Multi-tenant Commercial Investment Portfolio

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Asset management of your multi-tenant property can be more than managing income and expenses for new leases, renewals and relets. Consider shifting your perspective to view each asset property as a portfolio of investments. (The economic performance of each property will contribute to the returns and profits of the collection of owned assets (your core portfolio)). This will shape asset management and improve IRR, annually and over the holding period. Take these simple eight steps to carry out this shift for you.

1 Establish Your Basis. A portfolio of equity investments needs its basis to calculate a return over the holding period, so should your real estate investment. Your basis includes all costs associated with buying the property and readying it for tenant use. Each block of capital improvements updates the basis to calculate returns from (e.g. upgrades to lobby, common areas, elevator, sprinkler system, air handling systems, etc). The completed updates have created a new building ready to accept new tenants.

return on investment2 Establish Expected Returns. What returns are expected from the property? I recommend using MIRR vs. IRR to get a truer perspective of returns on investment. (MIRR factors your borrowing costs and returns from alternative investments; IRR assumes profits are reinvested into the property, which is often unrealistic.) This step requires a discounted cash flow (DCF) analysis to drive the leasing and financing terms to realize expected returns. Keep projections in the DCF as close to signed lease terms as possible; it will guide and expedite your leasing effort.

3 Bid Financing Terms. With your DCF nearly complete, put your financing terms out for bid to source the terms you’re looking for. Sensitivity analysis of the DCF can be performed to select the loan terms that meet your financing needs.

xls-anal4 Rent Roll. View leases as investments contributing to the returns of your property. The rent roll within the completed DCF serves as guide for negotiations of each lease. Collaborate DCF analysis with your investment analyst and your leasing team to ensure leasing efforts are guided by expectations of ROI. Leasing results should produce deals that contribute to the property’s expected returns, yet flexible enough to meet field conditions of leasing.

5 Operating Expenses. Use your DCF to shape efficiencies of expenses during the holding period. Trimming expenses without an end goal will likely produce marginal economic benefit. For example, negotiating property management issues and reducing property taxes should be guided by the DCF.

6 Lower Taxable Income. Remember to factor how depreciation, loan interest, and SALT payments can lower the taxable income for the property, raising its investment returns.

pm-icon7 Property Repositioning. Building systems and equipment nearing functional obsolescence (i.e. air handling, windows, elevator cabs) could be cause to vacate a percentage of the property to install capital upgrades. This should be approached as a redevelopment project that is economically evaluated to justify the investment, carrying costs during construction, and new revenue. Follow steps to plan the project.

8 Resale. Multi-tenant properties are bought based on income, expenses and sale projection; some more established landlord hold their properties for tens of years, improving returns from relets and capital improvements. A resale should be planned about 36 months before closing is needed to source a buyer at or very near to establishing expected returns. Use a copy of the completed old DCF to test it under project sale terms. That DCF will drive sourcing of a buyer to meet expected returns from re-sale.

Closing Comments. Ensure you have established all key points to making your multi-tenant property perform as a portfolio of investments; the return of each multi-tenant property contributes to the aggregate return of all properties your enterprise owns. Ensure your real estate analyst is nicely versed with Excel, Argus Enterprise, or PlanEASe to run the DCF, that includes running sensitivity analysis to test fine tuning of the DCF. Consider setting a company policy about handling each property this way, operationalizing the steps with your staff through a few test runs. Apply a project management framework to carry out the change in asset focus (Initiate, Plan, Execute, Monitor & Control, Close.)

If you agree that making this change is sensible for your asset portfolio, request a free 45 minute consultation with me by filling out the “Request a Consultation” form in the About Us web page. Please put “Asset Portfolio” in the subject line, paste the contact information of your executive assistant or COO into the message body. I will reply within 24 hours to schedule an exploratory call with your CEO or COO to assess your specific needs. Thanks for reading, perhaps I’ll hear from you soon. ###

Re-Capitalize Your Enterprise with Sale-Leaseback

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Is your enterprise seeking a recapitalization event? A sale-leaseback is a useful recapitalization tool for static uses of commercial property. The net proceeds of sale (equity + principal + capital appreciation) can be substantial. Before any sale-leaseback can occur, prepare a business case to justify the project; the terms of sale and lease are discussed to identify sale value, net proceeds, where to apply the cash and how the enterprise will benefit from the sale, currently and long-term. The sales-leaseback is attractive to seller and buyer in the early stages of economic expansion and during slow growth economies. Low, predictable rent increases benefit the tenant; investors benefit from a credit-worthy long-term investment. Facilities management can be outsourced to a property management firm, bringing efficiencies of services at low predictable costs. A consensus of yes among top management prompts strategic planning to plan a sale-leaseback project (“SLp”).


return on investmentXAction Spreadsheet

A sale-leaseback is a financing tool to re-capitalize an enterprise by exchanging property value and ownership for a long-term net lease; buyers are funded privately or publicly held. It works best with established enterprises (operating from a large single facility or from many sites with the same use), is a reliable loan for a lender, and is a reliable long-term investment for the buyer; the tool is akin to a corporate bond sold directly to one bondholder. I urge the preparation of a business case to justify making the commitment; facilities operating costs are assembled with accuracy. Most planning comes from a committee assembled by top management of the seller (CEO, COO, CFO, Chairman, board of directors if any). A commercial lease is often 10-15 years pending staff count and TI involved, yet the SLp uses 20+ year lease terms.  Results are compared to the costs to sell, a lease projection, property management expectations and the cost/benefit of tenancy vs. property ownership. The SLp taps equity, principal and capital appreciation by securing a large loan using the credit of the seller and the buyer to match stringent underwriting criteria of the lender; credit quality of the lease and buyer dictate the amount of the loan and equity required by the buyer. (Note: Equity investors of the buyers are attracted to the long-term reliability of income from each lease closed vs. buying an interest-bearing corporate bond.)

NPV_IRR

MIRR & NPV vs. IRR. What are the long-term projections of economic performance for the net proceeds of sale? Financial projections should include costs to finance equity and interest received from loans made by the company; MIRR (modified internal rate of return) shows the time value of your money more accurately over the term of the net lease. NPV shows the loss or profit from your investment assuming a discount rate. Compare MIRR to 10-year treasury yields and similar fixed investments. This cost-benefit analysis is included in the business case for the SLp.

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Sale criteria. Investment sale brokers consistently conduct marketing to source seller candidates for SLp’s. Buyers often create a private equity fund (with return expectations and placement criteria), placed through a mix of direct marketing and relationships with investment sale brokers. Instead of reacting to a marketing call (you’re unprepared for), prepare the business case outlined above, assuming a capitalization event. Report results will clearly show the pro’s and cons of committing to a SLp, qualitatively, quantitatively, operationally and culturally. Begin with a broker’s appraisal of the property(ies) to be sold, factor the potential net rent paid by your company’s credit score, this produces market value of the property(ies). Net proceeds of sale are the amount left from gross sale proceeds, less closing costs, less mortgage due, less capital gains taxes. A choice to pursue a SLp creates a steering committee to assemble the criteria for sale, guiding a project manager to source prospective buyers. The end goal is to select the most compatible business partner to purchase your property(ies). (Caveat: 20+ years represents a notable period of time in an enterprise’s life; seamless daily operations must continue.)

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Use of Sale Proceeds. Using sale-leaseback funds to improve a firm’s financial health fine sometimes, analysts say the best use is to reinvest the funds to support the company’s core business operations. “Sale-leaseback deals are definitely a higher-cost form of growth capital,” Ackerman says, emphasizing that companies should have a plan to use at least some sale-leaseback proceeds for expansion (Mitchell, NREI online, 2015).

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The U.S. is still perceived as a very stable economy abroad, and foreign cap rates are traditionally lower than those in the U.S., making the yields more attractive. Banks typically limit loan-to-value (LTV) on financing agreements to 80 percent, but sale-leasebacks allow a company to access the full amount of a property’s value. Firms can use the funds to expand their lines of business, invest in new equipment or even maximize returns after a merger or acquisition, according to net lease broker specialist Stan Johnson Co of Tulsa, OK (Mitchell, NREI online, 2015)

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To recap, sale-leasebacks are prevalent in low interest rate economics; they tap the value of a property, secure fixed rents/increases, tenant retains daily facilities management; buyer takes title to the land and building, responsible for the physical integrity of the building shell. An established business with a long-term future can attract a high price for their property(ies); returns from the rent income stream are similar to a long-term corporate bond. If your enterprise is considering a sale-leaseback project, please ask your CFO or COO to fill out “Request a Consultation” at the base of About Me in this website. Enter “capitalization” in the subject line, then paste the email signature of their executive assistant the message body. I reply within 24hrs to arrange an exploratory conference call within their calendar. ###

Planning for Change: Test-Fit Proposed Space

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No COO would accept a space layout that fails to meet operating needs. Deal terms alone lack critical information to make the right space choice for the [long-term] operating needs of your organization.  A space planner can create a test-fit of spaces being considered. The test-fit will reveal how your staff seats and flows within the space, and the cost and time to build (permits and materials’ procurement included).  Deal terms and test-fit results give a full picture of space choices. (Note: If you choose to take surplus space to grow into, the space planner should design the surplus space to lease/sublease until you need it (e.g. firewall and locked door)).  BREG’s 7-Point Service includes a request for test-fit into each proposal to lease space.  The following outlines the process…

Lease Proposal

Deal Terms. The business terms of a transaction incorporate your space budget and the legal requirements of occupancy. These terms should be aligned with your search criteria (created by your search committee during strategic planning).  Your realtor is versed how to craft the terms, customized to your needs.  The content of this proposal are the basis to begin negotiations for the space.  You’ll use sellers’s (near complete) counter proposals and test-fit results to compare spaces of focus, whittling to a short list of properties to negotiate for, in order of choice (1st, 2nd, etc.). Always give your realtor enough room to negotiate any final points critical to your organization to reach a signed term sheet. That term sheet will represent the business and basic legal terms to draft a lease or sale contract.

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Test-Fit. An architect specializing in space design and planning can design a test fit of the space(s) you’re focused on; the result is a roughly accurate plan (in 2D and 3D). Landlords may offer this concession to tenants approved for occupancy; hire an architect when searching for a property to buy. The plan created should show how your staff ‘seats into the space (e.g. private offices, departments, shared rooms & spaces, etc). The architect can advise of a timeline to ready the space for use (e.g. full set of construction drawings, permits, procurement of materials, labor to install) and a rough estimate of construction costs. If a landlord offers a Tenant Improvement allowance (TI) and construction time before rent begins, compare that concession value and time with total construction costs and lead time to ready a space for occupancy.  Ask your realtor to estimate the lead time necessary to complete the search project, from strategic planning to 30 days after the move-in; that estimate represents the term of the project.

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Lease Proposal

The profile of deal terms and test fit results, per property, positions your realtor to model each deal to compare spaces of focus equally, presenting their findings to the search committee.  This slideshow outlines how BREG can manage your search process, from planning to post move-in.  If you’d like to discuss your plans for a real estate project, please ask your CFO or COO to fill out “Request a Consultation” at the base of About Me in this website.  Enter “Test-Fit” in the subject line, then paste the email signature of their executive assistant the message body. I reply within 24hrs to arrange an exploratory conference call within their calendar. ###

Real Estate Investors, Tri-State Region $5M-$100M

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mhm-iconfinan-modelingReal Estate investors in the $5M-$100M range often have a skeletal staff and outsource select services. Deal analysis may be handled by a buyer’s broker (who is compensated in commission from a property sale).

Does your organization operate this way? Do your investment guidelines [consistently] need to be matched to the broker’s projections? (eg. scrub projections against your investment guidelines that includes core property type, financing sources, IRR/NPV/MIRR and holding period, splits or promotes to investors). If so, does that create “extra work” for your small staff?

Property financials and your investment guidelines are plugged into each suspect investment, and periodically, to assets within your portfolio. Such activities seek to identify how well a suspect or incumbent investment can contribute to your portfolio and enhance profits. Analysis reveals which assets need to be [financially] optimized or sold.

return on investmentxls-analI can perform these analyses for you on-demand or by project, free of HR expenses. Working with me gets you the projections you need to decide which property (ies) to buy, optimize or sell. I establish a working relationship with you, learn your investment criteria, equity relationships and financing tools to guide my work for you. Within a few completed projects, I will see properties from your perspective, expediting my work for you.

I was raised on real estate within the tristate region.  I leased or sold $30 million in transactions as commercial realtor [whether listed or not], most multi-tenant, some mixed-use, (eg. land, retail, industrial, flex, medical and office properties). I have a current, holistic view of the market and am adept at valuation. I am savvy to the makeup of micromarkets and the nuances of their communities. I understand how properties make money, to maximize rent and to divide floors efficiently. I am equally versed with how to build space that works efficiently. Extensive networking and transaction activities introduced me to key market players.  (Additionally, if you buy properties in the Atlanta MSA, I am savvy to that market, having worked it from Q403-Q407).

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segal 4x5pm-iconI am available by transaction or project; all compensation is reported annually via 1099, saving you HR expenses and benefits.  I approach work with a sensible, flexible, can-do attitude. (People I’ve met say a New York City attitude shines from me.) My efforts are complimented by knowledge and knowhow, with attention to detail.  If you’d like to discuss these “Quant with Project Management” services for your [real estate] investment portfolio, please ask your executive assistant to fill out “Request a Consultation” at the base of About Me in this website. Enter “Quant/PM” in the subject line, then paste their email signature in the message body. I reply within 24hrs to arrange an exploratory conference call within your calendar. ###

 

 

Project Management for Real Estate

Flex BldgActivating an initiative for real estate without carefully aligning it to your objectives and a cogent, time-sensitive strategic plan(s) will set your business up to clean up a big mess that’s expensive and time-consuming. Would you risk your cash (and resources) on an investment initiative without researching the likelihood of it performing? Of course not. A structured action plan that plans for success includes a business case, an impact analysis, activated by a project management framework. BREG’s 7-Point Service was designed to guide each real estate initiative along a tested business process to ensure each project’s success; see case studies in Mayer’s Blog for examples.

strategize-iconStrategic Planning

Executive planning includes strategic, tactical and operational plans. Strategy is a high-level view of a vision to achieve. Tactics are the means to realize the strategic plan. Operational plans are the goals for departmental managers to achieve from deliverables. Your real estate project (initiative) should be aligned to your organizational objectives, realized through tactical planning. A business case and a Business Impact Analysis (BIA) is recommended to determine how well the initiative is aligned to organizational objectives. Neglecting or passing-over this step could lead to an unplanned outcome or unwanted constraint, blocking the realization of objectives; fixing that problem creates excessive costs and downtime that materially impedes business operations.

Business Case. Any initiative needs cost-benefit analysis to justify how its implementation helps to meet organizational objectives. For real estate, it defines how an investment, expansion, or relocation effort would meet organizational objectives. Qualitative (judgement per criteria) and quantitative analysis (financial modeling) are performed with sensitivity analysis (what-if scenarios) to identify if the initiative is justified.

Business Impact Analysis. This assesses the risk associated with implementing the change. Is the risk worth the reward, or does the risk bring unwanted harm to the business?

Steering Committee. This group of thought leaders evaluates results of the business case and BIA, deliberating over the reports; an established commercial realtor can answer questions and offer advice. This group decides whether to return the research for more information, reject the initiative outright, or approve the initiative for implementation.

pm-iconProject Management Framework. The content below are the key points of project management.

Project Charter. An approved initiative is formally outlined in a project charter, to be signed by the project sponsor and BREG. The charter represents the goal of the project with which to create a Scope Of Work (the efforts performed to realize the goal), aligned with the scope of the project.

Scope Of Work (SOW). How your project will be conducted with the resources assigned to realize the deliverables. Roles of the steering committee, project manager and project team are outlined. A Work Breakdown Structure (WBS) outlines how work is distributed to project players with delivery dates of work completion. Project Procurement is a 5-Phase process to source services and materials for processing to produce deliverables. These two documents are critical to guide the project players along a path to completion, with deadline dates to realize deliverables on time. (Note: a scope statement may be needed for larger projects.)

Project implementation. Initiate, Plan, Execute, Monitor & Control, Close. These five core phases conduct the effort of the project. A certified and experienced project manager is versed with this process.

This framework can be abridged when the project scope allows for it, yet the framework guides project participants along a critical path to complete the project.

Project Close. Project participants may be inclined to part from the project after the deliverables have been met, yet this step ensures all parties agree the customer received their deliverables and have accepted the outcome. This brief formal process reviews deliverables with the customer, seeks acceptance of deliverables, and written consent to close the project. All project participants are informed when the project is formally closed. BREG extends the date of project closure several weeks after the go-live date to identify a punchlist items that ensure the customer realizes its objectives from the project. Then, the brief process of project closure is performed.

Centralized Management = Timely, Integrity, Reliable, Predictable:

  • CAPM BOK to assess project, prepare business case, seek consensus for project, prepare project charter, scope of work, WBS, assemble functional or matrix staff.
  • ITILv3 principles and processes include strategy, design, implementation, operations (support).
  • Daily and weekly monitor and control to fine tune processes to ensure project produces deliverables as envisioned.
  • Project is documented in cloud-based PM productivity app to ensure timely documentation of project progress.

    handshakeIf you’re considering to activate a real estate project for your business, the process outlined above works consistently. If you’d like to discuss your plans for a real estate project, please ask your CFO or COO to fill out “Request a Consultation” at the base of About Me at nytenantrep.com. Enter “Strategic Planning and PM” in the subject line, then paste the email signature of their executive assistant the message body. I reply within 24hrs to arrange an exploratory conference call within their calendar. ###

Industrial Real Estate for Supply Chain Management

Brown-Industrial-Building1A search for industrial real estate unmatched to your supply chain management (SCM) program could be a futile effort.  Imagine operating from an industrial space to facilitate your supply chain vs. one that fails to.  To accurately match industrial real estate to SCM, establish criteria from your SCM program to commence a property search.  (I can meet with your c-level SCM executive to identify the criteria for a search and suggest towns likely to have properties to meet that criteria.)  A 5-point plan and 4-point evaluation rubric can guide both the creation of criteria and the search/secure effort:

  1. Strategize. 2. Design. 3. Implement. 4. Operate. 5. Continual Service Improvement

  1. Strategize.  Identifying how your supply chain and staff operates guides the creation of criteria to commence a search/secure process, preferably by a Tenant Rep well-versed with industrial real estate.  Which of the key points below will fall into your space search criteria?

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2. Design. Implement the criteria from the Strategize phase into a virtual design of an ideal property; this vision drives your search and secure process.  This list of attributes guides the search – selection – secure effort.

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implementation-icon3. Implement.  CAPM. Plan the relocation as a formal project, run by committee, stakeholders, project team and project suppliers.

operationalizing-the-vision4. Operationalize.  2-3 years lead time is ample to factor in all facets of relocation at a leisurely pace.  This lead time gives your secure effort negotiating advantage and time to revise a search effort if the property of choice becomes unavailable.  The actual relocation effort through go-live date could take 12 months to process.

CCIM logoYour Tenant Rep should evaluate each property reviewed based on the search criteria plus the evaluation model applied by the CCIM strategic analysis model: a) market and competitive, b) site/location, c) political and legal, d) financial.  These criteria are integrated to produce attractive choices and guide the property bidding process.

CSI icon5. Continual Service Improvement.  Before final offers are submitted, arrange a formal meeting of all stakeholders affected by the move (warehouse ops team, mfg team, shipping/receiving team, SCM team, IT).  A thorough paper review and on-site walk-through of each location by these stakeholders will identify which property(ies) fall into choice order.  These staff members are your boot-on-the-ground team/managers who have deep knowledge of facility operations. Their perspective gives your search team valuable feedback on how to proceed with the final bidding process.

The industrial real estate for your business plays an essential role in your enterprise’s SCM.  Precise search criteria support a simple, efficient and expedited search/secure process; any needs for property retrofit are identified during the property evaluation process.  I can help with all facets above, having experience and academics to support it.  If you’d like to discuss the industrial real estate needs of your enterprise, please ask your CFO to fill out the form at the base of “About Me” page, write “Industrial site search” in the subject line, with the CFO’s email signature in the message body.  I’ll reply within 24hrs to arrange an exploratory conference call within their calendar. ###

Acquiring Commercial Space: DIY or Tenant Rep v2

In 20yrs as commercial realtor, I’ve seen many cyclical trends. Until circa 2005, properties were often listed by Listing Agents [specialists] and Tenants were often represented by Tenant Reps [specialists]. These specialty service providers made transaction activities efficient for their clients.


The combination of media coverage about the space market and listings of space in the Internet has made space relatively easy to find and secure (down to 300rsf). Rent prices in densely populated urban cities are not always posted in digital listings due to the dynamics of weekly updates to prices.

Over the past 10yrs, some Tenants/Buyers have endeavored to search/secure their space DIY with the Agents/Reps listing their building of choice.

In Suburbia, a DIY approach may be prudent for Tenant and Landlord (or Seller) for transactions up to 3500rsf. Limit leases to 5yrs to limit your rent commitment and foster flexibility of space use as market forces affect your operating needs. For deals larger than 3500rsf, an exclusive Tenant Rep gives your business a) the leverage to evaluate quantitative and qualitative aspects of a deal, b) compares analysis results of space options to operating needs and budget and c) facilitates competition for your deal through an experienced Tenant Rep. This post outlines why hiring a Tenant Rep is the most effective way to secure the space/property fitting your search criteria at the sharpest price above 3500rsf.

Select Case Studies

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LOFT LEASE. Q3 2015 Brokered strategic downsize of space via early relo to relet at market rate. Strategically planned with client to downsize space to meet showroom needs of business. Five month exhaustive search with transaction modeling produced submarket change to high traffic Class A showroom building + shared space for meetings with customers. Arranged for relet of 3680rsf to move into 1700rsf, brokered release of obligations, sale of unneeded items, project managed move. 5yr term with concessions. Brokered as Principal of Business Real Estate Group.

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LOFT LEASE. Q3 2013 Project managed landlord-induced relocation of NYC showroom of maturing Gen X/Y fashion mfg. Facilitated the design and construction of new space that met client’s operating and customer cultures. Overcame 4LF lower ceiling through strong A&D recommendation; lighting and industrial finish opened a space that could have appeared cavernous. Negotiated space reduction to fit operating needs/budget. 3680rsf, 6yr term; accessories row of NYC Fashion Center. R.E. Consulting Assignment.

 

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LOFT LEASE RENEWAL. Q1 2012 Renewed lease for NYC showroom of established ladies fashion mfg. Research of industry economics, local market and building economics facilitated spreadsheet analysis of renewal terms to prepare aggressive offer terms. Negotiated highly competitive rent and favorable renewal terms to save tenant notable rent expenses, coordinated construction trade to landlord, maintained favorable relationship with landlord for tenant. 4218rsf, 7yr renewal, worth $1.3M, $36K in concessions.

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4264wcrd

Q3/2006 Office and warehouse property in industrial locale along 1/4mi industrial strip.  Listed 16Ksf office & warehouse property owned by private Asian investor. Market study suggested marketing 13Ksf of property for lease re-position directly to Tenants and brokers and to potential users for recommended sale price of $1.36M.  Doraville, GA.

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Q2/2006 New flex lease on behalf of private property owner. Identified Tenant’s business, its operational status and general credit condition from tax returns. Identified key business terms (rent, T.I., possession, commission) needed to complete transaction, reached signed term sheet from Tenant with which customize industrial lease from Real Estate Trade Association. 3500sf flex lease in 16Ksf flex building to emerging business for 3yr term, as-is deal worth +/-$62,000.00. Community industrial park, Marietta, GA.

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rr-marietta

Q3/2006 Facilitated sale of two-story community office property, 50% leased, to local business on behalf of private investor/owner. Property appraised and sold for initial list price that was +/-$25psf over market. Customized new contract of sale from Real Estate Trade Association and advised Seller to negotiate results of inspection period . 4000sf property sold at my full valuation for $700K.  1 Blk off highly traveled N/W corridor, Marietta/Sandy Springs, GA.

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1252-oakleigh-dr-ep

Q3/2005 Coworker requested assistance to market rail-served 28,200sf industrial storage property, 14′ ceiling, 4.475ac within ailing south Atlanta industrial park.  Extensive market study suggested flex use, leverage water sprinker, low r.e. taxes, power upgrade and rehab of building interiors.  Marketed to users directly and brokers for $800K.  South Atlanta, GA.

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marietta-ga

Q2/2005 New office lease for operator of new business: Identified location and budget needs of unique to-be-formed skin spa business. Used demographic study to identify best geographic area to open first location. Recast landlord’s standard lease to match client and landlord’s needs. 2220rsf office lease in low-rise suburban office building for 5yr term plus renewal options worth $500K, including $15K in concessions, exclusivity of use in property , building and lawn signage, and non-disturbance clause.  Upscale family-owned community office building, highly traveled corridor, Marietta, GA.

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Oceanside Flex

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MIXED-USE INVESTMENT SALE FOR REHAB. 4/2004. Sold mixed-use two-story community property. Relationship-based contact sought underused/undervalued property to redevelop and relet for 1031 exchange transaction. Property uses include office, flex, warehouse and residential. Upon securing zoning variance, property will be redeveloped for multi-tenant office and residential use per conservative income and expense projections. I replaced a renegged buyer with this one.  8500sf property sold for $650K.   Affiliated with Sutton & Edwards / TCN Worldwide.

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FashionCtrNYC

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LOFT LEASE. Q4 2004 Showroom/loft lease with NBI: Relocated loyal client of 5yrs to facilitate long-term growth of company. Conceived and negotiated business terms of lease including compensatory damages due client if Landlord could not deliver premises from holdover tenant within contiguous space. 3565rsf in 3 separate spaces with staggered lease expiration dates released to 4218rsf of contiguous showroom space for an 8yr term worth $1.3 million, including $175K in concessions; accessories row of NYC Fashion Center.

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Investment Sale: L.I. NY, Multi-Tenant Office

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OFFICE INVESTMENT SALE. Q3 2003. Multi-tenanted office investment sale. Facilitated sale of multi-tenanted class B office building on owner/investor’s behalf to local investor seeking leased property for 1031 exchange transaction. 15,600sf low-rise 10+yr old office building for $2.45 million; foot of Westbury, NY CBD. Affiliated with Sutton & Edwards / TCN Worldwide.

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MEDICAL LEASE. Q4 2004 Medical use of grade level space. Office space listing for private equity developer to convert grade level space to medical use. Secured long-term lease to medical specialty. 3700sf with full tenant improvements, free rent and parking rights; Little Neck, NY (Mid-Eastern Queens).  Affiliated with Sutton & Edwards / TCN Worldwide.

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INDUSTRIAL LEASE. Q2 2003 Class C+ Flex lease, strong regional credit. Relocated office and shelter for regional animal shelter. Location required quiet Borough location near Manhattan with room for indoor/outdoor vehicle parking and temporary animal storage; zoning was an issue. 19,000sf 10yr flex lease worth $2.2 million, $276K in concessions to accommodate $225K in tenant improvements performed by Tenant; LIC NY Industrial Park. Affiliated with Sutton & Edwards / TCN Worldwide.

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OFFICE LEASE. Q2 2003 Class B+ office lease, national credit: Relocated two separate offices in Manhattan and Forest Hills, NY for office user representing a national insurance company. Manhattan relocation: 2200rsf sublet in Class C building to 3800rsf direct deal in Class B+ building worth $1million. N.Y. Boroughs relocation made in two steps: 1) 5100sf user-owned building to 9210rsf office sublease worth $290,300 from national insurance company in Class B+ building. 2) 10,100rsf 10yr lease worth $3.5+ million in Class B+ building, $200K in concessions. Both buildings owned by prominent regional landlords. Affiliated with Sutton & Edwards / TCN Worldwide.

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FLEX LEASE. Q1 2002 Flex lease due to merger: Secured relationship with flex user operating from storefront during acquisition of new business. Identified/negotiated space within newly upgraded multi-tenant flex park 3+ miles from storefront. New location amply accommodated space needs for customer while improving company image. 900sf to 3500sf, 5yr lease worth $215,500, $15K in concessions. Renewed / recasted lease terms January 2007; Hicksville, NY. Affiliated with Sutton & Edwards / TCN Worldwide.

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1100 Shames

OFFICE LEASE. Q3 2001 Referred internally to expanding privately held enterprise in collections business. A business case proved customer’s requirement was achievable. Sourced a 5500sf tired, obsolete (60%) flex space; convinced Landlord to convert to 90% office with storage space to drive-in door. 85% NBI including new HVAC and wiring. +/- 5500rsf 7yr lease worth +/- $400K, $150K in TI & free rent concessions, Westbury, LI flex park.  Relocated from 2300rsf class C office in Queens Village, Queens.  Affiliated with Sutton & Edwards/TCN Worldwide.

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RETAIL LEASE. Q4 2001 Retail lease from industrial conversion, national credit: Assisted regionally known furniture retailer to secure first storefront in Bronx after thorough site search of N.Y. Boroughs. Assisted in deal structure, annotated store lease with comments for counsel’s review and referred customer to specialty attorney to secure local tax abatements. 8,000sf 10 year lease worth $1.8 million, $60K in concessions; across from Montefiore Hospital.  Affiliated with Sutton & Edwards / TCN Worldwide.

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FLEX LEASE. Q4 2001 Facilitated growth of private emerging health snack foods company on Long Island from inefficient/crowded tower level office to flex space; identified /secured sublease of flex space, 7500sf with 1/3 office. Created expandable warehousing opportunity with local owner of public storage property to meet customer’s emerging needs for high ceiling warehouse space. Landlord needed convincing to accept tenant in exchange for rent of unused space.  Affiliated with Sutton & Edwards / TCN Worldwide.

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LynbrookOffice

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MEDICAL LEASE. Q3 1997 Medical re-use of storefront. Brokered re-use of Class C storefront for established local medical specialty group. Persuaded local landlord to secure long-term modified gross lease for complete rebuild of storefront space toward revitalizing under-performing retail strip. 2600sf plus parking rights in tightly parked neighborhood; Lynbrook, NY (Southwest Nassau).

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GardenCityMedical

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MEDICAL LEASE. Q3 1997 Medical re-use of space. Represented regional, family-run dialysis center to locate new site for coverage radius. Persuaded local family-owned landlord to secure long-term net lease for complete rebuild of long vacant flex space with limited future use. 6400 sf secured special access and parking rights; Garden City, NY (Foot of medical row and Roosevelt Raceway).

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DaVita Lynbrook

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MEDICAL LEASE. Q3 1997 Medical redevelopment. Represented regional, family-run dialysis center to locate new site for coverage radius. Persuaded local family-owned landlord to secure long-term net lease for complete redevelopment of former garage. 6400 sf on 12Ksf lot; Lynbrook, NY (Southwest Nassau).

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BellmoreIndustrial

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INDUSTRIAL SALE. Q3 1996 Industrial purchase with land sale: Secured relationship with owner of local auto dealership to locate /acquire industrial site for inventory storage. Brand-name national manufacturer owned selected site. Portion of site was vacant land zoned residential, sold in two separate transactions to local developer I located to build two, single-family homes. 18,000sf warehouse on 1.25 acres for $480,000; 11,000sf vacant land sold for $110,000, Bellmore, NY (South-central Nassau).

Lease Medical Office Space

If you’re a healthcare services provider facing a need for medical office space, there are multiple moving parts of a lease to consider. (The project is akin to a patient researching / preparing to experience a lengthy procedure with a short recovery time.) The Landlord’s review of your space use, needs of buildout and financial stability of the practice will be evaluated, as a loan officer of a bank would review your loan application; its a large financial investment to make relative to the income expected. Knowing a) your needs, b) how to mitigate the risk, and c) guarantee rent payments, will sell the landlord to accept a lease with your practice. For example, specialty medical chains or hospitals offer the guarantee of a large, financially strong corporation, that rent will always be paid for the duration of the lease; such guarantee is attractive to the landlord (their investors and/or lenders). BREG has leased office space multiple times for established practices and specialty chains that required new building installations; select Case Studies at this link show examples. The outline below offers takeaways to apply to your next office lease deal.

Establish a Committee. Establish a committee to assemble needs, goals and objectives three (3) years before the go-live date for the new space; the time passes fast factoring patient visits, personal lives and project planning. This committee will create the criteria for the space search, office operations equipment, space aesthetics, parking needs, move-in and go-live dates. Members will include a decision maker(s), a project manager versed with construction of medical space, a proofreader of content, a face of the committee (as Single Point of Contact) to the project’s players. Decision members sign off internally or publicly on key aspects of the project; avoiding misunderstood assumptions. This committee keeps the search and secure process moving forward until complete; doctors add input/make decisions when not involved with patients. All committee members (doctors included) must communicate calmly / thoughtfully through the move in date despite unforeseen dramas from the project. (Planning and lead time dilute the impact of these dramas.) When the space is fully prepped for use, add time for all staff to prepare their respective space for use plus a full test drill to ensure everything works as expected for opening day. There should be nominal downtime from opening day of the newly built space.

Identify your needs, goals and objectives of the project. Pre-planning puts time on your side to identify the right location and space, at financial and legal terms favorable to the practice. This is a sizable investment to the landlord; your interests must meet theirs to shake on a deal you’ll mutually accept. Physical attributes are space layout, waiting room size,clerical space, exam rooms, lab rooms, procedure rooms, management offices, community space, locations and sizes of entry/exit doors, proximity of space to building parking, HVAC, lighting. Aesthetic needs are cosmetic ambiance of space (wood, carpet, paint, furniture, display monitors, clerical counter to patients, musaq); the mood of the entire space contributes to the experience you want your patients to have from each visit. Technical needs include computers, phones/fax, medical equipment, plumbing, electricity, medical gas for equipment and for patients, HVAC. The project manager of the committee ought to be from an architectural firm with niche serving healthcare providers. It would be cost-effective to hire an architect to create a rough drawing of the space to your specifications and collect a rough estimate to build the space. The result is discussed with the practice’s accountant to identify a budget to lease the space; that investment contributes to project planning. A Tenant Rep realtor with niche in serving healthcare providers, works with your accountant to factor the construction estimate into a financial projection of leasing costs (both initially and over the term of the lease). The Tenant Rep should advise the committee on the lead time needed to source a space, build and equip it and begin operating from the space.

Lease Term. Conventional office space rents at a discount to medical office space, typically for a five (5) year term. Medical office space typically rents at a $7-$10psf premium to office space to factor in higher traffic use to the building and space and construction costs; an average ten (10) year lease amortizes the up-front investment to build the space. These aspects should be discussed in committee to budget the rent costs and project practice operations ten years forward. (Note: this approach is indifferent to the space size you secure.)

Tenant Rep = Advocacy. The nature of the search criteria and details of project execution necessitate hiring a Tenant Rep realtor. They advocate for the search/secure needs of the practice and the business terms of the lease until 45 days after the move-in date. This approach produces a best outcome of the project, enabling doctors and support staff to remain focused on patient care. The Tenant Rep will prepare a simple representation agreement to review for signature. Ask your practice attorney to review it to advise the committee of its implications and your rights.

Construction Management. The project manager within your committee is responsible to oversee “all” construction efforts to ensure the space is built to your specifications, on-time, at or below budget. Advocacy of construction for your practice is essential to project outcome; do not skimp on advocacy nor expect the landlord to complete “as discussed”.

Real Estate Attorney. Your Tenant Rep ought to recommend or refer a Tenant Rep attorney with niche serving healthcare providers. Such specialty will protect your rights in the lease; avoid a business attorney lacking years of experience negotiating office leases for doctors. The attorney’s job is to work with your Tenant Rep and the Landlord’s attorney to ensure your legal rights in the lease are protected. (Note: a lease gives you strong rights of possession and use during its term.)

Moving trades, equipment providers, Information Technology and phone/fax. The construction project manager oversees liaising with the commercial mover, medical and office equipment providers, cabling installers, and IT installers. Ask your IT provider to oversee the installation of your phone circuit and phone/fax equipment.

Construction Punch List. When your space is about 95% ready for occupancy, (about 4 weeks from the move-in date), the committee, Tenant Rep, General Contractor and Landlord should meet to tour the space to identify open items to close within the budget of the buildout. These items makeup a written “punchlist” for the general contractor to complete. After the tour, have your project manager meet with all moving trades to carefully label the space where items will be placed; agree on a delivery/install date and time to complete. Another tour should be made by the same entourage to view completion of the punch list; arrange a formal meeting to accept in writing that the space is ready for move-in. Your project manager should notify the moving trades to confirm the space is ready to accept their work. This careful tedious approach ensures a smooth outcome, on-time.

Your project manager should be on-site during the move-in process, overseeing the effort agreed to. Once complete, the entourage should visit the space a last time to accept (in writing) that the space is ready to use. Implement a day(s) for the staff to prepare their respective spaces for use (as outlined in the paragraph above about establishing the search committee). Your Tenant Rep and project manager should work collaboratively, over the next 45 days, talking every few days to ensure the space is operating as expected. Let them talk with any trades to close holes in space operations during that time, enabling doctors and support staff to focus on patient care.

I trust this post has been helpful to you and offered takeways to implement in your healthcare practice. If you’d like to discuss BREG’s Tenant Rep services for healthcare providers, please click “Request A Consultation” link in the upper right of the screen. Enter “BREG Medical” in the subject line; please include your name, email address and telephone number in the message body; I reply within 24 hours. Thanks for reading and listening. ###

Navigate Your Next Real Estate Transaction

If your CXO suite is planning a change of its real estate, learn to navigate market conditions effectively. There’s many moving parts to source and secure the right space and business terms to meet the operating needs of your company. Learn which questions to ask or how to position your business to get the deal terms it needs. I am currently offering conference room presentations as special guest to CXO meetings for businesses employing up to 150 staff. Request a topic from the blog posts here in “Mayer’s Blog” relevant to your needs.  Two presentation formats are available.

  • 15 minute presentation of basics, take a business card to ask questions via a planned follow-up call or meeting.
  • 30 minute presentation of full topic, plus 15 minutes of Q&A.

Should your CXO decide to discuss Tenant Rep services from me, all exploratory discussions of your needs are interactive via a white board, whether held in your conference room or via Skype.

If you’d like to invite me to present in your CXO meeting, click “Request A Consultation” link in the upper right of the screen. Enter “CXO Presentation” in the subject line; please include your name, email address, telephone number and topic subject in the message body; I reply within 24 hours. Any presentation requires five (5) business days lead time to schedule into my meeting calendar. (Any requests for custom made topics require fifteen (15) calendar days’ lead time to research and prepare for.)  Thanks for reading and listening, perhaps I’ll hear from you in the future. ###