All Forum Posts by: Brett Peters

From your experience...What are your opinions on MF and Mixed-use properties that contain boarding rooms? By boarding rooms, I mean individual rental units with shared kitchens and shared bathrooms.  Thanks in advance!

@Mike Henry, If you would like to take a thorough educational program regarding res and comm leasing, the most informative course I can recommended is CI-103 offered by the CCIM Institute. It is a bit pricey, but with an instructor lead course you will find everything you're looking for. 

@Akzhol A. With a property like this you without a doubt want to work with a commercial broker. I am not in that state so I'm not just saying that because I am one. It is a lot of work to find and place a tenant for single-tenant net lease, especially if the next tenant is also corporate. In my area they are notoriously difficult to negotiate with. 1.) I suggest you google a commercial brokerage in your area that specializes in Retail. You will be better served by someone who focuses on that asset type. 2.) I wouldn't hire a new agent unless they work with a team backed by a solid broker. They may work their tail off but there are a lot of nuances they may not be privy to that can impact your investments performance dramatically. 3.) I recommend going to CCIM.com. CCIM is a designation regarded as a PHD level equivalent in commercial investment real estate. You can search brokers who have this accreditation by area and specialty. Hope this helps!

@Michael Mastantuono I am a commercial agent in PA. There is some truth to what the agent told you, but i will attempt to put it in more perspective. In Retail, a detailed business plan is usually always requested by "shopping centers", along with a snapshot of business assets and proof of liquidity, meaning you have to show them bank statements. As for private retail owners, the request for documentation varies depending on the price of the space and the risk associated with the business. For example, if you were trying to start a restaurant and the space is 8k per month NNN, they are likely going to view you with more scrutiny because of the inherent risk associated with the restaurant business. With that being said, I work on a good amount of retail transactions and it is not super common for landlords to request something extremely detailed. Rather, a concise description of your business and your track record so you can give the owner a better picture of what you are trying to do. Retail leases are usually no less than three years and often much longer so owners want to make sure they aren't locking themselves into a nightmare, which happens a lot in retail. To add, I have often seen owners completely overlook those types of documents if the person has an extensive amount of experience in an industry such as yourself. Hope this helps!

@Derek Bell In my market there is a lot of activity and demand for flex. The biggest hindrances for developers in my area is a lack of inventory ie. Industrial land and what would be deemed compatible by zoning. Because of this fact, there is a number of development companies that specifically target AG and Residential land with the intention of up zoning to Industrial. They simply tie up the land and then  battle with zoning board, at times winning and at times losing. To the point, at least in my area it is not a lack of interest in the asset type but rather tight inventory and the ability to change the use of the land. 

@Troy Langbehn I am a commercial broker and not a contractor, but I have ran into this specific situation with an investment of my own. Typically, with items such as plumbing, mechanical, carpentry, electric etc. building inspectors definitely require a licensed contractor even if you own the building. I brought contractors from outside the area in on my project and they even made each of them apply for reciprocal licenses just because they weren't local. There is obvious ways around this for items which aren't that noticeable. But if they can identify certain items or structures were not present during the last time they did their walk through, you will most likely be fined and or have to remove it. This actually happened to me with a window that was literally two inches short of code. I had to throw away a brand new window and carve the old frame out to their satisfaction. So, to answer your question, yes that is a fact albeit one that is a pain.  

@Allen L. I would suggest visiting the website for NAIOP. They provide the most up to date articles and short reads on the Industrial market. You can also take it a step further and subscribe to their material in order to stay current with market trends. In my area, it is very difficult, not only to find available warehouse for purchase but also Industrial land. Demand is so high, that spec investors are purchasing AG land and up zoning it to industrial for development. Even golf courses, which used to be frowned upon for Industrial development due to environmental and zoning issues, is now being acquired by companies such as Amazon. I would recommend you make friends with an Industrial broker if you plan on making a serious attempt on this asset type. 

@Jennifer Moraski There is a plethora of sources to choose from regarding both sites and literature on commercial leases. Some are good but most are not in my opinion. As a commercial broker, and a graduate from the CCIM Institute. I can safely say that commercial leasing is a deep ocean and simply reading a few books can bring you up to speed on terminology and light tactics but will not make you authoritative on the subject. The best source of information on this topic is provided by the CCIM Institute in the form of the class CI-103. However, these classes are not cheap and you will need to complete at least 101 before gaining eligibility to 103. 

I suggest you perform some research on what I have mentioned. If you find yourself not prepared to make that type of commitment, then you should begin by visiting sites like CCIM, for commercial in general, NAIOP for Industrial, BOMA, for Office, ULI, for land, and ICSC for retail. All of these sites are the benchmark for those asset types and will allow you access to the most reliable information. Keep in mind, Commercial leases are essentially of three types, and all of the other forms either branch out from them or are under the same umbrella. Namely, Absolute Gross, Hybrid, and Absolute Net. Some asset types inherently use different types of leases depending on market standards. For example, in my area Industrial and Office are usually Gross and Hybrid, while Retail is just about always NNN. There are virtually an infinite number of ways to structure leases and "everything is negotiable". Start by digging into these terms and let the journey begin. Hope this helps!

@Brian Schuck It may be useful to look at this a different way in order to gain peace of mind and some negotiation power. It is possible to determine what her share was worth when she first received it. You can do this by using the annual appreciation rate of the property and then discounting backward by years. That would at least tell you how much she earned, albeit somewhat artificially. In other words, if you could hypothesize her profit margin, you could better answer the question of what she is willing to give up in gain.

To complicate this further, you could also consider that initial "share" as an initial investment, the gain as an annuity and the buyout as the lump sum. This way you can discount the gain as a stream of cash flows at an appropriate discount rate. This would answer another important question, what else could she have invested that money in and received a commensurate return? In other words, if she is getting 7% from stocks as an alternative form of investment, did she at least get 7% or more from the real estate? What I am trying to get at is in order to comprehend what is "fair" and what to counter, you are going to have to quantify some data. Otherwise, all of those percentages during the negotiation are almost entirely arbitrary on your end. Hope this helps...

@Cor Bay I have seen a similar situation like this on a property I recently worked on. To answer your question, yes, basement office space like second floor walk up space does command a lower lease rate. Truth is, if you simply leave it as is, you will always experience a higher amount of vacancy and turn over. The only thing I have seen work in a situation like this is turning it into "gym" space and leasing it at a lower rate. You have enough sf for it and it will also serve as a value add to the other tenants who would enjoy the close proximity. Hope this helps!