August 20, 2019 | Real Estate on Main Street: A Q&A with National Development Council Trainer Corey Leon |
National Development Council Trainer Corey Leon instructs Main Street staff and preservationists at last year’s Historic Real Estate Finance Certification Training in Des Moines, Iowa.
If you want to help close a real estate deal in your commercial district, but don’t know where to start, keep reading. We sat down with real estate expert and National Development Council Central Team Director Corey Leon to chat about the latest trends in real estate and why the Historic Real Estate Finance Certification Training Series he’s leading for the Main Street America Institute should be a part of every revitalization professional’s toolbox.
One of the most important things participants will learn at the training is real estate finance lingo, which Corey refers to throughout the Q&A. If you don’t know debt ratio from net operating income, fear not. Look for bolded words in the glossary to get a head start on learning key vocab words before the training.
What are some of the biggest challenges facing downtown real estate development? How does the Historic Real Estate Finance Certification Training address them?
The biggest challenge in downtown development is finding financing. But fortunately, financing is out there right now. We are in a relatively good bank underwriting situation, and we are in a great situation in terms of equity. This training can help participants understand the information that banks and lenders will want to know during a financing conversation— things like the risks involved and making a reasonable return on investment. If you address those concerns, you’ll have a fruitful conversation with them.
Why is this training important for Main Street staff and local preservationists?
Real estate is a very important part of any traditional commercial corridor. A Main Street Manager should understand the jargon and fundamentals of real estate— things like net operating income, the basics of rent, and operating expenses. If a Main Street Manager is talking with a bank that says they want a certain debt service ratio, the manager needs to understand what that means and where the market is so there can be a good discussion. It’s important to know what to expect when talking with investors, bankers, and developers. If you know the right questions to ask and show that you understand the basic concepts, you likely won’t get into a bad deal.
Also, I often hear people say they have “a problem property.” But the property typically isn’t the problem—it’s not being able to find a tenant. So, one of the things I stress in this training is to focus on finding a tenant.
What expertise do you bring to this training?
I started doing real estate consulting and teaching at the National Development Council eight years ago. I get as much out of teaching as the students because, as an instructor, you have to understand a concept in order to explain it. I consult on real estate deals as part of my job, so that helps keep me fresh for teaching. I know the latest structural, regulatory, and financial issues, like how banks are lending, how investors are looking at deals, and capitalization and interest rates. I bring that knowledge into the classroom.
What are some of the trends you’ve noticed in downtown development?
I’ve seen a focus on selling experiences over stuff. Restaurants, performance venues, escape rooms, and places that are not easily supplanted by online stores are going into first floor retail. The trend of more experience-oriented retail is very clear in both big cities and small towns. The suburbs are even copying that trend, and now we’re seeing “lifestyle centers,” which are basically replicas of downtown.
In the training, we’ll talk about how to deal with tenant demands, including parking. In many places, parking is going to be a cost, but not generate any revenue, and you have to plan for that in your project.
What’s the most important skill someone could take away from this training?
I think the main thing to take away is to not be afraid of real estate. Yes, we’re dealing with projects that may be $1 million or more, which may be really intimidating. But the only skills you really need for real estate are addition, subtraction, multiplication, and division. This is not rocket science, and I think anyone can do it.
What would you say to someone who thinks that Historic Tax Credits or New Market Tax Credits are too difficult to work with for a small project?
I would say that Historic Tax Credits (HTC) are straightforward. With some basic knowledge, you can determine if it’s a good fit and how it will benefit you. In the class, we’ll cover how to convert that program into a source for your project. We’ll go over how you can use the credit directly and syndicate credits to an investor. You’ll leave with enough knowledge to do an HTC deal.
New Market Tax Credits (NMTC) are a little more complicated. We’ll cover what makes a good project, how to seek NMTC, and how it’s going to benefit you. You don’t have to know all the details— that’s what a lawyer and accountant are for. What’s important is for a small developer to know what makes a good deal, so they’re not chasing something that’s not going to happen.
What types of case studies will the class review?
What I like about the class is that there’s a case study specific to each concept, which helps reinforce the learning. After we go through net operating income and cash flow, we do a case study. Then we do the same for Rehabilitation Tax Credits. Some people get intimidated because math for the case studies is done by hand. While some of us have to reach back to remember grade school math, once those gears have been re-oiled, people are back to remembering those basic operations.
What else should potential participants know about the course?
The class is a great jumping off point into looking at real estate— whether you’re planning on doing it yourself or assisting a real estate deal. Previous participants have said that just having that basic knowledge gives them the confidence to take on projects they may have shied away from in the past. We want folks to not be intimidated by real estate. The numbers might be big, but the concepts are basic.
Don’t miss the chance to learn from Corey in-person! Made possible by the generous support of The 1772 Foundation, The National Development Council’s two-part Historic Real Estate Finance Certification series will take place from November 11-15, 2019 in Milwaukee, Wisconsin, and January 13-17, 2020 in Baltimore, Maryland. Learn more and register here.