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Perspectives from a Senior Real Estate Industry CFO

An interview with Rob Luken, CFO, CPA, MBA from Charles River CFO, Inc.


Charles River CFO’s Rob Luken discusses six critical issues CFOs are concerned with and how an interim CFO can be a resource for firms to address.

  1. Rising interest rate’s impact on a project’s underwriting.

  2. The importance of modeling regional and property type differences.

  3. Understanding the impact of the hybrid work model on the property portfolio.

  4. Risk mitigation strategies for increasing capital costs.

  5. Recruiting and retention strategies in a declining labor market.

  6. How an interim and fractional staffing strategy adds value to a firm.

Q. As central banks increase interest rates to address inflation and the continuing challenges of the supply chain, real estate development projects are significantly impacted. What are one or two issues CFOs are looking at now for projects in the pipeline?

A. There are a few things that come to mind. Much of it depends on the stage of development. The supply chain issues and interest rate increases will impact the development project's original underwriting and may or may not affect the required return. If it does, depending on the project stage, it may be delayed, placed on hold or potentially scrapped for an alternative project or sold.

Q. Financial conditions are essential drivers of commercial real estate prices, and as costs increase, financing for new projects gets tougher. Do you see regional differences or differences in types of properties?

A. Yes, I see differences by region and types of properties. Real estate is regionally driven. The interest rates and supply chain issues are most likely across the board. However, we are seeing markets where development continues to flourish despite increased costs (labor, materials and financing). South Florida is a prime example where condo and housing development remains strong. Certain cities in the northeast continue to thrive, while others may be slowing down. Housing, in general, is more active than office space. Industrial, too, appears to have more activity than malls, another example. It is dependent on the region and type of real estate.

Office space, especially, has been hit hard. Stock prices (public and private) have been depressed as vacancy rates have climbed and growth prospects have declined. The office sector is starting to seek alternative uses for office space. Obsolete office space is being converted into apartments. Office building owners are evaluating strategic partnerships with other types of businesses.

Q. Businesses continue to evolve in their efforts to define optimal work environments for their employees. Hybrid is being redefined as a total rethink about how work is done. What insights do you have as a CFO on the impact on office space requirements and redevelopment?

A. There is no question the office sector is changing with the impact of the hybrid/remote work model. The employee required to be back in the office has a choice in the market whether to stay or seek a hybrid/remote offering. Companies requiring employees to return to the office are seeing more turnover. Companies requiring less office time may now be faced with excess office space. We will start to see more sub-leasing of office space in the next year or so as the out-of-office model continues. Overall, the office sector will be slowing new development. I expect banks to be less aggressive in the office space and more active in other sectors (multi-family housing or industrial).

Q. What risk mitigation strategies are CFOs evaluating these initial months in 2023?

A. CFOs are looking at their cost of capital and trying to reshape the balance sheet with hedging strategies or raising equity to reduce debt. I expect their financial modeling on new deals (acquisition or development) to be reshaped with the interest rate changes. To make up for some of the increase in interest rates, there was a corresponding increase in real estate values across specific sectors (office and malls being a possible exception) that can be a factor in determining their current modeling. In those organizations where HR reports to the CFO, employee engagement and possible workforce reduction strategies are being developed.

In my opinion, some investors are still looking for good real estate deals. CFOs should take advantage of the increase in the value of their existing portfolio to continue to seek growth opportunities despite the increase in interest rates. Real estate remains a good investment choice, especially in a recessionary environment. Again, this does not consider the issues with the office space. Eventually, the office sector too will rebound. It is just not certain in what form.

Q. How has the structural shortage of employees impacted the real estate industry?

A. Employee recruitment and retention issues are a considerable concern. Employees are retiring early and/or seeking a better work-life balance. We are approaching the end of the baby-boomer generation in the workplace, and the GenX generation is smaller in number. Legal immigration, impacting the entry level of the workforce in real estate, declined by over 37% in five years from 2016-2021. From manual labor to the executive suite, there are gaps that companies must address. There have been announced layoffs in the tech sector that may help other sectors. It seems there is a shortage of accounting professionals in the accounting space, whether it's the work-from-home attraction or simply leaving the industry.

Q. How can a fractional CFO advisor add value in 2023 to a real estate firm?

A. A fractional CFO adds value in several ways. Here are a few that come to mind immediately.

  • A smaller company without the financial resources to afford a full-time CFO will benefit from a fractional CFO's strategic, senior experience and improve the total labor cost.

  • A fractional CFO can assist a company in negotiating project financing.

  • A fractional CFO can add mentorship to a company looking to elevate a VP of Finance or Controller.

  • A fractional CFO can objectively assess and make recommendations regarding the current finance and accounting functions, including, for example, the monthly closing process, accounts payable and receivables, use of technology, staffing, profitability, and reporting.

  • A fractional CFO can supervise, review, and oversee resources at varying levels, including, bookkeeping, accounting, controllership, tax, human resources, technology, and legal.

  • Fractional CFOs work with existing accounting functions to address specialized projects such as year-end audit support, M&A due diligence support, and overall general business support.

As a real estate leader in today's uncertain economic environment, it's a good time to assess your organization's current needs and plan for success.

Charles River CFO works with clients to address senior financial staff transitions or to provide consistent, fractional solutions for your finance and HR departments. This approach frees your management team to build your organization while controlling overhead costs. Our scalable team approach provides the necessary expertise and flexibility to ensure your organization remains well-positioned for future success!


Rob Luken

Rob Luken is a senior-level results-oriented CFO and financial consultant with extensive experience in the real estate and construction industries. Rob brings financial leadership, strategic planning and organization to our clients, including advanced skills in technical accounting issues, financial reporting, financial operations, acquisition analysis, REIT structure experience and staff management.

Before joining the Charles River CFO team, Rob worked in large public REIT organizations and Big Four public accounting. Rob’s financial skills include fundraising, mergers and acquisitions, and audit readiness. Rob is a Certified Public Accountant with an MBA and Bachelor of Science in Accounting.


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