Commercial Real Estate Is Not a Commodity, Damn it
The reality of commercial real estate.Experts optimistic on outlook for suburban market
Check out this article from dhbusinessledger.com
Some activity includes businesses seeking to take advantage of the depressed rental rates by seeking more top-of-the line locations, which may not cost much more than what they are currently paying. Leasing activity has spiked about 40 percent in the suburbs over the last two years, said Daniel P. Cawley, president of Cawley Chicago Real Estate in Downers Grove…Read More
Thinking about re-tenanting your high vacancy office property? First Consider this…
Many landlords go full throttle into leasing a high vacancy property that was once full without considering tenant improvement and commission costs. In office deals these costs can run thirty five dollars ($35) per square foot. If you spend that money you may not recapture it when you sell it. You would have been better selling it with a high vacancy and moving on to better deals. You could waste years of time and sweat on what you could achieve now.
Sometimes it’s hard to let go but why prolong the agony on what you can remedy today!
Does this sound familiar? Please call for a full property analysis.
Senior Vice President
Cawley Chicago Commercial Real Estate
630.729.7937
Thanks to Dan O’Neill my Investment expert at my company for participating as my guest blogger!
Cawley Chicago Sells a 10,000 SF Industrial Building
Cawley Chicago Commercial Real Estate is pleased to announce the recent sale of a 10,000 SF industrial building in Warrenville at 3S320 Rockwell. Cawley represented the owners in the transaction which was on the market for 1 plus years. The purchaser was a user who lives in the geographic area, looking to reduce his commute time by relocating from the O’Hare area. The contract was executed in 30 days and closed 30 days later with bank financing through American Chartered Bank. The sellers like the buyer live in the area used the property to operate their business for the past 8 years. The recession of 2009 and 2010 eroded their business to the point the property size was more than they required.
Cawley closes a $9.8 Million Investment Deal
See story at REJournal.com: http://bit.ly/ovEFFy
Joseph Castrogiovanni, Jr., John A. Castrogiovanni, and Fran Knutson of JTJ, LLC sold the 122,092-Square-Foot Brynwood Square Neighborhood Shopping Center located at 2615 Mulford Rd, Rockford, Ill to Midland Atlantic out of Cincinnati, Ohio for $9,850,000 or $80.68 per square foot; and a CAP rate of about nine percent.
The buyer took legal title as “MO Brynwood, LLC.” John I. Silverman of Midland Atlantic took out a mortgage for $7,530,000 to finance the purchase of this shopping center. Dan O’Neill, senior vice president, from Cawley Chicago confirmed that he represented both the seller and the buyer. Marifran Georgis, the attorney for the sellers, verified the sale of the shopping center and also explained that the sellers are all in their eighties, and that retirement was the motivation for selling the property. Since the property was in excellent condition, the due diligence period took sixty days, and escrow took only thirty days.
Clayton Riney, who is in charge of leasing for all of Midland Atlantic properties, verified that Midland purchase.
Brynwood Square contains 122,092 square feet of leasable area and is situated on approximately 10+/- acres of land. The subject property is divided into sixteen inline tenant spaces which are anchored by a Hilander Food Store (Kroger). Hilander accounts for approximately 60 percent of the net rentable area of the center and is locked in a 15-year lease. At the time of sale, Brynwood Square was 96 percent leased.
The owners of Brynwood had been trying to sell this property since 2008. During that year, the property was listed with Marcus & Millichap for $10,750,000. In 2009, Brynwood Square was listed with Mid-America. Dan O’Neill had the property on the market for about a year since October of 2010.
http://bit.ly/ovEFFy
Terry Grapenthin of Cawley Chicago Commercial Real Estate, along with other industry leaders discuss the activity and market of the I-55 industrial corridor.
Read more, http://bit.ly/peBBat
Real Estate TEAM?
Does Team really apply in the ultra competitive cutthroat real estate industry? The common belief is real estate brokers have to develop a drive to perfect their “style” which suggests they have to be a one person band. Yet many firms are marketing teams to meet the demands of the new consumers who want more attention. Most teams are senior and new or junior teams to free up the senior member to develop more business. Note there is little attention to the existing client.
We think teams are necessary to better serve clients. But if they are not established for the right purpose nothing changes for the client.
Competition is stronger, client loyalty is weaker and technology is leveling the playing field and companies are fighting for the reduced piece of the pie.
So is teaming working? Are teams actually teams? Successful teams must have individuals whose strengths and weaknesses compliment not overlap one another. Things like temperament, skill, experience, product types, organizational habits and business development and transactional completion abilities. Then there is the leadership quotient and who and when takes the lead and the ego babysitting to allow for the team concept to provide the intended results.
In our view teams cannot be assembled; they must evolve and that is where the true test of team comes into play. There has to be a clear set of guidelines and rules and minimum levels established and they have to practice, practice, practice before they can perform.
We think team concepts starts with company culture. It comes down to the money in the lives of many. The past 2 years the world change. If it’s about the money then it won’t work long-term.
We believe the team can only function if the cooperative strengths are greater than individuals and committed to the benefit the service levles and knowledge to the client. It is also critical that internal competition is eliminated. This allows free flow of information through the entire organization. This kind of team has an ever-changing dynamic just as each transaction requires flexibility and fluid strategies. These teams commit first to the client then work backwards to the individual skill sets constantly re-evaluating the teams strengths and weaknesses to find a customized method to complete the transaction. This client first commitment will elevate any Company.
A sports comparison in inevitable right? Think about teams in any sport where the best players are committed to statistics and not the outcome! Client first is the outcome and we all know what the stats focused teammate gets.
How do you know if a team is stats driven or relationship driven? When you interview them notice how the first meeting goes. If they are talking about themselves and their company that is a stats driven team. If they ask good questions with the intent to understand your situation and requirements they are thinking about the outcome. Hire that team!
Evolution Revolution-Ball of Confusion
Click here to listen to Ball of Confusion by The Temptations
Somehow seems like our world is a ball of confusion. When you hear the lyrics they apply more today than back in the 60′s. Whats the old saying… “the more things change the more they stay the same.”
The past few months I have been writing about the evolution/revolution (or lack thereof) across most businesses. There are some industries (banking/finance) who don’t change and we continue to be bail them out. Hard to get people to change when there is no incentive.
Pressure causes each of us to react differently and in our company the reactions were varied. For us there was doubt and this ball of confusion about strategy and long-term survivability. One of the benefits of our forced evolution the past 2 years (as a result of the economic melt down) was figuring out how to measure everything from expenses to income opportunities and the earning process. Measuring adds an accountability principle (pressure) t0 into an industry known for its cowboys and shows up as pressure to perform. We actually created 4 new business lines, tightened our fiscal belt like every other company and added accountability as part of the evolution/revolution process.
Today I write about the evolution/revolution at my company. This week we had 2 brokers leave the company which puts the total in the past 6 months at 5 (out of 14). There is always movement of brokers in our industry from one company to another and I’ve never really paid attention to that sort of thing until now. To clarify; 3 brokers and the focus of this rant left for other companies and the other 2 left the industry which was the right choice. On the surface and to the outside world including our competition it could appear as though my company is coming apart at the seams (it’s not) and there “must be something wrong”. I don’t really care about our competition but I do care about our clients and the remaining folks.
I’m losing good people for what I believe are the wrong reasons. There is no barrier to entry to this fabulous industry but there are severe longevity barriers. The good news is those not properly equipped for the industry recognize that fact and find something else to do. Most people however look outside themselves as to the reason for their lack of success. I’d love to do a study to determine if moving to another company actually changes the income long term. In the short-term many benefit in the short term as many brokerage companies are offering signing bonuses and/or preferred commission splits but what about the long-term benefits and success?
In real estate; like most service industry’s consistent income-creation activities are basic required functions. The interesting point; it seems to me; is this habit is an individual change and not contingent on the name of your company. However if changing companies causes the individual to change something other than the name on his business card then it works and was the right thing to do. Maybe changing companoies increases confidence and causes individual change.
I wish all sales people in the industry well in all that they do but in particular I wish them the courage to seek and embrace change. Self change (evolution) is the hardest and often the last and typically forced. I regret losing people because I feel like I failed but cannot control a humans reaction to change and pressures.
2010 Been Merry Merry Good to Me
Here we are at the beginning of the new year…thank God! Better yet we survived another year and have actually seen an uptick in activity and maybe best of all attitudes seem to have shifted. Not really sure why that has happened nor do I really care, but the change is noticeable here at my company, with our clients past and present, and with the prospects we are chasing.
2010 was a good year for a number of reasons and I’m curious if any of these are true for you as well. Please comment back.
Reason #1- The fear of what was happening in our industry and that was felt all the way to my company diminished significantly for us here at my company as we found ourselves not living in the fear, but taking action. Sounds really simple right? Well, personally speaking, it was not until I realized fretting wasn’t going to make a difference. I had to simply do all those things that I had learned and perfected over my 33 year career. It was simple; I went back to communicating with people. For this industry and our company, it means calling our current clients, thanking them for their biz, checking to see if there was anything we could do for them, and make sure they were being well taken care of by our activities and communication of those. What I learned was communicating calms people; we all want to know we are being thought of. I was also grateful to see our clients response to our well-being in return. An awesome experience for all of us.
Reason # 2- Everyone in my company stepped up immensley. I know that sounds like a general statement, so specifically everyone increased their communication internally. All subjects and concerns were addressed and discussed openly and truthfully. The result was a bonding as a single entity to help each other get through difficult transactions, through words of encouragement, having fun with each other and focusing on actions to get to the next step or level. The result: December was a big income month, maybe our best ever.
Reason # 3- Being action oriented is one thing, but having a well thought out plan for the actions has proved to be another difference maker. We created 4 new business lines in 2010 and saw income production from 2 of those and this month will see the third line start to produce income. So in the worst economic time in the industry’s history, we created new business lines. So how did we manage to do that? Well the next reason answers that question.
Reason # 4- The overwhelming aspect of the crash impacted me so severely that I felt like there was no time to get everything done. I’m one of those people who refuses to lose so I would outwork the problem! Well 20 hour days can only go so far and then…well it’s no longer productive. So my partners at Vistage convinced me to reorganize the company to reduce my time commitment to management so I could get back to the 2 things I’m very good at: business development and strategy (I wanted to use Strategery in the worst way here). Previously, I was managing 14 people and now a more manageable 5. We created leadership heads for our resource management, industrial, office, retail, investment and property management/receivership business lines. This has provided me the time reductions necessary to get back to my core strengths and provide the other leaders the opportunity to participate at a new level with their direction of the company.
Reason # 5- We have all learned that living by the world’s standards is not the key to happiness or peace. The world does not know or care quite frankly about our well being; only what we can provide it. We are all about providing our clients a different experience through service of their needs first and foremost. By taking care of them, we are also taken care of as well.
See you next month and I may have a guest blogger for you (and me). Be well!
Do You Hear What I Hear?
I was fortunate enough to attend a recent forecast lunch the past month. Actually it is my favorite forecast of the year. These UIC boys are so smart and so deep and so detailed you can fall asleep…or get blown away by the information. One of the cool things is these guys are; in my opinion; unbiased and (this may be biased now that I think about it) they believe in the free enterprise system! Wow imagine that!!! Wish Barak would give and learn a lesson.
here’s why I think these guys are the best; the first words that preclude any/every prediction are “the numbers allow me to tell you” then present the prediction followed by guess what? EVIDENCE like some stats and then some graphs and charts that backs it all up. Detail? You want detail?
There were a couple of things that blew me away: The biggie was the size of the real estate industry as a whole related to us as a percentage of GDP (I believe in 2001) was .02% for the country. Told you they were deep!
So while you are trying to relate to what the hell that means let me help you understand or begin to define the real estate industry. They mean all of us poor real estate brokers,mortgage lenders (even the predatory bastard ones praying on the consumers), carpenters and all of the other tradesmen but also the carpet and appliance guys and dealers and their delivery drivers and sales clerks. I mean everyone who could touch any real estate transaction; (think of any/every thing in your house or office) suppliers of every kind, the insurance guys the lawyers, landscapers; got it?
That .02% GDP number grew to .06% in 2008 so whats that percentage increase in 6 years? Crazy right? now lets bring this thing in closer to the people you and I know. Remember hearing about “the fastest growing city, county, state, region, blah blah blah in the country”? Which city, county, state, region in the country have the highest unemployment rate…Hmmm: Nevada, Arizona, Florida and California (and why would anyone want to live in that state by the way. Yeah the weather is good but the leadership is nuts…wait a minute I’m calling the kettle calling the pot black. I live in Illinois!)
The numbers allowed these guys to give us numbers(the highest unemployment) showing the correlation to these states that experienced the “fastest this or that syndrome” and it is the RE industry that makes up 35% of that state’s unemployment number. Makes sense to me being a man with logic at my base. They went on to say these RE folks (victims probably in the nanny state) have been unable to recreate a new skill to alow them back in to the work force. Huh?
Apparently the numbers say that’s true and whats worse those that have recreated themselves have a house in a state with highest foreclosure rates, lowest resale values and velocity so they cannot relocate quickly enough to grab a job out of state. Sounds like there is no hope.
Ahhh but the government under BO (no pun intended on stinky body) is (de) incentivizing these folksy victims with unemployment and extension after extension and typical poor government accountability so these folksy victims don’t really have to go back to work. I have a couple of life long conservative friends who have worked their whole lives and participated and were raised in the belief you work hard and make your own living. These guys have been out of work for 1 + years and had opportunities to work but why do that when they can make close to the same without working…I’m afraid they have gone over to the dark side.
So our prognosticators suggested that SOMETHING has to be done about unemployment. They suggested a one time lump sum payment and that’s it; Spend it and it’s gone. Kinda like that concept. Motivates them to get a job before the doe runs out. What a novel idea incentivizing people to seek work! Don’t you love people that have a solution and not just the problem?
The lesson(s) learned from this lunch for me is there are particular segments that are doing fine and others that have tanked. The government does not segment the problem by industry and should.
The RE industry has shrunk they think back to the .02% number. How does this get cleaned up? They say incentivize people to work! Huh?
So besides fixing the welfare state attitude with unemployment stupidity the banks have to stop penalizing everyone but themselves and clean up the crap. Allow owners (mortgage holders) to have access to capital so they can compete in the market for buyers of their home or tenant prospects for their office or warehouse space.
Stop the de-leveraging of the economy! Stop covering your ass and help us by providing proactive financial assistance. SEGMENT THE MARKETS. Understand there is good real estate and bad real estate. Hire real estate experts to consult to determine value in the REO portfolios and dump the crap and market the good. The values will steady for the good stuff and demand will rise quickly. The crap is the crap and will always be the crap.
Real Estate is not a commodity damn it!!!
What to do Oh what to do???
Hey everyone! Happy Holidays to you all. I have been remiss in my postings and apologize but buried (thankfully) in trying to close a couple of transactions. The bad news is they have not closed the good news is I have new material for this blog going forward.
This posting is a copy and paste of my interview with the Business Ledger a local newspaper that has determined the folks may be interested to know our feelings on the crash of the industry 3 years ago (now) and what to do in a particular circumstance. The following scenario was posed and I your faithful blogger responded. I have a link at the bottom to the entire article. We will talk again next week.
Consider you represent a business looking to complete a real estate transaction. What type of advice are you likely to give that client about financing and financing alternatives to ensure an acquisition gets completed? If the tenant is leasing, what advice are you giving, or what measures are you taking, to ensure tenant improvements do get done and that the landlord is on solid footing?
My response:
Depending on the timing for occupancy, a discussion with the bank in advance of getting started in the process will allow various concerns to be bridged. Timelines are greatly extended for a number of reasons: loan commitment, approval, appraisal and passing typical inspections – environmental, mechanical, roof, etc.
The decision-making process for most institutions has become tedious, so verification of financial information may take weeks. It is also important to have a clear plan about the use of the property and how any improvements will be made and financed.
The largest obstacle will be the appraisal and establishing value. No one knows or is comfortable with value, so be prepared for a slow down or death to the process. If you can have the seller finance the project, then do that.
As it relates to leasing, have a five-year business plan for the company. Try to find a space that has the majority in the existing layout that is needed. This serves two purposes: reduced cost to the landlord and better rate for the tenant.
Second, fully understand the landlord’s financial position. Commit to a term that matches your business plan. Rely on your broker to provide the market expertise on rights of first offer/refusal, termination and lease clauses favorable to you and your growth plan. Sign as long a lease as makes sense for your company. Rates have never been this low but be sure you’re in a property that’s well maintained and with a landlord that’s financially sound.
Daniel P Cawley, SIOR (commreguy)
Cawley Chicago Commercial Real Estate
http://thebusinessledger.com/main.asp?SubSectionID=90&ArticleID=1590&SectionID=24
