I provide location advice to owners and occupants of industrial buildings in Southern California. My entire real estate brokerage career has been spent with one company, Lee and Associates. As we approach the annual summit which will be held in Las Vegas next week, a thought occurred to me...what do you most anticipate? For some it may be visiting Las Vegas where things that happen in Vegas end up on You Tube. For others, you may anticipate venturing west. Some in our group are looking forward to partying like rock stars and maybe visiting that club that you read about in Sunset Magazine. Networking and business development are common items to anticipate. I want to hear from you...my fellow Lee brokers. What do you most anticipate? If you will send me a comment, I will include you in the next blog which will encapsulate the comments from around the country. See y'all next week!
Monday, October 8, 2012
The Lee Summit...What do you most anticipate?
I provide location advice to owners and occupants of industrial buildings in Southern California. My entire real estate brokerage career has been spent with one company, Lee and Associates. As we approach the annual summit which will be held in Las Vegas next week, a thought occurred to me...what do you most anticipate? For some it may be visiting Las Vegas where things that happen in Vegas end up on You Tube. For others, you may anticipate venturing west. Some in our group are looking forward to partying like rock stars and maybe visiting that club that you read about in Sunset Magazine. Networking and business development are common items to anticipate. I want to hear from you...my fellow Lee brokers. What do you most anticipate? If you will send me a comment, I will include you in the next blog which will encapsulate the comments from around the country. See y'all next week!
Friday, June 22, 2012
Five reasons why companies relocate
I provide location advice to owners and occupants of industrial buildings in southern California. I have discovered that a company's decision to relocate is generally for one or more of the following five reasons: rent savings, a chance to own, a better location or facility, an up size or downsize, or achieving a better efficiency. I will use real examples to illustrate each of the five reasons. Thanks to the occupants that are featured here that have allowed me to represent them over the years!
Rent Savings:
Over the past three years, companies have been able to achieve rent savings without moving. The strategy was quite simple...ask the building owner for a rent reduction in return for an extended term. Owners were willing to accommodate occupants in order to avoid a vacancy and the cost to originate new leases. I posted about the cost of originating a new lease recently and you can read the post by clicking here. As the market starts to recover, these "blend and extend" lease extensions become less prevalent and in order to achieve rent savings, a company must downsize, move to a cheaper area, or a cheaper building...one with fewer amenities or with some functional obsolescence. IAS Industries, Raymond Handling Solutions, and King-Tek EDM all three benefited from renewing leases in exchange for lower rent. KLS Doors relocated to a newer, larger building for cheaper rent as did Advantage Adhesives.
Assuming a company possesses the characteristics of a company that should own, the environment for purchase over the past three years has been a "perfect storm" of record low interest rates and motivated pricing. Should your company consider ownership? You can read the post here which outlines the criteria. We recently represented a chiropractor, Dr. Kang, of Zen Care Wellness, who purchased a shell medical office from a lender. The Dr.'s existing landlord was the Irvine Company...who rarely sells assets. Consequently, the Dr.'s only chance to own was to relocate. Once in, Dr. Kang's debt service was about the same as he paid in rent at the previous location...a net savings once tax benefits and future appreciation are considered. My favorite example was a deal that my client Raymond Handling Solutions recently accomplished in Las Vegas. They now own, have more space (in a brand new building), and have income from an adjacent building that was a part of the purchase...truly unbelievable!
A Better Location or Facility:
A flight to quality has been a big motivator recently. Our client, Limbach Facility Services sold their obsolete building in Compton in 2005 and leased the building back from the new owner for five years. When the lease expiration was approaching, Limbach engaged us to locate a facility with a better image and a more prestigious location. Both objectives were achieved at the new home in Garden Grove, California. Limbach's landlord, Kilroy Realty is thrilled to have them as a tenant.
An Upsize or Downsize:
Companies are bought and sold, business ebbs and flows, employees are added, products lines are discontinued, etc. All of the above can necessitate a relocation. Our client, DMG, has outgrown their current facility and have "band-aided" the company's growth by leasing expansion space down the street. This has created a need for a larger building. We have been engaged to assist DMG in the sale of their existing building and the purchase of an "up leg" larger facility. Our client, Direct List Technology downsized over the years because their need for space based upon "space consuming" computers became smaller and smaller as the computers and printers became smaller and smaller. DLT discovered that they could generate similar revenue in less real estate.
Achieving a Better Efficiency:
Prior to King Tek EDM's "blend and extend" referenced above, they relocated to their present facility and signed a four year lease. I believe the short clip below illustrates King-Tek's situation prior to their move. They occupied seven different units in a multi tenant building and were experiencing tremendous operational inefficiencies...thus the relocation to a single freestanding building.
Friday, June 8, 2012
Five great ways to promote your business with video
Virtual tours:
Trial...operative here since that is what virtual tours provide. This virtual tour of 500 S. State College in Fullerton, California has been viewed 74 times (at this writing). I can assure you that to conduct 74 in person tours would consume an enormous amount of time...vs the return. By use of this method, we have achieved great trial of our product and are currently negotiating with a buyer for the purchase.
"How to":
I have not figured out a creative "how to" for CRE but the guys at Raymond Handling Solutions certainly have. The video below is one of a series of "how to" clips that receive tremendous user traffic.
Introducing a special offer:
Brokers touring 28 Hammond, Irvine, California are greeted with this video clip offering them a special gift.
Prospecting:
I had tried for weeks to get through to a company across the street from one of my listings. I finally emailed the owner a link to this video and he called me! The building was not a match but at least I made contact.
Video Blogging:
Video is the easiest way to create content quickly...much quicker than writing or emailing. This video was part three of a five part series called "Location Advice on Location". Check back for episode six!
So there you have it...five great ways to promote your business with video. Happy filming.
Friday, June 1, 2012
Most frequently asked Location Advice questions
Question number five: Can I make changes to the space and if so, who pays for it? Generally and it depends.
*Changes to a location...additional office, power upgrade, sprinkler retrofit, paint and carpet, moving walls, installing racks, distributing power, etc. can generally be accomplished subject to ownership approval and governmental approval with the proper permitting and code construction.
*Changes to the square footage (IE: adding a structural mezzanine), changes to the common area, fencing required parking spaces, creating windows in bearing walls...not so easy.
*Changes are typically paid for in one of three ways: the owner pays for all of the cost and concedes the cost (rare), the occupant pays for all of the cost (even rarer), or some combination of the two. This combination could be an owner paying for the refurbishment of the space...paint, carpet, and cleanup...and conceding the cost and paying for the cost of a sprinkler retrofit and amortizing the cost over the term of the lease.
*The "acid test" of who pays depends upon the owner's ability to pay, the owner's motivation, the general or specific nature of the improvements (think future marketability) and the market (is the competition delivering space to the market completely refurbished). Sometimes an owner will be willing to compensate a tenant in the form of free or half rent to offset the cost of changes.
Question number four: How do you get paid? The owner of the property pays us.
*A common misconception is that the fee adds to the purchase price or lease rate. The reality is that an engaged location advisor can achieve a much higher purchase price than the typical owner because of market knowledge and experience. On the occupant side, an experienced location advisor can negotiate a better lease rate and concession package because of our knowledge of comparables, availabilities, motivation and our expertise. The net result is a better deal for both parties. Our system for insuring the best deal is outlined in a previous post. You can read the post by clicking here.
Question number three: How long have you done this? Since 1984.
* Real estate content (comps, avails, absorption, current pricing) is the same but the method of delivery is different. Who would have foreseen in 1984 that I would be blogging and forwarding location advice electronically in 2012...prior to fax machines and the world wide web! Or, that we could survey inventory of available buildings...in our car...or at the beach...and send a list with images to our clients with the click of a button. Or, that we could send a video...in real time...of the property...unbelievable!
Question number two: How much is my building worth? That depends on a number of factors.
*We consider the market...up trending or down trending, comparables and availabilities. If the market is up trending, chances are your building is worth more than the comps suggest. If the market is down trending, you might be best served to price lower than the recent comps and preempt a long marketing cycle. Marketing time plays a role. How long can you afford to market the building?...a fire sale motivation will cause the building to be worth less. Does the building have special amenities...excess or surplus land, excess power, fenced yard, freezer/cooler space, special AQMD permits, etc. For the right buyer or tenant, these amenities can add to the price.
Question number one: How is the market? Weird.
*In southern California, the market has sufficiently rebounded to cause shortages in certain product types...100,000 + warehouse distribution buildings as an example. We are seeing some price appreciation as well. The occupant's mindset is that we are still in 2009 and the opposite is true. Our market is healthier than most admit. We have occupants in the market believing that motivation is still at 2009 levels and owners who believe the market has rebounded and that they should hold firm. Not a great dynamic for deal making. Another thing that has changed dramatically is the amount of regulatory approvals necessary to make a move. A recent 20,000 sf transaction was reviewed by seven governmental agencies before approval could be achieved. Wow!
Did I leave any out? Please comment below with your question and I will promptly respond.
Friday, May 25, 2012
Structure your presentations for YES!
The Premise:
Have you ever heard the phrase, "I don't sell for a living" so sales techniques are not important? Well I have, and I disagree! EVERYONE sells, EVERYDAY...you just may not think of what you do as selling. Three quick examples..."Darling, I believe we should try that new Latin restaurant that just opened"...which could result in all of the normal objections...too expensive, too far, I don't like Latin food etc." You probably will be eating frozen pizza! "Son, how about completing your science project before we go to the Angel game this weekend?"..."Oh Dad, I have this, its not due until two weeks from now, you are old school..." You may be dashing to Office Solutions at 10:00 PM the day before the project is due. "Hey guys, what about moving our golf outing to Shady Grove this weekend?"..."too tough a course, no caddies, etc." So you get the idea. EVERYONE SELLS, EVERY DAY. The success of your "selling" is up to you!
The Presentation: The key to "making the sale" is to make the idea; your client's, spouse's, child's, etc. their idea. I have discovered that the easiest way to accomplish this is to structure your presentation to include five easy steps...summarize the situation, state the idea, explain how it works, reinforce the key benefits, and suggest an easy next step. I honed these skills schlepping shortening in the seventies! Believe me, you had to make the idea the grocers if you wanted to convince the grocer that he should lose money on your product...tough sale!
Summarize the Situation: As simple as "Darling you mentioned the other day that we should add some "spice" to our lives". To as detailed as "You mentioned that you have seen several new signs on buildings in the area. We investigated your observation and discovered that the vacancy rate on industrial buildings in North Orange County has significantly increased in the past six months. The deals that are getting made fall into two categories...class A buildings leased at class C prices, and buildings sold at 2002 pricing. Your building is Class C. If your desire is to lease, then you must realize that tenants can demand "C" pricing on "A" buildings." A concise summary can build the "ownership" of the idea.
State the Idea: As simple as "Let's try that new Latin restaurant that just opened". To as detailed as "We recommend pricing your building to move. We must compete with "A" space and the best way to do that is with aggressive pricing." Make the idea statement very direct.
Explain How it Works: As simple as "The restaurant is running a two for one special if we reserve before 6:00" We can be there and back in no time and with the money we save, maybe we can catch a movie!" To as detailed as "We have a complete list of tenants in the market that can receive information on your building today. We believe that the aggressive pricing will separate us from the masses. Additionally, we can forward the information to all of the active industrial brokers in the market. Lastly, we have established a rather aggressive Social Media marketing campaign through Postlets that will allow us to distribute the information through Facebook, LinkedIn, and Plaxo." Very important to clearly define your plan.
Reinforce the Key Benefits: As simple as "Spice darling...like you said" to as detailed as "Leasing the building one month sooner than anticipated will save you ...$.
Suggest an Easy Next Step: As simple as "Let's leave in an hour" to as detailed as "We have prepared the agreement and upon your written approval, we will begin the marketing campaign."
It really works!
Try forming your persuasion into these five easy steps and enjoy the "sales" that you make every day!
Tuesday, May 22, 2012
How to create a CRE QR code...that works!
Create the content: This is the most time consuming part of the process...or it can be. As you will recall, a QR or quick response code can be embedded with text, a vcard, an SMS, or a URL. Depending upon the type of content that I am embedding I will use two or three different code generators. The one I use for vcards is Moongate. The reason is simple, the generator has more fields than other code generators and the code is easily scannable for IPhones and dumps the info into the phone's contact database. A scan of my vcard appears below:
Shorten the URL: This step can be skipped. The reason that I use this step is because I want to know who scans the code and how effectively it is used. If you shorten the code in a program like bitly, you create a simple analytic for your code. I believe you will have to create a free account with Bit.ly. Once you do, the main screen looks like this:
Generate the code: We are almost done as the last steps are conducted from the screen above. We have created our content, captured the URL, shortened it, and now we simply choose the URL of the "content type". Enter the URL (should be able to copy and paste). Choose what size QR code you want...S, M, or L and press generate. (I have chosen L and the large version appears).The screen below is how the program appears before you generate the code:
When you press generate, the code appears in the box to the left as so:
Copy the code: You can now copy the code by right clicking on the image and saving it. The code is saved as a PNG file and can be used in marketing brochures, postcards, blogs, websites, etc. the cool thing is that if you used the "shorten" step, you can now see who scans the code and views the video.
Use the code in your marketing: Below, you can see how we used a code in marketing another property, 28 Hammond. Go ahead and try it! It's cool.
Friday, May 18, 2012
Can prospects find your vacant building? Use these tips to make sure!
Some occupants insist upon driving through commercial areas to look for vacant buildings. Make sure that somewhere on site...on the banner or sign...or on the front door, your engaged agent creates a QR code with the video footage above embedded in the code. The visiting occupant (or cooperating broker) can scan the code and gain helpful insight into the vacancy. You can scan the code below and see how it works. This is one of the ways in which QR codes really work when marketing vacant buildings.
Friday, May 11, 2012
I Sold (or am selling) my Business...now what?
Business sold, location is leased long term: Chances are that the purchaser of your business considered the location and the remaining term of the lease. If the purchaser opts to occupy the location, generally, an assignment of the lease obligation should be requested. Any options to extend are personal and typically cannot be assigned, however. Also check and see if any personal guarantees of the lease's performance can be vacated. Generally owners of locations want as much security as possible in the performance of the lease, however, if the purchasing entity has a larger net worth, sometimes owners will vacate previous personal guarantees. If the purchaser does not intend to occupy the location, you as the occupant must deal with a term of lease that must be satisfied...without the benenfit of a business to generate income. Some owners are happy to work with an occupant that is paying a rate substantially below market. This hasn't been the case for several years as lease rates have declined. Please address the lease term (and the resposibility for it) in your letter of intent.
Business sold, location is leased short term: This can be tricky if the owner of the location believes that the occupant has such an investment (distributed power, AQMD permits, ISO 9002 permits, paint spray booths, offices, freezer/cooler space, conveyor systems, etc.) in the location that moving would be too costly. The owner may attempt to negotiate a higher than market rate assuming that a move would be too costly. Be well advised to determine the buyer's desire to stay in the location and attempt to negotiate an extension. Otherwise, your buyer may negotiate a lower price for your business based upon the uncertainty of the occupancy.
Business sold, location is owned by the business owner: Frequently in closely held businesses, owning your location can make a great deal of sense. You fix your location costs and you control the occupant (it is your company), you benefit from the location's appreciation, and there are some potential tax benefits individually. I explained in great detail the characteristics of a company that should own its location in a previous post. You can click here if you are interested in learning more about those characteristics. When you sell the business that occupies the location (even if the purchaser of your business signs a lease with you), the question you ask should be, would I want to own this location if it were vacant? Remember when you were the occupant and the owner, the dynamic is different than being the owner but not the occupant. You are now an investor who must compete with many other investors for your tenant's occupancy...are you prepared for that potential risk? As explained in a previous post, the cost of originating a new lease is staggering. If the answer is no, then there are steps that you can take to minimize the risk of owning a vacant building. First, analyze your location's monthly carrying costs...debt service, taxes, insurance, common area maintenance, miscellaneous maintenance, etc. You should maintain a 9-12 month cash reserve of this total amount. Second, determine how marketable the vacant location is. A location advisor familiar with the current market can provide this for you. How many vacant locations similar to yours exist? What is the current appetite (including market time) for such a location? What is the current vacancy rate for locations such as yours?...like yours specifically...not a market wide vacancy of all locations. How special purpose is my location? Third, determine what the location is worth to an arm's length investor with the new lease. This amount less any debt owed against the location and less any closing costs of sale (net of any taxes) determines the proceeds that can be deployed into an alternate investment. If you choose to deploy the funds into another real estate investment, the gain may be tax deferred if the upleg purchase meets certain criteria. You may be wondering why you would sell one piece of real estate only to buy another? The simple answer is to lessen the risk. By selling a special purpose single tenant location and investing in a general purpose multi tenant location, the management is greater but the downside is more manageable...ala selling stock in a single company and buying a mutual fund of many companies.
Pay attention to the disposition of your location(s) and you will be glad that you did!
Friday, April 27, 2012
A mobile app that will change your world!
Here is a "how to" step by step of the way in which IAnnotate will change your world:
Someone emails to you a pdf...assistant, another broker, a client. In this case a client of mine sent me a lease. I have highlighted the email and the pdf appears in the reading pane.
Once I hold on the pdf, I am asked where I would like to open the pdf. I use the "Open In" button
I have asked that the pdf be opened in IAnnotate PDF
The pdf is then opened in IAnnotate and ready for manipulation or saving. I this case I want to save the pdf for future use. You can see the pdf I opened in the lower right.
I have clicked the button at the top right which allows me to create a new file and name it. In this case I have named the file Allied Exhaust Idaho.
You can now see the new file that was created directly above the lease. I now have the ability to drag the pdf into the file for future access.
The lease is now safely "filed" and available for future access.
Now I get a request for a file that I have saved in a folder. This frequently occurs with listing brochures and I will demonstrate how to use the app for this purpose.
I have used the previous steps to save my brochure pdfs into their own folder entitled "Imported Documents. I simply touch the folder and the contents are opened.
I now have a screen of my saved brochure pdfs. I can touch and hold the one that I want to forward...in this case 500 S. State College
When I touch and hold the brochure that I want to forward, a task bar is revealed which gives me the option to e-mail. I tap the e-mail button and the next screen appears
I choose the original format button since I have not annotated the pdf (added comments). The pdf is attached to the screen below. I can then use the screen below and start typing the e-mail recipient which brings up my Outlook contacts. If I receive a request from someone not in my contacts, I need to save the contact in my address book before proceeding. Once the recipient is entered, the e-mail is ready to send.
Voila...start to finish, this takes about two minutes!
Steps in Locating a Commercial Building
I provide location advice to owners and to occupants of industrial buildings in Southern California. Throughout my career, I have enjoyed assisting many businesses in evaluating their real estate options and am proud to share with you the process that I use in locating the "right alternative" for my clients.
Before we jump to the process, I would like to dispel a commonly held misconception..."the more the merrier". Some occupants believe that if they engage multiple service providers to accomplish the same task, a greater result will occur. I frequently hear "the more brokers that I have searching, the more alternatives I will see." Actually, the opposite is true because there is no alliance formed, no commitment is created on either side, and there is no accountability for the results.
For a commissioned sales person who is paid only on closed transactions, a minimum amount of time will be expended without a commitment and only the "natural" solutions will be presented. If the requirement takes a different turn or doesn't fit into the "natural category", the "right alternative" will not be presented. As an occupant, your time is valuable. If you will see more alternatives, spend your time more efficiently, and pay the broker nothing (the fee is paid by the owner)...doesn't it make sense to work exclusively with one broker?
We have employed a systematic strategy in locating commercial buildings for tenants and buyers of all shapes and sizes.
Before we jump to the process, I would like to dispel a commonly held misconception..."the more the merrier". Some occupants believe that if they engage multiple service providers to accomplish the same task, a greater result will occur. I frequently hear "the more brokers that I have searching, the more alternatives I will see." Actually, the opposite is true because there is no alliance formed, no commitment is created on either side, and there is no accountability for the results.
For a commissioned sales person who is paid only on closed transactions, a minimum amount of time will be expended without a commitment and only the "natural" solutions will be presented. If the requirement takes a different turn or doesn't fit into the "natural category", the "right alternative" will not be presented. As an occupant, your time is valuable. If you will see more alternatives, spend your time more efficiently, and pay the broker nothing (the fee is paid by the owner)...doesn't it make sense to work exclusively with one broker?
We have employed a systematic strategy in locating commercial buildings for tenants and buyers of all shapes and sizes.
We are engaged by the client through a one page
exclusive engagement agreement which authorizes us to
search but does not authorize us to bind the client to a lease or purchase. The
client is not obligated to move or to pay us for our services. We seek
compensation from the owner of the property and/or operate as a sub agent under
a listing agreement with another broker if the property is listed. Our
experience indicates that this strategy produces the "best" economic deal for
the client and provides an efficient means of searching the market because we are your advocate.
We define the requirement, notify the market, qualify the
submittals, tour the alternatives, request proposals, negotiate the economic
points, work with counsel to negotiate and execute the lease agreement, oversee
the tenant improvement construction and celebrate the move-in.
We
have successfully employed this strategy recently with Western Air Limbach, KLS
Doors, Drake Controls, Raymond Handling Solutions, Orkin, Direct List
Technology, Advantage Adhesives, and many others. The steps we employ are
detailed below.
Defining the
Requirement
Overview:
We team with Raymond
Handling Solutions www.raymondhs.net
to help our client clearly define the requirement.
Raymond’s services are free of charge and can be invaluable in evaluating
warehouse, manufacturing, racking, operational flow, etc. An initial
determination of the size of the location is deduced. Our starting point is that
the relocation will require approximately "x" square feet of building square
footage and approximately "x" amount of office square footage. If a significant
change in the operation is considered…larger to smaller of smaller to larger, we
believe it is imperative to insure that we are searching for the correct square
footage and that the square footage considered will adequately house the
operation. After the requirement is
clearly defined, we prepare an outline of the requirement which provides the
market notification discussed in the following section.
Notifying the
Market
Overview:
The requirement letter is
converted into a “constant contact” email document and the email document is
e-blasted to approximately 1500 Southern
California brokers via our AIR mail database. We e-blast the
requirement once a week for the first four weeks and then once a week for four
weeks two months later. In this way we capture any new availabilities that
surface after our search has begun. We couple the market
notification with a deep search of all of the available multiple listing
services; AIR, ILS, CoStar, Loopnet, Rofo, Smith Guide.
Qualifying
the Submittals
Overview:
The
submittals are received and reviewed. The submittals are received from
cooperating brokers who have a suitable alternative listed or are aware of an
alternative that will soon be available. An example of this is the facility presently
occupied today by the company. If the company relocates as anticipated, the
building on that the company occupies will be available for lease or for sale.
Brokers are aware of the these “unlisted” opportunities and will make us aware
of such unlisted alternatives. Additionally, submittals
are reviewed from the multiple listing services…both currently available and
alternatives that become available during the search process. We will track ALL
new properties that hit the market via the AIR and ILS Hot Sheet and through the
Loopnet filters that we design. Probably the
most important aspect of qualifying the submittals is to get a complete
understanding of the ownership and the ownership’s motivation and financial
capabilities. If a significant Tenant Improvements allowance is needed, we need
to insure the ownership’s ability to provide the dollars necessary to construct
the Tenant Improvements AND to support the underlying debt for the term of the
lease. We will suggest that the ownership
provide us with a Non Disturbance, Subordination and Attornment Agreement which
will insure that the tenant's leasehold interests will be protected in
the event of an ownership default on the underlying debt. We will
preview all potential tour alternatives prior to the client
touring.
Touring the
Alternatives:
Overview:
Once the submittals have
been received and qualified, we will assemble a tour package with a summary,
brochures on each property, floor plans of each property, and a locator map. All
of the alternatives to be toured will have been previewed by the team and a tour
route established which maximizes the tenant's time. The tour package will
contain COMPLETE information on each alternative so that accurate consideration
of each alternative can be made. We will involve our
construction partner at this phase of the process. Prior to narrowing the
alternatives, we make a determination as to the viability and expense of
modifying and/or adding to the office layout. This includes a “test fit”, space
plan and cost estimate.
Requesting
Proposals:
Overview:
Once all of the
alternatives have been toured and a few of the best choices have been “test
fit”, space planned and cost estimated, we present Requests for Proposals to
four to six alternatives.
Negotiating
Economic Points:
Overview:
The team prepares a
comprehensive analysis of all proposals received. One to two of the best
alternatives are selected, chosen and negotiations commence to refine the
economic points. A non-binding Letter of
Intent is executed and forms the basis of the lease negotiations.
Lease Review
and Execution:
Overview:
The team works with local
or corporate counsel to negotiate a lease in conformity with the Letter of
Intent. The
negotiated lease is executed by all parties.
Construct
Tenant Improvement:
Overview:
The team works closely
with the contractor, owner, and the tenant to insure that the work is
progressing satisfactorily.
Move-in:
Three Factors that Motivate the Deal
I provide location advice
to owners and occupants of
industrial
buildings in Southern California. I have thought about factors
that motivate a transaction. I believe the three factors that motivate the deal
are: Attitude, Inventory, and Interest Rates. All can
influence the decision but in my opinion, only one factor can cause the decision
to be changed...a change in
motivation!
Attitude:
I have broadly lumped issues such as uncertainty, timing of a lease expiration, business forecast, market conditions, time of year, age of the business, age of the business owners, etc. into the category of attitude. As CRE practitioners, uncertainty is the attitude that causes the most pain. If a business owner is uncertain about the future, a buying decision will be postponed or a buying decision could morph into a leasing decision or your ten year lease could become a two year lease or your new lease could become a renewal at the businesses present location. In Southern California, the end of 2008 and the beginning of 2009 were particularly painful! We now are told that the worst recession since the great depression began in December 2007 and ended in June of 2009. While we can debate the end of the recession, none of us will argue the beginning. Many of us in the business sensed a "change" was coming at the beginning of 2008. Financing was becoming more difficult to originate, values were at an all time high, the market was feeding off an exuberance that many of us believed was unsustainable. Our worst fears became reality in the fall of 2008 as the financial industry imploded, values plummeted, and many real estate deals cratered. The uncertainty that resulted carried into the early part of 2009 until after the Obama inauguration.
Inventory:
The market's supply of suitable alternatives can affect the timing, and viability of the transaction. We have all experienced "seller's" markets. In these times, the demand for space far out strips supply. As a result, a seller can afford to be bullish and often is. You must carefully review the inventory each day and put your buyer or tenant in the best position to make a deal. Currently, the market is changing from a "buyer's" market to a "seller's" market. Because the number of suitable alternatives is quickly dwindling, there is a continuing firming of prices in the market. A location advisor must employ creative strategies to find enough alternatives to make a "market" for an occupant requirement. Specifically, the advisor must convince the occupant to expand the geographical search area, building square footage, transaction structure (lease rather than buy or vice versa), etc.
Interest Rates:
A wide swing up or down can motivate a deal. We saw double digit interest rates in the early eighties and have experienced record low interest rates for the past couple of years. If our interest rates were to spike by even a point or two, my belief is that you would see a spate of buying activity like no other.
Any combination of the above can cause a change in motivation. In my experience, this is the one thing that can cause a real estate transaction to collapse. Let's hope for good attitudes, a balanced inventory, and affordable interest rates!!
Monday, April 16, 2012
GlobeSt.com - Six Questions for Lee & Associates’ Edward Indvik - Daily News Article
Our CEO, Ed Indvik, includes in his experience Union Bank (where he met Bill Lee our founder), CB Commercial, O’Donnell Brigham, JA Stewart…Lee and Associates! Wow, that is quite a resume. I have often joked to Ed Indvik that his real estate related background reads like that of George Herbert Walker Bush's (Bush 41) government related background before he became President of the US. Both were (and are) incredibly qualified for the positions they held (hold). The great thing about Ed is that he is still the same approachable guy that I met some 26 years ago when he was Blair Armstrong’s (ODB) lieutenant and acquisition guy. Ed was a client once he made the move to Stewart in the late 80s as we developed and leased a few hundred thousand feet of space in Chino with the help of Doug Earnhart and Dick Rhodes. The shocking news of Stewart’s bankruptcy…and subsequently Ed’s unemployment…became the start of Ed’s tenure at Lee and Associates…definitely our gain.
Ed was recently interviewed by Globe Street on six questions about Lee and Associates. I thought that the article was particularly informative and hope that you will take the time to read about our company.
You can read the entire article by clicking on the link below:
GlobeSt.com - Six Questions for Lee & Associates’ Edward Indvik - Daily News Article
Thursday, April 5, 2012
Manufacturing in O.C. best in 8 years - Handling Hard Times : The Orange County Register
According to the article by Mary Ann Milbourn, "Orange County factories are revving up with local manufacturers expecting business to be the best since the first quarter of 2004, according to Chapman University’s quarterly survey of purchasing managers. Manufacturing statewide is also expected to jump."...
You can read the entire article by clicking on the link: Manufacturing in O.C. best in 8 years - Handling Hard Times : The Orange County Register
According to Jonathan Lasner of the Orange County Register, "Orange County's factories -- the long-suffering hubs of fabricating tangible things -- are enjoying the relatively best times in a decade or so.
Despite what many think, Orange County is not just for a place for careers in pencil pushing, theme-park running, product selling, real estate trading -- and medicine. We may not have the high smokestacks or the glow of old-school mill production, but manufacturing in Orange County is still a significant economic force...
You can read the entire article by clicking on the link: http://www.ocregister.com/articles/local-348043-year-factory.html
We have noticed the pace of activity increase within our office as well. The challenge in this part of the cycle is the availability of alternatives...vacant buildings. Every day we battle the shortage of manufacturing buildings that are suitable for the needs of today's manufacturing companies...power, sufficient office, loading, owner motivation, etc. While our inventory has experienced "net absorption" over the last year...fewer on the market..., the demand for "quality" options has increased. We expect to see rent growth at the end of this year...some size ranges have already seen this occur.
Monday, April 2, 2012
Bob Sattler, President of Lee Orange on property taxes
Bob became the President of Lee and Associates, Orange in 2007 and has steered our office through a physical move in locations, the 2008 financial meltdown, and the daily grind of managing 34 entrepreneurs who all "have a say"...all while managing to broker real estate deals simultaneously.
I believe Bob's take on Jerry Brown's plan to increase state taxes is especially important in this fragile California economy.
According to Bob: "It is ironic that on the day the LA Times has a front page article revealing that 64% support Governor Brown's proposed tax hike http://www.latimes.com/news/local/la-me-state-poll-20120326,0,7626225 story, the Wall Street Journal has an editorial that states "the tax increase is simply about the political power to deliver money to the interests that live off government.” http://online.wsj.com/article/SB10001424052702304636404577291981187256416.html?
"California has the fourth highest income tax in the nation. In the '70s when Delaware cut their rate from 19.8% to 10.3% and later to 5.95% after 5 years the state's revenues nearly doubled. The Journal goes on to say "California voters will have to decide whether to ratify this welfare-state redistribution one more time, or finally force the state to confront the limits of tax and spend politics." For the health of the state and of the commercial real estate market we need lower taxes not an increase."
Friday, March 30, 2012
Do QR Codes work for Commercial Real Estate?
What are QR codes anyway? QR codes or Quick Response codes are two dimensional bar codes that allow the author to embed text, URLs, phone numbers, or vcards. They are free and easy to produce and are "open source" meaning they can be created by many companies, and each company’s code reader should be able to read every other company’s QR codes. Meanwhile, Microsoft Tag’s technology is closed, meaning you can only create and scan Microsoft Tags using Microsoft’s platform. While some believe the open nature of QR codes will help them gain traction and become more widespread in the market place, others argue that by controlling the entire scanning process, Microsoft will be better able to assure quality, and thus rise to the top...as posted by Nicole Hall, Account Manager with Mobilize Worldwide.
You will need a QR code reader application for your smart phone or tablet. I use the AT and T scanner on my IPhone and IPad and it works great. The website for scanning MS Tags is http://www.gettag.mobi
What is the best use for tags in commercial real estate? In my opinion, tags (whether QR codes or MS tags) should supply content that is easily viewable or usable on a mobile format. As an example, if you scan the QR code that is at the top left of the blog, my contact information automatically drops into your contact manager so you don't have to insert the information manually...or have your assistant accomplish it. I proudly display this code on my business card and I get a lot of questions and the wow factor is epic! Folks that I meet and exchange cards have an easy way to save my information so that I don't end up in a stack of cards in their drawer.
Monday, March 26, 2012
CT Realty Investors Announces 100 Percent Lease-Up of Beaumont Logistics Center - MarketWatch
CT Realty Investors ( www.ctrinvestors.com ) announced today that the Beaumont Logistics Center, located at 520 Fourth St. and 415 Nicholas Rd. in Beaumont, Calif., has been fully leased to Updike Distribution Logistics and Hand Air Express. Combined, the two lease transactions represent one of the largest industrial leasing accomplishments in the Inland Empire in 2012.
CT Realty acquired the 572,143-square-foot project, which includes two new state-of-the-art LEED certified industrial warehouse buildings, in August 2011. At the time of purchase, the property was entirely vacant. The all-cash transaction also included 30 acres of fully entitled land which will accommodate another 611,000-square-foot cross-dock warehouse building. The project, completed in 2008, is located at the confluence of the 60 and 10 Freeways adjacent to the 60-acre Lowe's Distribution Center... You can read the article in its entirety by clicking below:
CT Realty Investors Announces 100 Percent Lease-Up of Beaumont Logistics Center - MarketWatch
Monday, March 12, 2012
Social Media for Commercial Real Estate that REALLY works! For Sale: Industrial in Fullerton, CA, $8,500,000
For Sale: Industrial in Fullerton, CA, $8,500,000
States Hardest Hit by Housing Collapse Lead U.S. Jobs Recovery - Bloomberg
I provide location advice to owners and to occupants of industrial buildings in Southern California. Our firm has definitely felt the effects of an expanding job market this year and the tail end of 2011. We experienced net absorption in the industrial market. Good industrial alternatives are getting more difficult to find and owners are a bit more reluctant to execute long term leases (in excess of five years) without greater than average annual increases (greater than 3%). We are seeing a couple of new spec industrial projects as owners anticipate a shortage of industrial alternatives within the next year. We have not seen much rent growth despite the shortage, however. Below is an article which outlines the industries which are adding jobs...no surprise technology, food, and healthcare.
States Hardest Hit by Housing Collapse Lead U.S. Jobs Recovery - Bloomberg
Friday, March 9, 2012
A new creative way to review title
"Part of rebuilding New Orleans caused residents often to be challenged with the task of tracing home titles back potentially hundreds of years.. With a community rich with history stretching back over two centuries, houses have been passed along through generations of family, sometimes making it quite difficult to establish ownership. Here's a great letter an attorney wrote to the FHA on behalf of a client:
You have to love this lawyer.......
A New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted if he could prove satisfactory title to a parcel of property being offered as collateral. The title to the property dated back to 1803, which took the lawyer three months to track down. After sending the information to the FHA, he received the following reply.
(Actual reply from FHA):
"Upon review of your letter adjoining your client's loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin."
Annoyed, the lawyer responded as follows:
(Actual response):
"Your letter regarding title in Case No.189156 has been received. I note that you wish to have title extended further than the 206 years covered by the present application.
I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased by the United States from France , in 1803 the year of origin identified in our application. For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France , which had acquired it by Right of Conquest from Spain . The land came into the possession of Spain by Right of Discovery made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Queen Isabella.
The good Queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus's expedition...Now the Pope, as I'm sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana . God, therefore, would be the owner of origin and His origins date back to before the beginning of time, the world as we know it, and the FHA. I hope you find God's original claim to be satisfactory. Now, may we have our loan?"
The loan was immediately approved. "
Tuesday, January 17, 2012
US Optics to attend the SHOT Show
:NSSF SHOT Show - Shooting, Hunting, Outdoor Trade Show - SHOT Show
History of the Company:
U.S. Optics Inc. was the brainchild of the former founder and President John Ben Williams Jr. The company had humble beginnings and was originally started from the garage of John’s residence in 1990. The idea to create an optics company that would fill the gap to provide truly custom telescopic rifle sights designed by the shooter for the shooter was born. This undertaking would take John down a road that he passionately followed and perused for over a decade.
John Ben Williams Jr. was tragically killed in a motorcycle accident on June 30, 2004.
In the years that John had with us he truly revolutionized the way scopes are built. John built his optical line from the ground up with input from individuals with backgrounds in military and law-enforcement. The idea was simple, build an optical line that was better than anything ever offered before. John wanted every scope to be exactly what the customer wanted, not just a few models that could be bought off the shelf. John wanted riflescopes that would survive the rigors of the battlefield and not breakdown under the stresses that large caliber rifles would produce.
With a lifetime spent in the gunsmithing industry and a solid educational background John found success with his new optics business. John acquired machinery and tooling from the rapid downsizing of an aerospace company Rockwell Scientific.
Early on John recruited his son John Williams III to build out his dream with him. John III started with the company during its infancy in late 1990. Together this father and son team collaborated to develop their scopes to the standard that was needed to compete with other optical firms on the market.
Over the years that followed USO developed a reputation in the industry and became known for producing some of the best special purpose telescopic rifle sights in the world.
Through dedication, perseverance and the highest standards USO has prevailed and thrived with constant innovation and updated product lines.
USO has sold scopes to Military outfits and Law Enforcement agencies through out the United States. We have also satisfied contract obligations with The Unites States Marine Corps. In 1999 the USMC inquired about refurbishing the aging MST-100 and was proud to be selected for this task. Over 150 scopes were successfully rebuilt for this contract.
With the passing of John’s father, John III was named CEO of US Optics and has continued to bring quality products and superior customer relations to the company. US Optics has a solid business platform and new product lines that ensure continued success in the future.
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