Tuesday, November 29, 2016

The SEASONS of #CRE. TUESDAY Traffic Tips

Whether your experiencing the BEST year of your career or the worst, think of your deal flow in terms of seasons. This thought process will put bad years in perspective and allow you to temper the good years. This and so much more on this week's VIDEO tip.

Friday, November 18, 2016

You Own, you're Moving - Now What?

Image Attribution: www.batmananimal.com
Recently, I authored a post wherein I discussed making the ends meet in a commercial real estate deal. You can read the post here if you missed it.

During my discussion, I grazed a topic which today will receive a larger nudge - if you own your building and have elected to relocate, should you lease or sell the vacant building you leave behind?

A move generally is bittersweet - a cause for celebration because an increase in business created the need for more space. Good for you! But, the additional sales spawned another problem - you will create a vacancy. Now what?

In short, the direction you choose in dealing with the excess space and filling the vacancy depends upon several factors. Indulge me while I dissect a few of them.

The structure of your new deal. Are you buying the new building, leasing the new building or leasing the new building with an option to buy the new building at a later date? Chances are, if you desire to own the new spot and don't have a pile of cash lying around, you will need to sell the building you're vacating. Conversely, if your next space will be leased, you may be able to hold on to the old address.

Your desire to be a landlord. Owning and managing a leased building occupied by a company - not your own - comes with a set of headaches - and not necessarily a bottle of aspirin. Some of the painful biggies - who will vet the credit of the new occupant, what if the new guy fails to pay, can you float a lack of rent while you scour the market for a suitable occupant?

Can you afford to lease the existing building? Here is what I mean and how I counsel companies facing this dilemma. The market is the market. Prospective tenants will only pay you a rent figure for your building based upon what has leased recently and what other buildings are demanding in rent. So now you must roll up your sleeves, compute your costs to own the building (mortgage payments, property taxes, insurance, maintenance), add a reasonable return for the equity you have in the building and see where that squares with the market rent. You may believe yours is worth more. Maybe, but are you willing to wait? Remember, waiting is expensive. Lost rent for all the months you wait can never be re-cooped.

Do you require the vacant building's equity to fund the new location? This one is easy. I recently represented a group based in Whittier. So far past the building's capacity was their operation, we practically had to meet in the parking lot. I advised the company to move out, lease a new location with an option to buy, sell the original building and once sold, trade the equity into the new building. Had this company not wanted to own the new location - thus the equity wasn't needed - the advice might have varied and a lease of the relinquished building considered.

Tuesday, November 15, 2016

MOST Overlooked in a #CRE Deal. TUESDAY Traffic Tips

If you're like I am, you frequently overlook this VERY important aspect of a deal. You can't close a sale without it - well you can, but it's risky, you can't affect a lease or give possession to a tenant, a lender won't loan. So what is it? It's insurance! Some changes are occurring in the industry causing premiums to rise. Are you prepared? I discuss this and much more in this week's VIDEO tip.

Thursday, November 10, 2016

Make TIME your Friend. TUESDAY Traffic Tips

Make TIME your Friend. TUESDAY Traffic Tips. You've heard me opine before, we have two things to sell as commercial real estate brokers - time and information. Today, I discuss TIME and a way to make time your #CRE deal's best friend. This and more in this week's VIDEO tip.

Managing an INFLUENCER. TUESDAY Traffic Tips

We've all dealt with them throughout our careers - the INFLUENCER. Not the decision maker, but close, these people can be your staunchest advocate or the largest impediment to making a commercial real estate transaction. Today, I discuss a three step way to make sure the INFLUENCER is your deal's best friend. This and more on this week's VIDEO Tip.

Three #cre Questions. TUESDAY Traffic Tips

With respect to my social media and content marketing, I get asked THREE questions, frequently. Have you made any money with that stuff? How much time do you spend? How do I get started. Today, I discuss three EASY ways to get started in your own content marketing. This and much more on this week's VIDEO tip.

Using FaceTime - Not what you Think. TUESDAY Traffic Tips

Using FaceTime - Not what you Think. TUESDAY Traffic Tips. Yesterday, I used FaceTime two different ways. In the morning, to tour a space with an out of area client. In the afternoon to deliver a lease to a cooperating broker friend of mine. Today, I discuss ways to use "face time" to build relationships. This and more on this week's VIDEO tip.

Tuesday, November 8, 2016

Exercise you #CRE Constitutional Right. TUESDAY Traffic Tips

Exercise your #CRE Constitutional Right. TUESDAY Traffic Tips. TODAY is Election Day 2016. Regardless of your politics, which are none of my business, get out and VOTE today! Politicians can affect commercial real estate laws more so than ever - SBA financing, tax deferred exchange laws, eminent domain, capital gains and many others. I discuss this and much more on the week's VIDEO Tip.

Friday, November 4, 2016

Making the Ends Meet in Commercial Real Estate Deals

Image Attribution: www.condenastore.com
Searching for a new building, negotiating a lease or purchase for said new building, closing the escrow or signing the lease, navigating through the city ordinances, getting phones, internet, and racking installed, AND meshing a move out of your current location and a move in of the new spot can be quite challenging - especially if there are some pressures at either end of the transaction.

Specifically, there is a bank with an outstretched hand - demanding a loan be repaid by a certain date - or they will foreclose. Or, there is a lease expiration looming which requires you to vacate your business home - and the owner of the building has sold or leased it to a new occupant. How about a property that has been acquired by an agency such as Cal Trans? - your structure will be demolished in order to widen a freeway.

Complicating matters is an objective by occupants to avoid a double payment. Who wants to pay for two buildings at the same time when your operation can only occupy one? Very few, indeed!

So what is a mother to do when confronted with these challenges? Indulge me as I make a few suggestions.

Start early. Many of the challenges of a move can be avoided or at least minimized by starting the process early. Some careful planning with a commercial real estate professional can prepare you for the current market conditions - how many buildings are available in your size range, how plentiful is financing and at what interest rates, what sort of lease concessions are frequent - free rent, improvement or moving allowances, what are the most favorable cities in which to relocate, etc. I generally believe a year to a year and a half is the correct amount of time to plan, execute and affect a move.

Be transparent. If you lease your location, sit down with your owner and let him know that you are considering relocating at the end of your lease. But, that you also want to factor in staying in his building as an alternative. If you've followed my advice below, you have some renewal and extension rights built in to your lease so this meeting with the owner needs to precede any time frame notices attached to the extensions. If you own your location, you need to decide if you will keep the building once you vacate and lease it to an occupant - other than your business - or if you will sell the building as a part of your relocation. I could write an entire post on this decision alone.

Factor in all the potential costs. Construct a model of all the potential costs of moving your operation - including the dreaded double payment. Planning for a double payment allows you to build this cost into your negotiation for the new space - and provide some timing flexibility. As an example, say you lease your present building. You pay $20,000 per month in rent. Your new location will cost you $40,000 per month and you've budgeted for this amount. The double payment is the combination of the $20,000 per month and the $40,000 per month - $60,000 per month. But, if you can convince the owner of the move up space to abate three months of rent ($40,000 x 3 = $120,000), you've effectively provided yourself with six months in the old space ($120,000/$20,000 = 6).

Conduct some research. My company leased office space in 1987. Our building was potentially in the path of the Santa Ana freeway widening - which meant our building was slated for eminent domain by Cal Trans and demolition. We did the deal but negotiated a sum for moving expenses.
Understanding your landlord's motivation can save you some agony. Is the owner planning to re-occupy your building at any time? Have expansion rights been given to other tenants that could affect your occupancy?

Negotiate extensions in your lease. I recently wrote about the various ways you can hedge against a move in the future by negotiating extension rights. You can read about that here. One of the most common extension rights in a commercial lease is the option to renew. In difficult times, owners will grant an option at pre-determined lease rates. When times are more robust, plan on an option with terms to be decided once you exercise your right. Regardless, this is your way of staying in your current location for an extended period of time without committing today - a beautiful thing for an occupant.