ThanksGiving In The Commercial Real Estate Industry

It’s Thanksgiving time!
A time for giving thanks for the blessings in our lives. Since this is a Commercial Real Estate (CRE) blog, I will focus my thanks on that and save the personal stuff for the dinner table Thursday night. So let me share a little bit of what I’m thankful for in the CRE industry as if you own or occupy space, this relates to you too.

I’m thankful for:

• Making it through the 2008 banking meltdown.
o I compare 2008 to someone shaking up a snow globe on the financial markets. That in turn effected every aspect of real estate. Lenders, owners & brokers couldn’t tell you which direction was up and everything froze.

• Surviving the 2009 market correction and bottoming out of CRE values.
o Values dropped like a stone all year as capital for purchases was/is non-existent and job losses mounted at a record pace. Some positive economic indicators are starting to spike which shows us that we have hopefully bottomed out.

• A 2010 recovery.
o Although it will be a long slow road, it is already starting to happen. Small businesses are starting to show signs of life & banks are slowly starting to sell off their toxic assets. With bad debt gone, they should be able to start lending again. Time heals all wounds.

• Our team of Advisors & staff at SVN/Paradigm.
o Like Thanksgiving Day we will all likely thank our family for supporting us through the good times and the not so good times. If any of you reading this have ever been to an SVN function or even to our office, you’ll see that we are a (growing) family. I am blessed to be surrounded by such a professional, well educated, morally centric and caring group of people.

In closing, I would like to also say thank you to our clients, colleagues, friends and a special thank you to OUR TROOPS who continue to fight for our liberties everyday.

Happy Thanksgiving, Merry Christmas & have a Happy New Year,

Miguel de Arcos
Managing Director

The Banking Industry Fiasco

Dear Colleagues,

For those of you that own commercial or residential property, the banking industry fiasco has a direct relationship on your property’s value. Their strategy with toxic debts has led to record bank closures and in turn has tightened credit dramatically. If consumers can not get loans, they can not buy your property and values are pushed down. Below is some information about the current state of the banking industry, you can draw your own conclusions….

“Reports indicate that 2009 will see one of the highest numbers of bank closings in US history. According to reports the hundredth bank will be closed and taken over by the FDIC next weekend. Just about a week ago the FDIC closed the ninety-ninth bank for the year. 2009 may not be as bad as previous years, in history, but according to the FDIC, currently there are 416 banks in its “at risk” category.

This indicates that there are many more bank failures to come in the months ahead. FDIC does not indicate which banks are in this category, to curb the mass withdrawal of money from the banks at risk of failures. Many bank closings have been caused by the real estate boom of the mid-2000s. It is clear that many banks are still at risk and will continue to be at risk of failure for some time.”
Maulik Shah, Sperry Van Ness | Better Capital Partners

Best Regards,

Miguel de Arcos
Managing Director

Experts: Lending Hampering Industry Recovery

Experts: Lending Hampering Industry's Recovery.

No commercial real estate crash ahead, Zell says :: CHICAGO SUN-TIMES :: Business

No commercial real estate crash ahead, Zell says :: CHICAGO SUN-TIMES :: Business.

Lease Accounting Changes – be(a)ware!

Lease Accounting Changes – be(a)ware!
Did you know that FASB (financial accounting standards board) and its international equivalent (IASB), are considering major changes to the way corporations record operating leases on their books? If the proposed modifications are codified, all corporations will be forced to move real estate (and equipment) leases from “off balance sheet” on to their balance sheets. This has huge implications on the profitability, and hence the growth potential, for every public and private company that currently occupies their real estate using leases.

It is estimated that if all corporations are required to capitalize their leases, the sum total could be well in excess of $1.3 Trillion (a 2005 figure) and of that amount nearly $1 Trillion would be real estate leases.

It has been suggested that the changes are intended to improve the transparency, credibility and usefulness of lease accounting. Like with most things there is undoubtedly some truth in this reasoning, but I have my own theory as to what is may be driving the change…………a potential for increased tax revenue.

Currently an operating lease is 100% deductible against corporate earnings. If instead, the lease is moved on to the balance sheet and a portion of it is viewed as an asset it would be fair to assume that it increases the potential tax obligation of the corporation (or private owner).

Regardless of the ultimate motivation of those behind this proposed change, it is important that commercial real estate advisors make sure that their clients are fully aware of this development, and if possible, take the opportunity to weigh in on the subject while FASB (and IASB) are still considering the changes.

What Makes a CCIM so Special?

Why select a CCIM professional? Our office proudly carries 3 CCIMs(Ajay Babbar, Wendy Supino and Berlinte Sebali) and a few others currently working towards the designation. An advisor who holds the Certified Commercial Investment Member (CCIM) designation is a recognized expert in the disciplines of commercial and investment real estate. The coursework and requirements needed to fulfill the designation are rigorous and aren’t taken lightly. In fact, this designation is so respected, broker allies also pursue the program, including investment counselors, asset managers, appraisers, developers, attorneys and bankers world wide.

Proficiency In Theory And Practice

A CCIM is an invaluable resource to the commercial real estate owner, investor, and user, and is among an elite corps of more than 9,000 professionals who hold the CCIM designation across North America and more than 30 countries. Nearly 9,000 additional professionals are pursuing the CCIM designation. Since the CCIM program was created in 1969, more than 15,000 commercial real estate professionals earned the designation. CCIM Institute has taught more than 225,000 students since 1969.
Recognized for its preeminence within the industry, the CCIM curriculum represents the core knowledge expected of commercial investment practitioners, regardless of the diversity of specializations within the industry. The CCIM curriculum consists of four core courses that incorporate the essential CCIM skill sets: financial analysis, market analysis, user decision analysis, and investment analysis for commercial investment real estate. Additional curriculum requirements may be completed through CCIM elective courses, transfer credit for graduate education or professional recognition, and qualifying non-CCIM education. Following the course work, candidates must submit a portfolio of closed transactions and/or consultations showing a depth of experience in the commercial investment field. After fulfilling these requirements, candidates must successfully complete a comprehensive examination to earn the CCIM designation. This designation process ensures that CCIMs are proficient not only in theory, but also in practice.

With such a wide range of subjects to be mastered and in a dynamic business such as real estate, the educational process doesn’t end once the designation is earned; there is a strong commitment among CCIMs to continuing education.

Only 6 percent of the estimated 150,000 commercial real estate practitioners nationwide hold the CCIM designation, which reflects not only the caliber of the program, but also why it is one of the most coveted and respected designations in the industry. The CCIM membership network mirrors the increasingly changing nature of the industry and includes brokers, leasing professionals, investment counselors, asset managers, appraisers, corporate real estate executives, property managers, developers, institutional investors, commercial lenders, attorneys, bankers and other allied professionals. Through this business network, CCIM members successfully complete thousands of transactions annually, representing more than $200 billion in value.

Certified Commercial Investment Members are in more marketplaces in North America – 1,000 cities – than all major real estate companies combined. Regions and chapters provide designees and candidates the opportunities to promote business and educational goals through local and regional forums and meetings.

Miguel de Arcos of Lake Mary office with Florida Governor Crist

I had the chance to meet with Governor Crist who agreed that the lifeblood of the economy is small businesses. I shared with him the dilemma that a small business encounters when credit freezes the way it has the past 12 months and how the commercial real estate industry like so many is affected by the credit crunch. I must admit I was impressed that he took the time to listen and discuss the issues small businesses face in this current economy. He committed that he would work hard to ensure that their growth and success is fostered.

A Client’s Recognition

From time to time our client’s reach out to us unsolicited to share a positive experience they had with one of our Advisors. We would like to recognize Advisors Todd Haber and Jeff Henwood by posting the client’s comments below:

1.
“Please forward to whomever the powers that be in your company, my complete satisfaction with my broker, Todd Haber. On every occasion, and every instance, he has gone above and beyond the call of duty and demonstrated absolute professionalism throughout our business relationship. His caliber of professional is hard to come by these days, and I look forward to doing other business with him in the future as well. Thank you, L.R. Brand, M.S., P.T.C.A. Santizo, B.S., M.D.”

2.
Dear Jeff,
I must first convey to you that you are a person of service, and am so pleased to be working with you. you received my email and your execution was better than I have ever received from a broker so far. I commend you on same.
Thank you so much. regards,
Menchie’s Frozen Yogurt
Amit Kleinberger
CEO

3.
Dear Jeff,
I am honored to have met you, and think very highly of your business etiquette.
As CEO of Menchies, I commend you for doing a fantastic Job. THANK YOU.
Amit Kleinberger
Chief Executive Officer

Thank you Todd and Jeff for representing your client’s interests so well.

Tenants Are Back: Good Indicator The Economy Is Improving?

My office had 8 closings in September. All were transactions where our Advisors represented Tenants. Is this a sign the economy is improving?

As I examine the deals, all but one would be classified as small businesses and entrepreneurs occupying space under 10,000sf. The outlier was a Public company exercising a blend and extend(reduce the rate and extend the term significantly) of 46,000sf+. Last months stats were similar.

This is the sign I have been waiting for… I believe that the small business owners will pull us out of the slumping economy through innovation and their ability to be more nimble with the ebbs and flows of the market. When one large company crashes down, several entrepreneurs pop up in its place to plug the gaps in demand. Think about it this way, a small business that is in a growth pattern, producing jobs and demand for a product, will get bought up by a large conglomerate. Without small companies creating jobs and incomes, the large ones won’t have the fuel to grow and create jobs either. While large companies are still trying to get their overhead under control(layoffs, cutting inventory, reducing rent), small businesses are ramping up new product lines and hiring more strategically. The government should be spending more time with the millions of small business owners and less worrying about the next large firm to collapse.

If the small business movement is in fact going to pull us out of the economic mess like it did after the Great Depression, our government needs to cultivate their actions and job creation, not stifle it. Let the entrepreneurs save us once again and put America back to work by saying no to over regulation and taxation of small businesses.

Delay and Pray

So far, banks in general have been reluctant to take losses on their commercial books. This “delay and pray” strategy is preventing most banks from issuing new loans as they prepare their balance sheets for potential future losses, experts say. “Bank…s will eventually sell as they cannot extend into perpetuity and the chances that the market will rebound to their highs are unlikely anytime soon,” said Bart Steinfeld with JLL.