New Kids on the Block

Seeing a void left by now-skittish investors burned by the subprime meltdown, Rob Banzhaf and Trey Halberdier opened BanDier Realty Partners in early January -- a commercial real estate investment, development and brokerage partnership based in The Woodlands.
"We really felt -- contrary to a lot of people -- that it was a pretty good time," Banzhaf says.
With a sunny outlook predicted for Houston's 2008 real estate scene, brokers are looking to capitalize on a strong economy and favorable market conditions.
Tyndall Yaap, managing director of the industrial division at Capital Commercial Investments, notes that in the industrial and offices markets, "we are at, or near, some historic low vacancy rates."
Strong growth in one industry -- oil and gas -- is creating a ripple effect, sparking growth in related businesses, Yaap notes.
"If you look at our office vacancy and our industrial vacancy, it's all tied together," says Yaap, who recently left Grubb & Ellis as an independent contractor to focus on development and acquisitions at Capital Commercial, in part lured by the strong market.
"You always have young people coming into the business and then they go and take on opportunities on their own," says Sam Scott, director of Commercial Gateway, the commercial division of the Houston Association of Realtors. "Firms in Houston are particularly fluid and people tend to make changes at the beginning of the year."
Strong fundamentals
Banzhaf and Halberdier say there's unusual movement because the market is ripe -- an optimistic view of the market supported by several weighty figures in Houston's real estate.
Despite 2007's problems in the capital markets, "If you look at the fundamentals of Houston, it is still strong from an investor standpoint," says Jeff Majewski, CB Richard Ellis Group Inc.'s senior managing director, who was one of the speakers at the company's year-end press luncheon last week.
With a 6.5 percent Class A office vacancy, the lowest since 1997, and rental rates at their highest since 1998, Sanford Criner, the firm's executive vice president, forecasts a positive 2008 for the office market.
Problems plaguing real estate markets across the nation have had a minimal effect, compared to the overall Houston market, Criner says. With oil near $100-per-barrel, a healthy energy industry has helped insulate the city from many economic woes affecting other parts of the country.
"In Houston we hang our hat on oil, which is good for the entrepreneurial buyer looking for a story," Craig LaFollette, multihousing specialist at CBRE, said at the luncheon.
Areas such as the Port of Houston and the Texas Medical Center are experiencing growth in industrial and health care facilities and are attracting the attention of investors, he adds.
In the office market, the fourth quarter posted a negative absorption, but 2007 closed with a total 3 million square feet of positive absorption. Vacancy citywide settled at 10.98 percent, with the Woodlands leading at 97 percent occupancy. In the Houston area, 29 office buildings are currently under construction, totaling 5.1 million square feet.
Real estate firm Grubb & Ellis sees positive indicators in each industry segment in its 2008 Real Estate Forecast. Participants in the report included James Arket, senior vice president of office tenant representation; Darrell Betts, senior vice president in the office investment group; George Cushing, senior vice president in the retail investment group; Jerald Dyer, vice president of the land investment group; Randy Moore, executive vice president and regional managing director; and John Nicholson, senior vice president of the industrial group.
The credit crunch is leading to an increased demand for rental properties, the report notes. Rents in all classes are on the rise, but particularly in the Class A market.
Grubb & Ellis predicts the office market will remain strong, with renters flooding to the Class B market as rents increase. The industrial sector saw nearly 8.1 million square feet of positive absorption, spurred by Houston's strong core industries.
Steady and stable
Compared to the rest of the nation, Houston has had steady growth over the past few years, providing a stability BanDier was looking for before it put down roots.
"In Central Florida and the West Coast, they had these huge spikes in real estate values," Banzhaf says. "We were looking for investment opportunities and, quite frankly, they didn't make any sense."
Banzhaf says their moment of opportunity was in part caused by out-of-town investors pushing capitalization rates low and prices high, but with the recent credit crunch those investors have slowed down or pulled out of the market altogether. Halberdier says that now there is a flight to quality to attract buyers back into the game; capitalization rates will rise, and reputable investors will be able to take advantage.
"We had lenders lending on speculative projects, loan to value; investors were basically coming out of town and not bringing a lot of cash to the table," Halberdier says.
"We had lenders lending on speculative projects, loan to value; investors were basically coming out of town and not bringing a lot of cash to the table," Halberdier says.
Even six months ago, Halberdier says, BanDier would have seen stiff competition from investors who simply aren't around anymore.
"Six to nine months ago, if we were in an income-producing deal, we would be competing with a dozen buyers," Halberdier says. "Today, we may be competing against half that."
With timing on their side, Banzhaf and Halberdier see a bright future for BanDier. Nevertheless, Banzhaf restates the need to always invest responsibly and to remain on the cutting edge, noting that the real estate market, as always, is cyclical.
"There is definitely a cautious optimism," Banzhaf says. "Are we going to experience something that we experienced in the '80's? That's why it's important to make smart investment decisions and to go after opportunities that may be off the radar."
Friends since grade school, Banzhaf and Halberdier completed their real estate licensing together while in college. The two later reunited after working at separate real estate firms, teaming up at the Houston office of a large privately held firm as brokers in 2005 before striking out on their own.
"We wanted to own and develop real estate, and to build wealth, not to broker for a living," Banzhaf says. "We were basically waiting for the right time in the market, and we feel that now is definitely the right time." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net