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Saturday, September 24, 2011

Seeing Toronto by Bixi

By Michael Fonda - Chicago

All of Avison Young gathered in Toronto last week for our Annual General Meeting. I’ll let Mark Rose or Earl Webb blog about company performance and our upcoming exciting announcements. This blog is about how my colleagues, Christine Choi and Hugh Williams (pictured) , and I used our free time on Saturday to experience a little Toronto serendipity.

Leaving the Royal York Hotel on Saturday morning, we decided to walk north to the University of Toronto campus. On our way we stumbled upon a Bixi bicycle docking station and decided to bike rather than walk. Looking like the tourists we were, it took us a fair bit of time to figure out the process of renting a Bixi. It’s actually relatively easy. Insert your credit card (you are charged $5.65 for 24 hour use of the bike); punch the icons on a touch screen; receive a piece of paper with a six-digit code printed on it; punch in the code on the docking station; pull the bike away from the station and off you go (after adjusting the seat height).

We rode to the Annex (a great residential neighborhood close to downtown); dropped in at the Nike store’s Runners Lounge on Bloor Street; visited the Royal Ontario Museum (because Hugh was born in Jamaica and because Michael Lee-Chin, the wealthiest person in Jamaica, is a benefactor of the museum we couldn’t miss that venue); the Art Gallery of Toronto; peddled around the University of Toronto and Chinatown; parked the bikes at a Bixi station downtown and ate lunch at Earl’s (a restaurant not associated with AY's U.S. President, Earl Webb).

The next morning, before our 24 hours expired, we road east to the Distillery District, explored the St. Lawrence Market and ate breakfast at the Le Petite Dejeuner (where we chatted up the talented proprietress, Tonya Reid). After breakfast we rode back to the Royal York, having deposited our bikes at closest Bixi station. We departed Toronto from the Island Airport on Porter Airlines.

Bixi is an interesting concept. Starting in Montreal, Bixi is now in eight cities and will soon be rolling into New York City with 10,000 bikes and 600 bike stations. The company appears to be a private-public partnership with a “green” business model. Read here for a more in-depth commentary on Bixi. Seeing Toronto by bicycle was fun. We met a lot of helpful Torontonians who directed us to restaurants, interesting neighborhoods, and attractions. When we were stumped by quirks in the Bixi process, knowledgeable Torontonians helped us out. Next year’s Annual General Meeting will take place in Washington D.C. Bixi is there and we will be too.

Next time you are in a city served by Bixi, try it.

Wednesday, September 14, 2011

Malcolm McLean, Keith Tantlinger and Globalization

By Michael Fonda - Chicago

I'm not even going to attempt to improve on Margalit Fox's terrific New York Times article on Keith Tantlinger (and Malcolm McLean). You'll just have to read it here.

My only comment is that having recently finished Jay Elliot's insightful book, iLeadership for a New Generation, about Steve Jobs guiding Apple Computer to the apex of the digital age, I was struck by the similarities between the team of Steve Jobs and Steve Wozniak and the team of Malcolm McLean and Keith Tantlinger. Jobs and McLean both were able to visualize a better method for people all over the world to interact with each other (Jobs with digital communication devises; McLean with containerized transportation devises) and then, with the help of great engineers like Wozniak and Tantlinger, deliver the absolute perfect product to the global marketplace.

You have to wonder, Who will be the next team to change the world?

Battening Down the Hatches

By Amy Erixon, Toronto

There was fruitful discussion about bracing for global headwinds at the annual REIT conference yesterday in Canada. The overall sentiment was cautious, a marked change from last year. Not surprisingly, the most pessimistic was the sole European participant followed closely by the American portfolio managers, who noted they are triple overweight Canadian real estate securities as compared to other regions, on the assumption it will hold up better in the event of another downturn.

Most Canadian panelists concurred, asserting that fundamentals in Canada are healthy and CEO’s are spending their strategic planning efforts on strengthening and diversifying their capital structure. There was robust debate about effectiveness of various capitalization tools including unsecured vs convertible debentures, timing of equity follow-on offerings, managing bank lines, and other widely employed strategies. There was also a discussion of some of the more innovative approaches tested during the last downturn including rights offerings, warrant sweeteners, and companies who paid dividends in shares vs suspending distributions in 2009. These debates underscored how much more sophisticated and defensive the public real estate companies worldwide been forced to become in recent years.

The moderators dug deeply into what participants learned in late 2008 and 2009 and how that has altered their capitalization strategies going forward. In general, companies with a strong value-add and development orientation indicated a preference for utilizing convertible debt (as best aligned with asset performance characteristics) whereas core oriented companies expressed a preference for unsecured debt when and where available, and all underscored the importance of maintaining a pool of unleveraged assets (for a rainy day). Universally participants indicated a need to have cash, or access to cash as a business climate imperative.

Lastly, there was debate about correlations of REITs with the stock market and their merits vis-a-vis open and closed end funds. This was followed by a discussion whether pension funds should/can/will become major players in the REIT (and REOC) markets globally. Conclusions were mixed, but generally it was felt in the US yes, Canada no, rest of the world maybe. The primary reason for the US is that US REITs have more flexibility to employ operating strategies (development, JV’s etc) to make the real estate perform like real estate, acknowledging it is strongly correlated to stocks during strong downturns. Many non-North American REIT markets are newly emerging and/or facing regulatory shifts which may make the sector more or less attractive to institutional investors over time. The emerging markets are comprised 80% of publicly traded development companies, particularly housing developers, possibly providing powerful future growth prospects. Some questioned whether the risk/return trade-off has been appropriately priced for these types of companies when compared to their US and Canadian counterparts. All in all, a healthy debate highlighting the pivotal role this sector is currently playing in recovery and recapitalization of property markets throughout the world.

Thursday, September 1, 2011

Commercial Property Management: Different Property Types: Different Approaches

By Peter Leroux (Toronto)

In speaking with a client this week, they asked me what differentiates our management approach to managing the different classes of commercial properties (retail, office and industrial). Though each asset class requires the core property management services of rent collections, physical maintenance, accounting and administration, there are definitely differences amongst the property types. Here is how we see it.

Retail Management

• Of all property types, the Landlord/Tenant relationship is very much intertwined. Each is dependent on the other to generate an ongoing market presence and mutual success. As a retail property owner, you are very much involved in your retail tenants’ business success or failure.
• Generally, a retail lease is much more complex than other commercial property types, dealing with such issues as exclusives, tenant sales and percentage rent, co-tenancy ownership with major retailers (anchors), tenant radius clauses, allocation of Common Area Maintenance (CAM) costs, etc. So our lease administration and negotiations are much more extensive and ongoing throughout a tenant’s occupancy.
• Retail management involves a detailed approach to marketing, market presence, tenant mix and services, community involvement, shoppers and their attitudes, the public’s gathering, enjoyment, comfort and security. So a Retail Manager is much more engaged with the public and has extensive personal interaction with their tenants.
• Rental collections tend to be more demanding than other commercial property types because sales can vary by month and time of year. Inevitably, it is the Landlord’s fault if sales for the month were poor.

Office Management

• Our primary focus is on tenant services and comfort, providing tenants and their staff a productive and conducive work environment.
• In our office properties we strive to create a professional business atmosphere for our tenants and their guests.
• Operationally, we maintain and operate more sophisticated machinery, equipment and building systems when compared to the other property classes.
• Environmental responsibility, sustainability and energy management are key drivers today in our approach to office management.

Industrial Management

• Our primary focus is on the maintenance of the exterior structure, grounds and parking areas.
• To ensure tenant retention and success, we are very much concerned with our tenants ease of shipping and receiving of their goods.
• From an owner’s perspective because of the nature of industrial businesses, wear and tear on their assets is greater than other property types along with Industrial owners face the greatest risk of tenants creating environmental situations

To recap, retail management is very interpersonal, office management is focused on the work environment and industrial management is geared towards structural management and risk mitigation.

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