When average apartment vacancy rates plumb the depths of 4.2% and office rents begin a slow and steady climb from a long night, it makes for good conversation with our real estate managers. BSW and some clients recently caught up with Harbor Group’s; Saul Lubetski (Vice Chairman), Samuel Reichmann (Managing Director) and Michael Belka (Chief Operating Officer) at Boulder’s Mateo restaurant for a “Meet the Managers” event.
Highlights from the conversation include:
• In general, Real Estate continues to perform well as rents increase and vacancies decline. While the apartment market has been improving for several years, we heard refreshing news from the office sector.
According to Samuel Reichmann, many of the “panic leases” signed during the depths of the recession are now expiring at a time when the new supply of office space is low and the economy is improving. Even though market conditions have improved, Harbor Group must still compete with other building owners for new tenants. An example of these efforts can be seen in this marketing video for One South Wacker Dr., an HGI BSW Fund I investment in downtown Chicago. http://youtu.be/vV9yXfOe02Q
• Last year Harbor Group sold a number of pre-recession assets as their fundamentals recovered. By selling into rising markets and being more selective with purchases, Harbor has demonstrated its disciplined investing. In light of an improving market, buyers should scrutinize acquisitions more carefully for areas of potential upside. These might include the assumption of a complicated financing structure, urban retail opportunities in irreplaceable locations, sub-urban office parks in select locations and capital improvement strategies.
• Harbor Group addresses sustainability by focusing on water utilization, waste management, energy efficiency, and general sustainability. When covering general sustainability, Mike Belka, highlighted the Harbor Fit program that aims to expand the fitness amenities at apartment communities. Harbor has added bike storage to support bike commuting at office properties. Mike talked about the Energy Star certification which all Harbor office properties have either received or are pursuing. This program recognizes reduced environmental impact of operations such as green cleaning, heating and cooling efficiency and low wattage lighting solutions.
• The Harbor Group – BSW funds, annual real estate funds first launched in 2012 demonstrate Harbor Group’s willingness to pursue value beyond traditional apartments and core office buildings. The most recent fund also includes land, mezzanine debt and urban retail assets.
We hope this update has been helpful. As always if you have any questions, please don’t hesitate to reach out to us.
Elias Bachmann – Senior Portfolio Manager