Browse Tag: commercial property news

NAR ‘s Dr. Lawrence Yun Appearing Oct. 20 In New Jersey

Dr. Lawrence Yun

(Above: Dr. Lawrence Yun, Chief Economist, NAR)

Attention Commercial REALTORS®  of the Garden State: Register Now for a talk by NAR Chief Economist Dr. Lawrence Yun!

Network with Industry peers from Meadowlands, Bergen and Passaic Counties as you discuss the future of the local commercial market at this business-after-hours cocktail reception. Chief Economist Dr. Lawrence Yun of the National Association of REALTORS, will present the economic forecast, outlook and trends for commercial real estate in 2015.  Immediately following Dr. Yun will be a local expert panel of commercial real estate professionals to provide local market insight.

Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, among them Blue Chip and the Harvard University Industrial Economist Council. He oversees and is responsible for a wide range of research activity for the association including NAR’s Existing Home Sales statistics, Affordability Index, and Home Buyers and Sellers Profile Report.

USA Today in 2008 listed him among the top 10 economic forecasters in the country and he has been named among the Most Influential Real Estate Leaders by INMAN News over the past several years.

Dr. Yun received his undergraduate degree from Purdue University and earned his Ph.D. from the University of Maryland at College Park.

Two Win-Win Strategies For Financing Commercial Tenant Improvements

Chinwe Onyeagoro

Business owners who are thinking of renting or buying commercial property typically consider making changes to the space, including:

  • general renovations
  • façade enhancements
  • installation of furniture, fixtures, and equipment
  • Americans with Disabilities Act (ADA) compliance improvements

The space modifications outlined above are all common types of tenant improvements. And once they are complete, a business can move into the building and begin operating. However, until they are done, a business cannot take occupancy of the space. One of the biggest challenges that impact an entrepreneur’s ability to build out commercial space (i.e., retail, office, industrial, etc.) is  — you guessed it — financing.

Tenant improvements are big ticket expenses that require significant capital investment. Whether the property owner or the tenant pays for those expenses is often the subject of much debate. There is no right or wrong answer on this issue. In the end, if the lease/purchase contract is structured well, investments in tenant improvements pay for themselves.

The following are two “win-win” strategies for financing commercial tenant improvements:

1) Raise the Rent – Landlords are in a great position to get loans from banks, non-bank SBA lenders, non-bank commercial real estate financing companies, and alternative lenders to fund construction improvements for prospective/existing tenants. For more information on real estate financing options, please see my article “The Five Kinds of Commercial Real Estate Term Loans”, originally published here at the NAR Blog The Source.  Assuming a landlord and tenant can come to terms on a reasonable budget for the desired space improvements, typically called a tenant improvement (TI) allowance, the landlord can structure the lease in a way that ensures he/she recovers his/her investment over the term of the agreement. The landlord can choose to do one or more of the following: raise the base rent, accelerate the growth of the lease rate, or extend the lease term.

2) Accept Seller’s Note – A motivated commercial property owner can sell their place a lot faster if they are willing to help buyers get the financing they need. It is typically a lot easier to secure funding for acquisition and renovation if the total loan requested is 80% or less of the total property value, which is called a loan to value (LTV) threshold. Unfortunately, most buyers do not have the cash to pay more than 20% of the total negotiated sales price of a commercial property at closing.  So, the seller can either loan the buyer the remaining amount of money needed or reduce the sales price of the property. Given that owners should always aim to get top value for their assets, the seller note option is a better solution. In this case, a seller’s note could effectively be put in place to ensure the buyer qualifies for the loan. A seller’s note is an agreement that requires the seller to accept payment from the buyer on the balance of the sales value of the property at some later date(s). The seller may also require the buyer to pay interest on the monies owed until the balance is fully repaid. The one key requirement is that the seller’s loan must be subordinated to that of an institutional lender. For example, a buyer looking to acquire a 5,000 square foot retail bakery shop in a downtown commercial location for $95 per square foot with a planned renovation budget of $17 per square foot would need to come up with a grand total of $180,000. In this case, the buyer puts $95,000 down (17%) and the seller’s note covers the remaining $85,000 (15%). This combination ensures the buyer will not exceed a lender’s 80% loan to value maximum. By offering a seller’s note, an owner can get a deal done faster without reducing the sales price of the property. In addition, the seller protects him/herself by filing a lien and securing the property as collateral until his/her loan has been repaid. Lastly, the seller receives a fee from the buyer in the form of interest payments (typically 5% to 15%, depending on the risk profile of the deal).

There is no wall that cannot be scaled and no bridge that cannot be crossed when it comes to getting a commercial real estate deal done. The real opportunity is to complete a fair transaction for buyer-seller or landlord-tenant. Tenant improvement negotiations are one area that leaves both parties typically feeling unsatisfied. It’s important to know that there are win-win options to get commercial space modifications done. All you need is the willingness to be creative and flexible on both sides.

ABOUT THE AUTHOR

Chinwe is the CEO & Co-Founder of FundWell. Chinwe has a strong personal interest and a professional track record devoted to helping organizations raise capital. She co-founded, capitalized, and operated a boutique consulting firm that over the last seven years has successfully raised a total of $120 million in grants, competitive loans, tax incentives, government subsidies, and owner equity financing on behalf of clients across the country. Chinwe’s consulting experience includes McKinsey & Company, where she provided financial and strategic business advisory services to Fortune 1000 company executives, and while at Monitor Company (now owned by Deloitte) she provided strategy and financial analysis for public and private sector clients, and managed a $3 billion dollar real estate account. Chinwe has a B.A. in Economics from Harvard College and is a Henry Crown Fellow of the Aspen Institute.

ABOUT FUNDWELL

FundWell (www.fundwellre.com) is an online resource that prequalifies and connects commercial real estate investors and small businesses seeking funding with a growing number of bank loans, non-bank debt funding, and other credit related financing options.

FundWell delivers a 75% loan approval rate in a marketplace where they typically face a 30% approval rate. FundWell helps commercial real estate brokers increase deal flow and speeds up closings by referring their clients to prequalified lenders that will fund their real estate needs and business expansion plans. FundWell also helps real estate brokers access financing to grow their businesses.

Since 2012, FundWell’s online financing marketplace and financial health information has reached over 24,000 small businesses, working in partnership with over 300 lending partners across the country that span 13 different types of loan products from conventional bank loans and SBA loans to factoring, equipment loans and commercial real estate loans.

Commercial Real Estate News Roundup For September 30, 2014

Denver skyline at blue hour

 

Putting on your pants in San Diego, East coast ports getting hotter, Denver’s plans to get even higher — it’s all here in the Commercial Real Estate News Roundup for September 30, 2014.

 

 

 

General

 

Demand for S.F. commercial property is through the roof, SF Chronicle, Sept. 27, 2014 – Tech and non-tech uniting across the Bay Area to drive property prices and narrow availability.

 

Banks Seeing Lower Loss Rates on Commercial Real Estate, Huffington Post, Sept. 23, 2014 – The mop and bucket from the Great Recession still being wielded even as years of desperate unwinding of bad loans declines in the face of something more natural and cyclical.

 

Commercial comeback, Boston Globe, Sept. 24, 2014 – Meanwhile in New England, industry and office growth in and around Boston pick up steam.

 

Charleston area buzzing with commercial building projects, Charleston Post & Courier, Sept. 28, 2014 – Buildouts in the southeast’s leading port city are crowding the ground and sky.

 

 

 

 

 

Office

 

The office tower that transformed downtown Houston is for sale — and expected to fetch record price, Houston Culture Map, Sept. 22, 2014 – 36 historical stories are on the market, and the tech and defense citadel called Houston is expected to make pricing history.

 

San Francisco’s 2014 office leasing breaks dot-com record, San Francisco Business Times, Sept. 25, 2014 – Luckily for the commercial property sector, the high-tech promise of the “paperless office” was always a bunch of hooey.

 

22-story office tower coming to downtown Denver, Denver Business Journal, Sept. 25, 2014 – Mile-high city aims to get 22 stories taller.

 

 

 

Industrial

 

Need for speedier delivery stokes hot industrial market, The Record, Sept. 24, 2014 – 3PL (third party logistics) and warehouse properties are in record demand, especially in New Jersey

 

Tight industrial market sends semiconductor firm to Sherwood for warehouse space, Portland Business Journal, Sept. 25, 2014 – Meanwhile up in the Cascades, spillover from traditional tech environs is changing the commercial property equation.

 

This deal shows how blazing hot Baltimore’s industrial market has become, Baltimore Business Journal, Sept. 29, 2014 – Strategic acquisitions of warehousing near Atlantic ports are proceeding at all building classes, says the BBJ.

 

 

Retail

 

Microsoft to Open Fifth Avenue Store, WSJ, Sept. 29, 2014 – Software giant left in wake of Apple’s dust considers retail expansion. 

 

Lucescu Realty sells Utah shopping center portfolio for $226 million, CSA, Sept. 29, 2014

 

Malls fight back against Internet, U-T San Diego, Sept 26, 2014 – What can’t e-tailing deliver that malls can?  Food and entertainment.  San Diego shopping centers focus on what it means to put on your pants to go shopping.

 

 

 

Multifamily

 

Apartments slated for big, vacant downtown Syracuse building, Syracuse Post-Standard, Sept. 29, 2014 – Vacancies no more in upstate New York 

 

SunTrust watches for multi-family bubble in Nashville, The Tennessean, Sept. 22, 2014 – Is Nashville over-developing and under absorbing its multifamily space?

 

Builders Turn Focus to Housing Market, NYT, Sept. 26, 2014 – Gotham and housing: the eternal waltz on an ever-shrinking dancefloor.