Hilco Real Estate (HRE) has made a significant expansion of its real estate receivership practice. The Northbrook, IL-based firm hired Matthew Mason as SVP, and he brings a team with him to HRE.

Mason joins HRE with 24 years of experience in real estate and fiduciary services. His background includes assisting institutional clients, lenders, and private investors with distressed real estate and serving as a court-appointed receiver for more than 200 retail, office, multifamily, industrial, hotel, and mixed-use projects.

Joining him at HRE are Andrew Streeter, who specializes in asset management of distressed assets through the takeover and disposition process; Robert Jones, a 20-year veteran of asset management, property management, leasing, negotiation and disposition; and Spencer Ruberti, who has more than 15 years of experience in commercial real estate, specializing in distressed assets and court-appointed receiverships.

“We are thrilled to welcome Matt to the Receivership group at HRE,” said Neil Aaronson, CEO at HRE, “With Matt’s extensive industry expertise and proven track record, we are confident that he and his team will offer a tremendous resource to our clients, securing, maintaining and right-sizing operations for individual real estate assets and portfolios.”

Pictured: Matthew Mason.

NAIOP SoCal President and Kidder Mathews regional president Eric Paulsen recently sounded the alarm on the lack of commercial real estate industry engagement on legislation that can prove detrimental to the industry’s interests. Actions such as emailing or calling a lawmaker’s office or checking a candidate’s voting record before casting a ballot happen too infrequently, in Paulsen’s view. Connect CRE invited Paulsen to go into depth on the problem as well as possible solutions. Here’s what he told us:

Q: Is the legislation that is harmful to the commercial real estate industry primarily at the state level, the local/regional level, national or a combination of the above? What are some examples?

A: Most of the legislation impacting commercial real estate is at the state and local level versus the national level. Too often politicians try to solve the right issue with the wrong approach, or don’t have enough understanding of the potential impacts and create more economic damage than benefit.

Examples include:

• For four consecutive years, NAIOP has dealt with state legislation that would have shut down nearly all warehouse development across California, eliminating jobs and hurting local economies. The latest version was AB 1000. NAIOP SoCal mobilized thousands of members and allies who contacted state legislators in opposition to AB 1000. While we stopped AB 1000, the author, Assemblywoman Eloise Reyes, has vowed to continue pushing for this harmful legislation. We must be ready to respond. We can provide logical counterproposals; educate those who don’t focus on commercial real estate of the harmful impacts of the proposal; and mobilize people to demand retraction of the proposal.

• At the local level, industrial properties have become the new enemy as several cities have enacted or considered adopting a warehouse moratorium as well as seeking to downzone and dramatically restrict not only the size of industrial buildings but what kind of tenants owners can have. These zoning ordinances are restrictive, and changes are made without notifying property owners and with no economic analysis of the impact on the industry or community.

• In Los Angeles, voters passed Measure ULA, impacting all property types. It stipulates that sales of residential and commercial property valued at over $5 million but less than $10 million are subject to a tax of 4%, while sales of properties valued at $10 million are subject to a tax of 5.5%. These crippling new taxes have depressed further growth and development in Los Angeles.

• In 2021, the South Coast Air Quality Management District (SCAQMD) adopted the indirect source rule (ISR) creating complex regulations governing over 3,000 warehouses. This rule requires warehouse owners and operators to either reduce truck emissions (i.e. by using electric trucks) and/or pay a substantial amount to the SCAQMD. This imposes additional annual costs on warehouses of approximately $1 per square foot, totaling close to $1 billion. No plan was presented by the SCAQMD on how these revenues will be spent. More importantly, most people assume these regulations are “sticking it to the wealthy,” but most if not all this cost is passed along to all of us as consumers.

Q: Has there been more legislation enacted in recent years or has there been less resistance/opposition from the industry?

A: CRE is the new demon as we are often portrayed as wealthy individuals harming the environment and not generating jobs, or as wealthy corporations that need to contribute more to fixing all the socio-economic issues plaguing our cities. CRE is the new revenue source as much of the legislation is a money grab to support other issues. Often it is local agencies who seek funding to increase general fund budgets. The WAIRE point system is an example of this. There is no way an industrial building will be compliant enough to solve for all items being demanded, so the operator ends up writing “mitigation” checks to the local city.

Apathy is costing the CRE Industry billions of dollars. More legislation detrimental to CRE, and common sense, has passed in recent years than ever before and the CRE industry has let it happen. Many politicians are elected with less than 10% of the vote and depending upon how you count, anywhere from 60% to 80% of our politicians have never held a private sector job. We must inform and educate the public and politicians on how critical the commercial real estate industry is to every aspect of life and how every one of their decisions impacts us individually versus as an industry or corporation.

Q: Industry associations can help keep members informed – what are some ways in which members can help industry associations?

A: NAIOP SoCal is devoting significantly more resources to legislative affairs because we must advocate for our industry in front of city and state officials. The chapter testifies before Planning Commissions, City Councils and State Legislature. NAIOP SoCal also updates members on pending local and state issues and rallies members to testify before state and local jurisdictions to show local government leaders that their actions matter.

Oftentimes legislators are unaware of the effect of the bill they are proposing. One politician in San Francisco wanted to ban the ability to evict a commercial tenant during COVID which had the potential of making every single contract in the state of California null and void, all to save his favorite restaurant.

Measure ULA in Los Angeles has not generated nearly the funds that politicians expected because it instead became a deterrent to invest in the city, dropping transaction volume by over 70%. Sale transactions reset the property tax basis in properties. Not only is it not raising the money hoped for, but it is stifling transaction volume and new investment which is minimizing money in potential recurring tax dollars.

It’s simple. Politicians want to get reelected, so they weigh the issue and side with the largest voting block either for or against that issue. Members need to make that call, send that email, and educate others not from our industry what the impact will be of upcoming legislation, and if they can, financially support groups that are doing all the above.

Q: Can you provide a “success story” illustrating the kind of industry involvement in shaping or opposing legislation that you would like to see more of?

A: Yes! NAIOP SoCal defeated AB 1000, which would have shut down nearly all warehouse developments across California. We mobilized thousands of members and allies who contacted state legislators in opposition to AB 1000. But this battle is far from over.

For the first time in history, NAIOP SoCal is sponsoring two bills in the State Legislature.

First, AB 2904 boosts transparency and doubles the notification period to property owners statewide when cities propose zoning changes that impact the value and use of their property. In mid-May AB 2904 unanimously passed the State Assembly and is now in the State Senate.

Second, NAIOP SoCal and CBPA sponsored AB 2433, the “California Private Permitting Review and Inspection Act.” AB 2433 would expedite the permitting and plan check processes by allowing developers to use private professional services if a local agency fails to meet a 30-day deadline. AB 2433 has unanimously passed three Assembly Committees and we are pushing to get it approved by the State Assembly.

Our goal is to get these bills signed into law. With these bills, we are playing offense. When our industry, which impacts every single person each and every day, is willing to make a simple phone call or send a brief email, it makes a difference.

Industrial developers are going the extra mile to fortify facilities as a confluence of population growth across Middle America and the rise of severe weather events outside of the region known as Tornado Alley puts more warehouses in the path of destruction.

Twenty-seven of North America’s top 100 logistics companies are headquartered in the Midwest, home to several states that fall into Tornado Alley, according to a 2023 report by Transport Topics. But increasingly severe weather ripping through other parts of the country is expanding the definition of which states fall under that umbrella, while population shifts mean more facilities are moving into danger zones.

“Manufacturing, warehouse and logistics folks are going to go where the population goes,” said Kathy Fulton, executive director of the American Logistics Aid Network. “If we are building in places we’ve never built before because people are moving to places they’ve never lived before, then there are hazards that we’re going to have to deal with that we’ve never dealt with before.”

Much of the influx of industrial activity in the region can be linked to pandemic-induced migration patterns, which saw many Americans moving out of large cities and into less populous areas. Industrial demand surged in the Midwest during the health crisis, with a 2021 JLL report projecting the region would need 275M SF of new warehouse space by 2026 to meet demand.

Kansas, for one, landed 21 distribution warehouse or logistics plants in 2022, according to the state’s Department of Commerce, including everything from a $1M investment by Fridgetek to a $326M investment by Heartland Coca-Cola Bottling Co.

“We’re seeing more [severe weather] events, and we’re seeing them in areas we never had warehouses before,” Fulton said. “This propagation of warehouse space over the last decade has put those buildings in areas where tornadoes may have occurred in the past, but they never affected anybody because it was just land.”

At the same time, pro-business policies as well as the availability of land, labor and power in cities like Atlanta, Charlotte, North Carolina, and Nashville, Tennessee, have generated more manufacturing activity in the Southeast, which is home to 28 of the top 100 logistics firms, per Transport Topics. 

And while tornado risk has historically been low in the region, a growing body of research suggests that is no longer the case.

States like Arkansas, Louisiana and Mississippi have experienced an increase in tornado touchdowns each year, an April report by Insider found, and researchers warn the storms could become more severe and begin to devastate a greater swath of the U.S.

“There does appear to be a shift [in tornadoes] toward the Southeast,” said Jessica Waters, vice president and manager of climate and structural resilience for commercial property insurer FM Global. “It’s something the science community is keeping an eye on, and it’s something that FM Global is certainly keeping an eye on so we can be in a better position to help protect our clients.”

A series of deadly tornadoes swept through southeast Missouri, southern Kentucky, Tennessee and central Alabama in March 2020. The worst of the storms occurred in Middle Tennessee, resulting in widespread damage, hundreds of injuries and more than two dozen deaths, according to the National Weather Service.

More than 400 commercial structures were damaged or destroyed in Nashville, according to CNBC. The impact was especially acute given the exponential population and corporate growth that had occurred there over the preceding decade, driven by companies like Alphabet and Amazon opening up hubs and creating thousands of jobs.

Tornadoes happen with little notice, which makes preparation difficult, said Richard Thompson, international director and leader of supply chain and logistics solutions for JLL. Many companies will shy away from Tornado Alley, he said, but those that choose to go there usually spend extra money on strengthening facilities.

“The holy grail of the supply chain is trying to predict the unpredictable, and tornadoes are the ultimate in natural disasters that are extremely difficult to predict and understand,” he said. “If you can’t stay away, then there are some building designs that are advantageous.”

Choosing the right construction materials is critical to protecting facilities against tornadoes, Waters said. Opting for a concrete roof over metal, or avoiding materials that could become projectiles in severe wind, are some of the things developers in Tornado Alley have to consider.

Those choices, she said, often translate to a heftier bottom line.

“There would be an increase in cost because you are designing the building to be more robust, you’re using heavier construction materials,” she said. “That comes into balancing the business’s tolerance for risk, and is it worth that investment?”

Climate resilience is a top priority for Prologis, the world’s largest industrial landlord, said Carter Andrus, managing director and global head of operations. The company implements disaster response planning and regularly reinvests in its buildings to protect against severe storms, including tornadoes.

“Prologis regularly reevaluates its construction specifications to withstand severe weather events to the best extent possible,” Andrus said in an email. “For example, we have increased the thickness of roofing materials used and added protection around HVAC units to improve resiliency of our portfolio.”

The decimation of transportation infrastructure can cause major supply chain disruptions in the event of a tornado. Last-mile logistics companies like Senpex use technology that aggregates real-time road data from various sources, including Google Maps and OpenStreetMap, to optimize routes so the business can continue to operate.

“This is our core, main problem for logisticians,” Senpex owner and CEO Anar Mammadov said. “The efficiency of the routes and how to make sure drivers are delivering more stuff in a short period of time.” 

But most manufacturers and logistics service providers don’t have the resources to make these kinds of structural or technological investments, Fulton said, which is where the public sector and nonprofits like ALAN have to step in.

“So many organizations just don’t have the money or the time or the staff to even build a simple business continuity plan or do a simple risk assessment,” she said. “That’s no shame to those organizations; there has to be a way that we make that easier for them … It’s an industry problem that all of us need to work towards together.”

FM Global invested $300M into the 2022 launch of a program that helps policyholders protect against flood, wind and wildfire exposure, Waters said. The credit has the potential to reduce total losses by $120B, per FM Global’s website. 

The Federal Emergency Management Agency also helps communities safeguard against natural hazards through the Building Resilient Infrastructure and Communities program. This year’s program awarded $136M to 325 applicants across 55 states and territories, per FEMA’s website.

These types of partnerships help harden infrastructure and drive business into areas that would otherwise be avoided due to climate risk, Fulton said.

“It’s going to keep our supply chains running after a disaster if we’re not losing power, if we’re not losing water, if we’re not losing whatever resource that building needs,” she said.

The threat of tornadoes is unlikely to drive companies away from certain areas, Thompson said. There’s just too many other benefits that outweigh the risks. 

Ultimately, whether or not a company lays down roots in Tornado Alley or any other market prone to natural disasters will come down to their tolerance for risk, Waters said.

“There are things that can be done to mitigate losses, but not all losses are preventable,” she said. “As an organization, the firm needs to look inward and really understand where their vulnerabilities are and where the heartbeat of their company is — that will help inform their decisions on where they’re going to build and where their logistics are located.”

Luxury centre Bond Street has felt the impact of no tax-free shopping.

UK luxury industry body Walpole has once again called on the government to reinstate a tax-free shopping scheme for international tourists following the UK’s departure from the European Union.

In its inaugural State of London Luxury report, in partnership with landlord Cadogan, it claimed that the loss is “a drag on both London’s and the UK’s economic performance”, costing the country £4.1B annually.

“Every passing year without the scheme entrenches the view of London as a costlier place to visit and a less competitive place to do business,” the report says.

The tax break was removed after the UK left the EU. It was brought back and then swiftly removed during successive government budgets, leaving critics to claim that London has been left at a huge disadvantage to luxury city rivals such as Paris and Milan. 

Citing the impact on visitor spending, Walpole said that in 2022, U.S. visitors spent at 101% of 2019 levels in London, but at 226%, 206% and 190% in France, Spain and Italy, respectively.

“If a next-generation tax-free shopping scheme could be introduced, London’s status as the world’s number-one luxury city would be guaranteed,” Walpole CEO Helen Brocklebank said.

The return of the policy would “be a windfall for the whole UK, including London”, and would add £4.1B to the UK economy and create an additional 78,000 jobs, according to Walpole’s research.

High-end tourists in London are estimated by Walpole to outspend mass tourists by 14 times per trip and double that of high-end visitors to other European cities, and the opening of 12 new five-star hotels between 2022 and 2025 should continue to attract more high-end visitors.

Beyond Bond Street — which has seen some high-profile retail departures — and Mayfair, Walpole said that affluent villages such as Connaught Village, Marylebone Village, Little Venice and Shoreditch offer hyperlocalisation and trend-led retail that have positioned London “as a global leader in growth and investment”.

Walpole and Cadogan also called on the government to extend the Electronic Visa Waiver to other high-spending markets beyond Gulf countries, particularly the Far East. Likewise, it said a joint UK-Schengen visa would significantly reduce the complexity for international visitors.

The report was launched on 15 May as part of Walpole’s annual conference, where Director Charlotte Keesing described the UK’s position outside the European visa system and the lack of tax-free shopping as a “significant drag on recovery”.

Meanwhile, Heathrow Airport Retail Director Fraser Brown warned of examples of wealthy visitors staying in London but travelling to city rivals Paris and Milan to shop.

In a sign that there may be some government movement, Trade Minister Nigel Huddleston has reportedly asked for more “information and data” on the impact of the decision to remove tax-free shopping.