Tenant Tips

Where to Get Commercial Real Estate Financing and Good Information?

On 05.10.10, In Newsletter, Tenant Tips, By Rob

In this market, one of the perplexing questions commercial owner occupants or property investors ask is ‘where do I get financing?’. You may have found that perfect office to relocate your business, found an apartment complex with an attractive yield or just want to refinance you commercial property, just to find that banks are still reluctant to lend.

Although there are still products like construction/development loans that have not returned to the market, investors are eager to lend on commercial properties. Most of the underwriting guidelines are different depending upon the property and loan type, which makes commercial financing more complicated.

So where is a good place to find such information? Contact Alan Mayhew at Capital Mortgage Group, 704-664-3611

Tagged with: Buying Commercial Real Estate

Are You Wasting Your Time?

On 03.08.10, In Tenant Tips, By Rob

Take a moment to calculate your total annual salary.

Take that number and divide it by 50 working weeks in a year, next divide that number by 40 hours per work week. This figure is what you are worth per working hour.

Time- $_______ (your yearly salary here) / 50 working weeks/ 40 working hours per week = $ _______ THE VALUE OF YOUR TIME

Don’t you think that your time is better spent running your business and not doing something that can easily be out-sourced ???

Don’t forget that in most cases real estate brokers who represent tenants are paid out of commission splits with the property owners leasing agents, that means it costs you nothing! That is the portion of commission you let the listing broker keep if you do your own transaction without professional representation.

On the tenant-buy side of the commercial property equation, it makes sense to find someone, who can help you with respect to making these important business decisions. My advise is to find someone!

Tagged with: Leasing Commercial Real Estate

Common Tenant Buyer Questions and Answers

On 03.08.10, In Tenant Tips, By Rob

Q. How much time should I allow to analyze renewing my lease or relocation decision?
A. As in most areas of business, the more time you leave yourself, the better decision you stand to make. If the tenant is relocating, this decision will result in the tenant needing more time to get the transaction and the desired result. Depending on the size of facility and the inventory of space in your market place, starting 8-12 mos. before is not uncommon. Renewal decisions should also begin well before the lease term end. In many cases, there is a huge benefit for the property owner to have written commitment for financial purposes. 4-6 mos. early can certainly be wise.

Q How can a broker save me money if I am going to simply renew my lease?
A. The broker should provide the comparable market conditions which result from a complete market study, this will give you the ammunition you need to make sure that your renewal lease is not abusive on the rate. Knowing what other concessions are being offered in the market place helps you get all that you are entitled in the renewal.

Q. What other areas of cost savings exist, other than the lease rate per square foot?
A. Tenant improvement allowances, escalation methods and abatements are key areas available for dollar savings.
Large companies with multiple leases can benefit from real estate consulting services like Workplace Consulting, Information Management, and Program Management. These services can be use to trend occupancy costs downward substantially. Your broker should be able to help you negotiate these items during the relocation or renewal process.

Q. Should I lease or buy?
A. The answer to this question should be answered only after careful consideration of your firms long term goals. In areas where real estate is appreciating (like Charlotte, NC) purchasing can be a very profitable approach. Consultation from a real estate broker, financial planners (CPA’s) and bankers can shed light on all of the key areas to consider before making this decision. The level of active involvement you desire with the investment should be carefully considered.

Q. What if I am short on the down payment needed to make a purchase?
A. There are several great loan programs available today. These programs coupled with SBA loans, can get small business operators into properties from 0-10% down! Many developers and investors will partner with businesses who are able to commit to lease-purchase option or land trust conveyance. Clearly, the nature of your real estate needs will dictate exactly how the deal could be structured. See your broker for details.

Tagged with: Leasing Commercial Real Estate

Improvement Tips For Getting Tenant Improvements

On 01.31.10, In Tenant Tips, By Rob

Tenant Improvements: Now you see them, now you don’t. If improvements are to be made to the leased premises prior to the tenant’s occupancy, the tenant must understand the economic impact of such improvements and know what it will get. Understand that getting such improvements is increasingly difficult in today’s economy given that landlords cannot secure tenant improvement financing like they used to. Here are some important tilps:

Make certain that the obligation to pay rent and other charges do not begin until the tenant improvements are complete.

Determine whether the landlord will be designing and constructing the tenant improvements at its sole cost (a “turnkey” arrangement) or whether the landlord will be giving the tenant an allowance, with either the tenant or landlord designing and constructing the improvements (an “allowance” arrangement).

Before entering into the lease, in an allowance arrangement, the tenant should have final space plans and estimates for the work so that the tenant is not exposed for the cost of improvements in excess of the landlord’s allowance or, at the very least, will know how much it will have to pay.

In both turnkey and allowance arrangements, the tenant must be certain to work with a competent broker and space planner to make certain that the space will be built out to satisfy the tenant’s needs

.

Where the landlord does the design work, reserve the right to look at, review and approve all designs and materials utilized, and the right to make changes up through the design stage of the tenant improvement design documents.

Additionally, in an allowance arrangement, make sure that the allowance will not be used up for base building work, such as bathrooms located in common areas, asbestos abatement, or sprinkler systems.

Agreement should be made as to the disposition of the landlord allowance if the actual tenant improvements cost less than the allowance. The landlord would like to keep the unused portion of the allowance, but the tenant should attempt to get the landlord to apply the allowance to the costs of other work that is the responsibility of the tenant under the lease or work letter, pay it to the tenant, off-set it against future rent, or allow the tenant to use some portion of it.

Negotiate remedies for landlord-caused delay and carefully define and limit the consequences of tenant-caused delay.

If you are not sure what you are doing, get help! See your attorney or tenant rep broker!

Tagged with: Relocation • Tenant Representation

Eight Easy Steps To Moving

On 01.31.10, In Tenant Tips, By Rob

Unfortunately The process of moving your company began the moment the decision was made to move and will not be complete until every invoice is paid, every scratch is mended, and everybody is settled into your new facility.

I suggest that the move be broken down into eight easy to manage phases:

1. Inventorying all items to be moved, refurbished or sold.

2. Developing an action plan for the move.

3. Preparing RFP’s and obtaining estimates from the movers and firm bids from other vendors.

4. Selecting a moving company and other vendors to be used in the move.

5. Educating your employees about the move.

6. Packing and preparing your furniture, equipment and contents for the move.

7. Supervising the actual move.

8. Post move follow up.

Tagged with: Relocation • Tenant Representation

Costly Mistakes To Avoid When Moving

On 01.11.10, In Tenant Tips, By Rob

Unfortunately many people find out far too late that there is more to moving a company than just calling a mover and setting a date. They are overwhelmed with the details and steps required. According to a survey of 231 law firms relocating to new office space, the biggest problems they had to deal with were:

Insufficient planning 52%

Selecting vendors 37%

Cooperation, teamwork and morale 29%

Disposal of obsolete files 21%

Forgetting important tasks 19%

Keeping within the budget and schedule 11%

Matching files to offices 10%

A Relocation Management study revealed almost two-thirds of the people responsible for the relocation of their company were either fired or demoted after the move. Other took time off for stress related ailments.

So how can these mistakes be avoided? They can be avoided by setting up a process and first asking the following:

Who is in charge? From the start decide who is responsible for the move. Even if you have a move committee, someone will always have to make the final decision.

Start planning early- Henry Ford said, Before everything else, getting ready is the secret of success.

Get the word out- The company rumor mill can impair morale. People in general, fear change and uncertainty. Tell people what is going on, and how it will impact them. You will be surprised at what they will tolerate and how much they will help out if informed.

Focus on the details- If you do not know what the details may be, then find out.

Allow enough time- Take in to account Murphys Law and things always take longer than planned. Make sure you have cushion in your schedule for delays.

Use checklists- A small company must consider a hundred or more activities; a large company upwards of a thousand. There are just too many things to remember. Use checklists to help assign, organize and track your progress.

Finally, a good tenant broker or buyers broker should be able to assist you in getting resources together for the move including the checklists!

Tagged with: Relocation

How To REALLY Save Thousands of Dollars On Your Commercial Real Estate

On 12.10.09, In Tenant Tips, By Rob

If you have real property with costs of $500,000 or more, purchased after 1986, you may be missing an opportunity for substantial tax savings!

Do you own depreciable real property?
Are you constructing or purchasing real property?
Are you expanding your existing facility?
Do you have extensive leasehold improvements?

If you answer “yes” to any one of these questions, there is a service that I provide that could save you a significant amount of taxes! The service I am speaking of is a Cost Segregation Study.

This is a little known process designed to legally recapture thousands of dollars using a qualified professional to perform this special study.

What is a cost segregation study and what is it worth? A cost segregation study is an analysis, using an engineering approach acceptable to the Internal Revenue Service, to reclassify costs from the long depreciation lives of 27, 31 and 39 years to 5, 7 and 15 years. The benefit of a study is the net present value of tax savings generated as a result of accelerating depreciation expense. This amount can be significant meaning tens of thousands of dollars in many cases.

Studies are done not only for property being currently purchased or constructed or improved, but also for buildings placed in service as early as 1987. Taxpayers can reclassify costs that qualified for shorter lives and can “catch-up” those missed deductions immediately. You don’t have to spread the missed deductions over four years anymore. As you can imagine, these amounts are usually quite large and result in big tax savings.

The Internal Revenue Service has made it clear, through various rulings, procedures and court cases, that they will not accept anything less than a Cost Segregation Study using a construction and an engineering approach. My study is comprehensive and well documented and in the format acceptable to the Internal Revenue Service.

By Richard A. Blum, CPA, JD, LL.M.

Please call Mr. Blum directly at (704) 770-8790 (704) 770-8790 or e-mail at Rblum@carolina.rr.com if you would like to further discuss these cost segregation studies or if you have any questions.

Tagged with: Cost Segreation

How To Avoid Common Tenant Mistakes When Leasing Commercial Real Estate

On 12.02.09, In Tenant Tips, By Rob

Tagged with: Leasing • Tenant Representation

How Do You Know If Your Landlord Is Paying His Bills?

On 11.16.09, In Tenant Tips, By Rob

A question I am often asked with respect to leasing commercial property is how one can know if the landlord is paying his bills.

Think about it for a second, if the landlord fails to pay his mortgage, taxes, utility bills or any similar related expense, those vendors who have not been paid can (and will) take legal action. That action can be anything from foreclosure, to disconnection of services.

So what can a tenant do?

Enter a good real estate attorney. Assuming the tenant used a tenant rep broker to assist him with the transaction, that broker would have negotiated important lease terms in the form of a request for proposal and received a written answer. The mechanisms in that letter would state how the final lease should be prepared in order to protect that tenant.

Once the broker received the lease which was drawn using the business points negotiated in the request for proposal letter and it response, he would have made informal lease comments and incorporated them with the comments of the tenant. These comments are then given to the tenants real estate attorney for proper legal review and manipulation.

I have NEVER been through that process with a tenant where important lease terms did not need to be changed. It is at this point where the real estate attorney will ensure that the necessary protection is in that lease document prior to signing.

If the landlord will not accept these important changes, then the good tenant broker will have an alternative property to consider before making their final decision.

This process is important given the economic environment today. How bad would it be for the tenants business to get locked out of the property until payments can be brought current?

Tagged with: Leasing • Tenant Representation

Rob Cassam's Commercial Leasing-Purchase Blog

The Right Real Estate Advice Makes All The Difference!