Top 5 Reasons to Buy Commercial Real Estate Now

by Pete Baldwin | Posted on: Wednesday, September 7th, 2011

1.      Commercial lending is the best it’s been in decades

Don’t believe what you hear when it comes to commercial loans not being available; they are plentiful and at the lowest interest rates I’ve ever seen on commercial property. Small Business Administration (SBA) loans were once known as long and painful and about as much fun as a root canal! Well, the times have changed and so have SBA Loans. Be sure to get with your real estate broker to locate a dependable and professional SBA lender. You will be pleasantly surprised with the results and products you find.

2.      The Bargains are far and few between

The word on the street is that commercial inventory is high. In some cases this is true, but I can tell you from first-hand experience that certain areas in the Phoenix area, such as north Phoenix and north Scottsdale, have very low inventory. A lot of the inventory you will find may not be suitable for you and may typically be in a bad location, have problems, etc. In other words – the good buys and good properties are nearly gone! Don’t take my word for it; get your real estate broker to pull comps and listings for you. Don’t wait any longer; get out there and find that piece of property you need!

3.      Different commercial verticals are on the rise

Whether it’s healthcare, general office or anchor retail, residential areas that realized significant growth four or five years ago are finally getting the local commercial amenities needed to help these communities thrive. The simple act of going to a grocery store has been very cumbersome for some outlying residential subdivisions. The good news is these empty commercial buildings are finally filling up, and the sellers are offering great incentives to buyers such as tenant improvements, deep discounts and even seller carry-backs in some cases.

4.      Commercial growth and construction will begin to increase again

While the inventory flies off the shelves and vacant properties fill up, commercial construction will once again begin to increase leaving the commercial buyer in a supply and demand dilemma. Let’s face it; we all want a good deal, and if you look hard and long enough you and your commercial real estate broker will find one; but be ready, the odds are you’ll have to act fast to get your offer accepted.

5.      Commercial Real Estate Brokers are in The Know

When you make the decision to start your real estate adventure, make sure you work with a local commercial real estate broker who knows where the deals are, what’s happening with current growth patterns, and what large employers are in the area. He or she should also have in-depth knowledge of the city’s zoning laws where you are looking. These key pieces of knowledge and good negotiation skills are going to be your secret weapon when it comes to getting a good deal on your next commercial real estate purchase.

So, you’ve heard me rant on and on about how you need to buy commercial real estate now. I can’t stress to you enough that the good properties are not getting cheaper, interest rates will likely get higher and commercial construction will, again, begin to pick up leaving the commercial buyer with a sense of, “I missed the boat.”

Stop waiting; don’t miss the boat, and get out there and buy the property you need; and remember to hire a licensed commercial real estate broker for all of your commercial needs.

Happy Buying!

These tips are provided by Pete Baldwin, designated broker and owner of Platinum Realty Network with offices in Scottsdale and Flagstaff, Ariz. With over 25 years of experience in business and real estate, Pete specializes in country club communities and second home investments, including large commercial portfolios. He also owns an Arizona branch of a family-owned, Montana-based company Baldwin Log Homes – Arizona Territory and has become the area leader in full- custom, handcrafted log homes in Northern Arizona. For more information, please visit www.PeteBaldwin.com.

IDEA to break ground on new Brownsville campus | brownsville, public, campus - Brownsville Herald

IDEA to break ground on new Brownsville campus | brownsville, public, campus - Brownsville Herald

Got Vacant Space? Think Inside the Box

by Ellen M. Berkowitz

CCIM.com

The good news about tough economic times is that they breed ingenuity. Leasing specialists in retail and other property sectors need to think “inside the box” –- the vacant big box, the empty warehouse, or the small office building abandoned by the busted start-up firm. By thinking short-term instead of long-term lease, entertainment instead of shopping, farmers market instead of vacant lot,  that space –- particularly in well located areas –- may be suited to new opportunities.

Backfilling Space

Landlords faced with grim prospects for finding large, long-term tenants should consider the development of new, creative uses for space including pop-up retail venues, theme parks, entertainment centers, children’s play areas, and other “people-intensive” activities, some of which may require only a short-term lease or permit. 

Pop-up retail is a trend catching on across the country because it helps anxious landlords fill spaces that have sat empty for months. It also provides retailers with a way to create a store with little overhead. These transactions usually have simple leases and do not include profit sharing. Halloween stores, which generally lease space from August to November, are the most common type of pop-up retail establishments, often taking over mall spaces left empty by electronics, furniture, and other large retailers.

Last year, Spirit Halloween Stores, one of the largest pop-up retailers in the country, operated more than 900 U.S. locations, according to Acon Investments, which owns the brand as part of Spencer Gifts. Many of them transformed into ToyZam! Stores, another Acon brand, and remained open through the holiday season. Spirit Halloween locates stores “in power centers, strip centers, free-standing stores, major downtown retail locations and in major malls surrounded by a national retailer mix, such as big box discount department stores and electronics stores … in communities with a population of approximately 50,000+ in a 3- to 5-mile radius with a car count of at least 25,000 cars per day. Good visibility from the major traffic road is a must,” according to the company’s Web site.

Traditional retailers also are trying out pop-up retail for a variety of reasons, such as testing new markets without a major commitment or taking advantage of vacant spaces they could not otherwise afford. Toys’R’Us, for example, opened 600 Express pop-up stores and 10 FAO Schwarz pop-ups during the 2010 holiday season, according to RetailingToday.com. The pop-up trend offers advantages to many types of retailers, as well as landlords, according to RetailingToday.com columnist David Berliner:  “For example, an online business that has clearance items or inventory that it does not want could open a physical pop-up store to sell these goods. If landlords adopt and execute such a strategy, it should help them bring a new level of excitement to their properties.”  

Family entertainment or themed attractions are another idea for large, vacant retail buildings. Typically, these tenants look for safe, high-quality environments, often in regional malls. Merlin Entertainments Group operates 63 themed attractions in 14 countries, including SEA Life Centre Aquariums, Legoland Discovery Centers, and Madame Tussaud’s. Similarly, family entertainment centers such as X-Scape are backfilling anchor stores in regional and strip malls. X-Scape provides indoor entertainment, a restaurant and sports bar, a ride and game area featuring amusement style rides, go-karts, mini bowling, laser tag, bumper cars, mini golf, and arcade games.  Children’s museums, gyms, or indoor play spaces are also popular tenants.

Signage Opps

Despite some zoning obstacles, signage remains a viable alternative to make money in real estate, especially in prime advertising locations. While some cities have taken steps to ban off-site advertising, others are increasingly turning to signage development agreements as a way to supplement existing revenue during very difficult financial times. These agreements give property owners the right to erect and maintain off-site signage for a set period of time in exchange for a share of revenue. Depending on the location of the signage, one development agreement can mean hundreds of thousands of dollars for a city over the life of the agreement, and millions of dollars for the property owner. In negotiating development agreements, billboard companies and property owners often have more success when they capitalize on creative billboards that enhance the urban streetscape or use “green” signs, especially when there are digital components to the sign.

If outdoor signage isn’t possible, property owners can go indoors. Zoning codes rarely, if ever, regulate signage not visible from the public right-of-way.  Signage on elevators, parking structures, urinals, and interior walls can produce significant revenue and add a fresh “hip” feel to unused space in a building.

Undeveloped Land

For vacant land, creative land use options vary, including farmers markets, urban gardens, and parking and vehicle storage. A great example is the development of bicycle storage and repair centers popping up near bus and train stops. Mobis Transportation Alternatives, for example, has opened Bikestations, bike storage facilities near public transit facilities in a number of cities. They offer secure bicycle parking, repair services, and showers for cyclists heading to work.

Entitlement Issues

Obtaining the proper permits for creative land uses can be tricky. Even if it is assumed that only a simple tenant improvement permit would be required for the new use, alterations or improvements to buildings may trigger a review of the building’s conformance with all current building, fire, plumbing, and electrical codes. Changing a retail space to a amusement park-like use could also trigger environmental review. The local government may consider these uses more intense, or worry that the project will create additional traffic impacts or demands upon public services, triggering environmental or other discretionary review. If the temporary use is subject to zoning restrictions (for example a farmer’s market or a swap meet), a lengthy governmental review and approval process is typically required. Additionally, creative uses can meet with community resistance, especially if vocal neighbors make their opposition known to the local officials.  

If a proposed use will require a substantial investment, it is important to consult with a land use attorney, the appropriate local government office, and the surrounding community to avoid problems.

 Ellen M. Berkowitz is a partner at law firm Manatt, Phelps & Phillips, LLP, which represents clients in the development of residential, mixed-use, industrial, and commercial projects. 

Retail Sector Begins to Bounce Back

Posted September 8th 2011
CCIM.com Newscenter

Consumer data and fundamentals point to a renewed recovery in the retail sector after the anemic GDP growth and rising gasoline prices that defined the first half of 2011, according to Cassidy Turley. Retail sales increased 0.5 percent in July, and June sales figures were revised up to 0.3 percent. Consumers also bought more appliances, clothing, electronics, furniture, and motor vehicles in July, driving a 0.5 percent increase in real consumer spending, the largest gain since December 2009. Wages and disposable income saw their largest increase since April, growing 0.4 percent in July. A 40-cent decline in gas prices since mid-May is also good news for consumer spending, according to the report.

Household balance sheets show the clearest improvement among retail sector fundamentals, with the debt-to-service ratio falling to 11.5 percent in July. From April through July, the retail sector also experienced the strongest four-month period of employment growth since the recovery began, adding 105,000 jobs. And prior to the 2Q11 slowdown, the retail sector had seen three quarters of positive net demand, stabilized vacancy, and rising rents in primary markets. However, a net loss of 8,000 retail jobs in August, as well as a volatile stock market, could further delay the fragile retail recovery.

Gyms Working Out for Landlords

Influx of Health Clubs Helps Shopping Centers as Traditional Tenants Pull Back

By KRIS HUDSON

Vacancy-plagued shopping centers in the U.S. are getting a lift from tenants who deal in sweat rather than typical retail goods.

Health clubs and gyms accounted for 8.8% of new leases signed so far this year by retail chains in the U.S., compared with 7.9% at the same point last year, according to real-estate research company CoStar Inc. The rush into shopping centers has helped fuel a 57% increase in square footage occupied by U.S. health clubs since 2007, to more than 70 million square feet.

Enlarge Image

Urban Active Fitness

Retail landlords focus more on nonretail tenants. This Urban Active health club opened in Pittsburgh in 2009.

The influx of health clubs comes at a time when retail landlords are scrounging for new tenants to offset a pullback among many traditional retailers. Retail vacancies in the top 80 U.S. markets remain near multiyear highs, reaching 11% for neighborhood shopping centers and 9.3% for regional malls in the second quarter, according to Reis Inc.

To compensate, retail landlords are focusing more effort on recruiting nonretail tenants such as dentists, medical offices, classrooms and insurance agents. Gyms, typically overlooked in boom times by landlords flush with other options, are emerging as big favorites in this category.

"As we expand, that is where we're going to go," Gold's Gym International President Jim Snow says of shopping centers. "That's what everybody is looking at."

Gold's, with 500 U.S. gyms either owned by the company or franchised, intends to open 17 gyms this year and 30 next year. The Dallas-based company recently introduced a 15,000-square foot express-gym format, which is less than half the size of its traditional clubs. Gold's has found that its express gyms fit well in spaces vacated by defunct or shrinking retailers. The chain recently opened gyms in Oklahoma City in locations that previously housed a Circuit City and a Sportsman's Warehouse.

Other rapidly growing health-club chains include L.A. Fitness International LLC, which intends to expand its stable of 370 clubs by opening 50 in each of the next five years. Global Fitness Holdings LLC's Urban Active is looking to add seven to 10 new clubs to its 37 by the end of 2012.

The expansions dovetail with a recent increase in health-club memberships nationally. According to the International Health, Racquet and Sportsclub Association, health-club membership in the U.S. increased 10.8% in 2010, to more than 50 million members, after several years of remaining relatively stagnant.

Also expanding in shopping centers is a close cousin of health clubs: day spas. Massage Envy Franchising LLC, which franchises massage clinics averaging 3,000 square feet, opened 43 clinics last year and another 43 so far this year, bringing its total to roughly 700. Many of the Massage Envy venues are popping up in fashion-oriented shopping centers frequented by female shoppers.

Not every health-club operator is following the herd. Clubs operated by Life Time Fitness Inc. are so huge, with indoor soccer fields, basketball courts and indoor and outdoor pools, that they typically are built as freestanding structures.

For landlords, health clubs are a cavalry riding to the rescue. In many cases, the clubs pay rent comparable to or only slightly less than what big-box retailers pay. L.A. Fitness's chief real-estate officer, Bill Horner, says his gyms are paying roughly $12 a square foot per year in the South and in the "high teens" in northern states. Gold's Mr. Snow says some older retail spaces can be had for $6 to $10 a square foot.

What is more, the costs for landlords of setting up a health club's facilities aren't onerous, roughly matching that of retailers in many cases, landlords say.

"Generally, health clubs are pretty good rent payers, in the sense that you will be able to recapture your [set-up] costs as part of the rent," says Michael Pappagallo, chief operating officer of Kimco Realty Corp., which owns stakes in 900 shopping centers in North America. "They're paying market rents for the space."

The trick comes in placating a center's other tenants about a gym's pending arrival. Parking often is a concern, as gyms tend to draw most of their patrons on Monday through Thursday nights, clogging parking lots. Fortunately, gym traffic tends to be light during key weekend shopping hours.

In addition, retailers typically want complementary stores around them to attract traffic. Health clubs don't often deliver many shoppers for fashion stores and jewelers.

In contrast, gym patrons do frequent nearby vitamin and supplement stores, pharmacies and casual restaurants that offer takeout service.

In this economy, an occasionally crowded parking lot might be tolerable if the alternative is a vacant storefront.

"We're always of the opinion that the more people we can get to a shopping center, the more chances we have" to boost the center's sales, says Greg Maloney, president and chief executive of brokerage Jones Lang LaSalle's Americas retail practice. "If [health clubs] don't come, we have no chance at all."

Write to Kris Hudson at kris.hudson@wsj.com

New App for Commercial Real Estate Analysis

Commercial Real Estate Analysis Your Way HD

Tap Tonio

 

Commercial Real Estate Analysis Your Way is a comprehensive financial analysis app that analyzes the cash flow of commercial real estate investments, leases, and loans along with calculating discounted cash flow measures like IRR and NPV.

 

It calculates IRR, NPV, and Cash on Cash before tax, after tax, before leverage, and after leverage so you can fully analyze the property.

This app also computes and shows metrics such as Cap Rate, Debt Service Coverage Ratio, and Loan to Value. You can forecast revenues, expenses, financing, cash flows, resale, rates of return, tax liabilities, and much more. 

 

Please visit us in our forum! We are committed to adding features you need or fixing issues you see.

 http://commercialrealestate.freeforums.org/index.php

 Please see the detailed screenshots below on this page!             

 

Product Features

---

◄◄SCENARIOS►► Instead of requiring you to try to analyze tiny charts and graphs the app includes five scenario generators. These scenario generators allow you to change several inputs such as price, loan percent of price, or rental rates while seeing the impact on the metrics in real time. Scroll down to see what one looks like and how it works.

► As you move the slider the app recalculates ALL the metrics in real time◄

 

• Email Properties! You can email a property to anyone with the app so they can have all your inputs. They can even make updates and send it back! This feature will also allow you to archive your properties or move them to another device. You can even email screen captures of many screens.

• Email PDFs! You can email a professional report with a cover sheet with the calculations for a property right from the app! See below for an example.

• Transparent Calculations! There is no need to worry about how the app is calculating the numbers and if it is correct. In the calculation modules the app shows how it is calculating all the tax numbers, cash flow numbers, and P&L statements for every year of the deal so you can validate the calculations or just understand the logic.

•  
  Very Convenient! You can input as much or as little detail as you want. For example you can enter one annual expense amount or enter up to 19 categories of expense such as trash, electric, insurance, and management expense.

• Powerful! This app has all the calculating requirements of a much more expensive desktop financial analysis program but has been heavily optimized to run on an iPhone. It has been fully tested on an iPhone 3GS and an iPad 1  with no background activities running. If you have a slower device or significant background activity there may be some lag in the app since it is very computationally intensive.

C-III Capital Partners Acquires JER Partners - Daily News Article

GlobeSt.com - C-III Capital Partners Acquires JER Partners - Daily News Article

Vacancy Drops in Key Logistics Hubs

Posted September 7th 2011
CCIM.com Newscenter

With absorption of more than 11.2 million square feet, California’s Inland Empire was the top performing U.S. logistics market in the first half of 2011, according to Grubb & Ellis Global Logistics Market Trends report. Inland Empire, along with Dallas (4.5 million sf), Atlanta (4.0 million sf), Chicago (2.6 million sf), northern New Jersey (2.6 million sf), and central Pennsylvania (2.0 million sf), constituted 85 percent of 1H11 absorption nationwide.

Minimal supply — a record-low 5.4 million sf were completed in 1H11 — and rising demand have driven the overall national vacancy rate down to 11.8 percent, a 200 basis point drop since year-end 2009. Philadelphia recorded the nation’s lowest vacancy rate at 2.2 percent, followed by Los Angeles (3.7 percent), Minneapolis-St. Paul (5.0 percent), Charleston, S.C. (5.4 percent), and Oakland, Calif. (6.8 percent). With fundamentals indicating the logistics market has officially hit bottom, completions are expected to rise in the second half of the year as the more than 7 million sf in the pipeline comes to market, according to the report.

Asking rents overall were up 0.7 percent nationwide over the past six months. The five highest rental rate markets across the U.S. include Los Angeles ($6.12 psf), Austin, Texas ($5.80 psf), Oakland, Calif. ($5.72 psf), Cleveland ($5.48 psf), and Minneapolis-St. Paul ($5.31 psf).

NAI Rio Grande Valley is a focused commercial real estate brokerage, consulting, development and syndication firm serving the Rio Grande Valley and based in McAllen, Texas. Our mission is to transform real estate opportunities into profits for owners, users and investors.

NAI Rio Grande Valley advises it's customers and clients on how to maximize the value of their assets and utilize real estate to their long term advantage through comprehensive and strategic planning, execution and management.

Freddie to Step Up Multifamily Loans

By AL YOON

http://online.wsj.com

Freddie Mac plans to accelerate its program to purchase loans backed by apartment buildings, increasing the availability of financing for landlords and helping to bolster the multifamily real-estate market.

Freddie Mac, the government-backed mortgage-finance giant, will likely fund more than $16 billion in apartment-building loans this year, up from $14.8 billion in 2010, said David Brickman, head of multifamily funding for the McLean, Va., company.

More than half of this year's total will come in the second half, including a just-closed $73.5 million loan on Rosslyn Heights apartments, a 366-unit complex in Arlington, Va., he said.

The bulk of the loans will be packaged into commercial mortgage-backed securities and sold to investors, which have shown strong demand for CMBS that are issued by government-backed entities such as Freddie Mac and Fannie Mae.

Fannie Mae invested $10.5 billion in the multifamily market for the first half of this year, putting it on track to exceed the $16.9 billion in purchases for last year.

At the same time, investors have been stepping away from CMBS packaged and sold by private investment banks.

"It's been steady growth, and that's a very stark contrast to what's been going on in the [private] market," said Freddie Mac's Mr. Brickman. "We are getting very strong support from the market."

The demand for Freddie Mac's commercial mortgage bonds was apparent last month, when its eighth deal of the year was caught in the middle of a ratings drama. An 11th-hour internal review at Standard & Poor's had prevented the firm from delivering final ratings on a $1.5 billion CMBS offering from Goldman Sachs Group Inc. and Citigroup Inc. and on a $1.04 billion offering from Freddie Mac. The Goldman-Citigroup issue still had a rating from Morningstar, while the Freddie Mac deal still had a rating from Fitch Ratings.

View Full Image

Gates Hudson

Freddie Mac bought a $73.5 million loan on the Rosslyn Heights apartments in Virginia as part of its expansion in commercial real-estate financing.

With only one rating, Goldman Sachs and Citigroup yanked their CMBS from the market, hired Moody's Investors Service to provide a second rating and pushed the deal into the autumn months.

But Freddie Mac's deal went off anyway, as investors told dealers they were comfortable with the Freddie Mac CMBS, even with just the single Fitch rating.

"Not a single one of more than 30 investors dropped from the deal" after the dealers reconfirmed the trades, Mr. Brickman said.

The disparity illustrates the fragile state of the $700 billion CMBS market just two years after it began to recover. As investors backed away from risky assets this summer and were met with greater rating uncertainty, banks are halting loans in the pipeline or renegotiating them with less favorable terms, said David Viklund, a real-estate lawyer at Paul Hastings in New York.

Meanwhile, yields on Freddie Mac CMBS, called K Certificates, are about 3.13%, 0.84 percentage point over a common benchmark. Yields on top-rated, private CMBS are running at about 4.84%.

The apartment-building sector, the only type of commercial real estate funded through federally backed programs, may be able to withstand any hiccups in the economic recovery, analysts said. In addition to funding availability, rising rents and a lack of supply in many regions are acting as tail winds for apartment-building values.

By contrast, office buildings and retail stores have been the main beneficiaries of the private CMBS market, with those sectors constituting nearly 80% of CMBS in the last quarter, according to Moody's Investors Service. Multifamily was "well represented" in precrisis CMBS, though the delinquency rate on those loans has soared to about 15%, making it one of the worstperforming sectors of CMBS, Moody's said.

Freddie Mac's and Fannie Mae's multifamily delinquency rates are a fraction of those for CMBS, though their funding has also been tied to excesses of the real-estate boom, such as the failed $5.4 billion acquisition of two huge apartment complexes in New York City, Stuyvesant Town and Peter Cooper Village.

Source: http://onlinewsj.com

GlobeSt.com - Bernanke’s View of the Market, As It Stands Right Now - Daily News Article

GlobeSt.com - Bernanke’s View of the Market, As It Stands Right Now - Daily News Article