An investor called the other day and complained, “I’ve talked to a bunch of brokers, but can’t find the deal I want. Can you send me a list of what you have for sale?”

We sent our list and asked the investor what he wanted. He said, “You know, a good deal. Something that makes sense. All I’m seeing out there are opportunities that are either overpriced or gone before I had a shot at them.”

If you’re an investor, here’s some bad news. Investors call our office, make the same requests, get a list of what’s on the market and complain about the unavailability of deals. We offer to talk through the requirement, but most say they’re happy calling brokers because they’ll get access to more deals that way.

Maybe, but aren’t you just looking for off-market deals in on-market locations?

Remember, sellers hire brokers to represent them in the sale of their property. They want the advantage of exposure to the largest audience and to sell their property for more than they could on their own, which means when you’re calling brokers, you’re talking to the people that owners want you to.

Out of our own interest as an owner advisory firm, please keep calling brokers. We encourage it and we like the calls. It makes our owners happy because it proves that we’re giving them great exposure and will eventually sell their property for the best price.

There are some investors, however, who refuse to limit themselves to the brokerage world.  For those who choose to go off-market, we won’t lie to you. It’s hard work and it costs money, time, and energy.

One client came to us and required an industrial building in the greater Boston 93/128 interchange market.  Out of 50 potential properties in existence, we sourced 6 sites that could be purchased, and the client selected 3 to seriously consider.  Of the original 6, 20% were listed for sale by the owner or with a broker, while the rest of the properties were off-market.

For those who want more, we turn down most that ask us to source off market deals either because we’re representing a conflicting search or our program requires too large a commitment; however, if you want to see if you qualify, call us at 617-674-2043 to tell us what you want.  If it isn’t a fit, we’ll let you know right away.  If it is, you can invite us for further discussions.  We’ll tell you how we’ve brought options to our clients that they didn’t know they had, allowing them to make investment decisions that achieved their objectives as well as increase the size of their portfolios.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

Don’t repeat the same mistake that investors made over the past 5 years.  Commercial real estate investors were betting on the come–that the next investor would pay a lower cap rate–and as cap rates decompressed, or increased, values declined and investors who based their projections on a lower terminal or exit cap rate, were caught holding the hot potato.

As you acquire commercial property in this market, pay attention to your fundamentals.  Cash flow performance makes up a large part of your return on investment, while those who are betting that the next investor will pay a lower cap rate than you did should be careful, it may not happen.

Institutional investors are focused on performing cap rates today. In the past, they projected 3-5 year holding periods. Now they’re looking at 5-8 or even 10 years.  And instead of counting on a lower cap rate to boost their internal rate of return forecasts today, they’re planning on cap rates increasing as much as 50 basis points.  They believe:

• Interest rates will increase during their holding period;
• Annual operating fundamentals and cash flow performance are paramount;
• Properties should support leverage and be sustainable through market fluctuations over a longer holding period.

Be careful. If you’re making promises or acquisition decisions on an uncertain future, it makes sense to be safe rather than sorry. The worst that can happen is that you hit your numbers, and if we’re all wrong and cap rates decrease again, you’ll just make that much more money.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

Time kills all deals, right? Yes, but to make deals happen, you must avoid time’s accomplice, the do loop.  We enter do loop unaware and full of good intentions, but what we have is an endless negotiation or circle of discussions that accomplishes nothing except to make us feel as though we’re accomplishing something.

For instance, an interested party comes to your building and makes you an offer.  You review the offer and it’s full of contingencies, has unacceptable pricing, terms, and conditions, but after thinking about it, you’re intrigued and want more.  You tell the interested party to rework the offer and come back with more information about what they’d like to do, perhaps a higher price, maybe better terms.

A few days pass, and your interested party submits a partial list of responses for you, verbally.  You review the changes, ask for more information, maybe give them a “that could work” to a term and send them on their way.  A few more days pass, and they come back. You repeat. They repeat. You repeat again.  A month has gone by. Maybe two.

Then you’re out to dinner with a friend, and he asks you how it’s going with your property. You tell him that it’s going well because you have an interested party you’ve been talking to.  Your friend asks you, “did you do the deal?”

You don’t know.  You don’t have a deal. You’re in the do loop–an endless negotiation.

When you’re in the do loop, you go ’round and ’round, because neither you, or the interested party has succeeded in isolating the variables in your negotiation.  This situation will continue until either you decide this negotiation is a waste of time, or you break the do loop. Unfortunately, do loop discussions usually end in someone dropping out because there’s no end in sight.

To break the do loop, end the endless talk by establishing constants in your negotiations. Take a position, make a commitment, and move forward.  Ask your interested party to do the same.  You’ll find that you start making headway and will be in a position to make an informed decision about the sale or lease of your property.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

It’s simple to fix the budget in Washington D.C. According to Fareed Zakaria, author and foreign affairs analyst who hosts “Fareed Zakaria GPS” on CNN, eliminate the mortgage interest deduction.

Among recommendations that include removing tax deductions for employers that take health care deductions, scaling back Obama’s health care overhaul, and increasing taxes, Mr. Zakaria recommends the destruction of the mortgage interest deduction, or the “sacred cow” that would take in a hundred billion dollars for the U.S. Government.  He emphasizes that our country’s appetite for debt is fueled by this subsidy and that Washington D.C. should eliminate it and profit from the savings they can use to pay for the 1.5 trillion dollar deficit and 1.3 trillion dollar deficit next year.

What Mr. Zakaria has forgotten is the effect of the mortgage interest deduction on home values. It’s priced into market values today.  How would home owners, lenders, and the real estate and related industries recover? And what would the secondary effect on IRS revenues from such a contraction?

What’s more, watch out commercial real estate investors.  The mortgage interest deduction is one of the reasons commercial real estate investors buy commercial properties today: including depreciation, leverage, and appreciation.  The deduction provides them with the ability to take advantage of tax savings on their leveraged cash flows as well as to account for an expense incurred to leverage real estate in an effort to drive value.

The removal of the mortgage interest deduction for commercial real estate would be catastrophic to property valuations across the country.  Returns would be significantly affected in an environment where we’re already struggling to absorb corrected valuations, some of which are less than the debt.

If you own property and wonder what the removal of the mortgage interest deduction would mean for your value, email me at Jeremy@Mansardcre.com with the words “Mortgage Interest Deduction” in the subject line.  Include your name, when you would like to be called, and the best number to reach you. I will contact you to schedule a time for you to invite me to your building for a free consultation.  We will discuss your current financials, market value, and how you can protect yourself from the possible elimination of the mortgage interest deduction with our Valuation and Asset Management Optimization Plan.

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To read Mr. Zakaria’s commentary, click here.

About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

Jeremy Cyrier, CCIM, principal of MANSARD Commercial Properties and Wayne D’Amico, CCIM, principal of Connecticut based Property Politics teamed up to train CCIM’s from across New England on the CCIM Institute’s Site To Do Business in Boston this week.  The class was held at 60 State Street Boston at the offices of Wilmer & Hale in cooperation with the Greater Boston Board of Realtors and was attended by commercial real estate brokers, data from across New England.

The all day event featured a full tour and use of the CCIM Insitute’s Site To Do Business, which is a GIS platform used to perform market analysis and to identify demand and opportunities in the commercial real estate markets across the United States.

Chris Norwood of NAI Norwood Group said,

“great job on the class….Leaving the class I feel much more comfortable with the site and enjoy working with it much more than I had in the past…I am liking this site more and more, with your help.”

H. Sandy Brown, President of the New England CCIM Chapter said,

“On behalf of all the attendees of your session, I would like to thank you both for a very informative and entertaining program, last week.  Your insights and practical applications of the usage of the STDB were fantastic.  I know we all left the program with a very practical knowledge of the site, and many ways that we can use it to help us better support our clients.  That, in itself, will make us stand our amongst other practitioners in our markets.  This is the true meaning of what it is to be a CCIM!!!

Again thank you for doing such a great job!!”

To invite Jeremy to train you or your employees on the Site To Do Business, email him at Jeremy@Mansardcre.com with the words “Site To Do Business Training” in the subject line.  Include your name, when you would like to be called, and the best number to reach you. Jeremy will then contact you to discuss scheduling a Site to do Business training session for you and your employees.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

Landlords are landing tenants.   What’s their secret?

They know how to stimulate demand.

Landlords landing tenants understand this secret and know that most brokers and landlords are spending time on the “symptom” and not the “problem”.   The “symptom” is easy to treat: do more. The “problem” is much more difficult: change your approach.

Most landlords who call our office, tell us,

“I have 20,000 SF in X town. Do you have any tenants?”  Or we’ll get a call and someone will ask,

“I’ve had my building listed for 12 months with no proposals.  I don’t understand why.  Can you do more than the guy helping me now?”

The truth is, the broker you’re working with is probably doing a good job.  But, you may be blaming your broker for the lack of activity, saying, “if my broker were doing a better job, he would be at least showing my building and bringing me proposals.  Anything would be better than nothing.”

If your broker has done his job well, and most commercial real estate brokers I know do, he’s put your building on the market and has been responsive to inquiries.  You ask for more and he promises you more.

“Run more ads, post better photos, call more tenants, hang a bigger sign, make a better website, call all of the brokers and tell them about the listing.”  If those efforts don’t work, change brokers and repeat.

Behaviorally, in an effort to drive a successful outcome, it’s our nature to intensify our actions when we don’t see something working. People intensify their actions until the system breaks or the outcome doesn’t change.

Change your approach.  Instead of talking at tenants by blasting them with more and more information about your offering, talk with tenants. Enter into a conversation about what their problems, challenges, and demands are. Yes, “more affordable rent” is at the top of the tenant’s list. It’s also the size, location, or need for improvements that the tenant cares about. Other times it’s a deadline or access to public transportation that matter most.

Try asking tenants what they would do if they owned your building and were trying to attract companies such as theirs.

Landlords understand that by crafting marketable solutions by understanding tenant demands, they place more tenants, land the best deals, and preserve and grow the values of their assets.  They also create relationships with their tenants based on  respect, understanding, and mutual success.

Have the tough talk with your broker and tenants today.  Find out what they really want, even if it’s not what you want to hear.  Successful landlords give tenants what they want and in the process build enduring relationships that survive market cycles.

If you have space that you are having trouble filling, email me at Jeremy@Mansardcre.com with the words “Get Tenants for My Building” in the subject line.  Include your name, when you would like to be called, and the best number to reach you. I will  contact you to schedule a time for you to invite me to your building for a free consultation.  If there’s a fit, you may retain us to fill your vacant space.   If there isn’t a fit, we’ll tell you we cannot help and will refer you to another firm.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and tenants. You may reach Jeremy at Jeremy@Mansardcre.com.

This question is not for owners that are out of money, have negative cash flow, can’t pay the bank, are facing foreclosure, have vacancy that is out of control, have terrible management in place, or have loans coming due and can’t pay down the debt to reset the loan to value ratio to today’s market standards. (If this is the case, you need to get out.)

This question is for you if the building you’re thinking of selling was worth more yesterday than today. You’re wondering whether you should hold on or sell the building and go somewhere else with your money.

Thus, when is the right time to sell in a down market?

If Sam Zell’s correct, then, “Everyday you’re not selling, you’re buying”  Here’s what this means to you:

1. The value of your asset is determined by how much you’re willing to accept and what someone is willing to pay.  It’s the intersection of these two opinions that is called a ‘meeting of the minds’ and that determines the value of your property at that point in time.  This is also known as fair market value.
   
2. Everyday that you choose to own your property, you are agreeing to own it for its fair market value.
3. The value of your asset fluctuates from day to day.  Each day that you choose to own it, you agree that its value that day makes it worth owning and that you would buy it back for that price right now, whether it be higher or lower than the day before.
4. Once you decide that you would no longer pay the current price, you become a seller.

Zell’s statement boils down to your asking whether your capital works harder in your current investment or somewhere else.  If it’s better invested in your commercial real estate, keep your property. Don’t sell it. It will come back.

But, if you see other opportunities that provide you with a better return, i.e. look at Apple stock in February, 2009 at $68/Share, now trading for $214/share, or other acquisition opportunities where you increase your capital’s velocity above its current performance, you may want to reconsider holding on.  If Zell’s right, and I think his statement applies to both up and down markets, even flat ones, then everyday you hold that property in a down market means that you’re buying higher today and selling for less tomorrow.

Consequently, the right time to sell in a down market is when you know that your capital will work harder in an alternative investment and that you would not invest in your asset today.  Your opportunity cost is too high to hold on and you’re better served moving to another investment.

Do you think you are a seller today? If so, email me at Jeremy@Mansardcre.com with the words “Sell my building in today’s market” in the subject line.  Include your name, when you would like to be called, and the best number to reach you. I will  contact you to schedule a time for you to invite me to your building for a free consultation.  If there’s a fit, you may retain us to sell your property.  If there isn’t a fit, we’ll tell you we cannot help and will refer you to another firm that may be a better match.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

Have you ever heard the story about the man who rows out to sea, jumps in the water, lets his boat float away, proclaiming “I am a man of faith. God will save me.”?

A fisherman spots him treading water and throws him a lifeline. The man pushes it away and says, “No, thank  you. I am a man of faith. God will save me.”  The fisherman shakes his head and calls the Coast Guard.

A Coast Guard helicopter races to the man, lowers the recovery basket, drops a diver and waits.  The man pushes the basket and the diver away and proclaims, “I am a man of faith. God will save me.”  The helicopter leaves, dropping a life jacket in the water, wishing the man luck.

The man treads water, watches the life jacket float off, and then he drowns.

He arrives in heaven, meets God, and says, “What’s the deal? I’m a man of faith and you didn’t save me.”  God says, “Really? I sent you a fishing boat, Coast Guard helicopter, diver, basket, and a life jacket.”

Sometimes we spend time looking everywhere else for answers to our challenges except at what we already have in front of us.  When if you take stock at the tools you have, you may be surprised at how easily you may be able to solve your problems.

• For instance, if you’re having cash flow problems, have you considered lowering your asking rents to stimulate demand for space in your building?

• If you’re losing too much cash flow to the IRS every April 15, have you considered running a cost segregation study that may make you eligible to recapture the last 5 years of lost deductions?

• Or, if your bank is breathing down your neck about your pending loan maturity date, have you considered forming a joint venture to dilute your equity interest in your property or offering your bank participation in the future of the property?

Don’t be a man of blind faith.  Sometimes everything you need is at your fingertips, waiting for you to take advantage and solve your dilemmas today.

Got a dilemma? Email me with your issue at Jeremy@Mansardcre.com.  Include your name, email address, and a brief description of your situation.  I’ll espond within 24 hours of reading your message with 3 solutions you can try today to solve your real estate situation.

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About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and investors. Jeremy Cyrier, CCIM was elected by Banker & Tradesman as one of its New Leaders in 2009. You may reach Jeremy at Jeremy@Mansardcre.com.

The department of labor released their November job loss figures this week boasting a decline in the number of new unemployment benefit claims continuing a five-week trend (see the press release). The immediate response from investors in real estate who were wishing for any sign of good news in this murky economy is a sigh of relief – we are on the mend!

A decrease in claims means that more companies are adding new employees than they are letting go, and thus it appears the job market is improving. Commercial real estate owners nationwide likely view an improved job market as a sign that vacancy rates will decline, companies are more financially strong, and values will level out or even begin to increase. As shown in previous economic downturns, as joblessness decreases, the result is an increase in rental rates and occupancy rates.

The optimist would take these numbers and run to adjust their 2010 projected income on their budget books. After all, the numbers don’t lie and history repeats itself. The realist will want to take a second look at the numbers and wait through the next few months before they are fully convinced of a market recovery. A close look shows that although new claims are declining, people who are collecting unemployment are staying unemployed for longer periods of time. There are also no strong indicators that companies are finished with all of their layoffs and downsizing – perhaps there is more to come.

Boston.com noted in their review of the numbers that the employment offices were closed for much of the last week of November due to the holiday. So how many claims are just delayed until December?

Finally, the conspiracy theorist might look at the numbers and think it’s all an effort to get consumers into retail stores for their holiday shopping, increase spending and tax revenue before the end of the year, and create an illusion of a stabilized economy.

Well that might be going a bit far, but let’s not get over excited about this change of tide. All that optimism is what got us into this trouble from the start – so stay real out there!

Complete our owners survey on how unemployment will impact your real estate investments.

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Jeremy Cyrier, CCIM and Lisa Carpenter sold 1183-1187 Massachusetts Avenue in Arlington, MA on behalf of the John A Archer 2003 Family Trust to buyer 369 Mass Ave Nominee Trust.  The transaction marks one of few commercial real estate sales in Arlington to date, but represents the significant demand for commercial assets along the Massachusetts Avenue commercial corridor in Arlington.

“We generated significant interest in the property through our positioning and were able to generate several offers to purchase the property,” Cyrier said.

The Trust sold the property for a premium by offering attractive terms, which resulted in a sale price $100,000 higher than the most recent comparable sale in Arlington as well as the production of an annuity income for the beneficiaries of the Trust. Overall they achieved a strong value in a challenging market environment and were able to select from several offers to take the most advantageous deal, meeting their desired yield.

Jeremy Cyrier, CCIM and Lisa Carpenter are both Brokers at MANSARD Commercial Properties, a commercial real estate brokerage and advisory firm with offices in Lexington and Boston.   For more information, feel free to contact Jeremy or Lisa at Jeremy@Mansardcre.com or Lisa@Mansardcre.com, respectively.

Do you think you are a seller today? If so, email us at Jeremy@Mansardcre.com with the words “Sell my building in today’s market” in the subject line.  Include your name, when you would like to be called, and the best number to reach you. A member of our team will  contact you to schedule a time for you to invite me to your building for a free consultation.  If there’s a fit, you may retain us to sell your property.  If there isn’t a fit, we’ll tell you we cannot help and will refer you to another firm that may be a better match.

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