John Pascal | Vice President of JMB Financial Advisors
John Pascal brings extensive experience in real estate acquisitions and operations to his role as vice president of JMB Financial Advisors, a Chicago-based company that provides customized capital solutions, including debt and equity, for institutional and private real estate investors.
Before joining JMB, John served as senior vice president and chief investment officer of Brookdale Living Community, a company that provides senior housing nationwide.
His experience also includes work as co-chief operating officer of Horizon Bay Management and Senior Lifestyle Corporation and service as executive vice president of Heitman Financial, where he was responsible for acquisition of multi-family, industrial, retail and office properties on behalf of institutional clients.
John earned a master’s degree in business from the Kellogg Graduate School of Management at Northwestern University and bachelor’s degree in accounting from the University of Illinois.
He answers our questions:
I am not sure what the biggest trend will be. There are several factors that affect valuations of real estate — interest rates, availability of capital and returns from alternative investments. Over the last several years, those three factors have been favorable for a significant run up in valuations for real estate. Other factors that are affecting real estate valuations and will continue to do so are technology, logistics and consumer tastes. Technology is affecting real estate in several ways. It has had a profound effect on the retail sector with consumers shunning many traditional forms of shopping for online purchases. Investors and lenders are very careful in how they value retail given this significant shift in retail demand.
Warehouse space occupied by companies distributing product purchased on line has increased significantly. The logistics of shipping product so consumers can receive them on an expedited basis, i.e next-day or same-day, has also become critical. The location of “last mile” industrial space or space located close to urban areas has become more valuable to accommodate this need.
To attract tenants/users it is important to have the latest technology to provide powerful internet access and the latest in “green” technology for office and hotel users that demand it and to reduce operating expenses and be environmentally efficient which will increase the bottom line and thus enhance value.
Consumer tastes or what users covet in terms of their work environment as an example has shifted with a desire on the part of office users to locate in buildings that have a significant technology infrastructure, have amenities and open spaces. Buildings that offer this type of space will be better suited to attract tenants and thus drive rents. There is also a strong shift in the desire of Millennials to live in urban areas where there is proximity to their work and play.
I think it has enhanced the desire for more “creative office space” with an open floor plan and more amenities to cater to the collaborative style and demographic that is typical of technology workers. As a result, there is more demand for buildings that can accommodate this type of space and away from more traditional office buildings. Buildings with large floor plates and high ceilings are more in vogue. Areas such as the West Loop of Chicago which was traditionally home to factories or “loft style” buildings have really taken off resulting in a surge of redevelopment and new development of not only office space but residential and hospitality.
The importance of location. The underlying factors that determine the favorability of a location may change but location will continue to be an important factor in all types of real estate decisions. The one thing that technology won’t change is how real estate is valued. The valuation of real estate will continue to be predicated on the cash flow the property is currently producing or has the potential to produce.
The type of capital that we seek for our clients will vary depending on the size of the deal. I think it is easier today to find capital for larger deals, i.e. greater than $10 million. It is more profitable to work on larger deals given that it takes about the same time whether the deal is $5,000,000 vs. $50,000,000. Therefore, for smaller deals, the cost of capital tends to be more expensive and not as accessible. As an advisor to sponsors, you need to take that into consideration when underwriting deals to make sure the economics desired by capital sources will be aligned with your clients’ expectations.
For most baseball fans in Chicago you are either a White Sox or Cubs fan, not both. I grew up a Cubs fan and will always be a Cubs fan. I don’t think there is any sports team that elicited the level of emotion amongst their fans that the Cubs did by winning the World Series. It was a lifelong dream come true for many die-hard fans like myself.