Wednesday, December 22, 2010

The Most Interesting CRE Bloggers in the World

My friend and colleague from Houston, Texas, Coy Davidson, has penned a post entitled, "The Most Interesting CRE Bloggers in the World." Location Advice is mentioned from the post that we authored last fall entitled "Five Gotcha Clauses..." Thanks for the love Coy and I hope that 2011 is VERY good to you! You can read the entire post by clicking here.

Monday, December 20, 2010

Newly Designated Enterprise Zones for California

Three new Enterprise Zones were conditionally designated on December 15, 2010. This will be good information to add value to any Anaheim clients/prospects. You can contact Michael Matter, contact info below for further information!

Anaheim Enterprise Zone
In Anaheim the Enterprise Zone boundaries include nearly all of the City’s industrial and commercial areas and approximately 80% of all Anaheim businesses.

Santa Clarita Valley Enterprise Zone
The Santa Clarita Valley Enterprise Zone supersedes the previous 8,500 acres designated for the city and extends the life for 15 years from the designation date. The new zone encompasses more than 14,000 acres of commercial and industrial land in the Santa Clarita Valley. The Enterprise Zone will stretch from west of Interstate 5 to Highway 14 and Placerita Canyon Road.

Harbor Gateway Communities Enterprise Zone
This zone will run along the southern 110 Freeway in Los Angeles and should include parts of Torrance P.O., San Pedro, Harbor City,Wilmington, Rancho Dominguez, Los Angeles, Walnut/Huntington Park, Florence-Firestone and Willowbrook.


Michael C. Matter Consultant
The Enterprise Zone Company
16 North Marengo Ave. Suite 210
Pasadena, CA 91101
Cell 626 277 6682
Tel 626 356 3013 ext. 106
Fax 626 356 3233

Friday, December 17, 2010

The Estate Tax Bill Slated for Signature

What follows is a synopsis of the Estate Tax Bill before President Obama for signature as compiled by Gregory W. Beck, CPA, and reproduced from

“RIA Newsstand 12/17/2010”

Estate Tax Relief

EGTRRA phased out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, lowered the gift tax rate to 35% and increased the gift tax exemption to $1 million for 2010. Under the EGTRRA sunset rule, the estate tax was set to return in 2011, with the top estate and gift tax rate reverting to 55%. For 2010, under EGTRRRA, the basis rules for inherited property were to be similar to the gift tax rules but with many opportunities for heirs to get increases in basis. Under the EGTRRA sunset rule, the pre-EGTRRA step-up in basis rules were to return for 2011.

The Senate passed 2010 Tax Relief Act:

· Lowers estate and GST taxes for 2011 and 2012 by increasing the exemption amount (technically, the applicable exclusion amount) from $1 million to $5 million (as indexed and rounded to the nearest multiple of $10,000 after 2011) and reducing the top rate from 55% to 35%.

· Allows estates of decedents dying in 2010 to choose between (1) estate tax (based on a $5 million exemption and 35% top rate) and a step-up in basis or (2) no estate tax and modified carryover basis. In technical terms, the Act achieves this choice by making the estate tax and basis changes effective retroactively for estates of decedents dying after 2009 but allowing the opt-out choice for estates of decedents dying in 2010.

· For gifts made after Dec. 31, 2010, reunifies the gift tax with the estate tax, with an applicable exclusion amount of $5 million and a top estate and gift tax rate of 35%.

· Provides that the GST tax exemption for decedents dying or gifts made after Dec. 31, 2009, is equal to the applicable exclusion amount for estate tax purposes (e.g., $5 million for 2010). Therefore, up to $5 million in GST tax exemption may be allocated to a trust created or funded during 2010. Although the GST tax is applicable in 2010, the GST tax rate for transfers made during 2010 is 0%. The GST tax rate for transfers made in 2011 and 2012 will be 35%.

· For a decedent dying after Dec. 31, 2009, and before the enactment date, provides that the due date for filing an estate tax return, making any payment of estate tax, and disclaiming an interest in property passing by reason of death is not to be earlier than the date that's nine months after the enactment date.

· Effective for estates of decedents dying after Dec. 31, 2010, allows the executor of a deceased spouse's estate to transfer any unused exemption to the surviving spouse.

Gregory W. Beck

Certified Public Accountant

Gregory W. Beck, CPA

A Professional Corporation

1748 W. Katella Avenue, Suite 107

Orange, California 92867

714/538-1040 Voice • 714/771-7580 Fax • 714/403-0809 Cell

Tuesday, December 14, 2010

DON'T use these terms, PLEASE

I provide location advice to owners and occupants of industrial buildings in southern California. As we approach 2011...WOW...where did the decade go??...I believe we should eliminate certain terms that have found their way into our business conversations. Recently I posted a question, Are you Authentic? If you didn't see the post, you can find it by clicking here. I believe that truly authentic people would NEVER use the terms below. So in order of our dislike of them, here they are...the terms you should NEVER use in business:

Number Seven: No Worries
The least offensive in my opinion, yet still overused

Number Six: Not a Problem
More offensive than "No worries" but incredibly common

Number Five: Be Proactive
Great concept...the opposite of "re-active" which communicates a business's desire to preempt an issue before it becomes and issue BUT, OMG, give it a rest!

Number Four: At the End of the Day
OK, we get are tying to place emphasis on the last point of the discussion!

Number Three: The Bottom Line
A variation of "number four". Since number four came along we hear this term used in fewer conversations...thank goodness!

Number Two: To be Perfectly Honest
I hear professional athletes say this a lot. This is the moment...wait for it...that I am going to really "level" with you. The problem is that the opposite is communicated...that you have not "leveled" with me before now. I realize the need for an exclamation in business communication. It is simply that "candid" or "frank" or "in my view" or "in my opinion" provide the emphasis without the transparent and insincere comment of "to be perfectly honest"

and Number One: Leverage our Core Competencies
Whoever coined this saying should be shot at dawn...not shot completely...just shot a little! I admit to have been educated at a mid south major SEC (then it was the SWC) state university in the late seventies...Go Hogs!! but really?? We understand that your company is REALLY good at certain things...maybe even the best, but not everything, but how about just saying it? We also get that you need to rely on others (leverage) but I have an about just saying that "we realize that we cannot do everything...consequently, we have these partners that we team with that will provide the products, services, etc. that we cannot provide..." See what I mean...authentic.

So here we go...No worries. When you engage our company, it's not a problem. We are extremely proactive in our approach to your problem. Because at the end of the day, we understand the bottom line for you is who not what company. May we be perfectly honest with you? We believe that we are the best solution for you because we leverage our core competencies to meet every situation that we encounter...I am truly going to throw up!! Be Authentic People!!

Monday, December 13, 2010

What Motivates a Company to Relocate? Five Reasons (part two of five)

I provide location advice for owners and occupants of industrial buildings in southern California. The second part of this five part series entitled "what motivates a company to move" involves the chance to own a location. In a recent post, we discussed the characteristics of most occupants that decide to buy their location. You can view this post by clicking here. Part one of this five part series discussed rent savings as the primary reason that a company would consider relocation. You can read part one by clicking here.
A Chance to Own:
So today we discuss the decision to own a location. Assuming of course that an occupant possesses the characteristics of most in the buying profile (time in biz, closely held, and favorable market conditions), owning a location can prove to be a way to lower operating costs, increase owner equity, and provide a stable "rent" model for the length of the financing.
A Recent Example:
I am currently working with an occupant that is considering owning their location. The occupant's motivators fall in line with those found with most companies considering buying...length of time in business, lease expiration looming, favorable market conditions, ownership "rent" similar to market rent, owner with a desire to diversify personal assets into real estate ownership, etc. We believe that the occupant in question will purchase, lower their "rent", increase their efficiency, and build equity for the future.
Available Financing:
The financing available to an owner occupant these days is truly amazing. Most owner occupants finance through the use of SBA financing via the 7A or the 504 loan programs. Both offer an owner occupant the ability to buy with a minimum down most instances 10% of the purchase price. the 7A is a bank loan guaranteed by the SBA and the 504 loan is actually two loans...a bank first of 50% of the purchase price and a second of 40% of the purchase price which is a 20 year fixed debenture made by the government. Both programs offer the occupant VERY low interest rates, varying amortizations and a fee waiver through the end of the year. We will post about the specifics of these two loan programs in the future. For now, suffice to say that financing is available and affordable to most owner occupants.

Tuesday, November 30, 2010

Nothing has Changed, Content is the Same

I provide Location Advice for owners and occupants of industrial buildings in Southern California. My quest began in 1984 with a phone and a roll-a-dex! As I ponder the changes that have occurred in business for the past 25+ years, it dawned on me that nothing has changed! The content is the same! Here are some quick examples: CRE brokers still sell and lease properties. The basics...square footage, location, price per square foot are still important in the deal making process. CPAs still compute the marginal tax rates and prepare financial statements and tax returns. Financial advisors continue to discuss price earnings ratios, return on investment and risk. Advertising agencies are all about placing content in the correct venue for maximum exposure. So the content that forms the basis of our business advice has not changed in...possibly forever! We all know that the way business is done has changed. So if the content remains constant, what has changed? I believe that the delivery of the content has changed and therefore has transformed the way in which we do business. Let's get an historical perspective on the changes in delivery, shall we?

Pre 1970- Door to door, Phone, ticker-tape, hard copy print, US Mail, stock tables, telegrams, TV, radio, mimeographs

1970s- Overnight delivery, main frame computing, data bases

1980s- Fax machines, personal computers, cellular communication, cable networks, digital phone systems, word processing, electronic mail

1990s- The Internet!!, fax blasting, speed dialing, mobile cellular communication, satellite radio, mobile computing, on-line auctions, on-line trading, e-commerce, free music downloads, texting

2000s- Wireless computing, social networks, video sharing, Geo coding, music downloads (paid), smart phones, blogs, on-line news, Netflix, Hulu, DVRs, tele conferencing, Skype

2010s- Tablets, faster connectivity, MS tags, QR codes, ???

So with all of these advances in the delivery of our content, the content remains virtually (sorry for the pun) unchanged!

Tuesday, November 23, 2010

Are You Authentic!

I provide Location Advice to owners and occupants of industrial buildings in Southern California. I pondered this question as the subject arose recently on a local radio talk show. The hosts lobbed the idea that politicians who are not authentic are also not Meg Whitman, who despite spending millions of her own money was never able to connect with voters. I have always enjoyed true authentic athletes especially golfers such as Lee Trevino who did things their own way, made no excuses, and were successful. I found this article on the subject, penned by Susan Baroncini-Moe entitled "Are You Authentic in Your Small Business?"

"Being authentic can be surprisingly difficult, especially in business. I often work with people who have no problem being genuine in real life, but who really struggle with authenticity in business. I hear from clients that, in business, they have to appear to be mega-successful — not just sort of successful, and not “hey, I’m growing a business here,” but really successful, in order to be taken seriously. There’s so much posturing and pretending, because people believe that you can’t become successful unless you appear to already be successful. But that’s just not true! In fact, it’s just the opposite."

Monday, November 22, 2010

Three Ways to Use MS Tags:

I provide Location Advice to owners and occupants of industrial buildings in southern California. This post will highlight the three ways that I use MS tags to market my services and introduce my products (listings). I will frame my thoughts under three headings: Introductions, Reinforcement and Gratitude.

Introductions and Reinforcement:

Our email channels are bombarded these days with ten times the information that we once received! Frankly, it has gotten unwieldy. So how do you separate yourself from your competition and get your message received? If you are interviewing for a job, how do you add some personality to the static resume? If you are meeting a prospect for the first time, how do you make an introduction beforehand that will provide some answers to the prospect's questions about you? I believe the use of MS tags can achieve all of the three above. Videotape your message, download the URL to a tag, save the tag as a JPEG, and place the JPEG in a note to the prospect, potential employer, or a prospect. How about using a tag with a message in a different language to engage your audience?

Below are some examples of Introductions and Reinforcements:
A simple You Tube video of a listing that we have in Fullerton, California. I believe that you will agree that the WOW factor is in place when a prospect receives this code attached to a brochure! This can introduce or reinforce!!

Here is an introductory You Tube video of my wife trying out for a reality TV show. This could be used to also introduce yourself to a potential prospect or employer.

The same video of the listing in Fullerton. This time, however, there is a Korean voice over! Very cool!! A great way to reinforce!


Have you ever played in a charity golf tourney? Has someone done something nice for you that requires a special thanks? Want to thank a client for a great deal or wish them a happy new year? Create a video of yourself, tag it and send the tag in a thank you note. Below is an example of a "hole-in-one walk" captured on video using an IPhone.

Wednesday, November 10, 2010

Dear Governor Brown, 3 Fixes for Small Business

Jan Norman of the Orange County Register and I were talking yesterday. She asked me a question that spurred a blog post idea..."if you were asked by Governor elect, Jerry Brown, how to keep small business in California, how would you respond?" Well, Jan, I am glad that you asked. I provide Location Advice to owners and occupants of industrial buildings in Southern California. In order to respond to the question of keeping business in California, I reflected upon the reasons why businesses are leaving California. I considered; labor, utilities, real estate occupancy costs, agency regulations, logistics, taxes, environmental mandates, and quality of life. What follows are three ideas that I believe would persuade businesses to stay in California. Increase property taxes, decrease state income taxes, reduce the state tax upon a sale of real property or a business.
Increase Property Taxes:
I can hear the collective scream from my fellow CRE brethren and property owners around SoCal...Nooooo!!!. Here is my contrarian view. Businesses aren't leaving California because property taxes are lower in other most states, property taxes are actually higher...Texas and Colorado as examples. Here is my idea. Raise taxes on commercial property in California (leave residential rates the same) and give the cities more discretion on how to apportion the taxes. In this model, cities can actually compete for businesses by providing property tax rebates much the same way our neighboring states do. Granted, the increased property taxes may cause real estate to become more expensive to occupants as the owners pass this cost along to their tenants. My theory is that owners will only be able to achieve market rents...whatever they are. Higher operating costs for owners, thus lower net income will cause a depreciation of property values which will lower the basis from which property taxes are based. If cities have more discretion on how property taxes are collected and spent, I believe that cities will apportion the revenues to the betterment of the cities...much the same way that redevelopment districts apportion incremental tax revenues.
Decrease State Income Taxes:
Owners, occupants, employees, etc. pay extraordinary taxes upon the income that they earn. Bordering states that charge no state income taxes...Washington, Nevada, Texas have an advantage. Let's consider a reduction by half of all state income taxes. If owners and occupants pay a smaller percentage to the state, the attraction of California is greater.
Reduce the State Tax upon the Sale of a Business or Real Property:
Companies, especially those closely held, with aging owners are considering a move out of state because when the business is sold, the proceeds from the sale of the business are greater. If we implement a program whereby a sale of a business asset carries a smaller tax burden, more companies will keep their operations in California.
Three simple ideas with predictable results!

Monday, November 8, 2010

Keeping in Touch...Do You?? Three Great Ways!

The Premise:

I provide Location Advice to owners and occupants of industrial buildings in Southern other words, I practice commercial real estate and have done so since 1984. My industry is notorious for the "hunter gatherer" mentality...we "eat what we kill" and consequently we are forever looking for the next deal. This is especially true for brokers that specialize in occupant representation. Many of us claim to be "relationship" oriented...and many of us in fact are...BUT, the reality is that we are paid based upon a TRANSACTION and the relationships must lead to a transaction in order for us to survive. There is also a conflict that arises here. When our relationship building results in a transaction and we "close" the deal and get paid, we in effect, take our "relationship" out of the market for the term of the lease we just negotiated OR for the length of the ownership in the case of an owner occupant sale. This holds true for occupant business and "one off" owner business. If our relationship is with an owner with multiple holdings...thus ongoing vacancy...our relationship (assuming we do a good job) can result in a "golden goose" of deals. These multiple holdings owners can also become buyers of additional holdings in good times and sellers of holdings in good or bad times. Regardless, we have to be creative in the way in which we keep in touch with our customers during that period when they believe "they don't need our services". I have discovered three ways that I highlight below as a means to stay in front of our "relationships" in valuable and creative ways.

Appreciation Marketing:

Send out Cards is a creative, "old school" means of keeping in touch and saying that all important Thanks!! Bo Lowe 714.307.3578 or

Social Media Marketing:

Use your Facebook business page, your Linked In groups, your blog(s), and Plaxo, to stay in front of your clients. Try to post relevant content to these social media sites and don't sell anything! The real ROI of Social Media Marketing is to build your brand. The ROI is generally unmeasurable until someone searches your name or sees an article that you posted. You will start to get noticed in a positive manner!

Timely Phone Calls:

Make time to call and talk with your customers...even if you have nothing pending with them. They will appreciate it beyond belief!!

Try these ideas! They will keep those relationships for decades!!

Thursday, November 4, 2010

Location Advice, Six Month's Old, Six Best

I provide Location Advice to owners and occupants of industrial buildings in Southern California. In addition to a very active commercial real estate practice, a busy home life and my duties as President of the Champions Chapter of SoCal BNI, I write this blog entitled Location Advice. Today, Location Advice celebrates it's sixth month in existence and I thought a retrospective look at the top six posts would be in order. If you missed them the first time around, here you go...six re runs!! So what have I learned in six months? Read below and find out.

Number Six:
31 Years and Counting
This post about my beautiful wife of 31 years

Number Five:
The Perfect Seller and Buyer
One company on the decline and another on the upswing

Number Four:
A video explanation of how to accomplish this

Number Three:
A generic explanation of what make me different

Number Two:
CRE and Social Media, the Early Promoters
Coy Davidson, Duke Long, and Randy Mason

Number One:
This very scary expose about the "real" issue with the foreclosure postponement

Tuesday, November 2, 2010

Please Vote

I provide location advice to owners and occupants of industrial buildings in Southern California. On this historical day, Location Advice is devoted to getting out the vote! Please exercise your patriotic duty and cast your vote today!!

I opposed the Defense of Marriage Act in 1996. It should be repealed and I will vote for its repeal on the Senate floor. I will also oppose any proposal to amend the U.S. Constitution to ban gays and lesbians from marrying.
Barack Obama

After a century of striving, after a year of debate, after a historic vote, health care reform is no longer an unmet promise. It is the law of the land.
Barack Obama

I just received the following wire from my generous Daddy; Dear Jack, Don't buy a single vote more than is necessary. I'll be damned if I'm going to pay for a landslide.
John F. Kennedy

I hope that no American will waste his franchise and throw away his vote by voting either for me or against me solely on account of my religious affiliation. It is not relevant.
John F. Kennedy

A vote is like a rifle; its usefulness depends upon the character of the user.
Theodore Roosevelt

Anything important is never left to the vote of the people. We only get to vote on some man; we never get to vote on what he is to do.
Will Rogers

Hell, I never vote for anybody, I always vote against.
W. C. Fields

Nobody will ever deprive the American people of the right to vote except the American people themselves and the only way they could do this is by not voting.
Franklin D. Roosevelt

Individual rights are not subject to a public vote; a majority has no right to vote away the rights of a minority; the political function of rights is precisely to protect minorities from oppression by majorities (and the smallest minority on earth is the individual).
Ayn Rand

Suffrage, noun. Expression of opinion by means of a ballot. The right of suffrage (which is held to be both a privilege and a duty) means, as commonly interpreted, the right to vote for the man of another man's choice, and is highly prized.
Ambrose Bierce

Vote: the instrument and symbol of a freeman's power to make a fool of himself and a wreck of his country.
Ambrose Bierce

I have absolutely no regret about my vote against this war. The same questions remain. The cost in human lives, the cost to our budget, probably 100 billion. We could have probably brought down that statue for a lot less.
Nancy Pelosi

Giving every man a vote has no more made men wise and free than Christianity has made them good.
H. L. Mencken

We don't want someone who will get 98 percent of the vote. We want someone who will get 51 percent of the vote.
Ann Coulter

I believe with all my heart that America remains 'the great idea' that inspires the world. It is a privilege to be born here. It is an honor to become a citizen here. It is a gift to raise your family here, to vote here, and to live here.
Arnold Schwarzenegger

Whenever a fellow tells me he's bipartisan, I know he's going to vote against me.
Harry S. Truman

A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville

In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville

Clever and attractive women do not want to vote; they are willing to let men govern as long as they govern men.
George Bernard Shaw

Monday, November 1, 2010

3 Creative Ways to Market Your Product or Service

Three GREAT new innovative ways to market your product or service: I provide location advice to owners and occupants of industrial buildings in Southern California.
Are you constantly looking for an edge to separate you from your competition? I know that I am and I believe the tools below can help you separate yourself and scream...innovation!!

Microsoft Tags: The tag on the left contains code for the blog that you are presently viewing. The tag on the right contains code for the video below. You will need to download an app on your mobile device by going to Follow the prompts to the Free app. You will then be able to scan the codes for viewing.

Video Tape Your Offerings or Yourself:
Do you know a good videographer? If not, find one. Or you can use your mobile device to create and post the video content on You Tube. I use Robert A. Perez who I met in my networking group, BNI. Robert can be reached at 310.435.2956 and You can also visit his website at

QR Codes:
Similar to Microsoft tags are the squirrely black and white boxes that tie to text, a URL, or some other form of medium. QR codes require a mobile reader which can be downloaded for free on most mobile devices.

Wednesday, October 27, 2010

"It's Your Business" an Interview with Jan Norman

I provide location advice to owners and occupants of

industrial buildings in Southern California. As frequent

readers of this blog know, I attribute some of my local

business articles to Jan Norman of the Orange County Register. You can read her blog (which is the entry point for most of her columns and stories). I had the privilege to sit and talk with Jan last week about her career and the subjects of some of her articles. I hope you enjoy the information.

Location Advice visits It's Your Business:

What do NRGTek, Succession Strategies, John Barry and Associates, Kelly Moore, and Allied Modular Systems have in common? They have all been recently featured in the Orange County Register's It's Your Business, a business column authored by Jan Norman. What do Location Advice and It's Your Business have in common? Location Advice has taken the opportunity to meet every one of these column subjects. Jan agreed to meet with me last week and discuss synergies. Many of the owners and occupants that I represent have a human interest angle that could portend future columns. I found Jan to be energetic, forthcoming, and genuinely interested in our conversation. I enjoyed getting to know her background and believe you will enjoy getting to know her as well. Jan is originally from Phoenix Arizona and attended Arizona State University. Jan moved to Southern California and started her Register career in 1981. Chris Anderson's (former Register Editor) vision was a stand alone business section that would compete with the Los Angeles Times. In 1984, the vision became reality and Jan moved to the business section. Throughout her business writing career, Jan's topics have varied from Technology, to Real Estate, to Retail, and finally to "It's Your Business" and coverage of small businesses and entrepreneurs in 1988. IYB focuses upon closely held local companies with 1-100s of employees. I encourage you to read the column and look for future collaboration between IYB and Location Advice!

Tuesday, October 26, 2010

How Much Does it Cost to Originate a Lease?

I provide Location Advice to owners and occupants of industrial buildings in Southern California. Location advice recently considered the much does it cost to originate a lease. This is important to know when considering whether to renew an occupant at a reduced rate. "Blend and Extend" is a term that didn't exist until the last couple of years. Now virtually all occupants...especially those with leases that originated within the last four years, are looking to reduce occupancy costs in return for a lease extension. Should an owner consider this? In order to answer the question, you must understand what the cost to originate a lease would be. We will assume to be discussing a 20,000 sf industrial building with 10% office finish.
Market Rent:
At the baseline of the analysis, what is the market rent for your building? Not a "puffed up" review of asking rates in the area, but a true blue, no nonsense, "what has recently leased in my size range with identical (if available) amenities?" Is the rent trend on the up-swing or decline? Does my building have anything that makes it unique (in a positive or negative way) in the market...excess land, excess power, proximity to freeways, special purpose improvements, etc. A competent location advisor should be able to provide this information for you as an owner at no cost to you. For purposes of this analysis, let us assume that the market rent for your building is $.50 psf per month or $6.00 annually on an industrial gross basis. You will receive $10,000 per month for the first year. Presumably this rate will increase throughout the term of the lease at a 2.5% annual increase. Total for the term will be $638,254...$.531 psf per month.
Down Time and "Lost Opportunity":
If your building became vacant, how long (to achieve a market rent) would your building lay fallow
until the next occupant could be located. For our purposes, let us assume that the building would sit vacant for four months. The lost opportunity rent would be $40,000. The actual lost rent would be the debt service plus the operating expenses during the down time. We will use "opportunity rent" for our example.
Free ?? Rent:
Generally, a new occupant will ask and receive some sort of rent abatement as a move-in concession. Notice that I used the term "abated rent". I would encourage owners to classify the rent concession as abated and not free. Most leases allow a recapture of "abated rent" in the case of a tenant default...but not a recapture of the "free rent". The amount of the rent abatement is dependent upon market conditions, length of lease, credit worthiness of the occupant, etc. Abated rent can also be used to inflate the coupon rate of the lease...keep in mind the effective rate will be less. For the purpose of our analysis, let us assume that the occupant is interested in a five year lease and the market conditions, credit worthiness, and term warrant four months of abated rent. Abated Rent of $40,000.
Tenant Improvements:
Will the new occupant require any tenant improvements? For any office deal, this is a given. An industrial deal...not so defined. As any rate the building will need to be prepped for the new occupant...paint and carpet. If special purpose improvements are needed, a savvy occupant will ask that the space be delivered "turn key" with the cost, risk, and occupancy permitting assigned to the owner. For our purposes, let us assume that the improvements will be minimal...paint and carpet for the office area only in an industrial deal...$3.00 psf of office space. $6,000 of Tenant Improvements.
Brokerage Commissions:
Commissions vary by market and by market conditions. In Southern California, EVERY office deal carries a full commission to the occupant's broker PLUS a per square foot bonus. The industrial commissions are generally 4%. This percentage is paid on the TOTAL CONSIDERATION of the of any abated rent. The owner must also consider paying his representative (the listing broker). Let's assume a 6% fee for locating and securing a new occupant. Total Commission of $638,254 x 6% = $38,295.
Based upon the assumptions, the cost to originate a new occupant lease would be $124,295!! An owner will receive the $638,254 over the five year term but will spend approximately 20% of this amount in origination fees and lost opportunity costs.
Back to the question of reduced rent in return for an extended term...certainly!! If...the occupant is reasonable in his request and the reduction in rent can be justified compared to the cost to originate a new lease. An occupant will save by renewing at his present location in other ways...avoidance of moving costs, avoidance of employee disruption, avoidance of business disruption, etc. These cost issues can be used to "add back" to the owner's side of the negotiations.

Friday, October 22, 2010

Five "Gotcha" Issues that All Occupants Should Negotiate

I provide Location Advice to owners and occupants of industrial buildings in Southern California. Approximately 3/4 of my activity is in leasing and lease renegotiation...either on behalf of a landlord (owner) or tenant (occupant). In my experience there at least five "gotcha" issues that should be addressed in any lease agreement. In my layman's opinion, The AIR lease addresses these issues quite thoroughly...with a few tweaks. In the case of an owner generated lease, the issues vary in their treatment. The five issues are: Operating Expenses; Capital Expenditures; Subordination, Non-Disturbance, and Attornment (SNDA); Rent Increases, and Miscellaneous. I will define each issue, and suggest "asks" during the lease negotiation. This is a layman's review as a CRE practitioner and should not alleviate the need to have all legal documents reviewed by counsel. These issues are from a California perspective and may vary by state.

Operating Expenses (Industrial):

Operating expenses, also known as Op Exes are the expenses that an owner incurs in the operation of a property. These expenses include, but may not be limited to, property taxes; property insurance; maintenance of the foundation, roof, and walls; landscape maintenance; maintenance of the building's, electrical, HVAC, etc.; utilities; occupants share of the amortized capital expenditures, etc. The costs are sometimes referred to as NNN expenses or "gross-ups". These expenses vary greatly based upon an owner's management preferences but are largely skewed by the amount of property taxes. If you negotiate a NNN lease, the costs are paid in addition to your rent...either as due or monthly. If the lease is an industrial gross lease, the base year op exes are included in the base rent. I suggest postponing the base year until the first full year after the commencement of the lease. If the lease commences in February, this is a tough ask. If the lease commences in October...not so much. I suggest asking for a cap on the increases in op exes over the base year.

Capital Expenditures:

Capital Expenditures are expenses that are largely non recurring such as roof replacement, parking lot replacement, drive and landscape modifications, etc. I suggest there be a mechanism in the lease to specify that any expense that exceeds 50% of the cost to replace a capital system (roof), be the responsibility of the owner and the cost be amortized over 12 years at an agreeable rate of interest.

Subordination, Non Disturbance, and Attornment:

This is defined as the financing holder's means of securing their interest and the outcome of any foreclosure. Also known as an SNDA, this clause causes the lease to be subordinate to existing and future financing that is placed on the property. As a tenant, a request that the lease be non-disturbed (terms not modified), should be sought in return that the tenant agrees to attorn (recognize) an owner that becomes the owner through the foreclosure of the underlying debt. Requiring ALL of these is important in my opinion...especially during economic times that could suggest a high likelihood of foreclosure. I suggest that the lease clearly provide for ALL of the components...S, ND, and A, and that where possible the lender be persuaded to sign an SNDA recognizing the lease.

Rent Increases:

These are defined as increases in the rental schedule during the term of the lease. Generally the increases are throughout the term of the lease and could vary based upon the change that occurs in the CPI or some other index. Caps and Floors are always suggested to hedge against a rampant inflationary increase.


Former and existing cabling removal, ADA requirements (and who is responsible), city permitting, subleasing and assigning, rent abatement vs FREE rent, and options to extend and purchase should all be carefully vetted and when necessary, negotiated.

Thursday, October 21, 2010

CRE and Social Media, The Early Promoters

I provide Location Advice to owners and occupants of industrial buildings in Southern California. An Urban Land Institute panel discussion and a recent post by Joseph Clem entitled "Who Says Commercial Real Estate isn't a Social Media Industry?" spurred a thought...Who are the early promoters with respect to Social Media and Commercial Real Estate? I believe that I am an early promoter of social media marketing with commercial real estate. I blog, use Facebook personally and for business, Tweet, actively manage and engage with my LinkedIn connections, use Plaxo to send birthday cards, promote my listings with You Tube, QR codes, etc. I am one of the only CRE practitioners in Southern California to consistently adopt social media. The purpose of this post is to highlight several of my colleagues who, in my opinion, are also early promoters of social medial marketing and commercial real estate AND do a great job of adding value to the social media community. The three practitioners, two of whom I have connected with on-line, are Coy Davidson, Duke Long, and Randy Mason. Each of these practitioners treat their content seriously and approach their posts in different ways.
Coy Davidson, Colliers International, Houston, Texas:
In my opinion, if you want to see someone who is "doing it right", check out Coy Davidson! I selfishly use Coy's methods to pattern my efforts in Social Media. Coy author's a blog entitled The Tenant Advisor and another entitled Social Media CRE . Both are filled with content and timely information.
Duke Long, Realty Executives, Lafayette, Indiana:
Duke's posts are edgy, controversial and refreshing! I thoroughly enjoy Duke's "tell it like it is...not like you want to hear it" approach to commercial real estate advice. Duke blogs under the title Ramblings of a Commercial Real Estate Broker. Thanks Duke for providing some chuckles and some friendly reminders that the business is not that is about the relationships!
Randolph (Randy) T. Mason, Lee and Associates, Irvine, California:
Randy and I have been personal friends and colleagues within our company, Lee and Associates Commercial Real Estate Services for almost twenty years. I met Randy in 1994 when he asked me to assist him in securing some business in Anaheim, California. We were successful and I was impressed by the energy, enthusiasm, and "out-of-the-box thinking" that Randy possessed before "out-of-the-box" thinking was fashionable. Randy has embraced all avenues of social media marketing. I am especially impressed with Randy's use of video on his blog entitled, Orange County Commercial Real Estate Experts, OCCREE. In Randy's "Ideas to Share" series, he posts video tips on hot real estate topics.
Bravo guys! Keep it coming!!

Wednesday, October 20, 2010

Training...Are You Spending Enough??

I provide Location Advice to owners and occupants of industrial buildings in Southern California. I recently considered the much do successful companies spend each year on training. The answer astonished me. Successful companies can spend up to 20% of their annual revenue on training. I am passionate about learning, networking, social media marketing and providing my clients with creative solutions in my location advice. This post focuses upon two individuals who provide training. Dave Hibbard from Dialexis and Laura Bruno, a franchise owner with the Referral Institute. I am privileged to know both of these professionals and believe that your company can benefit from knowing their capabilities as well! I hope that you will visit their sites and recommend their services.
Dave Hibbard, Dialexis:
"When our first time clients discover how we achieve results compared to other training organizations they are always impressed. Rather than tell you what we think however, you may appreciate knowing what our family of clients tell us:

Our Material
Our clients like the fact that the information we deliver is based upon real world material. We didn't seek out information from the Internet or our competition or get it from a book and then attempt to sell it as our message. Our work is appreciated because when it is delivered, the audience connects with the background experience of the Dialexis trainer. Everything we represent comes from years of experience not a book. We lived it, it worked and it moves those who follow the formula into the Top20%+.

Our Results
Our clients expect to receive a strong ROI based upon the investment they make in Dialexis training and why shouldn't they! It isn't enough today to simply provide training, receive payment and walk away. Our clients respect what we deliver because it is always attached to an ROI. Measurement of our work is what is expected and as a result, we are held to a high standard of information, delivery, follow up and results. Some of our programs are delivering from 200% to 2000% on our client's initial investment. This return is unmatched in the training industry and we are happy to supply you with the evidence of this claim.

Our Delivery
Having world-class material is one thing, but being able to deliver it with power and high impact is another. The truth is many trainers have interesting material to bring to clients, but lack the ability to deliver it in a compelling manner. Our clients tell us we are unique because we not only train, but also excite. Whether it is a Keynote delivery or a front and center training event, our clients tell us we are the best they have ever experienced.

Our Live Training
Our clients tell us that one of our key differentiators is the fact that we use live techniques during our training. That means if the training is prospecting - we not only teach it in the classroom, but also take it live to the phones and streets! At Dialexis we know that learning has a chance when training is combined with doing. Reach Dave at 949.715.9372"

"The Referral Institute helps business professionals work less, play more, and increase their business revenues by successful word-of-mouth marketing. We accomplish this through training programs that specifically focus on effective networking and quality referrals.

Word-of-mouth marketing is the least expensive and most effective way to grow your business. While we instinctively know this, did you know that there is a proven and effective system available on how to accomplish this? Well there is and we call the program, Referrals for Life. The Referrals for Life curriculum is being offered in over 20 countries and being delivered by over 200 trainers. Laura Bruno is the only Certified Trainer in Southern California and offers the programs in her training center in Temecula and in the San Bernardino and Upland areas.

Please browse our site to learn a more about word-of-mouth marketing as well as effective referral systems available through the Referral Institute. If you find that you are intrigued and want to find out more about out program, check our calendar for our next Referral Success 101 class, and sign up to attend, as this is our introductory workshop or give us a call at 951.699.2558 .We look forward to talking with you and seeing you at our next workshop."

Tuesday, October 19, 2010

Social Media Blunders...Etiquette 101

I provide Location Advice to owners and occupants of industrial buildings in Southern California. You may wonder, how does location advice translate to social media blunders? The connection is that I am committed to connecting with my network with social media. As such I utilize a blog, Twitter, Facebook, LinkedIn, Plaxo, You Tube, etc. Social media is just one component of my marketing efforts, however. But, it is critically important to me that I "play by the rules" in using social media and believe we ALL have a responsibility to behave correctly in the medium.

The premise:

Would you walk into a room full of strangers and shout...Hey I am here, everyone pay attention to me? Maybe you would, but I suspect you wouldn't make many friends or get the attention you are seeking. Would you call friend on the phone and completely dominate the conversation and once they started talking, respond..."I have to go"? If so, my guess is that the friend would screen your call in the future. Would you attend a church event and ask all the parishioners to buy your stuff? I believe that we can all agree that these are "social" blunders. Common decorum would suggest that there are ways in which we behave to avoid becoming a social pariah. My belief is that there are parallels with our use of social media marketing.

Social Media is "Social":

Social Media Marketing is evolving faster that any of us can grasp. Many of us are running so fast and furiously that we blunder in our social media efforts without even realizing it! At its roots, social media is "social" and we create the "media". There are "rules of engagement" which are important to respect if we expect to achieve connections through social media. I found two well written posts on this subject and links to the articles can be read by clicking on the titles. The Ultimate Social Media Etiquette Handbook written by Tamar Weinberg and The 11 Rules of Social Media Etiquette by Eric Brantner.

Three Rules of My Own:

Listen a great deal more than you talk. Remember the example of walking into a room of strangers and shouting. Make sure that you listen to the threads and only respond when you have something to respectfully add.

Don't say, post, respond to anything on-line differently that you would say, post, or respond to someone face-to-face

Don't sell...provide value. Realize that you may be "selling" in hyper space without knowing that you are selling. The best example of this is to post a request to look at my stuff, "like" my stuff, thanks for the follow...follow my stuff, etc.

Monday, October 18, 2010

The Mortgage Meltdown, Part Deaux?

I provide Location Advice to owners and occupants of manufacturing and distribution buildings in Southern California. Frequent readers of this blog know that I attempt to populate these posts with positive information on timely location issues, clients and trusted partners, companies on the move, networking, training, and social media marketing. This post is not one of a matter of fact, if factual, it is quite scary! I happened across this letter by John Maldin's "Thoughts From the Frontline" that was published on October 15th, 2010. Mr. Maldin, in the letter, asks that "we read the article and if we agree, pass the article along to friends and responsible parties." Although a lengthy and complex read, I would strongly encourage you read, take note...and possibly prepare for the fall out!

You can access the letter by clicking here.

My quick takeaways:

The Ally Financial (formerly GMAC), JP Morgan and now Bank of America delays in processing foreclosures happened for a significant reason.

Only a note holder...not a mortgage holder...there is a difference, can foreclose.

If this doesn't get fixed...and fixed in a hurry...the banking collapse of 2008 will look like a junior prom!

Thursday, October 14, 2010

Five Guaranteed Ways to Provide Good Service!

Are you a good service provider? I believe that I am. I provide location advice to owners and occupants of manufacturing and distribution buildings in Southern California.

So what! What differentiates me from my competitors? What differentiates you from your competition? Have you ever been asked this question? If so, how did you respond? I have given the question considerable thought and I believe that in order to be a good service provider, you must possess most or all of the following characteristics.

Experience and Stability:How long have you been in your industry? How long have you been with the same company? Businesses do not enjoy becoming your learning curve. If you are new to your industry or company, consider involving someone within your company with more seniority to assist you in the assignment. Although this involves some revenue sharing, you probably will have revenue to share and can utilize the experience as your own. As an example: I have enjoyed over 26 years with the same CRE company, Lee and Associates, and have lived in the same community for 23 years.

Empathy: A service provider's ability to empathize with a company is crucial. Zero in on the company's problem and empathize with their position. Don't just try to solve the problem before you properly diagnose the disease and empathize with the issues involved. If you own your company, make sure that your prospect knows this and that you have solved employment issues, space issues, legal issues, cash flow shortages or surpluses, etc. As an example: "I am a small business owner just like you and we dealt with the same issue like...this."

Creativity: Give some thought to the creative solutions that you have employed and the ways in which you will use creativity to deal with the issue at hand. As an example: "I use social media to market myself and my clients. Have you found any benefit in using social media marketing with your business?"

Resourcefulness: Have you ever listed how many professionals that you know or have referred, by category? Try it. How many attorneys, CPAs, Commercial Insurance brokers, sign companies, IT people, etc. do you know. How about knowing someone that is looking for a job? Maybe your prospect is looking for such a person with those skills and you can make an introduction. As an example: "I can refer you to someone who can solve your problem...try me!"

THANKS and GIVE BACK: Do you thank your clients for their business? How? The best way to thank a client for their business is to refer some business to them. Do you know who your client's ideal customer is? If not, you certainly should. As an example: Ask your prospects, "do your service providers refer business to you? I do and would like to refer business to you!"

Wednesday, October 13, 2010

Generate Business Through Your Contact Sphere!

I provide Location Advice to owners and occupants of industrial buildings in southern California. I have a contact sphere, do you? A contact sphere is defined as those professionals/trades that share your ideal customer but don't compete with you. My contact sphere consists of CPAs, transactional attorneys, business bankers, commercial insurance brokers, and wealth advisors. A mortgage broker's contact sphere could be a residential real estate broker, an escrow company, a title company, etc. A roofer might share a door and window company, a painter, a general get the idea. Identify your contact sphere and you can generate referral business if you are strategic!

Tuesday, October 12, 2010

Proposition 23 is a Green Job Killer! Do you agree?

California voters will go to the poll on November 2 to decide several key races and issues. Last week, Location Advice asked the question, Is Meg Whitman pro Manufacturing? I provide location advice to owners and occupants of industrial buildings in Southern California. Location Advice wondered if Prop 23 will be a job killer if enacted. Proposition 23, which would Suspend AB 32, the Global Warming Act of 2006, is on the November 2, 2010 ballot in California as an initiated state statute.

AB 32 is known as the Global Warming Solutions Act of 2006. The act, passed by the California State Legislature and signed by Arnold Schwarzenegger, is California's landmark clean air legislation.Proposition 23, if enacted by voters, will freeze the provisions of AB 32 until California's unemployment rate drops to 5.5% or below for four consecutive quarters. California's unemployment rate, which currently hovers around 12%, has been at 5.5% or below for four consecutive quarters just three times since 1980. AB 32 requires that greenhouse gas emission levels in the state be cut to 1990 levels by 2020. The process of cutting greenhouse gas emissions in the state is slated under AB 32 to begin in 2012.

You can visit the site here:

In their campaigns for and against Proposition 23, supporters and opponents have each adopted nicknames for the measure that clarify what they think of it. Supporters call Proposition 23 the California Jobs Initiative and opponents call it the Dirty Energy Proposition.

Louise Bedsworth, a research fellow at the Public Policy Institute of California, predicted in April that total campaign spending on Proposition 23 could top the $154 million record set in 2006 by Proposition 87. Through the end of September, campaign contributions to both sides totalled around $20 million, with the "No on 23" organizations ahead in the money race by about $2 million.