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

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?

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What Investors Value the Most in Their Commercial Real Estate Broker

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:

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.

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

Thanks for reading!

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The Top 9 Blogs I Read - Real Estate and Otherwise

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?

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Are You Ready to Start Your Own Business?

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

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

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!

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"Numb3rs" Real Estate Valuation Explained

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!

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Is There a Way Out for CMBS through REITS?

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.

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

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.

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Are You Ready for Some Good News?

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.

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Reality Check on Car Dealer Site Redevelopment Anyone?

On Monday, June 15th, an article appeared on thestar.com titled, "Un-pave car dealer's lots to put up paradise" On the surface of it, this sounds like a glorious idea. Who isn't sick of all the pavement? Who wouldn't love to see more green space in our cities? Why shouldn't these sites, many of which are likely contaminated, be turned into something friendlier and nicer and greener than a vast flat parking lot with old ugly service shops on them?

While no one has any clear idea – most dealers aren't talking – some, including local architects and urban planners, are drooling over the possibilities of turning parking lots back into paradise.

"For planners, car dealerships are always opportunity sites," says Jennifer Keesmaat, of the Office for Urbanism, an urban planning and design firm, working on large-scale planning projects across Canada.

Community markets. Community gardens. A place for local festivals and celebrations.

Well, let's take a look at the reality of these sites. I can think of a few hundred people who might be very upset about turning property that has been generating very large rates of income over the last few decades into sites with little or no economic value; the property owners themselves! Put yourself in their shoes - these aren't big bad corporations - they're hard working business owners who have employed thousands of Canadians for decades! Unless they really have a desire to give these sites away, or municipalities would like to buy these sites for market value (your money at work by the way), then these sites will have to be redeveloped under other car brands, as used car lots, or some other economic model that returns money on that money already invested in them.

I just heard of one GM dealer near Ottawa that put $11M into the showroom and service facility just last year and is now being shut down. (Can't seem to find the reference anywhere - so if anyone finds it, please post it in the comments.) That's a pretty hard reality pill to have to swallow. Now to be asked to redevelop the property into a craft markets or artisan shops is like a slap upside the head when the dealer just doesn't need it or can likely afford it.

For those property owners who'd get a warm fuzzy out of these ideas or, better yet, come up with a business model that makes sense under one of these schemes I say go for it! If such a clean, friendly use doesn't cut it in terms of their expected investment returns though, we'll all have to get used to the idea that these sites will likely continue to be commercial in nature.

In fact, if the Province of Ontario has their say under new intensification legislation, these sites will be required to be redeveloped into even more dense uses than they are currently being used for.

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What makes a Commercial Real Estate Guru a Guru?

What Makes a CRE Guru? What Doesn't? | Sibdu - Commercial Real Estate Professional & Social Networking

This is a really good article on what it takes to be seen as an expert in your field. And what you should avoid doing if you don't want to be dismissed as just one of the crowd.

Common sense ideas like not calling yourself the expert or guru. Sounds too self serving to be genuine. Don't be obnoxious; should go without saying, but sadly there are those who need to be reminded.

If you want to be seen as the expert, you need to create conversations by building relationships. Commercial real estate is still a people business based on long term relationships where both parties bring value to the association. Be a life-long learner. Never, and I mean never, assume that you know all there is to know on a subject. Constantly look for new avenues to educate your self.

For myself, I'd add volunteering to the list. Volunteering on your local association is a great way to give back, but it's also a very good way to project an air of expertise. Your peers will give you a little more respect for stepping up to the plate and volunteering for the betterment of your industry and your clients will see you as the guru because you are actively involved in your trade association. You'll make a lot of great connections as a volunteer; I speak from experience. The more you volunteer, the busier your business will get.

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Twitter anyone?

I've resisted going to Twitter for a long time now, but yesterday I caved in and signed up. Haven't started 'tweeting' much yet, and I want to make sure I go about this correctly. I read a very good primer on using twitter to promote your blog at problogger.net, and if you're interested I highly recommend it.

There aren't a lot of commercial real estate people using twitter yet, and I'm hoping to garner a few followers. Please consider following me as I start on this adventure!

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Profiting from Foreclosures

Entrepreneurs in High-Foreclosure Areas Turn Homeowners Into Tenants

Came across this article today and thought it was worthwhile sharing. The thrust of it is this: in certain US markets, where foreclosure is far more common than here in Canada, investors are buying houses that are coming up on foreclosure and keeping the former owners as tenants. My first impression was one of disbelief. It's so simple! So elegant!

And kinda repugnant too....though I'm not sure why I feel this way other than the pure 'opportunism' of it all.

I mean, really, if you think about it, it is a creative way for all parties to get something from the arrangement. The former owner isn't kicked out of the house, the bank clears the bad debt from their books, and the investor gets a property that kicks out cashflow from day one with almost no extra investment beyond the initial purchase.

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