Part 2 of 2
SAN DIEGO-In part 1 of this two-part Q&A, GlobeSt.com chatted with Westcore Properties’ founder and chairman Marc Brutten and president and CEO Don Ankeny on what sets them apart from the competition, including being adaptable to changing market dynamics and on their predictions for 2014. In part 2 of the interview, we dive into how not getting caught up too heavily in the economic recovery story is one major challenge facing the industry, and where opportunities are in today’s market. Ankeny will also serve as a speaker at our upcoming RealShare L.A. conference, held March 25th at the Hyatt Century Plaza Los Angeles.
GlobeSt.com: What do you believe is the biggest challenge facing the commercial real estate industry in 2014?
Marc Brutten: One of the biggest challenges facing the industry is not getting caught up too heavily in the economic recovery story. This may be a prolonged recovery period with peaks and valleys, highlighting the importance of properly underwriting the real estate interest rate risk, underwriting the downside of each transaction, and not to be overexposed to floating rate debt.
GlobeSt.com: Where does Westcore Properties typically look for opportunities in today’s market and why?
Brutten: We are looking in markets throughout California and in select west coast markets including Phoenix, Seattle and Las Vegas. We see significant infill opportunities in these markets and, coupled with our institutional knowledge and entrepreneurial execution, we know we can be successful. The market dynamics in these areas have great potential for growth and they all have strong investment prospects.
GlobeSt.com: What is your property holding time frame and how long do you typically hold value added properties in transition and why?
Don Ankeny: Making acquisitions is in our DNA. One of the pillars to Westcore Properties’ business model is to be creative and entrepreneurial in order to react quickly to new opportunities. This is important because time kills deals. We have a well-honed acquisitions process and we are skilled at evaluating and pricing the risk.
GlobeSt.com: Does Westcore Properties ever perform back-to-the-steel renovations or ground-up development?
Brutten: In the past, we haven’t been proponents of ground-up development since we have been able to buy commercial assets at significant discounts to replacement cost. That paradigm has shifted. We are now actively developing several infill sites we recently acquired and repositioning them to fit the needs of market dynamics, such as the increasing demand for warehouse space in mid-city markets.
GlobeSt.com: Is Westcore Properties seeing rent spikes in any markets and what are your predictions about rent spikes in the near future?
Ankeny: Rent spikes are on the horizon as demand outpaces supply in our core markets of San Diego, Denver, Sacramento and the San Francisco Bay Area. We are seeing strong rent growth and will not be surprised to see rent spikes in many submarkets. Many areas are built out, so there has been little new construction over the last cycle. Given the low vacancy rates we are experiencing with our assets and the shortage of entitled dirt, lease space will be in high demand.