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Commercial developers seek private investors


Private investors in search of financial shelter following an exodus from the equities market are creating a boon in commercial real estate, say officials from West Des Moines-based CB Richard Ellis/Hubbell Commercial.

To capitalize on the growing trend in Iowa and across the country, CB Richard Ellis/Hubbell Commercial executives last week announced the return of Timothy Sharpe and Linda Gibbs to head up the company’s first private client sales team.

“This is a specific initiative that they are spring-boarding,” said Mark Darwin, executive vice president of CB Richard Ellis/Hubbell Commercial. “We’ve continually talked about doing this for a while. I think it was a matter of merging our needs, our goals and our objectives with theirs, and we were able to do that.”

Founders of Sharpe Gibbs Commercial Real Estate Services, the husband and wife duo previously served as vice presidents in Hubbell’s commercial real estate division from the mid-1980s until forming their own brokerage and consulting company in 1998. After four years of serving as principals of their own company, both founders said they had reached their saturation point with the amount of business they were handling and had to make a decision as to whether to expand the company or seek other avenues.

“From a business standpoint, we were pretty maxed out in the volume of business we could do, and anybody who knows us, knows it’s not easy for us to say, ‘No, we don’t want to take on any more business,'” Gibbs said. “But we also recognized that we do not manage people well, that’s not our forte. Our thing is to go out and make deals ands that’s all we really want to do.”

Sharpe and Gibbs return as vice presidents, bringing with them a book of clients, the designations of Certified Commercial Investment Member and Society of Industrial and Office Realtors, as well as brokers licenses in Iowa and Arizona. Together, they also bring more than 30 years of commercial real estate experience to the company, including experience in selling investment properties and development projects to private investors.

“We have an opportunity now to capture business that is in the marketplace that I think has not been captured, in a more focused and refined manner,” said Feisal Sayeed, senior vice president and managing director for CB Richard Ellis/Hubbell Commercial. “People have been taking money out of the marketplace and putting it into real estate or cash. Locally, we’re finding business professionals are looking for real estate to hedge their future income.”

In the wake of an unstable stock market, brokers say private investors are diversifying their portfolios with retail, office, industrial and multifamily (apartment) real estate, hoping for steady returns. The problem nationwide, and in Des Moines, is that there are more buyers than properties available, advisers say.

“We’re seeing money chasing deals and they’re transcending state lines,” said Sharpe, who started his career in commercial real estate in 1983 with CB Richard Ellis/Hubbell Commercial. “The Midwest has a certain appeal to investors because it has a history of a stable economy. Now that we’re partnering with CB Richard Ellis, we can operate all over the country.”

Sayeed said local investors are looking beyond Iowa for properties. He said it’s not uncommon for his company to receive calls from CPAs looking to provide a safe haven for their clients’ investments.

“We have the product and the product knowledge, so we’re getting calls from CPAs, bankers and stockbrokers who say, ‘You have a building that’s $300,000, I’ve got a client that needs to get out of the market,'” he said.

Gibbs, whose commercial real estate career began in 1986 with CB Richard Ellis/Hubbell Commercial, estimates that nearly half of her former company’s work has been in investment sales during the last 18 months. When development opportunities are added, that figure is closer to 75 percent, she said.

“There’s not a lot of product out there,” she said. “This is the kind of business where you have to seek it out. You have to match the right property with the right buyer.”

In August, the National Association of Realtors said income and capital appreciation returns on commercial real estate are surprisingly strong. According to the NAR, 2001’s positive commercial property returns were in stark contrast to the 11.9 percent decline in the S&P 500 stock index. NAR cited statistics from the National Council of Real Estate Investment Fiduciaries Property Index, which said that yields during 2001, including income and capital appreciation, were 6.1 percent in the office market, 9 percent for industrial real estate, 6.6 percent in retail and 9.1 percent for multifamily investments. NCREIF is an association of institutional real estate professionals involved in pension fund investments.

Sayeed said 52 percent of large commercial real estate transactions nationwide are completed by individual investors. He said 21 percent are REITs (Real Estate Investment Trusts).

“When you’re talking about a $15 million or $20 million transaction, which is a large apartment building with 400 units or more, or an office building with 100,000 to 150,000 square feet, you’re very limited to those numbers of properties in Des Moines,” he said. “What you generally see is that doctors or lawyers have 100-unit apartment complexes or 50,000-square-foot office buildings or a large warehouse that falls below that radar screen and that’s where those transactions are done.”

Sharpe said the three mansions his former company recently sold on Grand Avenue are a good example of investors’ confidence in the real estate market.

“In the last 24 months, we have seen a considerable amount of these kinds of transactions reflected on Grand Avenue,” he said. “Professionals are looking to expand their asset base. It’s an initiative you want to try to grasp because of the paradigm shift in the way that real estate business is being conducted. It helps us help our clients accomplish what they want to accomplish.”

The current market, Sayeed said, is a win-win situation for buyers and sellers.

“On our side of the table, we have been trying to find people to run with this,” Sayeed said. “I always thought Tim and Linda would be the perfect choice. With their expertise and knowledge of the marketplace and with CB’s initiative nationally, we’re going to bring something the state of Iowa has never seen before.”  

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