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Growing Into Commercial Real Estate: A Family Affair

In today’s economy anyone going into the commercial real estate business needs at least one year’s worth of holding power, say brokers like 34-year-old Charles Carmichael from NAI Capital. It takes a while to get your feet on the ground in an industry where your livelihood depends on commissions. For Carmichael, who left a career in IT to join his father Chuck at NAI Capital in 2008, it was only fairly recently that he received his first significant check. “I can look back two years later and say, ‘oh wow, I had no idea what I was getting myself into,” he said. “It’s a cut-throat business and having the support of my father was critical.” In commercial real estate it’s usually the case that a junior person coming in to a firm with no experience gets paired with a senior person, as the mentorship element of training is critical. But pairing up with your father can be a whole new ballgame. The dynamic of the relationship and the support that Carmichael received, including moving back home for a period of time while he learned the ropes, was critical to his success, he said. “It was financial, it was emotional support, being able to live at home was probably key, otherwise I would have left the business,” he said. But things are starting to look up. The father son team is now working on three deals totaling $8.5 million. Although commercial real estate offers the potential to make a lot of money with a limited skill set and offers a lot of freedom for brokers to manage their time, parents mentoring their sons and daughters is probably one of the most effective ways of bringing in new blood into the industry at a very difficult economic time. “A lot of brokerages have a graying population, or what they call the missing middle, because in the 90s a lot of people who may have gone into commercial real estate went into tech,” said Mike Zugsmith, NAI Capital Chairman. “So it’s great when a parent wants to mentor a child because there’s a whole lot of knowledge that can be transferred.” At NAI capital there are several such family bonds. In the firm’s Santa Clarita office, for one, commercial broker Bert Abel works with his daughter Alison Abel and his son-in-law Maurice Capillaire. According to Zugsmith the firm embraces family teams as part of its culture. Zugsmith himself brought his daughter Michele Stein into the business and she is now director of operations for the firm. Zugsmith’s wife, Rachel Howitt is NAI Capital’s CFO. The firms CEO, Bob Scullin is married to a broker at the firm and there are at least three other husband-wife broker teams at NAI Capital and one team of brothers. “It’s interesting, a lot of companies will have absolute rules against any form of nepotism or family members working together and we always thought this is our business family and what could be a greater honor than, to have a parent ask their child to come with them in this environment,” said Zugsmith. Homes Sell Fast Despite the gloomy housing market, Trumark Homes recently sold 14 new homes over a four-week period in its newest community, High Lights in Granada Hills, which consists of 82 homes that overlook the San Fernando Valley. On June 12, 18 homes were marketed for sale and by July 12, Trumark only had four homes left. High Lights is located on the corner of Odyssey Drive and Blucher Avenue. The townhomes are being offered in different floor plans: 13 townhomes at 1,112 sq. ft.; 34 townhomes at 1,230 sq. ft.; eight townhomes at 1,326 sq. ft.; 14 townhomes at 1,412 sq. ft.; six townhomes at 1,604 sq. ft. and six townhomes at 1,659 sq. ft. According to Trumark, the homebuyer interest is a contrast to almost every barometer of home sales. A report released by the U.S. Department of Commerce indicates the sale of new single-family homes in June was 330,000 nationwide; 23.6 better than the record low set in May after the federal tax credit expired, but still 16.7 percent below the sales recorded in June 2009. New home sales in the West region dropped from 61,000 in May to 57,000 last month, which is 45.7 percent slower sales rate than June 2009. And the average new home stayed on the market 12.4 months before it sold. Some Glimmers of Hope Locally the Southland Regional Association of Realtors reported that a total of 649 homes sold during the month of June, down 16.3 percent from a year ago and 4.4 percent below this May’s tally. However, the June total was a 101 percent improvement from the 323 sales posted in January 2008, the month the local market hit bottom and started to rebound, according to SRAR. In other signs of improvement, condo sales during June hit the highest level since July 2007. A total of 262 condos closed escrows. This marked an increase of 11 percent from a year ago and 23 percent increase from this May, according to SRAR. Condo sales have increased 150 percent from the record low of 105 sales set in January of 2008. Commercial Slump Continues According to a Grubb & Ellis recent office and industrial market snapshot report, the Los Angeles County office market continued to struggle during the second quarter. When it comes to industrial, this was the first quarter in more than one year where positive absorption occurred, causing the industrial vacancy rate to decline. According to the report, the Los Angeles County office market vacancy rate remained flat at 16.6 percent during the second quarter. The office market experienced 135,600 square feet of negative net absorption bringing the year-to-date total to more than 1.1 million square feet of negative net absorption. Approximately 518,000 square feet of sublease office space was taken off the market during the second quarter, reducing the total to approximately 5.7 million square feet of sublease space available. Approximately 820,000 square feet of office space was under construction at the end of the second quarter. On the industrial side, the Los Angeles industrial vacancy rate decreased to 3.3 percent during the second quarter, down 10 basis points from a quarter earlier. The region experienced 472,000 square feet of positive net absorption in the second quarter, led by the warehouse/distribution sector, which posted 391,000 square feet of positive net absorption. Approximately 258,000 square feet of space was under construction at the close of the second quarter. Repeat Sales Index CoStar Group, Inc announced July 27 that the company is launching the CoStar Commercial Repeat Sales Index (CCRSI), a measure that is intended to help answer some critical questions in the world of commercial real estate including, “Are prices climbing or falling?” and “On a month-to-month basis are property values going up or down?” According to CoStar, currently, there are no effective, non-biased indices to measure commercial real estate price movements, and even less comparative information by property type or geographies. For CoStar’s new index the company has identified more than 85,000 repeat sale pairs in its U.S. database, and constructed more than two dozen sub indices using the CoStar’s property and comparable sales data. In residential real estate, the most well-known repeat-sale index is the S&P/Case-Shiller home price index, which has become the barometer of the health of the nation’s housing market. It has also been used by the Chicago Mercantile Exchange to support and facilitate derivatives trading against housing. New Luxury Apartments One of the largest luxury apartment complexes to open in the Valley this year, Empire Landing in Burbank opened for first move-ins on August 1. Located in Burbank’s entertainment and media district at the corner of Buena Vista Street and Empire Avenue, the complex includes 276 craftsman-style, luxury apartment homes set on seven landscaped acres. The residential complex is developed by Casden Properties, which also built the Palazzo Westwood Village and the Palazzo and Villas at Park La Brea. The complex was designed by Johannes Van Tilburg. The apartment selections include one and two-bedroom configurations ranging from 760 square feet to 1,140 square feet. The complex also offers private townhomes with an attached two-car garage. These townhomes offer two, three and four bedrooms as well as live/work space in sizes ranging from 1,120 square feet to 1,585 square feet. There also are 28 affordable flats that have been pre-leased. Starting prices range from $2,200 for a one-bedroom apartment, $2,800 for two bedrooms and $3,400 for townhomes. The project also includes 1,000 square feet of retail space that will be filled with resident-serving convenience shops and a 5,500 square foot club house complete with a full-sized swimming pool and fitness center. Staff Reporter Andrea Alegria can be reached at (818) 316-3124 or at aalegria@sfvbj.com.

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