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By AZ Advisory Team, November 23, 2009 2:59 pm

Add Amenities

Finally, you can also consider adding amenities to the property to make it more appealing and valuable. Value enhancing amenities can include something simple like creating a playground in a multifamily property or adding free wireless Internet for your retail tenants. Or you can add more extravagant amenities like a daycare center in your office building or an outdoor courtyard in a hotel property.

In summary, when scouting for commercial properties, look beyond the historical data and see what things you can employ to make the property more valuable. All other important factors considered, choose the one that gives you a lot of room to utilize value-generating strategies that is non-existent or yet untapped by the present owner and therefore not part of the price.

Know your property’s potential before you close the deal to realize maximum gains — after you have modified its usage to a more profitable one, after you have made improvements and added amenities, after increasing rents accordingly, and after decreasing expenses. The best deals are made when you buy a property, not when you sell a 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.

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By AZ Advisory Team, November 18, 2009 11:27 pm

Decrease Expenses

Evaluate the historical operating statements of the property to determine if there are areas where you can decrease expenses. For example, perhaps improving the property with more energy efficient light bulbs in the common areas will drastically reduce your monthly electrical bills. Or perhaps you find that the gas company can individually meter the units so that instead of paying for the gas, you can fairly pass that expense onto the tenants. In the vast majority of instances, a commercial property owner can cut expenses without significantly impacting the operations of the real estate itself.

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.

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By AZ Advisory Team, November 4, 2009 8:10 am

Increase Rent

The value of your commercial real estate property can also be increased by increasing the rent. In reviewing the historical data on a property, take notice of whether the tenants are paying market rent or whether there is potential for a reasonable mark up in rents. Determine how the improvements you make to the property can justify your rent increase. Pay close attention to both the upper and lower level of rents that are being charged for similarly situated types of real estate so you don’t price yourself out of the market.

Also, after repositioning the property or changing its usage and after upgrading with a LEED certification, you could charge a premium for these modifications. The upgrades will make your property more desirable, especially now that rents and tenants are decreasing, compared to properties that weren’t upgraded.

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.

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By AZ Advisory Team, November 2, 2009 11:31 pm

Change the Property’s Intended Usage

Often times, changing the use of a commercial real estate property can drastically change the value of the property. For example, suppose you find an old industrial warehouse in the middle of a bustling epicenter. Instead of keeping it as an industrial warehouse, you can seek a zoning variance to convert that warehouse to a hotel, or a condo building, or an office building, or any commercial use that makes sense for that location.

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.

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By Alex Zylberglait, October 27, 2009 7:21 pm

Make 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 certification

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.

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By Alex Zylberglait, October 26, 2009 5:46 pm

If 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.