For the past 5 years I have been forging a career as a commercial real estate agent. In that time I have learned that my services are invaluable to business owners and commercial property owners. Here’s a list I’ve compiled of reasons to work with a competent agent in your market, whether you’re looking to move your business, invest in commercial real estate, or list your property for sale or lease:
SAVE TIME: This reason is especially true for the business owner who invariably wears too many hats already. My business clients have enough to do in their day to day to take the time to compile and review listings, call listing agents, schedule and arrange property tours, write LOIs (offers), review city zoning, and stay on top of a lengthy negotiation, among other things. Of course the property owner saves a bundle of time as well. By hiring a commercial real estate agent to handle their sale and lease listings, the property owner is freeing himself of the time it takes to create and update listings on the various commercial real estate listing services, field phone calls and emails from prospective tenants or their agents, show the property, handle a negotiation, and facilitate a closing whether that be preparing and executing a lease document or managing an escrow through its process.
SAVE MONEY: For starters, commercial real estate agents who represent a buyer or a tenant are paid a commission. Generally speaking we do not charge our buyers/tenants a fee; instead we are paid a commission from the landlord.
More importantly, though, commercial real estate agents save our clients money because we have the skills to negotiate the best deal on all parts of the transaction. For instance, recently I negotiated an industrial lease for a client who runs an MMA gym. The asking price on the property was $2/SF/mo. My client wasn’t sure if that was a fair market rent or not, but I knew the landlord was shopping for a sucker. After showing my client some comps, I explained that we should be able to get the lease rate down to at least $1.65/SF. He ended up executing that lease at a $1.50/SF, with 3 months of free rent, and 3 months of early occupancy prior to the lease start date, free of rent, in order to obtain his necessary city permits, which we had already received a verbal approval for. My client was ecstatic with these terms and confided in me that he probably wouldn’t have thought to negotiate those terms on his own.
In regards to a property owner: yes - they would have to pay a commission on the deal, but many commercial property owners do not own property as their sole source of income. As such they are often unaware of market trends and negotiating tactics that an experienced listing agent will be able to recognize during the negotiation process. Commercial real estate agents are also knowledgeable of the smaller nuances in a lease that can save a landlord thousands of dollars over the life of lease. As an example, a property owner who I recently acquired as a client was unaware that tenants can be made responsible for the repair and maintenance of many utility systems which already exist on the property, ie plumbing, electrical, and HVAC. We are currently working on including this new verbiage in all of his lease renewals and new leases. Over the next 10 years this could save my client an estimated $50,000 (on the conservative side).
LISTING ACCESS: Most of my clients are not aware that
commercial real estate listings are not as centralized as they are in
residential real estate. Because there are so many different property
and transactions types, commercial real estate has several different
listing platforms, and only a couple of them are open to the public.
This is not the case with residential real estate. In residential
transactions, buyers and sellers have access to all of the data stored
in the MLS. You don’t need a residential agent to do the searching for
you because you can find all of the same information on your own. This
forces commercial real estate agents to pay a lot of money to gain
access to the most up to date and relevant information available. As
such, if you don’t hire a commercial real estate agent you will not have
access to a majority of the market’s available properties that fit your
requirement.
MARKET KNOWLEDGE & SPECIALIZATION: Commercial real estate agents have a market knowledge that our clients, both tenants/buyers and landlords/sellers, don’t have. After all - its our job and like any profession we need to stay on top of the trends in our field. Commercial agents perform much market analysis both on paper and in the field. It is this constant barrage of analysis which we carry with us that allows us to keep up with supply and demand cycles in our geographic regions. Because of this market knowledge we are able to quickly and inherently know if a listing is priced fairly or if a prospective tenant/buyer is worthwhile or not. We are well read and discussed on the latest market trends which allows our clients the peace of mind to know that we are pricing them as intelligently and as up to date as possible. What was fair market 6 months ago has the potentiality of not being fair market today.
Regarding specialization, when you’re shopping for a commercial real estate agent, its important to look for an agent who is experienced in the nuances of the specific geographic market and property type you are looking for. Most commercial agents specialize in a certain sector of commercial real estate, i.e. retail, industrial, or office. If you choose a commercial real estate agent who specializes in Los Angeles office space when you are looking for an industrial unit in Orange County, then you may not be getting the best “cluck for your buck” as my high school economics teacher would say. The agent will undoubtedly do a good job locating the property, negotiating the deal, and facilitating the close, but it may not be the absolute best you could find.
CONTACTS: Commercial real estate agents are well connected individuals. We are constantly in touch with our market’s movers and shakers: business owners, investors, property owners, our colleagues, politicians, etc. We are always networking and this wealth of contacts is a huge benefit to our clients. One of the tools a commercial real estate agent will use on a transaction is to email his/her contacts to let the industry know about a deal we are working on. In doing so, we are able to 1) gain access to listings that may not be available yet, or may not be listed, 2) let our former buyers/tenants know of a sale or lease listing that we have just acquired, 3) contact local politicians regarding zoning regulations for a specific property, and 4) help our clients locate the funding they need to finalize a deal. These connections close deals every day in commercial real estate; they are an incredible marketing tool that every good agent utilizes to their fullest.
So there you have it. 5 great reasons to hire an experienced commercial real estate agent in your region. Let us take care of our business while you tend to yours. After all, there are only so many hours in a day, and we take our business as seriously as you take yours.
And BTW - I’m an Orange County, CA commercial real estate agent who specializes in retail, industrial, and office requirements under 30,000 SF.
I look forward to your comments.
Serving Orange County Businesses Since 2007
Thursday, March 15, 2012
Wednesday, February 15, 2012
ECONOMIC INDICATORS BATTLE WHILE INVESTORS CASH IN
Trying to decipher economic real estate indicators these days is like watching the fifth set of a grand slam tennis final. On one side of the court we have Positive-Indicator, a once popular star who in recent years past was applauded for high rents and exploding property values. On the other side of the court we are faced with Negative-Indicator, a raw up-and-comer who’s shabby appearance over the past 4 years has crippled governments and eviscerated cash-flows. The two fierce competitors have battled tirelessly to this point in the match. Positive-Indicator easily waltzed through the first two sets as if Negative-Indicator wasn't even there. Then Negative-Indicator woke up and pounded his way to resounding victories in sets 3 and 4. Now, here we are in the 5th set of a grueling match and its either indicator's game; even the seasoned spectator has difficulty deciphering the momentum. Each time an argument is seemingly won, the debate gets served again for another edge-of-your-seat rally. What does this all mean? And what do we do with such conflicting information?
As an example of the confusion, I point to the office sector of commercial real estate. On January 25th, CoStar published two articles: "Landlords Poised To Regain Upper Hand in Recovering Office Market" and "Renew Or Relocate? Incumbent Landlords Willing To Sweeten The Pot". Just on their faces, these articles wreak of opposing theories. Midway through the former article Positive-Indicator serves a powerful, arching argument destined for an easy ace:
So which is it? Is it a good time for the office market, or is it a bad time for the office market. Well the truth is, its a little of both; it just depends on which side of the fence you're on and how you play your cards. For instance, office landlords have seemingly stopped experiencing rising vacancies, however they're taking it in the shorts on income, cash-expenditures, and property value. On the other hand, tenants are seeing an ability to keep their businesses afloat with lower overhead offered through decreased rents and landlord concessions. The real benefactors, however, are the investors who are lining up like wolves at the fire exit of a sheep convention that just caught fire.
A bit further down in the former article, we reach a header that reads, "Concessions Starting to Disappear"It starts as such:
Perhaps my favorite example though of the conflicting indicators is this article on DSNews.com: Housing Crisis To End In 2012 As Banks Loosen Credit Standards. Let me know if you find it as hilarious as I do.
Cheers!!
As an example of the confusion, I point to the office sector of commercial real estate. On January 25th, CoStar published two articles: "Landlords Poised To Regain Upper Hand in Recovering Office Market" and "Renew Or Relocate? Incumbent Landlords Willing To Sweeten The Pot". Just on their faces, these articles wreak of opposing theories. Midway through the former article Positive-Indicator serves a powerful, arching argument destined for an easy ace:
"'Coupled with low interest rates, companies are in a position to invest aggressively in new facilities and equipment. From a CRE perspective, Corporate America is well positioned to invest in their businesses, plant facilities and equipment,' (CoStar CEO Andrew) Florance added.But Negative-Indicator miraculously returns the shot with a backhand down the line, in the next paragraph:
"Challenges remain, including relatively weak consumer confidence, continued high unemployment, a record federal budget deficit and economic upheaval in Europe. Occupancy recovery varies widely between metros, with "have" markets such as supply-constrained New York City showing 7.4% vacancy and housing bust "have-nots" like Phoenix lingering at a stubbornly high 20.7%"Point goes to Negative-Indicator on this serve. However, Positive-Indicator is still serving and in the next paragraph he delivers another whopper:
"In the fourth quarter, CoStar recorded 18 million feet of net absorption, which drives occupancy rates and other leasing fundamentals, and a total of 49 million square feet for the year, doubling 2010’s absorption."Negative-Indicator weakly returns the serve:
"'Despite rising concerns about the darkening economic picture that started last spring and continued through the year,...But before the sentence is finished, Positive-Indicator slams a volley past his opponent for the point:
"...absorption rose sharply in the second half of 2011, and smaller tenants, the lifeblood of the office sector, are back.' said (Walter) Page (director of research for Property and Portfolio Research, CoStar’s analytics and forecasting divisionPage), noting that companies are leasing space."Phew! What a couple of points that was, and that was just a few paragraphs of one article. In the latter article published the same day, Negative-Indicator takes the offensive and its clear he has the lion’s share of momentum in his corner. From the get-go Negative-Indicator serves up:
"...typical of.... lease renewal decisions in the current market, landlords have a vested interest in holding onto quality paying tenants, or risk loss of income, more scrutiny from current and potential lenders, and face higher marketing costs to re-fill the space"Playing from his heals, Positive-Indicator attempts to return the serve:
"Tenants, too, have a vested interested in staying put. Tenants face a disruption in their business and significant relocation and operational costs if they leave a good location."But Negative-Indicator is too much for him on this point as he scores with:
"But the market reality is that there are good deals to be had out there as vacancies remain stubbornly high and money for refinancing commercial properties remains hard to come by. As a result, tenants are clearly making the decision to at least shop around."Sensing his opponent is weakened, Negative-Indicator adds insult to injury by serving a powerful ace in the next paragraph:
"'To compete with the market, landlords are offering up free rent to keep tenants, somewhere around one month per year of the lease, depending on the situation and other terms. Also, improvement money is being spent to upgrade finishes and make spaces more functional on extensions. Usually $10 to $20/square foot for 3- to 5-year deals and some additional credits or rent reductions if the space can be used as is.' (principal of RadatzWalsh Inc, Ryan) Walsh, said."The article continues on in Negative-Indicators favor as market analysts and experienced brokers drudge on about the gloom and doom for office landlords. Here's yet another unchallenged ace later in the same article from Negative-Indicator:
"'The smart landlords are offering concessions to maintain occupancy, so the tenant may renew but typically on much better terms than they originally thought. It's case by case. Some clients are reducing their rent by 20% and combined with space give back sometimes 40%+ reduction.' said Michael McKeever, senior vice president, UGL Services Los Angeles."
So which is it? Is it a good time for the office market, or is it a bad time for the office market. Well the truth is, its a little of both; it just depends on which side of the fence you're on and how you play your cards. For instance, office landlords have seemingly stopped experiencing rising vacancies, however they're taking it in the shorts on income, cash-expenditures, and property value. On the other hand, tenants are seeing an ability to keep their businesses afloat with lower overhead offered through decreased rents and landlord concessions. The real benefactors, however, are the investors who are lining up like wolves at the fire exit of a sheep convention that just caught fire.
A bit further down in the former article, we reach a header that reads, "Concessions Starting to Disappear"It starts as such:
"With improving occupancy and little new supply, concessions like free rent and tenant improvements are burning off in some markets and overall, the long downward slide in average office rents has likely bottomed.Did you catch that? "With little new supply" and "With office construction at an all-time low". That means that builders aren't building. Which means that the reason we're seeing positive net absorption is because there's no new space coming on the market. So although the numbers are accurate and the positive indicators are there, the big reason for their existence isn't necessarily because companies are opening up all over the place, its primarily because the market has boiled down to its core. And that's a good thing really. This will allow the market to solidify as it cools off, and in doing so cash-rich investors will have a huge opportunity over the next few years to gobble up properties on the cheap before rents and values begin to rise. So for the intelligent acquisition team, this is the time to strike while the market’s hot. This is the time they've been waiting for. The sharks smell blood and they're all swimming after distressed landlords who got in over their heads.
CoStar sees significant upside in office rents, which are currently 11% below their long-term trend, Page said. With office construction at an all-time low, rents will rise and are expected to reach their long-term average between 2015 and 2017.
“Office sales increased steadily through 2011 over the previous year as investors sought to get ahead of the curve, with investor interest spreading beyond the safer well-leased investment-grade buildings in top-tier markets and into smaller properties and second-tier markets...”
Perhaps my favorite example though of the conflicting indicators is this article on DSNews.com: Housing Crisis To End In 2012 As Banks Loosen Credit Standards. Let me know if you find it as hilarious as I do.
Cheers!!
Friday, February 3, 2012
16k SF Warehouse - 220 W Central Ave, Santa Ana
This warehouse is approximately 16,500 SF. It has plenty of natural light from the East and West facing windows, and an epoxied floor which is in great condition. Unfortunately the warehouse has no sprinklers, but it does have HVAC. The warehouse has two GL rollups at the rear of the building which lead to a 26,000 SF wrap-around, fenced yard which has two wide-entry gates. The office portion of this unit is a bit extensive for Premium Finance's use, but the entry gives a great first impression and the unit is move-in ready.
Friday, January 20, 2012
Industrial Real Estate: Turning The Corner In Costa Mesa
In my experiences as a tenant representative in the Orange County, CA commercial real estate market, I have seen some surprising trends in the last 6 months, one of which being the increased demand and occupancy levels of mid-sized industrial properties (10,000-30,000 SF). As an example, let me share a current experience with you:
A client of mine is looking to expand his used car sales business. 2 1/2 years ago Barbazza Real Estate found him his current location in a quasi-industrial/quasi-retail location on a prominent street on Costa Mesa's W side. Its a 2,400 SF industrial unit with a +/-4,000 SF enclosed yard. His business has grown substantially enough that last year we found him an overflow lot near his current location while we searched for a better property for his business. My client is looking for a space in Costa Mesa where he can store upwards of 100 automobiles. The business will need a large yard, some decent warehouse space, and a strong curb appeal. This should've been an easy placement, but unfortunately it has proven to be exhausting. Prior to August of last year, there was a plethora of industrial space over 6,000 SF sitting on the market with very little activity; that has changed. Barbazza Real Estate put together what appeared to be a promising search. We toured, and found the perfect property: 16,000 SF on a nice, wide street, with a +/- 30,000 SF enclosed yard off the back; the property was asking $.59/SF. We submitted an offer only to find that the property (which had been available about 9 months at the time) had been in negotiation for a week and already had 2 back up offers. The landlord executed a lease with a competing tenant a few days later. Since that time we have submitted offers on several other spaces only to find the exact same issue: in negotiation with backup offers on the table. Now that some months have passed, all of the properties that would fit my client which were available prior to August have been leased up and we are out in the cold, waiting for something new to come available so we can swoop in on it ASAP.
In my opinion what's happening is that landlord's have finally reduced their asking prices to a level that is attractive to businesses. In a nutshell, the head-butting that tenant prospects and landlords were doing over lease terms has subsided and businesses are willing to take on the risk. Considering the ongoing sluggishness of several sectors of the American economy, the question now is: how well will these businesses fair and will they be able to fulfill their leases? To help answer that question, here's what Grubb and Ellis had to say as quoted by CoStar in this article:
Thoughts?
A client of mine is looking to expand his used car sales business. 2 1/2 years ago Barbazza Real Estate found him his current location in a quasi-industrial/quasi-retail location on a prominent street on Costa Mesa's W side. Its a 2,400 SF industrial unit with a +/-4,000 SF enclosed yard. His business has grown substantially enough that last year we found him an overflow lot near his current location while we searched for a better property for his business. My client is looking for a space in Costa Mesa where he can store upwards of 100 automobiles. The business will need a large yard, some decent warehouse space, and a strong curb appeal. This should've been an easy placement, but unfortunately it has proven to be exhausting. Prior to August of last year, there was a plethora of industrial space over 6,000 SF sitting on the market with very little activity; that has changed. Barbazza Real Estate put together what appeared to be a promising search. We toured, and found the perfect property: 16,000 SF on a nice, wide street, with a +/- 30,000 SF enclosed yard off the back; the property was asking $.59/SF. We submitted an offer only to find that the property (which had been available about 9 months at the time) had been in negotiation for a week and already had 2 back up offers. The landlord executed a lease with a competing tenant a few days later. Since that time we have submitted offers on several other spaces only to find the exact same issue: in negotiation with backup offers on the table. Now that some months have passed, all of the properties that would fit my client which were available prior to August have been leased up and we are out in the cold, waiting for something new to come available so we can swoop in on it ASAP.
In my opinion what's happening is that landlord's have finally reduced their asking prices to a level that is attractive to businesses. In a nutshell, the head-butting that tenant prospects and landlords were doing over lease terms has subsided and businesses are willing to take on the risk. Considering the ongoing sluggishness of several sectors of the American economy, the question now is: how well will these businesses fair and will they be able to fulfill their leases? To help answer that question, here's what Grubb and Ellis had to say as quoted by CoStar in this article:
Grubb & Ellis in its 2012 market forecasts says trends such as homesourcing could begin to have real benefits this year but certainly by 2013.Costa Mesa is an incredible location for many businesses looking to lease all types of commercial real estate and, in my opinion, if mid-sized industrial chunks can be leased at near $.50/SF then companies will do well in their newly written leases and my client and I will need to keep an extra careful eye on the ball if we expect to beat out our competition.
Demand will accelerate in 2012, but given the sluggish domestic and overseas economies, only by about 15% to 130 million square feet. Large blocks of space will continue to outperform, Grubb & Ellis reported.
Third-party logistics providers are becoming an integral part of supply chains of an increasing number of companies, a trend that will continue to drive the Class A distribution sector.
For the recovery to accelerate more significantly, the market needs the return of business and consumer confidence so that smaller, local businesses will commit to more space at longer terms. However, the requisite level of confidence is unlikely to emerge until the second half of the year, and the November elections could delay it until the end of 2012.
Thoughts?
Monday, January 16, 2012
Barbazza RE: Not Just For Tenant Representation...
In the past 4 1/2 years Barbazza Real Estate has been on a gung-ho mission to create a commercial real estate reputation as a hard-working, up and comer while fostering a sturdy database of clientele by working diligently as an OC tenant rep. Happily, and humbly, we can say "MISSION ACCOMPLISHED!". Now onto step two: Landlord Representation. You may not know it, but landlord representation is not new to Barbazza Real Estate. In fact we have a very strong track record with the minimal exposure we've had in this sector of our business. Since its inception, Barbazza RE has managed two commercial buildings in Orange County: one, which was sold last year, is a 3 story retail and office building known as "Builder's Exchange" and which is located in the historic section of Downtown Santa Ana; the other property, which we still operate, is a two building industrial property on Costa Mesa's popular west side.
When Barbazza RE was brought on to manage Builder's Exchange in August of 2008, the 32,000 SF historic building was having a minor cash-flow issue and the Landlords were considering selling, but couldn't justify an adequate sales price due to a high vacancy rate on the 2nd floor executive suites and inflated expenses. As October 2008 rolled around and the world economy began to tank, several of the building’s executive suite tenants began having problems paying rent, while the banquet facility which leased the entire 7,000 SF 1st floor retail unit, was several months in arrears. Barbazza RE’s first step was hiring a new cleaning company which saved the landlord approximately $12,000 annually. We then found other areas where expenses could be cut and ended up lowering the landlord's expenses by 20%. Meanwhile, we rolled up our sleeves and did the hard nosed work of lease review and renegotiation: after some creative brainstorming sessions, Barbazza RE decided to renegotiate leases with good tenants who ran into hard times, and to evict problem tenants. In executing our plan, the landlord's cash-flow took a serious hit, but Barbazza RE was confident it could regain the lost income with better tenants....and we did. Within 6 months Barbazza RE had written 3 new leases with performing tenants, including a new ground floor retail lease for the entire 7,000 SF unit, and 2 executive suite leases which comprised approximately 1/4 of the executive suites’ rent-able SF. All of this, mind you was done while the market was tanking through 2009. Eventually Barbazza RE had improved the building's performance enough that by the end of 2009 the landlords decided to market the property for sale, and by March of 2010 the building was on the market. After receiving two low-ball offers in the first 5 months of the listing, Barbazza RE took on a co-broker, Gil Marrero at VoitCo, in August of 2010. In December 2010, Gil secured a stronger offer and the building entered escrow on Christmas day; a few short months later, escrow closed. Barbazza RE is very pleased with its success on the Builder's Exchange property. We took a poorly performing building and turned it around in the midst of the greatest economic collapse since the great depression. Enough so, that the landlords were able to sell their property at enough of a profit that the partners each walked away with 6 figure profits after taxes.
On a similar note, the industrial building which Barbazza RE is still managing, was also a problem child that has since turned the corner. In the summer of 2009, Barbazza RE was brought on to manage the 8,600 SF industrial property. At the time the building had two tenants: one in major arrears and wielding a physically threatening attitude. The other tenant, although less hostile and not in arrears, was taking advantage of the landlord's advanced age and was treating the property like it was their own private playground; they had erected a 600 SF metal shed in the middle of the yard without landlord permission and which blocked the ingress/egress of the property, thus creating a fire hazard and making it difficult to move about the property; they had also installed two rolling gates (also without the landlords' permission); and they had a friend living in an RV on the premises (again without the landlords' permission). Barbazza RE's first action was to confront the hostile tenant in as polite and professional a manner as possible. Our goal was to let them know that their landlord was no longer an aged individual who could be pushed into a corner; we did so by personally delivering them a 3 day notice. This battle went on for some months; we would serve them a 3 day to pay or quit and they would pay rent. Finally in February of 2010, the tenant realized they no longer had an upper hand and they vacated the property with 4 months remaining on their lease. The unit was in shambles of course, but with a little love and care, and aggressive marketing, Barbazza RE executed a new lease just 4 months later. Meanwhile, our other tenant had sold his business to one of his employees and moved out of town. The lease wasn't transferable, so Barbazza RE ran the new owner's application and executed a new lease in March of 2010. As a verbal condition of the lease, Barbazza RE required that the 600 SF shed and the RV be permanently removed from the property. The building was now 100% leased and we were in the clear...so we thought. Unfortunately this wasn't the end of our problems. The economy, as we all know, did not improve at the end of 2010 and by the end of the year both tenants’ businesses were failing, however they each handled the situation differently: the new business owner of our former tenant was communicative and forthright, and paid us money as it came in; our new tenant, on the other hand, was evasive and didn't return phone calls. We evicted the latter in October of 2010 - just 4 months after we executed their lease, and just 8 months after the previous tenant had vacated the property. And now it looked as if we were back at square one: our only tenant was a new business owner who was struggling in a sluggish economy. With some hard decisions to make, Barbazza RE was forced to think outside of the box yet again. After some creative brainstorming sessions, Barbazza RE decided to put our only tenant on a M2M lease, at a decreased rate for 6 months, with the stipulation that the business pay back the arrears on a monthly basis. Because this unit is the premier, front unit of the property, as part of the deal Barbazza RE gained the ability to list the unit for lease. In executing this agreement, the tenant was able to catch up somewhat on his arrears and Barbazza RE was able to execute a lease for the front unit in January of 2011 with an A+ tenant. We then moved the old tenant to the back unit where the rental rate and SF is less. Unfortunately this wasn't enough of an overhead decrease for our tenant. Their business just couldn't gain traction and we were forced to find a new tenant for the back unit. After a few months on the market Barbazza RE executed a master lease for the rear unit in October of 2011, and we are now 100% occupied with two A+ tenants who pay rent like clockwork. As a result the property is building a cash reserve again and the landlords are happy. We have begun work on a few deferred maintenance issues and we are looking to renew one of our leases this month.
With our track record of being able to lease up buildings in poor economic times through the creative resilience shown by the Barbazza staff, Barbazza Real Estate is poised to take the next step into landlord representation. Our goal is to take on 5 new buildings to represent as leasing representatives this year. We will consider managing the properties as well, however our goal is to work in a leasing only capacity. If you know of any small to medium sized commercial landlords in Orange County who either aren't happy with their current leasing company or who have decided to hire an outside representative to co-list or exclusively list their properties, please consider referring Barbazza Real Estate. We won't let you down.
Here's to a fantastic 2012!!
Sincerely,
Jason Piazza
Vice President
Jason@BarbazzaRealEstate.com
949-400-8086
When Barbazza RE was brought on to manage Builder's Exchange in August of 2008, the 32,000 SF historic building was having a minor cash-flow issue and the Landlords were considering selling, but couldn't justify an adequate sales price due to a high vacancy rate on the 2nd floor executive suites and inflated expenses. As October 2008 rolled around and the world economy began to tank, several of the building’s executive suite tenants began having problems paying rent, while the banquet facility which leased the entire 7,000 SF 1st floor retail unit, was several months in arrears. Barbazza RE’s first step was hiring a new cleaning company which saved the landlord approximately $12,000 annually. We then found other areas where expenses could be cut and ended up lowering the landlord's expenses by 20%. Meanwhile, we rolled up our sleeves and did the hard nosed work of lease review and renegotiation: after some creative brainstorming sessions, Barbazza RE decided to renegotiate leases with good tenants who ran into hard times, and to evict problem tenants. In executing our plan, the landlord's cash-flow took a serious hit, but Barbazza RE was confident it could regain the lost income with better tenants....and we did. Within 6 months Barbazza RE had written 3 new leases with performing tenants, including a new ground floor retail lease for the entire 7,000 SF unit, and 2 executive suite leases which comprised approximately 1/4 of the executive suites’ rent-able SF. All of this, mind you was done while the market was tanking through 2009. Eventually Barbazza RE had improved the building's performance enough that by the end of 2009 the landlords decided to market the property for sale, and by March of 2010 the building was on the market. After receiving two low-ball offers in the first 5 months of the listing, Barbazza RE took on a co-broker, Gil Marrero at VoitCo, in August of 2010. In December 2010, Gil secured a stronger offer and the building entered escrow on Christmas day; a few short months later, escrow closed. Barbazza RE is very pleased with its success on the Builder's Exchange property. We took a poorly performing building and turned it around in the midst of the greatest economic collapse since the great depression. Enough so, that the landlords were able to sell their property at enough of a profit that the partners each walked away with 6 figure profits after taxes.
On a similar note, the industrial building which Barbazza RE is still managing, was also a problem child that has since turned the corner. In the summer of 2009, Barbazza RE was brought on to manage the 8,600 SF industrial property. At the time the building had two tenants: one in major arrears and wielding a physically threatening attitude. The other tenant, although less hostile and not in arrears, was taking advantage of the landlord's advanced age and was treating the property like it was their own private playground; they had erected a 600 SF metal shed in the middle of the yard without landlord permission and which blocked the ingress/egress of the property, thus creating a fire hazard and making it difficult to move about the property; they had also installed two rolling gates (also without the landlords' permission); and they had a friend living in an RV on the premises (again without the landlords' permission). Barbazza RE's first action was to confront the hostile tenant in as polite and professional a manner as possible. Our goal was to let them know that their landlord was no longer an aged individual who could be pushed into a corner; we did so by personally delivering them a 3 day notice. This battle went on for some months; we would serve them a 3 day to pay or quit and they would pay rent. Finally in February of 2010, the tenant realized they no longer had an upper hand and they vacated the property with 4 months remaining on their lease. The unit was in shambles of course, but with a little love and care, and aggressive marketing, Barbazza RE executed a new lease just 4 months later. Meanwhile, our other tenant had sold his business to one of his employees and moved out of town. The lease wasn't transferable, so Barbazza RE ran the new owner's application and executed a new lease in March of 2010. As a verbal condition of the lease, Barbazza RE required that the 600 SF shed and the RV be permanently removed from the property. The building was now 100% leased and we were in the clear...so we thought. Unfortunately this wasn't the end of our problems. The economy, as we all know, did not improve at the end of 2010 and by the end of the year both tenants’ businesses were failing, however they each handled the situation differently: the new business owner of our former tenant was communicative and forthright, and paid us money as it came in; our new tenant, on the other hand, was evasive and didn't return phone calls. We evicted the latter in October of 2010 - just 4 months after we executed their lease, and just 8 months after the previous tenant had vacated the property. And now it looked as if we were back at square one: our only tenant was a new business owner who was struggling in a sluggish economy. With some hard decisions to make, Barbazza RE was forced to think outside of the box yet again. After some creative brainstorming sessions, Barbazza RE decided to put our only tenant on a M2M lease, at a decreased rate for 6 months, with the stipulation that the business pay back the arrears on a monthly basis. Because this unit is the premier, front unit of the property, as part of the deal Barbazza RE gained the ability to list the unit for lease. In executing this agreement, the tenant was able to catch up somewhat on his arrears and Barbazza RE was able to execute a lease for the front unit in January of 2011 with an A+ tenant. We then moved the old tenant to the back unit where the rental rate and SF is less. Unfortunately this wasn't enough of an overhead decrease for our tenant. Their business just couldn't gain traction and we were forced to find a new tenant for the back unit. After a few months on the market Barbazza RE executed a master lease for the rear unit in October of 2011, and we are now 100% occupied with two A+ tenants who pay rent like clockwork. As a result the property is building a cash reserve again and the landlords are happy. We have begun work on a few deferred maintenance issues and we are looking to renew one of our leases this month.
With our track record of being able to lease up buildings in poor economic times through the creative resilience shown by the Barbazza staff, Barbazza Real Estate is poised to take the next step into landlord representation. Our goal is to take on 5 new buildings to represent as leasing representatives this year. We will consider managing the properties as well, however our goal is to work in a leasing only capacity. If you know of any small to medium sized commercial landlords in Orange County who either aren't happy with their current leasing company or who have decided to hire an outside representative to co-list or exclusively list their properties, please consider referring Barbazza Real Estate. We won't let you down.
Here's to a fantastic 2012!!
Sincerely,
Jason Piazza
Vice President
Jason@BarbazzaRealEstate.com
949-400-8086
Friday, January 6, 2012
Tuesday, October 4, 2011
Stimulus, Free Trade, and The Commercial Real Estate Recovery
Commercial real estate (CRE) professionals have been trying to guess the direction of the CRE market since the US economy took a dump in 2008. When the recession hit, America lost jobs. Lots of jobs. And without jobs CRE can't have a thriving recovery because if jobs aren't being generated, then businesses won't need space to manufacture, sell, or administrate. To help spur the economy, the Obama administration is considering another round of stimulus (QE3). Although stimulus programs are an effective way to spur growth, it is important to note that a stimulus paid into an economy that is offshoring its jobs via "Free Trade" is a failed concept, as evidenced by QE1 & QE2. In a recent article published by CoStar, the author notes beneath the headline that "Cuts to Long-Term Rates May Help a Little, but Economists Say What's Really Needed to Get Things Humming is Jobs and Spending". (Ref.) And there it is; "Jobs and Spending". Spending without jobs won't secure longevity in the economy.
So where are the jobs? It has been noted several times since the recession hit in 2008 that big business is doing better than ever. In fact mega-corporations are sitting on a combined $2T (that's T for Trillion BTW). (Ref.) WOW!! That's a lot of dough, but we still have high unemployment in the US? If big corporations are making money hand over fist, then why is US unemployment so high? FREE TRADE!! (among other radically ideological nonsense) That's why.
In the 90's, Clinton ushered in the era of Free Trade against the advice of many centrist thinkers, including Ross Perot who ran against Clinton in 1992. "Perot is famous (among other things) for his statement during the 1992 presidential campaign that if NAFTA (North American Free Trade Agreement) was not a two way street then it would create a “giant sucking sound” of jobs going south to the cheap labor markets of Mexico." (Ref.) I think we can all agree that Free Trade is a brilliant text book plan which, in theory (or as I like to say, in a petri dish), allows countries to mutually benefit in cheapened trade between the nations participating. However, when practiced in reality, Free Trade is nothing more than a tool used by thieves and sociopaths to decimate their competition. The problem with Free Trade is that it is hard to enforce and often results in the wealthier country getting the short end of the stick, which has been the case for the US. As it stands now the US has cheapened its import tariffs to a degree that foreign corporations are importing goods (nearly for free) into the US which are made by workers earning slave wages in countries which don't adequately regulate industries. And American corporations are following suit. So if a corporation can take its business off shores to hire workers at a fraction of the price an American worker would be paid, while avoiding sensible regulations that keep lead out of children's toys and prevent damage to the environment without having to pay an import tax, then why on earth would they lease or buy commercial real estate in the US? And if businesses aren't operating on American soil, then commercial real estate's recovery will be sluggish at best, as will the residential recovery. So the question remains: what benefit is the US getting from Free Trade? I see what the benefit is to American and foreign corporations, but what is the benefit to American citizens and our domestic industries???
For the past year or two I've been trying to time the market properly to expand Barbazza Real Estate's CRE leasing, management, and sales business. Unfortunately it seems the Obama administration is looking to expand Free Trade (Ref.1)(Ref.2)(Ref.3), and as a CRE agent I can't help but think that any new Free Trade agreement will lessen the likeliness of a CRE rebound any time soon. So with this news it looks like we'll have to cool the jets for just a bit longer. Barbazza Real Estate's influence is ready to explode, we just need to get our government's trade policy (among other items) in the correct place.
So where are the jobs? It has been noted several times since the recession hit in 2008 that big business is doing better than ever. In fact mega-corporations are sitting on a combined $2T (that's T for Trillion BTW). (Ref.) WOW!! That's a lot of dough, but we still have high unemployment in the US? If big corporations are making money hand over fist, then why is US unemployment so high? FREE TRADE!! (among other radically ideological nonsense) That's why.
In the 90's, Clinton ushered in the era of Free Trade against the advice of many centrist thinkers, including Ross Perot who ran against Clinton in 1992. "Perot is famous (among other things) for his statement during the 1992 presidential campaign that if NAFTA (North American Free Trade Agreement) was not a two way street then it would create a “giant sucking sound” of jobs going south to the cheap labor markets of Mexico." (Ref.) I think we can all agree that Free Trade is a brilliant text book plan which, in theory (or as I like to say, in a petri dish), allows countries to mutually benefit in cheapened trade between the nations participating. However, when practiced in reality, Free Trade is nothing more than a tool used by thieves and sociopaths to decimate their competition. The problem with Free Trade is that it is hard to enforce and often results in the wealthier country getting the short end of the stick, which has been the case for the US. As it stands now the US has cheapened its import tariffs to a degree that foreign corporations are importing goods (nearly for free) into the US which are made by workers earning slave wages in countries which don't adequately regulate industries. And American corporations are following suit. So if a corporation can take its business off shores to hire workers at a fraction of the price an American worker would be paid, while avoiding sensible regulations that keep lead out of children's toys and prevent damage to the environment without having to pay an import tax, then why on earth would they lease or buy commercial real estate in the US? And if businesses aren't operating on American soil, then commercial real estate's recovery will be sluggish at best, as will the residential recovery. So the question remains: what benefit is the US getting from Free Trade? I see what the benefit is to American and foreign corporations, but what is the benefit to American citizens and our domestic industries???
For the past year or two I've been trying to time the market properly to expand Barbazza Real Estate's CRE leasing, management, and sales business. Unfortunately it seems the Obama administration is looking to expand Free Trade (Ref.1)(Ref.2)(Ref.3), and as a CRE agent I can't help but think that any new Free Trade agreement will lessen the likeliness of a CRE rebound any time soon. So with this news it looks like we'll have to cool the jets for just a bit longer. Barbazza Real Estate's influence is ready to explode, we just need to get our government's trade policy (among other items) in the correct place.
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