Tuesday, July 26, 2016

Are You VITAL to Your #CRE Clients. TUESDAY Traffic Tips.

Today, I relay a story about this situation that happened to me recently. This and much more on this week's VIDEO Tip.

Tuesday, July 19, 2016

Are YOU Invisible? TUESDAY Traffic Tips

Are YOU Invisible? TUESDAY Traffic Tips. Over 75% of commercial real estate searches begin on-line. Can you afford to be INVISIBLE? Today, I discuss two easy ways to make sure you can be found on-line. This and much more on this week's VIDEO Tip.


Friday, July 15, 2016

Should you Lower Your Asking Price?

Image Attribution: www.shawnkambo.com
Sellers of commercial real estate in Southern California have benefited greatly from an imbalance of supply and demand.

Too little supply coupled with a healthy demand. Only one way for sales prices and lease rates to go - straight up!

Fueled by declining available buildings and record low interest rates, sale pricing's steady upward march started in January of 2013 and, in my opinion, peaked in the first quarter of 2016. Lease pricing started the race to the top about a year later and probably has some track to run before reaching a checkered flag.

If you want to sell your building, you should consider a pricing strategy that reflects today's market. All those crazy numbers buyers paid a year ago, don't occur as much today - unless your offering checks all the boxes - and still probably not. Buyers are savvy. Their advisors are well informed. Everyone knows we are at the top and are proceeding gingerly - lest they make a costly misstep.

We recently sold a building in North Orange County. A competitor acquisition by the owner of the business and building created the desire to sell the building. Better suited for the combined operation was the competitor's location. The building we sold became the odd man out and therefore was slated for disposition.

Carefully analyzed were the market comparables, the currently available inventory, the building's amenities, and work that was necessary pre-sale. Our pricing recommendations were two fold - higher price with the seller paying for clean up and lower price without seller paying for the clean up. Opting to sell without spending the dollars to re-condition the real estate, was our client's decision.

We priced accordingly and sold the building in two weeks. Fortunately, our seller listened to us. Too often, a seller will take the high end of the range - in our case the recommended price if clean up dollars were spent by the seller - and not accomplish the refurbishment. All while rationalizing, "let's see what we get". A dangerous approach in today's market. Buyers will pay top dollar but the building better be perfect.

You may be wondering, hmmm, if we priced higher and deducted the clean up costs, wouldn't we have sold for more? Fair question. The answer was no, in this case. Had we priced at the top, conducted buyer tours, explained the property was being sold in its present condition, and fielded offers - the requested refurbishment discount would have far outstripped our "discounted" asking price. A buyer's perception of refurbishment costs always exceeds reality and they offer accordingly.

Ok, you might say, "I can always lower my price, I can't raise it." True to a point. What sellers frequently underestimate is the message pricing sends to the market. Priced too high - man, that building must have solid gold toilets. Or, that guy must be smoking the good stuff. Priced too low, a frenzy is created, multiple offers are generated, and asking price surpassed - in some cases.

Pricing an offering correctly - possibly a bit low - is so much easier than coming out with a super high un-achievable price and later reducing the asking price. When you commence the retreat in pricing, the market crosses its arms, waits, and says - "see, I told you that building was overpriced!"

Tuesday, July 12, 2016

In #CRE, It ain't over 'till it's OVER. TUESDAY Traffic Tips

How many times have you lost track of a requirement that passed on a listing only to find out they are still in the market? On the occupant side, if your guy likes a building that is in play, do you follow through until the building leases or sells? I discuss these items and much more on this week's VIDEO TIP.

Friday, July 8, 2016

If Commercial Real Estate was EASY - Everyone Would do it!

Image Attribution: www.ri-can.org
Today, I want to discuss a collection of deal challenges that currently clog my consciousness.

If your commercial real estate professional makes the transaction process look easy - rest assured, it's not!

By the way, I am grateful to all of our clients we have the honor of representing - challenges or otherwise.

Beating the foreclosure deadline. A lender Notice of Default (N.O.D.) is the kiss of death. The drum beat of foreclosure echoes, the offering is tainted, and we must disclose the status. In general terms, a lender files an N.O.D. when the borrower is delinquent on mortgage payments. The borrower has 90 days to cure the default by paying the past due amounts. If the borrower fails to bring the loan current, the lender can file a Notice of Trustee Sale and sell the building. We are racing to get the building sold. As you can appreciate, the market smells blood, which makes our task more difficult.

An occupant driving too hard a bargain. Currently, we represent an occupant in their quest for space. The occupant has benefited marvelously from past down markets. We have moved them twice in the previous six years. In both instances, owner concessions abounded and our folks got a great deal. Now the landscape is different. The market is heavily tilted in the owner's favor. Concessions such as free rent, reductions in the asking rates, abundant improvement work rolled into the lease, and bonus broker fees are a distant memory - except to our client - who is stuck in 2012.

Renewing a lease early - with a rent above market. Our client signed a lease before the market correction of 2009. Renewal time is approaching but our client is stuck with above market rent for a period of time. Our client wants the certainty of knowing he can remain in the building at the conclusion of his lease. He realizes he is paying (and has paid) an above market rent for several years. Our client is willing to renew early but wants some reset of his rent. The owner is unwilling to reduce the rent today in return for a longer term. The owner believes the market is trending higher and is willing to wait.

An ownership squabble. We represent an ownership entity with two owners. One wants to lease, the other wants to sell. Each has very compelling reasons why their deal structure benefits their objectives. Marketing an availability with warring factions in the wings causes confusion. Fortunately, we have the benefit of time and no lender with an out-stretched palm.

So what is the takeaway, here? A rising tide lifts all boats. With time, any problem can be solved, ownership issue resolved, and "right deal" located. Just make sure you manage the expectations.

Tuesday, July 5, 2016

BIGGEST #cre Time Wasters? TUESDAY Traffic Tips

I'm a BIG believer in face to face meetings. I tend to meet whenever a client or prospect will agree to see me...and sometimes when they won't. Are face to face meetings a waste of time, however? I discuss this and much more on this week's VIDEO Tip for commercial real estate.