BREVARD BUSINESS NEWS

JM Real Estate poised for second half of year; Bryan Ridgley joins firm

By Ken Datzman –  June 12, 2017

Over the last several years, commercial real estate has been one of the best–performing asset classes in America, bouncing back with a vengeance from the dark days of the Great Recession, which began in December 2007 and ended in June 2009.

That’s according to the U.S. Bureau of Economic Research.

The commercial sector has rallied strongly since the downturn, when many investors stepped aside waiting for the market to bottom as prices and valuations spiraled south.

Though buyers for commercial investment properties during those tumultuous times may have been scarce, it presented an opportunity for risk–takers flush with capital to scoop up various types of buildings and facilities and  steadily ride gains that have accelerated in the last 24 months.

Commercial property investors have since seen strong net appreciation, and buyers are now out in full force. Transaction volume for commercial brokers in Brevard County continues to rise, and longtime professionals in the field say they see no signs of a slowdown anytime soon.

“We had a record first quarter this year,” said broker Jewel McDonald, the president and founder of JM Real Estate Inc. in Melbourne, whose growing 20– year–old firm works with buyers, sellers, tenants, and  landlords in the commercial segment of the market.

“It’s shaping up to be another good year for our company. We’re well positioned to work with existing clients and with new clients.”

McDonald added, “We’ve just expanded our team with the addition of Bryan Ridgley. He worked in the local commercial real–estate industry for years before moving to Colorado. Bryan is very knowledgeable about the Brevard market and is a great asset to JM Real Estate.”

Industry veteran Ridgley is JM Real Estate’s vice president of investment properties. He recently moved here from Denver, where he had worked in commercial real estate for roughly the last 10 years. The red–hot economy in Denver has fueled both the residential and commercial markets there.

Now Ridgley finds himself back in a county where the population is growing, businesses are expanding, and the commercial sector is seeing new development and construction in targeted areas of Brevard where demo- graphics are favorable.

“When I looked at the commercial landscape in Brevard and where I wanted to be upon  my return here, Jewel was always someone who I had a lot of respect for in this market as a broker, and has a sterling reputation,” said Ridgley, who started his commercial real–estate career 14 years ago in Brevard County and is a business administration graduate of Presbyterian College  in Clinton, S.C.

“Her company has a really strong property–management presence. And that component, I thought, would be important to what I will be doing with the firm, which is working on the investment real–estate side. Often when you are selling a property to an investor and you’ve built a relationship with the individual, he or she will generally want you to manage or lease the property for them. So having a strong property–management business, like JM Real Estate does, was something that was very attractive to me.”

In Denver, Ridgley worked for a private–equity company on the acquisition side of the business.

“We would buy single–tenant, net–leased properties — primarily medical facilities — and package them into what’s called a Delaware Statutory Trust, or DST. We attracted investors who were typically coming out of a 1031 Exchange situation. They sold a property they had owned and through the DST it qualified for a 1031 tax treatment.”

He continued, “People would basically buy beneficial shares of the Trust, which featured high–quality new medical buildings with 15–year leases and investment– grade credit tenants. It’s a very popular program. The company I worked for is thriving.”

Real–estate investors — ranging from single–family homeowners cashing in on rising property values to savvy real–estate speculators — are taking advantage of the little known 1031 Rule that allows them to keep their profits tax–free. Internal Revenue Service Rule 1031 has been around for a long time, and is now enjoying a new popularity among real–estate brokers and individual investors, thanks to profits being gained from escalating property values.

Ridgley’s wide experience in the field includes advising on complex 1031 Exchange scenarios, and educating local investors on the benefits of DSTs and their impact on tax treatment and estate planning.

The 15 percent federal capital gains rate was replaced in January of 2013 with a new rate of 23.8 percent (including the 3.8 percent net investment income tax related to The Affordable Care Act), which has made DST–structured property investments a rapidly expanding segment in the commercial real–estate industry.

Ridgley began his career in 2003 with commercial broker Lightle Beckner Robison Inc. in Melbourne, where he was vice president of industrial properties. He later started his own brokerage company, Ridgley Commercial Real Estate, in the area. Ridgley was one of the leading industrial brokers in both square footage and transaction volume from 2003–2008 in Brevard before relocating to Denver and working for CB Richard Ellis.

In January of 2012, Ridgley joined KB Exchange Trust and KB Funds, whose parent company is Kingsbarn Realty Capital headquartered in Las Vegas, Nev. He was director of investments at KB Exchange Trust. Ridgley was responsible for the identification and underwriting of company portfolio assets. He also worked directly with people interested in investing in DSTs.

“It was a great experience. But there is nothing like being back in Brevard County, especially at a time when the commercial real–estate sector is seeing a lot of activity, as is the residential market,” he said.

“I have seen a lot of strength in residential land development in Brevard in the last six months,” added JM Real Estate’s John Stevely, senior commercial associate and value analyst. “The housing market seems to be showing no signs of a slowdown.”

Residential and recreational land sales accounted for 50 percent of all closed land transactions between October 2015 and September 2016, according to the newly released “2017 Land Markets Survey” published by the Realtors Land Institute and the National Association of Realtors Research Department. The survey predicts an average growth of 2 percent across all land types through October 2017, with a 3 percent growth expected in each sector, including residential.

Stevely also said there are a lot of “exciting things going on in the Titusville market with companies like Blue Origin and SpaceX. Titusville seems to be more of a ‘talking point’ these days because of its potential to attract new investment dollars. In general, I think the commercial market is showing considerable strength.”

The commercial segment in Brevard is underpinned by a steadily growing economy and a robust job market as an increasing number of companies expand their employment ranks.

“The market seems pretty hot,” said former area banker Rebecca Collura, senior commercial associate and financial analyst at JM Real Estate.

“Activity has really picked up since January. Right now I’m doing more leasing than sales. I like doing tenant representation. I really enjoy that part of the business. There are buyers and sellers in the market and deals are closing.”

The first–quarter closings for JM Real Estate included a $5.2 million sale of the Rivercrest Professional Center on North Harbor City Boulevard in Melbourne. The 45,475– square–foot office and retail facility, anchored by Health First, was purchased by a South Florida investor.

JM Real Estate also closed a $1.3 million property transaction in that quarter. “Neither of those two properties ever went to market. They were off–market deals where we put the buyer and seller together,” said McDonald.

Commercial–property assets in the United States posted an annual gain of 9.2 percent through this past December, and were nearly 24 percent higher than the previous peak in 2007, according to Moody’s/Real Capital Analytics’ property index.

Over the past 12 months, apartment real estate prices rose 11.4 percent, and prices for core commercial assets (office, retail and industrial) increased by 8.2 percent across all markets.

“The pace of the market has really picked up, especially on the investment side of commercial properties,” said industry veteran Charine Lewis, director of sales and leasing at JM Real Estate.

“There are a lot of people looking to buy good investment properties in Brevard County. Right now, the market seems like it’s being flooded with buyers, and there are not enough sellers at this particularly point.

Hopefully, the supply–demand mismatch will change.”

The small–to–mid–sized markets, such as Brevard, are seeing more attention from commercial real–estate investors as some of the larger regions have experienced price gains that have made their attractiveness from an investor perspective less appealing.

The availability of financing for smaller commercial properties is helping drive transaction activity. One major hurdle that affected the market in past years had been the lack of available financing to small commercial real–estate investors, due in large part to regulatory uncertainty.

But more financial institutions of late, including community banks, have stepped back into the financing of commercial real estate.

Commercial real–estate lending, including construction and development loans, is the core business of community banks. That’s mainly how they make their money.

McDonald said she is representing the seller of a roughly 15,000–square–foot retail strip center in Melbourne, and Florida Business Bank, a local institution, is financing the $1.6 million purchase for the buyer. She brought both the seller and buyer of the property together.

“We love working with local banks like Florida Business Bank. We always try to do that, and it’s great when it happens,” said McDonald.

On another side of JM Real Estate’s business, tenant leasing in Brevard County for office, retail, and other types of space has been solid. “I think the market has improved tremendously since  the Great Recession,” said Joe Poirier, senior broker and associate at JM Real Estate.

“We have seen an increase in demand for retail space and office space, which is primarily the area that I work in throughout the county. There are a lot of strong areas where space is being absorbed because of existing company growth and new businesses growth.”

He added, “We are still seeing some recovery in the markets where centers were developed long ago, but a lot of them are coming around now. As we head into the second half of the year, we’re hoping the market will stay on track.”

McDonald said many of the properties that JM Real Estate currently leases are fully occupied. “We are looking for more inventory to lease because that is a core part of our business. We’re excited about the growth we have seen this year in all phases of the company.”