Tag: Commercial Real Estate Brokers MANSARD Commercial Properties

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Commercial Real Estate Investing Tip for Working with Brokers

Honestly, I confess that if you've used this expression "I'm just looking for a deal that makes sense," to share what you're looking for, it's not your fault. It's ours--the commercial real estate broker community. Here's a real estate investing tip. In the real estate investing advisory business, we believe that there are no bad prospects, only bad salespeople.  This means that if you've been frustrated with the lack of performance and results you've achieved from your conversations with commercial real estate brokers, then it's our fault for not asking you to be more specific about what you're looking for. Unfortunately, commercial real estate brokers accept that statement because it's easy. They'll add you to their database, possibly send you a list of properties from one of the commercial real estate listing services such as CoStar or Loopnet, and then leave you to fend for yourself.  After a few weeks, you haven't heard anything , so you repeat your investment property search--frustrating. Next time you call our office, we pledge to ask you to be more specific.  If we can help you locate what you're looking for, we will.  If not, we'll tell you and refer you to someone who may be able to satsify your requirement. And the next time you call on a commercial real estate broker, try this experiment.  Don't use the words deal, sense, cash flow, creative, good, add value, or upside.  Instead, describe the property type, location, type of owner, yield requirement and price range you're looking for and see what happens. Your specificity will produce more commercial real estate investing opportunities for you to consider and your commercial real estate investment broker will have a clearer picture of what you're hunting for and who to call first when they see it.

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Your Commercial Mortgage ... a Time Bomb?

If you still own your commercial real estate and you have tenants with net operating income to pay your debt service, congratulations. You've made it half-way through the downturn. The second half may be uglier. While it may look like you're successfully wading through the weeds, when was the last time you checked the terms of your mortgage agreement? Some owners who think they're in good shape today, may technically be in default or facing a maturity default. Your debt service coverage ratio may be out of alignment with your mortgage agreement. You may have depleted your reserve accounts below the required amount. Or your property's value may have declined up to 40% since you originated your debt 3-4 years ago. More on this topic here. If you haven't done so yet, read your commercial mortgage agreement. You may find that you are in default, or worse yet, headed toward a deadline that may require you to invest more equity into your building that you don't have. Values have declined. Your loan to value ratio may need to be reset when your loan matures. If you don't have the net operating income to support a higher valuation than today's market will support, or the willingness to buy down your loan, you may run the risk of a maturity default. Owners are losing their buildings to maturity defaults today. Look at your mortgage and make preparations to protect your building for when your loan comes due. Get free weekly email updates of this blog. About the Author: Jeremy Cyrier, CCIM is the founder/principal of MANSARD Commercial Properties and member of the CCIM Institute faculty. He delivers thoughtful, large scale commercial real estate solutions to the individual challenges owners and tenants face. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

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How to Catch a Commercial Real Estate Lifeline

Have you ever heard the story about the man who rows out to sea, jumps in the water, lets his boat float away, proclaiming "I am a man of faith. God will save me."?

A fisherman spots him treading water and throws him a lifeline. The man pushes it away and says, "No, thank  you. I am a man of faith. God will save me."  The fisherman shakes his head and calls the Coast Guard. Read more

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MANSARD Welcomes John Hughes and Paul Lam

The more often we do something the same way, the more often it becomes more difficult to think about doing it any other way.  Have you ever heard the expression, “When the only tool you have is a hammer, everything else looks like a nail”?  Sometimes it takes that hammer to the head (or a market correction) to get us thinking differently and 
welcome to change. Swahili speakers in East Africa have a proverb that reminds us that change is a good thing and that we should embrace it; Kipya Kinyeni is what they say. In the spirit of the Swahili, we’re happy to announce that we recently added 2 new brokers to our team.  John Hughes, who brings with him his prior experience with New Dover Associates, is an expert in  the valuation, leasing and selling of office, industrial and retail properties throughout Eastern and Central Massachusetts. Paul Lam joins us as a new leasing and commercial real estate sales associate.  Prior to joining MANSARD, Paul founded and built a digital technology company and worked as an investment banker in the Mergers & Acquisitions Group at S.G. Warburg & Company.  Paul holds a Bachelor of Science in Economics from the Wharton School at the University of Pennsylvania with a double major in Corporate Finance and Strategic Management. Please join us in welcoming these two fine young men to MANSARD Commercial Properties.  We’re lucky to have them. Get free weekly email updates of this blog.

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Why Understanding Demand is Critical to Success in Commercial Real Estate Investing

A few weeks ago I had the privilege of teaching with one the CCIM Institute's most experienced and knowledgeable instructors.  He has spent a career mastering one of the most important, and often overlooked, components of commercial real estate analysis: identifying and quantifying demand.

He says that demand for space is 80% of the real estate decision and that financial analysis is the other 20%.  Too often, according to my colleague, investors and users focus on the 20% without really digging into what drives the numbers, who's going to be using the space, and why the proposed use makes sense.

Here's an example of why this is so important--overbuilding.  How many developers have you seen in the past 3-4 years losing gobs of money in real estate because of a shift in demand? And do you think the numbers they used are worth anything today? Here's why it matters. Essentially, jobs drive demand for office and industrial space.  As jobs are created, households are created, people get married, have kids and need housing and retail services.  They consequently create a demand for retail space and homes.

So what happens when the jobs go away, as in Massachusetts, which is currently reporting an unemployment rate of 8.6%? Demand for office space and industrial space declines,  creating more vacancies, which leads to a decline in demand for retail space and housing--i.e. a report out this week that multi-family vacancy rates nationwide have it a 22 year high.

The question is, when will the "death spiral" end?  (See Seth Godin's blog). The Death Spiral ends when businesses start reinvesting and hiring.  This is what I tell those who ask me when I think the housing market will recover.  Once the job losses stop and people start feeling more secure about their incomes, they'll start buying lattes and homes again.  Then as companies  ramp up to meet increased demand for their products and services, they'll soak up additional space at lower rates, hire more employees, and we'll see an uptick in consumer spending that will follow the initial consumption uptick of those with job security. My concern, however, is that our government will increase taxes and raise interest rates to pay for their meddling in our private industry, which would forestall the recovery and expansion as well as keep us in a protracted and skittish recovery for years to come.  What do you think? Would you like a demand analysis performed for your properties? If so, email me at Jeremy@Mansardcre.com with the words "How much demand is out there for my property?" in the subject line.  Include your name, when you would like to be called, and the best number to reach you. I will contact you to schedule a time for you to invite me to your office for a free consultation.  If there's a fit, you may retain us to conduct a demand analysis of your properties, their position in your market area, and identification of the top users with contact names and phone numbers to help you gain transparency into your tenant market.  If there isn't a fit, we'll tell you we cannot help and will refer you to another firm that may be a better match. Get free weekly email updates of this blog. About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and tenants. You may reach Jeremy at Jeremy@Mansardcre.com.

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Get up to 90% financing with an SBA 504 loan

Not long ago, if a borrower was simply able to complete the application for a 100% loan, and they would be approved.

Talk to those who have tried the same in recent months, and you’ll hear a different story – one in which lending institutions have limited borrowing to the point of virtually freezing the real estate market. Buyers are quick to become discouraged when loans are no longer readily available without putting 30% or more down. However, tough market conditions have increased the use of specialized programs to fill the gap.

The SBA 504 program is a popular option for owner-occupied properties in need of fast cash. Offered by the New England Certified Development Corporation, the product is designated for projects ranging in size from $500,000 and up, and can be used to purchase land or buildings, new construction or expansion, renovation, leasehold improvements, or equipment.

With an SBA 504 loan, a borrower obtains a first mortgage loan for usually 50% of the project from a bank. There is no maximum dollar amount. New England Certified then provides a secondary loan (called a debenture) for the next 40%. Certain manufacturing entities are eligible for up to a $4 million debenture. All other industries are capped at $2 million. Up to 90% financing means the borrower typically provides only 10% equity for the project. Loan terms may extend as long as 20 years, and low fixed interest rates (fixed for 20 years for real estate; 10 years for equipment) are available on up to 40% of the project.

Borrowers must:

· Be located in New England.

· Operate for profit.

· Owner must occupy part of the property.

· Have a tangible net worth of $8.5 million or less.

· Have an average net profit of less than $3 million over the last two fiscal years.

Existing buildings must be at least 51% occupied, or 60% for new construction.

Just because it’s more challenging to obtain a 90% loan these days does not mean it’s impossible!

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