O.C.R.E. Blog

How to Win the Commercial Real Estate Acquisitions Game

2011-07-29T10:01:00.000-04:00

Syndicated Post By Jeremy Cyrier

An investor called the other day and complained, "I've talked to a bunch of brokers, but can't find the deal I want. Can you send me a list of what you have for sale?"

We sent our list and asked the investor what he wanted. He said, "You know, a good deal. Something that makes sense. All I'm seeing out there are opportunities that are either overpriced or gone before I had a shot at them."

If you're an investor, here's some bad news. Investors call our office, make the same requests, get a list of what's on the market and complain about the unavailability of deals. We offer to talk through the requirement, but most say they're happy calling brokers because they'll get access to more deals that way.

Maybe, but aren't you just looking for off-market deals in on-market locations?

Remember, sellers hire brokers to represent them in the sale of their property. They want the advantage of exposure to the largest audience and to sell their property for more than they could on their own, which means when you're calling brokers, you're talking to the people that owners want you to.

Out of our own interest as an owner advisory firm, please keep calling brokers. We encourage it and we like the calls. It makes our owners happy because it proves that we're giving them great exposure and will eventually sell their property for the best price.

There are some investors, however, who refuse to limit themselves to the brokerage world. For those who choose to go off-market, we won't lie to you. It's hard work and it costs money, time, and energy.

One client came to us and required an industrial building in the greater Boston 93/128 interchange market. Out of 50 potential properties in existence, we sourced 6 sites that could be purchased, and the client selected 3 to seriously consider. Of the original 6, 20% were listed for sale by the owner or with a broker, while the rest of the properties were off-market.

The trick to sourcing and winning the acquisitions game is to know what you want, identify where it exists, and then work through the market one commercial property at a time until you find the motivated seller willing to work with you in a transaction. It's not difficult. It just takes time and energy to stick with program until you get the results you need.

Jeremy Cyrier, CCIM believes that actions without meaning are worthless. He is the President of MANSARD, a Massachusetts commercial real estate marketing and brokerage firm and is a member of the CCIM Institute faculty. You may reach Jeremy at Jeremy@Mansardcre.com or at http://www.masscommercialproperties.com.

Article Source: How to Win the Commercial Real Estate Acquisitions Game

Why Commercial Real Estate Is Not a Hammer and Nail Business

2011-07-18T09:38:00.000-04:00

Syndicated Post by: Jeremy Cyrier

You've heard the expression, "When the only tool you have is a hammer, everything looks like a nail." When you have one formula for capitalizing on commercial property investments, you try to make your deals work one way.

A broker called to ask how we sold a commercial property investment he had competed against us to list. We sold the investment for 35% more than he estimated based on his review of the property's numbers. It didn't add up.

He took the owner's gross income, subtracted the vacancy/credit loss and operating expenses to derive the net operating income. He applied a market cap rate to the deal, derived the commercial property's income value, made his recommendation and hoped to be hired for the listing.

They didn't like his price.

Here's why his hammer didn't work:

The owners were debt-free on this specific commercial property.
There were 3 stakeholders hoping to sell the investment for an above market value.
Cash flow was important to one because she was retiring during the sale.
The debt market was frozen and deals were difficult to finance.
One of the owners sought to pay off a primary residence mortgage with the sale proceeds.

After our stakeholder interest analysis, we presented a solution to the owners that allowed them to convert their equity to cash flow with an installment sale. To achieve above market value, we sold the commercial property with below-market financing terms that gave the new owner ample cash flow to operate the property, pay his annual debt service, and time to secure new financing once the property was stabilized at its highest and best use.

The recurring cash flow supported the owner looking for a retirement income. We bypassed the debt market because the sellers carried the paper. And we required the new owner to make a 17% down payment, which extinguished the other owner's mortgage obligation and paid for the cost of sale.

If you haven't done an investment deal lately or are having trouble finding the "right" opportunity, start by looking at the property investment strategies you've been using. Is there a pattern in your deals that could be your hammer and nail?

To get different results, you have to try different things. Put your hammer away and ask questions in the deals you're considering. You may find new information and new opportunities that will become new ways of making your investment goals come to fruition.

Jeremy Cyrier, CCIM believes that actions without meaning are worthless. He is the President of MANSARD, a Massachusetts commercial real estate marketing and brokerage firm and is a member of the CCIM Institute faculty. You may reach Jeremy at Jeremy@Mansardcre.com or at http://www.masscommercialproperties.com.

Article Source: Why Commercial Real Estate Is Not a Hammer and Nail Business

Are Mobile Home Parks A Good Investment?

2011-06-24T15:45:00.000-04:00

By Jo Amick

Mobile Home Parks- Substance over Looks?

As an investing strategy, mobile home parks are not known for their glamour (looks), but for their cash flow (substance!). It's amazing how we can overcome our apprehension and hang-ups when it comes to investing in a mobile home park when faced with a great investment opportunity. Now, there are some beautiful mobile home communities; fantastic landscaping, paved roads, new homes that are well-kept. But that's more the exception than the rule.

I have learned that mobile home parks are among the many great real estate investment opportunities out there. As an investor if you have preconceived notions about certain properties, you could miss out on a great deal. This reminds me of a conversation I just had.

Recently I was speaking with someone I used to repair the HVAC at a rental property, and he was sharing a story about a friend of his who had the opportunity to buy a mobile home park, and asked Charlie if he would like to go in on it with him. Charlie hesitated and then declined the offer, thinking he did not have several hundred thousand dollars to invest, and was not exactly thrilled at the prospect of owning 'trailers'. The investor decided to go it alone and buy the park himself. All I knew of the details was about 20 plus units. He did call Charlie later to tell him that the seller was highly motivated, and he got the whole park for about $40,000. At this point, Charlie- not knowing any of the numbers (OE, NOI, upside potential anyone?) was already kicking himself. "If I'd have known that, I'd have written him a check for 20 grand on the spot!" were his exact words to me.

What changed his mind? The price, of course! That mobile home park looked at little shinier, a little brighter at that price! And although you never know a deal until you really look at the details. I thought he was probably right in that he had made a mistake.

So what's the moral of the story? Never mistake Substance by going for Looks. As an investor, the key is in the numbers. There are a lot of incredible deals out there, and you have to keep your eyes and ears open to catch them. Don't let your built-in biases hold you back. You could miss the opportunities that can change your life.

Jo Amick invites you to learn to earn high and even INFINITE returns investing in commercial real estate with a group (on money you used to have sitting in pathetic CD's at 4% or less) when you become a Select Member with America's #1 Real Estate Network today! Join us for an upcoming educational presentation online to get information or to get started now: http://www.hisrealestatenetwork.com/713

Article Source: Are Mobile Home Parks A Good Investment?

Weatherman Jay Scotland Wants to Call His REALTOR

2010-12-21T10:28:00.000-05:00

This is a little old now, but I just found it on http://www.ptbocanada.com/journal/2010/12/21/video-peterborough-year-in-review.html and had to share. Jay was 'arrested' for charity and at about the 2 minute mark he asks for his lawyer and, remarkably(?), his REALTOR! Give me a call anytime you need some real estate help Jay :)

Commercial Real Estate Optimism - I'm Not the Only One

2010-12-16T11:19:00.000-05:00

Sam Zell is thinking long term and reading the signs...CRE will recover and price will rise.

Real estate mogul Sam Zell said he expects little U.S. commercial real estate construction over the next one to three years except for apartment buildings, a hiatus that would restrict supply and boost the value of existing properties. "We're now approaching 3 1/2 years of no development, and I see little prospect for new supply over the next 12 to 36 months except multifamily." With little new supply, the value of existing (properties) should increase and vacancies should fall, Zell said. "I think real estate is going to do well over the next 24 months."

found via http://bit.ly/eeXwK5

Picking and Paying Your Jerry Maguire

2010-12-13T10:27:00.000-05:00

Nice video by John Warrilow on the importance of cultivating relationships with business brokers and mergers and acquisitions professionals.

How to Win at Commercial Real Estate Negotiation

2010-12-09T09:52:00.000-05:00

http://www.sxc.hu/profile/Mattox

A Syndicated Post By John Highman

Commercial real estate is a category of property that is structured around income performance. It is the lease that provides the stability to the income performance. When you get the lease correctly structured and agreed, the property will be a performing asset. Poorly leased properties with random lease documentation on average achieve lower sale prices when purchased by an investor.

If you are a property investor, you will be very interested in the structure of the relevant property lease and the stability of the sitting tenant. If you are a real estate agent, it is important that you develop lease controls and processes that optimise the tenancy outcome for the landlords that you serve.

The lease on a property will impact the cash flow for many years, hence careful control and decisions are part of the process.

To lease a commercial property, it is not just a matter of making decisions regards rental and lease term. The critical elements of the lease document will include important points such as:

The type of rental paid is actually more important than the level of rental. This rental type can be gross or net rental and the recovery of outgoings from the tenant will be impacted by the choice of rental. The net income for the building is driven from the decisions taken by the landlord in this regard.
The initial lease term should be carefully considered and this is done at the commencement of the lease when the tenant is found. Usually this lease term will be a number of years based on the negotiation between the tenant and the landlord. In most property types, it is not desirable to have lengthy lease terms which restrict the landlord from future property decisions. This has to be balanced against the landlord's requirement to do the lease deal in the prevailing market at the time. A landlord should always retain control over the asset and not randomly give lengthy lease terms without careful consideration on the future of the investment property.
An option for a further lease term. Many tenants prefer and seek to have an option for a further lease term. This gives them stability in the business operation. It does however restrict the landlord from future property decisions and any associated strategies such as redevelopment or refurbishment. This then suggests that the option for a further lease term should not be given without careful consideration.
The incentive given for any initial lease term may exist and may vary by type. When property markets become less active or frustrated by the economy, tenants will ask for an incentive as part of taking up a lease; the landlord will have little choice. The incentive can be a variety of methods including cash, landlord fit out, reduced rent, or rent free period. The choice that the landlord makes is largely dictated by the impact of the incentive on the landlord's taxation position. For example, a landlord funded fit out may be an item of expense which may create depreciation under local taxation laws. The landlord needs to check this out with their accountant. It could be that the landlord will see the depreciation as more useful than a rental reduction or rent free to the tenant.
The permitted use for the premises should be clearly outlined in the lease documentation. What you should be seeking to do is control is direct the way in which the premises are used. This is critical when it comes to future occupation and potential assignment of the lease. It is to the landlord's advantage that the property is used specifically for an agreed purpose. This then prevents any conflict with the tenant mix in the property. When the tenant mix is poorly controlled, it will impact the rental and destabilise the property. As you would expect, this is critical in a retail shopping centre.
The outgoings recovery is of concern to the landlord and the tenant. The outgoings that are recovered from the tenant should be clearly detailed in the lease document. When a property is sold in the future, the recovery of outgoings will be of great interest to the buyer of the property. They will be seeking to maximize their net return and recover as much from the tenants as possible.
The controls imposed on a tenant during fit outs are important if you want happy tenants in the building. When a fit out is commenced for a sitting tenant, it is in the landlord's interest to control the trades people on site and the approval processes for the fit out works. This will allow the landlord to achieve the quality of fit out construction that complements the building whilst not upsetting other tenants in close proximity. Part of this will be the due regard to the structural drawings and design of the building. Any tenant fit outs should be approved by the landlord before the works are commenced. It may also be that the local planning authority should approve the fit out design and drawings before they are undertaken.

John Highman is an expert in investment real estate strategy, property performance, and tenant mix analysis and strategy. He is an author and coach that helps property investors, and real estate agents improve their retail, industrial, and commercial real estate opportunities and targets.
John has specialized in major commercial, industrial, and retail property for over 30 years. He knows what works and what doesn't. He gives you the 'good oil' on getting active and achieving results.

You can get John Highman's free tips and tools in commercial, industrial, and retail property at http://www.commercial-realestate-training.com

Article Source: http://EzineArticles.com/?expert=John_Highman

Getting the Real Truth in Commercial Property Inspections

2010-09-08T13:51:00.000-04:00

Syndicated Post

By John Highman

When looking at a new commercial or retail investment property for the first time, it is wise to have some form of checklist and system which assists you in the process. We have created this checklist to help get you on the right track.

When inspecting the property is almost like having your own due diligence process underway. Do not believe everything you see and certainly investigate anything of question. Anything of importance that someone tells you about the property should be investigated.

Having a keen eye for property detail and a diligent record keeping process as you walk around is the only way to inspect investment property. It is remarkable how these records have to be revisited at a later time for reassessment.

So let's consider the following as some of the basic issues to review in your property inspection process.

A copy of the land title records is fundamental to your inspection before you even start. As part of this process, also seek out a copy of the survey records and any existing leases or licences. Also seek out any unregistered interests that may not appear on the title to the property. If in doubt seek a good property solicitor to help.
Take care to understand the location of the property boundaries and look for the survey pegs relevant to the survey plan. If in doubt seek a good surveyor.
Within the property land title there can be a number of easements, encumbrances, and other registered interests which need fully investigating. These interests can impact the price that the property achieves at the time of sale and can also impact of the method of lease occupancy. If any registered interests exist on the property title, a copy of the relevant documentation is the first stage of the investigation which should then be followed by questions.
Local council records may also have impact on the property. Are there any orders or notices that have been issued or are outstanding on the property, and can these things be of concern to the potential investor?
The zoning for the property and the zoning activity or changes in the precinct can impact a property. As part of this process, it is wise to include neighbouring properties and inspect them to ensure that they have little or no effect or impact on your subject property.
Copies of the local town plan will help you understand current planning issues. A discussion with the local planning office or planning officer can put you on the right track and explain any current issues or matters that may arise. In this process, it is wise to keep records of the discussions and the findings.
If copy of lease documentation is available for neighbouring properties then seek it out and review it. It is always good to know what the neighbouring tenants are doing and how long they will be there.
The local topography and plans across the immediate area will help you understand the fall of the land and the impact of any slopes and natural drainage. Look at the location of any water courses and flood plains. Seek out the history of any flooding in the area.
Supply of electricity into and across the area should be understood. If your property is an industrial property then the supply of energy to the property will be strategically important to any industrial tenant. If any easements or encumbrances exist across the property for electricity, then seek to understand the rights and obligations that these documents create on the property owner.
Services and amenities to the investment property will impact the future operations and interest from the business community. To the question to ask here is the nature of these services and amenities and whether they are well maintained.
Look for changes in road and transport corridors that impact the property or region. Any change in roads can dramatically shift the way in which property is used.
Look for the location of public transport and its potential to enhance your property function. Many businesses need stable and frequent public transport to help employees access their jobs.
Look at the community and business demographics of the region. The growth patterns for the last 5 to 10 years will help you understand the future of the property.
Other property valuers in the area are a good source of market intelligence. They can usually tell you the history of the area and the current business sentiment. Rental levels, incentives, and sale prices per square metre are valuable elements of market intelligence. They will all have impact on the yield that the property presents to any property investor.
Look around the area to see how many other properties are currently available for sale. Seek details of these properties and the prices being sought. If these properties have been on the market for a long time it will give you an idea of just how acceptable the regional prices and business sentiment is at the time of your inspection.
Look around the area to see how many properties are currently vacant. With reference to each particular vacant property, get details of the rental being sought and the time that the property has been on the market. You will need to form their own judgment on whether these rentals are relevant and reasonable in the current marketplace.
The supply and demand of vacant space by property category is an investigation to be undertaken in the region. What you want to know is exactly how much space is coming into the market in the future and how much space exists now for tenants to occupy.
Check out any new property developments that could be in the early stages of consideration and development approval. The key question here is the impact that these properties may have on your property.
The history of the area is always of high value to you. In commercial, industrial, and retail investment property, the history that you are after is the last five years. It is remarkable how much information you can glean from regional property sales and rental trends. Given that commercial and retail investment property works on the cycle of rise and fall, it is the history that can open up your understanding of what's been going on and where things are headed.
With any property investigation, and particularly with properties that are complex and large, it is wise to seek out the comments of architects and engineers. What you need them to do here is comment on the structural integrity of the property and its future usable life. Also seek to identify how the property may be expanded or refurbished when times require.
Chase down the tenancy schedules for other properties in the area. Whilst these are not always easily obtained, they are of high value. They will tell you so much about the activity in other properties and buildings that may impact your future leasing strategy or property sale. What you do not want is a significantly high vacancy factor near your property when you are trying to lease it.
Review the local precinct for the larger businesses and how they operate. In doing this, you can understand who are the major business players and the major employers. Having these companies in the area is good thing, but losing them can be a major threat to the region. We call this the business stability factor. It should form part of your investment property assessment for the future.
Review the other major tenancies in the area and see how they operate. They can both stress and enhance the area depending on how they operate and the times of day that they do so. Of prime example is a transport company that has vehicle access peaks at certain times of the day. This can challenge the other businesses in the area and how they operate.
Walk around the precinct and the property taking many photographs for later investigation. It is surprising how useful photographs become for the reassessment of the property inspection. Walking through the streets in the region allows you to get a feel for the function of the streets and the neighbouring properties. It puts you in greater perspective for the services and amenities, and the function of all local surrounding businesses. A tip in the keeping of digital photographs for later evidence is the reversion of the important photos to 'gif' type files. This format is not easily changed and therefore more stable as court evidence of critical matters.
Knock on the doors of the other local businesses and talk to them about how things operate locally for them. Other tenants and businesses in the region will tell you so much and put you on the track of challenges and problems in the region.

Inspecting the commercial investment property is very much a physical process. In only this way can you completely connect with the property function before you form an opinion of its suitability for your plans, pricing, rental, or occupancy.

John Highman is a prominent investment real estate speaker and coach that helps property investors, and real estate agents globally to improve their commercial real estate property performance. He himself is a successful real estate agent that has specialised in major commercial asset sales and leasing for over 30 years.

You can get John Highman's free tips and tools in commercial, industrial, and retail property at http://www.commercial-realestate-training.com.

Article Source: http://EzineArticles.com/?expert=John_Highman

Commercial Real Estate Success - The First Step

2010-06-22T14:19:00.000-04:00

Syndicated Post by Darin Garman Platinum Quality Author

"The gem cannot be polished without friction, nor man perfected without trials." -- Chinese Proverb

One of the things to help you reach your commercial real estate and your wealth goals in the next year is really decide which track is best for you at your current place in your "investment life."

I have a lot of investors contact me with the same question, especially in recent months...

"How do I get into some great commercial real estate properties that will start building my wealth ASAP?"...Or something to that effect.

First, decide what your track is. What do I mean by track? I mean deciding how to proceed based on where you are AND what your expectations are.

Be realistic with this and schedule some time to work on planning for your wealth goals this year. If you are reading this article, I can guarantee you have heard 1,000 times to write down your goals. But I would make another suggestion that is critical to your success - write down what you DO NOT WANT from your investment business.

For example, on my list I have the following items:

I do not want a large amount of unnecessary overhead expenses.
I do not want to be a "hands on" landlord.
I do not want to be involved in the day-to-day property management operations.
I do not want a large number of employees.

You get the picture. What you will find is identifying what you DO NOT WANT is just as important as identifying the goals you want to achieve.

The reason this is so critical is if you choose a wealth goal that violates one of your "DO NOT WANT" list items, you will not achieve it. Many investors fall prey to what I would call 'other people's goals" - whether those be of a spouse, business partner, or friend. I have even seen very experienced investors make this mistake.

Make sure you include these items in your planning:

1. Make a list of "DO NOT WANT" items for your commercial real estate business.
2. Make sure your "WANT" list does not violate these rules.

This is one of the best way to get to your goals, faster. No question about it. So, decide where you really want to be and GET SERIOUS about accomplishing all you can in THIS YEAR. Remember, if you are not where you want to be at this point you have no one to blame other than yourself.

Do you want to learn more about investing in commercial properties? Click the link below for my FREE 7-Part Investment e-Course. I'll also send you my FREE special report and teleseminar access "How to Buy Apartments and Commercial Real Estate With No Or Low Money Down."

Download it free here: Commercial Real Estate.

Article Source: http://EzineArticles.com/?expert=Darin_Garman

Real Estate is Like Golf

2010-05-14T16:05:00.000-04:00

Follow the Wheel Estate Cam for more.

Building a Stellar Condo Conversion Team

2010-05-06T13:24:00.000-04:00

Syndicated Post

All successful condo conversions rely on the efforts of a great many people, and building a condo conversion team that you can work well with is paramount to a successful and lucrative project. The people you surround yourself with will be your most valuable resource for information, skill and guidance. Here is a brief rundown of the good people you will want to find for your team.

Mentors
One of the best ways to ensure success is to copy and do what successful people do. If you aspire to be successful in the field of condo conversion, then it only makes sense to forge some friendships with others who are doing that already. Study what they've done and what they're doing. Ask them what mistakes they've made and what lessons they have learned, so you can avoid similar pitfalls. Everyone who is trying to master a skill can learn best from a mentor. Ideally, you want your mentor to be someone who has completed a few successful condo conversions, and is willing to share that information with you.

Real Estate Broker
Since you are dealing in real estate, a knowledgeable and experienced commercial broker will also be a valuable member of your team. You can't begin your project without finding the best property for your investment, and this is the person who will help you find what you're looking for, and will be at your side to guide you through each and every step of the process.

Construction Lender
Next on the list should be a banker that you respect and trust, and who has experience working with real estate investors. You are going to need loans and financing to fund your project and this is the person who can make it all happen. It's not a bad idea to look to your own personal banker first and see if that will be a good fit. After all, you already have a relationship and it may work out just fine.

Bookkeeper and Accountant
To help keep things in good order financially you will also need a reliable and knowledgeable bookkeeper and accountant. Again, it is wise to seek out professionals in this area who have experience working with independent business owners and if possible who also understand real estate investing.

Architect
An architect will be needed for some projects so it's a good idea to establish a relationship with one right away even if you may not need the service for your first project.

Real Estate Attorney
A lawyer who is experienced in working with real estate investments will be of enormous value when it comes time to handle all the legalities of your purchases, sales and the day to day functions of your corporation.

Building Inspector
You will also want a reliable building inspector as part of your team, preferably someone who has lots of experience. Missing a major flaw during an inspection can cause you plenty of dollars and headaches down the road.

General Contractor
Naturally your team will also include numerous members from various trades. The best way to establish this team is through a general contractor that you get to know and trust.
Building a reliable team is one of the most important steps of your condo conversion project. Build it well and you'll save yourself time and money in the end.

If you liked this article about condo conversion investing, tell all your friends about it. They'll thank you for it. If you have a blog or website, you can link to it or even post it to your own site (don't forget to mention http://www.TheCondoKit.com as the original source), or just come visit our site to learn lots more.

About the Author
Matt Sparks is a successful entrepreneur, both offline and on. He is also an amateur rock climber and author. He has written books, articles, and blogs about social business, real estate, finance, New Urbanism, sustainable cities, longevity, and rock climbing.

(c) Copyright - Matthew R. Sparks. All Rights Reserved Worldwide.

Article Source: http://EzineArticles.com/?expert=Matt_Sparks

First Quarter Commercial Real Estate Sales Up in US Too

2010-04-26T15:00:00.000-04:00

After posting yesterday about the tremendous year over year increase in City of Peterborough commercial real estate sales (Yeah, I know it's a small number -> 8 vs 3 sales, but this isn't a major metropolitan area either!), this tidbit was released today on nreionline.com:

Q1 CRE Sales: Change in Attitude
Apr 26, 2010 1:55 PM, By Ben Johnson, a special to NREI from OKCREview

What a difference a year makes. You hear that a lot around the commercial real estate industry today, especially when it comes to the overall investment sales market.

According to new data from New York-based researcher Real Capital Analytics (RCA), sales volume reached $15.4 billion, which is a 50% increase from the first quarter of 2009. More good news: Every property type registered higher volume.

Surprisingly, despite the huge overhang of distressed properties, it was core rather than distressed sales behind the volume gains. Sharp declines in cap rates were recorded for certain assets due to competition among buyers and the rapidly improving debt markets that are allowing buyers access to low interest rates.

Let the good times roll....I can dream can't I?

Source: http://bit.ly/8XQ2gF

Peterborough 2010 Commercial Real Estate Market Off to Great Start!

2010-04-25T16:35:00.000-04:00

It's a bright new day for commercial real estate in Peterborough!

Just a quick note about sales volume and dollar volume of commercial sales reported on Peterborough and the Kawarthas Associaion of REALTORS® MLS®.

In 2009 during the period from January 1 to April 25, there were a total of 3 property sales recorded within the City of Peterborough, not including leases and business sales of course. In 2010, during the same period, there were 8 property sales through the MLS® for the City. This is an increase of over 166%!

Looking at the dollar volume of sales is even more striking. During this same time period in 2009, the total sales volume was just $684,000. In 2010 year to date, total sales volume was $4,105,000. This represents an increase of just over 500%!

And you thought the commercial real estate market in Peterborough was slow...

Moustached Americans Seeking Tax Break

2010-04-15T13:30:00.000-04:00

And now for something completely irrelevant to commercial real estate! I love it! Here's hoping we can get a similar scheme passed here in Ontario :)

By QMI Agency

Moustached Americans are looking for a tax break from Uncle Sam.

The American Mustache Institute (AMI) says the "social and environmental benefits to moustache growth and maintenance provide a service to the U.S. economy."

And at least one expert agrees with them.

Dr. John Yeutter who is an associate professor of accounting and tax police at Northeastern State University in Oklahoma says in his paper, Mustached Americans And The Triple Bottom Line, that moustache maintenance is a deductible expense.

"Given the clear link between the growing and maintenance of moustaches and incremental income, it appears clear that moustache maintenance costs qualify for and should be considered as a deductible expense related to the production of income under Internal Revenue Code Section 212," he wrote.

Yeutter points out that in the U.S. Congress, there are 29 Democratic members sporting moustaches and 12 who have beards.

Previous congresses have provided tax incentives for specific societal segments whose efforts enhanced economic growth, Yeutter said.

The AMI is suggesting a $250 special deduction for moustache grooming supplies. It says those tax incentives could be used to purchase items like wax, facial hair colour, moustache combs and mirrors, condoms, moustache insurance and "Burt Reynolds wallet-sized photos."

Source: http://www.torontosun.com/news/weird/2010/04/15/13597256.html

Sometimes You Just Have to Jump Off the Edge

2010-04-12T09:11:00.001-04:00

After seeing this video, I'm reminded of the importance of just getting in there and doing it! You have to jump off the edge sometime.

Coincidentally, I read a great post this morning on the Bloodhound Blog titled: Simple Concept – Not So Simple To Execute – Grow a Pair It's a great read, and worth taking the time for.

GTA Commercial REALTORS® Release Commercial Market Report

2010-04-07T17:12:00.000-04:00

TORONTO, ONTARIO--(Marketwire - April 6, 2010) - In March, TREB Commercial Members reported 860,895 square feet of leased space, a 104 per cent increase from the 421,642 leased square feet recorded in March 2009, Commercial Council chair Garry Lander announced today.

In the first quarter of 2010, lease transactions for commercial space increased 73 per cent from the first quarter of 2009.

"Demand for commercial real estate is strongly related to economic growth and job creation. As company's order books expand, they will take on more employees and many will ultimately require more space," Mr. Lander said.

"The level of GTA employment has been trending upward since the summer of 2009, with the Canadian economy growing more strongly than expected. The commercial market has benefitted."

Lease rates for industrial space dipped to $4.91 per square foot net (sfn) from the $5.59/sfn figure recorded in March 2009. Commercial and office lease rates rose, with the former trading for $18.59/sfn compared to $17.44/sfn last year and the latter climbing to $12.47/sfn compared to $9.78/sfn last year.

Sales Market Highlights

TREB Members recorded 54 sales of IC&I properties in April, including 34 industrial buildings of all size categories, with an average selling price of $70.27 per square foot. This compares to a figure from non-MLS sources of $70.60 per square foot.

For a complete copy of the Commercial Realty Watch visit www.TREBCommercial.com.

Members of the Toronto Real Estate Board's Commercial Division adhere to a strict Code of Ethics and Standards of Business Practice, only those who have met the standards established by their peers are eligible to become Members.
Greater Toronto REALTORS® are passionate about their work. They adhere to a strict Code of Ethics and share a state-of-the-art Multiple Listing Service. Serving over 28,000 Members in the Greater Toronto Area, the Toronto Real Estate Board is Canada's largest real estate board. Greater Toronto Area open house listings are now available on www.TorontoRealEstateBoard.com.

For more information, please contact
For Media/Public Inquiries:
Toronto Real Estate Board
Mary Gallagher, Manager Media Relations
Office: (416) 443-8158
Email:maryg@trebnet.com
www.TorontoRealEstateBoard.com

How to Find the Right Commercial Real Estate Broker

2010-03-23T17:16:00.000-04:00

Syndicated Post by Darin Garman

One of the things that can really catapult your success investing in apartments and commercial real estate is working with the right commercial broker. Finding a great deal is really all about the numbers, and getting more deals across your desk. Working with the right commercial broker will not only save you time, but make you a lot of money by getting opportunities in front of you.

So the question is, "How do you find the right commercial broker?"

I will "bottom line" this for you and make it easy. Make sure you find a broker that does nothing but investment real estate and specializes in it. DO NOT use a broker that is a "jack of all trades," meaning going from an open house on a Sunday to chatting with you about the 320 unit property on Monday.

You want someone that does nothing but spends time in the investment real estate world.

Why?

The specialized knowledge that a commercial broker has will be able to get you more GOOD opportunities to look at and because they know the market will be able to identify properties that can be very profitable. A good broker can also assist you in developing ways to purchase the property where you are making money at the closing table too. Plus they will help you avoid some of the common investment mistakes, as well.

This, more than any other of my "rules" is violated, and the investors that do violate this many times pay for it too. Make sure that you are not one of them.

Do you want to learn more about investing in commercial properties? Click the link below for my FREE 7-Part Investment e-Course. I'll also send you my FREE special report and teleseminar access "How to Buy Apartments and Commercial Real Estate With No Or Low Money Down."

Download it free here: Commercial Real Estate.

Article Source: http://EzineArticles.com/?expert=Darin_Garman

A Creative Strategy You Can Use to Buy a Business Now

2010-03-05T09:02:00.000-05:00

Syndicated Post by Martin Shultz

You want to buy a business now. You believe that market conditions in your target industry have bottomed and are most likely to improve. You need a creative strategy that will allow you to satisfy wants and needs of prospective business sellers, but still not expose you and your capital to too much risk if your timing is wrong. In summary you want the best of both worlds.

Yours is not an unreasonable request. And there is a proven and much used creative strategy that both buyers and sellers have used to bridge these kinds of gaps for decades. It had probably fallen into disuse during the expansionary period leading up to the current severe recession. It was not needed very often because of easy availability of relatively cheap debt, and because most people believed the good times would continue to roll. And most who didn't believe this weren't going to step into the path of an oncoming freight train by buying a business.

The circumstances that have brought about the need for this creative strategy are different than those common during this last expansionary period. Now there is uncertainty about future prospects. Both in terms of direction and in terms of amount. This disparity will tend to create a significant gap between the future expectations of most businesses for sale, in the minds of current owners, and prospective buyers. And the respective views of the future may not even be expressed explicitly. They may be implicit in their respective views of the underlying value, and related price of a business.

Sellers understandably want to ignore or seriously discount the results on their respective businesses of the past couple of years. They want to revert to the industry multiples that had previously been used as rules of thumb for valuations in their industry. And in doing so, either want to average the past few years cash flow results, and apply the multiple on the average, or something similar.

As a buyer, you have a different perspective. You would certainly like to get a bargain, and buy a really great business at a considerable discount. But in the real world, that doesn't happen very often. So you need a creative strategy to get you to a situation that is almost as good. And that is a situation where you won't lose money if you are wrong. This is consistent with Warren Buffet's rule number one for investing. It is "Don't Lose Money". (And as information rule number two is remember rule number one.) Or at the very worst, you will lose money but you know how much, and are prepared to risk that amount.

Let's get down to basics. You are evaluating a business that you are thinking of buying. You may be having difficulty justifying the asking price. It is not consistent with your view of the future. You may not be as confident as the current owner about the specifics of future expectations for the performance of the business. You may disagree with the timing of the cash flows his price implies. You may also disagree with the actual size of the annual cash flows his price implies. And there may be other issues including expectations for future interest rates. All of these have caused you to believe that at the asking price you will not achieve your expected return on capital. Or even worse, cause you to lose money. And worst of all, it is difficult to quantify the loss you could be exposed to. It may be time for some creative buying.

In these circumstances, many buyers will work diligently to convince the seller of the error in his thinking. In some situations that may work. But there are other factors working against you. The seller may have become fixated on a price, and this fixation will close his mind to your argument. An old uncle of mine used to say "convince a woman against her will, she's of the same opinion still". I am certain he was not the author of this what we would now consider to be a sexist remark, but used it frequently. He failed to realize that it applies equally to men and women. So try as you might, your attempts at reason and logic may well fail.

There are other details that will come into play as well. And they are very important to enhancing the buyer's willingness to accept part payment in the form of an earn out out (sic). So you need to have the details clearly understood and incorporated into a formal agreement. Things like what triggers the obligation to pay, and when payment becomes due. You will need professional help to accomplish this, either from a lawyer or accountant experienced in working with this concept. Make sure that the agreement contemplates the seller being provided with some right to audit so long as you have earn out related obligations to him. That way you should avoid any feeling on his part that he is being cheated. Proactively offering the right to audit will help you sell him on the concept in the first place. It will show him that your intentions are strictly honest.

This type of creative strategy is one that gets the seller what he wants or close to it. Provided that future events unfold in accordance with his stated or implied view of them. But it saves you from paying for something that may not take place, until it does happen. It effectively saves you from paying today, for a future that you don't experience, and one that you don't benefit from. You will be in a position of agreeing to pay for these future results, and paying for them, as you experience their benefit.

Will this work in every situation? Not likely. But proposing a creative strategy like this will demonstrate to the buyer that you agree with his price, so long as it is justified by results. Nothing works in each and every case. But you have nothing to lose by proposing it, particularly when it is obvious to you that you will have a disagreement on price without it. What is the worst that can happen? The seller will say no. And that is not fatal. What is more likely is that the seller will ask questions for clarification. Providing you with an opportunity to explain and discuss the situation. Be flexible in considering his input. So long as it is consistent with your risk management approach.

You may have to give a little on price in order to properly manage your downside risk. You may end up paying a bit more than you originally wanted to pay. But does that matter when you are paying with income that exceeds your original expectations? And only from this incremental income. It is not unlike paying commission on a sale that you wouldn't have made without the efforts of the individual entitled to the commission. You will be paying purely for results. At least on the earn out portion. Consider the slight increase to be the premium that you are paying to insure your risk.

For more actionable information that will help you in assessing a business buying opportunity take a look at the information at http://www.selling-a-business-without-stress.com/freereport.html. Although it is written to help sellers of businesses, it will work well for you. It is written from the perspective of what buyers should look for in a business, and accordingly what business owners should provide.

The author, Martin Schultz is a leading authority in preparing a business for sale and the publisher of the free information site http://www.selling-a-business-without-stress.com which provides actionable information about selling a business. His experience includes over 20 years evaluating acquisitions including as one of the founding shareholders of a publicly traded company that grew through acquisition. (After merging with another business of similar size, the merged company now trades on the NYSE.) His other credentials include an MBA from a highly respected North American university, followed by over 30 years of business experience. Martin is now an author and business consultant in corporate finance.

Article Source: http://EzineArticles.com/?expert=Martin_Schultz

Still confused about an 'earn out'? Stay tuned and, in an upcoming article, I'll get into the explanation of the mechanics of this creative business purchase and sale option! - Doug

Commercial Real Estate Recovery Stronger Than Many Realize

2010-02-24T16:40:00.000-05:00

The recovery is stronger than many realize, says Chaim Katzman, chairman of Gazit-Globe and Equity One. His reasoning? Good deals still are very scarce. Katzman has been raising capital and recycling funds through new partnerships in anticipation of more investment opportunities coming to market, he says. "The bid-ask spread is narrowing as more people realize that things aren't as bad as they first thought," he says.

Video Link: http://bit.ly/aYNuao

Source: reit.com

More videos from NAREIT: http://www.youtube.com/NAREIT1

Commercial Real Estate Bottoming

2010-02-12T08:03:00.000-05:00

In reference to the ever popular claim, "Commercial real estate is the next shoe to drop" - which, in my opinion, is the most over-hyped and over-used sensationalist claim in modern business reporting history - Walt Rakowich, CEO of Prologis says:

"...the shoe has dropped....that's old news..." - emphasis added

Time to start looking at the next part of the cycle folks.

via Deal Junkie

Peterborough This Week Asks: Does Peterborough have the infrastructure it needs to grow?

2010-01-28T14:46:00.001-05:00

In this article yesterday in Peterborough This Week, Joel Wiebe explores a recent report on projected growth for the city and county of Peterborough. One of the main themes of the piece is the need for improved traffic movement in the city and the debate that just won't die: The Parkway.

Facing a 13 per cent population growth and only a four per cent employment growth, he (Jeff Leal, MPP) says reflects the City's demographics, with many retired residents here and more on the way.

MPP Leal points out it also shows increased commuters using services like the Go buses.

The City's director of Utility Services, Wayne Jackson, says it is up to councillors to determine what is too congested for a road. Is an extra 15 minutes in a commute acceptable?

"Time is money for businesses," he says of possible economic impacts.

He highlighted Mayor Ayotte's comments about people heading down residential side streets if the roads get too busy. This leads, he explains, to angry residents.

Good alternatives need to be found, he adds, whether it means expanding or altering current roads to allow more traffic to be handled or to entice people use different roads.

I can't believe I agree with Coucillor Peeters, but:

Councillor Patti Peeters has a simple answer -- build The Parkway.

"Why are we still talking about The Parkway?" she asks. "Because we need one."

This is something I've been vocal about in the past. Click here for my letter to the editor, and here for a response to that letter about the Parkway. Councillor Peeters is absolutely right, we need the Parkway and it should have been built 50-odd years ago when the land was assembled. Roads identified in the print edition of the paper as congested or in danger of congestion included: Monaghan Road, Parkhill Road, and Fairbairn Street. Sounds suspiciously like the route one would take if the Parkway existed...

Route taken by many city residents today.

Parkway Route as envisioned by city planners 50 years ago.

Of note is that the route most people take today, along Clonsilla, up Monaghan, across Parkhill and then north on Fairbairn, is primarily through residential areas. I know, because I regularly use this route because there is no alternative. These are mostly two lane roads built 50 - 70+ years ago when average traffic counts were likely less than a third of the volume seen today. The people that live on those streets must curse those politicians of the past who didn't have the will to see this road built.

Not one of those streets was designed to handle the volume of traffic that they see every day. As a result of driving so much traffic through those residential streets, there are far too many lighted intersections. The amount of stop and go traffic in a city the size of Peterborough is inexcusable. Where are the environmentalists on this issue? I thought that constantly starting and stopping your car was terrible for the environment? I thought sitting in an idling car was bad for the environment; did I miss something?

I've said it before, I'm saying it again:

Build the Parkway. Now.

Update: There was a really good letter to the editor in Peterborough This Week on February 9, 2010 that supports what I've been saying: Build The Parkway

Nicely put Mr. Bayly!

Hayek vs. Keynes Rap Anthem

2010-01-27T13:52:00.001-05:00

Found via bloodhoundblog.com. Also check out: econstories.tv - the creators of the video.

It's the economy, stupid ;)

Canada Ranks 3rd Best Place to Invest in Commercial Real Estate for 2010

2010-01-25T15:28:00.000-05:00

via thestar.com

The United States remains the country selected as the “most stable and secure real estate investment environment,” according to a recent survey report by The Association of Foreign Investment in Real Estate. But the country on the move is Canada, which now ranks 3rd worldwide thanks to our stable investment environment!

The United States remains the country selected as the “most stable and secure real estate investment environment,” although with a declining lead:
• The U.S. receives 44 percent of the vote;
• Germany receives 21 percent;
• Canada receives 14 percent.

In addition, according to the AFIRE site, Canada is also number 5 on the list for the best expected appreciation in property values going forward.

Should You Renovate to Attract and Retain Tenants?

2010-01-14T13:53:00.000-05:00

Are you a small independent landlord trying to rent your properties? Consider renovating them. A recent survey indicates that over half of small, independent landlords are renovating vacant properties in an effort to differentiate themselves from the competition and attract tenants. Renovations don’t just help you attract new tenants; they help you retain current tenants as well.

“With so many homes and apartments sitting empty, landlords want their properties to stand out from the competition,” says Tracey Benson, president of The National Association of Independent Landlords. “Even if landlords have no rent coming in, they need to bite the bullet and make improvements to put their properties on renters’ short lists.”

The Association recently conducted a survey of landlords across the country and found that over half (52%) of smaller, independent landlords who expect the difficult rental market to continue are renovating their vacant properties. Over three-quarters of these landlords (76%) are doing so in an effort to attract tenants, while 42% of respondents said they are renovating to keep current tenants from moving.

But you don’t need to install high-end accoutrements like granite counters, stainless steel appliances or laminate floors to attract or retain tenants. Even low-budget investments like new carpeting or a fresh coat of paint can make a difference.

“Just about any improvement will make a property look better than one that hasn’t received much TLC,” Benson says.

For more information on how to attract or retain tenants in your apartment properties, or to learn about available properties, give our Century 21® office a call today.

Source: Century 21® USA

Point of Capitulation Reached in U.S. Commercial Real Estate

2010-01-11T12:31:00.002-05:00

Great video from CNBC on the state of commercial real estate according to Barry Gosin, CEO of Newmark Knight Frank.

Of particular interest to me were his words, "The market has, for the most part, capitulated." This is important because it reflects the words of some of my clients - they have been looking for this 'capitulation' so that they can get back into the market and start buying again.

Do I agree with them that they needed to wait for this point of capitulation? Not at all. A good deal is a good deal is a good deal regardless of what everyone else is doing and it's always the right time to buy if the fundamentals of that particular deal make sense.

Why am I happy to hear this kind of talk then? It means that the market is catching up with common sense and we can get back to business! Don't wait any longer to look at investing in commercial real estate. Let's get back at it!

If you're ready to get started, call me.

Bludgeoned Commercial Real Estate Has Begun To Entice Chinese Bottom Feeders

2010-01-10T21:42:00.003-05:00

7 Time Management Tips For Small Business Owners

2010-01-08T12:13:00.000-05:00

Guest Post

Are you a small business owner who is always late in meeting deadlines? Or are you the kind of business owner who does not have time for his family and always feels the pressure of doing more in less time. Then please keep on reading. Being self employed is really great but it also demands you become more organized. This article is going to cover the tips which would help you to manage your time in much better way so that you can become more efficient and therefore more productive.

Learn to say no: You should learn to say no to all unnecessary business meetings or enquiries from customers who are not really interested in your services. Unnecessary business meetings and customer enquiries take too much time that could be saved if you start filtering them and ignoring the less important ones.

Make a list: Making list of tasks that you want to do in one day and to arranging them according to their importance and allocating a fixed amount of time to each task saves a lot of time that used to get wasted in thinking about which task to do after completion of any other task.

Set small goals: Day to day you should set smaller goals which are easily achievable instead of setting long term goals. For example, if you want to read a book having ten lessons, rather than setting your target to read the whole book in ten days, set a goal of one lesson a day. Reading one lesson a day has a better chance of being achieved than reading whole book in ten days.

Avoid wasting time on social media websites: We never notice but most of us use to waste lot of time checking emails, surfing social media sites, reading blogs etc. Set a fixed amount of time to read your emails, twitter, forums etc.

Complete task in one shot: Never leave the tasks without completing them. We have a habit of delaying tasks that are either tough or are not of our choice. But leaving them without completing them and resuming them again wastes your valuable time which you have to spend every time to make yourself ready to start the work exclusively for each specific task.

Use technology/outsource: Many free applications are available which can easily handle almost all kinds of business operations. You can use such applications or outsource your administrative tasks so that you can focus easily on creative ways to grow your business.

Be flexible: It is very common to face unpredicted situations where you have to give your attention to other activities which are not related to your business. For example: taking care of an ill family member or attending a family function. Try to keep your schedule flexible so that you can easily adjust to such things without sacrificing already scheduled tasks.

Rudo Barr is working as an internet marketing executive for Fortepromo which creates high quality promotional products that help companies to promote their brands.

It IS Time to Buy Commercial Real Estate

2009-12-30T12:27:00.000-05:00

Found this on a cre-advice.com and it mirrors what I'm starting to hear in the market and what I've been screaming from the roof-tops:

Investors have to do something with their money: You can buy in to the investment grade bond market and earn a whopping 3.75%, or you can buy NNN leased, credit tenant real estate and more than double your return. As Bill Gross of PIMCO points out as a cost of capital sitting on the sidelines: “an effective zero percent interest rate, as a price for hiding in a foxhole, is prohibitive.” In 2010, buyers will exit the payless funds earning close to 0% in search of manageable risk. Quality commercial real estate will receive considerable attention in this context.

Because problems with debt structure will motivate a large number of sales, pricing will remain in flux in the next year. As a result, headline measures of cap rates will fail as indicators of the underlying variation in property trades. Rather, buyers and sellers alike will be depending on their Advisor’s knowledge of the market and of the emerging mechanisms of exchange – such as auctions – to guide their investment strategy. Investors with strong operational capabilities who are seeking to acquire assets over the next year are in an ideal position. This group will be able to purchase assets during a period of dislocation, before asset prices normalize and while long-term yields are at the their peak.

What do you think? Would you rather sit back and 'enjoy' 2-3% returns when you know that inflation will eat up most of your buying power over the next several years, or get into a solid commercial real estate investment where you should be able to crank out at least 7% for the forseeable future? Sounds like a simple choice to me.

Ready to buy? Contact me.

Of Course It's For Sale!

2009-12-27T08:51:00.001-05:00

Back in the spring, I did a piece on selling your business and was featured on our local Chamber of Commerce Podcast site as a result. Since I'm taking a bit of a break right now, I thought this might be a good syndicated post to share about getting ready to sell your business.

Syndicated Post

I sent a friend who was interested in owning a business to visit a shop in town. I had told her the owner had just bought the place and had done a really good job of getting more customers into the store.

When I saw my friend the next day she told me she had visited the store and was surprised to hear the new owner say she wanted to sell it. I was surprised to hear that, so when I was in town a couple of days later I made a point of talking to the owner. She remembered my friend and all her questions. "That woman was so interested in the shop I asked her if she wanted to buy it." She went on to explain: "It's a business. It should always be for sale - for the right price."

Many business owners become so emotionally attached to their business that they don't consider selling until it's too late. If someone asked you to name a price for your business what would that price be?

Many entrepreneurs start businesses planning to sell them within a few years. Others just struggle to actually become the owner of the business instead of its only employee - if you thought working for someone else was bad, try working for yourself!

To be the business owner is to think of your business as an asset, something like a car or a house that can be sold on the open market. What gives the business value is its assets and the ability to generate positive cash flow.

No matter how you feel about your business, we can calculate what it's worth. For example, most business brokers will probably tell you that a typical business is worth 1.5 to 3.5 times discretionary cash flow plus the value of the tangible assets. In this case, discretionary cash flow is total cash flow plus the expenses that a new owner would not be obligated to pay - depreciation, owner's salary, auto expenses, loan payments, retirement contribution, travel and entertainment, etc.

Knowing what it's worth now will allow you to make the changes that will increase its value in the future. It will probably require increasing revenue, but if you increase revenue at the expense of margins you will actually be decreasing the value. Pay attention to the cost of that additional revenue. Do you need to do more marketing, increase production capacity, or add employees? Very often these steps can be taken incrementally to lessen the impact on cash flow but achieve the same long term goals. The key is planning and having the patience and persistence to achieve the results.

Do you know what your business is worth? If not, how would you know what to say if someone offers you a million dollars cash for yours? Maybe it's time to find out.

Dave Ferguson is a business coach and the owner of Lake County Business Coaching, Inc., a coaching firm dedicated to helping people in business to improve their performance and their results. More information is available at http://www.LakeCountyBusinessCoaching.com.

Article Source: http://EzineArticles.com/?expert=Dave_Ferguson

Five Fool Proof Ways to Brighten Up Your Commercial Property

2009-12-23T10:26:00.001-05:00

This looked like a great post for the end of the year; great tips on brightening up your commercial building to keep and attract the best quality tenants.

Enjoy!

Syndicated Post

1. On Cleaning Up and Success Team

So far, I have viewed and analyzed no less than 3,000 properties internationally. And I have discovered that most owners tend to overlook this very simple but vital task. Shocking, isn't it?

Irrespective of whether you are planning to rent out or sell your property, clean it up completely. This means the interiors as well as the exterior. Of course, unless you enjoy physical work and don't mind getting your hands dirty, you can always engage others. There are freelancers available through outsourcing website who wants to earn some extra bucks. It is recommended that you work with a "Success Team" to keep your properties in tip-top condition and make your investments more fool-proof and blissful. Ideally, members of your success team should include plumbers, electricians, handymen, painters, cleaners and other professionals like lawyers, valuers, real estate negotiators, property managers and interior designers. There are also professional cleaning companies with the equipment that can make your place shine like brand new.

Humans are very visually oriented. Thus, they are impressed by what they see, making it paramount that you clean up thoroughly. Yes, that means top to bottom, left to right, and inside out. Most buyers and tenants want a property that has been well taken care of.

2. Trim Overgrown Trees and Shrubs

Where applicable e.g. landed industrial and semi-detached commercial shop offices that come with trees and/or bushes at the front, side or back of the building. By trimming overgrown trees and plants, it instantly brightens up your property, makes it more attractive and opens up more space.

3. Repaint with Lighter Colours

This is weird but true. Using a different colour does give a different effect to the same room. To prove a point, the next time when you see an advertisement by companies marketing paint, pay close attention. The paint boys spend thousands to show you how a colour can make a world of difference in life. Using lighter colours like white and beige to paint your property makes a given space look brighter, bigger and wider. (To get more space, you don't always have to break any walls or buy more land. Just paint with a light colour!)

4. Bring in More Natural Light

Use your own creativity, or observe what your neighbors have done. Explore and discuss with interior designers about ways to bring in more natural light. It could be as simple as enlarging existing windows, or putting in more windows; using more glass doors and partitions; replacing roof tiles with transparent tiles or skylights etc. The outcome are astonishing!

- You do yourself a favour, by adding more value to your property;
- You do your tenants a favour, helping them save on electricity;
- You are also helping preserve Mother Earth, by reducing global warming and reducing the depletion of our natural resources.

5. Add More Lighting Points

Where appropriate, add more lighting points. With commercial properties, it is almost universal that tenants prefer bright places - unless they are in the business of "candle light" dinners. By creating a brighter and more spacious look, you can dramatically improve the attractiveness of your property.

Mike has been writing articles online for nearly 2 years now. Not only does this author specialize in personal investment, productivity, you can also check out his latest website on ftd flower delivery which reviews on FTD Flowers Delivery

Article Source: http://EzineArticles.com/?expert=Mike_Milanez

You Can Become a Multi Millionaire Through Commercial Property Investment

2009-12-21T09:01:00.017-05:00

Syndicated Post

It is estimated that 98 percent of the world's millionaires have either made or parked their money in property. This is clear indication that there is a huge amount of wealth waiting to be harvested through property investment.

And yet, only about 5 percent of the population of any given country are active property investors. Why? Perhaps, the reasons are inexperience about what real estate investment has to offer, or simply the lack of motivation to get started because of limited information and guidance.

There are tried-and-tested ideas, strategies and recommendations which are general in application, giving you the flexibility to invest in any part of the world. In addition, the tools and advice provided will certainly ensure that you invest in the safest and smartest way possible to gain maximum returns on your investments.

They are facts of life in the world of property investment. Facts that have been verified. As Bernard Baruch put it, "Every man has the right to be wrong in his opinions. But no man has the right to be wrong in his facts." With better insight, are you ready to jump on the red-hot commercial property market bandwagon? Never mind if you're in the minority group, the crucial factors are:

1. Get serious
2. Get committed
3. Get started, and
4. Get off your butt, now!

Commercial property investment is an amazing avenue to great wealth. A few right investment can absolutely change your life and lives of your love ones.

Believe that nothing is impossible in a willing heart. All possibilities lie in you being willing to take the first step in the right direction towards financial freedom.

Mike has been writing articles online for nearly 2 years now. Not only does this author specialize in personal investment, productivity, you can also check out his latest website on ftd flower delivery which reviews on FTD Flowers Delivery

Article Source: http://EzineArticles.com/?expert=Mike_Milanez

Have We Learned Anything From The Meltdown?

2009-12-18T14:48:00.000-05:00

TORONTO, Dec. 15 /CNW/ - A new Ernst & Young report reveals that a shifting and vastly different post-recession real estate landscape has executives grappling with lingering challenges.

Top 10 lessons learned in real estate: Ernst & Young

Below are 10 lessons from change that have emerged for the sector, which are also quickly becoming trends for 2010. According to the report, those who take heed of this advice are more likely to continue to adapt and grow in an increasingly global and competitive real estate market:

1. Focus on capital preservation - Most real estate executives are and will continue to be concerned with stabilizing their organizations and enhancing their ability to access capital and improve the flexibility of their balance sheets. Maintaining liquidity is paramount to capitalizing on future opportunities.

2. Form strategic alliances and/or partnerships with foreign investors - Partnerships will be formed to acquire assets on a scale never seen before. Expect Canadian companies with strong balance sheets to venture into foreign markets.

3. Provide more effective risk management and protection of asset values - Real estate companies are revamping their framework to more effectively manage risk. Pricing risk appropriately will define future growth.

4. Provide an increased focus on tenants - Property owners are becoming more diligent in evaluating the creditworthiness of tenants to determine who might present a risk. In light of this, underwriting will become even more stringent.

5. Evaluate supply chain and contractors - Corporations who hire developers and construction contractors are evaluating the risks of having financially troubled contractors/suppliers who could file for bankruptcy and stop work on a project.

6. Prepare for increased taxes and government regulation - Companies are preparing for regulatory framework - around private equity investment funds in particular, as well as arranging for fuller disclosure of investment plans, asset verification and other information of interest to shareholders.

7. Control costs and streamline operations - Companies are improving their overall performance, with issues such as tying executive compensation to performance resurfacing.

8. Look at Canada's relationship with the US - While there are noticeable differences between Canada and the US in terms of macro-economic structure and real estate fundamentals, don't overlook the influence and effect of our largest trading partner.

9. Accelerate decision-making - Decisions are being made more quickly to take advantage of shorter windows of opportunity and to respond more quickly to adverse developments.

10. Concentrate on long-term growth - Real estate executives are thinking about the future. They're looking at extending their company's market reach, building relationships, thinking creatively and strengthening their management capabilities.

From my perspective one of the most important lessons on this list is number nine, accelerate decision-making. Why? As more and more opportunities come back onto the market it'll become even more important than in the past to be able to make quicker acquisition decisions because there WILL be more competition for those assets. Slow decisions were a problem in the last boom when even well heeled tenants, investors and developers seemed hamstrung by indecision and this will continue to be a challenge going forward.

How do you see your company reacting to new opportunities as they become available? Have you got a plan to be able to streamline your acquisition process when deals are put on your table?

Source: Top 10 lessons learned in real estate: Ernst & Young

Commercial Real Estate Blues - A Christmas Tune

2009-12-15T13:37:00.001-05:00

Via TrafficCourt on RetailTraffic blog.

He Who Hesitates Is Lost or "If You Wait for the Robins, Spring Will Be Over"

2009-12-11T16:49:00.003-05:00

Thanks to TrafficCourt and David Bodamer who picked up William Ackman's ICSC Report in New York:
ICSC Mall REIT Presentation 12-7-2009

Some of the relevant highlights from the above report:

The U.S. economy has recovered
The U.S. consumer is beginning to bounce back
The credit markets have improved
Mall REIT balance sheets have strengthened
Cap rates have declined substantially
Store closure fears were overblown
Tenants are much better capitalized
Rent relief has been minimal
Tenant sales are down, but inventories are down even more while retailer cash flows have improved materially

Which would you rather own?

1) A 10-yr Treasury at a 3.4% yield
2) A 10-yr TIP at a 1.3% yield, or
3) Shares in a mall REIT at a 7.5%, 7.0%, or even 6.0% cap rate

Conclusions:
During one of the worst recessions in over 50 years, mall REITs and their tenants have proven to be highly resilient
Consumer spending does not need to return to 2007 levels for mall REITs and their tenants to outperform
Store closures of underperforming tenants is a long-term positive for the mall industry
Tenant cash flows and balance sheets have massively improved over the last twelve months
Many opportunistic retailers have substantial growth plans. Retailers on the sidelines are just like those investors who didn’t buy stocks in the spring

Looks like I'm not the only one who thinks that the market is turning for the better! Tell me what you think of this report - are Mr. Ackman and I out to lunch?

Top 3 Expenses Most Often Missed by New Investors

2009-12-08T14:34:00.002-05:00

When calculating return on an investment (ROI) or internal rate of return (IRR) there are a number of expenses to take into account and surprisingly, there are a few that get overlooked entirely. I've noticed that, particularly new investors (and often brokers who should really know better!), miss a few essential expenses far more often than I would have expected.

When working on calculating an ROI or IRR, you always need to start with a reconstruction of the net operating income (NOI). A basic worksheet should look something like this but may be more or less sophisticated based on the asset class:

In researching properties for buyer clients, I always ask for a copy of the income and expenses from the owner or from the broker as reported by the owner if the property is listed. A complete picture of the income and expenses, along with all other pertinent physical, demographic, and economic information about the property and the market, is the only way to properly analyze a property on behalf of my client. Omissions or errors here have a direct impact on the valuation of the property and are therefore essential.

I almost always receive a list of the monthly rents or an annual summary of the gross income - though not everybody seems to grasp the concept of total gross income and often it takes a couple of calls to get all of these figures. I usually get a summary of the expenses as well, though often there are a number of glaring omissions. Either by design, because the numbers are too large and the person providing the information is hesitant to be open with me, or by mistake because they don't actively track their expenses or have a poor record keeping system, or simple ignorance.

The top 3 most often missed expenses are basic to the operating expenses of any property, but they are sometimes the most difficult to obtain. They are:

Property and liability insurance.
Repairs and maintenance.
Vacancy and credit losses.

Why are these left out so often? As I said, these are real numbers that have a direct impact on value, so if there is a particular expense or expenses that would negatively affect value, some sellers will intentionally make it difficult to discover them. Most often though, they are missed through simple ignorance.

Property and liability insurance.
While not necessarily a large expense in itself, if you are looking at a smaller investment where every penny counts, missing an expense of this nature can have a very serious impact on future profitability - even if such an omission is innocent.

Repairs and maintenance.
Usually this one is omitted intentionally. Why? "Because the roof is only 4 years old, and the paving is only 2 years old...what else do you think needs to be done?!" From the inexperienced buyer's perspective, it often is left out for the very same reason - there is sometimes a mistaken belief that just because repairs have recently been made that there won't be any further repairs needed for the foreseeable future. Maintenance items like, snow removal and grass cutting are often ignored by first time investors because they intend to do the work themselves and therefore don't feel it's necessary to account for those expenses. But isn't your time worth anything to you? Even if you plan on doing the work yourself, you should be compensated for your time!

Vacancy and credit losses.
This is the most often missed expense in my experience. If the building is full, why should you account for vacancy? There are a couple of reasons: 1) Your tenants are not invincible - one of your tenants could step in front of a bus tomorrow and you'd be looking for a new tenant. If the property is a small one, and one of your tenants just decides to leave or goes out of business, you could be looking at significant carrying costs while you re-lease the space. 2) In the long term, some credit losses are unavoidable. Even with the best of tenants with the best of intentions, occasionally things don't work out the way everyone hopes and there's just too much month left at the end of the money. 3) The last, and maybe the most important, is that when you apply for financing on any investment property, the bank or lender you use WILL include a vacancy allowance to account for lost income that could affect their ability to collect your payments. Go into the financing application process well informed or you could be in for a rude awakening.

So there you have them, my top 3 most missed expenses by new investors. Tell me what you've experienced as a buyer or as an advisor; ever run into these or other items that have put the brakes on a deal you were hoping to close?

How to Use Internal Rate of Return as a Measure of Real Performance in Commercial Real Estate

2009-12-01T14:58:00.004-05:00

Ever wonder which metric is the best way to analyze a piece of real estate? Me too! There are so many to choose from. Cap rates, ROI, gross rent multipliers, net rent multipliers, leveraged rates of return, yields, etc., etc. ad nauseum. The problem I see with most of these is that they look at a snapshot in time for a given asset and don't take into account increases or decreases in income over time.

Enter the realm of IRR or 'internal rate of return'. The internal rate of return shows the rate of return over a period of time and takes into account variables in income over that period. Rather than looking at just one point in time, you get a picture of the return you should expect during your entire anticipated holding period.

Let's look at a very simple example:

123 Any Street, Peterborough, Ontario is a hypothetical office building of 21,000 square feet with a projected first year net operating income of $105,000. Prevailing market cap rates indicate you should be looking at 8.5% as your 'going-in' rate. This puts a hypothetical value of $1,235,000 on the property (give or take a few dollars). Pretty simple, income divided by cap rate equals value.

What if you did some digging into the rent roll and discovered that one of the tenants, who occupies about 4,000 square feet of the building and therefore generates 19% of the net operating income, had a lease that was coming due in two years, and further that you found that they did indeed plan to move out at the expiry of their lease and have purchased land for construction of a new building two blocks away? That's a significant drop in future income and therefore will have a direct impact on the value of the real estate today. A future event will have direct impact in the present.

As the new owner of the building there would be some period of time when the space might be vacant, and there would be some cost associated with releasing the 4,000 feet including: leasing commissions, build-out for a new tenant, advertising, etc. The series of cash flows over the first five years of ownership (assuming a sale at the end of the fifth year at a similar cap rate) might now look like this:

You can see that there is a substantial difference in the IRR of the two scenarios. This doesn't mean that the property is a bad purchase, it just gives the investor a better picture of the real performance of the property and provides a more realistic idea of actual return over time. Other factors that would change this picture include things like: the effect of financing, rent escalations, economic factors, changes in future cap rates, and competition in the form of new buildings coming onto the market to name just a few.

If the IRR is within range of your expected rate of return then you can move onto doing more due diligence for the property. If it is well below what you expect, then you need to either negotiate a lower price, or keep looking for another property that does meet your investment criteria.

Have you ever used this method of comparison before? Did you find it useful? Let me know, I'd be interested to hear some real world examples.

28 Qualities, Skills and Traits That Commercial Real Estate Brokerage Clients Watch For: The Good, The Bad, and The Ugly

2009-11-27T10:53:00.002-05:00

Today, a review of the 28 things that commercial brokerage clients look for when choosing, working with, and firing(!) agents. Over the last week or so you've seen these lists in several posts, but I thought it would be a good idea to gather all of these ideas into one resource page that can be accessed easily.

The Lists:

Top 7 Skills and Qualities Investors Look For in a Broker:

1. Direct solicitation of potential buyers.
2. Quality communications and follow through.
3. Accuracy and quality of financial analysis.
4. Negotiation skills.
5. Quality of investment package.
6. Quality of research.
7. Team assigned to their transaction.

The Top 7 Things Tenants Look for in a Commercial Real Estate Broker:

1. Understanding of their business.
2. Open communications and accessibility.
3. A relationship built on trust and concern.
4. Financial/analytical skills and structuring advice.
5. Collaboration and a team approach to their needs.
6. Understanding of the market and opportunities.
7. Accompaniment on building tours.

The Top 7 Things Clients Look for When Selecting a Commercial Real Estate Broker:

1. Relationship with Broker.
2. Prior experience/performance.
3. Reputation of firm/brand identity.
4. Understanding of their business/objectives.
5. Personalized approach/solutions.
6. Fee structure.
7. Knowledge and advice.

The Top 7 Things That Frustrate Brokerage Clients:

1. Lack and poor quality of communications.
2. Lack of accessiblility to their broker.
3. Sloppy work, inaccuracies and poor research.
4. Feeling that they are just a commission source.
5. Brokers not knowing when they are "over their heads".
6. Lack of interest in their business needs and goals.
7. Lone Rangers and "listing-only" solutions.

So, you say, what's the point? Well, looking at each of these in turn and thinking about what they mean to existing and potential clients, we can see that there a number of solutions and, more importantly, opportunities presented in them.

I give you, The Profile of a Customer-Centric Brokerage Company. *Insert cheesy dramatic music here*

Many thanks to CEL&Associates Inc. who actually gathered the data and did the research to come up with all of these lists and the following outline of a customer-centric brokerage company.

A Customer-Centric Brokerage Company should:

Possess a real-time 360 degree customer profile.
Embrace a continuous feedback process.
Hardwire the voice of the customer into all decisions.
Invest in talen, training and professional development.
Share knowlege of the customer.
Commit to service excellence.
Possess customer service standards.
Build valued and lasting customer relationships.
Include customers in company values.
Tie commissions to customer satisfaction.
Celebrate those who achieve customer satisfaction.
Involve customers in solutions.
Continuously seek customer feedback.
Possess a thorough knowledge of customer needs.
Exceed customer expectations.

Some powerful, and some surprising ideas. Stay tuned for more on these topics as I plan on dissecting a number of these ideas in more detail. Have a great weekend, and let me know what you think!

The Top 7 Things That Frustrate Brokerage Clients Most

2009-11-23T13:52:00.002-05:00

So far we've looked at what investors value most in their broker, what tenants va lue the most in their broker, and what clients value most when selecting a broker. Today, the other side of the coin, the things that really make clients blood boil.

Warning! If you are a commercial real estate broker and you do any of these things, even occasionally, you're sabotaging your business in ways you probably can't even imagine!

The List:

Lack and poor quality of communications.
Lack of accessiblility to their broker.
Sloppy work, inaccuracies and poor research.
Feeling that they are just a commission source.
Brokers not knowing when they are "over their heads".
Lack of interest in their business needs and goals.
Lone Rangers and "listing-only" solutions.

What really frustrates you when you hire a real estate agent, particularly a commercial broker?

Source: CEL&Associates Inc.

Top 7 Things Clients Look For When Selecting a Commercial Real Estate Broker

2009-11-19T10:09:00.004-05:00

What's the difference between a client and a customer? Well let's take a look at the definitions (from thefreedictionary.com):

Customer:
n. cus·tom·er
1. One that buys goods or services.
2. Informal: An individual with whom one must deal: a tough customer.

Client:
n. cli·ent
1. The party for which professional services are rendered, as by an attorney.
2. A customer or patron: clients of the hotel.
3. A person using the services of a social services agency.
4. One that depends on the protection of another.
5. A client state.
6. Computer Science A computer or program that can download files for manipulation, run applications, or request application-based services from a file server.
[Middle English, from Old French, from Latin clins, client-, dependent, follower; see klei- in Indo-European roots.]

In real estate legal terms, a client is someone with whom a brokerage has entered into an agency relationship wherein they agree to provide certain professional services and owe certain legal obligations to the client. In reality, the client relationship, at least a good one, goes far beyond a mere legal obligation. While a customer is treated fairly and honestly, they don't get the same level of advice or counsel that a client gets, nor do they realize the long-term benefit of a true client relationship; they're just there to buy something and move on.

In my opinion the key really is the relationships. As much as new technology has made the job of finding property and property details easier, and much as it has made the task of marketing and finding real estate quicker, it cannot replace the human connection that face to face relationships build. I don't care how much you Twitter or write in your blog or how much time you spend on Facebook! These are good tools to start the conversation, but the connections, the relationships are the ticket.

Given this, it's no surprise that #1 on the list of things most valued by potential clients is the relationship with the broker. If the client doesn't feel a connection and doesn't feel that they can trust you, nothing else you do will ever turn them into true clients for life.

Without further ado, the Top 7 Things Clients Look For When Selecting a Commercial Real Estate Broker:

Relationship with Broker
Prior experience/performance
Reputation of firm/brand identity
Understanding of their business/objectives
Personalized approach/solutions
Fee structure
Knowledge and advice

I'm always interested in varied opinions, so let me know what you think. Do you agree with this list? What would you change or add to it?

Watch for my next post on this topic: What frustrates brokerage clients most!

Source: CEL&Associates Inc.

The Top 7 Qualities and Skills That Tenants Value Most in Their Commercial Real Estate Broker

2009-11-18T09:55:00.000-05:00

As part of an ongoing look at what consumers want from their real estate broker, today I'm looking at what tenants value the most when choosing a broker to represent them.

Tenant representation is a very specialized field and one that doesn't get the respect it deserves, in my opinion. From a brokerage perspective, it just isn't very sexy. The deals aren't as visible, the commissions (generally) aren't as big as investment deals, and the broker is often seen as just another cost in the transaction rather than bringing the real value that they do add to the process.

So what do tenants look for in a commercial real estate broker? Here are the top 7:

Understanding of their business.
Open communications and accessibility.
A relationship built on trust and concern.
Financial/analytical skills and structuring advice.
Collaboration and a team approach to their needs.
Understanding of the market and opportunities.
Accompaniment on building tours.

Source: CEL&Associates Inc.

Did I miss anything? What do you look for?

What Investors Value the Most in Their Commercial Real Estate Broker

2009-11-16T13:35:00.002-05:00

I recently found an old paper in my files that I had to have had lying around for the last 3-5 years. It was a summary of survey results put out by a company called CEL&Associates Inc. on behalf of the Canadian Real Estate Association. I'm sure that the results might appear in a different order today, but the underlying themes seem, at least to me, to be timeless.

Over the next couple of weeks, I'll post a few times on this topic and look at what tenants, clients, and investors look for when selecting a commercial real estate broker. I'll also post about what frustrates these same people and report on the profile of a customer-centric brokerage company.

Without further ado, the top 7 skills and qualities investors look for in a broker:

Direct solicitation of potential buyers.
Quality communications and follow through.
Accuracy and quality of financial analysis.
Negotiation skills.
Quality of investment package.
Quality of research.
Team assigned to their transaction.

I'd love to hear what you think of this list, and where you agree or disagree.

Thanks for reading!

HST Has Builders Sprinting

2009-11-12T11:28:00.004-05:00

HST has builders sprinting - Yourhome.ca

"We've had a lot of customers sitting on the fence, but because of the tax they're much more willing to seal the deal," says Bazely, owner of Barrie-based Gregor Homes and president of the Ontario Home Builders' Association.
"We've ramped up production so we can close on our homes before the HST takes effect next year."
Bazely says he recently talked to his trades and suppliers to ensure they are ready for winter.
"Every week we lose, we get closer to that July deadline."
The new tax, which combines the PST and the GST, will have an impact on homes worth more than $400,000.
It would add, for example, $6,000 on a $500,000 home – enough money to upgrade to a better kitchen or floors, and a good incentive to close early for many consumers.
A $1 million dollar home gets hit with $36,000 in extra taxes.

An EXTRA $6,0000 on a $500,000 new home! Incredible! How in the world can anyone say that this is good for the economy?

In the GTA a $500,000 new home is not out of the ordinary. The Province will be cashing in on the backs of hardworking Ontarians and our fragile economic recovery is likely to take a serious hit when this ill planned and ill conceived new tax hits the road next year. How can they stick to the story that the average person will only see an increase of $79 per year in spending as a result of this new tax? Do they honestly think we're that stupid?! I hope everyone remembers this when it comes to election time.

McGuinty and his band of *insert expletive here* need to go!

Getting the Best Possible Commercial Real Estate Advice

2009-11-09T15:00:00.004-05:00

Commercial real estate can be tough to get a handle on and making sure you get the best commercial real estate advice can make the difference between making it and losing your shirt. Professionals and "gurus" have devoted years to identifying, financing and making deals happen no matter through all kinds of markets. Do you honestly think you're going to waltz right in and be the next Donald Trump?

Commercial real estate is a terrific way to make money, but you already knew that because you are here! So what's you're next step on the path to financial success as a commercial real estate investor?

First, get a sound knowledge base in real estate and investing principles. This could mean taking some courses at a local college or online, reading some books or attending some seminars. Obviously, a trip to Border's Books or the library is going to be cheaper than other two options, but do whatever you think is best for your unique situation. Any way you do it, you need to learn the basics of the business and know what you're getting into before you sink money into an expensive seminar, course or worse yet an actual piece of property.

The nature of available property investments differs from market to market, so the best piece of commercial real estate advice you can get is to find a mentor you guide you through it all. A good mentor, whether they are directly located in your market or not, can teach you how to spot good deals, avoid bad ones and maximize returns. They can also point you in the right direction as far as education, seminars, what you need and what's a waste of money.

Once you have a good knowledge base a reliable source of information for the type of investments you're considering, you're ready to test the waters. Find the local investors who are making your dream a reality and watch what they do. Do your best to follow their progress on deals and look at the work it takes to make it all happen. Start looking at properties and deals that are comparable to what successful commercial investors are involved in and prepare yourself for your first good deal that comes your way.

Still looking for more commercial real estate advice? TheRealWelathBlog is run by professional commercial real estate investors who know their way around a deal. Make sure to subscribe to their newsletter so you get the most out of their updates and this wonderful blog!

Emily Cressey is a Commercial Real Estate Investor based out of Seattle, WA. She and her partners have invested in over $30 Million in commercial real estate projects. If you are new to investing, or would like help getting started, visit their commercial real estate investing site and subscribe to receive your free 5-video Course On Commercial Real Estate Investing For Beginners.

Additionally, if you would like reasonably priced commercial real estate advice, please feel free to contact The Real Wealth Company for affordable hourly consulting.

Cressey, E. (2009, July 23). Getting the Best Possible Commercial Real Estate Advice. Retrieved November 9, 2009, from http://ezinearticles.com/?Getting-the-Best-Possible-Commercial-Real-Estate-Advice&id=2651682

Canadian Real Estate Sentiment Survey Results

2009-11-04T18:58:00.006-05:00

“We’re in the third round of a five round boxing match, but in the first two rounds nobody threw a punch. At some point somebody’s gotta throw a punch.”

Source: REALpac / FPL Canadian Real Estate Sentiment Survey, Fourth Quarter 2009, Released November 3, 2009

I'm sensing a recurring theme on this blog about getting into the game. The time is right to get back into the investing game. Money is flowing, and the economy isn't floundering as badly as some had thought it might still be. Granted, the past 12 months haven't been all peaches and cream, especially in the brokerage world, but contrary to popular perception, the sky hasn't fallen on the Canadian commercial real estate market.

In fact, REALpac just released their Q4 Canadian Real Estate Sentiment Survey and found that, overall, investor sentiment is improving in Canada. It shows that overall sentiment about the market has improved, on their index, from 50 to 68 from Q3 to the beginning of Q4 2009. An impressive improvement to say the least.

So why doesn't the overall market reflect this survey? At least in my corner of the world, Peterborough, Ontario, transactions are WAY down relative to 2008. I did a quick bit of research and found some interesting results.

I compared all MLS® sale transactions recorded by the Peterborough and Kawarthas Association of REALTORS® from January 1 to November 4, 2008 vs. the same period in 2009 (it's an odd time frame, I know, but it seemed like a good idea at the time!). I only looked at transactions over $150,000 in order to weed out the business sales that did not include real estate, and leases that sometimes get recorded as sales.

2008 Number of sales: 39
2009 Number of sales: 26
2008 AVerage sale price: $494,437
2009 Average sale price: $357,385
2008 Average sale to list price ratio: 88.46%
2009 AVerage sale to list price ratio: 73.93%

Of note, there were four transactions over $1M in 2008, including one that was over $2M and only one transaction above $1M in 2009. (Remember, this is a small market with a combined city and county population of only about 135,000 people.)

So what do I see in these numbers?

First, there is an obvious trend toward fewer and smaller deals, including a drastic reduction in transactions over $1M. Secondly, and this is my subjective opinion, there isn't really a lack of interested buyers, rather there's been a significant lack of faith in the market in general on the part of would-be buyers. The perception has been that there ought to be more 'good deals' out there, and that by waiting it out, these 'saavy' buyers will be able to cash in on the distressed assets that must surely be just about ready to come onto the market.

But there haven't been that many distressed properties in Canada. I beleive that a lot of the poor sentiment is spill-over from the US media coverage of the severe slide they've seen in their market. In a recent article on globeinvestor.com, Kirk Kuester, managing director of Colliers was quoted as saying,

"There hasn't been that much distress [in the Canadian market], and if companies do find themselves in a bit of a pinch, it's not that difficult to raise equity on the market."

From the same article:

Brookfield Properties Corp. and its partners have an unexpected problem: They have $5-billion to spend on commercial real estate, but markets have recovered so strongly that they can't find the juicy deals they hoped would lead to 20-per-cent returns.

The stock market's resurgence from March lows has allowed many of the world's most challenged real estate companies to issue stock or sell bonds to solve financial issues brought on by lower rents and higher vacancies. Meanwhile, the sector is showing signs of recovery in Canada, further encouraging landlords to hang on to buildings that had caused concern through the recession.

"There really hasn't been that much out there," said chief executive officer Ric Clark. "When we first started thinking about this, we had many companies on the list as potential targets - the public markets have been so efficient that many have been able to solve their problems."

Brookfield set up a $5-billion real estate investment fund in September with Brookfield Asset Management Inc. and dozens of major institutional investors. The plan was to buy malls and office towers from owners that were struggling to keep tenants and pay mortgages.

While the U.S. market is still going through a historic upheaval (7.9 per cent of lease holders are behind on their payments and one in 10 shopping mall stores sit empty), things have stabilized enough that the consortium is rethinking its ability to score its targeted 20-per-cent return on any investment.

In fact, in the hunt for deals, many Canadian REITs have gone out and raised warchests to buy distressed assets that haven't materialized thus creating the real potential of reducing their stock prices. From theglobeandmail.com:

But what if the market isn't all that distressed? Third-quarter statistics from RealNet Canada Inc. hinted that a rebound is taking hold in Canadian commercial real estate markets after 18 months of contraction. If there aren't deals to be found, the REITs may have watered down their shares without giving shareholders any reason to hope for better payouts in the future.

"Most REITs have taken advantage of the open capital markets," said Mark Rothschild, an analyst at Genuity Capital Markets. "Most management teams have expressed confidence this capital will be used to take advantage of distressed opportunities - we believe that there will not be many extremely accretive acquisition opportunities and ultimately many of the recent offerings will prove dilutive."

I know I'm starting to sound like a broken record, but why aren't investors, large and small, private and institutional, looking at the cost of NOT investing? What is the real cost of inaction and hence lost opportunity? Waiting for the market to become more active and therefore more competetive means that there will only be even higher prices and reduced opportunities in the future.

What will you do? Sit on the ropes, waiting for your oponent to wake up and realize you aren't in the game, and be surprised when you get K.O.'d? If you're ready to get started and need some direction, please drop me a line. Get ready, round 4 is coming up!

Why You Can't Afford to Ignore Vacancy When Buying Commercial Real Estate

2009-11-02T16:15:00.004-05:00

Firstly, what is vacancy?

Vacancy is the estimate, usually based on historical data for a given property or property type within a given market, of the amount of space within a building that is typically vacant and is usually expressed as a dollar amount per foot or more commonly as a percentage of gross rent.

Vacancy is one of the most overlooked expenses, in my experience, when dealing with individual investors. For some reason, most people have a hard time believing that their building might not be 100% full 100% of the time.

Is this reasonable? Not even close. Especially in the current economic climate where vacancies are still climbing and businesses aren't expanding at the same rate that we've seen over the last decade.

As part of your due diligence when analysing a property you should always include a vacancy expense in your pro forma - even if the building is full at the time of the analysis. The building won't be full forever!

Don't misunderstand - some vacancy is good for the market. Shocking, but true. What happens when times are good, and growing businesses can't find vacant space to move into? They risk stagnation and missed opportunities. So a little vacancy is a good thing, but rampant vacancy is obviously harmful too.

How much vacancy is healthy? Well that really depends on the property type and the general market. Residential income properties generally use 5% as a normal vacancy rate (at least in my market), but storage properties typically run anywhere from 10-20% vacancy in healthy markets. The key is to do your research and try to find out the prevailing vacancy in your market and use that as a benchmark for comparison purposes.

Failing to factor in a normal vacancy rate in doing your financial forecasts can be deadly to your bottom line, especially when there's little room for error in a tight market.

Is That Property You're About to Buy Really a Good Investment? Here's How to Tell...

2009-10-28T16:14:00.003-04:00

So you've set aside some money or maybe you've inherited a big bag of cash(repleat with dollar signs on the side of course!) from your rich aunt, or even better, you've set up a syndication group and you're ready to start buying commercial real estate.

Great!

The next step is to go out and find some potential investments. Once you've done that (easier said than done!), you need to decide if the investment is a good one or not.

How to do that? Contrary to prevailing belief, there isn't a flood of distressed property flooding the market, nor are prices being affected too drastically in Canada. From a recent Globe and Mail article about the state of the Canadian market:

But what if the market isn't all that distressed? Third-quarter statistics from RealNet Canada Inc. hinted that a rebound is taking hold in Canadian commercial real estate markets after 18 months of contraction.

And this from reportonbusiness.com on the same topic :

Canada's commercial real estate market is on the mend, as an 18-month slump in Toronto has ended and other urban centres are showing signs of renewed activity that suggest the sector has de-coupled from its troubled U.S. counterpart.

After almost two years of flat or declining activity, industry tracker RealNet Canada Inc. said investments in commercial property in the Greater Toronto Area increased by 46 per cent in the third quarter over the second quarter, to $1.31-billion, while the number of transactions increased by 20 per cent.

"This is a statistical sign of a recovery, even if it's not a full-blown recovery," said RealNet president George Carras, adding that sales are still only half of what they were going into the recession. "You can't call a bottom until it's passed, but this data is positive and very factual - it's real, hard evidence, and not anecdotal comments."

So how do you get started?

Do your research and use professionals to find the right kinds of properties. You can do all of the leg work yourself, but why not use the expertise of people who work in the markets where you want to invest? The efforts of several people working toward the same goal will almost always result in a quicker turn-around and hopefully with a higher degree of success.

Once you've found a good investment candidate (or several hopefully), you need to do your homework and analyze the tenant mix, the income and expenses as well as the condition of the property and the general market conditions in your area. Assuming that the market is stable or improving and further assuming that the property is in good condition, and also that the tenants are solid risks, all you really need to do is dissect the income and expenses and consider the cost of carrying a mortgage loan.

Simple, right? Well, the process isn't too complicated, and a competent commercial real estate professional should be able to help you with this.

Start by looking at the Net Operating Income (NOI). Take a look at all of the income streams from the property and deduct all of the operating expenses, but ignore debt service costs, to derive the NOI.
Next, calculate the debt service payments required to carry the property. Your lender will give you a clear picture of the required downpayment based on the property and your credit history and will give you an idea of the expected interest rate and loan amortization term. Use this handy calculator to make your calculations (note: this site defaults to a Canadian calculator - if you're in the US, remember to check the button that says US property or the result will be incorrect for your purposes.)
Now deduct the annual debt service (12 X the monthly payment) from the NOI to arrive at a pre-tax cash flow number. This is the money left over after all expenses save income taxes are paid.

NOI-Annual Debt Service Payments=Pre-tax Cashflow

Is the number you arrive at greater than $0, also called positive cashflow? If not, is it really an 'investment'? Even if it is greater than $0, is there any room for error, or will you be in a negative cash flow position if the property's income drops just a little?

Definition from thefreedictionary.com:
investment - the act of investing; laying out money or capital in an enterprise with the expectation of profit

'The expectation of profit" is the key phrase here. I have seen too many would-be 'investors' either fool themselves or be fooled by others into buying into the philosophy that $0 or negative cashflow is acceptable because 'the market always goes up and you'll realize a profit when you sell'. While this is most certainly the case most of the time, for myself and my clients, that's just not good enough.

If an investment doesn't provide positive cashflow from day one, then it isn't an investment, it's a liability.

The exception to this rule is when rehabbing a building and you go into the project knowing that it will be a set period of time before you can expect a return on your money. In general, however, when considering pure investments where you are simply buying a property based on its existing income stream, if there isn't positive cashflow on the first day of ownership then it probably isn't worth considering.

Super Concrete or How to Build a Pyramid

2009-10-24T15:37:00.003-04:00

I ran across this story on wired.com today about super concrete and the US Military. Among the story ideas, including bombs bouncing off bunkers and other fantastical applications like mugs that don't shatter, the writer mentioned a French scientist, Joseph Davidovits of the Geopolymer Institute, who claims that the Ejyptian pyramids may have been built with a re-agglomerated stone rather than massive blocks.

An intriguing idea that solves a lot of heretofore baffling logistical challenges.

The applications for construction of major projects, even today, are enormous. Quick runways, immovable and nearly indestructible foundations... other ideas?

Funny Friday - Awesome Real Estate Ad!

2009-10-23T19:25:00.004-04:00

Thanks to Future of Real Estate Marketing for finding this gem and sharing with the world!

The guys over at I Love Local Commercials are really on to something with this plan to market small businesses with creative online ads. Great job and really funny!

Enjoy!

Tips for Increasing the Cash Flow of Your Business

2009-10-22T14:17:00.003-04:00

Need more cash? What business owner doesn’t these days? Even if your revenues have remained stable during this recession, your company may still be short of cash if it’s tied up in accounts receivable, inventory or capital equipment.

Thomas Comollo, a partner with B2B CFO in Ponte Vedra Beach, Fla. says there are several “tricks of the trade” that well-managed companies use to maximize their cash flow. These policies can be used by any sized business. Here are a few that will help maximize the cash in your checking account:

Shorten your cash conversion cycle. This is the time that it takes a business to convert a sale to cash. The shorter, the better. Dell keeps its cash conversion cycle one of the best in the business by getting paid up front, ordering parts only after the order has been received and paid for, and not carrying excessive inventory.
Reduce accounts receivable. Consider billing by e-mail so customers get invoices more quickly. Tighten your collection policy, and follow up as soon as invoices become overdue.
Reduce inventory. Don’t order parts or supplies until you absolutely need them. Limit access to inventory to prevent theft, and get rid of obsolete inventory immediately.
Stretch out your payments. Don’t pay vendor bills until they are due, and negotiate longer terms. Don’t be afraid to ask for 60 days to pay. Be careful though, don't create a situation where you start paying late - your good credit is too important!

5 Tips for Negotiating a Renewal of Your Commercial Lease

2009-10-21T09:37:00.002-04:00

Your lease is nearly up, and it's time to renew. Now is a great time, experts say. The recession and resulting downsizings, bankruptcies and corporate closures have created opportunities for companies looking to stay in place and renew their leases. Vacancies are up nationwide, and subleases are driving down rents. That makes landlords nervous-and anxious to retain their current tenants.

To attract new tenants, landlords often offer concessions such as free rent or buildout allowances. But renewing tenants have received little more than a rent hike-until now.

Here's how to get the best deal on your lease renewal:

Hire an expert. Consider engaging a broker who specializes in tenant representation. A qualified broker can help you negotiate your lease--to your financial advantage.
Start early. Don't wait until the end of your lease. Allow time to negotiate with your landlord and to research alternative locations should he be unwilling to bend. Experts suggest beginning the process about a year before your lease expires.
Keep information to yourself. To optimize your bargaining position, keep key information to yourself. For example, don't let your landlord know that his location is the only one that works for your business.
Do your research. Always have several other alternative locations that will work for you. Get proposals from each so you can compare the details of each deal. Then approach your landlord with comps. A landlord is only likely to give you the same type of deal new tenants get if he believes you have alternatives and might leave.
Get legal advice. Have a commercial real estate attorney review the lease before you sign it.

Been through the process already? I'd love to hear how you made out and what worked best for you in the comments.

If your lease is up for renewal soon, I'd be happy to assist in any way I can. Just drop me a line and let me know how I can help.

The Top 9 Blogs I Read - Real Estate and Otherwise

2009-10-19T11:53:00.003-04:00

Thought I'd share some of the blogs I read on a regular basis; these are the places I go to keep informed.

Commercial Real Estate Blogs:

Deal Junkie
Billed as "A Peek Inside The Commercial Real Estate Sector", Deal Junkie is a good place for quick and timely commercial real estate stories and editorial. Deal Junkie is a commercial real estate blog with a focus on the debt & equity market in US and Canada.

Real Property Alpha
"Investment Real Estate, Incremental Innovation, and Shameless Self-Promotion"
Run by John Reeder of Mimi Song Realty Group and Sperry Van Ness, Real Property Alpha is a great site with lots of well reasoned and well researched articles on commercial real estate and finance. Worth the time to explore this site.

Retail Traffic
"Where real estate, retail and development meet"
This is the blog page of Retail Traffic Magazine and provides insight on the retail sector with comments on the impact of retail on commercial real estate development.

The Dirt Lawyer's Blog
"Digging the dirt on commercial real estate transactions and law in Chicago and beyond"
This is the blog of David Stejkowski, a lawyer in Illinois that I found early this year. He's always got an opinion about timely events in corporate real estate and the industry in general. Highly recommended.

The Commercial Real Estate HandBlog
Informative site with lots of 'how-to's' for investing in commercial real estate. I just found this site a few weeks ago, and I'm impressed with the amount of information that they give away. Worth stopping by.

General Real Estate Blogs:
Agent Genius
"Our primary goal is to educate readers to improve their business as well as the overall industry with the end goal being improvement of the consumer experience." Fabulous site for REALTORS by REALTORS with lots of great tips and ideas on how to improve the brokerage business. Tips on SEO, branding, attitudes, you name it.

The Real Estate Tomato
"Juicy blogging advice for REALTORS"
Loads of great blogging advice for agents including mountains of information on content creation. They must be pretty busy over there however, new content on the site has been very slow in being released recently. If you're new to real estate blogging, you should definitely check it out.

Non-Real Estate Blogs:

Problogger
"Welcome to ProBlogger.net - a Blog that helps bloggers to add income streams to their blogs."
While I'm not trying to monetize my blog, I find the ideas and strategies presented here to be invaluable. Darren Rowse has really figured out how to make blogging work - and he does with class.

The Blog of Tim Ferris
"Experiments in Lifestyle Design"
Tim Ferris is the author of 'The Four Hour Work Week" a much misunderstood title. He advocates only doing those things that excite you and reducing work to the bare minimum to acheive your goals. Not for everyone, but I find inspiration in the dream!

I could go on for hours with great sites that have fantastic content, but this is a good start. Take a look and tell me what you think. What other sites do you recommend that I'm missing?

What's the Difference Between Market Value and Market Price?

2009-10-14T16:39:00.002-04:00

How are values estimated? How do sellers know what to ask for their property (assuming no bank is knocking on the door)? How do buyers come up with a price that they are willing to pay for a property?

Given the lack of deals in the market place today, there is growing confusion about what constitutes 'market value' vs. 'market price'.

One is an estimate of price and one IS the price.

Where there are no, or very few, transactions taking place it becomes very difficult to estimate values. And, where buyers have an expectation (that may or may not be based in reality) that there should be a lot of 'good deals' out there because of the Great Recession, I'm seeing more people grasping for what real values should be.

Market Value is defined by the Ontario Real Estate Association (OREA) as:
“The highest price in terms of money, which the property will bring to a willing seller if exposed for sale on the open market; allowing a reasonable time to find a willing purchaser, buying with the knowledge of all the uses to which it is adapted and for which it can be legally used, and with neither party acting under necessity, compulsion or peculiar and special circumstances.”

A couple of provisos, also from the OREA:
“Market Value is not to be confused with market price: the amount paid, or to be paid, for a property in a particular transaction. Market price is an accomplished or historic fact. Market price tends to closely align with market value in an efficient marketing system involving willing, informed buyers and sellers, given reasonable periods of time with no undue influences. However, successive market prices, in comparable properties form the basis of estimating the market value of a particular property.

Market Value is not to be confused with cost. Expending $2,000,000 in constructing a new development plus $500,000 for the purchase of the land in no way ensures a market value of $2,500,000. However, assuming a reasonably efficient market, the difference between actual cost and market value may be negligible unless obsolescence was built into the property or intervening factors affect the market place: e.g., lack of housing, supply, dynamic growth in a particular market, extremely depressed market conditions etc.”

A lack of 'successive market prices' is the problem facing sellers and buyers today. And, as time goes by, it gets harder and harder to nail down values because more and more time is slipping away. As time goes by, historical data becomes less valuable and therefore the process is exacerbated.

So what is a buyer or seller to do? Let common sense prevail. Where an investment property has solid tenancies and shows promise of long term returns along with cash flow today, why wait to sell or invest? Now is the time to make smart investments. The cost of inaction is just too high.

Source: OREA Real Estate Encyclopedia, Premier Edition, 1997

Further Indicators That it's Time to Buy?

2009-10-06T11:06:00.008-04:00

The Analysis and Opinion

The evidence is compelling and the research is strong. This great article from the National Real Estate Investor, gives some really good background on the spread between US 10 year Treasury yields and historic cap rates.

As of the second quarter of 2009, the cap rate spread ... has widened to more than 400 basis points. We believe this trend reflects increased risk-aversion among investors, who are pricing in a negative outlook for real estate.

During the recession of the early 2000s, cap rate spreads also rose to more than 400 basis points, making real estate appear undervalued relative to Treasuries. We believe that entering the real estate market during such periods of above-average spreads may be advantageous to long-term investors.

When most investors are taking a wait and see approach to investing, it's often the right time for those with the vision to start investing. And there is evidence that you should start soon:

These periods of high cap rates and spreads often do not last long. From 2003 to 2007, spreads narrowed significantly as the economy recovered and property values appreciated.

As the economy begins to rebound and real estate fundamentals improve, investors will likely become less risk-averse. We believe it is likely that more capital will flow into the sector in 2010. Consequently, we expect cap rate spreads to eventually narrow gradually, reverting toward the mean, and repeating the cycle.

My thanks to the Dirt Lawyer, David Stejkowski at The Dirt Lawyer's Blog for finding and sharing this. You should consider following David on Twitter: @DirtLawyer for insightful and timely posts on commercial real estate topics.

Other Indicators

via Retail Traffic today:

Bill Rudin, Rudin Management, and Steven Roth, Vornado Realty Trust, talk about their views on the real estate market - where we are and where we're going.

Steven Roth, "We're optimistic that there things, you know, moving in the right direction."

Bill Rudin talks about wanting tenants to sign short term leases, 2 years or so, so that they can play the market as it goes back up i.e. increasing rents along with strengthening markets vs. the tenants who want to lock in now for longer term leases, 10-20 years, now because there is growing sentiment that this is the bottom and they want to take advantage of that.

Really good take on the US commercial real estate market. Thanks to Retail Traffic for finding and posting this video.

Why Commercial Real Estate is NOT the Next Bubble

2009-09-29T10:26:00.002-04:00

For the last several months, I've been saying that commercial real estate is not collapsing.

John Levy, president of the John B. Levy & Company, shares some really good insights on why he believes this too. First and foremost is that the reduction in values in commercial real estate and the necessity of refinancing undervalued assets are not a surprise. This is something that we've been watching for some time and is not a 'bubble about to burst'. It's already happening and, in fact, institutional investors are preparing for it by readying their funds to take advantage of the situation. Really informative video that's worth every second to watch and does an excellent job of putting the current real estate market in perspective.

Why Peterborough Retail Rents Are Cheap!

2009-09-23T14:15:00.005-04:00

via MSN Money: The world's most expensive shopping districts.

According to real estate advisor Cushman & Wakefield, it costs an average of $300 USD per square foot to set up shop along Bloor, the street that stretches through the heart of the city.

Often, when asked about retail rents in Peterborough, we're surprised when the reaction we get is one of disbelief, "You get how much?" As if $16-22 per foot for new retail space in Peterborough, Ontario is some kind of out of this world number that can't possibly be correct.

You haven't seen anything yet!

Check out some of these statistics as gathered by Cushman & Wakefield in their Main Streets Across the World Report (registration required, but free):

$300 - Bloor Street West, Toronto
$110 - Queen Street West, Toronto
$200 - St. Catherine West, Montreal
$50 - Sussex Drive, Ottawa
$50 - 17th Avenue SW, Calgary
$210 - Robson Street, Vancouver

Still think $16 is expensive?

Now, I know that the naysayers among you will cry, "But there's a heckuva lot more money passing through the doors along Bloor West, than Peterborough!" And to a point, I'd agree. There is more money passing through the tills on Bloor Street - but enough to justify a rental rate increase of 1,838%?! Are the retailers selling 1,838% more per foot? I think not. (Note: If anyone can find some research on sales per foot in Toronto vs. Peterborough, I'd love to see it.)

Retail spending in Peterborough, on a per capita basis, has averaged over 16% higher than the provincial average for the last 6 years according to the most recent GPAEDC Community Profile.

Construction costs are lower in Peterborough, but only slightly. Using rsmeans.com Quick Cost Estimator, I found that a 10,000 foot retail store would cost about $132 per foot to build in Peterborough versus $139 per foot in Toronto - only a 5% difference that doesn't come close to making up the difference in lease rates.

Land is far cheaper in Peterborough though, and this does go a long way to making retail space much more cost effective both for tenants and landlords. But that's not my point...

My point...

Peterborough, like a lot of other mid sized towns around Ontario, is a bargain!

Regardless of what it costs to buy land and build in a given community, from the retailers perspective, the sales forecast for each store on a 'dollars per square foot' scale should be the true measure of a retailers success in a given marketplace. All other expenses, including rent, come out of this top line revenue number. If a retailer can sell $500 worth of product in Peterborough and it only cost $210 to do so vs. $490 in Toronto - which is the better location?

Let me know if you need a little help with the math... :)

Why Shouldn't Canadians be Bullish?

2009-09-21T14:44:00.004-04:00

Canadians Bullish for First Time Since 2007, Nanos Poll Shows

Interesting article on bloomberg.com about our (Canadians) feelings and perceptions about the economy of this country. Of note:

The share of Canadians who say they believe the economy will strengthen over the next six months rose to 45 percent, according to an advance copy of Nanos’s quarterly economic survey provided exclusively to Bloomberg News. That’s more than twice the 18 percent who predict the economy will weaken.

The results are consistent with recent data that suggest the economy has emerged from its recession this quarter, helping to fuel rallies in the country’s stock market and currency. Canadian wholesale sales, manufacturing sales and the index of leading indicators rose more than forecast last week, according to government reports, while home prices have risen to records this year.

and

Real Estate Seen Rising

Confidence is strongest in Ontario and the prairie provinces of Alberta, Saskatchewan and Manitoba, and weakest in Quebec, according to a regional breakdown of the data.

The poll also found that Canadians are three times more likely to say the value of their real estate will increase over the next six months than say it will decrease.

“A key driver for the optimistic mood relates to perceptions of real estate,” Nanos said.

While I agree that there seems to be a more upbeat attitude around town these days, there's still a ways to go. What we need are a few big commercial real estate deals to happen to show those still sitting on the sidelines that there are good deals to be had and that there's no time like the present to invest.

Why You Should Consider Joint Ventures for Commercial Real Estate Investments and How to Make Them Successful

2009-09-17T16:54:00.004-04:00

If you're like a lot of investors out there, you might not have access to a large enough pool of cash to get into some of the best investments out there. Sure, you can probably put together a couple of smaller deals, maybe a four unit residential building or a small neighbourhood strip with a convenience store and a dry cleaner - but what about something with a little more scale? What if you could get together with a partner and invest in an industrial property or mid-sized office building? Maybe a 50 or 60 unit apartment complex? Sound interesting?

Welcome to the world of Joint Ventures. What is a joint venture? The definition of a Joint Venture from Wikipedia:

A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship ...

What are the benefits of a JV?

Save money
Increased pool of resources including money and talent
Greater opportunities based on increased scope and reach of the JV
Appearance of increased size might offer more access to deals

What are the risks, and why do JVs fail?

Lack of planning
Poor organization
Failure to clearly delineate duties and responsibilities
Failure to understand and perform duties agreed to
Smaller investors have less margin for error and therefore small mistakes can be exaggerated and more costly

To reduce the pitfalls of JVs and limit your exposure to potential problems you need to make sure that you do your homework and set up a formal Joint Venture Agreement wherein all parties' duties are clearly defined and understood. Use a competent lawyer experienced in this kind of contract work and set up the organization before committing to any projects. The following items are the basis of a good joint venture agreement. *Remember to get legal advice prior to signing anything.

The Joint Venture Agreement Checklist:

The date on which the agreement is established and executed.
The names, addresses and identification of the parties, including the type of business of each member of the joint venture.
The name under which the joint venture will do business.
The principal place of business of the joint venture.
The purpose of the joint venture. If the purpose is to access a specific project, a full description of that project is required.
The terms of the joint venture: when and how the joint venture is terminated; and, how such items as guarantees, defects, and insurance will be handled after termination.
A statement that the parties are actually co-ventures for the project whether or not the contract is in the name of all members.
A declaration that the organization is a joint venture, not a partnership.
The establishment of a fund by the parties to finance the work, together with the amounts to be contributed by each party, with the fund being deposited in a special bank account under dual control and all progress payments and other revenues being deposited in such account.
A clause providing that, if additional working capital is required, the parties will proportionally contribute additional funds, as needed and naming the penalty for failure to contribute.
A declaration of the participation of the parties and percentage in which profits and losses are shared. Usually these percentages are proportional to the contributions to the working fund, but the amount of contribution of funds by parties can be increased or decreased depending on the contributions of equipment or expertise which also must be considered.
Payment of any fee to the controlling co-venturer or sponsor should be specified; whether a share of the profits in excess of that contemplated is given to the controlling manager or a flat dollar sum is paid.
If equipment is involved, a specific clause should be inserted especially where the parties contribute varying amounts of equipment.
The parties to the joint venture should agree to sign all necessary documents relating to the contract, bank loans, bonds, indemnity agreements and the like.
Control management committee may be determined. A management committee may be established with provision for remuneration. Alternatively one of the co-venturers should be designated as general manger of the project, with authority to bind the joint venture.
A provision to clearly define not only the management duties, but all other duties of the co-venturers and procedures to be followed in dealing with unusual situations or problems that may develop.
A regular meeting schedule should be considered.
A financial and periodic joint venture and progress reporting procedure should be implemented.
Establishment of a joint venture bank account, and the appointment of a chartered accountant and lawyer.
The possibility of the death, bankruptcy or insolvency of a member must be handled.
The acquisition of equipment and materials by the joint venture and the disposal of such equipment and material either by sale with the proceeds treated as ordinary revenues, or by distributing the funds to the co-venturers on a pro-rata basis.
Provide for the acquisition of licenses in the name of the joint venture or each co-venturer as required.
Specify the type of insurance carried by the joint venture and clearly define the liabilities that are to be insured against by each participant.
Define items which are to be considered as costs to the joint venture for the purpose of determining profit or loss and describe those items which are not reimbursable to members of the joint venture.
A clause should be included respecting the confidentiality of trade information passed between the co-venturers.
Ownership or retention of patents, technology, and consultant reports should be addressed.
Establish the performance security requirements of the project and the bonding obligations of the co-ventures.
State that undivided pro-rata interests are held by the co-venturers on all assets of the joint venture.
Restriction should be considered regarding assignment of co-venturers undivided pro-rata interests in assets of the joint venture.
Indemnification.
Substitution or addition of co-venturers.
Payout of funds.
Disputes arbitration clause.
Winding up, final performance and financial statements for the joint venture.
Notice clause.
The applicable jurisdiction of the Agreement should be stated.

The nature, size and complexity of the project together with the sophistication of the parties will determine the detail in which the Joint Venture Agreement is prepared and aforementioned topics dealt with. This checklist is meant only as a guide to putting a Joint Venture Agreement together. The appropriate professional services, such as legal counsel should be sought out and utilized.

Source: "How to Use Joint Ventures - A handbook for firms bidding on major projects", A Government of Saskatchewan publication. Prepared by Thomas Pavlovsky, B. Admin., C.A. and Ted C. Zarzeczny, Jr.,B.A., LL.B. for the Major Projects Branch Originally prepared by the Government of Saskatchewan.

Failing to plan is planning to fail. Do your research, find a partner or partners you know you can work with and get out there and build your empire!

Are You Ready to Start Your Own Business?

2009-09-16T16:37:00.003-04:00

Interested in starting a business in the Peterborough area but need some direction? You should consider using the services of the Business Advisory Centre (BAC) at the Greater Peterborough Area Economic Development Corporation (GPAEDC).

What is the BAC?

The Business Advisory Centre, a member of the Ministry of Economic Development & Trade's Small Business Enterprise Centre network, is a one stop resource centre for entrepreneurs and small business owners. Our professional consultants advise business owners in the City and County of Peterborough on key aspects of startup and maintaining successful businesses.

Programs and Resources
Visit their website to see such resources as:

A list of upcoming events and seminars to support small business
Details of their mentoring program
Start-Up information including an FAQ a Business Planning Guide and a Financing Programs Guide
Other online resources like: How to Start a Pet Business, How to Start a Restaurant or Catering Business, How to Start an Event Planning Business

Other topics covered and resource links include:

Getting started
Planning
E-commerce
Retail
Home-Based Business
Developing New Products
Advertising and Marketing
Business Development and Maintenance
Co-operatives
Running a Business

There is so much on the site in fact, that it would take me weeks to describe everything you can find on this there! What a fantastic resource for new and experienced business owners alike. Dive in, and take a look at what the GPAEDC has put together here!

Congratulations guys, what a great package!

To reach the BAC, contact:

Nicole Truman
ntruman@gpaedc.on.ca
705.743.0777 Ext. 2123

Is it Time to Invest in Commercial Real Estate Yet?

2009-09-15T15:32:00.007-04:00

According to this article on netgainrealestate.com, it might be.

Using historical statistics, the current climate can be dissected to some extent. Net Gain describes a recession as a manner of alleviating surplus. There have been 20 prior recessions since the start of the 20th century, all of which have made a full recovery. Statistics show that the length of time between peaks of a recession determines the level of excess, which indicates the severity of the next recession.

In assessing the past 20 recessions, the average number of months between peaks is 59 with the most recent lasting 81 months. The average length of time between peak and bottom is 14 months. Based on this information and fact that the current recession is in its 20th month, investing in income property at this time would be a wise decision.

I've tried in the past to look at various indicators of the 'right' time to buy and have always come up short. I've always felt that if a deal creates cash flow that meets your investment criteria and the risk inherent in the deal isn't higher than the return warrants then it's always a good time to invest in commercial real estate.

That said, if you do need an outside indicator, the one proposed by netgainrealestate.com is probably one of the better methods to follow. Since history tends to repeat itself (no matter how many times we fool ourselves into thinking that, "This time it'll be different. No really! ...why does everybody laugh when I say that?"), taking a look at previous recessions and the inevitable recoveries that followed is as good, or better, a method of market timing as any other.

Should an Inexperienced Residential Agent be Selling Commercial Property?

2009-09-10T13:26:00.005-04:00

Well, isn't that a loaded question and one that I've discussed before. Actually I came up the title for this piece after reading the following headline and question on Yahoo! Answers:

What is the process in writing an offer for a commercial property?

"I am a residential realtor. I have a client that wants to purchase a $8 million property that is listed by another broker. Do I send the listing broker a “Letter of Intent” or a commercial contract to sign? When a letter of intent is signed by the seller and buyer, does it then go to a real estate attorney? And does the real estate attorney handle the rest? Need Help ASAP!!"

Link to original page here.

The question and the answers (and I use the term 'answers' loosely), were posted about a year ago but they resonated with me because it's the kind of thing I hear from my residential counterparts fairly regularly.

First, the posted answers:

1) The answer chosen as the best solution suggested that the best way to move forward is by way of a Letter of Intent (LOI). By itself, this isn't a terrible answer and is often the right thing to do. In this instance though, there wasn't enough information given to know if that would have been the right solution or whether moving directly to an Agreement of Purchase and Sale (APS) might have been the best idea. This first answer, and remember this was chosen as the best answer, went on to say that the agent should at all costs avoid the use of a lawyer because they just charge $300 an hour and get paid whether or not the deal actually closes. Pardon? It is NEVER advisable to suggest that a customer or client NOT use a lawyer! If they feel that they'd like that extra layer of advice, by all means, encourage it! If an agent tries to discourage a client from using the services of a legal expert (we're not lawyers!) and then something untoward happens that costs the client money or other damages, guess who'll be found at fault? I'll give you three guesses, but the first two don't count...

2) The second answer suggested skipping the LOI and moving directly to the APS. Again, there wasn't enough information to make this call.

3) The third answer suggested that LOIs were a waste of time as they aren't binding. This is usually true, but is not always the case. This answer goes on to suggest that the agent must present the offer in person or he'll never learn why the property is actually for sale or what the seller will accept. He goes on to talk about agents that like to 'play games' with LOIs and bullying agents at the negotiating table. Sounds to me like this guy has had a bad experience somewhere in his past!

4) The final answer, while a little superficial, "...keep your composure; appearance is very important...", does give the best advice of the four, at least as far as it goes, "Many of your questions would be best answered by YOUR broker." At least this answer advises getting further would-be expert advice. The problem with this is that the agent is a residential agent and, in all probability, so it the broker. My hope would be that the broker would give the same advice I'm about to...

Sadly, all four of these answers are wrong.

My answer:

Don't do anything you don't have some training to do or where you just don't have a good gosh darn idea of how to do it! If you don't know the process for writing a commercial offer, should you be 'trying it out' on your unsuspecting client? Absolutely not.

I refer to our Code of Ethics, which is now enshrined in law under REBBA 2002:

5. Conscientious and Competent Service, Etc.
A registrant shall provide conscientious service to the registrants's clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence in providing those services. O. Reg. 580/05, s. 5.

Interpretation:
This provision, deriving from Rules 1(4), 40 and 42 of the previous code, generally focuses on the duty of care owed to all clients and customers. This duty involves reasonable care and skill in providing accurate information, as well as when performing functions to which the registrant has agreed. The standard of care for this duty is one of reasonableness, i.e., how a prudent and informed registrant would conduct himself or herself under similar circumstances.

What does this mean? It means that you have a legal duty to ensure that any service you offer is offered with the competence and knowledge to support it. If you can't perform your duties to your clients or customers within this guideline - you should not be doing it! Not only are you not providing good service to your client - which should be your chief concern - but since the Code of Ethics is now part of the Act, you are breaking the law.

The real solution to such a happy conundrum as having a buyer willing to spend $8M:

Refer the deal to a commercial practitioner in your area who does have the knowledge and competence to provide commercial real estate services. Three things happen when you do this that will seem like magic:

1) Your client gets the service he/she deserves and you get to look like the hero for providing said service;
2) Your client will likely get a better deal by having proper representation in the transaction and there will be fewer road-bumps in the negotiation and subsequent due diligence period; and
3) Everybody makes some money! Your client earns a return on investment by successfully purchasing the asset, the agent you refer the deal to earns the lion's share of the commission because they have the expertise to see the deal through to completion, and you earn 25% or more of the commission for filling out a simple referral contract. Sounds like the ideal win-win-win to me!

If you really want to get involved in the wonderful world of commercial real estate, great! Go get some training. Find a mentor who will work with you during your first few years of learning this rewarding business and have fun with it. This is what I did, and every other successful commercial practitioner I've ever met has done the same.

If you want to take your chances and try to work deals like this flying by the seat of your pants, you might get away with it a few times, but, sooner or later you'll get your wrist slapped at best or found guilty in court and fined or jailed at worst. It's up to you, but think hard about your choices before you act.

Self Interview, Just for Fun

2009-09-09T10:11:00.003-04:00

Thought I'd do something different today and interview myself! Seems I'm not quite famous enough (yet) to be interviewed by one of the big guys, so I thought this might be fun. You'll get to know me a little better and I get to share a little about myself outside of commercial real estate.

Q: Most valuable gift you’ve ever received?
A: The ability to think for myself without feeling that I should 'go with the flow'. The desire to 'know' without compromise or giving up on knowing the truth. (Thanks Mom and Dad!)

Q: Favourite way to chill out?
A: Depends on my mood. Reading a good novel or just flaking in front of the tube are two of my favourites. A good video game session with friends is always fun too!

Q: If you were a Star Trek® character, which one would it be?
A: I have to go with the cliche answer of James T. Kirk. He's the captain, and who doesn't like to call the shots? He gets to go on all of the really fun missions, and he always gets the girl! I share one common belief with the character above all others: neither of us believe in a no-win situation; there's always another option.

Q: What is the last book you read?
A: The Dark Tower III - The Wastelands, by Stephen King. Incredibly, I hadn't read any of the books in the Dark Tower series before - I'm more of a sci-fi or fantasy adventure reader than a King fan - but this series has me hooked now! Action, romance, magic, gunslingers...what more could you want?!

Q: What was the last movie you went to see?
A: JJ Abrams' Star Trek. Not surprisingly. I was skeptical at first, but I have to admit, this is right up there with The Wrath of Khan and The Voyage Home in my Star Trek movie favourites. Seeing the movie sitting alongside real fans was a blast - laughing at some of the inside Trek themes and historical canon was a riot!

Q: How would you explain your business in one sentence to your eight-year-old nephew?
A: I help people earn money by teaching them how to buy buildings and trading some space in them for money.

Q: If someone wrote a biography about you, what do you think the title should be?
A: "On The Way to My Life, I Met the Oddest People."

Q: What kind of people do you dislike?
A: Rude and disrespectful people really get my juices boiling. Seriously, does it take a lot of effort to say thank you for holding a door or to give a little courtesy wave when I let you into traffic? Sheesh!

Q: How would you describe yourself in three words?
A: Trustworthy. Dependable. Lifelong learner. (Okay, that's really four words, but lifelong learner is a compound word...right?)

A Funny for Friday

2009-09-04T13:50:00.003-04:00

Sign Reads:
Lemonade $6.2 Million/glass
House free with lemonade

Have a great long weekend everybody!

The Single Best Place to Start Looking for Commercial Real Estate in Canada

2009-08-31T22:19:00.004-04:00

One of the most common questions I hear, so common in fact that it's almost a daily occurance, is, "Where do I find commercial real estate listings? Isn't there something like realtor.ca that I can go to so that I can do my own research?" The short answer is yes, there is, and it's called ICX. www.icx.ca is a national site provided by REALTORS® across Canada that shares informatioan about commercial properties for sale across the country.

A short visit to www.icx.ca will quickly show you that there are a LOT of commercial properties for sale in Canada. Like realtor.ca, the national residential search site, this site is not a public version of the MLS®, rather it's a showcase for commercial listings. It's a one-stop shop for all MLS® listed properties that also features some timely commercial real estate stories on its homepage.

Below is a view of the home page, and here's a link to instructions on using the site.

The site allows you to search by location, property type, transaction type (lease/sale), price, etc. There's even a map search so that you can dial down to specific areas visually. Looking for a specific REALTOR®? You can search for one on icx.ca. Don't forget to subscribe to the site's RSS feed while you're there.

Sites like these don't replace a good relationship with a commercial REALTOR®, but they're a good place to start your search. Drop me a line if you need some help navigating the site or if you'd like some assistance in your search.

Good luck, and happy hunting!

Inexcusable Behaviour From Commercial Broker

2009-08-30T08:53:00.005-04:00

Found via www.squarefeetblog.com. Square Feet is a commercial real estate blog providing information, market data, as well as commentary on news and happenings which have an impact on the Silicon Valley commercial real estate market.

2 Men Arrested In Pleasanton Cab Driver Assault Full story from CBS Channel 5.

Pleasanton police have arrested two men suspected of verbally and physically assaulting a taxicab driver Thursday.

Units responded to report of a battery in progress at a 7-Eleven store on Valley Avenue at around 1:10 a.m., according to the Pleasanton Police Department. Jaswinder Bangar, a local taxi driver, was found suffering facial lacerations and a broken tooth.

Bangar told police he had picked up two men at the Redcoats British Pub and Restaurant in Pleasanton who, on the way to Danville, began calling Bangar derogatory names and punched him in back of the head.

Bangar said he pulled into the parking lot at 7-Eleven to call police, but the two men, later identified as Jacob Billingsley, of Alamo, and Danville resident Michael Goldstein, grabbed the cell phone and broke it.

A subsequent investigation into leads led officers to Goldstein's home in Danville, where both men were found hiding.

How is this a real estate story?

Goldstein was managing director Collier's Stockton office in California. According to squarefeetblog, his profile has been removed from the Collier's site. I guess after this kind of alleged behaviour, his company thought the better of being associated with him.

My Reaction

It's strange...I felt personally affronted by this guy's alleged actions. Normally, we're so insulated from and inundated by stories of reprehensible behaviour like this that we don't take notice of them. And that's a shame because these are all people with real lives being affected; but they're just so far away we don't feel any real emotion attached to them other than to say, "That's awful!" and then we go about our day and forget all about it.

This time however, I guess because one of the accused is a commercial broker, I think I felt a little ashamed. I shouldn't - I didn't attack the poor driver - but I did all the same. This guy has besmirched all of us in the commercial real estate industry by his actions and yet I felt somehow responsible (?) for him when I read this. One of our own has fallen and crossed a line that should not be crossed. Ever.

Shame on him!

We need to hold ourselves to a higher standard than this. We have a difficult time as it is in this business battling negative press and negative bias every day; we don't need this kind of heat. I hope, if found guilty, he gets the maximum penalty allowed and that his state registrar pulls his license. Permanently.

Invest Like Joe and Don't Look Back

2009-08-28T14:42:00.005-04:00

NYT - Inland Real Estate Dives Into Troubled Commercial Market

G. Joseph Cosenza, president of Inland Real Estate Acquisitions of Oak Brook, Illinois, is on the right track. At a time when the majority of property investors either have their heads in the sand waiting for the storm to blow out or are standing around with bewildered looks on their faces, muttering to themselves about cap rates and falling values, Mr. Cosenza is buying.

He's buying a LOT of real estate. Since early in 2008 he's been on a buying spree, spending about $4 billion on acquisitions across the US.

He is happy to be swimming against the tide — buying while others watch from the sidelines. “I say to them, thank goodness and just get out of my way,” Mr. Cosenza said. “We’re not looking for trophies; we’re buying solid income-producing real estate that is not in default.”

Some observers say that Mr. Cosenza and other intrepid investors stand to profit handsomely. “For the opportunity fund with the resources, it’s time to make a killing,” said David L. Funk, director of the Cornell University Program in Real Estate, a master’s degree curriculum. “In 10 years, people will look back at 2009 as the year fortunes were made.”

He (Mr. Cosenza) says he intends to keep buying. “I have another six to eight months when people will be frozen in their tracks,” he said, “and I’ll have a clear field.”

The smart money is getting back in the game now - when will you?

Photo credit: Sally Ryan, NYT

Update August 31/09: He's at it again! Inland is setting up a new $5B fund.

Inland Diversified intends to use the proceeds from this offering primarily to acquire a diversified portfolio of commercial real estate. Potential commercial real estate assets will include: retail, office, multi- family, student housing, industrial/distribution warehouse, lodging, medical office/healthcare related facilities, public infrastructure assets and triple- net single use properties.

Are You the Tortoise or the Hare in Your Approach to Real Estate Investing?

2009-08-27T09:26:00.002-04:00

Do you have a plan in place to achieve commercial real estate success? Maybe you’re just spinning your wheels going from idea to idea without any clear direction or consistent actions to reach your goals. Do you even have clearly defined goals?

Reaching success, whatever that means to you, is only possible with consistent and persistent action over a period of time. Take some time to do some research, find a mentor, whatever it takes to get you pointed in the right direction. Develop a plan of action and, most importantly, stick to it! A plan is only as good as its execution. I just made that one up – feel free to quote me ;)

I found this article online and thought that it mirrored what I was thinking in a lot of ways, so I decided to share it with you here in its entirety. As you read it, think of how you can use the underlying philosophy to your advantage whether in your pursuit of commercial real estate or other things you value in your life like health and happiness. It’s an old story, but the inspiration is timeless.

Three Steps to Becoming Consistent and Persistent

To achieve a level of success in most anything in life requires one to be consistent and persistent, as achievements are not typically accomplished in a single or random number of actions.

First let's understand what we mean by being consistent and persistent.

Being consistent is performing a task on some type of schedule or performing a task in a similar manner. Taking a walk every morning is an example of a consistent behavior. Following a select route each day is also a consistent behavior.

Being persistent is refusing to give up or to let go, even in the face of adversity, warnings or setbacks even to the point where one is told they are being obstinate, or there is no reason to continue to go on or to hope for a particular outcome. Being persistent can be having a belief that something will or will not happen such as someone with a terminal illness will get better and continue to live a normal life. If our individual in the example above slipped and broke their ankle, they would be persistent if they started each day by taking a walk even if they were on crutches.

The desire for success and the consistent action to achieve one's goals combines to create persistence. It is the consistent and persistent attitude and behavior over time that leads individuals to success or failure, to winning or losing.

Success Tip # 1
Possess determination and refuse to give up, quit, or be defeated. Individuals with a passion or dream who wish to achieve success will identify their goals and objectives to achieve the success desired. Armed with their action plan and their internal drive they will continue taking regular steps when most others would quit. A part of this component of being consistent and persistent is the pride and quiet satisfaction of an accomplishment. This is not action or thinking related to arrogance or boasting, but the down deep dignity and self-respect an individual possesses who will go to all lengths to complete a task or achieve a goal.

Success Tip # 2
Be willing to demonstrate patience and have the faith of a desired outcome at some point in the future. Success for many is a journey requiring a period of time in some cases a long period of time; it is not just an overnight stop between starting something and completing something. Possessing faith in the outcome and seeing the accomplishment in your mind is actually one of the steps in achieving a goal.

Success Tip # 3
Being open to taking an appropriate risk to achieve the goal is yet another factor in a consistent and persistent individual. You will notice I said "acceptable" risk by only possessing a "play-it-safe" attitude will result in missed opportunities. Yet by being open to untried solutions and understanding and assessing the risks involved, one can move closer to desired success. In other cases it is necessary for an individual to make an attempt and to be okay with failing as long as there is a lesson to be learned and not repeated in future attempts.

I'll take you back to the Aesop's fable of the tortoise and the hare. The rabbit started fast and disappeared down the path. To the tortoise it had to look like the race was hopeless as there is no way on this earth he could keep up with the rabbit. Yet he constantly and persistently put one foot in front of another, and after a while he passed the point where the rabbit had stopped to take a nap. But the race was not over as the finish line was still far away. So the determined tortoise continued down the path one step at a time maintaining his actions. Like many people who work in bursts and then stop for a while, the rabbit woke up and continued speeding towards the finish line. But like the individual who continued to perform the appropriate actions even when it looked hopeless, the tortoise crossed the finish line just ahead of the hare. By all rights a hare should always beat a tortoise.

But in life it doesn't always work that way, the fast and the strong do not always win only because they stop or quit even if it is for just a period of time. So for the individual with determination, patience, and the ability to take a risk, and at times fail the race can be won, the goal accomplished, and success achieved - with the habits of being consistent and persistent.

Sharma, Ajay. (2009, August 21). Three Steps to Becoming Consistent and Persistent The Free Library. (2009). Retrieved August 26, 2009 from http://www.thefreelibrary.com/Three Steps to Becoming Consistent and Persistent-a01073976784

Also found at: easyarticles.com

Photo credit: Chris Hendricks www.screenhog.com

Here's a Simple Way to Save up to 35% in Realty Taxes

2009-08-26T10:30:00.004-04:00

Do you own a commercial or industrial property? (I hope so, and if you don't, you need to call me! Soon!)

Do you have any vacancies in your building? (Unfortunately, this is a reality today for many Peterborough property owners.)

Did you know that you might be eligible for a rebate for a portion of the realty taxes you already paid if you had significant vacancy last year? (Yes. Really.)

There is help for property owners who have empty or partially empty buildings. If you've had a vacancy for at least 90 days at a stretch, you can apply, by the end of February in the year following the period in which you had vacancy, for a rebate of up to 35% of the taxes you paid. Below is an excerpt from the FAQ on the City's website on this process. If you have any questions, feel free to drop me a line and I'll point you in the right direction, or visit the City's website for details and contact information.

City of Peterborough 2009 Commercial, Industrial and Multi-Residential Tax Bills Frequently Asked Questions (FAQ)

Q. My Commercial/Industrial property has been assessed as fully occupied this year, but it is vacant (or partially vacant). Why is this, and is there some way that it can be taxed as vacant?

A. All buildings in these classes are assessed and taxed as fully occupied, regardless of whether there are vacant units in a building at the time the assessment roll is prepared. Property owners must apply to their municipality, in writing, each year for vacant space rebates by the last day of February of the year following the vacancy. That means you have until March 1, 2010 to apply for the vacancy rebate for the 2009 tax year. The classification of vacant properties reverts back to occupied for each new tax year’s assessment roll.

The percentage tax reduction to be provided through the rebates would be 30% for commercial properties and 35% for industrial properties, prorated for the portion of the year that the property was vacant. Rebates apply to properties that have had vacancies for at least 90 consecutive days. The definition of eligible property (i.e. what constitutes vacant space for the purpose of this rebate program), and the calculation methodology (i.e. determining the portion of the property’s total tax that is attributable to the vacant area to which the rebate percentage will be applied), is legislated by the Province through Section 364 of The Municipal Act, 2001.

In the meantime, if you'd like to recalculate your taxes based on your Assessment Notice, there's a handy calculator on the City of Peterborough's site. Just be sure to use the drop-down menu option to change the assessment class for your property.

Stop the Presses! Deal Reached on Peterborough Site!

2009-08-25T13:30:00.005-04:00

Bill and I are proud to announce that we have successfully negotiated a conditional agreement to sell the former Eastern Pentecostal Bible College to the Peterborough Housing Corporation. There has been a lot of interest in this property since we listed it on behalf of the owners, and we are pleased that we have reached an agreement with such a well respected local organization.

This process has been very rewarding for us on a professional level and we thank our clients, Master's College and Seminary and the Peterborough Housing Corporation for allowing us to contribute.

PRESS RELEASE:
August 25, 2009

Master’s College and Seminary, formerly Eastern Pentecostal Bible College has reached a conditional agreement to sell its former residential campus at 780 Argyle Street to the Peterborough Housing Corporation (PHC). The Argyle Street property is a 114,000 square foot facility on 6.3 acres located on the west side of George Street adjacent to Pioneer Park, north of Parkhill Road. Master’s College and Seminary is pleased that Peterborough Housing Corporation will now breath new life into the complex. Bill Pyle and Doug Lytle of Century 21 United Realty have partnered with both Master’s and the PHC in order to create this unique community initiative.

Peterborough Housing Corporation has a vision to create an intergenerational centre in this outstanding facility. The property will be used to create approximately 90 units of supportive housing units for seniors with the balance of the space reserved for public-service uses such as a day nursery or health facility. The facility is large and so PHC will use approximately 80,000 – 90,000 sq ft of floor space to create the residential housing units for seniors. The residential units are intended to be a mix of affordable and market priced units, with the balance of the floor space devoted to a community partner(s). The objective is to create a truly rich neighbourhood asset.

PHC has submitted a proposal to the Housing Division of the City of Peterborough for Federal- Provincial funding under the Affordable Housing Program. PHC has been instrumental in partnering with agencies that can bring operational support to the living experience of seniors, as demonstrated by PHC’s newest project in Lakefield where Community Care will be locating its offices on the site.

It is the intention of the Peterborough Housing Corporation to hold an information/open house meeting for the neighbourhood in the beginning of September. The proposed uses for 780 Argyle Street will ensure that this landmark site and quality educational and residential facility will continue to serve the community for many years to come.

Edit:
Story is being picked up by the media:
Peterborough This Week
The Peterborough Examiner

Canadian Commercial Council of REALTORS® Installs New Board of Directors

2009-08-19T15:05:00.004-04:00

I'd like to join CREA in congratulating the new Board of Directors for the Canadian Commercial Council. The new board consists of the following great lineup who will each serve a two year term:

Jim Gammer - Chair
Peter Sardelis, CCIM - Ontario Director
Allan Corbett, RI - British Columbia/Yukon Director
Guy Bélanger, FRI, B.A.A. - Québec Director
Karen Barry - Chair Elect
Mark St. Pierre - Prairie Director (MB, SK, AB)
Hodges Hamm - Atlantic Director (NS, NB, NL, PE)

The Canadian Commercial Council of REALTORS® was founded in 1994 and represents commercial real estate specialists from Boards and Associations across Canada. The Council provides a strong interactive network for real estate practitioners who specialize in industrial commercial and investment real estate.

Way to go guys! Looking forward to good things over the next couple of years.

Further Links:
howcommercialrealtorshelp.ca
icx.ca

Commercial Real Estate Is NOT Collapsing

2009-08-18T17:40:00.002-04:00

What's causing the slow motion commercial real estate crash?

Definition of collapse:
col-lapse
[kuh-laps] verb, -lapsed, -laps-ing, noun
–verb (used without object)

Number 1 definition: to fall or cave in; crumble suddenly
e.g. "The roof collapsed and buried the crowd. "

Commercial real estate is not collapsing sounds like a crazy claim to make at this point in time, but I'm not convinced that it has collapsed. The meaning of the word collapse has a strong connotation to me. It bears the feeling of imminent and dangerous events. I feel that a 'collapse' in an industry means that it has been decimated if not outright destroyed. If the roof collapses, you'd expect to see bodies in the wreckage at worst, or a tangled mess of scrap at best. Strangely, I don't see that in this industry yet. As the article above alludes, the current commercial real estate meltdown is a 'slow motion collapse'.

Can there be such a thing? Perhaps, and I'm just spitballing here, but perhaps there isn't a collapse in commercial real estate.

*gasp!*

Maybe, just maybe, the economy was starting to look up and the media needed something nasty to report on. Could it be that opportunistic institutional investors latched onto this idea as a way to affect the market by driving prices down? Now, before you jump in and start calling me nasty names, no, I don't have my head in the sand and, yes, I can plainly see the size of refinancing and restructuring of debt that will need to take place in the next couple of years across North America (particularly in the US).

Activity in the commercial market has all but died in some areas, but others are starting to see some light at the end of the tunnel.

From the article above:

Even as the sector continues to struggle, capital has been flowing in searching for opportunities. In recent weeks, hotel chain Hyatt, mortgage modification ship Pennymac, and commercial REIT Starwood Properties Trust, have all filed for IPOs.

and

One possible area of upside for commercial real estate, ironically, comes from the struggles in residential real estate. "The flavor-of-the-month asset is multi-family properties," Malka said. "With all the problems in the residential market, people are running back to apartments and renting," making for a favorable situation...

Some of our clients are actively looking for new opportunities again. Particularly properties that have long term upside and that are considered risky right now. Properties like small and medium strips, and locations in secondary markets are risky, but the long term rewards are high.

A Return to Business?

There was a long period when everyone seemed to be holding their collective breath, but I see a slow return to business happening. I don't see a collapse so much as a group head-scratch and a refocusing of direction with a healthy dose of reality.

What are you experiencing? How have you or your clients been reacting to the market?

Why Lease Abstraction is Important to Realize a Better Return

2009-08-11T11:35:00.001-04:00

A lease abstract is basically the boiled down essence of a commercial lease. It oulines the basic terms contained in the lease so that all parties to the lease can see in plain language what their rights and obligations are. Lease abstracts are especially useful in analyzing property before a purchase and are used fairly often by finance companies to get a quick idea of the details of the leases in an income producing property prior to making an offer of funding.

Some of the common items found in a lease abstract:

Address of the property or premises
Lease term including start, end and possession dates
Tenant and landlord name(s) and contact information
Description of the premises, unit number, address, etc.
Amount of base rent for each year of the term
Amount of additional rent and how calculated (proportionate share, NNN, etc.)
Description of what expenses are paid by whom
Allowed uses
Restrictions on alterations
List of common areas and facilities
Amount of liability insurance required
Late payment handling and penalties if any
Conditions for surrender of premises (remove or leave tenant improvements)
Outline of tenant improvements paid for by the seller
Amount of any concessions or inducements
Detail of renewal options if any and any first rights of refusal for re-leasing space or taking over adjacent space
Any miscellaneous provisions

Prudent owners of commercial real estate recognize the value of these documents and prepare them in advance of offering a property for sale to ease the absorption of information by potential buyers. If the due diligence process is painless, you can get it sold more quickly. If you make the process easy and straightforward, you'll also generally realize higher net sale proceeds at the end of the day because, when comparing your investment property to another one, yours looks (and is!) better managed and therefore represents a lower risk.

For a sample of a blank Lease Abstract, just email me and I'd be happy to forward one to you for your personal use free of charge.

The 10 Secrets to Successful Commercial Real Estate Investing

2009-08-10T19:36:00.003-04:00

Hint: The real secret is that there are no secrets...

The fact of the matter is, there is no secret, no hidden recipe for success. What works for one investor might not, and often won't, work for another.

Investing in commercial real estate, as it turns out, is very personal. I don't mean that investors should fall in love with their properties, just the opposite, but each of us has different likes and dislikes. Some just love personal interaction and gravitate to investments that allow them to meet and work with diverse people; apartment buildings for example. Others really enjoy the chase and like to invest in single tenant retail properties where there's a lot more involved in getting that big tenant that can make or break an investment property's future.

What it really boils down to is careful consideration of your aptitudes and extreme due diligence.

1. What kind of personal interactions do you enjoy?

2. What kinds of property get you excited? The answers to these first two questions will guide you to the right type of property to look for.

3. Decide on an investment goal or series of goals. What kind of return do you expect? What size of real estate empire do you plan to build?

4. Look for a market, not a building. What does that mean? Don't find a product before you find a market that is demanding it. Take a look at the geographical area that you'd like to invest in and find out what's hot, what part of the real estate market is growing and in demand and look for properties that can fill that need.

5. Look for properties with 'upside'. What's upside? Opportunity! Properties that have tenants that are paying below market rents, properties that need a facelift, vacant buildings are great if you have a relationship with tenants and can fill them quickly, properties with excess land that can be developed, etc. The list is endless and only limited by your creativity and market demand.

6. Do a thorough analysis of any properties that appear to meet your investment criteria to ensure that you'll be able to meet or exceed your goals.

7. Get professional assitance when necessary. You should consider using the services of a commercial REALTOR®, these people know the market and they know the players. They are generally compensated by the property sellers, so, in most cases, these services won't cost a thing. Always, and I mean always, consult a lawyer before you commit yourself to a deal. Consult an accountant before you commit to a long term strategy of investing. Hire inspectors and contractors to give you an idea of the physical soundness of a building before you buy it. Don't forget the evironmental engineers - a large number of commercial properties will need environmental assessments prior to securing financing.

8. Develop a good relationship with your source of funds. Financing isn't just challenging in 2009, it's always challenging. Get to know what your financier likes to see in a property proposal and provide it. Don't try to get fancy and don't try to convince them that 'this time it'll work'. Just the facts with a coating of opportunity.

9. Be persistent. You'll have to look at a lot of real estate before you finally get to do a deal that works. Robert Kiyosaki is probably pretty close to the truth when he says, you'll have to look at 100 properties, make offers on 10 of them, attempt to finance 3 of them and finally buy 1.

10. Don't fall in love with a piece of real estate! There will always be another deal, another property to pursue. Do not, and I can't stress this enough, DO NOT fall in love with the idea of investing so wholeheartedly that you buy the first property to come along. There are always great properties, but not all of them are right for your particular investment needs. If you feel like you have to shoe-horn it into your criteria, you should probably be moving on to the next one.

See? Nothing fancy, nothing far out. Simple, good old fashioned hard work and a clear set of goals and expectations will get you further ahead than any slick systems the 'guru's might want to sell you or any so-called 'secrets'.

Want to bounce around some ideas? Drop me a line, I'm always happy to help.

If You Wait Too Long To Jump In The Water, The Sharks Will Be Waiting For You!

2009-08-07T16:54:00.003-04:00

What happens when a bunch of chum (commercial real estate investors) drops into shark infested waters (the marketplace) before you jump in? If you wait just a bit, when you hit the water, the sharks will be waiting for you. The commercial real estate market is nearing the bottom and those who jump in now will be able to eat the late arrivals alive!

UK CRE bottoming: Reuters article

"The strong appetite for prime assets appears to have broadened out sufficiently to allow a stabilisation and improvement in the wider market," Wylie said in a statement.

"Although concerns remain over the near-term prospects for secondary assets with weaker covenants, this month's figures seem to confirm that investors have awoken to what is now widely being seen as a once in a generation buying opportunity."

NA CRE close enough: CPNOnline article

For the most part, the investment community has been holding back on commercial real estate acquisitions, waiting and waiting for the market to hit bottom. But according to a new report by CB Richard Ellis Investors, while the bottom may not be at hand just yet, it's close enough.

So, now really is the time to buy; holding out for rock bottom may very well result in lost opportunities. "There's been so much focus on the downside, particularly over the last year, and there's been good reason to be mindful about buying properties," he said. "But much of the downturn has passed and much of the re-pricing has happened. You can still be in defensive mode, but you can buy properties on that basis. In the market now, there are more attractive opportunities, so you don't need to be an aggressive buyer to take advantage of those opportunities."

Before you start writing nasty comments about the lack of funding for your projects, let me interject. I get it that money is tougher to get these days. I get it that investors are under a brighter light right now and it really is difficult to get financing for some deals.

That bears repeating: some deals.

There are a lot of really good deals out there right now, you just need to know how to find them. Financing can still be found too, you just need to look a little harder. In my daily business, I'm starting to get a lot of calls from investors and developers interested in cautiously getting back into the market as well as mortgage brokers looking to place money. It's still who you know that will see you through these uncertain times.

Seize opportunities when they arise or you might just get eaten by the sharks.

Stand Up and Receive Your Business Excellence Award!

2009-08-05T16:55:00.004-04:00

It's just about time for the annual Business Excellence Awards Dinner presented by the Greater Peterborough Chamber of Commerce. There are 17 categories of awards from Entrepreneurial Spirit to Business Citizen of the Year. Self nominations are allowed - so go ahead, nominate your own local company, and good luck!

About the Awards

The Peterborough Business Excellence Awards publicly recognize and honour local businesses that have demonstrated a passion for excellence.

The Greater Peterborough Chamber Of Commerce and the Small Business Week Committee have established the Peterborough Business Excellence Awards in order to promote the advancement of responsible business leadership and prosperity within the community.

Benefits of Participation

Your company will gain recognition as a top achiever and will join leading companies in Peterborough, as an outstanding member of this community.
Your business will be recognized by media and business newsletters.
Three Finalists will be recognized at an awards dinner on Wednesday, October 21st.

Many noteworthy and accomplished companies will be recognized and honoured with these prestigious awards.

Deadline for Nominations: August 31, 2009. Click here to view and print the nomination forms.

If you have any questions, please call the Chamber Office at 748-9771, or email your inquiry to excellence@peterboroughchamber.ca

Pessimism is Probably Good News for the Commercial Real Estate Business

2009-08-04T10:11:00.004-04:00

Bad News is Good News article from seekingalpha.com

Anyone who reads this blog regularly is probably getting sick of hearing me say this, but here I go again: When everyone else is selling, you should be buying. When everyone else is in a state of immobility, especially after a major market shock like we've just seen, you should be buying. Those who get back in the game now will look like geniuses in 18-24 months.

From the article linked above:

"Predicting a bottom is a fool’s errand but it would be equally foolish not to watch for signs of recovery. Hidden and overshadowed by all the bad news in the report is the fact that sales actually picked up over the last 3 months. Transaction volume showed a nice increase in the 2nd quarter, the first such up-tick in nearly 14 months.

I don’t know when the turn around will happen, but I do know that a predominantly bearish sentiment is a bullish indicator and that just because something is counterintuitive doesn’t mean it’s wrong."

Let's get back in the game before we catch ourselves standing on the sidelines wondering what the heck happened while the smart money laughs all the way to real estate fortunes heretofore unknown!

"Numb3rs" Real Estate Valuation Explained

2009-08-02T01:13:00.004-04:00

Just saw an episode of Numb3rs from Season 4 (Number 11, I think, "Breaking Point"). It dealt with an investigative reporter who went missing. She had uncovered a shady real estate developer who had been undervaluing properties in a poorer neighbourhood where he was planning to build a mixed use retail and condominium project. The reporter, Bonnie, was going to break the case on the evening news and the developer had her kidnapped until a zoning board vote passed that would allow his project to move forward unopposed.

Sounds familiar...well without the kidnapping and the criminal minds etc., etc. of course.

As part of finding the bad guy, as he does every week, Charlie Eppes uses mathematics to crack the case. In the process he gives a fair explanation of how real estate values are affected by neighbouring properties. Actually, it's better than fair, it's great! If you get a chance to watch the episode, it was very well done with some impressive character development that is sometimes lacking on the show.

To hear the clip with Charlie's explanation, listen here. Enjoy!

Friendly Neighbourhood Spiderman Saves the Day!

2009-07-31T10:38:00.002-04:00

This was just too cute to not post! A future REALTOR® in the making? After all, don't we work hard and risk our sanity and safety to save our clients money on a daily basis?

The Right Way to Calculate Net Operating Income (NOI)

2009-07-30T14:25:00.003-04:00

What is net operating income or NOI anyway? NOI is the income derived from a property after all expenses except the cost of financing, or "debt service" have been subtracted. Since debt is voluntary (assuming you're filty stinking rich), think of NOI as the money you put in your jeans at the end of the year after you've paid for all other expenses. When you boil it down, determining NOI is a fairly simple process of adding up all your income and subtracting all your expenses. That said, a lot of people make serious mistakes when trying to calculate their NOI or when estimating the NOI of a potential purchase.

Often, newer investors don't take into consideration such things as vacancy and bad debt when calculating NOI. These are real expenses that should be accounted for when doing your calculations as they have a direct effect on the value of the property. Other overlooked items that should be taken into consideration are things like realty taxes, property insurance, off site management, legal and accounting fees, supplies like cleaners, brooms and mops, and payroll expenses if the property is large enough to have maintenance workers onsite.

Without a clear understanding of what NOI is and how it is calculated, you'll have a really hard time getting a handle on the real rate of return for a given property.

Example:

The numbers in the above example aren't really important, what is valuable about this kind of format is that it makes the process of analyzing the NOI very simple. If you'd like a copy of this in Excel format, please email me at: info@ocre.ca

With this information as well as a desired rate of return, you can easily calculate the value of any piece of property. Powerful and simple.

Bottom of the US Housing Market is Close

2009-07-29T12:51:00.002-04:00

Found via retailtrafficmag.com

According to Sam Zell, founder of Equity Group Investments, LLC, the bottom of the US housing market will be a turning point in the American economy. He says,

“The key to everything is single-family housing because that’s where consumption comes from,” Zell said. “If people don’t have confidence in their biggest asset, they won’t have the confidence to spend.”

While Mr. Zell is careful not to foster a false hope, he does give the impression that the economy shows signs of improvement, if not outright recovery right away.

What signs do you see of a recovery - or at least a mitigation of the recession - in Canada or the US?

Build Your Commercial Real Estate Vocabulary

2009-07-28T16:01:00.005-04:00

Is this your first step into investment real estate? For many Canadians, investment in a multi-family or multi-tenant unit is attractive as an investment. If you’re considering that, welcome to an entirely new vocabulary, and terms such as NOI, or cap rate. A commercial REALTOR® can explain them to you in detail, and explain the impact each one can have on your decision whether a specific property is right for you and your investment portfolio.

Abandonment
A person or entity that leaves demised premises before the end of a lease term has ‘abandoned’ that space. Hence, an abandonment.
Absorption Rate
The net statistical changes in occupied space over a period of time. Positive absorption reflects an increase in occupied space while negative absorption reflects a decrease.
Accrued Expense
Expenses incurred which are not yet payable, or have not yet been paid.
Acquisition Cost
The total cost to the purchaser of a property; includes soft costs and sales costs.
Additional Rents
These are rents charged to a tenant for the maintenance, taxation, and insurance of any common areas.
After Tax Yield Rate
The annual rate of return on equity after payment of income taxes.
After Tax Yield
This is the annual profit remaining after payment of income taxes, or the annual return on equity after payment of income taxes.
Amenities
These are features that make a property more attractive, useful, desirable, and/or rentable and are usually included in the sale price or rent calculations.
Amortization
The process of paying off a debt, together with interest, usually with equal payments at regular intervals over a period of time.
Anchor Tenant
A prominent tenant occupying a large proportion of a commercial property and attracts customers and other tenants to the property.
Appraisal
An objective estimate or opinion of value of a property, as supported by the presentation of relevant data analysis.
Arrears
Money that is due or past due, but has not been paid.
Assessment
This is a levy against a property in addition to general taxes, and it is usually applied by a civic authority for improvements such as streets, sewers, etc.
Assignment
The method or manner by which a right or contract is transferred from one person to another.
Basic Rent
This is the rent agreed to through negotiation and does not include adjustments and additions.
Blanket Mortgage
This is a single mortgage covering more than one property, such as a mortgage covering all the lots of a builder in one subdivision.
Break-Even Point
This is the point where the effective gross income equals the cost of all operating expenses and debt service payments.
Build to Suit
The construction of a building or property that suits the particular needs of the occupant.
Capital Improvements
These are additions to the property or improvements that enhance or extend the useful life of the property.
Capitalization
This is the anticipated stabilized rate of return from an investment. Also known as the cap rate.
Cash Flow Analysis
A projection of the buyer's estimated cash flow over the holding period.
Clear Title
Any property that is free of any and all competing claims, mortgages, liens, and encumbrances.
Comparables
A term used to refer to area rents or competitive rental properties or area sales that have sold, implying that "rent comps" and "sales comps" are comparable in size, location, condition, amenities, etc., to the subject property.
Conditional Offer
This is an offer to purchase property subject to certain conditions, including the buyer's approval of income and expense statements, title commitment, physical condition of the property, loan commitment, etc. - being met. The specific amount of time allowed to clear these provisions is called the inspection, contingency, or most often a conditional period.
Density
This is the amount of total square feet buildable on a set land. For example high density properties feature more floors.
Encroachment
A building, part of a building or obstruction which intrudes onto another property.
Encumbrance
A claim, lien, charge or other liability attached to real property which may diminish its value.
Escalation Clause
A clause in a lease providing for an increase in rent at a future time. This could be a fixed or pre-determined rate increase, or a cost of living increase that ties the rent to a cost of living index, or direct expense - the rent is adjusted according to changes in the expenses of the property such as a tax increase.
First Right of Refusal
An option in a lease provided to a tenant in a lease contract providing first right to occupy space or match an incoming offer on adjacent space that may be required for the tenant's future expansion.
Floor Space Ratio
Also known as FSR, the maximum floor space of a building relative to its land area
Free and Clear
When there are no liens or loans against real property
Graduated Lease
A lease that features details for changes in the rental rate, usually based on periodic appraisal or time.
Gross Lease
A lease where the tenant pays all or part of the expenses of the leased property, such as taxes, insurance, maintenance, utilities, etc.
Gross Rent Multiplier
Sales price or value divided by annual effective gross income. For example if sale price is $325,000 and the effective gross annual income is $50,000 the G.R.M. is 6.5 ($325,000 /$50,000).
Gross-Up Area
It is the space leased but not occupied by the tenant, usually for areas such as washrooms, lobby area and utility centers.
Hurdle Rate
The rate of return expected by an individual investor below which he/she may choose not to purchase a particular property. This is not the same as a cap rate or ROI as the hurdle rate is an internal measurement of return desired by the investor and is independent of the real estate.
Internal Rate of Return
The rate of return over a holding period including periodic cash flows and reversion at the time of sale. Can be measured before and after tax.
Interest Only Mortgage
A non-amortizing loan where the lender receives only interest during the term of the loan and recovers the principal in a lump sum at the end of the term.
Landlord
Company or individual who rents property to another.
Lease
A contract where one party (the landlord) agrees to allow another party (tenant) the exclusive, common and/or joint right(s) to use a property for a specific period of time.
Leaseback
A transaction where an investor purchases property and then leases it back to the seller.
Lease Buyout
When a landlord offers to take over the current lease of a tenant.
Lessee
The tenant, or the party a property is rented to.
Lessor
The landlord, or the one who rents the property to another.
Letter of Intent
A formal method of stating there is interest in a property, but it is not an offer and generally creates no obligation.
Lien
A hold or claim which one person has upon the title of the property of another as security for a debt, charge, tax or judgment.
Loan-to-Value Ratio
This is the principal amount of a loan as a percent of lending value. For example, if property is purchased for $500,000 and is financed by a bank loan for $300,000 the 'loan-to-value" or "LTV" ratio is 60% of the property's lending value to a borrower.
Mortgage
A legal document pledging a described property for the performance of the repayment of a loan.
Negative Cash Flow
When the income from an investment property does not equal the usual expenses. The owner must come up with cash each month to meet these expenses.
Net Income
The difference between effective gross income generated by a property and the operating expenses including taxes and insurance. The term is qualified as net income before debt service.
Net Lease
A lease requiring the tenant to pay, in addition to a fixed rental, the expense of the property leased, such as taxes, insurance, maintenance etc. Often confused with net-net and net-net-net or triple net. These terms are all ‘net’ of some other expenses that may or may not be paid by the tenant.
Net Operating Income
Also known as NOI. This is the annual net income remaining after deducting all fixed and operating variable expenses, but before debt service and income tax. The specific formula is:
NOI = Scheduled rental income + other income - vacancy and credit losses - operating expenses
Net Rentable Area
Also known as net rentable square feet. This is the total amount of square feet that can be used for rental income. It typically excludes stairways, elevators, hallways, common areas, etc.
Net Rent Multiplier
The factor resulting from dividing the net operating income into the sale or purchase price.
Non-Conforming Use
Property used for purposes that do not conform to the permitted uses in the municipal or provincial zoning by-laws.
On-Site Improvements
Work completed on a property that improves its value.
Option
The right to purchase or lease a property at a certain price within a designated period of time for which a consideration is usually paid.
Payback Period
The time required for the complete recovery of an investment; often used with the concept that all income is considered a return of capital until the entire investment is recaptured and that income received after complete payback is considered profit.
Percentage Lease
A percentage lease is when the tenant pays a minimum rent then also pays a percentage of the volume of the business done on the premises whichever is greater. The percentage paid differs according to the types of business.
Phase I Environmental Audit
This refers to an initial environmental assessment of a facility by a qualified environmental engineering firm for potential contamination to determine if further investigations are warranted.
Phase II Environmental Audit
A more substantial investigation that requires further subsurface sampling, electromagnetic and hydro-geological study.
Pre-Lease
The leasing of a property or space that has not been developed or constructed.
Pro Forma
Means "for form only". A study prepared to estimate future income, expenses and potential profit or loss.
Radius Clause
In a percentage lease, it is customary to have a clause that details the distance from the property that a competing store from the same chain may be located. This is usually a distance sufficient so that two stores from the same chain are not in the same trade area.
Retail Premises
Premises used for the sole purpose of selling goods and/or services to the general public.
Reversion
The net sale proceeds from a property at the time of sale at the end of a holding period.
Solid Offer
An offer that is or has become unconditional and is now firm and binding on all parties.
Unencumbered
This is a property or land that has no liens, claims or mortgages against it.
Vacancy Rate
The percentage of total scheduled rental income lost to vacancy and bad credit costs.
Yield
This is the ratio of income from an investment to the total cost of the investment over a given period of time.
Zoning
The rules of a municipality that detail the allowable uses for the real property in specific areas, and only then on specified conditions.

Few transactions are as complex as those in commercial real estate. From finding the right property, lease space or investment to closing the deal, there is a lot more involved than most people think. This is where the expertise of a commercial REALTOR®, their negotiating skills, and procedural knowledge will prove invaluable. If you are looking to buy, sell or lease a commercial or investment property, these are some of the terms you should be familiar with.

Based on a list provided by the Real Estate Board of Greater Vancouver (REBGV) and found on howcommericalrealtorshelp.ca. Modified by poster.

Why David Miller is Quite Possibly the Worst Toronto Mayor Ever

2009-07-27T16:30:00.005-04:00

Toronto misses out on stimulus money. - Toronto Star, July 27, 2009

I used to wonder where Toronto got such a reputation as an egotistic city. The center of the known universe and all that. I mean, I know a lot of people from Toronto, and they aren't that bad! Most of them are just like everyone else, trying to get by and make life a little better for the next generation.

Then I read this article in today's Star. Seems Toronto won't be getting any federal stimulus money because David Miller decided not to play by the rules that every other city and municipality in Canada had to abide by.

Thanks to David Miller's bravado, John Baird's combativeness and the obduracy of CUPE Local 79, Toronto has scarcely received a dribble of national infrastructure money.
The city was eligible for approximately $300 million of the economic stimulus in January's federal budget. All it had to do was submit a list of "shovel-ready" projects that weren't already slated for construction, created local jobs and could be completed by 2011. The deadline was May 1.
But the mayor chose to ignore the rules. Gambling he could get a special deal, Miller submitted just one proposal: that Toronto's entire allotment be dedicated to the purchase of a fleet of state-of-the-art streetcars, built in Thunder Bay and scheduled for delivery between 2011 and 2018.
The federal infrastructure minister responded with a two-word obscenity. Fuming that Toronto was the only city that flouted Ottawa's guidelines, Baird rejected its application.

When will Miller get it? Toronto doesn't always deserve a 'special deal' just because of its sheer size. Why should it? Especially in this case where the stimulus money would come from all Canadians and not just Torontonians. His 'proposal' wasn't even close to being within the guidelines of a 'shovel-ready' project. It didn't even involve a shovel for crying out loud! No infrastructure improvement, no new employment, nothing within the guidelines at all.

In late June, Toronto filed a second infrastructure application, consisting of a long list of small projects – close to 500 – that meet Ottawa's criteria. "We haven't heard back," said Stuart Green, the mayor's spokesman. "It's still under review."

Yeah. Good luck with that.

Should You Really Care What Everyone Else is Paying for Commercial Real Estate?

2009-07-23T11:00:00.006-04:00

No transactions means no basis of comparison for cap rates: retailtrafficmag.com

The Problem
The point of the article is this: without numerous transactions taking place in an open market, determining the prevailing cap rate for a given property type in a given market is nearly impossible. Traditional wisdom says that buyers pay what other buyers are willing to pay for a similar asset. That price is usually based on the income stream generated by that asset and the risk associated with the source of that income, namely the tenant. As the world economy has contracted, and in particular as the American real estate business has imploded, buyers, even those that are well capitalized and have the ability to buy, have taken a wait and see attitude.

This has done a couple of things which have exacerbated the commercial real estate drop:

1) it has stopped the flow of transactions (bad news for those of us in the brokerage business!) and therefore has reduced the flow of money through the system which normally creates ancillary benefits like construction and renovation sales and land transfer taxes to name just two; and

2) a lack of transactions takes away the ability for those buyers who are ready to buy to make, what they deem to be, intelligent offers based on historical deals.

As to the first, there's not much we can do about the economic side benefits of real estate transactions until those transactions start flowing again. It's the second item that I'd like to discuss.

As I said, traditional wisdom is that buyers pay what other buyers are willing to pay for a similar asset in a similar geographic area. Geography matters because of the local employment climate, demographics of every location, and a host of other factors that can affect investment decisions and risks. What does all of this mean?

In the investment vacuum in which we find ourselves today, no body really knows what to pay for property because no one else is buying!

On an intellectual level, I understand this. This is what we were taught in CI 101. On a gut level though, I'm having a hard time with this. Here's why: if I expect to make a certain rate of return on my investment dollars, does it really matter what everyone else is paying for similar assets? Doesn't this kind of mentality smack of playground kids whining, "That's not fair! Jimmy got TWO popsicles, and I only got ONE!" If one popsicle was refreshing and you really only expected to get one in the first place, does it really matter that Jimmy got two? Similarly, if a 9% ROI was a sufficient rate of return last year or even ten or twenty years ago, why isn't it sufficient this year (assuming similar risk factors etc.)? If you have a clear set of investment goals and you can find a piece of real estate that will allow you to achieve that goal, does it really matter if a similar property might be purchased more cheaply? What is the opportunity cost of waiting until someone else buys property? What if, by waiting, you not only lose revenue today, but you wait too long and miss the market?

A Renewed Thought Process
I think it's time we stopped looking at what everyone else is doing. Let's use our heads and look at investments that have sound overall fundamentals. Make sure the tenant is solid. Ask questions about their ability to access cash, why they're moving or staying, who is their customer, how long have they been in business, is their industry growing or in decline. Insist that you have an opportunity to look at their financial statements if you're really concerned. Take a good look at the bricks and mortar of the deal. Make sure that the building and grounds have had appropriate capital reinvestments over time and plan for future expenses. Make intelligent decisions about which properties you buy, but stop worrying about what everyone else is doing.

When everyone else is selling, you should be buying. When everyone else is buying, you should be selling. Don't follow the crowd to dinner or you'll end up at the back of the line and all the really tasty food will be gone! All you'll be left with will be the scraps left by those who had the foresight to get moving now!

Invest for cash flow today, and let time do the rest.

Is There a Way Out for CMBS through REITS?

2009-07-21T12:09:00.004-04:00

Found on Reuters Blogs. I was beginning to wonder when opportunistic funds would show up at the party. American REITs are starting to show some initiative in the new commercial real estate market by setting up funds to buy up distressed properties and loans and to take advantage of drastic reductions in US CRE prices.

Essentially what’s happening here is that debt (in the form of CMBS) is being rolled over into equity (in the form of REITs). This is a good thing, and I hope we see much more of it.

This is a two-stage process, I think: first the REITs will buy up distressed CMBS at a discount, then they will wait for those CMBS to default, at which time the REITs will take possession of the collateral — the commercial real-estate securing the CMBS. In other words, the REITs — and the REIT investors — aren’t looking at yields, they are looking at property values. - Felix Salmon (Reuters)

Phil Wahba and Ilaina Jonas (also of Reuters) report:

Several large investment firms are creating new lending companies that plan to go public to raise billions of dollars to take advantage of the distress in the commercial real estate market, and more are on the horizon.

The planned IPOs, which include units of firms like Apollo Management and Alliance Bernstein, could be just the beginning of what some bankers expect to be a boom in Real Estate Investment Trusts (REITs) going public over the next few years.

This could be part of a larger solution as billions of dollars in mortgages and securities in the commercial real estate sector come up for renewal over the next few years; possibly reducing the effect of so much capital evaporating all at once.

I'm excited to see some creative uses of equity at a time when so many seem certain that the sky is about to fall on commercial real estate. I've said it before, and I'll keep saying it, opportunity exists for those willing to take a good look around and take some calculated risks. Investment fundamentals don't change, just rates of return.

Pricing Commercial Real Estate in Today's Realty Reality

2009-07-20T10:16:00.003-04:00

Is it just me, or is there a real sense in the marketplace that buyer's feel that they should be getting blazing hot deals these days? I'm all for trying to get a good deal; after all, isn't that what we get paid to do, negotiate deals that both parties feel are beneficial? But do you get the feeling that some buyer's think that they're doing sellers a favour by 'taking that property off their hands'? I don't know about you, but I think we've got a ways to go before buyers and sellers are on the same wavelength again.

As one of our clients put it, "The point of capitulation hasn't been reached." Well, I don't know about 'capitulation', that sounds like someone has to give up something valuable, and that makes me uncomfortable.

I'm a believer in the win-win scenario after all. If all parties to a transaction don't feel that they got something of value, then I don't feel as though I've done my job well.

Captain Kirk said it best in Star Trek II, The Wrath of Khan, "I don't believe in a no-win scenario."

In talking to my colleagues, clients and customers, I'm getting mixed signals about the market and pricing. Some are extremely busy (as we are right now - buyers seem to be coming out of the woodwork right now!), and others seem to be in the doldrums still. In an effort to gauge how the market is being priced right now, I'm running a little poll to see how listings are being priced.

Please take a moment to vote - the poll is at the top right of the main page of this blog. Assuming I can get a reasonable number of responses, I'll report back with my findings in a future post. Let me know how the market is treating you right now, I'd love to hear someone else's war stories!

Why Commercial Real Estate Investors Should Care About White Paint and Dresses

2009-07-18T12:55:00.004-04:00

Over the last few years, different pundits of every stripe have advocated watching different commodities for signs of economic turbulence or improvement - depending on his/her point of view. I came across this article today in the Globe and Mail, and was amused, and somewhat surprised at the indicators discussed.

Take a look, it's a quick read and you might just get some new ideas - I know I did.

Take this for example:

Mark Zandi, chief economist at Moody's Economy.com, said he follows the price of titanium dioxide fairly closely: "It's stretching a little bit, but I think it has historically been a good barometer of broader economic conditions."

He noted that yesterday's U.S. figures matched other signals about the economy making a slow recovery.

"It's consistent with the idea that the economy is still soft. We are still in recession, but we're headed in the right direction," Mr. Zandi said.

...and this:

Mr. Yamarone, for example, said one of the most important indicators he tracks is the sale of women's dresses.

"The woman is traditionally the [chief financial officer] of a household. She sees when times get tough," he explained. "When things get tough, she postpones a 'self purchase.' And there is no greater self purchase for a woman than a dress."

Right now, his dress sale indicator "is still contracting."

Is there anything you look for in assessing an economic recovery or real estate recovery in particular?

Here's a Quick Way to Estimate Construction Costs for Commercial Real Estate

2009-07-14T09:15:00.003-04:00

Looking for a way to get an idea of the cost to build a new shopping centre? How about an apartment building? A retail store? Try www.rsmeans.com

Their Quick Cost Estimator is free to use, and provides a really good idea of the cost of construction for most projects. While the detailed reports (paid) are far more detailed, the free estimates are pretty good. I've used this site a number of times to come up with an estimate of replacement cost for properties we've had listed for sale. It's pretty powerful stuff to be able to say that the institutional property you have listed for $8.3M would cost over $18M to replace. What a bargain!

The site produces a cost estimate based on your location (major centres in Canada and the US), so it takes into account local labour costs, and provides a high, medium, and low range of estimates.

Some things to keep in mind:
1. The Quick Cost Estimator does not take into account the cost of the underlying land;
2. It does not include an estimate of brokerage or legal fees or most other soft costs for that matter;
3. It ignores the cost of financing.

This is a great little resource for getting started on your journey toward building your commercial real estate empire. Give it a try and let me know what you think of it.

Little Known Ways Your REALTOR® Works for You

2009-07-06T08:20:00.004-04:00

Here's a question that I'm sure most sellers are wondering about: In what other ways besides putting a property on the MLS® and a sign on the lawn or building do REALTOR®s market and promote properties for sale? What other techniques are used to get the word out? In other words, what you really want to know is, do you guys actually DO anything, or do you just sit around waiting for the phone to ring?!

Here's a snap-shot of some of the things we do and use for our clients. There are myriad ways a REALTOR® can get the job done, but this is a good start:

Professional Marketing Package
A professional package for distribution both electronically and in hard-copy (ugh!) of information should include: rent roll, zoning, photographs, aerial shots, maps, floor plans, survey or site plan, property details including recent capital improvements, area information, and a call to action - instructions on how to arrange a showing through the REALTOR®.

Website
The REATLOR®s website should be easy to navigate and provide similar information as the marketing package in an online form.

Blogging
Similar to the website, the blog should contain contact information, but more than that, the blog is the REALTOR®s chance to interact with the buyers directly. This isn't always a direct marketing tool for your property, but it creates credibility in the eyes of the buyers and provides another vehicle for communication with investors.

Commenting on Other Blogs
Again, this isn't a direct marketing tool, but it generates credibility and traffic for the REALTOR®s blog and website and therefore visibility for your property.

Facebook and Twitter
These social networking tools are becomming necessary tools of today's REALTOR®s. Quick bursts of useful - highlight on useful - information is critical to the success of REALTOR®s today. When we're successful that means we're selling your property!

Economic Development Contacts
Maintaining a good relationship with the economic development office in your area is vital to staying connected and top of mind when new businesses are coming to town or for finding out when existing businesses are expanding or moving.

Investor Tours
Tours put on by the provincial government through local economic develoment offices provide an opportunity to showcase listings to buyers who are not only going to see the property, but are ready, willing, and able to make a purchase.

Municipal contacts
Like the economic development contacts, these people are well connected. They know when zoning and development applications are being submitted almost before the applicants do! We try to stay on their good side, so that when we need their help, they'll be there.

Targeted Database Development and Marketing
Every property is unique. As such, there are only so many buyers for each property. We take a look at the permitted uses for the property and any other likely uses and develop a list of potential buyers and buyer types. Then we develop databases of contacts and start emailing and telephoning until we get a bite. Simple, direct and effective.

Sphere of Influence Marketing
The longer a REALTOR® is in business, the larger their sphere of influence. This sphere includes people like lawyers, accountants, mortgage brokers, bankers, investors, developers, builders, etc. Having a large sphere of influence means that a REALTOR® can quickly make contact with the major players in a given market for any given property.

Networking
Overused word that means rubbing elbows with peers and potential prospects. Participating in things like the Chamber of Commerce and volunteering on community boards provides a really good way for REALTOR®s to interact with a large group of people very effectively.

Other Agents
Talking to other agents who have their own spheres of influence. Each REALTOR® has a group of unique contacts and you never know where a lead will come from just by making conversation. Watching the market and calling agents who have similar properties listed is another great way to leverage the efforts of other agents; they might have picked up buyers for a similar property that just didn't quite make the cut and maybe your property is just what they're looking for.

Referral Networks Within Franchises or Associations
The large franchises like Century 21, Re/Max, Prudential and others all have internal referral networks that work very well across great distances. Often a request will come in from another affiliate office across the country or even the other side of the continent! Agents who work independently or with smaller boutique operations also leverage large referral networks through professional associations like CCIM and SIOR among others.

MLS®/ICX®
Well, you didn't think it was just for show did you? The database based websites of MLS® and ICX® for commercial properties remain a powerful marketing tool. While MLS® means much more than just listings, these services run by your REALTOR®s national association provide worldwide access to your property and they do the promotion!

Sign on the Lawn or Building
The 24 hour salesperson. Would you play hockey with one player in the penalty box - on purpose - for the whole game - every time!? The sign is not the be all and end all of sales, but it sure does raise local awareness.

These are just a few of the things we do, what else do you expect from your agent?

Are You Ready for Some Good News?

2009-07-03T11:16:00.002-04:00

Found via Sibdu.

Last week I wrote about the state of commercial real estate in the US and posted a video featuring Richard Lefrak. This week, another take on the situation in the US with a much more positive spin.

William Rudin, of Rudin Management, has a very upbeat and positive position as it relates to the future of commercial real estate. While he agrees that not all of the pain has been felt yet in terms of pricing corrections, he is seeing signs of renewed strength in the market. His firm is doing a lot of new leasing and is seeing a fair amount of sub-let space being taken off the market as firms move back into space that they had formerly vacated.

Here in Peterborough and central Ontario, we're seeing a fair bit of renewed energy in the market too as investors who had been sitting on the sidelines get back into the game. New money is coming into the market from outside as well; we're getting calls from the GTA and elsewhere inquiring about development opportunities again.

The good times aren't back yet, and likely we won't see a boom again for a while, but it looks like the worst might just be behind us.

Don't Fall for This Negotiating Tactic

2009-07-02T16:47:00.001-04:00

I recently had a contact, a charitable organization that is leasing space, ask me if they could somehow get a reduction in their rent by offering a charitable donation receipt to the landlord. The problem they had was that they weren't sure who the landlord was or how to approach him to broach the subject. They had a contact, referred to as the 'property manager', so there had been no real problems with maintenance or upkeep on the property. They just didn't know who the owner was.

Turns out that the owner had just been calling himself the 'property manager' and since they had signed a lease through a broker and the name on the paper was a numbered company this was the only contact they had.

Calling himself the property manager allows him to 'refer to a higher power' i.e. ask the boss if it's okay, a tactic used during negotiations when all he really wants is an opportunity to think over a proposal without making a snap decision.

The counter to the 'refer to a higher power' tactic is this: Agree with him, but ask for a commitment now that is conditional upon the approval of the higher power.

Example:
Tenant: "John, we are a registered charity and we would really appreciate a modest reduction in our rent in exchange for a charitable donation receipt from us. This will do a couple of things, it'll really help out our organization which is trying very hard to do some good in the community and you'll receive some tax benefit for allowing the reduction. What do you say?"

John: "Well...I'm not sure. I'll have to check with the owner to see if this is something he's comfortable with and get back to you.

Tenant: "Okay, I understand completely that you can't commit to something like this without authorization. That said, should the owner be amenable to this kind of arrangement, is there any reason we couldn't start this with our next rent check? Assuming you get approval, of course! When can we expect an answer?" (Said with a big bright smile!)

What's he going to say? No? So what if he does? At least you tried and now you know. Turning this around and trying to get some kind of commitment from the person using the higher power tactic is a good way to try pin them down.

Typical Shopping Centre Perception

2009-06-30T15:05:00.008-04:00

Ever notice that your perception of the perfect property depends on who you are and your motives at the time?

Changes to the HST on New Homes - A Lobbying Success

2009-06-29T17:39:00.002-04:00

TheStar.com | News & Features | Lobbying nets 'major' changes to HST on new home purchases

A little good news on the HST front. The Provincial Government has agreed to some changes to how the new HST will be applied to houses.

But after vigorous lobbying from the Building Industry and Land Development Association and the Ontario Home Builders' Association, the province has agreed to charge the HST only on the amount of the purchase price over $400,000 and not the entire purchase price.
"This is a much-needed win for builders and homebuyers," said BILD president and CEO Stephen Dupuis. "This is a major amendment."
"It was the right move for the government to make," said Ontario Home Builders' Association president Frank Giannone. "And the lower middle class, who we were worried about, will be protected."

There's still a long way to go, but this is welcome news.

What's the Best Business Advice You've Ever Recieved?

2009-06-26T14:46:00.002-04:00

“The Best Business Advice I Ever Got” | Real Estate Opinion MAG - AgentGenius

Found this great piece on agentgenius.com today and just had to share it with you. Personally, I've had a few really good pieces of advice through the years. Some of the best were:

Underpromise and overdeliver. (On the linked list too.)
Be yourself; don't compromise who you are for the sake of a deal.
This one's a little more greed oriented but it's still always stuck with me: Everyone you see walking down the street has $50 in their pocket that belongs to you. Your job is to try to get them to give it to you.

There have been many more, but I'd like to hear yours. What's the best business advice you've ever received?

Is Your Mortgage a Death Pledge?

2009-06-26T11:05:00.004-04:00

You didn't just sign that did you?!

Just a quick post today about the history of the word mortgage. I remember when I learned the origin of the word 'mortgage' back in real estate class in the mid '90s, and I couldn't help laughing out loud at it. Literally, the instructor told us, it was a 'death (mort) pledge (gage)'. Pay up or 'Vinny' will come and take your money or your hide!

mort·gage n.
1. A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
2. A contract or deed specifying the terms of a mortgage.
3. The claim of a mortgagee upon mortgaged property.

tr.v. mort·gaged, mort·gag·ing, mort·gag·es
1. To pledge or convey (property) by means of a mortgage.
2. To make subject to a claim or risk; pledge against a doubtful outcome: mortgaged their political careers by taking an unpopular stand.

[Middle English morgage, from Old French : mort, dead (from Vulgar Latin *mortus, from Latin mortuus, past participle of mor, to die; see mer- in Indo-European roots) + gage, pledge (of Germanic origin).]

Word History: The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, "dead," and gage, "pledge." It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt "is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the [mortgagee]." This etymology, as understood by 17th-century attorneys, of the Old French term morgage, which we adopted, may well be correct. The term has been in English much longer than the 17th century, being first recorded in Middle English with the form morgage and the figurative sense "pledge" in a work written before 1393. Source

The modern usage of the word has become muddied, most people talk of paying off their mortgage rather than the loan secured by it, and very few people give any thought to the origin of 'mortgage'. In a time when it's become more difficult to obtain real estate loans secured by mortgages, I thought it was fitting to take a look at how easy we really have it today. It often feels like the bank owns your property, even though title is no longer held by the lender as it was in the past, but no one asks you to actually give a death pledge today...well not often ;)