REoptimizer® Blog

Jordan Slater

Recent Posts

How Landlords Determine Asking Rates for Leased Properties

Posted by Jordan Slater on Jun 10, 2013 1:59:00 PM

 

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Topics: commercial real estate

Promoting Synergy in Your Corporate Real Estate Portfolio

Posted by Jordan Slater on Jun 7, 2013 10:35:00 AM

The old adage that no man is an island applies equally well to your corporate real estate portfolio. While many companies look at each of their locations individually, taking a holistic view of all of your locations across both geography and building type can help you to find synergy. Comprehensive analysis can save you money, reduce travel time and increase the efficiency with which each site operates.

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Topics: corporate real estate

A Borrower's Checklist for Securing A Commercial Real Estate Mortgage

Posted by Jordan Slater on Jun 5, 2013 10:05:00 AM

Getting a mortgage on your commercial real estate assets can be a lengthy and complicated process. Furthermore, many of the most attractive financing terms are available on investment property rather than on property that is owner-occupied. This is especially true for businesses that are not eligible for Small Business Administration financing and are looking for long-term debt on their properties.

Before sourcing a commercial loan, companies that are asset owners and users frequently set up a subsidiary company to own the asset. The company's operating division can then lease the asset from the subsidiary. From an income statement and balance sheet perspective, the transaction makes essentially no difference since the revenue all passes through to the parent company, but it makes a significant difference to the lending market. The asset can be financed as an investment and qualify for the favorable terms available from life insurance and conduit lenders.

While requirements vary between lenders, you can expect to prepare the following items:
  • Property operating statements and financial information for at least two full years and an additional year-to-date statement. The operating statements should clearly delineate a property's income and expenses, breaking out capital and recurring expenses.
  • Leases and tenant financial information. To analyze the stability and safety of the property's income stream, most lenders will want to see the actual lease documents and any financial information that you have on the tenant. If your company is the only tenant, you will need to disclose your financial information even if you are privately held.
  • Building information. The lender will frequently request copies of your tax bills, deeds, and vendor contracts. This helps them to verify the expenses that you underwrote on your operating statements as well as project what their exposure will be if you default on the loan and they have to take the property back.
  • Borrower financial data. While the rent from the tenant ultimately pays the mortgage, you will usually have to demonstrate that your business is creditworthy even under a non-recourse loan.  Lenders frequently request current and historical balance sheets and income statements for your business and may also want audited statements or tax returns for further substantiation. In addition, be prepared to prepare a schedule of real estate that your company owns. 
Once you have completed your initial application document package, the lender will also require information from third parties as well as confirming documents from tenants. Some commonly required documents include:
  • An Appraisal. Appraisals are prepared by a third-party that analyzes your building's condition, the income it generates and the prospects of the surrounding market to determine what its value would be. Lenders frequently use it to decide on a loan amount -- it's the "V" in the LTV ratio.
  • A Phase One Environmental Report. The Phase One report analyzes the site and any surrounding sites to determine if there is a risk of environmental contamination. If the site is likely to be contaminated, the lender will probably require a Phase Two report. Phase Twos involve taking soil and water samples to determine how much contamination, if any, is present and what needs to be done about it.
  • A Property Condition Assessment/Report. PCAs and PCRs are thorough building inspections. Frequently prepared by engineering firms, they let the lender know what work, if any, is required in both the short- and long-term to keep the building operating in good condition.
  • Estoppel Certificates. Generated by tenants, estoppel certificates are documents that are attached to a copy of the lease to certify that the attached lease represents the actual agreement under which they occupy the building and pay rent.
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Topics: commercial real estate

A Lessee's Risks in Lease Transactions & Operations

Posted by Jordan Slater on May 31, 2013 12:10:00 PM

Compared to owning a building, leasing space should be relatively secure. After all, tenants usually aren't directly exposed to the fluctuating value of real estate assets, changes in the commercial mortgage interest rate market or liability for major capital expenditures on the buildings they occupy. However, tenancy isn't always the smoothest situation either. Below are some of the underlying risks associated with lease transactions.

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Topics: Lease Transations

Securing State Money for Your Company's Operations

Posted by Jordan Slater on May 13, 2013 2:37:00 PM

Ronald Reagan was known to joke that "I'm from the government and I'm here to help" were the scariest words in the English language. Whether or not he was right overall, one thing is for sure: when it comes to setting up operations in a new state, that municipality can very quickly become your company's best friend. Between helping to smooth the transition process and providing money to lure you in, including state governments in your corporate real estate planning is an excellent strategy that can save your company money.

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Topics: corporate real estate

What Tenants Can Take From Increasing CRE Demands

Posted by Jordan Slater on Apr 15, 2013 1:07:00 PM

With demands for commercial real estate increasing all across the country, tenants are finding that it's not as easy to negotiate with their landlords as it was a year or two ago. It's become increasingly difficult to get rent reductions without a very good reason, and landlords are actually starting to raise rents. This might seem like a landlord's dream and a tenant's nightmare. However, when you scratch beneath the surface, there are ways that many tenants can turn the increasing demands for their spaces into opportunities to achieve better cost performance from their corporate real estate portfolios.

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Topics: commercial real estate

Emerging Markets for Industrial & Office-Based Operations

Posted by Jordan Slater on Apr 8, 2013 12:24:00 PM

While the real estate recovery has taken hold in many of the country's largest cities, many perceived second and third tier markets are emerging as major destinations for office and industrial tenants. Some of them are being fueled by growth in natural resource production while others are growing thanks to business-friendly policies or low costs of living for workforces.

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