“FORECASTING COMMERCIAL INVESTMENT”

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Our Guest

Jeremy Sisson is the CEO and Broker of Record for Evan James & Associates, an award-winning, full-service commercial real estate brokerage headquartered in Orlando, FL. They specialize in investment sales, landlord and tenant representation, debt sourcing and property management.

Mr. Sisson has been in the mortgage and real estate industries for the last sixteen years, where he has been party to thousands of transactions. He started as a multi-family specialist at the nationwide powerhouse commercial real estate investment brokerage, Marcus & Millichap.

He’s now a power broker, as he negotiates and closes deals in every major niche and product type of the commercial real estate industry.

Guest Link

www.ejarealestate.com

Show Transcript

Hello, welcome back to the Dr. Nilda Business Foresight Show. With me today is my co-host, Rachel Calderon and Jeremy Sisson. So, let me give you a little bit of his background. Jeremy Sisson is the CEO and Broker of Record for Evan James & Associates, an award-winning, full-service commercial real estate brokerage headquartered in Orlando, FL. They specialize in investment sales, landlord and tenant representation, debt sourcing and property management. Mr. Sisson has been in the mortgage and real estate industries for the last sixteen years, where he has been party to thousands of transactions. He started as a multi-family specialist at the nationwide powerhouse commercial real estate investment brokerage, Marcus & Millichap. He’s now a power broker, as he negotiates and closes deals in every major niche and product type of the commercial real estate industry. Welcome, Mr. Sisson.

It’s good to be here thank you for having me.

We’re going to jump right in. You have a bachelor’s and a master’s in business and yet you chose to become a real estate broker or to get into real estate. What attracted you to real estate?

I think initially it was a position that was offered to me when I first came into the work world when I got my bachelor’s in business administration and marketing many years ago. I’m a big fan of always working with different types of clients and focusing on customer service and working in the mortgage industry was where I started. It provided me and afforded me the opportunity to make a decent amount of money to provide for my family. So, that’s kind of how I got started. The MBA was a different thing that came about 15 years later. As a CEO of multiple brokerages and holding companies, it made good sense to get my Masters in Business Administration from UCF so we can continue growing the operation. Actually, our Dean of the Graduate School asked why didn’t I get my master’s in real estate and I said well I’ve already been doing this 15 years I really want the MBA to kind of help expand the business and grow it.

If someone is interested Jeremy in selling their commercial property or real estate why should they call you versus another brokerage and what makes you different from the rest?

I’m sure most would agree that there is an overall slowness to how fast commercial real estate deals are done and the communication in general. I would say that the answer is located in our main differentiator from other brokerages which is sublime customer service. So, while all brokerages provide a level of customer service that most clients would categorize as satisfactory we routinely go above and beyond the call of duty. The call of duty if you will to answer the phone on the first ring where it doesn’t go to voicemail. We send emails right away and respond. We set up tours for clients within 24 hours of the request. We give our clients the good bad and ugly that 360 point of view on each deal so they see the full perspective. Some of the responses that we’ve routinely gotten from our clients are I didn’t expect a call or an email in several days or wow that was fast or it’s nice to know there’s someone who responds in a timely manner. So, I would say that was the reason why we get chosen pretty routinely even over bigger brokerages.

So, customer service for you guys is top of the line because of your response time?

Absolutely

In the commercial industry I’m guessing because it’s different than regular real estate.

Yeah, you can say that we respond in the way a residential real estate agent would respond. They’re very quick on the draw and that’s not normal in commercial real estate. As a matter of fact, when we’re Co brokering deals with other brokerages we have to wait for responses for a week at a time because it’s maybe they’re listing. We have a buyer, for example, so, we try to act as if we’re on the residential side and that has done us very well over the years.

I know a lot of people who do flipping and they do a lot of single family homes. When an investor has the money why would they choose a commercial property over single family homes that they can flip? What is the difference? What’s the good, the bad and the ugly?

Typically, people that we work with a lot of them started in residential investing. They buy a house they get a return and then they’re hungry for a duplex or a quad Plex. Or maybe they want that 10-unit apartment complex. So, there’s definitely an evolution in terms of people who invest in residential real estate. Almost all of them inevitably go into commercial real estate in some capacity. I think one of the main reasons why is it’s a more sophisticated transaction. You can cash flow a lot more money on commercial real estate deals versus residential. If you think about it from a risk perspective if you lose a tenant on a rental property now you’re out 100% of your income. On a 50-unit apartment complex if seven units are unoccupied you’re still covering your debt service, covering your expenses and probably still being profitable if 43 of them are occupied. So, there’s less risk based on the larger properties that you can purchase. I would say that that’s the reason why people move and why it’s probably better to invest in commercial real estate because ultimately most people who are doing residential end up doing commercial investing anyway.

I’ll be honest the people that I know that do the house-flipping or that have invested in several single-family homes. How do you convince them that commercial real estate is a better investment, a better return or better on the ROI?

I guess it depends on how much money you want to spend and invest. If you’re buying residential homes and if there was a downturn in the cycle commercial real estate traditionally is less affected by a downturn in any market in any cycle rather than residential. They’re the first to get hit so if you lose half of your tenants you’re going to be in a bad position. Also, the appreciation on commercial real estate assets is a lot less than it is in residential.

Now I noticed that you work closely with professional athletes and you do residential real estate. Why do you do both? Not many real estate brokerages work closely with athletes how come yours does?

Well, we actually work with both professional athletes and residential real estate agents. Traditionally most commercial real estate brokers don’t do that. The answer is yes, we actually work with both. We feel residential agents should have the opportunity to break into the commercial real estate industry without having to forego their residential read-and-butter. So, as a brokerage, we’ve actually created a CRE a commercial real estate mentoring program. Where for a percentage of each deal and an hourly rate for mentoring we can actually assist any residential agent to break into and flourish in a specific product niche or a geographic area. Now in regard to working closely with the professional athletes like you said I sit on the NFL Alumni Association Central Florida Chapter Board of Directors and I’m their volunteer community relations director. I see firsthand the financial shape that some players come out of their career with which is more often than not virtually no money savings or investment. That’s why we created as a brokerage our CRE professional athlete program. Where we work closely with high net-worth professional athletes and entertainers, their CPAs, their accountants, their talent agencies, attorneys and financial advisors to provide sound and expert commercial real estate investment strategies for the athlete and their families. What we do is we focus on creating a portfolio of commercial real estate investment assets for each Pro client and their families that will provide a stable means of income production long after their professional athletic and entertainment careers have ended. That’s kind of why we do it because we want to put them in a better position to where they’re making twenty-five fifty thousand dollars a month even if they’re not playing anymore.

What advice would you give someone who is investing in CRE?

I think the first thing I would probably tell them is to interview several commercial real estate brokerages and agents to represent them. I would probably also tell them to talk with specialists and all product types and niches before investing in a particular one. Then probably the last thing that I would tell them is to have several people who understand the financials and the nuts and bolts of each deal that they’re looking to invest in. And what constitutes a good buy before they actually pull the trigger. Once you have that team of experts in place then I would say happy investing.

What I see Jeremy is that there’s a lot of financial planning also with the commercial real estate. So, it’s not just going in buy the property and that’s it. But, you seem to be very well rounded and caring for the entire portfolio. So, there’s somewhat of financial planning is that accurate?

Well we don’t do the financial planning piece most clients have financial planners and accountants that they consult with. As anyone who buys commercial real estate knows there are tax write-offs for owning properties so it’s a way to mitigate your tax liability when you own property whether it’s residential or commercial or otherwise. So, these high net worth individuals just take advantage of the IRS tax code that already exists.

Is this only for people who have a high net worth or will you work alongside anybody along with their planner to make sure that they get the right property?

We will work with anybody. We have clients at all walks of life. We have attorneys who make a great deal of money. We have athlete clients. We’ve got a lot of operators Tier two operators and commercial real estate who that’s all they do is buy properties. We work with them all day long so we’ll work with anybody who either once has the money and wants to learn or they are they’re already investing and they want to buy more. So, we work with a wide range of clients.

Jeremy if someone wanted to refinance their debt service how can you help them that is ballooning?

Most people don’t realize that certain commercial real estate brokerages have the option to help them secure debt on a new purchase transaction or even help them refinance their current debt load if they say have a 5 a 7 or a 10 your balloon coming due which is what you were talking about. So, at our brokerage one of our four core competencies and business practices is for a fee we will source the debt and equity for our commercial real estate clients. The other three core competencies that we focus on are the representation of buyers and sellers and the acquisition and disposition of their real estate investment assets. Obviously tenant and landlord representation and advisory services and then commercial real estate management property management. So, one of the four just goes back to helping people source their debt because at the end of the day you can go to your local bank but what if your local bank says no? Through the years we’ve developed hundreds of relationships with private lenders, credit unions, regional banks, national banks, insurance companies and so you’d be surprised at how many quotes we can pull together for a client if they need some.

I’m a futurist as you well know I would like to know where do you see the future of commercial real estate?

 

Actually, there’s a lot of different ways that we could cut the information but I actually pulled out four predictions for the commercial real estate industry over the next 10 to 50 years. So, what I’m going to do is I’m going to go through all four of those. First, I wanted to start by saying obviously thank you for having me and then next I want to lead by saying that the predictions I’m about to talk about will have an impact over the next ten to fifty years in our industry. Some may come sooner than others but all of these are just predictions. The current state of the commercial real estate industry is typically driven locally and regionally so each market will be a little bit different of course. However, the overall health of our industry nationwide from the 30,000-foot macro level is very strong despite rise in interest rates that perceived overheating of some property values and the tightening of lender guidelines. So, across product types and niches the vacancies are down and occupancy is up. Rents are up. Cap rates are compressed. For owners in the marketplace looking to sell there’s more capital available than there are deals to invest in and we actually get calls all the time from investors both locally and coast-to-coast looking for cherry deals around the state of Florida and the Southeast United States. When I say all the time I mean all the time. We get those calls constantly. So, my advice to an investor like that is to have a decent sized group of commercial real estate brokerages and agents that you can trust in every major market who will feed you local deals as they come available. Everyone wants the off market 70% off retail deal price deal that’s the ideal location with no hair on the deal and has tremendous upside to it. It’s like finding the holy grail. Like my mentor used to say they want to buy at a C Class price point in an A-class location which is very hard to find but they do come available. So, one of the easiest ways to gain access to those types of deals is to have a long-term solid relationship with brokers like myself who see these deals come across their desk on a regular basis. The last recommendation is if you are offered a cherry deal and you pass on it don’t expect to be the first call the next time that comes available. So, be flexible and ready to make a move if a deal is offered to you. So, with that said that was kind of the snapshot of the industry in general. The four predictions. The first one that I see happening in our brokerage disease is retail will continue to be disrupted by major players like Amazon and overall tenant mix. And base of tenants may radically change over the next 25 to 50 years. I’m going to give you some statistics and some information to back that up. There was actually a recent article by CMO.com that talked about how has already disrupted the retail market and they focused on five points. They were supply chain and management distribution. Obviously, they have that two-day shipping that everyone knows, a better customer experience everyone knows that they have one-click checkout and they lower price iniquities just by being in the market that was number two. Number three is increased efficiencies by offering larger selection with more price points. That’s why people toward that online rather than the offline purchase. Number four is the data and personalization which is their competitive advantage. A better selection and product evaluation through comparison shopping. They do a lot of suggestions ratings and sales data and the last one that they said is killer product search. Amazon has become the Google of product search. Would you guys be the 55% who basically start with Amazon first?

Absolutely!

That’s my first search engine when it comes to products.

They have so many different price points for the same product so, it beats having to go through the entire internet. It’s one-stop shopping.

So, how that affects us in the commercial real estate world is they’re building these fulfillment centers. They’re building 132 million 2.3 million square foot fulfillment center literally right here in Orlando near our International Airport. So, it’s going to affect Christmas season this year it’s going to be done in quarter 3. They bought Whole Foods for 13.7 billion and they’re eyeing Target. So, they’re positioning with a tremendous amount of brick and mortar on the country. Some of these changes that they’ve already made in whole food alone are they’ve cut prices, they’re selling Amazon tech in the grocery stores and they’re switching to Amazon Prime as the whole foods new rewards program. So, what’s going to happen is any type of retail who has to compete with this online shopping juggernaut will be affected. Retail strip centers and shopping center landscapes will change with the type of tenant mix’s that we’re not used to seeing and perhaps even the grocery anchored shopping centers may change dramatically as well. I’m sure you’d be willing and interested to know from an investor perspective which retail businesses are least likely to be affected by Amazon’s presence. Here’s the ones from a commercial real estate perspective who more than likely will not be affected by Amazon’s presence. They will be local restaurants, DIY which is do it yourself stores like Lowe’s and Home Depot, automotive chains like AutoZone, O’Riley, and Advance Auto Parts, retail pharmacy outlets like CVS and Walgreens, discount dollar stores like Dollar General Dollar Tree and Dollarama and discount retailers like Zara and T.J.Maxx, Ollies, Sephora, DeeDee discounts and Big Lots. Not only will they survive but they may continue to grow and prosper even with Amazon in the marketplace.

Why?

So the reason why these types of retail will be less affected by an online shopping presence is they’re more likely to have an immediate need or one attached to them rather than a delayed one. For example, yes Dr. Nilda if your spark plug goes out on your car you’re less likely to wait two days for Amazon to send it to you.

That is too long.

It is because you need your car the same day so the same goes for local restaurants and the fact that shoppers really like hunting and finding market deals. These are the businesses that just they’re kind of Amazon proof if you will because there’s an immediate want or need. You don’t say hey let’s go to a restaurant tonight down on Mills Ave. and you’re not going to wait for that it has nothing to do with Amazon.

A good portion of that also is like that customer relation that a restaurant would have versus Amazon sending you a box of a cool apron or chef. They would send it to you and ship it to you but it’s a different experience than you would receive if you instantly go there, sit down and they cater to you. Amazon, unfortunately, can’t do that.

No because it’s about the experience exactly how you said. I just had a conversation with a friend of mine who was telling me I hate online shopping. I was like really, I love online shopping. She goes no I need to look, I need to touch, I need to try on. She said I can’t wait two days to get a package and then try it on and it doesn’t fit it and I have to send the package back. She goes you see they just ruined my day. They just ruined the whole experience. I can see how stores like Zahra and TJ Maxx and these stores are going to stay because there are people that need that. Again, they need that kind of service they need to speak to somebody they need they need to touch it and feel what they’re going to purchase.

So, for those people yeah, I get it.

You’re absolutely right and that’s the reason why it literally comes down to common sense. But if you think about it people don’t use common sense all the time. So, from a commercial real estate investment perspective I would say certain types of retail are strong but Amazon will be a disruptor in the marketplace. So, the second one that’ll be a trend for commercial real estate is there will be a great need for more low income reliable housing as more families are at or near the poverty line. There was a study, let me see how it goes, so most reads choose to build A class apartment complexes near tight primary core markets. That leaves very strong openings to build mid quality or at least mid-quality apartment complexes in less affluent areas. So, case in point our brokerage recently put out an ad for units in a property that we manage for our client. There were over 500 enquiries because the rental price points were reasonable for the common person. There was a recent report by Freddie Mac that said that the number of affordable housing for very low-income families across the U.S.A actually dropped 60% between 2010 and 2016. They said there is a rapidly diminishing supply of affordable housing with rent growth outstripping income growth in most major areas. So, they actually introduced a small balanced loan program that targets smaller multifamily buildings that most people have trouble securing private financing on so that initiative may help stem the decline of the supply of affordable housing. One of the reasons why this is happening is there’s a lack of government subsidies that are available for C class apartment complexes. Well that’s been changing or decreasing over the years so there’s actually less money in building a complex like this due to the lower return for investors. So, without federal assistance rural counties would lose 40% of their housing stock that’s affordable to residents who live in and around poverty and urban areas would lose 50 percent of their stock. So, since there’s a huge demand for this type of product and I know because our brokerage gets those calls on properties that we manage. My guess and prediction is that the market will find a way to fill this gap over the next 50 Years. Well it’s not the sexiest investment in the world someone will find a way to fill this huge demand for a lower-income housing.

I actually hope so because to be honest with you here in Atlanta there is a huge population of homeless not because they don’t have a job but they’re totally displaced in these hotels that are charging them so much money. As a matter of fact, they’re probably paying more by staying at a hotel at those extended stays and some of them can’t even afford that. They actually are in a tent right here in my town which is horrible. I think it’s terrible because no one has made it easy enough for them. Again, they’re working class citizens it’s just that they cannot afford the rent. I hope that that really goes cross the board.

That’s really interesting I love that. Now Jeremy I know that you have a third and fourth but here’s my thought we’re at the top of the hour and what I would like to do is I would like to invite you back to air the third and fourth prediction. So, that we could delve a little deeper and spend a little more time on that. How’s that sound?

Yeah, that’s fine I’d love to come back. This is the tip of the iceberg.

Fantastic I love this. We look forward to a follow-up interview. In the meantime, let’s stay in touch. Thank you so much for coming. Thank you so much I know you’re a really busy man and thank you so much for taking the time to spend with us to be on our show. Thank you so much.

Thank you for having me.

This ends this segment of the Dr. Nilda Business Foresight Show. We want to thank you guys for staying tuned in and being here with us. We look forward to next week where we have another foresight strategist and other futurists who will come and give you more information. And of course, we look forward to having Jeremy back. Alright guys we’ll see you soon bye.

 

Interview With Jeremy Sisson- “Forecasting Commercial Investment”

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#Jeremy Sisson CEO of Evan James & Associates