don’t let the notion of saving a few bucks cloud your judgement on something as important as your business’s location. A common misconception is that hiring a tenant/buyer representative is going to cost you money that could have otherwise been saved. In most cases, tenant representation services come at NO COST to the tenant. Per industry standards, tenant rep brokers are compensated by property owners for securing a lease at their property.

In addition to the fee not coming out of your business’s start-up or expansion fund, your tenant representative will work in your favor to negotiate terms, tenant improvement allowances, free rent and other concessions, without any conflict of interest. Not only can using a tenant rep broker save you money, it will also save that one precious commodity that we never have quite enough of, and we can never get back — time. Time that can be used to focus on your core business which, after all, is what got you here in the first place.

Natalie Korn is an Associate of Intersection, specializing in leasing of commercial space, representing both landlords and tenants, with an emphasis on retail. Contact Natalie at 619-785-3503 or [email protected] to learn more.

written by
Natalie Baylon

There is a mystical element to the concept of a Family Office. Seen, but not heard. Looked for, but not found.  In the past few years the Family Office has become a commonly used term when it comes to raising capital. Someone you know has relationships, is targeting, or working with a large Family Office, or a group of them. When I first heard the term, I thought to myself “This is a group of investors we have to get connected with. We built our company by delivering informed strategy and highly personalized service to private investors and owners of commercial real estate. They are the ideal client profile!” So, we embarked upon a journey to build a set of relationships with high quality, high net worth family offices who were looking to get more out of commercial real estate. We soon realized that it wasn’t going to be easy.

We started our research where any astute business person would; we googled it, “Family Office Investing” and up came the results. Pages and pages of lists, referral sources, strategies and conferences that would give us access to the names, locations and in some cases investment strategies for all shapes and sizes of family offices.  We didn’t feel like buying a list of names for $4,000 was the best value proposition so we attended conferences where we might connect with a few of them (there are many to choose from). I can tell you from personal experience, few if any of these family offices or their representatives want to be solicited at a conference. Unless you have a direct referral into them, or a preexisting relationship, connecting was not easy. Soliciting really isn’t our style anyway, so we were left in a bit of a lurch as to next steps.

With little success in making connections to new family office relationships, we paused and took a long look at our own company. We needed to get a better idea of who we were and whether or not we were a fitting partner for family offices. We were just getting started with a branding project and part of that project was to interview our current clients in order to better understand their expectations of us. The process resulted in a new name, look and set of internal values that really spoke to who we were.

A significant part of the branding project was research. We interviewed internal stakeholders and fifteen clients across all categories of the service platform. These interviews gave us incredibly valuable insight as to what our clients liked and disliked about the various services we provided for them. It was then that we realized we were going about the idea of building our client base with family offices the wrong way. We knew we could do good work for them, and we knew we wanted to grow relationships with like-minded investors.  However, we didn’t understand that the value our company offered them wasn’t as important to them as our values. By clarifying our values, we took the first and most important step in building a platform that would put us in a position to broaden the set of investors for whom we worked. Today, many of them are family offices and the way we have done it has been an enlightening and fun journey.

There are many kinds of family offices and they need trusted partners with whom they can invest. We recognized this because when we analyzed our current list of clients, we found that a couple of them had portfolios with significant value. They trusted us to manage and lease multiple properties worth millions! They were our best clients and they were actually running a micro-family office.

A micro family office is characterized by the volume under management being much smaller than the normal minimum threshold to set up a family office. We were working for two micro-family offices but just didn’t think about them that way. In fact, and this is often the case with micro family offices, they did not view themselves to be in this category of family offices at all. We had built deep relationships with these clients over the years and had a successful track record of performance for them. Understanding their bigger picture objectives-legacy, transference of wealth, charity, and many other dynamics of their family office helped us put together a road map for future family office clients.

Single family and multi-family offices generally operate on a much higher scale than the micro-family office. Here is the distinction:  The single-family office only serves one single family and does not accept external management mandates. The multi-family office services more than one family and may offer a more generic solution to their clients. In fact, many of the family offices that would seek out a multi-family office partner to support them are so large that they operate much like an institution.

Remember a little earlier when I mentioned values?  An integral aspect of our branding project was establishing core values. In our company, they are Wisdom, Equality, Determination, Ingenuity, Stewardship and Collaboration. These values speak to the internal qualities that govern our conduct, and external qualities that support our clients. With that clarity, our entire organization has circled around a path that is destined to enhance the lives of those we serve. Our brand promise, “vision and guidance to help you get more out of commercial real estate”, similarly supplied us with critical direction. By defining who we were internally and how we had helped our clients over the years, we developed the correct ethos with which to engage this mystical entity called the family office.

The reality that we were already working with micro family offices helped us be more intuitive as we serviced them. Some still don’t think of themselves in the micro family office category, but they are. Our relationship with our micro-family offices blossomed with the start of our first fund. It gave us the opportunity to put our own money into investments alongside of them and elevate the trust they have in us. Fortunately, they told a few friends about what we were doing, and we built relationships with a few new families.

Today, we have grown into the proud manager of commercial real estate for six family offices that vary in size. The smallest of those is a $30M family and the largest is a family worth hundreds of millions. We learned that the key to building those relationships was creating a matching set of values, and a service profile that matched as well. That took us to new product offerings and to new relationships that allow us to do what we do best. The mystical element didn’t really exist at all…we were already doing work for them and just needed to define the alignment that had made us successful partners over the years.

written by
Natalie Baylon

In 2012, the JOBS (Jumpstart Our Business Start Ups) act was passed by Congress, thereby opening the door to general solicitation for private securities offerings in commercial real estate. At the time, many of us who raise capital for our own commercial real estate investments felt somewhat euphoric at the possibilities. The ability to market private securities offerings was going to open a flood gate of capital into privately held real estate assets. Fast forward to 2018, and the results have not quite been what we had hoped or expected.

Over the past 6 years, we have raised capital for our investments from friends, family, trusts and family offices. The process is inefficient. However, we have been able to raise approximately $20 million dollars of equity with this approach. We were relatively happy with this amount and expected the JOBS Act to enhance our efforts. However, as we became aware of the lack of regulatory direction, the high expense, and lack of affirmative capital commitment from crowd funding sources, we became less enthralled with the concept.

What has been so disappointing about the JOBS Act? From a sponsor’s perspective, it has been the lack of real reliable equity delivery from crowd funding capital raising platforms. In fact, we have watched many startups with a focus on capital generation through on-line sourcing or “crowd funding”, fail. Others are foundering or failing. Fees, transparency, and lack of internal resources to support due diligence have been issues as well.

One issue that we believe has impeded the amount of capital raised through online marketing is the lack of an advisory element for investors. Historically, brokers and/or financial advisors have worked with investors in evaluating real estate investments. Since crowd funding does not typically involve an advisor, it is difficult for investors to evaluate sponsors and their proposed real estate investments. Track record is of course very important to evaluating the sponsor. However, other things like fee structures, investment strategy and risk profile of the investor, are critical to the efficacy of raising money on line. Without an advisor, the leap of faith that investors take is even greater. This has made adoption of these platforms even more difficult. Raising capital for real estate investments is simply not an on-line game…yet.

Momentum is picking up. Over the past few years Congress has refined the JOBS Act fully approving all its provisions in May of 2016. With a clear idea of the regulatory environment surrounding Crowd Funding, capital flows should start to see some traction. According to Kickstarterforum.org, global commercial real estate equity crowd funding is expected to total $8.2B in 2018. This is up from $400M in 2013, and $3.5B in 2016. Given that the global real estate equity markets in 2016 were $217 trillion ($8.2 trillion in the US), there is still a lot of room for growth. The future should be brighter as millennials start to earn higher wages and begin looking to technology to make investments into commercial real estate.

Despite continued growth, the elephant in the room for Crowd Funding commercial real estate is still liquidity. Investors will typically lock their capital up into these investments for anywhere from 3 to 10 years.

This is a fundamental challenge for capital flows into commercial real estate. Investors like to know that they have access to their capital if they need it. Sponsors, on the other hand, don’t want to spend what it takes to create a truly liquid investment platform (aka traded Real Estate Investment Trust) because of the high cost. Enter the next new thing, Crypto Currency.

How can Crypto Currency impact investments into real estate? Efficiency and cost effectiveness. The potential efficiency of tokenizing real estate is hard to describe in just one post. Utilizing tokens capitalize commercial real is dependent upon having the appropriate protocols in place to ensure that compliance with securities laws are met. Currently, there are a few technology companies who may have figured out how to do this out globally. If they are successful, raising capital into private investments through secure tokens is just around the corner and will open capital flow for sponsors with limited up front expense.

Another aspect of Crypto Currency’s potential influence upon capital flows into real estate is liquidity. Ostensibly, you can own a coin that is a $100,000 interest in the Empire State Building. If you want to sell it, and Mary from Florida wants to buy it, so long as the protocols are met (done with a simple Crypto transaction known as a smart contract), you can sell it for whatever price she is willing to pay. The result is a highly efficient trade mechanism for single or multiple real estate assets. This is something that has never been done before in the private real estate investment space and we find it compelling.

Are you a believer in Crypto Currencies? If not, then you might not be thinking generations ahead. One of my good friends who is a communications professor at Pepperdine recently shared a story with me that I think is germane: Her students filled out a survey relative to how important technology was to them in their lives. Almost every student in the class agreed that they just wanted to find a way to go through the day with as little personal interaction as possible. They wanted to order their food, text or Snapchat their friends, figure out their homework, do their banking, etc., without having to directly address humans in any of these tasks. Without commenting on this socially (and I could go on), the message is clear. The next generation of investors in commercial real estate are going to need more than we are currently offering them. They are going to need more access to better investments, greater transparency from sponsors, increased access to easily understood due diligence, and liquidity.

In over 31 years, I haven’t seen a solution for creating this kind of fluid capital flow. However, if you believe that technology can serve every corner of the economy, then commercial real estate can and should be served as well. More importantly, whether it is Crypto or Crowd Funding that ultimately take hold, the next generation of investors (our kids and grand-kids), will be looking to technology to make these investments simple and efficient. This could, and we expect it will, create the kinds of capital inflows we were excited about back in 2010.

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