In The News

A Growing Appeal by Jessica Dearnley

Northwest Arkansas has been on the national radar from a number of perspectives for many years now. Our appeal has been well chronicled and justified in a number of quarters.

One segment of the investment sector, however, hasn’t been as “all in” on NWA as others. That would be institutional investors. But indications are that may be changing.

Not too long ago, the idea of institutional investment in real estate in NWA was akin to investing in China or India. International real estate investors, to a great extent, remain focused on the East and West coasts and Texas. The Washington, D.C., area gets its share of institutional investment, as do “NFL cities.”

But there are signs NWA is increasingly attracting the attention of institutional investors with an appetite for higher capitalization rates and comparatively low land and construction costs. The opportunity for the region is to continue educating institutional investors. We must “sell” the area to this important sector just as we have successfully done with other sectors. There are a number of selling points.

First, consistent population growth. According to the Northwest Arkansas Council, 24 net new residents have been added to Northwest Arkansas each day since 1990. Non-native Arkansans now represent 56 percent of our population. That staggering statistic reflects the fact that NWA has become an attractive destination for relocation.

Not long ago, I was on a flight to Boston full of MBA graduates from Harvard Business School and the Tuck School of Business at Dartmouth. They had been in NWA to interview the way they normally would on Wall Street. NWA has been named one of the most affordable places to live in the country. That’s resonating with recently graduated students looking to start careers and families.

A second selling point when it comes to attracting institutional investment is the fact that retail and office growth follows rooftops (i.e.: residentialgrowth). Flake & Kelley Commercial represents The Fresh Market, Starbucks, Whataburger and Cabela’s, among others in NWA. Their investments here are based in no small measure on our demographics. Walmart, J.B. Hunt and Tyson are core employers, and each core employee represents a number of new employees in non-core jobs.

A third component in the growing appeal of NWA among institutional investors is better cap rates and higher returns. Real Estate Investment Trusts (REITs) have outperformed the S&P 500, investment-grade and high-yield bonds since 2009. However, several investment research firms are estimating that shares of REITs are at peak. One valuation metric for REITs is the implied cap rate. The implied cap rate is derived by dividing the net operating income by the market capitalization, plus the debt. Right now, commercial property prices are considered about 15 percent above the 2007 peak, and the overall implied cap rate is at an all-time low. As REITs still need to place capital, they are going to be forced to consider alternative markets. U.S. investors may be less familiar with developing countries and the associated risk, but investing in the home of Walmart, J.B. Hunt, Tyson Foods is more comfortable. As headquarters for several leading players within several sectors, we are less risky with those company headquarters than other tertiary markets.

Keys to building on these and other strengths will revolve around continuing to attract millennials and burnishing our growing reputation as one of the best areas for startups. As with any kind of portfolio, diversity is the key to stable, sustained growth. And stable, sustained growth, along with low land and construction costs, is essential to attracting institutional investors, especially REITs.

We should be appealing specifically to non-traded or unlisted REITs since these are not followed by the large research firms and are less regulated, meaning they are seeking higher returns. Given the region’s sustained growth, its growing appeal to yet another generation of emerging business leaders and a proven ability to weather economic downturns, there is reason for institutional investors to be attracted to NWA. 

Jessica Dearnley is principal broker/partner for Flake & Kelley Commercial in Northwest Arkansas. She is a chartered financial analyst (CFA), certified public accountant (CPA) and certified commercial investment member (CCIM).

Real Estate, Infrastructure Continue Growth, Improvement in Conway

Millions of dollars have been invested in improving Conway infrastructure and adding retail destinations to the growing city, and according to panelists at the first Outlook Conway conference on Tuesday, the development isn’t slowing.

Members of a commercial real estate panel discussed projects by their respective companies, including multimillion-dollar retail centers and strip malls. They also talked about the history of the city and the growth they have seen in the area.

Panelists were Woody Rush, senior vice president of leasing, Jim Wilson & Associates of Montgomery, Alabama; Joshua Brown, principal of Haag Brown Commercial of Jonesboro; Brent Salter, vice president of Salter Properties of Conway; Greg Nabholz, CEO, Nabholz Properties Inc. of Conway; and Hank Kelley, CEO and partner of Flake and Kelley Commercial of Little Rock.

The panel was moderated by George Waldon, a senior editor at Arkansas Business who covers commercial real estate and banking.

“For somebody who’s born and raised in Conway to see the transformation – it was 20,000 when I was in high school and 65,000 now,” Nabholz said. “One of the most exciting things for me is the revitalization of downtown Conway has been huge.”

Nabholz said that the city’s colleges help provide an attractive environment to develop around and that he sees a lot of demand in the health care, technology and creative sectors.

“A lot of that [demand] is from people who are starting new companies, but these are homegrown businesses being started here, and that’s exciting because they’re going to stay,” Nabholz said. “We don’t have to worry about a corporate decision in NYC or something and they leave.”

Rush, whose company is pre-leasing space at the city’s highest profile retailer development, the planned Shoppes at Central Landing, said Internet sales are taking away from brick and mortar. But in Conway, retail sales remain “tremendous.”

In order to attract tenants to the city, Kelley said Conway must market itself as part of a bigger “central Arkansas” area. He said by highlighting the region as a whole rather than only the county, it allows them to capitalize on the area’s strengths.

“Conway is a bright spot in the north Arkansas market, but I encourage you to think of yourself as something bigger than one county,” Kelley said.

With a median age of 29.3 and median household income of about $51,000, Kelley said Conway is a prime destination for new retailers.

Brown agreed and said Conway has the advantage of being able to play off Little Rock and central Arkansas area. He said potential retailers can look at Conway and see that people can easily come from other cities in central Arkansas to shop there.

 

Article originally ran in Arkansas Business by Alexis Hosticka.
http://www.arkansasbusiness.com/article/111183/real-estate-infrastructure-continue-growth-improvement-in-Conway

Eddie Bailey Awarded CCIM Designation

Eddie Bailey NEW

Eddie Bailey, CCIM, of Flake & Kelley Commercial has been awarded the Certified Commercial Investment Member (CCIM) designation by the CCIM Institute. The designation was awarded during the Institute’s Midyear business meetings April 5 in Chicago.

Bailey was among the 149 commercial real estate professionals who earned the designation by passing the CCIM Institute’s Comprehensive Examination, the final element in the designation process. This new group of CCIM designees hails from 38 U.S. states, the District of Columbia, and several provinces in Canada.

“CCIM designees are respected industry-wide for the fundamental Real Estate knowledge learned throughout the course”, Bailey said. “Obtaining the designation has been a personal goal of mine since 2012 and I’m proud to now be a Member.”

The CCIM designation is awarded to commercial real estate professionals upon successful completion of an advanced analytical curriculum and presentation of a portfolio of qualifying industry experience. The curriculum addresses financial analysis, market analysis, user decision analysis, and investment analysis — the cornerstones of commercial investment real estate. CCIMs are recognized experts in commercial real estate brokerage, leasing, asset management, valuation, and investment analysis.

Learn more about the CCIM Institute’s education and designation program at www.ccim.com

Bill Pendergist Honored as Member of Arkansas Business 40 Under 40

Bill-PendergistEach year, Arkansas Business honors 40 intriguing business and political leaders under 40 years old who bear watching. The Arkansas Business 40 Under 40 honorees are nominated by readers and chosen by the editors of Arkansas Business. Congratulations to Bill Pendergist for being chosen as part of the 2016 class of 40 Under 40.