If you’re a commercial real estate professional, try this commercial real estate custom search from google. searches 9 sites, including: businessweek.com, forbes.com, wsj.com, realestatejournal.com, propertyline.com
I have every exclusive listing professional photographed.
Jim Oesch, one of the best commercial real estate photographers in the country, charges me well less than $1000 to shoot a building. Jim is flown all over the country to shoot buildings.
He makes buildings look so good, I’ve actually got complaints from prospective buyers: “the building doesn’t look nearly as good in person!”
I argue your marketing materials not only sell your listing, but win you your next one. Whether we’re talking about a residential commission (in the five figure range) or a larger commercial sale, it’s money well spent.
If your mortgage broker extols the virtues of a “conduit loan,” i.e., lower rates, longer amortization, and so forth, be wary. I’m not telling you to avoid conduit loans, but if you’re accustomed to dealing with banks, say farewell to a customer service-oriented experience. Also beware of
-Lengthy prepayment lockouts
-Arduous reporting requirements
-Prepayment penalties (called defeasance) that make prepayment unfeasible
If you want to sell your building in the next year or two, I would discourage you from using this sort of debt.
Despite talk of a market slowdown, there’s clearly still many more buyers of investment property than sellers out there — at least for commercial property.
I get at 5 to 10 calls a week from investors looking to buy.
When I find the “deal of the lifetime,” who do I call?
Obviously someone who has cultivated a relationship with me.
Also, someone who has clearly stated their investment criteria to me.
Investor who call and say, “I’ll look at anything that makes sense” or “show me everything you’ve got” don’t rise to the forefront of my mind when I’m quietly marketing an exciting investment opportunity.
The investor who spells out this criteria garners instant credibility and more attention for me. What do I mean? Tell me :
-the product type/s that interest you (e.g. office, industrial, retail, multifamily, flex, self storage, residential land)
-tolerance for risk and vacancy
-yield expectations
-minimum and maximum deal size
-what you own or have owned
Do your self a favor and think this through. You’ll see more deals from brokers and buy more buildings.
REIT stocks have been hammered of late, some deservedly so. One worth a look is First Potomac Realty Trust (NYSE:FPO). It’s a nice play on one of the strongest commercial real estate markets in the country, ie Washington DC. I’ve sold buildings to them and I am impressed with the principals. The commercial real estate market as a whole is WAY oversold. Things may have slowed down but around here at least market fundamentals are sound. FPO’s dividend has grown nicely and the yield is through the roof right now thanks to the punishment the market has given the stock.
If you’re considering making a switch to a career in commercial real estate brokerage, prepare for at least a three year (yes, three year) ramp-up. That’s because the cycle of the transactions — whether sale or lease — is so much longer. It takes the patience of Job, and of course, brass balls, to sell real estate.
A mentor once told me, “the first year you weep, the second year you creep, and the third year you leap.”
One way to create value in an industrial building is to consider a roof raise. A dated 14′ clear might sit empty for years while 30′ clear and up buildings all around it fill up.
You don’t even have to do the roof lift speculatively. Space Technology Inc. will gladly take your building specs and formulate a quote to raise the roof. In fact, they will do this with every building in your portfolio in the hopes that one of these quotes will turn into a job someday. You can take the bid and market that 14′ clear building as a state of the art high cube building.
Not all warehouses are good candidates for the process, and expect the price to come in at $10 per square foot or more.
3. get a contact management program (e.g. Act!). Then really use it. Put every prospect you talk to in it. Schedule regular follow up calls. Make the calls
4. Telling isn’t selling. Put yourself in the prospect’s shoes. How can you help them make more money?
5. Consider subscribing to Lexis Nexis’s people finder service to track down difficult-to-locate owners. There you will find unlisted phone numbers.
6. Make the sales calls. It’s the hardest part. Most sales people loathe them.
7. If your focus is on selling property, work to secure exclusive listings. Make it your focus.
8. Consider taking the CCIM 101 course which teaches the basics of underwriting commercial real estate. Most of my colleagues and competitors can’t do much more than apply a capitalization rate to value a property. Being able to go a little beyond that, to have a basic understanding of discounted cash flow analysis, will lend you a TON of credibility.
9. When marketing commercial buildings targeted to users, use direct mail. You can buy lists at reasonable prices from D&B (www.dnb.com). You can design and mail the postcards from any number of online web sites.
10. I’ve sold a ton of real estate — primarily smaller assets — through craigslist. If you live in a major market where craigslist is popular, use it.
We are reaching a point in the economic cycle where it is time to start tracking distressed properties.
Look for the legal announcements in the newspaper highlighting foreclosure proceedings on commercial properties. You’ll be able to pick them out because you know the market and recognize the address, or by the loan amount listed.
I recommend that you then call the lender and not the property owner. You can find the lender most often because lenders typically record a UCC filing statement with the government to document their lein on the property. These UCC filings may be listed online, or you may need to head to your local courthouse or records office to find them.
Call the lender and find out who deals with “troubled loans” and who deals with “REO” (real estate owned). You can broker the sale of the note to an investor (perhaps at a discount). If that doesn’t fly you will want to stay in regular touch with the lender who may ultimately foreclose on the property…or the borrower may just hand the keys back to the lender.
Position yourself as the local market expert and secure an exclusive listing to sell the property!
Here’s what I wrote for KLNB’s market report covering the state of the Office/Industrial market in the Baltimore Washington Corridor (but much of it holds true for the national commercial real estate market as a whole):
The last quarter has brought with it a dichotomy of sorts in the demand for commercial investment real estate in the Baltimore Washington Corridor. The appetite from institutions for well-located, quality real estate – particularly class A buildings in the most desirable business parks – remains strong and prices for this product have held steady or increased. Relatively older or less-well-located assets have seen demand from investors diminish, and yield expectations from prospective buyers of that real estate have risen commensurately.
Driving this dichotomy is the widely publicized cred
it crunch on Wall Street. Fears of widespread default on residential mortgages have irrationally spilled over into the commercial side, despite leasing fundamentals – particularly in our region – that remain strong. As a result, Wall Street-based originators of debt slated for securitization– the lenders that have offered the most attractive terms available and have financed the majority of investment real estate that has changed hands in the past several years – have much less money available to lend.
These lenders – popularly referred to as “conduit lenders” – have become much more selective about which properties they will finance, and their money is much more expensive to borrow. Spreads — the margin over treasuries at which these lenders set their interest rates– have increased today from a range of 95 to 110 basis points over the corresponding treasury before the crisis up to a 200 to 250 basis point spread today. Complicating matters further is the fact that the market is extremely volatile and pricing changes almost daily. The other major sources of financing for larger commercial real estate acquisitions – life insurance companies and banks – have always been relatively conservative; as such it is not surprising that these lenders have not moved to meet the unmet demand for inexpensive financing.
Institutional buyers (real estate investment trusts, pension fund advisors, and the like) are not as reliant on this sort of financing and as such have continued to bid aggressively on a very selective basis, focusing on the most desirable assets in the market with almost as much relish as before the credit crisis. Capitalization rates well below 7 percent still are the norm for the most sought-after “core” office and industrial assets in the
Class B and C assets that cannot attract interest from institutional buyers are not changing hands as readily. There is market disequilibrium; many sellers have not adjusted their pricing expectations downward to meet the yield expectations of the private buyer that demands at the very least modest positive leverage from his debt. Practically speaking, at today’s interest rates, an investor needs to buy at a capitalization rate that is higher than 7.5% to 8.0% to garner positive leverage, and needs to do meaningfully better than that if the asset requires significant ongoing capital expenditures.
Owners that refinanced before the credit crunch with assumable financing – and secured record low rates and often an upfront interest-only lasting for several years– will benefit doubly when it comes time to sell: buyers will be thrilled to assume that financing and will be able to rationalize higher prices than they could if that below-market-rate financing was not in place.
User-buyers are paying the highest prices in the marketplace today, as (a) interest rates still remain near historic lows and (b) these users are more focused on the overall cost of ownership versus that of leasing and ownership frequently wins out in that analysis today. Many an owner of late expends significant time, energy and expense filling a building with tenants to ready it for sale, only to later learn the unhappy irony that the building would be worth more empty (to an owner-occupant) than full (to an investor).
More than a few would-be buyers and sellers are taking a “wait and see” attitude, with sellers expecting that the market “froth” will subside, and buyers boldly predicting greater crisis and opportunistic buying opportunities to come. Prudent sellers will price their assets appropriately and move to sell while rates remain low, rather than trying to “time the market.” Appropriately-priced and widely marketed assets still generate multiple offers from the investment community. Buyers looking for opportunistic buying opportunities are not yet finding them: there is little-to-no distress among owners of commercial real estate in the Corridor. Distress, where it exists, is nascent and primarily in the residential sector.
