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?
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