Friday, June 27, 2014

The good ole days in #CRE...circa 1985...AKA where is my Delorean?

Image attribution:
I am pleased to say that I just closed the sale of an industrial building in 30 days! My guy waived contingencies in two weeks...including city approval of his use and operation, secured financing from his savings and loan at 9.5%, and will move in next week!...this post from 1985!

Man, those were the I sounding old?

I have to admit I got a bit jaded this week as I attended yet another seminar on AB 1103...California's weak attempt to benchmark energy uses across commercial real estate sectors. I pondered how the "deal process" has morphed in the last thirty years. More on that in a moment.

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA, I sell and lease commercial real estate for a living and have since 1984. As I have sold or leased hundreds of industrial buildings over four decades...and can compare the differences...I am qualified as an expert...if I can only remember why...

So back to the deal environment and how the process has changed in the past thirty years...

Thanks to the regulatory environment that ALL California real estate brokers must adhere to these days, the number of newly minted legal professionals, the Savings and Loan industry imploding, three ugly recessions...1991-93, 2000-2001, and 2008-2009 , changes in the property tax laws (prop 13), gross imbalances of revenue intake and outflow in our cities, etc., our sprint to closing a commercial real estate deal has many new "hurdles" to hump...and many new costs to bear. By the way, ALL of these have surfaced in the last three decades.

Non binding Letters of Intent: A binding offer has evolved into a "we will consider if we want to but only if the consideration will not adversely affect anyone or if it does we can change our mind...and only a lease or a PSA will bind us unless we have a great lawyer and we didn't really mean it and can get a judge to see it our way..."

Phase I, II, and III environmental reports: These broke on the scene in the mid 1980s and add $2500-??? depending upon the phase and extent of enviro contamination (including regional issues). Like leaving home without an American Express card...lenders won't lend without them.

AQMD credits: Frankly, I still don't understand these. If I ever do business with a company needing a spray booth of any sort, I immediately refer them to my expert.

Title 24: HVAC calcs that affect any new office space construction...just wait...this is about to ramp  up to a whole new level thanks to AB 1103.

Seismic upgrades: I get this. We don't want a building falling into a heap when the Earth moves.

Appraisal review boards: Banks and/or brokers used to have a say in the appraiser they chose...that was abused, values sky rocketed...unjustifiably...we now cannot provide any input and neither can the lender as they must follow the recommendations of the appraisal review board. If you get a bad appraisal (less than value)...prepare for a war.

Natural Hazard Disclosures: We need to protect California's business operators from the threat of a flood...mind you Southern California gets approximately 9 inches of rain a year...Texas can get that in two hours...

Americans with Disabilities Act: Once again, I get this one. The problem is no one seems to understand what is required, who is responsible, and what it costs...and oh yeah, no one polices this at the city level...hmmm.

Conditional Use Permits: Visit the counter at a city, check the zoning, is the use permitted?!...ummm, not so fast I recently visited my fair city of Orange, California, checked the zoning, the use was permitted in the zone..and was told I needed a CUP...which costs $3-$5000 and 120 days. Why? because the city was considering changing the zoning in the future and the use wouldn't comply with the new zoning.

High pile storage permits: You can't just rent a building, stack your stuff and do business. You must now comply with the type of stuff you store, in what quantity, at what height, etc. Have your fire consultant's number on speed dial!

Racking permits: About a $10,000 price tag and a 30 day lead time...

Occupancy permits: You can't just move in and operate your business...even if you're an approved use in the zone...and doing everything to code.

UL machinery ratings: Gotta have the tag OR you gotta get the tune of $2500 per machine

AB 1103: The new law enacted in in the mid 2000s...but yet to be fully implemented (because no one understands how to implement it) seemingly has a good reduce energy consumption...until you read the fine print. Energy companies are under a mandate to produce 33% of their consumables by the year one understands that the energy lobbies are pushing the regs down to the end user.

A buyer of an industrial building is now forced to engage a specialized consultant to advise them on all of the above...some are lender requirements...ala, enviro a significant cost, BTW!

So what are the takeaways assuming you don't have a Delorean and a wild haired professor with a time machine?
  • Understand what is required...and the timing of each requirement
  • Properly prepare owners and occupants so that expectations are managed
  • Have several consultants in your database that you can refer to your owners and occupants.

Friday, June 20, 2014

The MOST misunderstood #CRE tool

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Twitter is stupid! Twitter is much maligned. Twitter is misunderstood. I just don't get Twitter. I've heard ALL of these comments.

However, Twitter is the BEST social media platform for engagement.. And, as my buddy Bridget Willard notes...the REAL ROI of social media is the engagements that are affected...AKA, how many people you meet, get to know, converse with...and ultimately do business with.

If all of that is true, then how does the platform work and why is it misunderstood?  Indulge me a moment and I will expand my thought process.

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA, I sell and lease commercial real estate for a living and have since 1984. I have also blogged and tweeted consistently for four years and have amassed a solid Twitter following (nothing like Duke, Coy, Linda Day Harrison, Bridget Willard, Carol Stephen, or Barbi Reuter)...but I am trying. ALL of this qualifies me as some sort of an expert if I can only remember why...

How Twitter works: If Facebook is a family reunion, LinkedIn is a job interview, Pinterest is bulletin board, Google Plus is the "up and comer", Instagram is...hmmm...not really sure...I like to think of Twitter this the world's largest mixer! EVERYONE who is anyone is there! But, similar to attending the world's largest mixer, there are certain "rules of engagement" to consider.

Why Twitter is misunderstood: In all of the seriousness given to a Jon Stewart news report or a Cohen brother's movie and to increase your #CRE biz, make sure you follow...sorry...these guidelines to understand the max!
  • Tweet your listings or client requirements...shamelessly...twelve to fifteen times a day
  • Don't follow anyone who doesn't follow you back
  • Take others content and brand it as your no attribution to the author
  • NEVER thank anyone for a follow, a retweet, or a favorite...after all you DESERVED it!
  • If someone follows you make sure you acknowledge their follow with a direct message asking them to like your Facebook page, read your blog, and give you the password to their Schwab account
  • Modify tweets to fit your "spin"...after all you need to sell something
  • Buy as many followers as you can is all about the numbers...forget about growing a following the right way...through engagement, meaningful content, and courtesy
  • When someone follows you, send them an email thanking them for the follow and proceed to pitch them unmercifully until they say yes...they will buy your stuff
  • Don't watch, listen and learn from the best in the #CRE industry...what do they know?
OK, you get the idea. My tongue was squarely in my cheek. Just do the opposite of the above and you will be fine.

Friday, June 13, 2014

California's new "GROWTH" industry for #CRE?...not what you think!

Image Attribution: www.longrange.sbcounty
So what is California's new "GROWTH" industry? You would believe that it is Cupcake shops, food trucks, and uber food delivery services...but these all are only off shoots of California's REAL new "GROWTH" industry...medicinal cannabis!

I receive no less than five calls a week from medicinal cannabis operators wanting to lease or buy one of my industrial listings for the purpose of GROWING medical marijuana...AKA weed, ganja, dope, hippy lettuce, medicinal fill in your favorite moniker. The operators are EXTREMELY well financed, organized, and have well researched arguments as to why their use is no problem. A great occupant, right?...not so fast!

I believed it was time to investigate the issue and learn just exactly why or not an owner should avoid this use in his building...other than the obvious...IT'S AGAINST THE FEDERAL LAW! Indulge me for a moment and let me try to explain...

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA I lease and sell commercial real estate for a living and have since 1984. I have never made a lease or sale (that I know of) with a medicinal cannabis provider, grower, etc. BUT I may have (back in my youth) partaken in the herb recreationally...if I did, I didn't inhale, BTW. I guess this qualifies me as an expert if I can  just get my short term memory to cooperate and remember why.

So back to the burning question of medicinal cannabis.

According to Wikipedia, "In the United States, there are important legal differences between medical cannabis at the federal and state levels. At the federal level, cannabis per se has been made criminal by implementation of the Controlled Substances Act, but as of 2009, new federal guidelines have been enacted. According to U.S. Attorney General Eric Holder, "It will not be a priority to use federal resources to prosecute patients with serious illnesses or their caregivers who are complying with state laws on medical marijuana, but we will not tolerate drug traffickers who hide behind claims of compliance with state law to mask activities that are clearly illegal."[California passed an initiative to allow medical cannabis in 1996. In the intervening decades, multiple states have passed similar initiatives. A January 2010 ABC News poll showed that 81 percent of Americans believed that medical cannabis should be legal in the United States. Recently, in May 2014 Minnesota became the 22nd state to legalize medical marijuana not including DC."...and "Cannabis remains illegal throughout the United States and is not approved for prescription as medicine, although 20 states— Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington—as well as the District of Columbia approve and regulate its medical use. (The Federal government continues to enforce its prohibition in these states.) However, the state of Maryland, which still explicitly bans the drug, enforces drug laws that are favorable towards the medicinal use of cannabis, making it a non-incarcerable offense with a maximum penalty of a $100 fine. In the 2010 election, Arizona passed a referendum permitting the use of cannabis for medical purposes, and on May 20, 2011, Delaware became the 16th state to legalize medical cannabis after Governor Jack Markell signed medical marijuana legislation into law."

According to California Norml, "Cities and counties across the state have moved to establish zoning regulations for medical cannabis cultivation. In many cases, these are driven by complaints from neighbors who don't like the sight or smell of marijuana, or by public officials with overly punitive attitudes. Public safety concerns have been raised, and there have been a few incidents of violence around marijuana gardens. While there may be a need in some cities to require greenhouses or other security measures for gardens, in rural areas and in whole counties, there is no justification for outlawing outdoor marijuana gardens. In any case, hardship exemptions for indigent patients must be included to assure safe access under state law."

I believe this blog post accurately describes the 5 horrible things nobody tells you about legally growing pot. The post is a bit racy...kinda like some of Duke Long's enter at you own risk.

So in my opinion, here is the bottom line...with industrial vacancies hovering around 4% in Southern California, why should an owner risk leasing or selling a building to a medicinal cannabis operator...either a dispensary or a grower? I cannot think of a good reason why...but I can think of many reasons why not:
  • It's illegal federally...even in states where it's legal
  • It's illegal in most southern California cities...although it's legal in the state
  • An occupant CANNOT get an occupancy permit...unless they lie. The city will "red tag" your building and you won't collect any rent
  • The use is potentially disruptive to adjacent tenants and property owners
  • Your property will be surrounded by a "different" crowd of folks
  • There are MAJOR upgrades to a building needed for the of rooms, power, lighting, ventilation. Even if the occupant were to pay for these upgrades, if the use gets red tagged (shut down) the owner is stuck with special purpose improvements that aren't re-usable...except for the power.
I will take a cupcake baker, a food truck commissary, or a uber food delivery service to occupy my listings any day!

Friday, June 6, 2014

Blogs you MUST read and Apps you MUST use...#CRE and beyond

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Duke Long has his "best of" lists of which I am happy to say I made all three last year. This year, who knows?

Coy Davidson has his "weekend reads"...which is a collection of commercial real estate articles that Coy curates and/or authors.

The News Funnel's blog, Funnel Cast selects it's ten favorite blog posts each week. I generally make the list and am grateful.

So what has any of this to do with commercial real estate blogs and apps? Indulge me and I will explain.

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA, I sell commercial real estate for a living and have since 1984. I have authored this blog since 2010 and have produced a series of #CRE videos entitled Tuesday Traffic Tips since 2013. I also consume a great deal of on-line content in the form of blogs, videos, webinars, tweets, etc. ALL of this qualifies me as some sort of an expert...if I can only remember why...

Back to the blogs and apps...I decided I needed my own list of favorites. By the way, these are blogs I actually read and apps I actually use. So in no particular order, here goes...

Favorite blogs (I read these as soon as they hit my in box):

Duke Long: If you don't read Duke and you are in the #CRE trade, you are missing out! Duke's irreverent style, insight, and "in your face" are second to none in our world.

CRE Outsider: Chris Clark authors a look from a real estate outsider (that's what she claims but her perspectives are impressive) into the world of commercial real estate. I really enjoy the app reviews and the breaking stories on M and A in the CRE tech space.

Second Time Around: Penned by a great guy, Michael Beckerman...founder of The News Funnel...this blog is a quick read and examines entrepreneurship, tech, and the view from an over 45 something as he ramps up his CRE aggregating news start up.

Ethan Penner's Blog: I'm not sure how I found this blog but I enjoy the angle of finance, government, and Ethan's take on these issues. I only wish he would acknowledge my comments...

PICOR update: This is the only submarket blog that I read. But Barbi Reuter writes how could I resist. Our oldest son graduated from the U of Arizona and I love there!

Your Social Media Works: Beautifully written by Carol Stephen, this blog discusses all things social media...Pinterest, Facebook, Twitter, Blogging, Linked In, etc. I have learned a ton from Carol.

You Too Can Be A Guru: Bridget Willard, office manager extraordinaire, serial blogger, tweeter, and practitioner of all things construction, pens this blog and quite well, BTW! Check out the "best ways" to tweet and behave in the social media space.

The Economic Collapse: If you constant this blog, you are sure to be enter at your own risk. I enjoy reading the views from a doom and gloomer...who backs up the opinions very well. I just don't take it too seriously, yet I jump off a bridge...

When Coy Davidson authors an authentic post, I also read Tenant Advisor

Favorite Apps:

The News on the go...MUST have
I Annotate...edit those PDFs on the fly...I wrote about it
Costar Go...ALL you need in the field...MUCHO dinero, however
Facebook...nothing else to say
Twitter...nothing else to tweet
Chromecast...coupled with Netflix, no need for cable TV

So there you have 'em! Not as flashy as Duke, as well researched as Coy or as organized as The News Funnel...but they are ALL mine!

Wednesday, June 4, 2014

The REAL differences between Texas and California

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I was honored to be a guest blogger on The News Funnel recently. The post in it's entirety can be read below...or accessed through Funnel Cast.

A great deal has been published recently about the crappy business environment that the Golden State of California offers vs. the "streets are paved with gold" that Texas offers. Governor Rick Perry has amassed more frequent flier miles traveling to California than Governor Brown has traveling to the his head! With Toyota announcing that it will relocate to Plano, Texas from Torrance, California...along with 4000 good paying jobs, BTW...I thought it was time to list the REAL differences between Texas and California. Indulge me and I will highlight the differences.

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA, I sell and lease commercial real estate for a living and have since 1984. I actually was born in Texas, spent my formative years in a neighboring state (right across the state line in Texarkana), and still have family and friends there that I visit quite frequently. ALL of this qualifies me as some sort of an expert...if I can only remember why?

OK, here is what you paid for...
We can wax philosophically about taxes, cost of living, regulation, incentives, quality of life, taxes (yep mentioned it twice)...etc. But no one writes about the REAL differences between the two states.

So in no particular goes.
  • In Texas people ride bulls, in California we ride waves
  • In Texas fish is deep fried prior to consumption, in California we eat fish raw
  • In Texas the energy trade is the "awl bidness", in California it is petro chemical business...and only discussed privately
  • In Texas an RSVP means that you show up unless mortally wounded, in California an RSVP means that you'll be there unless something better comes up
  • In Texas "America's team" resides, in California...well never mind
  • In Texas college football they gig 'em and hook 'em, in California everyone's a winner
  • In Texas the tallest mountain is bio degradable, in California you get a real altitude change
  • Texas has WhataBurger , California has In N Out...I know, I know, Texas has 'em too...but its a Cali tradition
  • Texas has Allen's (no relation) boots, California has Rainbow sandals
  • Texas has wind sheer, tornadoes, sleet, snow, thunder and lightening, and floods, California has the marine layer
  • Texas has three types of venomous snakes, California has the Real Housewives of OC
  • In Texas you're greeted with a "howdy" and left with a "y'all come back now, ya hear!" In Cali its "whatsup dude!"
  • If you ask directions in Texas, you get something like..."well, you know where Mr. Oliver lived? Well, when you get to his house you turn left and go to the old Piggly Wiggly and then I think its right"...In California you get "take the 405 to the 710 to the 10 toward the city and off at wait, take the 5 and off at Valencia and then all the way on Melrose. 
So if your moving to Texas, remember to ask for specific directions or you may end up in Hollywood.