Thursday, May 30, 2013

A piece of Location Advice in Anaheim, California

I provide Location Advice to owners and occupants of industrial buildings in Southern California. We are pleased to have provided advice to a delightful company, WinDor recently. The company is family owned and operated with two generations active in the manufacture, sale and distribution of vinyl doors and windows. The company is manufacturing in Southern California which is tricky...but they do it very well! Part of the company's strategy was to sell the company owned real estate and lease a location. David Newton, Mark Larson and I are happy everything worked out. You can read the entire
Mark Mueller, Orange County Business Journal article by clicking here.

Friday, May 17, 2013

Location Advice...not what you think!

I provide Location Advice to owners and occupants of industrial buildings in Southern California. So what is Location Advice anyway?

I certainly know...but do you? Well I believe it is time for a review for all of the millions of readers out there...thanks Honey...that are curious. So here goes!

The premise: Every business has one thing in common...whether its a multi national corporation or a home based start-up...and that is...drum roll, guessed it, A LOCATION! Whether your company occupies ten floors of a Manhattan high rise or the guest bedroom of your house, a million square feet of high cubed, ESFR protected warehouse or a desk in your dining room...all businesses have a location...thus the need for advice on your location.

Are you an owner, an occupant or both? Figure this out as the advice you seek and the advice that we can provide will differ and vary (especially the cost).

Advice to owners (non occupants): Referred to as landlords, lessors, investors
You need our advice when your occupant vacates your building and you need to locate a replacement tenant or buyer for your building. We provide the marketing, showing, advertising, publishing in the multiples, to attract an occupant...whether directly or through a cooperating location advisor (CRE broker). We can also help you with market data, comps, avails, opinions of value, trends, vacancy, requirements in the market as to tenants and buyers, etc. The fees for this advice are owed when the transaction is completed (in California) and are generally a percentage of the consideration...IE: $10,000 per month for 60 months is $600,000 X 6% is $36,000 shared between the owner and tenant representative.

Advice to owners (occupants): Referred to as owner/users, owner/occupants
Same as above however we have to advise you based around your business operation in the location...tricky if you decide to locate a new occupant while operating in the location. The post I recently authored regarding being out of space but not wanting to move was written with an owner/occupant in, you should do everything possible to postpone moving.

Advice to occupants (non owners): Referred to as tenants, lessees
The advice we provide is geared around you moving your location and purchasing, moving your location and leasing, or staying in your existing location and helping you renegotiate your lease. Regardless of the advice provided, the occupant does not pay us...the owner of the property does. You should get the best advice you can (experience and area expertise) as your location advisor is YOUR advocate and will represent your requirement to the market...owners and CRE brokers. The process we undertake is extensive and most CRE service providers will require a signed engagement.

Additional advice on an hourly fee basis: Expert testimony, broker opinions of value (BOVs)

Tuesday, May 14, 2013

Should you waste energy worrying about AB 1103?

I provide Location Advice to owners and occupants of industrial buildings in Southern California. Today's post explains, in layman's terms, AB 1103, The Energy Star Benchmarking requirement that will take effect July 1, 2013 for commercial buildings in California.

Today's discussion is general. Should your desire be for a more thorough discussion, please contact Elizabeth Watson, partner, Greenberg Glusker or Marika Erdely, CEO, Green EconoMe.

Purpose of the law? The law's purpose is to provide a national reporting benchmark for a commercial building's energy consumption and energy efficiency.

What buildings are affected? Any commercial building (office, retail, industrial, service commercial, hospital, school, etc.) 5000 or greater square feet that is leased, sold, or financed from a contract created July 1, 2013 or after.

Are all commercial buildings over 5000 square feet affected? Ultimately, yes. There are "phase in" provisions for the law...buildings over 50,000 sf on July 1, 2013, Buildings between 10,000 and 50,000 sf on January 1, 2014 and buildings 5000 sf and larger on July 1, 2014.

What will be required of a building owner? If your building meets the criteria above, you will be required to disclose the Statement of Energy Performance to any prospective tenant, buyer, or lender before sign a lease, a purchase and sale agreement or loan documents.

What will be required of a building occupant (tenant)? Your building's owner, property manager or facility manager may require you to disclose your utility bills to them (which are the data that comprise the Statement of Energy Performance). New leases may contain provisions or forms for the disclosure of these energy bills (electric and gas...water not currently included) to the property owner.

What happens if I don't comply? The disclosure is a California State Law but penalties haven't been established as of this post. The best service is to comply and avoid any potential backlash.

How do I make the disclosure? The disclosure must be made within a 30 day window prior to executing a lease, PSA or loan documents on energy data from the prior year.

The general steps are:

Open a Energy Star Portfolio Manager account (ESPM), and input space usage information
Select a service provider, allows access to account
Upload the Energy Usage Data to Energy Portfolio Manager
Access the CEC website (California energy Commission)
Download the Disclosure Summary Sheet
Owner uses link from CEC website to access ESPM
Owner submits Compliance Verification Report within ESPM
Owner generates ESPM standard forms to use for disclosure
Owner presents four documents at or prior to transaction: Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist, and Facility summary

As a building owner, what should I do today?


Figure out if your building meets the size parameters and decide if your building will be leased, sold or re-financed after July 1, 2013.

If so, Create a means of collecting utility bills...easy if you are the occupant...more difficult if you are a landlord.

Create an Energy Star Portfolio Manager account

Seek counsel to include the disclosure and utility bill access in your agreements.


Thursday, May 9, 2013

Must dos when purchasing a commercial building

I provide Location Advice to owners and occupants of manufacturing and warehouse buildings in Southern California. Today's post will deal with that "all important" must do list when purchasing a parcel of commercial real estate.

We will assume that you have made a decision to buy and have followed the  suggestions of a previous post on buying an industrial building. We will also assume that you have considered your financing source and have consumed the post on financing a commercial building.

You have agreed upon business points and have signed a letter of what? Hopefully, your location advisor will assist you though the process and will not just wait for escrow to close and the commission fee to arrive!

Generally and simplistically, here are the things you "must do".

Sign the Purchase and Sale Agreement: Also known as the PSA, deposit receipt, contract for purchase, escrow instructions, etc. I prefer the AIR Standard Offer, Agreement and Escrow Instructions for the Purchase of Real Estate. This document  is widely used in the state of California and contains succinct points on due diligence, financing, representations, warranties, remedies, deposits, liquidated damages, etc. Your contract should contain adequate time frames for you to secure financing and check out the building...structural (roof), environmental, title, operating systems (HVAC, plumbing, electrical, loading doors, fire sprinkler system), underlying liens, underlying financing, leases, etc. I generally ask for 30-45 days for "non-loan" approvals and 45-60 days for loan approval. The times are run concurrently from the opening of escrow (when both parties sign the PSA). Two items of note in the AIR PSA: Paragraph 7.1 obligates you as the buyer to use the services of the buyer's broker for a period of one year from the reference date...not big deal if you close...maybe a big deal if you don't. Paragraph 18.1 obligates the seller to pay a commission if contingencies are waived and you don't buy the building. I would suggest modifying or eliminating both of these paragraphs.

Open Escrow: You or your location advisor should deliver a signed copy of the PSA and any deposits to the escrow company listed in the PSA. As a buyer, you have some say in the title and escrow officer choice. I enjoy using a private escrow company because I get personalized service. My escrow company of choice is Heritage Escrow in Irvine, California. Janet Tilbury is extraordinary and my choice if you want to get the transaction closed with no brain damage.  Janet's phone number is 949.930.8501.

Order the Title Report (prelim) and the NHD: Your escrow officer accomplishes this for you. Once again, you get some say in the title company selected even though the seller pays for a standard owner policy. It is generally a good idea to have a real estate attorney review your prelim especially if the building you are buying is a condo, a PUD, or has an association. Any financing against the property will be removed at the close unless you are assuming the loan.

Review the NHD: The seller will provide you with a Natural Disclosure Statement which will tell you if the building is in a flood plain, seismic area, etc.

Conduct the necessary inspections, receive the reports and review and approve them: I would suggest engaging a company such as All West, Marc Cunningham to conduct a Property Condition Assessment (PCA). the PCA will review all of the building systems...HVAC, electrical, roof, foundation, plumbing, seismic, plumbing, elevators, sprinkler system, etc. and generate a report with any needed repairs and a capital expense schedule for the first five to ten years of ownership. Additionally, you or your lender will order a Phase I Environmental report which reviews the enviro history of the site and the previous uses. All West can also do the enviro but I would suggest routing this through the lender as some companies are not on the lender's accepted list and any loan made on the property will be subject to the environmental health of the building. The lender will also order an appraisal and any loan will be subject to a satisfactory appraisal at the agreed value.

Achieve a financing commitment: Make sure to build the appraisal and enviro approvals into the loan approval so that the time frame negotiated for loan approval includes receipt, review and approval, of the necessary enviro and appraisal reports. If you are seeking an SBA loan, there are actually three approvals...the bank, the CDC, and the SBA. I would suggest not waiving any loan contingency until ALL of these approvals are received.

Waive contingencies: You will receive a PCA with recommended repairs, you will receive a loan commitment. I would suggest approaching the seller on accomplishing some major repairs depending upon the other points of the transaction. Once all are received and approved and you are satisfied with the seller participation (if any), you can waive contingencies. Understand that once you waive, your contingencies you will have liquidated damages if you fail to close because you default. Generally, your liquidated damages amount will be equal to your deposit.

Close the escrow: The fun part! Now you own a building, congratulations!

Monday, May 6, 2013

Are you wrong about us? Misconceptions about Commercial Real Estate Brokers

I provide Location Advice to owners and occupants of industrial buildings in Southern California. As frequenters of this blog will attest, I have practiced CRE for a looong time...since I was a mere babe in the woods...pre grey hair, children (except for one), college graduations, weddings, meetings with Duke Long, etc. So, I pride myself on being an expert in the common misconceptions that folks have about people in my profession. I will recount a few of these in the hope that you may benefit from the understanding...lest you are looking to hire one of us OR be hired.

We are transactional and not relational: Ultimately our relationships must lead to transactions or we starve. Many of us ARE willing to earn the transaction through a relationship...however long that may take. Brokers that only focus on the transaction and not the relationship don't last very long. I enjoy repeat business from many, many clients...that only comes from valuing and fostering the relationship.

My needs are outweighed by your needs: The skilled among our ranks will tell you that if we ignore your needs in favor of our own...we get crushed! Good commercial brokers focus upon the client's needs first and foremost...the rest follows.

We are old school and don't embrace technology: Wow! I am the first to admit that our industry is slow to change its stodgy ways. Many of us, however, are early adopters of technology with Facebook pages, LinkedIn profiles, blogs, video, a dramatic online presence, etc. Google searches have become the new signage...would a broker market a building with no sign or represent a requirement with no notice to the brokerage community?...hardly! If the building you are marketing or the requirement you represent has no on line presence...the sign is missing!

We will only show you listings from our company: One of the most common misconceptions and one of the most untrue! Before the days of Loopnet, ILS, CoStar, AIR, 42 Floors, and other forms of computerized multiples, we focused on the easy mark...spaces listed with our companies. Now the occupant sees everything...absolutely! If we don't show it  to you, you have the means to find it your self.

We are paid a salary: Commercial brokerage is among the truest forms of capitalism...we eat what we kill. We are strictly commission, paid 1099 income, are largely responsible for our own expenses (including health care) and are incredibly thrifty (remember, we spend our own money). Some of you may be scratching your head at this point trying to reconcile the transaction vs relationship statement. Trust me, we have to spend our time and share our information wisely (as that is all we have to offer). We are very focused upon the relationships are too tough to garner.

All Lee and Associates brokers work for the same company: As with any major firm...we all are independent contractors and are in essence competitors with other Lee (or other firm) brokers. At  Lee we have a nice code of conduct...rules of engagement...that preclude us from poaching another Lee broker's client, etc...AND we are incentivized through our structure to refer business to other offices...BUT we are independent.

Once the transaction is done we are finished with you: We want your next deal, and the one following that one. We want for you to refer your friends, family, and business connections to us for location advice. We look for ways to add value to the relationship AFTER the deal is done. We value your phone calls asking for referrals to professionals within our network. As the last post examined, there are ways to add value with clients. Is your commercial real estate service provider finished with you? If so, we may need to chat!