Advocacy, Education & Networking for Commercial Real Estate

SPRING 2015

Diversity Collaborative Continues its Push for Diversity in the Commercial Real Estate Industry

The U.S. commercial real estate industry is a $5 trillion business that employs millions of people, yet it’s recognized as one of the country’s least-diverse industries. Reports have stated that less than 1 percent of people in management-level positions at commercial real estate companies are minorities. Also, white males continue to dominate every job category in commercial real estate except clerical.

The Minnesota Commercial Real Estate Diversity Collaborative – composed of nine commercial real estate associations and individual members -- continues its strong push to create a more diverse and inclusive commercial real estate industry for Minnesota.

BOMA Greater Minneapolis’ Executive Director Kevin Lewis believes the industry needs to keep up with the changing demographics of today’s workforce and boardrooms.

“We envision a future for the commercial real estate industry where professionals demographically reflect our clients, tenants and communities,” Lewis says. “We’re passionate and going strong,” says Chantily Malibago, Portfolio Manager, Enterprise Real Estate Services | UnitedHealth Group, who serves on the Diversity Collaborative’s Steering Committee. The

Collaborative’s 2015 tri-leadership includes Malibago; Lisa Dongoske, Executive Vice President of Occupier and Investor Services at Cushman & Wakefield/NorthMarq; and Gabe Philibert, Senior Vice President | Business Banking at Bell State Bank & Trust.

The Collaborative maintains that the lack of diversity is not reflective of the changing demographics of society, and this gap will be detrimental to the industry. Malibago calls the cultural gap “harrowing.” Lynette Dumalag agrees. She’s an associate at NTH, Inc., a board member of BOMA Greater Minneapolis and serves on the Collaborative’s Outreach committee. “Our industry is not known for its diversity, but a lot of our partners are diverse,” she says. “As we work with architects and other vendors as well as our clients, we see a diverse population. A lot of our clients or investors are out of the country, so to be able to reflect our changing clients and how they look and our changing investors and how they look – I think is pretty important.”

But Dumalag warns: “If you want to attract a diverse group of employees, you can’t continue to do the same practices and expect a different result.”

By Liz WolfFreelance Writer

Continued on page 6.

Property AppealsPage 2

President’s MessagePage 3

BOMA’s Board...Our rudder for the present and futurePage 4

Kilowatt CrackdownPage 5

The Need for SpeedPage 7

Page 2 • Spring 2015 • BOMA Greater Minneapolis

So your Valuation Notice just came in the mail, and that increase in value has caught your attention. Can that be right? Why did my property increase in value that much? If you are like many property owners you might have these exact thoughts every year.

According to the National Taxpayers Union, a nonprofit group that promotes lower taxes, “As many as 60 percent of properties across the country are over assessed.”

If you are questioning your valuation, an appeal might be the answer for you. Before you file the appeal it is a good idea to research how your local government assesses your property. The next step is to check for errors in your assessment. Your local assessor’s office can provide a property record card, which has information used to assess your property. If the assessor has incorrect information, you may be able to show the assessor the correct property data, get a reduction, and skip the formal appeal process.

A common misconception is that you are filing an appeal of the taxes of the property, when in reality you are appealing other property features. Most commonly, an appeal is based on the belief that a property is overvalued. Successfully reducing the valuation of a property should also reduce the taxes of that property.

Keep in mind that the local assessor is using a mass appraisal system, loaded with historical sales data, and the assessor’s job is to “estimate” the market value of all properties on the assessment date each year. The job of the

assessor is not easy, and with limited staffing, it is difficult for an assessor to inspect every property, every year.

The error in the mass appraisal system is the assumption that all similar properties operate in the same capacity which, as you know, is not the case. Each of your properties has a life of their own.

Since the assessor may not know the exact details of what is going on with your property, you will need to provide the assessor with this information. This is where the appeal process comes into play.

Understanding this, now what do you do? Remember, it is your right to appeal your assessed value, but as property owners and managers we often do not have the time or expertise to prepare and discuss the valuation process with the local assessor.

You might want to talk to a tax consultant or property tax lawyer about making the decision to file an appeal of the value of your property, as a tax professional can be very helpful in explaining the appeal procedures and processes to you. Also as these requirements tend to vary from state to state, a tax professional can point out the specific factors of the procedure

required in the state where your property is located.

The fees for tax professionals can vary widely. Attorneys typically have an hourly fee they charge, and some will work on a contingency basis (a percentage of the tax savings), or a combination of hard costs (filing fees, appraisals, etc) and a contingent fee of the tax savings. Perhaps a combination of fee and contingent based professionals will work best for your properties.

Either way, take time to evaluate the financial benefits of the potential tax savings from your property tax value appeal. It’s a good idea to talk to your tax professional upfront about all of the fees that may be associated with the process, especially if you will be required to go to court. Your costs may vary widely, depending on whether your lawyer charges an hourly or flat fee for appeals, and it is common for contingent fee vendors to charge a higher contingency fee if the appeal goes to court. While taking an appeal to court is certainly a possibility, I have found that most appeal cases can be resolved prior to taking a case to trial.

Benefits of property appealsAppeals to your local assessor are one way to control expenses. Many commercial property owners consider real estate taxes as a pass through expense, but fail to consider the costs associated with real estate taxes for vacant space, or the potential loss of a prospective tenant due to higher than market expenses. Existing tenants will surely appreciate your efforts, especially if you come to them with their share of a tax refund. If your property is over assessed, a tax appeal will help keep real estate tax expense in line with other similar properties in your area, controlling this one area of expenses might help retain current tenants, as well as helping to close on your future lease proposals. t

Slade Helde is a 15 year veteran in the appraisal industry, and currently is the Director of Real Estate Tax for IRET Properties, overseeing the valuation, property taxes, and personal property taxes covering 791 tax parcels in 12 different states.

Property AppealsBy Slade HeldeDirector of Real Estate Tax, IRET

PAYING TOO MUCHPROPERTY

?

BOMA Greater Minneapolis • Spring 2015 • Page 3

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Greetings, BOMA colleagues……….and Happy Spring!

Seems like we just closed out 2014, and as I write this we are nearly at the end of the first quarter of 2015. For BOMA, the month of April means change. At the April Annual Meeting, BOMA members elected new

officers and Board members for the coming year. With that, my term as President of BOMA Greater Minneapolis has come to an end. To be sure, this has been a very fun and fulfilling year for me. As I wrote in my first article nearly a year ago, being elected as President of this extraordinary organization was very much a high point for me, and I intended to take every opportunity to help our BOMA move to the next level. And I believe, we, as an organization, have become more relevant and recognized in the community, all while continuing to address and serve the needs of our fantastic membership.

Even though my time as president has come to an end, I intend to stay fully engaged in all things BOMA. Many thanks to all of you who supported me, particularly the Executive Committee and the Board on the challenges we took on and the progress we made this past year. From representing our members on local issues such as the Nicollet Mall reconstruction, all the way through national issues such as the renewal of the Terrorism Risk Insurance Act in Washington, BOMA Greater Minneapolis was right there in the thick of it. We made strides in

strengthening our Strategic Plan and we made progress on becoming more user friendly to our members with enhancements like a new website. While we still have work to do, we clearly are moving in the right direction. My sincere thanks to outgoing Board members Tanya Hemphill, Tom Heuer and Jon Kuskie for their incredible contributions to BOMA Greater Minneapolis over the past few years. I especially want to thank Jon for his guidance and insight as past president. Whenever I needed some guidance and candor, Jon has been right there for me. Many thanks to our current Executive Committee of Kim Ihle, Mike Hagen, Jon Kuskie and Amy Wimmer for all the additional time they have put into serving the organization this past year. Finally, many thanks to Kevin, Laurel, Kristine and Mackenzie for putting up with me this past year. They have been awesome to work with. As we turn the page, I extend my congratulations to incoming President, Kim Ihle. I have gotten to know Kim very well over the last couple of years, and I am excited for Kim to step into these shoes. Kim’s experience, expertise and leadership means another great year ahead for the organization.

Finally, thanks to all of you for allowing me to be in this role the past year. I have created many new friendships that I truly appreciate and I strengthened relationships with many that I have worked with over the years. I appreciate all of the comments, candor and suggestions that many of you brought to me. As I said, this is an experience I thoroughly enjoyed and now I look forward to continuing to serve BOMA in the years to come.

By David Wright, BOMA PresidentU.S. Bank Corporate Real Estate

President’s Message

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Page 4 • Spring 2015 • BOMA Greater Minneapolis

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By Kevin Lewis, Executive DirectorBOMA Greater Minneapolis

BOMA’s Board….Our rudder for the present and future

Wi t h o u t question, t h e longevi ty

and foundational backbone of our organization remains tied to the unwavering support, engagement and leadership by our Board of Director’s. In my 3+ years with BOMA Greater Minneapolis, I can attest to the fact there are very few associations where the volunteer leadership has provided the type of cooperation and dedication in advancing a core mission as displayed by our board. Because of this, I want to take a moment and acknowledge our outgoing board members.

Tanya Hemphill (now with Piedmont Office Realty Trust, Inc.) has helped grow the Medical Buildings Special Interest Group as we embrace this emerging market segment of our membership. Tom Heuer, our service provider board member, has been an incredible wealth of information as we delve into the array of recycling initiatives and ordinances on local and state levels. And Jon Kuskie, our Immediate Past President, has served a crucial role in BOMA’s leadership wading through many issues during his term on the board. The single best decision our board made last year was to add the position of Immediate Past President to the Executive Committee. Jon’s continued involvement and contributions to the EC were immeasurable. And don’t

forget that it was Jon back in 2013 who agreed to make the jump from Secretary/Treasurer to President when Ted Zweig took a position in Houston. I will always be indebted to you Jon for making that commitment to me and BOMA.

This brings us to our outgoing President, Dave Wright. It would be difficult to find a BOMA member who is more involved with BOMA and other civic activities than Dave. Not only by serving in the time consuming role as President of our organization, but he also is on BOMA International’s National Advisory Council and was recently named to their Asset Management Committee. Add in fact, he is a regular course instructor for our BOMI classes. You would think he is tapped out. Guess again. He continues his role as Chair of the Downtown Improvement District’s Operations & Services Budget Committee, has a

position on the Nicollet Mall Project’s Implementation Committee and for good measure represents BOMA on Greater MSP’s Partner Advisory Council. And fear not, he will continue his involvement on the Executive Committee and on the Board as Immediate Past President. Whew!

As I have stated, our strength is in the volunteer leadership of BOMA. Our outgoing board members have provided their passion for the profession, their dedication to the association, and their concern on behalf of their fellow BOMA members and are a legacy of which we can be proud. In closing, please join me in extending our gratitude, respect and praise for the roles they embraced as a BOMA volunteer. Their contributions and efforts will always remain in my mind.

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Kilowatt Crackdown - Extended Deadline!

There is still time to enter the Kilowatt Crackdown! This year’s deadline has been extended to June 30, 2015.

Dozens of buildings representing more than 28 million square feet of commercial office space participated in the 2014 Crackdown, which means there is ample opportunity to get involved this year and save even more energy and money. On the off chance you’ve never heard of it, this year-long contest challenges Minneapolis area building owners to improve their buildings’ efficiency and puts them against each other in a friendly competition.

Companies implement changes such as retrofitting lighting, upgrading motors and variable frequency drives, buying higher efficiency heating or cooling equipment and conducting building tune-ups. Xcel Energy distributes roughly $1 million in rebates each year.

Xcel Energy p r o v i d e s a s s i s t a n c e by benchmarking a building’s energy use, helping building managers determine a list of suggested improvements and locating stimulus funding and

rebates to help offset the cost of improvements.

The Kilowatt Crackdown partners include BOMA Greater Minneapolis, Greater St. Paul

BOMA, Xcel Energy, the St. Paul Port Authority through its Trillion BTU project and the City of Minneapolis through its financing programs.

According to ENERGY STAR, energy represents the single largest operating expense for commercial buildings. The Kilowatt Crackdown not only improves a business’ economic competitiveness, it also

reduces the use of fossil fuels and greenhouse gas emissions.

Winners will be awarded in the spring of 2016. For more information,

please visit www.bomampls.org. t

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Making a difference One way to help break the barrier for minorities is through a pipeline program educating young people about career opportunities. In that effort, the Collaborative offers academic scholarships to college students interested in commercial real estate. Dorcas Gyamerah was awarded the Collaborative’s first scholarship in 2014. She graduated from St. Cloud State University last May and is working at Welsh and Colliers International | Minneapolis-St. Paul. This year, scholarships were awarded to Dina Intenga, who’s studying construction safety management at the University of Wisconsin-Platteville, and Mandy Yang, who’s pursuing an MBA at the University of St. Thomas.

Educating more young people about career opportunities The Collaborative continues to team up with Step-Up Achieve in Minneapolis, which places young people in paid summer internships at local companies. The Collaborative also continues partnering with Cristo Rey Jesuit High School, a Minneapolis college preparatory school for low-income students, which offers a corporate

work-study program. Many local companies are hiring students from both Cristo Rey and Step-Up Achieve. Philibert, who has played a big part in bridging Step-Up Achieve with the Collaborative, says education and awareness for young people are crucial. “I was in their shoes,” he says. “I knew nothing about commercial real estate until I was a senior in college and graduated. I had no idea about the opportunities.” He says partnering with Step-Up Achieve and Cristo Rey can help bridge that gap. A call to action

The Collaborative is comprised of many committees. Its outreach committee has worked diligently to strengthen its partnership with groups like Step-Up Achieve and Cristo Rey. A scholarship committee continues to proactively stay in front of students while its communication committee

created a website where people can access information about the Collaborative, its mission, initiatives, scholarships and how

people can volunteer. Please visit www.diversitycollaborative.com.

But the Collaborative needs help. “Much of what we do is based on the volunteer efforts of a small, but dedicated group of members,” Malibago says. “There are many ways industry members can become involved—from participation in career fairs at local high schools representing the commercial real estate industry to participation in one of our committees.”

The Collaborative held a Town Hall Meeting in mid-March to bring

more visibility to its efforts. “We updated the community on our 2015 initiatives including exploring 501(c)(3) status, our MSCA

charitable partnership and the need to increase volunteer participation through our committees,” Malibago says. There was a solid turnout with approximately 50 people attending and nearly half signing up to volunteer.

Lewis says it’s impressive to have all of these organizations come together.

“Not only are the organizations into this, but it’s great to see that our members and volunteers are really the ones leading the way and encouraging their organizations to be a bigger part of it,” he says. “It’s important for BOMA to be part of this as well as our partners at MNCAR, MSCA, NAIOP, etc. We’re glad to have everyone on board for a common goal.” t

Diversity Collaborative continues its push for diversity in the commercial real estate industryContinued from cover.

Liz Wolf is a freelance writer and can be contacted at wolfliz99@aol.com.

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The need for speed!

“I feel the need, the need for speed”, one of the most popular sayings from the movie Top Gun. Well, that is the leading reason your tenants are inquiring about fiber optic services. Speed. No other medium can provide the speed that fiber optic services can offer. large Fortune 500 firms, mid-size companies with many regional offices, healthcare, education, and financial entities are all moving to fiber. Why?

1. SPEED, SPEED, SPEEDa) Internet speeds at the same speed as the internal network, most companies are deploying Gigabit Ethernet (1000 Mbps) speeds to the desktop computers via network switches. Gigabit Ethernet is now available on many carriers’ (CenturyLink, Cogent, Comcast and many others) networks. This allows for fast and easy connectivity between company branch locations.

b) Hosted services or cloud services. Companies that move to this strategy need to be confident that their internet service will be available and will not create

unwanted delays. With the server hosted in the cloud the Internet often becomes the “bottleneck” as it relates to speed. Gigabit over fiber is making this a thing of the past.

c) Video streaming services are a reality. Video is a very high bandwidth application and fiber allows for greater speeds that are not available on copper based systems (DSL and Coax broadband). Ethernet services are symmetrical versus broadband services which are asymmetrical. You have guaranteed download and upload speeds with Ethernet links.

d) Ethernet offerings over fiber range from 10 Megabit on up to 10 Gigabit per second. 25, 40, and 100 Gig are in the works and will come to market soon.

2. ACCESS, things to consider. a) Does your building/property have fiber installed today? If so, do you have multiple entrance points? MPOP (Main point of presence-demarc room) / APOP (Alternate point of presence-secondary demarc room.)

b) If you do not currently have fiber, do you have spare conduits that terminate in the right of way for easy access?

c) Have you surveyed the available fiber optic cable in proximity to your building? What is the closest access point?

3. What if fiber is not available?a) Well, traditional broadband services are an option. However, DSL and cable broadband do not offer the speeds that fiber will. In addition, length becomes a concern. There are distance limitations for each service. A survey by the carrier will be required to determine if the building “qualifies.”

b) Traditional T1 services are available at most buildings. T1 = 1.544 Mbps. You can bond multiple T1’s together to form a higher bandwidth circuit. T1 is a symmetrical circuit and offers the same uplink speed as download. Very slow by today’s standards.

There are many things to consider when evaluating the need for fiber. One thing is certain, you will be asked the question, “are fiber services available in your building?” many times over the next year. Do you have an answer for that question? t

By Chad PetersonPresident, Communication Systems Specialist

BYP Council LaunchedIn light of the looming shortage of property managers and building engineers over the coming decades, BOMA Greater Minneapolis is pleased to announce the launch of the BYP Council in January 2015.

As the natural next step after BOMA Young Professionals, the mission of this council is to expand professional knowledge, develop relationships within the industry, and ultimately provide participants with complete understanding of the value of BOMA membership! This council is currently made up of 12 young professionals who will plan networking and educational opportunities specifically geared towards young professionals in the industry.

Watch your E-News for more information about their upcoming meetings & events!

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