Geesh North Hills. Got Some Critical Mass?

February 8, 2010 by Rankin Commercial Properties

I had the opportunity to meet a man who used to work with John Kane at Kane Realty some umpteen years ago. You’d figure the guy was like another Donald Trump with his massive North Hills project. In some ways I guess he is, after all John started out small and grew big. But he didn’t start in a one bedroom apartment in Manhattan, and he certainly doesn’t sound like the type of guy who would trademark the phrase “Your Fired.” Nope, according to my source, John was a simple guy who just knew how to run a business. In fact, unlike Trump, John Kane is very soft spoken. Apparently he’s just good at hiring the right people to handle the right tasks.

Sounds simple but it isn’t. Just look at North Hills. In 2000 North Hills was a trash heap mall with one real tenant, JCPenny’s. Eight years later it became Raleigh’s premier outdoor shopping mall with restaurants and shops that appealed to Raleigh’s young professional crowd.

By 2009 the center became a Raleigh Hot Spot for entertainment with its beach music festival, and now, it is growing again.

The genius behind the development shows why Kane has grown from the strip mall king in 1978 to Raleigh’s premier developer. Mixed use development projects are some of the hardest developments to build while maintaining synergy. Mixed use generally involves retail, office, and residential components. One mistake can ruin the entire project. For example, North Hills built its original office component directly over the retail shops. HUGE Bummer!

Because the office was built over the retail, office tenants had no convenient place to park. Generally office users arrive earlier than the shopping crowd, so what spaces where convenient where then used for the office users, and retail shoppers had to park further away. If there is one deterrent to North Hills, its that dog gone parking.

Luckily it wasn’t a complete flop. North Hills has an underground parking deck that makes up for most of the parking issues. Which brings me to the next genius thing about North Hills.

Somehow, Kane got a Super Target in the parking deck, under the entire center. If it wasn’t for the North Hills landscape which hangs over I-440 that would have NEVER happened. There is something to say about choosing development site wisely and I think he nailed it with that one. The fact that Target receives enough visibility from I-440 to make them happy UNDER North Hills makes the project for Kane. With Target and JCPenny’s under North Hills, and the Movie Theatre on top, Kane’s got 3 solid anchor tenants, which have added security to the small tenants throughout the center.

I almost forgot the Renaissance. Hotel’s aren’t the number one business to be in right now, but from what I’ve heard, the Renaissance is the number one place to be if your wife kicks you out for a night.

The next phase of North Hills is almost a perfect model for mixed use development. In fact it is so perfect, even Harris Teeter agreed to bite the bullet and dive into the parking deck (another odd move for an anchor tenant). But let’s face it, if Harris Teeter where in line, the mixed use aspect would never work.

This isn’t the first time I’ve seen a Harris Teeter operate from the depths of a parking deck. The downtown Charlotte Harris Teeter is barely visible at all. However, it is extremely risky of the tenant during today’s economy. At the same time, why not be in the hottest center in Raleigh.

In theory the expansion makes perfect sense. Harris Teeter is under the residential units and parking deck, while the small shops are neck and neck at street level. My only question is, if the Harris Teeter Shoppers never leave the parking deck, how will the small shops survive? We’ll see. Can’t say I have any better ideas, and quite frankly, I am impressed that once again, John has managed to tuck away an anchor deal.

The office component in the second phase is also much better planed. Having the building completely separate from the residential and retail makes it much more inviting to office users. At least those who are willing to fork over $30 PRSF for office space.

However, it is a beautiful building and you can’t say Kane hasn’t left his mark in away you’ll miss it. In fact driving down I-440 the thing looks gigantic. Let’s hope CapTrust doesn’t end up filing for bankruptcy after paying for that name plate. After all Wachovia got way in over their heads in Charlotte and now Wells has several beautiful outstanding, VACANT, landmarks filling the holes in the Charlotte skyline.

Looking forward to watching this project continue to develop. He’s already got the critical mass to keep this project on point. Hopefully some of the other dummies out there trying mixed use will learn a thing or two.

- NC Commercial Source

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Lat Purser and Boxes one in at Saltbox Village

February 8, 2010 by Rankin Commercial Properties

Lat Purser boxed one in the Saltbox with a new Meat House for the Village. The Meat House is a neighborhood butcher shop selling high end meats, cheeses, and a little wine for all you drunks.
Lat Purser & Associates represented Saltbox Village LLC and Rankin Commercial Properties represented the Meat House in the retail lease transaction.
Lat Purser & Associates has been a leader in providing Commercial Real Estate Services to clients in North Carolina, South Carolina, and Florida for nearly 45 years.
Rankin Commercial Properties is one of Raleigh’s newest Commercial Real Estate Firms with a very aggressive team of brokers pushing and focusing on Tenant and Buyer Representation Services.
Saltbox Village is a neighborhood shopping center in Cary, NC located on Kildaire Farm Road near the intersection of Kildaire Farm Road and Cary Parkway.
The addition is a great fit for the Village after loosing the Fresh Market in 2007 I think most of us feared the worst for the center. Ace Hardware was a great steel from the old Food Lion center down the road, but the Meat House put the icing on the cake. Now you can go grab all the propane and accessories you need from Ace and then stop by Meat House for some kabobs all at the same time.
Speaking of which, whoever came up with the name Saltbox Village? What is that? What is a Saltbox?
Answer: It’s an Architectural Design

Ahhh I get it, Saltbox Village is named after its architectural design… but I still don’t quite get why someone would name anything, even a design, Saltbox.
“Yeah so make a right at the stop sign and drive down the road about a mile, our house is the second Saltbox from the end.”
Talk about embarrassing.

- NC Commercial Source

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A little Moody on Commercial Real Estate

February 8, 2010 by Rankin Commercial Properties

Moody’s reported that the start of 2010 is showing signs of growing demand for investors in commercial real estate. I can honestly say for the last two years we’ve had a demand. Only according to Moody’s it not the industry demanding more money, its investors demanding investments. That’s a good sign. Thanks Moody’s!

Of course Fitch had worse things to say about the market. According to Fitch delinquencies in commercial mortgage backed securities reached a whopping 4.71%.

Federal Reserve Board governor Elizabeth Duke said in a speech to a Raleigh business group that nearly all of the bankers she has talked to in recent weeks have said that their business plans for 2010 are “based on achieving increases in loan volumes.”

Of course I had a talk with some commercial mortgage bankers at Suntrust who said they aren’t touching loans. Not sure where the Duke got her information, but I know plenty of Commercial Property Owners who would love to see some of that LOAN VOLUME. Thanks Duke!

Well, the good news is that things seem back to normal. That is, no one really knows what’s going on in the market. This time last year, everyone one knew what was going on, RECESSION!

It would seem as though the times are changing, we went from a bullish state to uncertainty that led to unloading of assets and a full melt down back to uncertainty which seems to be leading to “proceed with caution.”

General Growth Properties recently refinanced Carolina Place Mall in Charlotte, NC. That was a significant accomplishment for the second largest US Mall owner. However, General Growth still has about 35% of its company in bankruptcy.

But even the bankruptcy hasn’t been bad for the General, new terms, better terms, and long term refinancing are showing some improvements to the overall General’s portfolio. You got to respect the Generals move on the bankruptcy filing; it was clearly the best tactical move to combat unwilling lenders in the refinancing war.

- NC Commercial Source

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Commercial Real Estate Firms Are Fisting it out for Market Share

February 8, 2010 by Rankin Commercial Properties

Cassidy & Pinkard a Colliers International Franchise recently announced they were merging with four other firms out west, making them one of the largest Commercial Real Estate Property Management Firms in the country.

Not surprising to hear about another Commercial Real Estate Firm merger. After all, smaller regional firms are much more vulnerable in the current market. Most of these firms are having problems keeping up with paying the bills.

Commercial Real Estate firms make money when deals are happening and buildings are receiving rent. If a property losses 25% of its rental income, so does the property manager.

The problem is, as these property managers loose income, the first place they cut back (similar to any other business) is marketing and advertising. Ironically, the reduction of marketing and advertising adversely reflects on their ability to release the space and the cycle continues.

Many believe the commercial real estate market is drying up for the time being. From the research we have been able to do at NC Commercial Source, it appears that the leasing market is actually doing fine. The problem is that the tenant mix has changed. There are more franchisees and start up businesses and less established “high credit” businesses.

That doesn’t mean the deals are bad. In fact most of the start ups are coming from previously high income individuals who have the cash to start, run, and operate the business. America is the type of country that runs off of inspiration.

Newer businesses simply aren’t tuned into the “traditional” commercial real estate practices. They don’t have a preferred broker they work with, they don’t know what a tenant representative is, and they certainly don’t realize the necessity of having one.

Why should they, so many commercial properties are now marketed online.

So why all the mergers and acquisitions of Commercial Real Estate Firms. Its really just a false sense of hope that by acquiring other firms, they will expand their market share and get whatever clients are left.

Honestly, it isn’t going to work. The larger firms need to break their “traditional” approach and start reinventing themselves.

Over the past couple of years we’ve seen several “boutique” firms popping out of the wood work. Rankin Commercial Properties established itself in 2008 after the owner left Grubb Properties another boutique firm. These firms are reinventing the commercial real estate market. They are setting the bar on properly marketing space in the 21st century.

However, as successful as these smaller firms are with their marketing, Landlords still tend to flock towards the “Franchise” firms. Perhaps this is why Byrd Commercial Properties of Cary traded in their name tag for Keller Williams Commercial.

We recently did a study on boutique firms vs franchise firms. One of the issues we found was that the Franchise and National Named firms have almost too many listings as compared to brokers. Their brokers can’t focus on marketing their properties because they don’t have enough hours in a day.

So, they use an indirect marketing approach to attract as many people as possible and hope someone leases space somewhere in one of their buildings. There attitude has become, we have the listings, we don’t need to market them, people will come to us. In reality this doesn’t do very much for their landlord clients.

Ironically, the smaller firms are doing the opposite. They are doing what we call direct marketing. When they have a listing they are coming up with prospect lists and then targeting end users of the space. It becomes a much more effective approach to marketing spaces. At the same time, a direct marketing campaign normally focuses on one property in stead of trying to put 15 options in front of the tenant.

Over the past several years we’ve seen several small commercial real estate firms get picked up by larger firms in Raleigh and the Triangle market, similar to Byrd Commercial Properties. Grubb & Ellis franchise Thomas Linderman Graham absorbed Richards Commercial, and on March 1st the local Raleigh Colliers International office, Colliers Pinkard will be joining Cassidy Turley.

However, merging really isn’t the way to go. What firms need to do to gain market share is reinvent their marketing plat form, strengthen their brokerage team, and start leasing space.

- NC Commercial Source

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Stay in tune with Overhauling Raleigh’s Development Ordinances

February 8, 2010 by Rankin Commercial Properties

The City of Raleigh appears to be moving toward the concept of Form-Based zoning which would be a complete departure from the current system of land use controls.

They are still in the very early stages of their comprehensive re-write for the City’s Zoning, Site Plan and Subdivision Ordinances, collectively referred to as a Unified Development Ordinance (UDO). The current Code was first released in 1959, and this re-write is likely to be a once-in-a-generation event that will dictate how development occurs in the City of Raleigh in the foreseeable future.

This seems to be an interesting trend in zoning, and while it is a totally different concept, it can be good to work with for Commercial Real Estate Developers. Through community involvement, the community sets standards for what it wants its physical for to look like. Those forms guide development, rather than strict use provisions which then carry with them typical setbacks, parking requirements, and other stipulations. This approach creates a different arena for developers and owners, but if Commercial Real Estate Brokers and Developers get out in front of it and learn about Form Based Codes and participate, the process may give them plenty of opportunities.

-NC Commercial Source

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Opportunity Knocks at Commercial Real Estate

January 13, 2010 by Rankin Commercial Properties

Opportunity knocks at Commercial Real Estate, but will the banks knock back?

Many contrarian and opportunistic property investors have been building and holding cash for 2010 Commercial Real Estate foreclosures, but the question remains, will the banks unload these assets at discount rates?

The bubble for Commercial Real Estate can be traced back to January / February 2008, months after the Residential Real Estate bubble. By March 2009 both markets were at an all time low.  But many would say Commercial Real Estate vs. Residential Real Estate never had a “bubble” and was simply reacting to the market.

Regardless, the price difference between what a seller is willing to sell for and a buyer willing to buy for are far from reach.  Buyers see the market as a riskier investment and only want to see 10-15% CAP rates.  Sellers are still looking for 7.5-8% Cap rates on the sale.  Banks have mostly been turning a blind eye to technical breaches of loans.  Instead of foreclosing and being forced to take write-downs, they have held nonperforming commercial property loans on their balance sheets, extending deadlines, refinancing debt, or selling the debt to other sources.

Some banks are forcing sales of commercial properties without reclaiming the asset.  A forced sale keeps the owner in the commercial property until the bank sells, and holds the owner accountable for the interest of the loan and remaining balance.

General Growth Properties has been a poster child for commercial real estate refinancing issues over the past two years.  Last year after numerous failed attempts to refinance, General Growth Properties filed for Chapter 13 bankruptcy.  Since filing, General Growth Properties has refinanced half their debt and is expected to exit bankruptcy as an independent company in the first few months of 2010.  Meanwhile, competitors of General Growth have been circling the company trying to acquire its assets either through buying its debt or making offers to purchase the entire company.

New construction of commercial real estate has slowed as rental rates no longer support the prices of new construction

But the outlook for Commercial Real Estate is becoming less grim.  Existing commercial properties are seeing positive absorption helping to improve leasing standards and push the market forward.

Contrarian investors may have missed their opportunity for a steal, and depending on how long they wait might not get a deal at all.  With the banks holding out for better prices, and properties beginning to lease up as the economy recovers, commercial properties could bounce back before any real catastrophic events occur within the industry.

How to handle a Bankrupt Tenant in Commercial Property in North Carolina.

January 12, 2010 by Rankin Commercial Properties

How to handle a Bankrupt Tenant in Commercial Property in North Carolina.

January 12, 2010 – Disclosure: Take this advice to your attorney for your attorney’s opinion.  This article is not intended to offer legal advice.

For a property owner or landlord, bankruptcy usually means one thing, you’re screwed.  Once a tenant files bankruptcy you cannot ask them to pay for rent, require them to pay for rent, evict them, or restrict them from entering the commercial property.

Even though your commercial lease agreement says they have breached the contract, you cannot take action. 

Bankruptcy in today’s society is an excuse to not have to own up to the debts one has accumulated and simply give them up while, in many cases, protecting their assets from liquidation.

Most of the time someone files for bankruptcy they’ll claim virtually no assets.  Yet if they are a tenant in your property, you know they have assets.

I recently had a conversation with a client who was a victim of the Peak Fitness Bankruptcy, a case well known to North Carolina.   Peak decided to do a “midnight run” sending moving trucks in the middle of the night to locations across the state collecting valuable exercise equipment.  Our client met them at the door and somehow managed to save the items for the court, then bought them off the court house steps for $1.00.  Thousands of Dollars worth of equipment for $1.00.  He feels he lucked out. Well, he did.

Bankruptcy cases never favor the landlord.  Secured lenders are paid first, and Landlord’s are paid last.  If you want to move up the chain, the best thing you can do is document the tenants belongings and file a lien on their property when they begin to default.  This way, if they do file for bankruptcy protection, you become the secure debtor of their property.

Most of the time, if a tenant plans to file bankruptcy the landlord does not see it coming.

Residential Real Estate and Commercial Real Estate differ in many ways.  One of those ways is “Self Help Eviction.”  In the state of North Carolina Self Help Evictions are permitted in the commercial property context.  However, even though it is permitted, potential liabilities still exist for a landlord that does not go about it in the correct manner.  The over-riding rule is that a landlord may take certain actions to retake possession from the tenant as long as those actions do not breach the peace. 

Case Example: Spinks v. Taylor, the North Carolina Supreme Court held that “while a landlord is permitted to use peaceful means to reenter and take possession of leased premises subject to forfeiture, he may not do so against the will of the tenant; an objection by the tenant elevates the reentry to a forceful one, and the landlord’s sole lawful recourse at that time is to the courts.”

If a landlord believes it is necessary to secure the leased commercial property in order to protect it from damage, loss of fixtures, etc.  The landlord should chain the doors and post notices of eviction after hours so as to avoid the possibility of being challenged in person by the tenant.  This way their eviction is not a breach of the peace.

In addition, any notices of eviction should provide sufficient contact information for the landlord so that any person who needs access to the building for legitimate reason may reach landlord in a timely fashion.  This latter factor is necessary to avoid incurring any unforeseen liabilities to third parties such as locking up an employee’s heart medication which in turn leads to that person having a heart attack.

Self-Help Eviction is not always the most advisable course of action, it is under certain circumstances legal.  In doing so, the landlord should be able to prove the tenants intent to terminate the lease in bankruptcy, and risk that the tenant may cause harm to the properties fixtures, or other circumstances that clearly show a risk in allowing the tenant to have access to the space.

If a tenant is present and so much as tells the landlord that the tenant is not leaving, then the landlord at that point will have exhausted its legal self-help remedies and must pursue the judicial route.

Remember eviction notices must have a contact number, notice of eviction, and trespass warning.

Finally, consult a bankruptcy attorney before taking ANY action.  Bankruptcy attorneys can give you valuable advice in regards to a tenant’s protection under the code.

Raleigh, NC – Is a Career in the Commercial Real Estate Market a Bust?

October 28, 2009 by Rankin Commercial Properties

Raleigh, NC – Is  a Career in the Commercial Real Estate Market a Bust?

 

I recently read a column on CarolinaNewsWire.com by two brokers from Trademark Properties called “Once Lucrative Commercial Real Estate Market faces 50% Job Cuts Nationally.”

 

The synopsis of the article basically said that according to “some industry experts” 50 percent of the 130,000+/- Commercial Real Estate brokers nationwide will be out of the business by 2011 by “sheer job attrition.”   

 

But is it really job attrition?  When the market was hot in the mid 2000’s closing deals seemed as easy as shooting fish in a barrel.  Rents flew, Cap Rates ran high, and Commercial Real Estate Brokers instinctively flocked like the salmon of Capistrano.  Where they truly Commercial Real Estate career seekers? No. Did they sell a few properties? Yeah.  At the time there wasn’t any other way for them.  It looked like a good opportunity and they took it.  

 

The process was simple, if you list it, they will come.  A broker new their ship had come in when they got their name on their own sign and their own shovel.  But the field of dreams came to an end in 2008 and brokers became adrift in sea of increasing inventory.  

 

Brokers are commissioned based, independent contractors, who are working much, much, harder and earning less money.  The lean times are disheartening and the brokers who once flocked the market are slowly retreating to more stable income jobs.

 

Think of the commercial brokerage career as a lifeboat on the ocean.  Until early last year, a broker’s lifeboat was tethered to a yacht called “The Good Times”, being tugged along on the water without much drama.

 

If you needed food, water, or anything else (like income), you just went to “The Good Times” and grabbed what you needed.

 

Unfortunately, “The Good Times,” similar the Titanic, hit an iceberg and started to take on water and sink early in 2008. Now all those ambitious Commercial Real Estate career seekers are trying to un-tether their life boat before it follows “The Good Times” into the deep blue sea.

 

Sometimes it’s a buyer’s market, sometimes it’s a seller’s market, but it is always a broker’s market.  Looking ahead, this is a great market for Commercial Real Estate Brokers.  Less competition, more cash waiting on the sidelines, and leaner, stronger, tenants.

 

While 2008 seemed relentlessly slow and 2009 has seen the worst of the recession, 2010 is poised to be one of the greatest commercial real estate markets since the late 90’s.  

 

Last night I was speaking with a close friend who had just raised $150 Million in private funding to buy distressed commercial properties across the United States.  In a recent smaller fund, they have made a 30% return monthly by investing in residential real estate. Mean while the big boys, like Simon Property Group, have risen billions of dollars in the past two quarters for “strategic commercial real estate acquisitions.”

 

When will those funds hit the market? Most likely starting in March of 2010.

 

Brokers make their money from commissions.  While the market has been lacking high dollar deals in recent quarters, the volume of smaller transactions has risen tremendously as jobless executives start up consulting practices or purchase franchise rights to retail businesses.   

 

With a surge of start up businesses and decreasing rents, savvy Commercial Real Estate Brokers are still making a good buck.  When the private money comes back to play in 2010, the Commercial Real Estate Market will likely begin to boom again.

 

The overall commercial real estate market has been a major casualty of the recession with values falling as much as 30+% from their peak, and sales down 83% from a year ago (113 Billiion to 9 Billion Nationwide), causing a decrease in broker income and forcing many commercial real estate firms out of business.  

 

GVA Advantis recently closed their Durham office along with 16 others in the Southeast.

 

But, the gap between US commercial property buyers and property sellers is narrowing, indicating the shattered market is closer to beginning a path to recovery.

 

The last two quarters have seen a slight improvement in transactions. Credible buyers are appearing and bidding on assets. Previous Property Investors who were showing up to bid weren’t credible and  were often unable to close their financing. Current Investors fall into the institutional category and are well capitalized to close large Commercial Real Estate transactions.
But prices are not improving and values have fallen over 30% from their peak prices reached in 2007.

 

Other sellers also are getting closer but have not yet embraced the new price reality and sales are being discussed but not done at a level that can clearly indicate market prices.  Investors understand that’s where the market is headed and yet transaction additivity remains extraordinarily low.
Commercial real estate sales worldwide in the second quarter were down some 67% from a year earlier, with US volume suffering more, down 83%.

 

The correction in the commercial real estate market, is going to be painful for a lot of people, particularly those who bought their commercial properties using considerable amounts of debt financing.

 

Commercial Real Estate remains edgy from current market operating conditions: limited capital, extremely tighter underwriting, shrinking net operating incomes, shrinking space demand and declining property values.

 

It is apparent that the “Great Gatsby Era” of Commercial Real Estate has come to an end following downward spiral of unraveling residential real estate portfolios which spread rapidly into commercial portfolios by the end of 2008 and beginning of 2009.

 

 For commercial real estate companies today, that means leaner and more efficient operations and more focus on tenant retention rather than tenant attraction.

 

Rankin Commercial Properties was formed as a Full Service Commercial Real Estate Firm in order to help “lean down” on operating costs for commercial property owners in North Carolina.  The company offers in house cleaning and janitorial, landscaping, maintenance, construction, and facilities services in combination with the traditional property management and brokerage services.  In doing so, Rankin Commercial Properties can shore up expenses, spread the overhead costs, and help commercial property landlords save considerable amounts of money.

 

The “Great Gatsby Era” wasn’t just a pecuniary boom for Commercial Real Estate Tycoons; it had also become an economic “cakewalk” for service providers.  Commercial Brokers had the luxury of slamming signs in the ground and collecting phones calls, general contractors added 50-60% profit margins while hiking salaries, and other property service providers enjoyed the constant climb of service fees from nonchalant property managers.

 

Rankin Commercial Properties (RCP) was originated in Late 2007 with the vision of constructing a fully integrated commercial real estate company to offer commercial property owners quality, affordable services accompanied with proactive management and aggressive brokerage services.  RCP materialized a year later with the closing of 4109 Wake Forest Road, its first rehab project.

 

 Today, Rankin Commercial Properties has over 500,000 SF of available property listings.

 

Despite some signs of overall economic stability, commercial real estate is still reeling from the effects of the credit crunch while trying to avoid the recession’s knockout punches. At the same time, they know the cycle will eventually turn will eventually come to an end.

 

We probably have already experienced the worst, but our economy is still falling, at a slower pace. Several leading indicators suggest that we will likely bottom out before the end of this year.

 

Nonetheless, property investors should keep in mind that the economy declining at a slower rate is a lot different from actually beginning to expand. The recovery process could be less robust and take longer than expected.

 

We believe that there will be more distressed assets coming to the market over the next 12 to 18 months, Property Investors with cash can cherry pick the best assets in the most desirable markets.

 

Preferred equity, mezz debt, super senior CMBS and ‘loan-to-own’ are also attractive investments during this period.

 

However, the end isn’t next month, continuations of reductions in job losses through the next two or three quarters, will offer some hope but won’t put a lot of money back in consumer’s hands, and a return to growth is another story, because inflation and rising interest rates resulting from the stimulus is a real threat, and that will hold down spending and hiring.

 

What does all of this mean going forward?

 

First, lenders want more equity in the deals (whether it’s a new loan or a refi). Second, prices have already dropped in most markets to the point where a lot of commercial properties are under water or close to it, which will continue that downward pressure on prices because lenders will be taking back more commercial properties and selling them at a discount to get them off their books and property owners will be selling them at a discount to avoid going back to investors to raise additional capital for a refinance.

 

 Commercial properties aren’t losing tenants as fast as people think, at least not in Raleigh, North CarolinaCommercial Real Estate Brokers simply aren’t able to do deals because they haven’t been properly trained to prospect for tenants.  Proper marketing techniques, cold calling, and sincere drive will keep properties leased.

 

The disconnect between what commercial property sellers want and what commercial property buyers are willing to pay is clearly pointed out by looking at sales volumes around the country-anemic compared to any “normal” year.

 

Because of the pricing disconnect between buyers and sellers of commercial real estate, many in the industry are mining the books of lenders looking for nonperforming loans, foreclosed properties and pending loan maturities as a place to extract current opportunities.

 

We still have commercial property owners trying to sell properties at 7-8% CAP rates.  It’s not happening.  Then they try to reduce their costs to raise the CAP rate by firing their service providers and doing it themselves.  The problem there is that the property then goes south because tenants see the lost property services and could care less about the landlords struggles. 
With falling NOIs and corresponding lower property asset values, commercial real estate owners will be hard pressed to refinance and retain property ownership of their leveraged assets over the next 12 to 24 months. As banks begin or continue to foreclose on commercial buildings, many of these institutions will be forced to make hard decisions about their move-forward strategy for these assets. As the economy begins to recover, well capitalized commercial real estate buyers will have many assets to choose from, both distressed and non-distressed, since, as we’ve heard so many times recently, if you have money, you won’t find a better time to be a buyer.

 

Based on conversations and business meetings, banks are getting into the commercial real estate business. If a workout cannot be accomplished on a default, banks will foreclose.

 

REO (real estate owned) opportunities are rising. It will be similar to the RTC days. People chasing notes are the first wave of property investors stepping in. Purchasing notes have advantages but some serious disadvantages. What needs to happen is the foreclosures to happen expediently with the understanding that lenders are going to off load the commercial properties just as fast.

 

No commercial real estate investor is going to accept the prices that banks are trying to dispose of their assets because equity is expensive and the rules of the game are still changing. Immediate opportunities will continue to be those where property investors are buying the notes at less than par (if the banks get rid of them at that price) with the expectation that these troubled loans are really REO opportunities.
CMBS/Commercial lenders and their servicing agents are going to be drinking from a fire hose shortly as we are seeing an increasingly large waive of troubled assets enter foreclosure. For  the next 18 to 24 months, we are in for a rough ride downward as commercial real estate lenders continue to foreclose these troubled assets and more importantly sell them off at very low price-per-square-foot prices.

 

Commercial Property Owners need to position themselves as best they can to compete with the REO product in terms of rental rates and concessions; which if they are underwater is going to be tough to do.

 

The commercial real estate industry as a whole will shift from transaction oriented to property management oriented. Returns from commercial real estate are made up of income from cash flows (NOI) and appreciation; traditionally 70% from cash flows and 30% from appreciation. The past five years or so have seen the majority of returns stem from appreciation due to cap rate compression not NOI growth. Now that cap rates are headed back up and probably will not return to historic lows in the next five years, returns have shifted back to cash flows as the main source. Real estate companies that have a core property management focus will be well poised to assist property owners as they seek ways to increase their NOI by filling vacancies, increasing rents and reducing operating costs.

 

Traditional transaction brokerage companies will survive, but on much less volume. Further, companies that can show a strong track record of property management, leasing and disposition work will be well suited to partner with commercial lenders who are forced to hire “work-out” firms to help delinquent sponsors that lack these basic skills.

 

The real estate industry is not in transition from one cycle to the next, it is undergoing a major transformation that requires new strategies, new business models, new business practices and new systems. There are many positive long-term trends and opportunities, however, getting there requires vision, leadership, capital and a knowledge- and customer-centric focus. Some of the areas of opportunity include, but are not limited to: energy; waste management; healthcare; data storage; government; R&D; trade; pharmaceuticals; corporate campuses; defense and security; high tech; green industries; FIRE; back office services; and infrastructure.
Commercial Real Estate Companies will have to become leaner and more efficient. It’s a well known fact that many large commercial brokerages have not only let go their lower performing sales people, but more importantly a lot of the staff that supported those people. The opportunities coming out of the recession will in part be related to the accumulated market knowledge and more and stronger relationships that the survivors gained in the downtime, which only full-time immersion in the business can provide. Bad times can be a great opportunity to sharpen skills, take courses, clear your desk and your mind, refine marketing tools and techniques, and allow time to plan new strategies and tactics, some longer range planning than we are usually able to do during the busy times.

 

Rankin Commercial Properties is a leaner, more efficient, boutique firm in Raleigh North Carolina.  For more information on Rankin Commercial Properties visit www.rankincommercialproperties.com .

 

Rankin Commercial Properties (RCP) is a fully integrated Commercial Real Estate Company, “built-to-suit” customers and clients, with exceptional commercial real estate products and services.  The mission of Rankin Commercial Properties is:

 

“To establish Rankin Commercial Properties as North Carolina’s Premier Commercial Real Estate Firm through systematic team work, proficiency, integrity, and a sincere desire to achieve success and improve the overall vitality of the communities and environments in which we do business.”  

 

At Rankin Commercial Properties, we realize that in tough markets, all bets are off.  What used to work when riding along “The Good Times” doesn’t necessarily work anymore.

We tell our commercial brokers to think of their career as their life boat.  How will that life boat not sink with “The Good Times?”

 

· Identify your destination and chart a course from where you are to where you’re going

· Detect storm clouds in the far distance and forecast the on-route weather

· Plot course changes to avoid the storm

· Continuously adjust the power settings and headings to steer your boat.

 

Becoming nimble hinges on a Broker’s ability to:

 

  1. Quickly consider several inputs from the environment (markets, buyers, sellers, available financing, government action, etc.), and
  2. Make several simultaneous changes to the way you run your business
  3. Forecast and monitor the results of these changes on your entire business (sales pipeline, margins, income ratios, etc.) and repeat steps 1-2 with the necessary adjustments.

 

That is what having efficient systems gives Rankin Commercial Properties.  And efficient systems are what make our brokers nimble.

 

Proficiency is literally Rankin Commercial Properties knack to create, maintain balance, and improve in all areas of our Broker’s careers.

 

It’s not just about our brokers business skills.

 

To be truly proficient, brokers must continuously focus on all these areas:

· Personal relationships (friends, family, spouse, children, etc.)

· Professional relationships (co-workers, employees, partners, etc.)

· Health and vitality (including spiritual)

· Personal finances

· Personal growth and development (including life skills like time management)

· Business skills (including networking, sales skills, leadership, etc.)

 

As the credit crunch squeezes the sleeper-hold on the commercial real estate market, thousands of brokers are struggling to stay in business… and thousands have already called it quits.

 

But what if you’re somewhere in between doing well and calling it quits?  What if you have a couple of months of reserves and the prospects of closing a deal are not good before you run out of cash?

 

Should you take a side job to support yourself while commercial real estate makes a comeback?

After all, what do you have to lose?  The answer is everything

 

There is one immutable law when it comes to success in anything, including commercial real estate brokerage:  you will only make it if you’re 100% committed to the outcome.

 

You’re not cut out for commercial real estate brokerage — or any other work that rewards people for their results – if your not willing to put in 100% effort.

Commercial real estate brokerage is not for the faint of heart… it’s not for quitters… it’s not for sheep.  Anyone who has made it in this industry can tell you that successful brokers do not even consider failure as an option.

 

Successful commercial real estate brokers burn their ships when they get to the enemy’s shore. It’s success or nothing!

 

Desire is the first step to success. Commercial Real Estate Brokers must commit all their resources towards achieving their goals to be successful.  At Rankin Commercial Properties, our brokers are constantly driven to increase their desire to do more. 

 

A lack of integrity is usually the shortfall for most Commercial Real Estate Brokers.  Integrity is a brokers ability to pull everything together and make it happen regardless of the circumstances.

 

All the talent, technical know-how, commercial broker training, and whatever else you can think of is not going to make you successful if you: Can’t connect with people and build trust. Are out of touch with reality. Never finish. Never embrace the negative. Are not oriented towards perpetual improvements. Can’t look beyond the obvious.

 

Unfortunately Commercial Real Estate Firms do not build integrity, desire, or character into their Brokerage Training Platforms.  Rankin Commercial Properties does.

 

For more information on becoming a Successful Commercial Real Estate Broker, visit Michael Moshiri’s the Succesure.com.  Michael Moshiri’s Commercial Real Estate Training platform is one of the most successful platforms in the industry, a sure thing to be Succesure.

 

In terms of positioning for recovery, the big issue today is people making hard decisions to cut muscle (the fat has long since been cut), and not knowing when/where that muscle will be necessary in the future. The emergence of commercial real estate boutiques from all of those who have gone out to start their own firms will be interesting. Some will be very creative/successful doing interesting things.

 

The industry is also optimistic in office leasing. There is always a need, and the number of businesses far outweigh retail operators and landlords. During the next two to three years, commercial real estate companies that are faring well, comparatively, are going to be able to take advantage of the drastic cuts in office rents, and increases in landlord incentives. Over the next 12 months, landlords are going to realize that anything resembling the $200/PSF era of the 2006/2007 leasing bubble will not be able to compete in the new economy. The supply and demand rules are in complete effect, and with supply at its current levels landlords are going to have to adjust. If they aren’t able to adjust (because of their break-even point) they are probably going to be in distress. Which then brings us back to bank foreclosures, and the need for everyone to face reality.

 

There will certainly be pain to endure on the part of landlords, as many markets have seen rental rates start to soften and concessions have increased significantly. As loans mature and landlords look to restructure or renew their debt, many will face difficulties with higher vacancy rates and stagnant (if not decreased) base rental rates on their rent rolls. It seems that those companies with financial strength and long term perspectives would be wise to negotiate (or renegotiate) long term leases right now for those corporate locations that are deemed to be stable in the coming years. The company with long range strategic planning and the ability to make decisions will create tremendous value in the coming years as a result of transactions with excellent economics right now. With that being said, for branches or offices with uncertain futures, it makes sense to negotiate short-term renewals while ensuring for maximum protection and flexibility in the lease document.

 

Contact:
Charles Rankin, President
Rankin Commercial Properties
800-737-9632
http://www.rankincommercialproperties.com

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Marketing Commercial Real Estate For Sale and Commercial Real Estate for Lease

October 27, 2009 by Rankin Commercial Properties

Rankin Commercial Properties:

Rankin Commercial Properties works with commercial real estate buyers, sellers, landlords and tenants to assist in negotiating the sale, purchase, exchange or rental of North Carolina commercial real estate.

Tenants come to Rankin Commercial Properties with an idea of how much commercial space they need to start a business. They sign an agreement so Rankin Commercial Properties can act on their behalf to negotiate terms of the lease, sale, or purchase.

Rankin Commercial Properties works with landlords and building owners to help them rent their vacant commercial properties. Rankin Commercial Properties uses multiple computerized listings of available properties in the area to aid in narrowing the search for the perfect property.

Commercial Real Estate and the Internet Revolution:

When Rankin Commercial Properties lists a property, they list it where, anyone looking for property will see it.

Rankin Commercial Properties sees the future of Commercial Property Sales in the internet.  They focus on listing properties and advertising properties in multiple portals so anyone searching for particular commercial space will come across their property listings.

“95% of all tenants and purchasers of Commercial Real Estate search the internet for properties before contacting a commercial real estate broker, of those 90%, 25% will never contact a broker” explains Charles Rankin, President of Rankin Commercial Properties.

Property searchers have the world at their finger tips.  Hundreds of listings can be found online via sites such as Loopnet, Costar, CPE, etc.  However, most viewers can only see 25% of the available properties on the market.

Commercial Real Estate Marketing Issues:

Buyer Representation and Tenant Representation Services started as a means for businesses and investors to find available properties in the market.  Yet nearly 25% of business owners and commercial real estate investors now use the internet as their sole means for finding opportunities.  While using the internet to find commercial properties is only 25-45% effective, it is quickly growing as the most popular way to search for commercial properties.

Property Owners and Landlords are also beginning to take advantage of the internet for marketing their own commercial properties.  While street signs are still one of the most effective means of property marketing, the internet is the largest source of information for Commercial Real Estate Brokers and the general public.  The problem is, most of the time a landlord or property owner lists a commercial property online without the assistance of a Commercial Real Estate Broker, they effectively miss out on 45-65% of the market searching for their commercial property listing.  

Commercial Real Estate Agents have often been seen as saviors and slackers.  Some are terrific at what they do, others are bottom feeders who are only successful when the market is so hot, its like shooting fish in a barrel with a shotgun.

National Franchise Brokerages are often chosen over local firms because they are “BIG NAMED” and therefore must have the capabilities to lease commercial real estate or sell commercial real estate better and faster than the local boutique brokerage shops.  Yet the truth is, it is just a name, another franchise purchased by a local commercial real estate firm.  Their capabilities are no more than those of a local boutique firm.  

Most Commercial Real Estate Brokers underperform due to a lack of time and organization.  Most commercial property brokers have less than 1 to 2 hours per week to work on each of their listings. It is impossible for them to correctly market their available commercial property listings in that time frame.

Many inexperienced commercial property searches or sellers choose to work with a friend or colleague in Residential Real Estate for their Commercial Real Estate needs. Commercial and residential real estate are two completely different disciplines from the clients, property types, contracts and documents.

Innovative Commercial Property Marketing:

Rankin Commercial Properties uses multiple avenues in marketing their commercial property listings. Probably the most effective and efficient of these is a Direct Marketing Model.

Every commercial property listing has a best use or niche. Even office buildings, as some would call a commodity, serve a general purpose.  When marketing a commercial property, Rankin Commercial Properties first determines the highest and best user for the available commercial space.

The company then creates a prospect list from that information, deviating slightly left and right to expand the realm of possible users. Rankin Commercial Properties refers to this process as Alternative and Strategic Leasing.  Alternative being the deviated prospects that may be a good fit but not the norm for the property.  Strategic being those potential tenants who are the ideal fit for the available commercial property.

Rankin Commercial Properties then creates a direct marketing campaign uniquely designed to around that particular commercial property.  While every commercial property is marketed in many similar ways, the direct marketing campaign must be unique and require deliberate execution.

The direct marketing campaign is then implemented via a variety of media sources Print, Internet, Word of Mouth, Press, Broker Networks, Cold Calls, Mass Mailings, etc.

The Rankin Commercial Properties management and commercial real estate brokerage teams then meet weekly to discuss all property listings, their unique marketing campaigns, and hold brainstorming sessions to determine additional ways to implement the success of the program.

Weekly meetings and brainstorming sessions also provide an opportunity to make sure all commercial properties are being marketed weekly, brokers are not over loaded, and the proper allocation of efforts and time are going into each commercial property listing.

Most commercial real estate brokers fail at sales because they don’t have enough time to allocate to their commercial property listingsRankin Commercial Properties grows its commercial real estate brokerage team with its commercial real estate listings

Rankin Commercial Properties is a Commercial Real Estate firm with offices in Raleigh and offices in Cary, NC.

Time to Invest in Commercial Real Estate Lending

October 27, 2009 by Rankin Commercial Properties

Unemployment is showing no signs of improving, foreclosures keep piling up and stresses are just now emerging in the commercial real estate sector.

It’s just too good to be true! Finally, an ideal time to lend money to real-estate developers. Why?

Real Estate Equity Investors can take advantage of high spreads and lack of competition from conventional lenders such as banks that still are licking their real-estate wounds.

There is a significant liquidity calamity. The banks and financial institutions are being conservative about lending new money, which history shows as the wrong option.

Now is the best time to be a lender. With the highest quality assets and highest spreads. Assets have been written down to realistic levels and there is a low potential for further write downs, and you sense the trough.

 Big players such as Morgan Stanley, Goldman Sachs, Merrill Lynch are out of the business for the moment.

The fear is that we are going to do very well in the initial years then all the banks will be healed and the spreads will come in and competition will grow. Recovery comes a year before employment recovers. By the time unemployment improves, it’s too late (to invest). There has never been an economic recovery that hasn’t been accompanied by a proliferation of real estate sales.