KNOW YOUR ASSETS: Why should I lease your building?

There is a lot of competition to attract tenants – especially in the business climate we are in. I don’t need to tell you that vacancy rates are high and tenants are taking advantage of that in their negotiations.

So how do you make your building/space/unit stand out? Be it industrial, office, retail, or residential, there is something unique about your real estate, but don’t look for the obvious – it may not always be physical.

About five years ago I listed a 215,000 square foot industrial building in Marlette, Michigan, which is in an area known as “The Thumb” (yes, Michiganians will always hold up their hand and point to the spot where they live – at least those in the Lower Peninsula).

Marlette is midway between Detroit, Flint and Saginaw; three cities that have been badly affected by the loss of jobs in the auto industry. As a result there are many 200,000 square foot vacant plants available. Not only that, but the owner insisted on a lease rate nearly double the market rate.

Marlette is surrounded by Amish farmers and they and their families made up most of the plant work force. While being given a tour of the plant by the manager of the vacating occupant, he continually bemoaned the fact that his loyal, hard working, reliable employees would lose their jobs. He told anecdote upon story of what a blessing they were and how profitable the plant was because of them.

I asked him if he would give me a letter of recommendation for his employees, which he immediately agreed to and threw in the entire community. That letter was posted on my web site presentation of the plant and became the centerpiece of my marketing. I did not promote the building – there were many to choose from – I promoted the work force.

After just a few months I had received four offers to lease the building and it went for slightly over the already high list price. The new tenant was a Spanish Tier 1 auto supplier that was actually headed to Mexico.

Step back and take a fresh look – what makes your building superior? It may not be the building or even its physical location.

PROBLEM SOLVING: Use opposite thinking

What is opposite thinking? I first heard of it many years ago in an interview with the author of a   book, “The Power of Opposite Thinking.” He described what opposite thinking was and gave this example:

One morning he read in the newspaper that a new high rise office building was having a difficult time signing leases and was in fact losing some of the tenants it already had. Why? The explanation was that when they designed the building the architects determined how many elevator trips would be made each day and divided by 24; the hours in a day.

The fact that most trips would be made from 8:00 – 9:00 AM as workers arrived, then during lunch hour and again at 5:00 PM when workers left for home was not factored in. As a result the long wait in the elevator lobbies had people angry and demanding to be let out of, or actually canceling their leases.

Engineering studies were done and the only solution the engineers could come up with was to remove the office at the end of one corridor on each floor and install an outside elevator. The cost, along with the loss of revenue, was staggering.

Our author contacted the building’s owners and persuaded them to let him have one week to study the problem, to see if there was another solution. The owners were reluctant, having been worn down by the process, but finally gave in. He had one week.

The author spent a day observing the elevator usage and computed the average wait time. Then he went to other buildings and timed the average wait at those buildings. It turned out that the wait time for an elevator in the subject building was only 20-seconds longer than in other buildings. So, the problem was perceived, not real. What solution did he come up with? He appealed to the human ego.

The author met with the building owners and after giving them his findings advised them to line the lobbies with ceiling high mirrors. People love to check themselves out in a mirror, he explained.

After installing the mirrors the anxious owners and the author watched and saw that while few people looked directly into a mirror, most would look at themselves out of the corner of their eye.

The extra 20 seconds was no longer noticeable, people became calm, the tenants no longer had a problem (even though they didn’t realize it) and soon the building was fully leased.

Don’t always look for the logical answer – look for the opposite answer.

BUYING DEVELOPMENT LAND: Get enough time

The neighbors will say, “All of a sudden they were building “it” and nobody knew anything about “it” until they began to move dirt.”

If only that were true.

The process of getting a development or building approved can be quick and painless in one community – and a nightmare in the next one over.

Municipalities vary in philosophy; some encourage development for many reasons; betterment of the community, increase the tax base, belief in the free enterprise system, etc. – and some are downright unfriendly to developers.

Sometimes the unfriendliness may be justified in a particular case, or with a particular builder and/or developer, but when it is consistent you know there is a problem. If you want to conduct business there you must give yourself enough contingency time in the sales contract to obtain your approvals.

It is well known in my area that the time required to gain site plan approval is much greater than in municipalities just a short distance away. Without going into speculation as to why that is, I will just cite two examples.

In the first one an out-of-state developer of a national discount store asked me, even though I was not involved in the deal, “How long do you think it will take us to get approved?” I told him, “About two years.” He was actually flabbergasted, saying, “We have never taken anywhere near that long in any state where we do business.” Two years later he phoned me, reminded me of what I had said, and told me it had taken 23 ½ months. He thanked me for giving him the advice to get plenty of contingency time in his sales contract.

The second example I will simply say, “I was in my 50s when the sales contract was signed and qualified for Medicare when we finally closed the sale.”

Know the community in which you are about to do business, and if you don’t, use local professionals and heed their advice. The best time to get the time you need is when the sales contract is being negotiated.

COMMERCIAL FINANCING? Now lending

This news release, dated January 16, 2009, is welcome news to the commercial real estate community:

Sperry Van Ness International (SVNI), one of the nation’s largest commercial real estate brokerage firms, will launch Sperry Van Ness/Better Capital Partners on Monday, January 19, 2009. The new division will be led by premier investment banker Eric H. Better who will serve as President and Principal of the new division. A new website has been created exclusively for Sperry Van Ness/Better Capital Partners and can be found on the internet at www.svnbcp.com.

Sperry Van Ness/Better Capital Partners will offer Sperry Van Ness advisors and their clients a full capital stack which includes debt, equity and joint ventures for all forms of commercial real estate properties nationwide. The firm’s services include: Permanent, Bridge, Mezzanine, Construction, and customized financing for acquisition and refinance.

“During this financial crisis, it is vital that Sperry Van Ness provide a national financing platform that will service, and assist our advisors and their clients, so that more deals can be closed,” said Kevin Maggiacomo, President of Sperry Van Ness International. “Eric Better is one of the industry’s premier commercial real estate investment bankers and we are confident that his team has the capital market knowledge and lender relationships that will ensure success. We welcome Eric Better and his lending team to Sperry Van Ness.”

Sperry Van Ness recruited Eric H. Better from Los Angeles based George Smith Partners Inc., a leading commercial real estate investment banking firm. Mr. Better has formed a dedicated commercial real estate banking division that will provide financial services to more than 1000 Sperry Van Ness advisors and their clients nationwide. Mr. Better is joined by a seasoned team of commercial real estate lenders, bankers, brokers and sales professionals.

[Bios deleted – please go to www.svnbcp.com for the very impressive biographies of the team; as well as the extensive list of Loan Programs, Property Types, and more. It’s worth the trip.]

Founded in 1987, Sperry Van Ness is one of the largest and fastest-growing commercial real estate brokerage firms in the industry, with more than 1000 advisors in over 150 locations. Sperry Van Ness delivers results for clients through a proven business model that immediately markets every one of its clients’ properties to the entire brokerage community. Based in Irvine, California, the firm operates internationally and provides brokerage, consultation, asset management, property management, leasing, accelerated marketing, and auction services. Sperry Van Ness’ gross sales volume totals billions of dollars annually in office, multifamily, retail, industrial, self-storage, hospitality and land transactions. For more information, please visit www.svn.com and www.svnbcp.com.

Vacant Land: is now the time to buy?

There is no question that vacant land values have been punished, especially in the last year – and there is the opportunity.

Having specialized in vacant land sales since 1967 I have seen many ups and downs in the market and admittedly this current market is the worst I have seen.

A few years ago I spent over a year persuading a farmer to accept a $6 million cash offer from a national builder. The sales contract was finally signed, just in time for the housing crash, and I now have that property listed for $2.6 million and the owner will take terms.

About that time I received a $2.65 million cash offer on a beautiful hunt and fish club in northern Michigan, with a 30 day closing. The offer was soundly rejected but that property is listed with me now for $2.65 mil and I am not encouraged by the current lack of interest, nor are the owners.

So if the opportunities are so good why am I citing what amounts to horror stories for the owners? Because the value was once there and I believe the values will soon come back – and more. In many cases, much more.

Now is the time to make an offer on that 800-acre hunt and fish club with a private lake.

Investing in Commercial Real Estate: now is the time

Many people believe that the real estate market is risky, while the stock market is sound and showing good results. But is that really the story?

The government bailouts have created a false economy; they have buoyed Wall Street and banking, hiding the true condition of the stock market.

How can this be true? According to analysts, the government, you and I through the Chairman of the Federal Reserve Ben Bernanke, have bought U.S Treasuries and mortgages to the extent of increasing the monetary base by $1 trillion dollars. That money, to a great degree, has gone into the stock market – and not into the economy that produces wealth by actually producing something. As one analyst, Andy Kessler said, “Ben Bernanke has been the market.”

Further, according to other analysts, a $2.7 trillion increase in equities in the stock market was matched by a $400 billion decrease in money market accounts.

What accounts for the $2.3 trillion difference? Bailout money.

One conclusion that can be drawn is that the stock market may not be as sound as it appears, while commercial real estate, which can be bought at favorable prices and with favorable financing, is. Many analysts predict that in coming years we will have severe inflation in order to pay off all of this deficit spending. If that happens, commercial real estate could be the best producing and safest place to have your money.

Even the competition respects us

October 29, 2008. This coming Saturday, November 3, is a big day as we will auction a 156-acre farm near Clinton Michigan.

The neat thing about this auction, for Sperry Van Ness | Lillie & Associates, is it was referred to us by another auction firm. That firm will auction the equipment and we will auction the real estate.

You know you’re doing things right when the competition sends you business.

A good reputation pays dividends

February 4, 2008. The article with the link below ran in the Detroit News. The reporter phoned me to ask my opinion of how the listing of Northland Shopping Center was being handled (the listing did not have a price – it was make an offer). I was quite flattered that the reporter thought enough of me that out of all of the real estate brokers out there, he phoned me personally to ask my opinion.

I answered his questions, gave him some information and suggested that he also speak with David Gilmore of the Sperry Van Ness Accerated Marketing Team as the marketing method resembled an auction more than a traditional plan. I only wish he had included my quote, “The success of that method is largely determined by how widely it is promoted. Sperry Van Ness immediately emails such properties to 60,000 commercial brokers and 40,000 potential buyers. You never know who will produce the best offer.”

That was a blatant promotion of our firm.

The Sperry Van Ness philosophy is to promote our listings to every commercial broker in the country along with our database of 40,000 potential buyers, which is always being expanded, especially now that we are international.

The difference between selling in house and cooperating the sale with other companies is that even with a lower sales price if it is sold in-house the office gets nearly double the commission. With Sperry Van Ness we believe we represent the buyer, not ourselves, and believe that the sales price will be higher if more people have the opportunity to bid on the property.  While 80% of sales in the commercial real estate industry are in-house, Sperry Van Ness is almost exactly the opposite; 70% of our sales are cooperative and over 70% of the remainder are cooperative between our offices. The reporter also asked me for help on another real estate story he is doing on cottages in northern Michigan. I told him that Sperry Van Ness does commercial sales only, and suggested a very good broker in northern Michigan. Again, though, I was very flattered that he asked.  Gary Lillie 

Here is the link:

http://www.detnews.com/apps/pbcs.dll/article?AID=2008802010337

Sperry Van Ness national conference

January 28, 2008. Gary returned to the office today from rainy California. It was at the Hyatt Regency in Huntington Beach that Gary attended the annual conference for the entire Sperry Van Ness company (did you know that Huntington Beach was named for the foreman of the ranch owned by the father of General George Patton, which at one time stretched from Redlands, California to the Pacific Ocean, then south to and including Catalina Island?).

The 2007 top producer sales awards were given out at the black tie banquet Saturday evening. It was interesting to observe that successful real estate people are not stereotypical. The award winners (there were over 160) were a good cross section of America. They were anywhere from 24 to 6o years old (the number in their 20s was gratifying), they were men and women, (4 of the top 10 were women), they were native born as well as naturalized citizens (3 of the top 10 spoke with heavy accents) and they were extremely good at what they do (the 14th place finisher sold over $200,000,000 worth of commercial real estate). The commonalities were that they all worked hard, worked well together (often in teams), had respect for one another and had fun doing what they do.

The conference had a full schedule with numerous speakers, seminars and break-out sessions where advisors were able to better their professional skills. Selling real estate is not persuading, which is why at Sperry Van Ness sales people and brokers are known as “advisors.” It’s apparent that we’re pretty good at it.

Working with bankers

January 21, 2008. A client that Bob and Gary are working with asked for help in negotiating a purchase and obtaining financing on some rental real estate that he has had his eye on. The property owner has finally decided to sell, but for many reasons, mainly the condition of the properties, it will be a difficult transaction to complete. So the client asked Gary to meet with him and his banker.

After talking over all of the problems, nuances and ramifications of buying these rental units, Gary suggested a strategy that neither the client nor the banker had thought of. Now begins the negotiations, which is the part that takes sales experience and skill. Selling is not talking someone into something, because that usually can’t be done. In the few instances where it can be done, it can turn out bad. Selling is listening to the needs and points of view of both sides and then matching those needs and goals. Selling is pointing out and explaining the benefits that others didn’t see. That is the fun part of selling.

Gary was so successful at matching the goals of both sides in one transaction that the buyer and seller, after the sale closed and Gary collected his (sizable) commission, pooled some money and jointly paid Gary a bonus, telling him to take a well-earned vacation.