9/26/22 Dallas Mastermind Group Meeting Copy

Dallas September 2022 Key Take Aways!

• ESG is a risk management tool for investors to better understand the risks to investments so they can be better informed. It features three pillars – Environmental, Social, Governance. (Danielle Barrs – EisnerAmper)
• The UN coined the term ESG in 2007 as principles for responsible investment and is also used as a value creation tool. (Danielle Barrs – EisnerAmper)
• The Environmental pillar includes energy consumption, energy efficiency, reduction of operating costs, waste management, water management, animal welfare, biodiversity, renewable energy and a goal to keep the environment strong for future generations. (Danielle Barrs – EisnerAmper)
• The Social pillar includes human relations, employee treatment, community relations, health & safety, and includes providing a safe and healthy environment for tenants. (Danielle Barrs – EisnerAmper)
• The Governance pillar includes board independence, conflicts of interest, executive compensation and ensuring someone is accountable for ESG issues. (Danielle Barrs – EisnerAmper)
• Financial Materiality and Impact Materiality are two sides of the same coin. Financial Materiality is Outside In (how ESG issues affect the business), where as Impact Materiality is Inside Out and looks at how the business affects those around it. (Danielle Barrs – EisnerAmper)
• There is a new SEC rule focusing on carbon and has a big impact on the real estate industry. 40% of carbon emissions are attributed to buildings, and it’s higher in cities (around 70%). Includes both operations and construction. (Danielle Barrs – EisnerAmper)
• TCFD is the Task Force on Financial Related Disclosures. This is the gold standard for framework for ESG disclosures. It includes four thematic areas – governance, strategic planning, risk management, metrics and targets. (Danielle Barrs – EisnerAmper)
• There are a variety of sustainability-linked loans that include discounts of as much as 5-10% and it’s important to be aware of the benefits and requirements of these types of loans. (Danielle Barrs – EisnerAmper)
• Extreme weather events are increasing and affect areas like flood zones. This is another reason to review ESG-related risks. (Danielle Barrs – EisnerAmper)
• The Paris Agreement is an agreement that seeks to keep the rise in global average temperature to below 1.5-2°C above pre-industrial levels. (Danielle Barrs – EisnerAmper)
• Many businesses are requiring vendors to disclose their ESG risks. (Danielle Barrs – EisnerAmper)
• RTG Capital has gotten into the outdoor storage space and have been working on purchasing lots across the US to store tractor trailers. They have 6 locations under contract and 10 more in the pipeline. They are  working toward building their portfolio. (Robert Gunby – RTG Capital)
• Insurers have a moratorium on new policies in affected areas during a storm, so deals may be on hold waiting for insurance policies until after a storm passes. (Blake Lugash – Realty Capital Partners)
• Some people are starting to get a little nervous about interest rates. (Blake Lugash – Realty Capital Partners)
• The report on the economy is a mixed bag. There has been some job growth, but not as much as expected and not great for Texas. Job openings have begun to trend down. Business outlook surveys have indicated a slowing over the past 4-5 months (though 2021 levels were exceptionally high, so rates have moved back in line with the average). Many forward looking indicators have turned negative in both Texas and the whole US. Price pressures are moderating, based on survey data. Some indications that supply chain issues are resolving. (Laila Assanie – Federal Reserve Bank of Dallas)
• There has been no significant tax legislation affecting real estate, and nothing is expected until at least the new Congress comes in after the midterms. The legislation for the Inflation Reduction Act removed parts affecting carried interest. (James Smith – Smith, Jackson, Boyer & Bovard)
• Clients looking at creative things with opportunity zones, but not sure the deals will work out. Exploring how far to push the envelope. (James Smith – Smith, Jackson, Boyer & Bovard)
• Seeing some issues with deals, some have fallen through but there are still deals getting done despite interest rates. More people are getting cautious. (James Smith – Smith, Jackson, Boyer & Bovard)
• Cache Realty Capital just purchased a mixed use property (office and retail) in Cincinnati. They were able to grab it at a good rate and expect to be able to increase rental rates. (Christi Rogers – Cache Realty Capital)
• Cap rates have softened on single tenant properties. (Scott Remphrey – Brytar Companies)
• There has been a lot of activity in disposition on the legal side of the real estate industry. There is an uptick in tenants trying to get out of contracts to avoid bankruptcy. (Jenna Zebrowski – Law Offices of Jenna Zebrowski)
• Vanguard Real Estate Advisors is primarily focused on land and multi-family. They work in six different states, but focus on Texas, Arkansas and Oklahoma in the tertiary markets. (Jordan Cortez Vanguard Real Estate Advisors)
• The need for mental health services has increased, with psychiatrists being at the top of the medical field in terms of demand. Team Sohail is in the market for health care professionals in this field. (Sohail Pirzada – Team Sohail)
• Luxury clients are always looking to invest and many of them have recently been going through divorce proceedings. (Suzanne Johns – Only Luxury Estates Dallas)
• SL Taylor Investments is looking for equity to put together a portfolio in select zip codes in the Dallas area, looking to build a portfolio of over 1000 units in the next decade. They’re looking for properties with vertical capacity. (Lance Taylor – SL Taylor Investments)