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INVEST IN THE BEST – 5 REASONS WHY “GOOD DESIGN IS GOOD BUSINESS”

INVEST IN THE BEST – 5 REASONS WHY “GOOD DESIGN IS GOOD BUSINESS”

While not unique to architecture (and often credited to IBM’s Thomas Watson), the phrase “Good Design is Good Business” is relevant enough to our market that the American Institute of Architects adopted it as their trademark slogan. McKinsey & Company identified the business value of design in 2018 and released their “McKinsey Design Index (MDI)” to describe the impact of financial performance on firms with excellence in design.  Companies with top-quartile MDI scores outperformed their industry benchmarks by as much as two to one. 

The McKinsey study focused on over 300 companies across multiple countries and industries. But what about our business – commercial real estate – reflects the importance and impact of design on long term business value? 

Lower Maintenance Costs.With good architectural design, we emphasize the use of sustainable, lasting materials. Over time, these materials require significantly less upkeep than their cheaper, commercial-grade counterparts. Also, our strategy for applying good design to “premium” properties means that our target audience is a tenant community more likely to take care of the properties they select. 

More Reliable TenantsSpeaking of tenants, good design in the premium market attracts tenants that have deeper financial resources than their peers. While not 100% foolproof, our history has shown that these tenants can survive financial downturns more effectively than their less capitalized peers. UBS reports that since the last recession, net worth is down for all but the top 10% of earners, and in the past decade the number of billionaires in the United States has more than doubled. These tenants can afford to continue making lease payments long after their more leveraged competitors cannot. 

Market BuzzGood design actually helps find those reliable tenants in the first place. When a premium property comes to market, communities and local media take notice and assist in informing the public. Media groups report on the positive news that a new development is emerging, reiterate the innovative design, and applaud the impact on the community. Good design engenders positive market buzz and its integration with growing communities and environment sustainability. This market impact improves the ability to reach new tenants who seek premium spaces. 

Better Long-Term Property ValueAny real estate proforma must consider an ongoing cash flow statement. But real estate also provides for an ongoing “real” asset that may appreciate over time. Of course, real estate at the higher (premium) end of the market is more likely to increase in value over a long period. This increase in value produces additional return for investors, as that property either sees a favorable refinancing, increased rent rates, or a high sale price. In any case, a premium property is much more likely to outperform its status quo peers over the course of its lifetime. 

Impact to CommunityAn overlooked aspect of real estate is its potential impact on community. Famed Italian architect Renzo Piano summarized this impact by stating, “You can put down a bad book; you can avoid listening to bad music; but you cannot miss the ugly tower block opposite your house.” With good design, we can have the opposite – positive – effect. Our developments can improve the walkability of neighborhoods, add green space, and integrate with the surrounding landscapes to create a positive, visceral connection with the people nearby. Premium properties attract valuable businesses and add beauty as well as prosperity to surrounding communities. 

We believe in Good Design. We believe it provides a powerful way to improve the environments where we work, live, and play. We believe it responsibly integrates with the natural environment and builds a lasting legacy for future generations. And we believe it provides a good foundation for thriving real estate investments. It’s Good Business, through and through. 

KC Conway Friday Economist Forecast

KC Conway Friday Economist Forecast

If you have time, you may want to sign up with the public link for KC Conway’s Friday Economist Forecast. KC Conway is a top real estate economist and very familiar with the markets in which Premium Property Trust operates. The update is free and will be live-streamed on YouTube. You should sign up at least five minutes early as it will start promptly at 3:30 pm EST (2:30 pm CST).

https://www.youtube.com/user/CCIMInstitute/live

Homewood medical property sells for $1.3M

Homewood medical property sells for $1.3M

Our fund just acquired a new property located adjacent to another property we are bringing into the REIT. We are hopeful to help develop this area into a walkable mixed-use center; working alongside some residential developments planned nearby. Thanks to the hard work of our Premium Property Trust team to get this done…Michael Hang in particular!

https://www.bizjournals.com/birmingham/news/2020/02/12/homewood-medical-property-sells-for-1-3m.html

REIT Investing 101: How a REIT Works

REIT Investing 101: How a REIT Works

Matthew DiLallo of The Motley Fool published a good introductory article about investing in REITs. In particular, he provides good coverage about how REITs finance growth and some key ratios to evaluate whether a REIT has “a strong enough credit profile to support both its dividend and its ability to continue expanding.”

https://www.fool.com/millionacres/real-estate-investing/reits/reit-investing-101/reit-investing-101-how-reit-works/

REITs Have Become The New Flight-To-Quality Asset Class

REITs Have Become The New Flight-To-Quality Asset Class

Brad Thomas contributing to Forbes about the “Flight-to-Quality” where investors sell what they perceive to be higher risk investments and purchase safer investments. In this case, he’s seeing REITs as the beneficiary.

https://www.forbes.com/sites/bradthomas/2019/09/23/reits-have-become-the-new-flight-to-quality-asset-class/#5a75e46b7507