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Commercial Real Estate Investments: Will more buyers result in more sales?
December 21st, 2009Financing, pricing gap and wait for distressed sales are blocking the path for commercial real estate investors.
According to an exclusive survey produced jointly by National Real Estate Investor and my company Marcus & Millichap, buyers are preparing to forge ahead with acquisitions in 2010. Two-thirds of investors (65%) who responded to the 6th Annual Investment Survey plan to boost their investment in commercial real estate over the next 12 months. That figure is up from 56% in the third quarter and 51% a year ago. The fact that buyers are once again returning to the table is a huge vote of confidence for a commercial real estate industry that has been slammed in the past year by falling property values, occupancies and rents. Respondents to the annual survey who do plan to expand existing portfolios anticipate an average increase of 26%, up from 24% in the third quarter and 22% a year earlier.
Contact me to receive the full report.
Are you one of the 65% of investors who are looking to expand portfolios and go ahead with acquisitions on bargain commercial real estate properties in the next 12 months? Contact me in advance for me to find a good strategic acquisition for you.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Price Declines Easing – Transactions Increase as Investors Take on Commercial Real Estate Opportunities
December 18th, 2009
Price declines in the commercial property sector around the nation are dwindling slightly according to a report by the CCIM Institute and the Real Estate Research Corporation. And that a potentially meaningful recovery is projected to in about six months, the report said.
The quarterly report noted volume increases in the office, retail, apartment, and hotel sectors on a quarter-to-quarter basis, but it is still declining overall on a 12-month trailing basis.
In its 2010 forecast, the report said that credit is projected to remain stiff, and as more loans reach its due, bank foreclosures are expected to swell. Commercial real estate sales volume and transactions are expected to increase as more entrepreneurial and opportunistic funds will flow into the market.
Contact me if you want to explore and seize opportunities in commercial real estate across the nation as I find the best investment strategy and the best fit between investors and property assets.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Real Estate Giant in Qatar to Invest in U.S.Commercial Real Estate
December 7th, 2009
Got news today that a real estate giant in Qatar, called Barwa is exploring investment opportunities in US commercial real estate and is encouraging other investors to join him as he made a presentation at a one-day business seminar “Entering the US Market“.
Barwa Real Estate Company deputy chief executive officer and Group Strategy & Investment executive director Mohamed Abdul Aziz al-Saad said in a report that the company’s investment exploration will be focused on commercial properties.
The company with over QR25bn (USD6.8bn) in assets value, has previously invested in Sudan, UAE, Bahrain, Egypt, Switzerland, France, Turkey, among other countries, as part of its international portfolio.
“It’s not going to be centered on coastal areas in the US only…” al-Saad added.
More and more foreigners are seeing opportunities opening up for commercial real estate investments. Howabout you, what do you see? From wherever part of the globe you are, opportunities are opening up here in the U.S for foreign investors. Contact me for a free consultation.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
DISTRESS MOUNTING
November 16th, 2009
As we continue to track the amount of debt in distress across all product types and geographies, it is evident that it’s a matter of time until lenders begin to divest these assets. Even though they currently do not have as much pressure to realize losses immediately they will eventually have to do something about it. Considering they are not generally lending money at this time, the increased defaults will only make their balance sheets that much more unattractive. Having said that, I do not believe that we are likely to see an RTC 2 of some sort but rather the divestiture of troubled or toxic assets will likely come in the form of waves; that is as bank’s balance sheets gradually improve they will likely divest of certain assets over time. The wildcard in all of this, of course, is any kind of government intervention that would act to accelerate or decelerate this probable scenario.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Cost Segregation – A Tax Savings Tool
October 30th, 2009
We have been talking about Cost Segregation for quite sometime now in my print and e-newsletters – the Real Estate Investment Digest, as well as in one of my past conference calls.
For those of you who missed it, Cost Segregation is a strategic tax savings’ tool that allows companies and individuals who have constructed, purchased, expanded, or remodeled real estate to increase their cash flow by accelerating depreciation deductions and deferring their federal and state income taxes.
The goal of a Cost Segregation study is to identify, segregate, and reclassify project-related costs that are currently classified as real property to shorter depreciable tax lives for federal and state income tax purposes. Recent IRS rulings and procedures have allowed taxpayers to change accounting methods to take advantage of these previously understated depreciation expenses–back to 1987. This is done without amending tax returns.
Cost Segregation started in the 1960’s and has been called component depreciation studies, investment tax credit studies and various other names. No matter what name you use–Cost Segregation can save you tax dollars and increase your cash flow. There are over 300 court cases and I.R.S. rulings supporting the benefits of Cost Segregation. The following is an example.
Hospital Corporation of America v Comm. 109 TC 21 (1997) ruled that certain assets associated with a specific piece of equipment not linked to the normal operation and maintenance of the building qualify for five-year depreciable tax lives instead of 39-year depreciable tax lives.
Essentially, the tax courts and IRS have agreed that the taxpayer can use a Cost Segregation study to segregate the cost of his assets.
Standby as I elaborate on what Cost Segregation can does. At the end of this series, I would recommend companies specializing in this field.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Five Ways to Increase the Value of your Commercial Real Estate Property – 2
October 27th, 2009Make Improvements to the Property
Improvements can take the form of cosmetic improvements or substantial rehabilitation. Cosmetic improvements include such things as new paint or wallpaper, new decor to the common elements, new landscaping, new carpeting/flooring, etc. Substantial rehabilitation involves making structural improvements to the property – for example a substantial rehab may involve redoing all the units of a multifamily property, or changing the structural façade of a shopping center, or making major renovations to the lobby of a large office building. While doing rehabilitation, it will be a bright idea to make improvements toward LEED certification. In any case, you increase the value of the property for not only your tenants, but for your own portfolio as well.
LEED (Leadership in Energy and Environmental Design) is a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. LEED gives building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance.
This strategy uses five categories to guide building performance: Sustainable Sites, Water Efficiency, Energy Efficiency, Materials and Resources, and Indoor Air Quality. It can be implemented for new or existing buildings of any size.
The federal government already requires LEED for all military projects and most projects where government offices are housed, because of the environmental benefits of the process. Cities such as Chicago require all their public buildings to be of this high quality. Major retailers like Best Buy have made the commitment to building LEED Certified stores.
LEED Certified buildings are said to have better occupancy rates because LEED is considered a “premium amenity”, something that separates the wheat from the chafe. Clearly, there are benefits to getting ahead of the curve in the commercial real estate market. Do not be left behind. If you are truly interested in maximizing your cash flows and to start saving real money you should consider engaging a LEED consultant and see how you can upgrade your performance.
I will be glad to put you in touch with reputable companies to help you get LEED certification.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Five Ways to Increase the Value of your Commercial Real Estate Property – 1
October 26th, 2009If you are thinking about purchasing commercial real estate, it’s important to know that there are things that you can do to enhance and increase the value of your investment. As such, when you search for a commercial property, look at the property’s potential in addition to its historical data. Because the value of commercial real estate is primarily driven by the cash flow that the property generates, any strategy you employ has the potential to increase your cash flow, decrease your expenses, and increase your overall equity and the value of the property.
Case in point is a Class B office building known as Golden Eagle Plaza at 525 B St. in downtown San Diego which was turned into an arguably Class A superstar by Hines Interests LP. The San Diego Business Journal reports that Hines upgraded this well-located, 22-story office building, by refurbishing it with a new lobby, new roof, elevators, controls and systems, and by getting a LEED certification. Read full article here.
Now that commercial real estate assets are anticipated to devaluate in the coming months, investors like you should be seeking new strategic assets to invest in. The economics of purchasing existing buildings (especially when its owners are distressed) with fairly good fundamentals and then upgrading them is very promising.
Aging properties, making sure it passes its Forty-Year Recertification, must also be upgraded or the best tenants will look elsewhere when they seek additional space in the coming years in response to the anticipated growth in the economy.
Hines’ retrofit strategy seems to be paying off as early as now: San Diego’s large law firms ares moving to Golden Eagle Plaza like the firm of Procopio, Cory, Hargreaves & Savitch LLP, have already committed to 100,000 square feet in the building.
Stay tuned for my future posts as I elaborate further on how you can increase the value of your commercial real estate property.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Deal Anxiety
October 19th, 2009
As we begin the last quarter of the year, we are beginning to see an increased amount of activity in the market by both sellers and buyers. You may have heard of the term “deal fatigue” before but I think what we are seeing now is a case of “deal anxiety”. With the realization that values have declined and may continue to decline for some time, sellers are coming to grip more and more to true market values. At the same time, buyers are realizing there are some very good deals out there that will allow them to lock in good values and low cost financing (if they can get it) and to position themselves strongly for a future rebound. Having said that, the majority of the deals that are getting done are what’s been termed as “trophy or trauma” deals. That is, deals that either are very good pieces of real estate or those that are truly distressed and the value opportunity is too good to pass. The increased in transaction activity has not come with significant increase in capital liquidity though. Most deals are still involving seller financing, assumptions, or all cash transactions.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Setting Up A Building Facilities Database And Operations Manual 2 of 4
October 9th, 2009Data, Information, Knowledge and Action
Databases form the necessary foundation for managing current projects and programs and for projecting future costs and property facility management department activities. Data by itself, however, is fairly useless. A skilled analyst can take raw data and manipulate it to extract patterns, trends, and inferences—information—that explain relationships between the events that constitute the data. Therefore, energy consumption figures, for example that reveal an office using 3000 kilowatt-hours of electricity in 1997 and 6000 in 2001 are data; the observation that consumption increased between 1997 and 2001 is information.
Knowledge takes information one step further by putting it in the context of experience. For example, the increased in power consumption makes sense because occupancy in the building increased. But since 1997, there were no energy saving measures in place such as motion-sensing automatic light switches and an efficient air conditioning. If energy-saving measures are implemented, they would expect some reduction on energy consumption. Knowledge, therefore, is information used to explain something and even project future values.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Setting Up A Building Facilities Database And Operations Manual 1 of 4
October 8th, 2009
Most building facility and operations departments have a wealth of information but inadequate means to organize it. To manage the wide spectrum of operations and facility information properly, managers must understand the term database and building an operations manual in its most basic sense.
Great care must be exercised in designing and selecting management tools that enable managers to find what they are looking for—even when they are rushed, cannot remember where the information is, do not remember its name, and do not know how it works. The management tool for these tasks is a simple database to provide access to needed information and a manual, either in electronic or physical form, to provide information on how to use each element and how the entire facility works. Before you design a database and a manual, however, it is important to understand the relationship between information and data.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
