written by
Anton Myskiw & Ethan Okazaki

THINK 2.0: Intersection’s Updated Market Selection Methodology

 

In a world characterized by uncertainty and rapid change, the ability to adapt and innovate becomes paramount. At Intersection, understand the significance of staying ahead of the curve. Our journey began in 2020, a year marked by the COVID-19 pandemic. A year that compelled businesses into lockdown and sent shockwaves through the market. During this period, we made a pivotal decision—to reflect on our commercial real estate investment strategy and pioneer a transformative approach to market selection.

THE CONCEPTION

This introspection gave rise to THINK, a dynamic and data-driven market selection methodology with a clear mission: to identify industrial markets poised for exponential growth. THINK emerged as the cornerstone of our investment thesis. Guiding us towards acquiring over 500,000 square feet of industrial real estate in just three years.

The genesis of THINK was rooted in a deep understanding of the driving forces shaping the industrial real estate landscape. Two key factors became conspicuously evident, further magnified by the onset of the pandemic—onshoring/reshoring of manufacturing and the rise of e-commerce.

Before 2020, onshoring/reshoring of manufacturing and e-commerce was already gaining momentum. However, the disruption in global supply chains triggered by the pandemic sent shockwaves through the corporate world. In turn, companies had to reassess their global footprints, questioning the tradeoff between lower costs and operational resiliency. For many, the pandemic underscored that sacrificing resiliency for cost savings was a risky proposition. This paradigm shift hastened the onshoring of manufacturing, buoyed by legislative incentives, driving up the demand for logistics space in strategic U.S. markets.

Furthermore, e-commerce, a growth phenomenon even before the pandemic, soared to new heights. E-commerce revenues surged by over 100% in the preceding five years, with the pandemic pushing it to new peaks. In the second quarter of 2023, e-commerce sales constituted a significant 15.4% of total retail sales, signifying a profound and lasting change in consumer behavior. Given that e-commerce retailers require approximately three times more logistics space than their brick-and-mortar counterparts, demand for such spaces quickly outstripped supply in many markets.

THE EVOLUTION OF THINK 2.0

Recognizing these shifts in the industrial real estate landscape, we resolved to identify high-growth markets based on objective data and demographics. Thus, the THINK framework was born, a data-driven market selection methodology fueled by multivariable regression analyses and a weighted ranking system. THINK became our guiding light for the past three years, and we’ve been tirelessly refining it ever since.

THINK is data-driven market selection methodology used to identify industrial markets poised for exponential growth.

Today, we are pleased to introduce THINK 2.0—the latest evolution of our market selection methodology. THINK 2.0 incorporates a series of enhancements to our analysis:

1. Implementation of a second regression utilizing an additional dependent variable.

2. Addition of a liquidity metric to account for market depth and transaction activity.

3. Refinement of data curation and variable selection.

4. A streamlined ranking and scoring system designed to eliminate statistical noise.

Since 2020, our investments in markets identified by THINK have borne fruit. Consistent leasing demand and rental rates that exceed proforma projections as a result. Consequently, we’ve completed a full cycle on one industrial asset and are on track to meet or surpass our projections for the other assets currently in our portfolio.

In the ever-evolving landscape of commercial real estate, we are committed to staying at the forefront, shaping the future of the industry. THINK 2.0 is a testament to our dedication to innovation and our unwavering pursuit of success.

To learn more about this Intersection’s Market Selection Methodology, please reach out to Anton Myskiw @[email protected] or Ethan Okazaki @[email protected]

written by
Alec Spencer

“Why do I need a Tenant Rep Broker?”

Commercial Tenants will often sign leases without a broker- unfortunately, it’s unlikely those tenants get the best deal. Having a broker advocate for your terms is crucial. 

Commercial landlords have goals for their property and above all, they want maximum returns and higher rent. Property owners typically hire listing brokers who handle the day-to-day leasing activity and get compensated in the form of a commission after the deal is executed. When a tenant searches for commercial space on their own, it is important to remember the lessor broker has a fiduciary duty to the property owner, not you the tenant.

Maybe the most common industry misconception is a tenant operating without broker representation will save the landlord money by eliminating one side of a commission. While that may be true, listing agents are far savvier than that. What actually happens when a tenant is unrepresented, is the listing agent ends up receiving a larger commission for less work on their part as listing agreements typically provide full market commission regardless of whether or not the tenant has a broker.

 

“So where is the value in hiring a real estate professional for Tenant Representation?”

 

Maybe the most valuable is by saving the tenant time and energy. As a business owner, you don’t always have time to search available properties, schedule tours, contact listing brokers, or negotiate rates and terms. An experienced and driven Tenant Rep Broker is there to handle all the busy work so you can focus on your expanding business venture.

Your Tenant Rep Broker also lends their market knowledge and has the ability to effortlessly navigate the moving parts of a lease. A well-versed Tenant Rep Broker knows what is available, who represents the owner and submarket rental rates. A deal is really an equation for these landlords so good Tenant Rep Brokers know how to calculate what is available and suggest where the ‘give’ is for each space. For example, a property with a high vacancy rate may have flexibility in its asking rent, whereas the final vacancy of a property may be firm on the asking price, but willing to offer a tenant improvement allowance to build out the space.

Tenant Rep Brokers also know the complicated dynamics of leasing and facilitate the process from start to finish. Including, finding and touring available spaces, presenting offers and letters of intent with credit statements and proof of financials, negotiating terms to get to a lease draft, reviewing a lease with an attorney when needed, advising on the time and cost estimates if there is a buildout, guidance on required permitting through the city- all these of which are done with the tenant’s best interest in mind.

Lessor Rep Brokers are unconcerned with tenant needs and will not be of use to a prospective or hopeful tenant, which is why it’s important to remember who is on your side.  Working with a professional and having someone advocate for you through such a large life milestone is invaluable.

To learn more about Tenant Representation, please reach out to Alec Spencer at [email protected] 

Autumn Valencia is the Marketing Coordinator at Intersection, providing strategic marketing expertise to support business objectives across company divisions. For general and marketing inquiries, please contact Autumn at [email protected] 

written by
Natalie Baylon

Intersection is pleased to announce the sale of a fully leased and stabilized internal investment fund property managed by Intersection

Experiential Poway Retail Center Closes for $13.5 M

Senior Directors, Kyle Clark, and Dan McCarthy along with Senior Associate Alec Spencer, represented the seller in the sale of the North County retail center, Old Poway Village at 14005-14055 Midland Road, Poway CA. The 35,191 square-foot award-winning center consists of a selection of carefully curated retail tenants.

The property was sold as a fully leased and stabilized investment. After acquiring the property in 2017, Intersection established a new vision for the center that focused on building a destination lifestyle center for the Poway Community. To accomplish this, Intersection replaced several non-performing tenants with new, carefully curated businesses to create a retail experience conducive to the family neighborhood of Poway and surrounding North County residents.

Artisan Food and Beverage tenants The Hop Stop, Smokin’ J’s, and Mission Cellars anchor the center, and they are complemented with users such as the Bark and Collar, Poway Music Academy, Poway Pilates, and a lineup of other local tenants that support a unique dining and shopping experience.

“This has been a true passion play for Intersection.” Said Mark Hoekstra, Managing Director of Intersection. “I grew up in this neighborhood and always felt that this center could become something special. It has been an amazing journey seeing this property transform”.

The property was sold to a 1031 Exchange Buyer who closed within 45 days of opening escrow. “We positioned this asset to sell with clean triple net leases, good lease term on the rent roll, and have maintained the property impeccably.”, shared broker Kyle Clark “The Escrow was smooth with no surprises.”

The buyer plans to hold the asset long-term drawing upon the stabilized cash flow. “This property performed very well during the pandemic.” Stated broker Dan McCarthy. “Our tenant base was resilient, and the many outdoor areas benefited our food and beverage tenants significantly.”

To learn more about this deal please reach out to Kyle Clark at [email protected] or Dan McCarthy at [email protected]

Autumn Valencia is the Marketing Coordinator at Intersection, providing strategic marketing expertise to support business objectives across company divisions. For general and marketing inquiries, please contact Autumn at [email protected] 

written by
Anton Myskiw

Intersection Makes First Nevada Acquisition Adding to a Diverse Portfolio of Value-Add Properties in Attractive Growth Markets

LAS VEGAS, Nevada. – Intersection officially announced the close of escrow on a 100% occupied 18-unit flex industrial property in Las Vegas, Nevada for $4,525,000. This property is the seventh acquisition made by the company crossing $70M of total capitalization.

The property, located at 4355 -4375 W. Reno Ave., Las Vegas, NV 92105 is a two-building project in West Las Vegas and was purchased in an off-market transaction from a local ownership group. The deal was sourced off-market through a local broker Erik Sexton of NAI Excel Las Vegas.

“This was a property that needed institutional quality management and an entrepreneurial strategy. Intersection recognized the value and moved quickly.”

Said Sexton. Intersection Senior Analyst Anton Myskiw added, “We have been working diligently to find industrial/flex assets in this market. We’ve already completed 3 new leases and will execute a value-add plan that improves operations as well as the curb appeal of the property.”

The asset is currently 100% leased by a wide cast of both local and regional tenants, with 72% of the building’s occupancy rolling in the next 12 months. Las Vegas is an attractive industrial growth market, given its positioning as a centrally located logistics hub for the Western region of the states. With 8.5M SF of industrial space under construction in the second quarter of 2021- Intersection is confident this property is a prime candidate to attract auxiliary/complementary users servicing the larger projects-general contractors, material vendors, and other development-focused tenants.

To learn more about this transaction or to inquire about how to invest in a portfolio property please contact Senior Analyst Anton Myskiw at [email protected]

Autumn Valencia is the Marketing Coordinator at Intersection, providing strategic marketing expertise to support business objectives across company divisions. For general and marketing inquiries, please contact Autumn at [email protected] 

written by
Steve Gildred

Helpful Tips to Become a Skilled Networking Professional

When it comes to networking, commercial real estate is no different than any other industry; the better you take care of your network, the better your network takes care of you. While the brokerage side of the business may seem like an individual operation, you’re only as strong as your network and networking is a craft that requires patience and dedication to fully master. The following are just a few helpful tips and suggestions to help you become a premier networker in commercial real estate:

Play Your Cards Right

As a broker, you find yourself on the go often. Since you never know when you might stumble across your next client, it’s an absolute must to have your business card handy at all times. Just as important as handing out business cards, however, is taking them. A card given puts you on someone’s radar but a card taken gives you the power to initiate a relationship. To properly maximize your business card collection, it’s important to log every new entry into a database of contacts that can be tracked and monitored. Next, you must create a plan for when and how you intend to initiate contact. Last but not least, be mindful of timing; each new contact carries with it a limited window of opportunity, and business cards have a propensity to stack up on your desk if you’re not proactive with them.  

Invest in Your Network

The greatest gift you can give someone is your time and nobody is more keenly aware of this concept than a premier networker. Relationships are not born from the mere initiation of contact but by logging meaningful time and establishing a genuine connection. This may sound simple enough but it becomes infinitely more complex the larger your network grows. As a result, prioritizing relationships is critical as one only has so much time to offer and must be cautious about which relationships to allocate your time towards. The balance of maintaining old relationships while developing new ones is a careful song and dance that requires a strong sense of priorities and self-awareness. 

Establish Yourself in the Local Community

A great way to expand your professional network is by attending local networking organizations such as the Commercial Real Estate Alliance (CRA), Building Owners and Managers Association (BOMA), and National Association for Industrial and Office Parks (NAIOP). These organizations typically meet monthly and will provide you with exposure to other local professionals and business owners. In order to maximize your affiliations and create a consistent presence within these organizations, it’s important to attend as many networking events as possible. This is especially true of your initial years as a new member of the organization.

Have Fun

Whether you’re exchanging business cards, cultivating close relationships, or mingling at networking events, remember to always have fun with it. At its core, networking is designed to be a uniquely rewarding experience and should be taken as such. The more people you can plug into your network that you genuinely enjoy, the more satisfying your experience will become. At some point, networking will stop feeling like work altogether as it eventually becomes second nature. And that’s when the real fun begins because, in the famous words of Mark Twain, if you can “find a job you enjoy doing, you will never have to work a day in your life”

To discuss networking strategy in more detail or if you would like more information about Intersection, please reach out to Steve Gildred at [email protected]

Autumn Valencia is the Marketing Coordinator at Intersection, providing strategic marketing expertise to support business objectives across company divisions. For general and marketing inquiries, please contact Autumn at [email protected] 

written by
Natalie Baylon

A Detailed look into general partner investing and navigating a deal through a pandemic

Throughout my years raising capital for our real estate investments, I have encountered a few investors who ask how they can be the General Partner instead of the Limited Partner in a deal. The first thing that would come to mind when I heard those questions is: Invest thousands of hours in learning a complex industry, and hundreds of thousands of dollars into people and technology, and you will be just getting started. Putting together a successful commercial real estate deal is not for the faint at heart or the inexperienced. It takes years of hard-work, talented people and you have to actually find the right deal in a very competitive market. That said, Ingenuity, Collaboration, and Stewardship are core values of our firm so we always tried to find a way to give our investors a taste of the General Partner “like” returns by targeting value add properties with higher return scenarios.

 

During the Pandemic, we were raising our second Fund and in March of this year (2020) we purchased an office property. Bad timing? Not really. We still love the deal and our basis, and in fact, feel very bullish about the long-term opportunity to generate a strong return for our investors. The structure in that deal, however, was a little different. We had a joint venture partner in that property, and our Fund was acting as the General Partner. All of the returns from the Joint Venture, including carried interests that we would be able to earn in excess of the property level returns, were set up to inure to the Fund. This structure effectively put all of the Fund investors in the role of General Partner. Normally, this scenario is structured a little differently with investors only earning a percentage of the carried interest. However, because we were using Fund equity as the General Partner capital, we felt that sending 100% of the carried interest to investors was the right thing to do. Considering the risk that the Pandemic has thrown into the market, we’re happy to have that structure in place and are optimistic that the returns will ultimately play out in a significantly positive way for our Fund.

As we approached the structure of our last deal, we started to consider the concept in a more meaningful way for future deals. Our research returned that the GP Co-Investment structure seemed very appealing for us as we continued to build our investment practice. We had just built out a new strategy for acquiring logistics based industrial in markets west of Denver and realized that we could lever our personal capital more effectively if we brought in GP-Co Investors in multiple deals. They would have the opportunity to earn a 10% piece of our carried interest effectively allowing the individual investor to earn greater returns than our institutional limited partners when measured against project-level returns.

Sometimes unexpected situations create opportunity. Not only did we develop a new and exciting investment strategy, but we were also able to create an investment structure that helped us address the requests of those who wanted to be General Partner in some of our deals. The thousands of hours, and hundreds of thousands of dollars invested in people and technology, along with a little entrepreneurship, helped us put our private investors one step ahead. We’ll still do all of the heavy lifting of course and continue to focus on enriching the lives of those we serve (whether they be GP’s or LP’s)!

Autumn Valencia is the Marketing Coordinator at Intersection, providing strategic marketing expertise to support business objectives across company divisions. For general and marketing inquiries, please contact Autumn at [email protected] 

Read More Insights

Insights

Intersection. A Company Driven By Integrity.

Read Article

Insights

Crowd Funding-2.0 Is the JOBS Act starting to take hold?

Read Article