Second-tier markets Niche properties

Tourist Attraction

CCIMs’ local market knowledge adds value in well-traveled markets.

Serving as a powerful economic engine, travel and tourism generate an estimated $1.9 trillion in the U.S. each year, according to the U.S. Travel Association. And, where there are travelers and tourists, there are prime opportunities for commercial real estate investment.

Top spots such as New Orleans — which sees an estimated 8.5 million tourists annually — support thriving hotel and restaurant sectors, which, in turn, help such established markets renew their claims as must-see travel destinations.

However, smaller markets can also thrive on the economic boon tourists and business travelers bring to a community. For example, the allure of Mount Bachelor, recently named one of National Geographic’s top 25 worldwide ski destinations, draws 2 million visitors to Bend, Ore., annually. But the central Oregon town of nearly 80,000 is also gaining ground for its entrepreneurial climate, luring young professionals and small businesses from larger markets.

How do CCIMs leverage the opportunities provided by a tourist-oriented market? For two CCIMs who work in these two diverse destinations, it centers on having a vision, tapping into their network of contacts, and providing in-depth market knowledge.

Big Opportunities in the Big Easy

Though much of New Orleans was damaged by Hurricane Katrina, the already-vacant
Audubon Building at 931 Canal Street was no worse for wear after the storm hit. Originally built in 1909, the property served as office space with ground-floor retail until 2004 when the interior was demolished. After Katrina in 2005, the building remained untouched until 2009, when Robert Hand, CCIM, SIOR, now president of Louisiana Commercial Realty in New Orleans, took on the listing, which had languished unsold for the previous 12 months.

The gutted eight-story building with no parking was located on the outskirts of the French Quarter, making it a prime location for a hospitality investment. But marketing the property and convincing a prospective buyer of its future use was challenging. “Prospective buyers could not inspect above the first two floors of the property since the stairs were demolished, there was no electricity, and the elevator was removed,” Hand says.

But the structural challenges didn’t hamper his marketing strategy. “I developed a short list of existing hotel owners in the area and contacted each individually. I also marketed the property regionally and nationally, reaching out to hotel franchisees and national brands,” he says. “The tourism market is a tight-knit group and people in the industry know each other, so you can work through referrals and centers of influence. I had almost 100 people on my short list and, of those, six made offers.”

But the deal-clincher resulted from a true act of dedication that surpasses traditional marketing tactics. “The last thing I did was climb out on a ledge 40 feet above Canal Street to post a large for-sale sign on the building,” Hand says. “It turns out the sign attracted at least one buyer.”

Hand relied on his CCIM tools and professional network to help streamline the transaction. “I walked potential buyers through that process of determining if they could make money off the property. I had already done the analysis and because of this, potential buyers were able to determine if this was the right project for them. I prepared a 30-page marketing presentation that covered everything a buyer would need to know, including contacts in the city planning department, architects, historic tax credit attorneys, and even research on tourism, including the trend of tourists flying in and out of the airport and how much money they spent on hotel stays. Site To Do Business was instrumental in providing the demographics.”

Upon securing a buyer, Hand conducted negotiations with the New Orleans planning department, negotiated contracts, and helped the buyer receive $2 million in income from selling historic tax credits. With a total cost of $45 million dollars to purchase and renovate the property, the new owner, Canal Street Lodging LLC, rolled out The Saint Hotel in 2012. The boutique hotel includes 166 luxury rooms on eight floors adjacent to the city’s Canal Street streetcar line and a short walk from the French Quarter.

Hand says having a vision for the property and working his professional network were the keys to the deal. “The best strategy was to use several marketing channels to reach local as well as regional and national hotel owners who are already in the industry and know what the risks were. I had a vision, had already run the numbers, and put together a team of experts to answer all the questions a potential buyer would need to know before making an offer.”

Tourist Town Turned Tech Hub

Bend’s close proximity to Mount Bachelor makes it a perfect place to spend long weekends hitting the slopes. But this fast-growing town is also a mecca for entrepreneurial small businesses. Recently pegged the “next big city for entrepreneurship” by Entrepreneur magazine, Bend offers prime leasing and development opportunities with some of the country’s biggest high-tech firms, including Facebook and Apple.

It’s precisely this burgeoning growth and start-up energy that requires commercial real estate investment opportunities that appeal to a unique mix of tourists and business-minded locals, says Darren Powderly, CCIM, partner and president of Compass Commercial in Bend.

The Firehall Building, which was converted from the town’s historic firehouse into mixed-use office, retail, and restaurant space nearly a decade ago, meets the town’s unique demands. After its conversion, the space was occupied for five years by a successful Italian restaurant, yet when that closed in 2009, the landlord struggled to find a viable operator. Due to market demographics, its unique architecture, and other factors, the 4,500-square-foot space “does not fit the typical format for big national restaurant chains,” says Powderly. Instead, as director of marketing for the listing, he sought regional and local restaurateurs who could create the right environment for the space. His ideal tenant turned out to be Brickhouse, an upscale independent steak house and wine bar. “The restaurant has to have a great reputation among locals to have staying power, but it also has to impress and market itself to travelers, hotels, and local tourism agencies,” he notes.

While the need to appeal to tourists is ever-present in Bend, a variety of geographic, economic, and cultural factors has put the town on the map among entrepreneurial young professionals as well. With direct flights from Portland and San Francisco/Silicon Valley, Calif., high-tech companies and small businesses are fueling the local economy and driving commercial real estate opportunities.

The region’s variety of business development and relocation tax and financing incentives complement the entrepreneurial environment, Powderly notes, citing Facebook’s $210 million investment in a 300,000-square-foot data center in the area. Low land costs and ample access to power sources are other factors luring high-tech companies, he adds.

Commercial real estate opportunities continue to grow among the tech and start-up firms that are eyeing the region. For example, last year Compass worked with The Staubach Co. to recruit Consumer Cellular to central Oregon. Consumer Cellular, which is based in Portland, signed a long-term lease for a 77,500-sf call center facility with plans to employ 500 people within three years.

In the year ahead, Powderly plans to continue to use his CCIM network in an economic outreach initiative he’s spearheading through the non-profit Economic Development for Central Oregon. His efforts will concentrate on marketing the region to small tech and start-up companies in the San Francisco Bay Area. Powderly knows first-hand how to reach this segment of the industry, having made his way to Bend — and into commercial real estate — via the Silicon Valley software scene.

Powderly says his CCIM training has been highly valuable in “providing world class investment real estate advisory service to clients.” With most of his Compass colleagues hailing from large markets around the country, Powderly notes that he chose to pursue his career in a small market where he could enjoy a high quality of personal and business life with access to the many natural attractions that draw visitors to the area. “CCIM helps me achieve this,” he says.

Jennifer Norbut is senior editor of Commercial Investment Real Estate.

Robin’s Resort Keeps It All in the Family

When Roger Langpaul, CCIM, of 360 Real Estate Services in Clive, Iowa, saw the rustic 6.5-acre Robin’s Resort on the Lake of the Ozarks shoreline near Osage Beach, Mo., his first thought was: “Condominiums.” But that was in 2001, when developers were buying out small, family-owned resorts and putting up condos like clockwork.

After spending time at the resort and taking in some of the most beautiful sunsets imaginable, Langpaul chose to buck the trend. He purchased the property as an investment and retained the family-owned resort structure. Not only has the investment been rewarding for Langpaul, but “by Robin’s staying as a [single-owner] resort, we provide much more of an ongoing economic benefit to the city and the surrounding community,” he says. “Our guests pay a city sales tax and a lodging tax that stays here in our community. Our guests also patronize the local restaurants, bars, entertainment venues, grocery stores, and other retail services.”

Langpaul has made substantial investment into the property, including two condo-style buildings containing a total of 22 units. “We designed the units such that our exit strategy is to be able to sell these as condos and continue to rent them in a rental pool,” he says. In addition, Langpaul added a second swimming pool, a hot tub, a large covered pavilion for guest use, and three new docks.

The resort continues to offer a family-oriented environment with events such as spring and fall fishing tournaments and golf packages. Guest service is a critical aspect of the ongoing operational policy. “Robin’s Resort may not be part of the Marriott or Hyatt flags, but there is absolutely no reason that our guests should not get that level of service while they are here,” he says.

The resort’s gross income “has more than doubled” in the 12 years since Langpaul bought the property. Overall, the investment in a seasonal tourist area has been a win-win for Langpaul and the local market. “We have a long-term business plan that complements and benefits the surrounding community.”

Jennifer Norbut

Listen to the “Commercial Real Estate Show” online anytime at www.CommercialRealEstateShow.com.

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