Tuesday, May 24, 2011

An Amazing Industry

Commercial Real Estate

This industry and challenges it presents can cause a person to hang their head in desperation. Banks, credit, zoning, are all areas where an agent needs to have expertise, and many more. Some adopt the mantra " whatever can go wrong, will"
Others, however, are able to look at the clients needs, and see nothing but possibility.

I can think of very few industries that allow someone the in-depth look necessary for a good Commercial Agent to do his job properly. Its more than square feet, or clear height. The considerations are almost endless. The agent will often ask why something is needed, and armed with this new perspective, can serve the client even better.

We have the privilege to survey many businesses because of their need to make changes. It is this aspect of commercial real estate that is the most exciting. Imagine if everyone could do this before launching their career. How different our lives would look like, and how much happier we would be with this kind of opportunity. I have been exposed to several companies over my career that have ignited a passion in me that was hard to contain.

Probably because my strength is "Futuristic," and "Ideation."

I can literally "see" what people are building for the future. In the third grade, they called it "daydreaming!" Today, it is the ability to create a vision for others of what they are building, and where it can go.

It is this kind of insight that has opened doors leading to new technologies. World changing technologies. It has opened doors to new and creative forms of financing. When coupled together, create business opportunities more powerful than those of the Industrial Revolution. These opportunities are limited only by our ability to dream big, the connection of the pieces of information gathered from so many over the years, then plugged into the new age of technology. The movement beyond the box of conventional thinking

With all that, I believe I have the ability to change the world.

I predict a bright future, one full of wonder, as we cast off the old ways, and put on the new. A world where our energy is the byproduct of our waste. A world without cancer. A world full of innovation that few have the ability to see, because they are looking the wrong direction. Looking to what is or has been instead of what can be.

I am thankful for the portal of Commercial Real Estate, that has opened the future to me and shown me my part in it.

Thursday, December 23, 2010

Warning signs

As predicted interest rates have begun to climb even after all the pressure from the administration to keep them at bay. Real Estate prices have remained depressed, largely due to the unwillingness of banks to lend except to their strongest clients and often with debt equity ratios of 60/40 or 75/25 at the very best. Most borrowers are being turned away.

Inflation is showing up in virtually every other sector. The prices in the grocery are higher and yet portion sizes of processed foods are far smaller. Fuel, clothing, services etc. are showing significant increases because of the devaluation of the dollar. Anything that comes from overseas will cost more, and there is a lot that fits in this category.

Commercial real estate is selling well below replacement cost and provides a place that you can position cash in a tangible asset. Even if the property is just able to carry itself, that season shouldn't last long. Inflation will soon drive prices up and you will be locked in at today's prices.

Dan Ferris sheds some light on what is happening in an article I have quoted below. He is not alone. In fact there are too many reporting the same or similar things every day.

By Dan Ferris, editor, The 12% Letter
Thursday, December 23, 2010
"Since November 1, long-term U.S. Treasury bonds have fallen 7% in value. That's not supposed to happen. But it's happening.

Since November 1, the municipal bond market has fallen 6%. That, too, isn't supposed to happen. But it's happening.

For most of the last century, the whole world has believed the obligations of the U.S. government – and the obligations of thousands of states, cities, towns, and other municipalities in the U.S. – were the safest investments in the world. These "safe" investments aren't supposed to crash.

The reason U.S. Treasurys and municipal bonds are crashing is by far the most important financial development of 2010.

The crash has affected and will continue to affect the value of every stock, bond, exchange-traded fund… every type of investment there is.

If you've already looked for the reason bonds are crashing, it hasn't been hard to find. This past month, for example, the reason bonds were crashing was on the front page of all the major financial websites. It's been there since November 3, when the Federal Reserve announced it would print $600 billion between now and June 2011 and buy Treasury bonds with it.

On one day last week, the headline at Financial Times' website read, "Fed maintains asset purchase plan." The Wall Street Journal's website read, "Fed Sticks To Bond-Buying Policy." And Bloomberg's site read, "Fed Retains $600 Billion Bond Buying Plan to Boost Economy."

It all means the same thing: The Federal Reserve will keep printing money. The dollar will continue to get weaker. The bond market will continue to fall. Interest rates will continue to rise."

If you are trusting a fund manager to give you personal attention and save you from where we are heading, good luck, you'll need it. Assets like gold and silver, are a good hedge, but commercial real estate can grow in value, pay for itself, and withstand whatever happens to paper.

The time to act is now.

Friday, December 18, 2009

How can we get this done

Confronted by what seems to be a brick wall when seeking conventional financing, the question is how do we get past this roadblock. American business has a reputation of finding a way, even when the task seems impossible. That's one of the things I love about this country.

Many who have been downsized, or sent packing on early retirement and many others are looking to finally follow their dreams and create opportunity for themselves and others. These are the people that through there ideas change the world, and make it a better place. Theirs are the ideas that will not see the light of day that could change life for the better, because the funds aren't available. Unless they are willing to think differently.

Not everyone wanting to purchase a building or business has the solid gold credentials required these days by the conventional lending sources. This doesn't mean they are not a good risk. Until regulators change the strict regulations imposed on the banks things are not apt to change. Here are some ideas from Mike Handelsman published in BizBuySell that are worth looking at.

Retirement Funds

"As with borrowing money from friends or family to buy a business, some might consider using money from a retirement nest-egg as risky. That said, it can often be an effective way to invest in your entrepreneurial endeavors and has had successful outcomes for more and more of today’s business buyers. As laid out by the government’s ERISA law, you can invest your existing IRA or 401(k) funds to the purchase of a business without taking an early distribution and incurring penalties. It is even possible to combine money from your retirement fund with loans and other funding methods for greater flexibility. Many entrepreneurs choose to invest in a business they control because they believe the growth opportunity is greater and want to diversify a portion of their retirement holdings outside of the stock market. If you find this is a viable option, sites such as GuidantFinancial.com can provide you with more information on this small business investing method.

Seller Financing

Today, more and more business-for-sale transactions are resting on a seller’s willingness to finance at least part of a sale. In a deal that includes seller financing, the seller takes part of the purchase price in cash and the remainder in the form of a promissory note that the buyer will pay back with interest over a period of three-to-five years. This has become essential in a time when buyers are having difficulty accessing funds through traditional methods, therefore naturally gravitating toward seller-financed businesses to help offset some of the cost up front. Sellers who continue to say no to seller financing are finding it difficult to close a deal, and as more of them have realized this, there has in turn been an increase in seller-financed businesses on the market. To make it easier for buyers to locate these businesses, BizBuySell.com recently introduced the ability to filter search results based on a seller’s willingness to offer financing.

If you’re in the market for a small business it’s important to be aware of these alternate funding options, but also know that in some cases it is still possible to borrow from a bank. Government stimulus and bank policy have been trying to promote ongoing small business lending, although many banks are still more conservative than they used to be about to whom and when they’ll loan money. If you’ve inquired and are unable to secure a bank loan, taking advantage of one or more of these financing methods could still allow you to achieve the goal of being your own boss. Today’s business-for-sale marketplace is full of exciting opportunities that would allow you to take your destiny into your own hands, and with various options available there’s no reason to let a shortage of traditional capital sources get in the way of your dreams."

There are also private money lenders that are filling the gap created by the banks.

Values are plentiful if you are willing to take the necessary risk, use unconventional sources of funding, and act. Remember, Lack of an action plan is still a plan.

Monday, November 2, 2009

Ray of Hope

"First, residential real estate was given the OK to modify loans from U.S. regulators and now its commercial real estate’s turn. Coordinating the effort, the Federal Deposit Insurance Corp., Federal Reserve and Office of Thrift Supervision released the new guidelines for banks, which emphasize that modifying loans in a prudent fashion is often in the best interest of both the bank and the creditworthy commercial borrower."

A performing loan is better than a foreclosure for all involved, even if the ratios are not what the regulators want to see.

The economic climate will improve and the more people that make it to that day, the better. Regulations should not perpetuate disaster, they should help avoid or at least forestall it.

Tuesday, July 14, 2009

Changing Face of Real Estate

Changing Face of Real Estate

The good the bad and the ugly

In my last post I wrote about the fact that real estate in many areas of the United States is “ON SALE”. I have recently seen clients acquire unbelievable properties at even more unbelievable prices. One example is a 68,000 Square Foot building for $100,000.00. Yes that was One Hundred Thousand not One Million. This of course was not a high-rise in the heart of town. It was an industrial property with potential and a fantastic value. This kind of thing is playing out every day. Low interest rates and low prices make this the perfect buyer’s market. That’s the good news.

Now for the bad news - the Waxman-Markley comprehensive energy bill. Sounds good, right? A bill to support energy independence and reduce global warming? You’ve heard it before and it’s still true today. If it sounds too good to be true … it probably is.

Take a look at this video for an idea of the impact this bill will have on real estate.


This video speaks to residential real estate, but the bill does not discriminate between residential and commercial properties. The result of this measure, if passed, would heap enormous costs on the back of sellers further reducing their net at closing. This at a time when many sellers find themselves having to bring a check to closing!

So, while opportunity abounds, let me offer this brief word of caution: this market is not a place for the uninformed.

According to an article in The Washington Post by Martin Feldstein, professor of economics at Harvard University, this legislation would do little to impact the global emissions issue anyway. Waxman states that only 25% of global CO2 production is attributed to the U.S. and it’s dropping. Meanwhile emissions in China and other developing nations continue to grow. Making the changes proposed in this bill will have a minimal impact of less than 4% reduction in global carbon emissions. However, the impact on U.S. property owners and businesses will be far greater than this blip.


Costly and burdensome requirements for property owners are littered throughout the 1,200 pages of this bill. 1,200 pages that our representatives vote on without bothering to read. Shame on them and shame on us if we let this proceed without speaking up. Does this story worry you enough to contact your representative? It should and I did. Because if this passes without all of us speaking up and fighting for common sense, then we’ll have hit the trifecta of my title – the ugly.

Friday, May 8, 2009

America on Sale

The dictionary defines inflation as:
"Expansion in the money supply beyond the increase in available goods and services. Often misunderstood to mean a rise in prices, which generally accompanies such an expansion."
In recent months we have seen just such an expansion of the money supply, and there are those like Warren Buffett and Milton Friedman who agree an accompanying rise in prices is on the way. Few disagree.
With this in mind, establishing what your business needs and acquiring it at today’s prices makes a lot of sense.
Real estate is one of the most important tools of business and in today's market it's “on sale”. This sale-priced market, on the cusp of an inflationary cycle, means opportunity for those who recognize the signs. Some of the richest men in history made their fortunes in times just like this. The greatest factor in achieving their goals was, and is, overcoming fear. Fear will cripple even the best of plans, if not managed effectively.
One of the biggest fears I hear is “what if?”
What if it rains? What if it doesn’t rain? What if the sky falls? The next time you find yourself saying "what if…", step back and look at the big picture. We are the strongest economy in the world. We have hit a pothole in the road, but the needs and demands of three hundred and fifty million people are not held at bay for long. Neither are the those of the rest of the world in which we play a big role in supplying.
Getting ready to fill those needs is the order of the day for anyone who doesn't want to be left behind. Those who take a strategic look at the future, who are proactive and positive in today’s negative environment, will be money ahead when prices start to rise. And most importantly, they will be in a position to profit from the return to growth.
Am I suggesting everyone run out and buy something, anything? Of course not. I am saying be smart, don't hide your head in the sand, or cry the sky is falling. Don't make decisions from a position of fear. Ask yourself where you need to be to profit in the future. If that means buy, then by all means do it now. The opportunity of a lifetime is only good for the lifetime of the opportunity.

Monday, April 13, 2009

Welcome to the Ohio Industrial Group

Welcome to the new Prudential Commercial Real Estate Industrial Group blog. Here you'll get some of the latest ideas and thoughts about industrial real estate in the Ohio market. Plus, you can post questions for our group of experts to answer. Anything goes, so post a question in the comments section below. We'd love to hear from you!

Our group of experienced commercial realtors really believe that industrial real estate, and the businesses that go with it, are the heartbeat of America. Manufacturing, transportation, warehousing, service businesses - you're what keeps us all moving forward.

Led by Tim Mehan, an industrial real estate and construction veteran of more than 30 years, the Prudential Commercial Real Estate Industrial Group team is looking forward to blogging with everyone interested in Ohio's Industrial sector.