1. Introduction to Real Estate
Real Estate Finance, Spring, 2018

2. Overview The real estate Careers in real estate Hotel
Industrial/Warehouse
Office
Retail
Multi-family
Careers in real estate
Acquisitions / Investment
Development
Financing
Leasing
Asset / Property Management
Other: architecture, design, engineering, environmental, law, planning

3. IRR coverage, Northern New Jersey
IRR Northern NJ Counties: (2012 population)
Bergen 919K
Essex 787
Hudson 653
Hunterdon 126
Middlesex 823
Mercer 369
Morris 498
Passaic 504
Somerset 328
Sussex 147
Union 544
Warren 108
Total 5,806 NJ Total 7,949 (73%)

4. Marcus & Millichap coverage, Northern New Jersey
M&M Northern NJ Counties:
(2012 population)
Bergen 919K
Essex 787
Hudson 653
Morris 498
Passaic 504
Union 544
Total 3,905 IRR Total 5,806 (67%) NJ Total 7,949 (49%)

5. Hotels: Limited vs Full Service
Limited Service: no dedicated, revenue-producing food and beverage component
Low operating costs: no catering services or multiple restaurants.
Room rates are typically low: demand is from price-sensitive travelers.
Majority target $75 per night or less; higher quality can command a premium. Some extended stay w/ kitchenette etc.
Chart and notes from ushotelappraisals.com

6. 47,000 rooms in Northern NJ. Only 430 rooms under construction.
Hotels
Typical Math:
RevPar = Avg Daily Room Rate * Occ Rate
= $155 * 0.74 = $ Price/Rm = 365 * RevPar / Cap Rate
= 365 * $ / 0.075
= $558,207
47,000 rooms in Northern NJ. Only 430 rooms under construction.
Data and charts from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

7. Industrial, Office, Retail
Asking rents are annual per square foot
Some simple math* to determine price / ft2 = ( asking rent / ft2 ) * (1.0 – vac rate) / cap rate = ($8.8 / ft2) * (1.0 – 0.097) / = $122 / ft2
* To be valid at the building level, this assumes
building vacancy rate is the same as the market vacancy rate
all tenants are paying current asking rents

8. Industrial
“Pricing levels have exceed $200 / ft2 for well leased, modern facilities” … location matters for rent
Data and charts from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

9. Example Industrial Facility (from Jeff Milanaik)

10. Notes on Industrial Locations (from Jeff Milanaik)

11. Industrial Detail
Data and charts from Marcus & Millichap Northern NJ Industrial Research Report, 2nd Half 2017

12. Office
Charts from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

13. Waterfront Corporate Center
Class B vs Class A
121 Chanlon Ave
121 Chanlon Ave New Providence: 85% leased, cap rate 8%, $131 psf
Waterfront Corporate Center
(I think this deal is for this building) 3 Waterfront Plaza, Hoboken: fully leased, cap rate 5.75%, $433 psf
Data from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

14. Office Detail Class A/B/C: $165 / $131 / $123 psf
Class A vac rate: 23.4%. Class B,C vac rate: 12.6%
Data and charts from Marcus & Millichap Multifamily Office Research Report, 2nd Quarter 2017

15. Retail
Charts from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

16. Shoppes at North Brunswick Sale price $225 psf
Shoppes at Union Hill
Sale price $688 psf
Shoppes at North Brunswick
Sale price $225 psf
Data from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

17. Retail Notes Class A vs. B Top 3 malls (sales psf)
Class B sales are struggling / declining
Class A malls seen as performing relatively well
Top 3 malls (sales psf)
Mall at Short Hills: $1,200 psf
Garden State Plaza: $775 psf
Willowbrook Mall: $740 psf
US Shopping Center Classifications and Characteristics:
On the relationship of Sales and Rents sf (from our own Ray Cirz):
Data from Integra Realty Resources Northern New Jersey 2017 mid-year viewpoint (July, 2017)

18. Retail Detail
Data and charts from Marcus & Millichap Multifamily Research Market Report, 3rd Quarter 2017

19. Multifamily Avg. eff. rent: $1,815 Jersey City:
Class C: $2,333 Class A: $3,061
Current cap rates
Bergen, Hudson, Union: 5-6 percent
Essex, Morris, Passaic: 7-8 percent
Avg. price: $155,700 per unit Bergen & Hudson:
$209,000 per unit
Data and charts from Marcus & Millichap Multifamily Research Market Report, 4th Quarter 2017

20. Multifamily
Unlike office and retail, rents are monthly and are per apartment
Effective rent = contract rent less free rent and any other cash allowances
Data and charts from Marcus & Millichap Multifamily Research Market Report, 4th Quarter 2017

21. Careers in Real Estate
Real Estate: Land and structures that potentially produce income
What makes RE different from finance is focus on location
Careers in real estate
Development – build or rebuild
Leasing – find tenants, affect the income on the property
Sales / Acquisitions – new owners that more highly value the cash flows
Asset Mgmt / Investment – use cash flows of asset for some purpose
Financing – slice up the capital stack to debt/equity
Property Management – required operations, if done well boost incomes
Other: architecture, design, engineering, environmental, law, planning