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Close-up: NAIOP

A place for commercial real estate professionals to network, learn industry

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When Sean Giffin needs a sounding board while working on a leasing deal or help with specific lease language, he calls friends in the commercial real estate industry whom he has gotten to know through an organization called NAIOP.

“I can call NAIOP friends to discuss how to handle a particular situation or read a lease agreement. It’s a supportive peer group,” Giffin said, who is leasing manager at Liberty Station in Point Loma for the NTC Foundation.

NAIOP stands for the National Association of Industrial and Office Properties, its original name. The commercial real estate development association organization now just goes by the acronym NAIOP. It has 15,000 members nationally and 530 members in its active San Diego chapter.

Among its members in San Diego, the largest contingent comprises brokers, followed by developers and investors, leasing managers, general contractors, law firms, engineers, architects, design professionals and students.

Forty percent of its members are under age 35 and belong to a subset group called the Developing Leaders Program, with committed members like Giffin and his peers.

Aside from networking opportunities, the association focuses on education about current and pending legislation and how it affects members, getting to know political candidates’ stances and making informed choices and market forecasts. It also focuses on legislation, supporting pro-industry bills.

“It’s fantastic from a networking and educational stand point. It’s helped us understand legislative issues and that has been a great help for me and my company,” said Brigham Black, current president of NAIOP San Diego and senior vice president of Pacific Properties, a real estate investment trust.

As an investor, principal and commercial real estate executive, Black has been in the industry for 18 years and a member of NAIOP for 11 years.

“We feel like we have a very good relationship with our legislators and the mayor. We don’t support candidates or endorse them. We’re concerned about the mayoral race, we educate our members on the candidates’ stances and sponsor mayoral debates,” Black said.

Members form an opinion on who to vote for, based on the candidates’ views on real estate, industry financing and community planning.

He described NAIOP as a pro-business and pro-jobs organization that supports causes and ballot-gathering measures and will fight a referendum if need be.

Advocacy on key issues

One issue the organization has focused its resources on fighting is a proposed increase to the linkage fee, being considered by housing advocates and the city council.

Linkage fee is a hot button issue that has been debated for the last 20 years, and is basically a fee imposed by local government on new or proposed developments to help pay for a portion of costs of public services needed for the development.

Fee advocates want to double the linkage fee currently being charged to commercial and industrial developments and use it for gap financing in affordable housing construction.

“The only two sources of money for this gap financing are from linkage fees and any ‘in lieu’ fees the city collects from the construction of market rate residential housing, where the developer/builder doesn't comply with the actual on-site inclusionary housing requirement of 10 percent,” said Craig Benedetto of California Strategies, the law firm that represents NAIOP in San Diego.

“The city originally contemplated a number of funding sources for the affordable housing trust fund, but after the first year only levied the linkage fee.”

Black said fee advocates want to increase the linkage fee such that new developments would be charged anywhere from a dollar more per square foot up to $25 more per square foot.

This would be a huge imposition on a developer who is already taking a risk and needs to see return on his pro forma, and such fees will effectively put off new commercial developments, according to Black.

“The city’s rationale is to create more density in housing, more incentives to change ‘employment’ land into residential land,” Black said. “Linkage fee advocates wants to see more areas zoned as residential. We don’t want to see employment land disappear. There’s already a supply constraint in San Diego and we want to see commercial development grow over the next few decades.”

The fee increase would raise the cost of development, which in turn would increase rent for commercial tenants.

“We feel this is a money grab in a very tight budgetary environment. So far the efforts of NAIOP and others have come together to fight this tax increase,” Black said.

The organization’s stance is that the fee should be minimal, not so high that it would eliminate the economic drivers for the industry.

NAIOP also works closely with the San Diego Taxpayers Association and the San Diego Regional Economic Development Corporation.

Nationally, NAIOP has lobbied to stop the carried interest tax being levied at the ordinary income rate. Carried interest is the promoter’s interest or stake in a development, and is currently taxed at the capital gains rate, but legislators want to switch that to the higher level ordinary income rate.

NAIOP opposed the tax because it would change the rate from 15 percent to nearly 35 percent, on the grounds that the increased rate ignores the risk undertaken by developers and treats the carried interest income as if it were guaranteed salary.

The organization also supports initiatives such as the redevelopment of wetlands and industrial properties that have sat vacant for long.

“We want change that makes sense. We don’t just oppose, we also work with change for the good, such as with the U.S. Green Building Council,” Black said.

Developing young leaders in the industry

The San Diego chapter meets regularly for mixers, breakfasts and golf tournaments, where aside from the meet and greet, members also receive a market snapshot presentation.

It also holds market showcase events where vendors such as furniture companies and service providers such as banks, janitorial services and others set up booths.

Through community involvement initiatives, NAIOP members have adopted a local Special Operations Marine battalion and supports its families, in addition to supporting other chartiable causes such as HomeAid San Diego, which addresses homelessness, and the HeadNorth Foundation, which supports those who have suffered from spinal cord injuries.

Membership dues for principal members runs to $795 a year, while the under-35 group pays $275 a year.

Younger members such as Giffin were drawn to NAIOP because of its successful Developing Leaders program.

“Peer interaction and support is a big reason. I’m not just going to events with a bunch of seasoned people but also my own age group. And the program has its own agenda and outreach projects, from food and clothing drives to beach clean up,” Giffin said.

He said NAIOP’s educational measures have helped him keep up with what’s happening locally, regionally and nationally, from the linkage fees to the government’s closing of redevelopment agencies. He has been in the industry for 9 years and a NAIOP member for 5 years, and said he knew he wanted to be in commercial real estate when he was in college.

On the other end of the spectrum is another under-35 member, Allison Beall, who majored in sports medicine before opting for a career in construction.

“I made the leap partly through my relationships with people and networking. Joining NAIOP helped me get up to speed with the industry and understand clients’ business better,” Beall said.

She is director of business development with Pacific Building Group, a family-run construction and general contractor firm. At age 33, Beall has been in the industry for 9 years and a NAIOP member for 5 years.

She said the mentorship program was vitally important for her – she’s had four different mentors. She’s also built relationships with peers and said that has been the best part of joining the group.

The organization has opened up new horizons for members like Beall and Giffin.

“It’s been one of the best career development decisions I’ve made. What you put into it is what you get out of it. I’m very involved with NAIOP,” Giffin said.

Nagappan is a San Diego-based freelance writer.

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