All Forum Posts by: James Storey

Sure am. Great for pure passive income. Just have to make a thorough decission about the location as location, visibility, and underlying economics of the metro area is everything when investing in these types of assets. If you can get around that, the building will always be leased out and you will get some decent rent growth.

James Storey, CCIM

For Property owners and investors I use Reonomy. It's costs about $399/month. Their phone numbers are about 90% accurate but like most softwares, not all properties have contact data. For those we research the secretary of state who the principal is and then get their contact on people finder.

for tenant rep prospecting, we by batched data from data axel by a specific industry we want to target and then we buy the owners data. Unfortunetly it is very expensive at $0.20/contact. We now have a datae base of over 100,000 tenants but we have had to pay about $20k for but at least we own the data and we can mass email market or give them to our inside sales agent to call to set up lease need analysis meetings.

In the end you can spend for all the data in the world but unless you are afectivley catagorizing it and managing in a CRM, it really wont mean much. That said, you should focus on building a database of your own that you dont have to rely on incorrect data sources like CoStar.

James Storey, CCIM

@Ted Brandt having to re-tenant a building you bought as a NNN investment is always a part of the risk equation when buying these assets. I have found that the best way of mitigating this risk has been to focus on buying the real estate not the tenant or the lease. What I mean buy that is if you buy real estate by the right location and visibility, the asset will always be leased even if your acquisition tenant decides to leave. With that said, I would focus on primary market and if you focus in QSR's, focus on high visibility off major thoroughfares with demographics that can support various types of tenants. Most people are trying to go after higher yield which is inherently riskier from a release aspect when if there were focused on the assets trading in the 4%-5% CAP range, they typically will mitigate or mostly eliminate their risk and focus on rental growth within the space market rather than relying on what the capital markets are doing. That said, you will never be able to eliminate the risk entirely.

As to your other questions, with releasing a space, you will more than likely be responsible for some capital cost in the form of tenant improvement allowances and broker commissions. Even if you rep your own leasing, most corporate tenants will have a tenant rep broker and it is standard in commercial real estate for the landlord to pay those commissions. As far as tenant improvements are concerned, it is usually standard to give a tenant a base improvement allowance which can be around $10-$20/sf with anything above that being amortized into the lease. With that said, you are improving the value of the facility and it would be like making another investment for a brand-new Net leased asset. 

James Storey, CCIM

Quote from @Aaryan Patel:

What is IRR?? How can I understand that complex formula?? I know that it is a rate of return that factors in the time value of money, but still don't get it.

IRR takes into account cash flow, equity build up, and appreciation of an asset invested in. It's the rate or return that is equivalent to a compounding return. This way you can use assets like real estate and compare it to other types of investments in your portfolio. It is also the return that is compared to investors debt and equity stack to ensure that the investment is ample enough to pay back investors returns and debt service. It's one of the reasons why it is used so frequently with many investors. 

James Storey, CCIM

We are selling a decent amount of office investment sales here in Indianapolis. It is still appealing to a lot of investors mainly for the higher cap rates and lower competition. We are selling some at 8.5%-9.5% CAP rates. The larger risks are the office spaces that have larger units say 7,000+sf. The better investments tend to be multi unit buildings with the average unit size of 1,500sf. From my experience as a broker, those units are always leased out and take a much shorter time to find a tenant replacement in the unit goes vacant.

James Storey, CCIM

Hey Derrick,

I would go to CCIM's website and find a local CCIM you could work with. They have a Find A CCIM tab on their website. They are considered some of the top commercial brokers in the field. As a disclaimer, I hold the CCIM designation as well but their commercial broker register is a great place to start either way.

James Storey, CCIM

I would agree with Carson. Perpetual fees in this type of situation probably wouldn't be fair for you and any other client. I think once you have established the relationship, you should be able to go directly to the lender.

James Storey, CCIM

Quote from @Hong Y.:

The restaurant owner of my New Jersey commercial space is looking to terminate his lease early since business isn't doing well and isn't able to find someone to purchase his business. There is currently no exit clause for the tenant and I have 3 months of security deposit.

Also, I'm slightly on the fence on what to do with the restaurant equipment. Not sure if the owner is deciding to sell it or leave it.

Any suggestions on a course of action that would be most suitable in today's time?

In situations like this, I would negotiate a lease buyout. Without an exit clause, the tenant will need to do a sublease of the space or offer to buy you out for the net present value of the lease. The tenant could probably leave equipment to cover a portion of the net present value along with the security deposit.

First thing is to mention that if the tenant would like to exit out of the lease, they would need to help to find a new tenant and then you can negotiate any buy out options from the differential between their current lease and the new tenants lease.

Remember, a lease is a form of debt and it has to be paid back.

James Storey, CCIM

Would you consider subsidizing his rent for finding a different space to rent in the form of a buyout on your side? Is doing more than $100k worth it to you? It may be a more expensive play but if you might help him pay for the difference between market rents and what he is paying now to lease a new building it may incentive him to find a new space to lease and you maintain a low cap rate sale. From the sounds of it, this is a more troublesome tenant so nothing might not be good enough unless you help him replace lost income from shutting down his business for a little while.

Last shot is trying to negotiate with the buyer and see if they might be open to some sort of concession for keeping the tenant for the next 2 years. Sounds like you don't have many options unfortunetly without getting legal council involved with the sublease situation.

James Storey, CCIM

At first I thought it was priced aggressively at a 4.25% CAP but looking at the rental rate, I think there could be some upside potential from rent even if Sherwin Williams left the space. Looks like Sherwin Williams is paying right under $9sf NNN which is pretty low but you would have to wait 6 years to get any chance of a rental increase. If there is already renewal clauses in the lease at give rates then the value add aspect is out of the window unless you held it long term.

Repositioning would be rather simple in my opinion. The open box could be anything but may need some TI to make it right for the right tenant.

James Storey, CCIM