Tag: Opportunities
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Why Your Commercial Real Estate Broker Doesn't Find You Deals
You call commercial real estate brokers in your market, tell them about what you're looking for, and meet with a few. It feels like you're making progress. The word is on the street, you're looking to buy a commercial real estate investment property with great cash flows, upside potential, and at distressed prices. Every commercial real estate broker knows. You wait by the phone and check your email for the wealth building deals to roll in. Here they come....the emails you've been waiting for. You open them. You see a pattern. These commercial property listings are all the same. You chock it up to the fact that you contacted the commercial real estate brokers at the same time and they're sending you what's available on the market. A few weeks go by, and the investment property sales lists dwindle and no agents are calling. What happened? You're every commercial broker's business and no broker's responsibility. Rewind a few weeks. You're a commercial real estate broker. You receive a phone call from an investor who's looking for a good deal in your market. He wants you to send him a good investment property to buy, so keep your eyes open and start hunting. You want a commission right? Well, sure. But here's the catch. You get at least one phone call like that every day. You're asked to find a good deal for this investor, maybe go hunting for him, and start sending him listings. He's probably not a hot horse who's going to buy a property off the first list you send him and he's likely having the same conversation with other investment property brokers in your market. He's everyone's business and no one's responsibility. You add him to your database. Maybe you put him in your email distribution list and figure that something might happen, but if not, you may get a call one day when he has a property he needs to lease or sell is commercial property. After a few weeks, you stop sending him lists of investment properties for sale because you've also been asked by 15-20 other investors in the same period of time to do the same activity. Somehow, they think you're out there working for them, too, because they're getting the same listings as everyone else. What they don't know is that no commercial broker's out there hunting, they're just entering a search and clicking the send button. You've been selling investment properties long enough to know that most of these calls are a fool's errand. The promise of a commission looms on the horizon, but you know you're going to have to spend more in time and resources to maybe get that commission than you'll likely earn, plus you have no commitment from any one investor that they'll honor your commission if you bring them a commercial real estate investment opportunity. Pretty risky if you're a broker. You decide you're better served investing in those who have hired you to help them acquire and dispose of investment property. Ultimately, as an investor, ask yourself, when you repeat the same behaviors as everyone else by calling a bunch of brokers to tell them what you want, should you expect an outcome that's different than everyone else who's doing the same? The next time you're on the phone with a commercial broker, try asking him how many calls he's had from investors "looking for a good deal" in the last 30 days. Then ask him how many of those investors he's spoken to after the initial conversation. Chances are you already know the answer. To get different results than everyone else, change your approach. Ask your investment property brokers how many investors they're representing. The ones who have clients are getting deals done, while the ones who aren't....well, just check your email box for the latest commercial property listings. By taking a different approach and employing an investment property broker to execute a search and acquisition on your behalf, you may be delighted that when you become someone's responsibility, you're everyone's envy. 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.0
MANSARD and Property Politics Team Up To Train New England CCIMs
Jeremy Cyrier, CCIM, principal of MANSARD Commercial Properties and Wayne D'Amico, CCIM, principal of Connecticut based Property Politics teamed up to train CCIM's from across New England on the CCIM Institute's Site To Do Business in Boston this week. The class was held at 60 State Street Boston at the offices of Wilmer & Hale in cooperation with the Greater Boston Board of Realtors and was attended by commercial real estate brokers, data from across New England. The all day event featured a full tour and use of the CCIM Insitute's Site To Do Business, which is a GIS platform used to perform market analysis and to identify demand and opportunities in the commercial real estate markets across the United States. Chris Norwood of NAI Norwood Group said,"great job on the class....Leaving the class I feel much more comfortable with the site and enjoy working with it much more than I had in the past...I am liking this site more and more, with your help."H. Sandy Brown, President of the New England CCIM Chapter said,
"On behalf of all the attendees of your session, I would like to thank you both for a very informative and entertaining program, last week. Your insights and practical applications of the usage of the STDB were fantastic. I know we all left the program with a very practical knowledge of the site, and many ways that we can use it to help us better support our clients. That, in itself, will make us stand our amongst other practitioners in our markets. This is the true meaning of what it is to be a CCIM!!!
Again thank you for doing such a great job!!"To invite Jeremy to train you or your employees on the Site To Do Business, email him at Jeremy@Mansardcre.com with the words "Site To Do Business Training" in the subject line. Include your name, when you would like to be called, and the best number to reach you. Jeremy will then contact you to discuss scheduling a Site to do Business training session for you and your employees. 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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Hey Retail Investors....Did You Get Your Letter Yet?
You walk to the mailbox. Inside is a letter from one of your tenants. Expecting a check? You tear it open, skim it, get that sinking feeling, and then re-read it line by line to see if what it says is really true... Saturday night, I bumped into a well recognized entrepreneur (let's call him John) who's achieved tremendous success in the retail industry. I'd seen him on television, been to his stores, furnished my office and home with his products and admired his marketing and advertising acumen as well as the experience his company created for its customers. He's been successful in competing in price, service, and providing an experience that brings people back again and again. In fact, my partner told me that his wife walks the stores with her friends just for fun. John and I wound up striking up a conversation. He asked me about the commercial real estate market, what was going on, and how anything is really being priced these days. He added that he had just put in a bid on a $10M building that he believed he could now buy for 30 cents on the dollar. "Crazy." He said. John asked, "Why the gap in pricing and what's going on out there?" There's a lot to it." I said and went on to explain. We discussed the market conditions, John's competitors, and how to value assets in such an uncertain economic environment. Then the letter conversation began. I told him that a client had recently called us asking for advice. Subway had sent him a letter. It said they're either going to close the location or pay 25% less rent. Then there was a fellow CCIM who recently sent a broadcast email to our CCIM network looking for help with her client who owned a free-standing Starbucks location in Texas who had received a letter from Starbucks stating that he had 2 options. Agree to lower the rent by 25% or they would close the location. John topped it off by adding that one of his largest competitors in the area, Sleepy's, was up to something similar. He heard that they sent a letter to 600 property owners telling them they were going to start paying 25% less across the board on their leases. Imagine the results.... See more on this topic here. What a shame. What about you? Have you received any letters? If so, from whom? And if you were facing either vacancy or receiving 25% less rent, what would you do? 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. Sign up for free CREFrontline updates, if you haven’t already. It's free and has absolutely no obligations.0
Going out of Business: The Breakdown of a Relationship
by Lisa Carpenter: As Valentine’s Day approaches, it occurs to me that the relationship between an owner and their building is like a love affair. In good times, it’s easy to get along. The owner is doing his part by managing operations and the tenant is doing her part by paying rent – a perfect balance. But what happens if the owner becomes complacent and takes his tenant for granted? Maybe he ignores some of the warning signs. A late rent payment here and there, shorter hours of operation, an empty office or two – but she’s still in business. Everything will work out. Then comes the dreaded call to his office. She can’t keep the truth from him anymore. She has to close down operations at this location. The “going out of business” sign appears in the window and she’s moving out over the weekend. The owner believes this is a unique occurrence and it won’t happen again… and then it happens again, and again. Now he is facing 20% vacancy and he still doesn’t have a plan. His only response is to post a “for lease” sign in the window… and again he waits. Rather than sitting back and waiting for vacancy to cure itself, there are some steps he can take to avoid drastic income loss. Heed the warning signs – If a tenant can’t pay their rent this month, they may not be able to pay next month either. Consult an expert – Know what a vacancy will cost before the space is vacant. We can research market rents and vacancy rates to determine the best approach. Plan ahead – Don’t be reactive, be proactive. The more information an owner has, the better his position to negotiate with existing or future tenants. How much is it costing to wait? More than the lost rental income. The longer a space remains vacant, the negotiating power of the tenant increases. Call (617) 674-2457 today for a free vacancy analysis. Sign up for free CREFrontline updates, if you haven’t already. It's free and has absolutely no obligations.0
Why CAP Rates Won't Save You This Time
CAP Rates Won't Bail You Out This Time
The past several years have been forgiving to commercial real estate investors. You could go out, buy a building, lower the rents, and sell the property for more than you paid for it. Huh?
Sounds strange doesn't it? Imagine this, you're a savvy real estate investor who's interested in purchasing a 40,000 SF office building located minutes from the highway and is 100% occupied. The asking price is attractive--it's priced on a 9 CAP rate. It has a net operating income (NOI) of $600,000 and your 70% LTV debt will cost you 7.5%. You pay $6.6M for it. Now, looking at this deal, you know two things for sure. The CAP rate is far higher than the cost of leverage on the property, so there's a pretty good bet that you're going to be cash flow positive right out of the gates on this one. The second thing you know is that you've got a full building, teeming with strong tenants that are are paying on multi-year leases. Looks pretty good, doesn't it? So you buy it. You collect your cash flow each and every month. Things are going great. Then the market begins changing. Another investor has seen that you're 100% full and charging great rents, so he decides to build a new 50,000 SF office building 2 blocks down the street. It's one of those new "green" buildings with modern architecture, the latest amenities, and guess what, your new neighbor's going to be charging 10% less rent than you are. Worried? You should be. Over the next year, your building begins to increase in vacancy , as your tenants let their leases expire and move down the street. The remainders start picking at your rents trying to renegotiate their rates because they figure you're getting anxious and are afraid they'll leave too, if given the opening. You rewrite the leases, keep the building, and now have 85% occupancy. Your net NOI is $442,000. Nasty, you're now out $158,000 per year. Then some guy who says he's from San Diego calls you and makes you a cash offer. He offers you a 6 CAP or $7.36M. He figures that he's not going to earn 6% during the next 12 months in the stock market and is betting that he'll be able to sell your building to the next guy for even less than a 6 CAP without doing much to it. Guess what, you just hit it big. You're now going to sell that building for more than you paid for it, grossing $700k, despite the fact that you were collecting less rent and experienced an increase in vacancy over the past few years. You just made money to take your building the opposite direction you were supposed to. This story ended in the third quarter of 2007. How about now? Bad news. The market's changed and those CAP rates are going up, which means that values are going to be coming down. You'll no longer be able to buy a building and expect to sell it for more than you paid for it, even if your operating fundamentals deteriorate, because investors see that the future is uncertain and they want their initial investment back faster. If you're buying on CAP rates today, you should know that you may be buying yourself a major problem. CAP rates give you a glimpse at 1 year's operating performance for your property without taking into consideration the cost of financing, reserves, commissions, taxes, or most importantly, the overall holding period. Be warned, there are better tools out there for evaluating deals. And if you're just using the one that worked for the past 7 years, you may be unpleasantly surprised at what you don't get in return. 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. Sign up for free CREFrontline updates, if you haven’t already. It's free and has absolutely no obligations.