Merry Christmas! Here are your CAM Charges

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This time of year, landlords all over Southern California, present their tenants with a Christmas gift - a bill for operating expenses. Merry Christmas indeed! Also referred to as Common Area Maintenance Charges - CAMs - these lumps of coal disguised as presents - anticipate the cost to operate your location.

So what’s included? Contained within the invoice is an estimate of property taxes, insurance for the structure, and various maintenance line items - such as roof, landscape, air conditioning and so on. Typically, these estimates take into account what’s known and what’s anticipated for next year.

Property taxes. Specifically, property taxes will be known - sort of. Owners receive their property tax bill in October for the last six months of the current year plus the first six months of next year. Yep. You got it. If you receive a bill now for expected charges next year - the last six months of next year are unknown. Confusing? Yes. Since County fiscal years run differently than calendar years - most landlords simply figure a small pop will occur and invoice accordingly. However, if your building sells or if The California Schools and Local Community Funding Act should pass - prepare for a large increase!

Property insurance. Insurance on the structure tends to be fairly easy. Policies are written annually. If the owner of your building and his insurance broker are in synch - not the Boy Band, BTW - these renewals can occur in December - allowing for the owner to allocate accurately.

Maintenance. Other expenses - such as mowing the grass and clearing leaves from your roof - can be predicted through yearly renewable maintenance contracts.

But what’s not included? If your owner hires someone to collect the rents and pay the mortgage - AKA a property manager - most likely this isn’t included in your CAM. Bank charges, depreciation, legal and accounting bills, and debt service are not generally your responsibility.

Major improvements - such as resurfacing the parking lot, changing the storefronts, installing drought tolerant landscape, employing solar panels, or replacing the roof - are afforded special treatment in your lease. Known as capital expenses - significant dollar expenditures - they are normally billed back over a number of years vs a lump sum transfer to a tenant.

Do I pay these? Yes! Companies who rent their business home are bound by lease agreements - unless your landlord has allowed the contract to lapse - at which point a month-to-month relationship exists. Regardless of the term remaining - lease contracts are generally one of two persuasions - a Net or Gross lease. And you pay operating expenses with BOTH.

With a Net - or sometimes called a NNN or Triple Net lease - you commonly pay as you go. Base rent is paid monthly and operating expenses are paid separately as they occur. In other words - property taxes twice a year, insurance once a year, and other maintenance as it happens. Remember - roof, HVAC, and trimming the bushes are all your responsibility - in addition to your rent. Some owners figure it’s easier to simply calculate what their occupants will pay and divide the number by twelve vs relying upon the tenant to pay when due.

With a Gross - or sometimes called a Modified or Full Service Gross lease - your expenses are baked into your base rent. A word of caution here. Some believe a Gross lease limits increases in monthly payments. After all - a base rent bump is specified. But, most Gross leases allow an owner to recapture an increase over your first year’s expense - known as a base year. A double whammy!

Can I dispute the charges? Of course! Typically you have a right to audit the invoice - even requesting specific calculations and back up documentation. Plus, if an owner over or under estimates - there is a reconciliation the following year.

It’s been my honor, dear readers, to converse with you weekly - not weakly hopefully - this year! My best wishes to you and yours for a magical holiday season! Merry Christmas, Happy Hanukkah, and Joyous Kwanzaa to you all and to all a good night!

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Is the Stadium Deal a Home Run for the Angels?

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An expiring lease, an opt-out clause, an aging building in need of millions in capital improvements, a beloved sports franchise, a negotiating deadline - all under the scrutiny of a wary public - unfolded this week in Anaheim, California as the Los Angeles Angels of Anaheim forged an agreement with the city. The deal is subject to council approval and a vote will be held on December 20th, 2019.

As reported by the Orange County Register on December 5, 2019 - called for is a sale of the roughly 153 acres including the stadium to a partnership which includes the owner of the baseball franchise. The price tag? $325,000,000! Not chump change for sure. But did the city of Anaheim leave runners on base when the game ended?

What follows is this columnist’s take on the merits of the commercial real estate deal.

The facts: Obligated to play through 2029 - unless the Angels opted out of their lease - which they did last year setting up the negotiations this year. Although specific points of the Stadium lease are fuzzy - we know Anaheim contributes a high six figure annual total to a maintenance fund for the venue, receives little in the way of property tax revenue from the parcels, funds the remaining debt of a convention space deal gone bad, benefits from seasonal ticket sales in excess of 2,600,000, and uses the approximately $3,600,000 from the Angels each year to defray the cost of a private public partnership investment for stadium remodeling forged in 1996. Anaheim’s portion was over $20,000,000.

The Net? Approximately $626,000 per year returned to city coffers since 1996 when the renovations were completed. Certainly, the city derives sales tax revenue for merchandise and food sales as well. Dramatic infrastructure improvements were needed - to the tune of $150,000,000 - to enhance the fan experience and continue the draw - thus persuading the Angels to stay.

The valuation. Without getting too deeply into the weeds - a commercial appraisal considers three things in determining value - COMPS, income, and replacement. Additionally you have appraisals occurring to determine fair market value - which is the case with the Stadium - or an appraisal to justify a purchase - which happens when a buyer and seller agree to a price through negotiations. 

With Angel Stadium - my guess is the appraiser leaned heavily upon the income a development could generate as no significant land comps exist and replacing the stadium would be secondary to a development of the entire acreage. 

Therefore - certain assumptions would have been made as to projected rents, density - number of units, product type - office, residential, retail, etc. 

All in. Was it a good deal or an undervalued deal? Depends. Without the Stadium - the site is probably worth more. But, to get to that value would have required severing ties with the Angels, a lengthy bid process, a vacancy, downtime, etc. With the Angels as the buyer - costly stadium upgrades are avoided, a huge boost in property taxes is achieved and a new development can be centered around the Stadium, Artic, Honda Center, etc. 

  

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Pitfalls of an Limited Liability Company - AKA 3 Horror Stories of LLC Ownership

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In California - the Limited Liability Company or LLC is the most common entity with which commercial real estate is owned. Individuals within an LLC are known as members. Members are governed by an operating agreement which outlines whom within the LLC are authorized to sell, buy, and borrow. Also, percentages of ownership are specified in the case of multiple members. Why an LLC? Because of a multitude tax advantages and liability protection - which are beyond the scope of this column. However, as commercial real estate practitioners we encounter some pretty hairy issues involving LLC ownership.

Waking a Grizzly. Annual fees must be paid to the Franchise Tax Board and tax returns must be filed each year with the state of California. If not, the LLC may be declared inactive. To re-activate an LLC is akin to awakening a hibernating Grizzly. We once experienced an LLC that was formed, owned a parcel of commercial real estate, and was allowed to lapse - for thirty three years! Now the owner wanted to sell but couldn’t. You see the individual - with whom we were dealing - was not the owner because title was vested as the LLC. Therefore - with an inactive LLC - the individual member couldn’t sign a listing engagement, execute a Purchase and Sale Agreement, or transact any business until the past returns were completed and overdue due fees paid. Fortunately, no income had been reported through the LLC - thus no taxes were owed. Therefore, it was a matter of preparing tax returns dating back to 1986 and forking over thirty-three years of filing fees - which now - with interest and penalties - were in the tens of thousands of dollars. Oy vey!

Who’s in the mirror. Frequently, we experience this challenge. An LLC owns a building which is occupied by a business. Even though the entities of ownership may vary - building LLC and business a corporation - the individuals of each entity are synonymous. In a recent case - over time this changed - two of the three members of the building ownership LLC died and the business corporation was sold to the employees. Created was a difference of objectives - the occupying company needed less space or a correspondingly cheap rent. Desired by the LLC - now comprised of four heirs and an original member - was maximum return from the investment. So now what? The LLC sold and the business relocated to a building half the size.

But we are divorced. Sure. But your real estate ownership may not be. In a particularly nasty situation - we were thrust between LLC members - an ex husband and wife. The only remaining joint asset was a piece of commercial real estate once occupied by a business they operated. While still married - the business was sold but the real estate retained - providing a nice cash flow for the couple. When the two divorced - now desired was a sale of the building. Problem was - the divorcees also wanted to defer the taxes which would inure from the sale. The solution was a risky tactic known as a “drop and swap”. Title was changed to tenants-in-common from the LLC. This change in ownership vesting allowed the individual members - divorced husband and wife - to go their own ways. Please seek legal counsel and tax advice before attempting this.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Hunters vs Farmers - a Parody

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Commercial real estate professionals must be transactional - they must close deals - to survive. However, the pathway toward those deals can be through the transaction treadmill or through fostering long term relationships with owners and occupants of commercial real estate. Today, I vary a bit through a parody that describes the difference between transactional and relational brokers. I hope you enjoy the comparison.

Once upon a time, in a land far away - before the Internet - there lived a buffalo hunter and a seed farmer. Buffalos were plentiful and slow, and would graze for hours on the grassy plains. Because the flat lands were populated by bountiful bison, the seed farmer found very little land on which to plant, cultivate and harvest his crops. Farming subsisted on small hilly plots here and there - unsuitable for grazing. 

Buffalo hunting was easy. These herbivores were huge and habitual. The hunter - without much skill or effort - in a couple of hours - could "harvest" all of the meat, hide, and hooves he and his family could handle. Others were attracted to the bounty. Times were good to be a buffalo hunter! Eventually, the hunting became more difficult, the hunters outnumbered the hunted and buffalo became extinct. Now what?

As the hairy hunted's haunts - the grassy plains - became less populated by the buffalos, the seed farmer found acres of fertile soil from which to extract the Earth's green goodness - crops. Although the growing cycle was long, the work tedious, the benefits and payback uncertain, the seed farmer continued to plant. When the Earth's bonanza was broadcast - the seed farmer was overwhelmed. Seeds beget seeds, the output grew (sorry) and the farmer was able to feed his family forever. 

Searching for new prey, the buffalo hunter happened upon acres of cultivation and decided to become a seed farmer - how tough could it be, right? After all, he was a mighty buffalo hunter. Unfortunately, the buffalo hunter failed at farming. The hunting chops he possessed - sitting around and shooting a large animal - didn't translate well to the skills required for seed farming - patience, perseverance, nurturing, tilling and harvesting.

The buffalo hunter eventually was forced to sell fax machines. Hmmm, how many of those are around today.

So, can you guess which one has a transactional focus vs building relationships?

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Are New Industrial Buildings too Expensive? Look Beneath Them for the Answer.

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Vacant land - needed for construction of manufacturing and warehouse structures - hardly exists in our area. Why, you may ask? Years of robust demand have encouraged developers to snap up every inch to construct new buildings.

Your average vacant industrial parcel - if you could find it - weighs in at over $65 per square foot or $2,831,000 an acre! Wow. To add some context - when I entered the commercial real estate fray during Reagan’s administration - entire buildings could be purchased for cheaper.

Within recent years, the majority of new industrial development locally, has begun with a campus of aging improvements. Take the Boeing campus in Anaheim, the Beckman location in Fullerton, or the ITT Cannon site in Santa Ana. Yep. All were former homes to massive amounts of aerospace, integrated circuit, or medical device manufacturing employment. Over time - as market demand shifted and the ways in which these plants were used - obsolescence occurred. Opportunities for a re-tool of the parcels emerged and shiny new developments were born.

Rarely in Orange County do we find an industrial building with extra land. As discussed in a previous column, a greater price for a building will be paid by a developer or an occupant if extra land exists. One such example occurred this year along the La Palma corridor in Anaheim as a developer paid top dollar for an existing Fry’s Electronic’s store with - you guessed it - extra land.

However, I must define "extra". We use the term excess and surplus interchangeably - even though we shouldn't - to describe extra land. You see, if the extra land doesn't serve the use contained, yet cannot be separated and sold, the land is actually surplus land. In this instance, an occupant who had a large outside storage need would ante up. If the surplus could house additional building square footage - voila! Fry’s offered both! Slated for a “last mile” facility where rows of Prime vans can be parked - yet with the ability to expand square footage if needed - this was a win win aquisition. However, in the absence of these two circumstances, no increase - because fronting cash for future advantage is costly. Conversely, if the extra land was excess - I can separate it and sell it - eureka!

A developer will analyze a land purchase based upon the density of new buildings he can achieve. Simply, if he can get one square foot of improved industrial structures to every two square feet of land - he’s golden. Also known as coverage ratio - 50% is very good for a project of manufacturing or warehouse buildings. Once coverage is determined - a model can be created which suggests the economic viability of the project. Said another way - can money be made from the investment required? Sadly, the answer is often no - which causes builders to consider other product types - such as apartments. Ever wonder why Jamboree south of the 405 or the area surrounding Angel Stadium is consumed with multi family structures? That’s the reason. Land is worth more under high rise residential than used as a base for a warehouse.

So, to the question. Are new industrial buildings too expensive? With 98 of every 100 occupied and very cheap money - we still have a ways to the top. Plus, with land prices, city pushback, and construction costs increasing - don’t plan on much new supply. Big demand - short supply. Sounds like even higher prices are headed our way.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

5 Random Commercial Real Estate Thoughts

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Occasionally it is healthy to purge the inbox - in a manner of speaking - and share with you some happenings in the world of commercial real estate. As Jim Barksdale cleverly stated - “'If we have data, let's look at data. If all we have are opinions, let's go with mine.” We’ll, here you go - a bit of both - data and opinions.

Mis-direction. Please be informed when entering your favorite supermarket these days. Petition gatherers are out in force with all manner of messaging about Proposition 13. Few I’ve encountered get it right. One initiative has qualified - garnered the necessary signatures - and will be on the ballot next November - The California Schools and Local Community Funding Act. Also know as the split roll initiative - if passed, will assess commercial and industrial real estate differently than residential and agriculturally zoned property. The pen wielders want your John Henry for a re-write of the already qualified initiative plus another that would allow homeowners over 55 to transfer their property tax basis to a new purchase.

Prime time. Ever head out to the Inland Empire - maybe to pick apples at Oak Glen or catch a flight from an airport that allows Uber to drop you off at - not near - the terminal? As you’re gazing at the San Bernardinos in front of you - you catch a glimpse of the famous Amazon logo. What is that anyway? But, I digress. Do you wonder if Amazon owns or leases those massive concrete card houses? Generally, they are leased. Why, you may ask - with more green than an AOC proposal - would Amazon waste money on rent? Three reasons. Their space needs are fluid, depreciation on balance sheets dampens earnings, and a plethora of property owners clamor to host their tenancy - and build accordingly.

Highway to the danger zone. Many sellers of commercial real estate employ the IRS tax code chapter 1031 to defer capital gains on the sale of an appreciated parcel of commercial real estate. Certain rules apply - you must identify the property(s) you intend to buy on or before 45 days from the sale, like kind must be purchased, you’re obliged to spend as much as the sale’s price - including debt, and all must be done on or before 180 days - almost. This time of year is the “danger zone”. A commonly overlooked provision is you must purchase the replacement property(s) in 180 days. True. Unless the following April 15th is sooner. So if you close after October 15 and before December 31 you only get the benefit of 180 days if you file an extension of your next year’s tax return. Complicated? Yes. Please seek counsel from your tax professional.

Eeney, meeney, miny, moe. What is the most sought after commercial real estate asset class these days? The travails of retail thread the airwaves. Office space is costly to re-tenant. Sure, appetite for industrial - manufacturing and logistics space - is ravenous. But, demand is highest for religious facilities - churches.

What happens in Vegas...Another conference season is squarely in the books culminating with our company Summit in Las Vegas last month. SIOR, CCIM, Core-net, and NAIOP all host soirées this time of the season. You’ll know when you see a bunch of old white guys in suits “networking” at the popular watering holes. So, what’s up? The “Amazon” factor disrupting retail and supply chain logistics, generally robust industrial activity nationwide, the slog of bringing new inventory to market, and whispers of a recession.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Baseball and Commercial Real Estate - 5 Similarities

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Well, another World Series is in the books but not without some history. At no time since the Fall Classic was begun with matinees has a team not won a game at home - EVER! Don’t count on a repeat. Teams wearing white uniforms have such an advantage - especially if the previous series was clinched early. Pitching rotations are front loaded, local crowds are rapid, and the final AB belongs to the home sluggers. Anyway, congrats to the Nats for a remarkable season! To face elimination five times yet hoist the Commissioner’s trophy is one for the ages. Reminds me a bit of 2002 when our Angels emerged from the Wild Card spot to clinch. I had the privilege that year to attend game six and seven - Epic! But more on that later.

So what’s any of this to do with commercial real estate? Indulge me while I recount a few similarities.

It’s a LONG season. Commencing in early April or late March - the big league regular season spans six months and 162 games. If a team advances to the playoffs - tack on another thirty days and potentially twenty more games. Consumed is the end of winter, all of spring and summer, and part of fall. It’s common for a commercial real estate sale to languish as well. Several of my deals this year originated with a contact over ten years ago. No need yet - but a commitment to keep in touch. Plus, once a requirement is identified - plan on another few months to execute. Literally - babies are born and learn to walk quicker than the gestation of some transactions.

Hours of mundanity are sprinkled with moments of ecstasy. Baseball games can be akin to a large dose of Sominex! Wake me up when something happens. Runner on base - no outs? Just how many times is the pitcher going to look him back? Endless foul balls, throws to first, and strikeouts cause even the most die-hard fan to yawn. But just when you least expect it - Howie Kendrick goes yard and folks - we have a game. You can be cruising along with a commercial real estate deal and WHAM! Problem! I’ll never forget this time of year in 2008. We were rolling toward our best year ever when the financial world ended. Values plummeted in a matter of days, lenders froze, and a cacophony of commercial real estate carnage convened. However, few things are sweeter than a closing. If touching ‘em all is similar - put me in coach! I’m ready to play.

Fundamentals are critical. “Amateurs practice until they get it right. Professionals practice until they can’t get it wrong.” Never, was this saying - credited to George W. Loomis - more prescient. Big league pros in both baseball and CRE rehearse ad nauseam.

Plays at the plate are common. Few plays in the bigs are more exciting than a call at the plate! With a runner rounding third, barreling toward home and the right fielder firing in the rock - all manner of chaos ensues. Vision is blurred and time stands still as “blue” considers the outcome. Safe! Or Out! Verdict delivered. No appeal - well not always - will be rendered. Just last week we had a sale approaching the closing table. Buyer, seller, and lender were poised. Ooops. Title glitch. Is our deal going to be safe or out? Fortunately, we had a friendly umpire - who saw things our way. Deal done.

It ain’t over til it’s OVER. A moment in the 2002 series - Angels v Giants - occurred in game six. The game was a must win for the Halos as they were down three games to two and facing elimination. Late, with a five run lead, Dusty Baker - manager of the Giants and former Dodger player - lifted his starter in favor of his closer. Problem was - he gave the game ball to the starter as if to say - congrats! Break out the bubbly. Hmmm. That inning - an inspired Angel squad propelled by the Rally Monkey and legions of Spirit Sticks - forged a miraculous comeback and we were headed to a game seven! Yep - wasn’t quite over. Too many in our trade place sales in the “win” column before they actually close. A mentor of mine told me long ago - “ the deal isn’t done until the broker gets paid!” Contrary to Dusty’s premature celebration - keep the champagne on ice until closing is confirmed.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Three Ways to FAIL as a Commercial Real Estate Professional

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The airways and media channels are clogged with ways to succeed. Seven habits of successful people, characteristics of top producers, Three ways to own your tomorrow in ninety days - just by doing this!

Well, I wanted to write a success column of a different sort - an anti success column . I guess, by default, if you don’t do the things that will cause you to fail - you will succeed - but I digress. I can assure you this, if self destruction is your goal, follow this simple three step plan, and you'll be outta the biz in no time flat - guaranteed! 

So, here, in no particular order is my failure recipe.

Calling owners of exclusively listed properties. When I got in the business - before Alaska was a state - well almost - the one thing you didn't do was contact an owner of a listed property - period. If you are a member of the Association of Industrial Real Estate or the Society of Industrial and Office Realtors - you are bound to a code of ethics. Over time this rule softened somewhat and it was acceptable to call a national multi property owner, if, you weren't calling about a specifically listed property - but were simply calling to yack about the general market conditions. This is still a slippery slope. 

Look, here's the bottom line, if you get the reputation of an owner schmoozer, you run the risk of losing your largest source of potential business - the cooperation of other brokers. They won't trust you, share info with you, and will talk about you at open houses. We had a particularly nasty fellow in our area. He was notorious about soliciting owners of listed properties. Needless to say he was a bit unpopular with the fellows. We showed up an an open house one day - not his, BTW, only to find marketing flyers of HIS buildings plastered in the open building - and HE didn't plaster them! Somebody got EVEN! Classic! 

Not specializing. Take a look at the folks that kill it. They are specialists! Some like to know everything in a given geography. Others enjoy a product type - manufacturing, high rise office, big box retail. Maybe your thing is a specific industry - food production, law firms, or apparel distribution. One of our top guys only does national home health care facilities. A generalist must do two things to succeed - which are expensive and time consuming. He must learn a new market and new processes every deal! Here’s what I mean. Let’s say your specialty is manufacturing buildings between 20,000-75,000 square feet in the city of Anaheim. If someone asks - “how’s the market?” - your response will be focused on deals, activity, movement, and availability. If you’re a generalist - you’ll respond - “quite robust!” - which effective communicates nothing of value.

Ignoring your pipeline. Too often, we get so wrapped up in the execution of the deal, that we postpone, ignore, or stop prospecting - ENTIRELY! Picture a large diesel truck motoring down the 405. He's rolling! You don't see him stopping - unless some moron is traveling 55 in the fast lane. He's got momentum. For him to stop, start over and get that big rig cranking takes time and fuel - AKA, money. He avoids this whenever he can. Think about your commercial real estate practice in the same way. If you must start over, to fill your deal flow, you squander precious MO. The true professionals employ a machine that runs 24/7/365. Through mail, social media, signs, and follow up calls - their focus is upon finding and winning vs. simply fulfilling. Sure. I get it. What’s the point of finding new if you don’t close the old? But, trust me - getting ramped up is slow and painful.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Old Guys Rule - With Technology - 5 Ways

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We've all seen the T-Shirts - "Old Guys Rule" a cute way of reminding our society that if you were born before MTV, you are not irrelevant! Quite the contrary - you might actually still have a voice! I’m often mentioned as one who has captured social media as an integral part of marketing my commercial real estate brand. Others nationally include Howard Kline, Coy Davidson, Duke Long, Linda Day Harrison, and Barbi Reuter. Locally, folks such as Randy Mason, Andrew Bermudez, Justin Smith, and Sean Ward light it up. Most of us are of the age - we remember flat front pants - the first time they were popular!

I like to refer to this chapter of my life (I'm 62, BTW) as the "sir stage". This precedes the “he’s old - who cares” stage! If you doubt that the "sir stage" exists, take this test. If you share my chronology, see how many people refer to you as "sir" the next time you shop (Amazon doesn't count), eat out, or go to the car-wash. If you have a fade haircut (under 35), how do you respond to a customer or client that is over fifty? I'll wager that you call him "sir" - even if you don't hail from Georgia - where "sir" is mandatory - regardless of age.

So, just how is it that OLD GUYS RULE with Technology? Simple!

We lived and worked BEFORE technology was affordable. I've said this many times, in this space, but technology makes things sooo much easier than the old ways of doing things. The preparation of a survey of available properties for an occupant tour used to take a week, now it takes thirty seconds - and the survey is in the client's inbox in one minute. Before, the only way to see a building was to visit it in person. Now, with the click of an app, a virtual tour is created. And, need a signature? Instantly you have it with DocuSign.

We know MORE PEOPLE than you do. The sheer number of folks we know creates a hurdle that is solved by the use of technology - how do you stay in contact? Easy - Facebook, Twitter, Blogs, Pinterest, Instagram, YouTube. Reunions these days are populated by the folks online and off. The online people spend little time catching up - social media allows an image roll of our lives. We can get to today without recapping the past.

We understand what SCARES people about technology. All of us OLD GUYS who have ventured onto the dark side of technology understand some are afraid of the new reality. An example of this happened to me the other day as I listened to some grey hairs kapitzing about Twitter - “yeah, I don't use it and I don't believe my clients use it either". You can imagine the raised eyebrows, when I recounted the number of engagements Twitter had created for me. Because we understand the FEAR, we can empathize with credibility.

We are not afraid to call someone. OLD GUYS know that you gotta get a meeting (real or virtual) if you wanna make a deal - and we are not afraid to take an ONLINE relationship OFFLINE. Not so long ago - our business required a call, a fax, or mail to make contact. We learned how to do this. Before the days of swipe left - you actually had to dial a real person.

We are concerned about LEGACY. Blogs, videos, shared images, ALL are great ways to deposit our knowledge for the future. I can actually see my grandkids watching a Tuesday Traffic Tip (my video series) or reading an archive of the OC Register someday and replying - my GrandDad was the MAN!

Yep! And it's SIR to you sonny boy.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

5 LOVE Languages of Commercial Real Estate Brokers

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 My wife, Carla and I were introduced to Gary Chapman’s book, The Five Love Languages, in 2011. This classic easy read was originally published in 1995 and contains the keys to a successful relationship - by understanding your mate’s love language and learning to speak it!

If you are unfamiliar, as was I, with the five languages, they are touch, time, affirmation, gifts, and service. It is quite coincidental that we discovered the book while on a forty-five day road trip around the US. Carla’s language is time and mine is affirmation - so the trip was time spent together with some affirming words to me that we wouldn’t go broke as we abandoned our day jobs for a little R and R.

The book caused me to reflect recently on the five love languages that we experience as commercial real estate brokers - so I decided to spend some time in your service, touching the keys to exercise my creativity in producing this gift to you. Hopefully, at least four or five of you out there provide me with some affirmation - whew! Got ‘em ALL.

So, in no particular order, here are the five love languages of Commercial Real Estate - AKA, what drives us.

Money. You will know this guy’s language straight away if you get in the way of a money driven broker and a dollar bill. He will bowl you over to get to the greenback. This broker will sacrifice his client for the commission and is looking for the quickest way to the paycheck. Doing what’s best for the client? - only if it results in the largest

fee - not my favorite guy with whom to negotiate.

Relationships. Golf, Laker’s games (well maybe in the early 2000’s), cocktails, lunches, gifts at Christmas, gifts at birthdays, gifts for gifts - this guy is ALL about the relationship and keeping the client happy, healthy, well fed and well watered. Generally, his clients are his friends as well. Dining with spouses, vacations - why not invite a client/friend to join. 

Analysis. Sometimes referred to in the biz as the “over broker”, this practitioner’s hallmark is the spreadsheet. Lease vs buy, effective rent, amortization, termination penalties - you name it, he spreads it - he spreads even your thinning patience. Done in the name of “what’s best for his client”, this broker is a frustrated engineer. Let’s just zoom back here and see the deal for its good points, shall we?

The “Deal”. AKA, the deal junkie, this guy is all about making transactions - big, small, it simply doesn’t matter - he just enjoys watching two parties say yes. He would have been a justice of the peace but the hours suck. Generally, this guy is creative and has myriad transaction experience from which to draw. If you move on past his listing, he will hound you until you place your occupant in another building - then he will hound your client.

Drama. Proportions are blown with this fellow. The simplest item becomes a federal case and you wonder if he even consulted his client before he blew his stack. Yelling, screaming, and constant F-bombs are a steady diet. A smooth transaction is out of the question - what fun would that be?

Well, there you have the minimum. But I thought of a couple more - Bonus Languages.

Networking. Provisors, BNI, Chambers of Commerce, RBN, SIOR, CCIM - this guy is EVERYWHERE! Sometimes I wonder when he finds time to transact amidst this flurry of swapping business cards. His elevator pitch is honed, rarely delivered without passion, and with scant regard to the setting. Yep - even at his daughter’s dance recital!

Legalities. Few of us are lawyers but many of us get our Perry Mason on when negotiating a contract. Let’s leave the waivers of subrogation, mutual indemnities, and liquidated damages to those with ESQ following their names - shall we?

So, what is your Commercial Real Estate love language? I would really appreciate your comments.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Should Commercial Real Estate Be More Like Amazon Prime?

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Aha, got ya! Catchy titles can do that, huh? If you doubt it for a moment, raise your hand if you checked out "Bruce Jenner's love child with Natalie Gulbis" in the latest Enquirer? I thought so! 

So, a bit of context. I was shopping with my bride of 40 years this week - actually, she was shopping, I was there for support. She wanted to buy a postage scale. We went to our local Office Superstore/Max/Depot and to our delight, there were five choices - all in stock and ready to follow us home. The problem was, the price. Ever the thrifty (which is one of the reasons I love her), she whipped out her faithful iPhone, scanned the bar code, and immediately discovered the scale could be purchased through Amazon Prime for HALF the price - with one day FREE shipping! OK, now she had my attention! But how were we supposed to have instant gratification, bag the bear, and take it back to our cave - today? The solution was to ask for a "price match" from the cashier. I should mention that I have socks older than the cashier - but I digress. Apparently, this merchant only matches cheaper prices on THEIR website - not from Amazon Prime. Guess what, the scale is still on the Superstore/Max/Depot shelf and not in our garage. The one in our garage was delivered by a friendly man in a brown truck yesterday. 

Should commercial real estate deals be more like Amazon Prime? Should some tech guru create an app that allows you to check the deal you're about to ink vs other owner motivation in the market? What if you were at the closing table and your client asked for a moment to check his phone. Oops, need a few more days to see this other property that just hit the market. Never happen, you say? The business is too complex, there are too many variables, no two spaces or owners are identical - etc, etc, etc. 

OK, I get it. All I know is that our friendly Superstore/Max/Depot lost a sale because THEY were shortsighted.

Are we shortsighted as well? Look. Commercial real estate deals - akin to fire - need three things to burn - an owner, an occupant, and a property. We layer in a few more variables as practitioners - what’s transacted, what’s available and price trajectory. Plus, our licensing allows us to bring the elements together, help the parties agree, and document the transaction.

Could a site eliminate the role of a broker? Potentially. Here’s how. An occupant can view available inventory through Loopnet. Maybe not as accurate as other walled gardens of inventory - but passable? For every Loopnet Listing - an owner awaits a bite from a prospective tenant or buyer. So you have the three elements - owner, occupant, and property. What’s missing? The platform from which to transact. Are there on-line portals for deals currently? Yessir! Ten-X. So would a marriage of these two spell the demise of our profession? I’ll leave that to Inquiring minds.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Cut Out the Broker - Save 6%! Maybe Not

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I told the owner of my building, hey if you decide to sell, call me first. I'll buy it and we can avoid paying the 6%". REALLY? This was a conversation I recently heard. I was not eavesdropping, mind you. I was the guest of a network buddy of mine at the monthly meeting of trade organization. The conversation was between my friend and one of his clients - that I had met previously. As I stood there with them - I recalled trying to help him last year with some space issues he was facing - for FREE!

The comment really irked me and I flippantly responded, "yeah, by all means, cut out those greedy brokers!" The client quickly excused himself and walked away. He realized the comment struck a nerve.

I've thought about that encounter a lot over the past week and have tried to imagine myself in his position. If I leased a building and had an opportunity to buy it, would I "cut out the middle man?"

Indulge me and I will attempt to explain why I wouldn't - with full disclosure that I have seen the "end of the movie." By the way, I believe this buyer's sentiment is rooted in the premise that "we didn't find the building or negotiate" the deal - so where is the value? I also believe his position is on widely held by most occupants of commercial real estate.

Here is the value - a commercial real estate professional can anticipate the issues and structure the deal around them or formulate a suitable alternative. This is BEST done before final terms are negotiated, but sometimes, we are shackled.

So let's assume we are talking about a 20,000 sf building, a $4,000,000 purchase - or a $240,000 ($4,000,000 x 6%) dollar savings (potentially). $240,000 represents $12 psf on the square footage of the building. A lot of money for sure! However, if the buyer overpays (based upon market data that brokers track) this "savings" can be consumed quickly.

What if the property doesn't appraise? How does the buyer bridge the gap? Brokers are skilled at solutions due to the market comps, current avails, etc.

What if something "untoward" is discovered - historic hazardous materials, seismic zone, non ADA compliance, unpermitted office or other improvements, a sprinkler system that is inadequate, a lien against title? OK you get the idea. A seasoned professional - has overcome these challenges many times before.

Who will handle the management of the deal's execution - escrow, title, inspections, loan qualification, review of leases, estoppels, etc? A real estate attorney trained at identifying issues - but equipped to resolve them?

What if specialized consultants are needed in the execution process? Buyers can utilize our networks.

So how do you "hear the buyer's concerns?” Remember, the buyer is convinced you are excess baggage.

From experience, I reduce the fee and offer to manage the transaction. Specifically, in return for my involvement, the fee is 1-2%. I justify this because I didn't find the building or negotiate the terms - just like the client believes. But, I can add significant value from the agreement forward to close.

As we know, negotiating the terms is generally the EASY part. The execution is the difficult step. Win win, done!

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Trends, Trends, and More Trends!

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What is in store for the real estate market over the next 18 months? What about interest rates, commercial leasing, mall re-positioning, rent control, homelessness, and the question of “what keeps you awake at night?” These issues were volleyed by a panel of esteemed commercial and residential real estate professionals yesterday at the monthly luncheon of The Risk Management Association - RMA* On the dais were Jeffrey Bloom, EVP and Director of CRE, Comerica Bank, Steven Card, Senior Managing Director, Savills, Jack W. Carroll, Sperry Equities, and Brett Whitehead, President and CFO, Brandywine Homes. I found their comments column worthy so here goes!

Trends. Tight supply of commercial and residential offerings - fueled by tough city entitlement processes - which limits new construction. Older commercial real estate suffers from a lack of amenities - open concept layouts for office buildings, fitness centers and a general shortage of the stuff new workers crave. Adjusting these aging facilities will take an enormous amount of capital to retrofit.

Interest rates. Clearly, both sects - commercial and residential have benefited by the recent rate drop. Approaching 6% were rates last winter. The plummet this summer has created a bit of a residential buying spree. Cheaper mortgage rates also bring into play deals which otherwise might have been overlooked because of pricing. How long will the beneficial rates hang around? Who knows. Ask Jeff Lazerson!

Commercial leasing. Steve Card from Savills lamented the lack of suitable alternatives for his office tenants. With so few seats available - a game of musical chairs ensues. You don’t want to be left standing when the music stops. We’re experiencing similar frustrations with manufacturing and distribution space. What’s left on the market is a bit motley. Steve opined - and I agree - it would take a super large downturn in our economy to get vacancy back into the normal realm - 15% for office and 6% for industrial.

Mall re-positioning. Brett Whitehead of Brandywine homes shared with the audience - Brookfield Homes has purchased 150 regional malls nationwide! Seen as an opportunity to capture the “experience” many young residents seek - these well located, but vastly under-performing assets will be re-tooled into the neighborhoods of the future with proximity to dining, shopping, entertainment, and employment.

Rent control. General consensus among the experts was rent control is here to stay but is generous - 5% plus inflation. However, purchasing decrepit complexes with under market rents, refurbishing and jacking up the rates will no longer be a strategy.

Homelessness. Seen as a political rather than a real estate issue - the panel politely jettisoned this hot potato. Stay tuned.

What keeps you up at night? Steve Card, Savills - finding the right deal for his tenants in a market with very little available. Brett Whitehead, Brandywine Homes - delivery time of new neighborhoods. Jack Carroll, Sperry Equities - increasing costs and timing loan maturation with lease expirations. Jeffrey Bloom, Comerica Bank - earthquakes! As these are impossible to predict and underwrite.

*A bit about RMA. The Risk Management Association (RMA) is a not-for-profit, member-driven professional association serving the financial services industry. For more information, please visit their website https://www.rmahq.org/

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com

Investors, Investors, Investors

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Your investment stake in commercial real estate varies based upon your use of said real estate. If you occupy your business address - you are an investor of sorts but generally classified as an owner occupant. Conversely, if your monthly income relies upon a rent check from your commercial real estate purchases - you are an investor owner.

Today, I thought it would be fun to dissect the sundry sorts of investors we encounter in the commercial real estate profession. So, in no particular order - here goes.

Owner occupants. Let’s start here. Important to understand is an investment is made in a location by the owner of the business - simple! Not to confuse things - but generally, owners whose businesses live in the buildings they own have an investment structure. Most typically, the proprietor of the company creates a Limited Liability Company - an LLC. Title to the real estate is then vested under the name of the LLC. Occupying the parcel is the business. Frequently, the business has a different ownership - IE a Sub Chapter S Corporation. Although the LLC and the Sub S have synonymous underlying principals - they are two separate entities. Therefore the Sub S pays rent to the LLC. The LLC is the investor and the Sub S is the tenant. 

Whew! As you can gather, a myriad of places to invest money exist for a small business. Machinery, equipment, customer acquisition, and new employees all compete for the investment dollar. Considered must be the return on investment for all of these opportunities to grow the business. Specifically - if I buy a new machine and spend X amount of money - will sales grow proportionately vs. how will a purchase of my premises affect the expansion of my enterprise?

Private capital investors. Generally defined as the use of your own money - in this case dollars generated from the investor’s hip pocket. Certainly a bank may have been used to finance the real estate purchase but the down payment came from a non-public source. In the case above - an owner occupant - consider what happens if the business that occupies the building is sold but the commercial real estate is retained. Now, that owner occupant becomes an investor owner. Before, he controlled the tenant - an operation he owned. Now, he simply owns the real estate. 

We have a client who parlayed this method into a fairly substantial commercial real estate portfolio. Acquired were the properties - in different locations - his company occupied. Amassed were a dozen or so buildings. He then sold the business, struck long term leases with the new company for all of his properties and voila! He is a private capital investor. Before, the operation he owned made money and paid him rent - a daily double. Now, the returns are only from the rental income.

Institutional capital investors. Broadly defined as the use of other people’s money - OPM - institutional capital can vary widely from friends and family to the State of California’s Public Employee Retirement System - CalPERS. An institutional investor uses these funds to buy and manage commercial real estate. Clearly, different levels of sophistication are needed. Regardless, a tenant must pay rent in order to generate a return on the invested proceeds. Occasionally, these institutional investors will package their holdings and create a publicly traded company - known as a Real Estate Investment Trust - REIT. A stock is available to buy and sell through a stock exchange - NYSE or NASDAQ. As every share of stock is valued the same, easy transition in and out can transact. Your dividends are generated from a small sliver of rent from the underlying buildings. Quite creative!

Leases, Subleases, and the Like

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Your business expansion will enjoy more space very soon. Now your employees can park at their place of employment vs down the street. Crisp new offices or tons of manufacturing space await you in the new location. You cant’t wait!

You’ve opted to lease the new spot and postpone ownership. You’ll encounter two leasing scenarios once you scour the market for suitable addresses - leases and subleases. So what are the differences? Indulge me while I describe them.

Leases are negotiated directly with the owner of a parcel of commercial real estate. Therefore - they are referred to as direct leases. Normally - your initial conversations will be through your commercial real estate professional. The deal you get depends upon the landlord’s motivation, competition in the market and the skill with which your broker volleys. She will work with the owner’s rep to craft your agreement. Outlined will be a monthly payment amount - rent, number of years - term, increases in rent throughout the term - bumps, and concessions - free or abated rent, refurbishment, and extra stuff - tenant improvements. An early termination right, extension rights through an option to renew, right of first refusal, or right of first offer to purchase may also be included. Once you reach a pact - you and the owner will sign a lease, you’ll deposit the requested amounts and secure insurance. Now your company can live in the new location for the agreed upon period - let’s assume five years.

But during the lease term - something untoward occurs - a decline in sales, someone acquires your company, you decide to move your manufacturing function to China, or California imposes a huge levy on your product - which dictates a move out-of-state. You find yourself with a glut of space - for which you’ve committed! Now what? Well, those circumstances, dear readers create subleases.

A sublease is akin to a remnant sale at your favorite carpet retailer. A full roll of flooring is not available - so you get to pick from what’s left. Because a finite amount remains - little flexibility exists. If the scrap fits your area - great! You benefit. But if you’ve a larger area to cover - you’re hosed. Also, the smaller the amount of over run- the fewer takers. Now a price discount must be employed to liquidate. Ouch.

With a sublease - the primary motivation is to stem the bleeding. Excess space wastes rent payments. The thought of providing any concessions runs contrary to a desire to move-on. Consequently - a different dynamic unfolds compared to a direct lease. Plus - another layer of decision makers will be involved. Remember. A lease is in place - with a landlord and a tenant. Now the tenant becomes a de facto sub-landlord and you are the sub-tenant. All parties - master landlord, sub-landlord, and you - sub-tenant must agree and all must approve.

So with the descriptions of leases and subleases as a backdrop - how should you proceed?

Consider all your alternatives. If you need a ton of abated rent, extensive tenant improvements, or a 10 year term, a direct lease might be your best bet. Conversely - absent these requirements - a sublease can provide you with an adequate solution.

Seek counsel. Leases are complex. Subleases are uber complex. They are not for the squeamish. If your “landlord” stiffs the owner - your sublease is in jeopardy. You’ll need two sets of approvals. Plan on extended time frames to get all resolved. We recently encountered a sublease that took ninety days to get the nod!

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Repairs During Escrow - Who Pays?

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Buying a commercial building for your business to occupy is similar to acquiring a residence from which to raise your family. After all - your business will “live there” and grow for many years to come.

Most commercial deals are structured with a time frame to conduct due diligence - a fancy way of saying - figuring out if you want to complete the purchase. Generally - if something untoward is discovered during this contingency period - you can cancel the deal without penalty.

Some sellers are very organized and greet you with all manner of reports, studies, and opinions on the condition of title, roof, HVAC, office improvements, and environmental history. Others will simply allow you - as the buyer - access to snoop around on your own. By the way - the organized seller - the one with all the provided documents - has typically priced his offering in accordance with the report’s findings. Therefore - if you confirm the building needs a new roof - chances are the seller won’t pay. More on that in a bit.

A word here about purchasing a building in its “as is” condition. Normally a buyer relies upon his own investigation of the property’s condition - and commercial contracts are worded this way. So does this mean you must close a deal with a faulty wiring system? No. It just means the seller is not representing or warranting it or agreeing to mend.

So what happens if you realize the air conditioning has eclipsed its cooling life and blows about as hard as a defeated politician? Or - you discover - the roof is akin to a slice of Swiss cheese? Clearly, you have three choices - buy the building with all its faults and deal with the issues later, ask the seller to remedy, or walk away.

Let’s presume you love everything about the property and have decided you want to proceed - but feel its incumbent to ask for some repairs. Plan on the seller responding in one of the following ways.

He will tell you no. Certainly in the case of the organized seller - he preempted your request for repairs by investing in condition reports. He knew deficiencies existed and alerted you. Slim are your chances of convincing this seller otherwise. Conversely - if your seller was unaware - you may be able to extract some repair money. Make sure you fashion your ask with copies of your findings along with a reasonable dollar amount. What is unreasonable? Asking for a new roof on a forty year old building.

He will tell you yes. Bingo! However - the way in which the request is fulfilled is as important as the seller agreeing. A reduction in price is common. This makes a lender happy although he must re-work the loan percentages. Credits through escrow used to be the norm. Lenders now frown upon this as buyers supplemented their down payment - a no-no. Finally, a seller may simply offer to make the repairs. I’ve seen this approach work well when the dollar amounts are small or quick fixes are possible. Most sellers will not opt to do the refurbishments - however - as they don’t want the liability or the timing delays.

He will not respond. Similar to saying no - but akin to your parents answering “we will see.” So why would a seller not respond? Because a no is final. A non-response could be one of the following. He believes you’ll proceed anyway if he waits. Or - other parties to the transaction - IE the real estate professionals - might kick in. Maybe the seller wants to gauge the interest of bridesmaid buyers. Our AIR CRE Purchase and Sale Agreements allow for this “maybe” period with a ten day response requirement.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.

Three Unintended Consequences of a Property Tax Increase

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Last week I delved into a subject best discussed in private - politics. Specifically - taxes and your tenancy. I weighed in on a proposed ballot initiative which - if passed - would split the property roll. Known as the California Schools and Local Community Funding Act - the proposal would tax commercial and industrial properties differently than those zoned for agriculture and residential uses. Local communities and schools would benefit.

UPDATE - As of August 12, 2019 - the authors of the proposition - which qualified for a spot on the November 2020 ballot - have removed the plan in favor of one with a few tweaks. From my review - it appears any commercial or industrial property with an assessed value of less than $3,000,000 and at least 50% of the property occupied by the owner will now avoid re-assessment. The previous text exempted fully Owner Occupied commercial and industrial spaces with an assessed value of less than $2,000,000. Now - petition signatures are needed for ballot qualification.

You may be thinking - so what? Large commercial property owners should pay their fair share. Why should a large corporate entity benefit from a property tax “loophole”? Maybe. But let’s consider - for a moment - the potential consequences of a revised levy. By the way - three companies paid a collective $185,481,000 in property taxes for the fiscal year 2018-2019 - close to 3% of the total secured property taxes billed in Orange County! Can you guess who they are?

Unintended consequence number one. The two largest property tax payers also employ close to 34,000 people. Next in line adds another 13,000 paychecks and is corporately based in Los Angeles County - so it’s tough to surmise how many reside in the OC. Suffice it to say - quite a few. If property taxes on these three are re-written to current market values and the “loophole” closed - thus raising the cost of doing business - will new investment and hiring be curtailed? Who cares? Certainly businesses who sell to these large corporations - contractors, food suppliers, material handling companies. And those who rely on paychecks from these companies to rent housing or service debt, buy groceries, fund college educations, pay medical bills, attend sporting events, eat in restaurants, stay in hotels, etc - all huge drivers for our local economy.

Unintended consequence number two. Over 1% of the total property tax receipts come from a large investment concern whose operations rely upon rents from its holdings. Guess where that property tax increase will fall? Yep! On the backs of the many tenants whose leases contain provisions for such a tax pass-through. So? Well - the CPA who prepared your tax return, the attorney who drafted your will, that department store where you rented your tux, and your favorite dining spot for date nights could rent from this owner. His costs will have to be recouped somehow. I wonder where? Probably with increased charges to you.

Unintended consequence number three. Companies with fewer than fifty employees - whether they lease or own the business property they occupy - will get an exemption from the unsecured property tax they pay. Machinery, fixtures, and equipment used in the operation of the company are taxed similarly to real property - 1% of their assessed value. A manufacturing company with a ton of CNC machines, injection molding equipment, or drill presses might opt to automate vs hiring new folks - especially if their head count is at or near fifty. Look at it this way. An employer could automate - thus reducing his need for workers plus get a tax break from the automation equipment he buys.

I certainly hope you invest some time to fully understand this ballot proposition and the potential consequences it can create.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.