Experts Discuss Silicon Valley Real Estate at Menlo College

Experts Discuss Silicon Valley Real Estate at Menlo College

The Real Estate Symposium was a winning opportunity for students, alumni, and professionals to learn the inside scoop on real estate practices in Silicon Valley. The event offered key tips on real estate transactions that would take years to learn in the work setting. Four experts, Stephen Roulac, PhD, Michael Repka, JD, Roger Honey, JD, and Harold Justman, JD, contributed to the four-hour program. Panelists Steve Sauter, from Marcus & Millichap, and Zachary Lapping, from Prometheus Real Estate Group, also joined the concluding presentation.

Stephen Roulac, Roulac Global

Stephen Roulac, founder of Roulac Global, was the opening keynote speaker on “Seven Technologies that Drive and Transform Property Markets.” Menlo College Real Estate Professor Harold Justman introduced Roulac as “the man who invented global real estate strategy.” Roulac predicted that those who understand cap rates will perform better in the 21st century. He referred to George Washington as the first real estate mogul and largest landowner to lead our nation, and someone who realized that his investments would be better served if there was different governing.

In a whirlwind review of the origins of real estate, Roulac transported the audience from a nomadic economy, through the industrial revolution, to modern capitalism. His seven technologies covered transportation, information, communication, manufacturing (he called it “making”), energy, education (he termed it “wording”) and money.

“Those of us in Silicon Valley are in the epicenter of the 21st century renaissance,” Roulac said, explaining choice of place as a preference which has evolved over recent modern times. To illustrate, he polled the audience to find out how many people still lived in their hometowns. Over half of the audience had moved from their birthplace.

Michael Repka, DeLeon Realty

Michael Repka, CEO of DeLeon Realty, talked about Real Property Tax issues. Repka, also a Real Estate Professor at Menlo College, presented ‘tax talk’ on why owning modest property in a popular area is better than owning higher-scale property in a marginal area.

He explained current capital gains, which can be as high as 37.1%, and tax treatments for proceeds covering stepped-up bases; Section 121, the exclusion of gain on foreign primary residents; 1031 exchanges; deferred sale trusts; and more. His humorous real estate slogans, such as “swap until you drop” entertained the audience through the complicated tax option discussion.

Roger Honey, Law Offices of Roger G. Honey

Roger Honey, from the Law Offices of Roger G. Honey and Justman, thoroughly reviewed the pitfalls of using electronic signatures. After explaining legalese in the signature transaction act, Honey emphasized the importance of getting a valid and binding signature before using electronic signatures by joining in a theatrical enactment of a business transaction.

Steve Sauter, Marcus & Millichap and Zachary Lapping, Prometheus Real Estate Group

Justman and a panel that included Roulac, Steve Sauter, and Zachary Lapping, discussed “Cap Rate Compression in Silicon Valley.” The capitalization rate (cap rate) is a real estate valuation measure used to compare real estate investments. A cap rate is often calculated as the ratio of net operating income (NOI) to property asset value. For example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.

Harold Justman, Justman & Associates

Justman summed it up succinctly: “Cap rate tells you the yield you get on your investment.” Sauter added “a high cap rate means higher return.” Justman reviewed the period of the 80s and 90s when “cap rates went up, crushing real estate values. In the 90s cap rates fell, and the value of real estate went up.”

Discussing the concept of risk, Roulac said, “We live risk—a condition which is even reflected now in our political candidates. The central banks have hoped that rates would rise and interest rates would come up. With the manipulation of the rates by the federal bank, the rates are in an artificial position in the system. Like the California Hotel, we’re checked in and we don’t check out because people are addicted to low rates. A lot of real estate trades like tech stocks. There’s great risk in the capital market, which poses an economic risk.”

“What will we do when we’ve shot yield rates?” Justman mused. “There is a massive uncertainty in the market for cap rates.”

Roulac concurred, “this is one of the most exciting and terrifying times.” Both he and Justman agreed that one has to think globally and have a strategy.

At the conclusion of the program, Menlo College President Moran summed up the robust real estate problem for many in the audience, remarking that “real estate is on my mind all the time.”

“I thoroughly enjoyed it,” said Anthony Pitani ’16, who is currently interning with A. J. Morgan & Company in Beverly Hills. “I gained a lot of connections and the possibility for a couple of internships.”

Rachna Gandhi ’17 agreed, “Such an amazing symposium. I met investors, brokers, and CEOs. It was one of the best learning experiences I’ve had.”

The event was part of the week-long Silicon Valley San Francisco Disrupts Real Estate Symposium (SVSFDRE), facilitated by Roulac, which included field trips to Twitter, Facebook, Runway, Galvanize, and affordable housing developments in Oakland. Scholarships for Menlo students and recent alumni to attend SVSFDRE were generously sponsored by Blake Hajek, Victor Kasik, ’16, Chop Keenan, ’66, DeLeon Realty, Maya Sewald, ’73, Howie Dallmar, ’74, and Gap Global Real Estate.