Greg Herbert's (gregherb) Blog

Build To Suit: An Opportunity

Greg Herbert, CCIM SIOR (Northland Real Estate) — Mon, 10 Dec 2012 13:05:36 -0800

This is a short recapture of a specialty in commercial real estate, the intent of making it an enjoyable and somewhat informative read. The presumption that commercial real estate is such a specialized practice is true and false. While in fact it can be as common and simple as driving a car for those who practice in the field or a difficult as translating a foreign language into readable English. Thus; Build to Suit; an opportunity for all. Ingredients of a transaction, a need and a want. The need is for an asset to meet the present or future needs of an owner, operator, existing business, or new venture to name a few, ultimately to house a business. This can be a new structure, or a remodeled or converted existing facility. Likewise, the want provides a financially viable entity that is capable of producing, financing, purchasing, building, remodeling, or ...... an existing asset to meet the needs of the party with the need. A Build to Suit Risk, real estate carries a certain inherent risk, one that if it can be quantified, is acceptable as offset by return. Understanding the business, demographic requirements, locations requirements, physical requirements ranging from building configuration, location, lot configuration, traffic considerations, competition and interaction with competition and ancillary uses, employee base, driving time, circles of influence and market areas, and much more help measure the relative risk. Whether the occupant has a proven concept, a new concept, a tested verse untested concept, branding, financial strength, longevity of product all play into the formula. Understanding how to conceptually fit all this into a valid business plan that is risk acceptable, financeable and marketable considering that it is always important to have an entry and exit methodology in mind from inception to completion of a concept. In evaluating potential opportunities it is important to understand that risk and security are value judgments based on beliefs and experiences; one parties success may be another parties failure for the same concept. Really no different than what works for one owner is a tree covered lot in the hills while another would seek a Desert or oceanfront, all are right. So, Build to Suit, an opportunity is a result of a meeting of the minds in various senses. Factors are many and varied in the decision making model and thus the complexity of the build to suit transaction. Once the parties initially agree the aspect of analysis of the business operation as the potential tenant, concept, financial viability, operational end management factors and longevity. From the owner/landlord (Lessors) standpoint, positioning, the realism of the operation and location, highest and best use, financing, cost of acquisition, construction, evaluation of second tier risk if the initial concept is not successful, all reduced to return on and of investment. The final test after the others factors and questions are answered as best as one can is whether the cos of occupancy meets the market and the realistic scope of the market, will it support financing and return on investment, does the business occupant with the stated overhead and anticipated yet realistic volume fall with the acceptable parameters of similar operations in similar locations and markets. Build to Suit: An Opportunity.

Real Estate Want

Greg Herbert, CCIM SIOR (Northland Real Estate) — Sun, 04 Nov 2012 07:45:12 -0800

Have a requirement for year end close: Price 5-25M can conisder smaller to 1M, need projects, entitle land, PUD's, bank owned who seeks year end or end of quarter close, consider those that would have a two to five year hold, will act as intermediary for developer or future developer, don't have to the end developer, nationwide, primary, secondary or nearby metro suitable with upswing potential. Can close very quickly if entitlements are in place and pricing is acceptable. Will strongly consider note purchase directly from lender if the situatuion is available, prefer to work with rated lenders and not those on the edge although will look at different opportunities. We will consider the worst asset in a porfolio if the price is reflective and opportunity is available. Suitable assets are groups or blocks of properties, individual if asset is large enough. As we diverge from the West Coast the opportunity must have larger scope and opportunity to warrant travel. Please advise, Regards, Greg

meet Zephyr

Greg Herbert, CCIM SIOR (Northland Real Estate) — Thu, 08 Mar 2012 11:01:23 -0800

Well, here is Zephyr the Golden Boy (the little one on the left - Rudy a close collegue on the right). Zeph is just celebrating his one year birthday and while romping with Rudy two weeks ago, somehow shared a piece of Rudy's chew toy (a corn cob) and swallowed it whole. A surgery later, tomorrow, Zeph gets his final stitches removed and I have had the opportunity to have about $2500 extracted from an otherwise sound account. The irony here is Zephyr went through the same thing 14 weeks ago so he has two surgery's at one year old, this is similar to raising the kids.... All is well, Zeph is happy, he has become the official office dog as a recuperation where he is no longer free to roam or explore without the benefit of a leash. During this healing process, he has become well acquainted with the "Cone of Shame" as we call it, to keep him from helping remove his sutures. The spirit of a golden boy is so special, it is a hard transition to see the 14 day recuperation, they understand the pain and trauma although always have the will to get up, run, romp and jump as a puppy will do without the realization that calm during this period is good. Numerous benefits have come from this experience, a better bonding with dear Zephyr, a chance for some obedience and one on one, support of my favorite vet who is also a tenant so a great economic way to keep money flowing in the inner circle, and finally a great appreciation for Zephyr, the Golden Boy. I will have to wake Z to make sure he is appreciative of the blog. Greg

Retail Site Development Question Master Developer

Greg Herbert, CCIM SIOR (Northland Real Estate) — Wed, 16 Nov 2011 09:51:12 -0800

Processes in selecting a master developer for a new retail project. In the primary marketing of a prime retail assemblage, usually a viable arterial corner, signalized and ideally located in a market gap for one or two major's (anchor tenants), the selection of the master developer can make or break a project and is not always an obvious decision. Like any decission made in the marketplace, whether consumer goods, consumables, wholesale, even internet, the available developers are the primary selection in whether a project becomes a go or no go. Every developer carries around a tool bag of experience, contacts, visualizations, team members and also including financial capacity. The flavor of those tools can include development of similar sized and configured projects, similar demographic market developments, and various other attributes although the single most important decision may be the matching of the contacts available to the developer with the apparent opportunities or gaps in the market for the particular development site. Interpreting and discovering these gaps is the key to targeting the correct end users. When it is possible to determine the end users, and sometimes this is very simple, other times it is a very complex formula, the solution set is found the primary one or two anchor tenants that will experience and thus bring the most success to the site. The success will then draw additional infill tenants that will nicely compliment a successful development. This can be as simple or complex as one makes it although it is very important to seek competent advice in determining and interpreting these factors.

Positioning in the Emerging Market Commercial Industrial

Greg Herbert, CCIM SIOR (Northland Real Estate) — Thu, 10 Nov 2011 13:54:10 -0800

Well, today another discussion with clients who are watching and waiting for the economy to stabilize, as we attempt to decide when to make the market move! Do I mean stabilize or actually bottom out regarding the commercial industrial model? We desparetly need to start making product on this continent and absorb some of the vacant or near vacant manufacturing sector properties and create demand for the secondary and tertiary suppliers and jobs. We see the financial markets attempting to attract stable dollars and overcome by the short sale syndrome which predominates trends. But, in other words, trends which take three notable acts to take birth and are characterized by multiple random acts, creates chaos. So, to make conclusions in this market is extremely difficult, not only in the present, but the future as well. Characteristically, it has been customary to look into the near and immediate future as well as the distant and far future, today a mere weeks away. No true visions of the far future have been clarified. A good and deep client yesterday had the comment that this might be a 2015 recovery, far from the projections of a three to five year recovery to satisfy the requirements of immediate relief in short sales. Even short sales at a three to five year are questionable, in a four to seven year, the yield decreases to negative. Questions arise as this paradyme is synthesized, nothing will be as it was. Thoughts and opinions expressed here are the soul creation of the author and not representative of the mainstream, thinking that is apparently clogging our current system from reconvery. We will get through this as everyone learns to leave their ego at the door and make the right decissions!

Intrinsic Value a factor in Commercial Sites

Greg Herbert, CCIM SIOR (Northland Real Estate) — Mon, 31 Oct 2011 17:53:15 -0700

With the current destabilizing trends in value throughout the commercial market it is important to acknowledge the intrinsic components that may add to or supplement value within the marketplace. Many factors effect value other than the obvious relative to location location location. While location is ultimately a primary factor, the smaller issues my overplay or underplay the location card, often in dramatic ways or sometimes in a more subtle manner. Examples can range from the aspect of near corner verses far corner at an intersection which is signalized or non signalized, depending upon the arterial speed, turn lanes, the location or absence of curb cuts can undermine a perfectly good business location. Research has determined in different situations, the consumer will make a decision regarding a commercial product selection based on a 1-3-5 second sign interaction or logo identification. Depending upon on the street speed, traffic flows, turn lane access and signalization, a buy no buy decision is often made on such short order that is becomes to late to access a site and takes advantage of a commercial product before the site becomes inaccessible or traffic dictates a passby. The suggestion and passby may actually enhance a secondary competitive location further along the same arterial, thus competition located adjacent or nearby may be enhancing to both or all parties in some cases. Thus, once in place, the sign placement, orientation to driveway or alternative access points, facade signage, drive-thru accessibility, all have value in place whereas new constriction may not be able to afford or have the opportunity to access these intrinsic opportunities in place with existing or grandfathered construction.

Federal Funding as a flailing resource in the Marketplace

Greg Herbert, CCIM SIOR (Northland Real Estate) — Thu, 13 Oct 2011 12:38:10 -0700

Working through various buyers and concepts often initiates the need for various sources of government funding, whether through the Federal, State, County or City. With the current Federal Monies Crisis, many of those Federal sources have either been depleted, require extensive additional paperwork, have many more applicants than historically, all leading to lapses in continued or new funding. This is slowly impacting the State and local entities who likewise fund in part through the Federal sources. With this concern are transactions hanging in limbo where funding which once was predictable, that is now a strong contingency to threaten progress. Short and Long term prognosis would seem to be political in nature whether it will be resolved or not in a reasonable time frame, more importantly, a time frame that will full-fill the parameters of an ongoing transaction. Resolution of this has been successfully bridged in a few cases with arbitrage or private funding either for capital expenses and ongoing operating costs that may initially in start-ups be deficits. Can this be the long term solution? Apparently the funds that exist in the private sector are the same source of funds that in part end up in the Federal sector, a function of our tax dollars at work or not at work as the case may be. In some cases the private sector funds are easier to access on a one on one basis although it also can be more difficult in that the private sectors are also flooded with unsolicited requests. The question is, whether this is an answer, a solution or an ongoing situation that we must all deal with to promote transactions using alternative methodology.

Commercial Deals Closing

Greg Herbert, CCIM SIOR (Northland Real Estate) — Wed, 12 Oct 2011 11:13:53 -0700

Today is a closing day which is good. Commercial Real Estate is alive and moving, albeit, slowly and at its own direction! Small town commercial real estate outside of the more popular and self propelling metro areas continues to move in this amazing economy. The details and energy required to put the transactions together and keep them in tack until closing is not even comparable to the past, immense amounts of time and concentration are involved in each detail. It almost would appear that the deals get fatigued which is certainly true of the brokers as the long drawn out events occur at a much slower pace, the real pace today is this truth. It is fortunate to be at the closing end of a transaction when likewise, one examines the market and finds 20-30% more available properties, either vacant or in transition, up from just two or three months previous.

CCIM Regional Marketing Session and Seminar

Greg Herbert, CCIM SIOR (Northland Real Estate) — Mon, 26 Sep 2011 17:07:23 -0700

Portland Oregon, September 22 - 23, 2011 Just returned from attending the regional marketing session and seminar put on by the Oregon/Washington CCIM Chapters, a regional event attended by members from Oregon, Washington, Idaho, Alaska with national participation from the CCIM President out of Connecticut. Great to see many new and old faces as the market is beginning to present some real opportunities, either for the sellers and owners who have struggled through the last two years or the buyers who at this point are ready to move funds and acquire those assets that need assistance. The conference added different perspectives as well as educational opportunities, yes, commercial practicitoners also need specialized education to tune up those opportunities as they arise. Just now back at the office reviewing the different packages and attempting to differentiate and understand the various pieces of information to create the right approach unique for each individual or group of investors who at this time are ready to move if the right deal appears to add to or enhance portfolios.