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Carey Webb Retail commercial leases define the landlord/tenant union and govern all aspects of your tenancy. While it both protects and binds you to a location for an extended period, none are perfect nor provide for every contingency. The fact that a lease is a landlord-generated document is, in itself, sufficient cause for any tenant to enter into it with both caution and sound guidance. Knowing what to ask doesn’t guarantee landlord acquiescence, but not knowing can cost you tens of thousands of dollars and potentially impact your business’ success. Awareness of potential pitfalls forearms a tenant with solid decision-making criteria. It is always recommended that any business without an in-house real estate staff avail themselves of the services of a licensed real estate broker specializing in real estate representation. Fees are almost always paid by the landlord in the form of commissions. Common belief is that once a tenant signs a lease and opens for business, the vast majority of the lease will never come into play. As long as the tenant remains open and pays the rent on time, all seems in order. In reality, many things can intervene over the course of a lease triggering unexpected costs …

Mark S. Biskamp Many lenders are using note sales as a way of disposing of distressed loans secured by real estate. The note is sold at a discount to a buyer who is interested in the note at the reduced price or in acquiring the real estate securing the note. Understanding the key elements of a note sale helps in structuring the best deal. In a distressed note sale, the lender sells the note and mortgage covering the real estate as opposed to foreclosing the mortgage after default and selling the underlying real estate itself. The note sale allows the lender to recoup losses without the time and expense of foreclosure and resale of the real estate. The buyer steps into the lender's position under the loan, and after closing, can exercise the lender's remedies under the loan documents for a borrower default, including foreclosure on the real estate. The lender typically sells the note to the buyer “as-is” with few representations and warranties and without recourse against the lender if the borrower fails to pay the note. The buyer will therefore need to conduct due diligence on two levels – on the loan documentation and financial ability of the …

Ronald L. Goss, CPM The number of professional designation, certification and accreditation opportunities are ever increasing as well as the number of people earning them. Why? Because the value of professional designations continues to grow as business, in particular, and society becomes more complex as bodies of knowledge expand. In turn, demand has accelerated for more independent confirmation that the alleged professionals hired are knowledgeable, competent and ethical. The consequences of incompetence obviously are particularly dire in managing commercial, industrial and multifamily real estate. Individuals, business and property owners, corporate executives, government administrators and third-party players increasingly want assurance that their providers of professional services have some basic level of qualifying experience and ethical commitment verified by impartial third-party experts. As a result, a myriad of new certification programs are being established each year to meet the demand for people with independently established, profession-specific credentials. As our industry’s data and experience base expands, such assurance of expertise and skill for coping with change certainly becomes all the more important. For example, events such as 9/11 and the recent Great Recession, and its aftermath, have focused a spotlight on the benefits of competent, nimble management of real estate properties in areas …

William M. Bennett Student housing has become an increasingly accepted investment within the real estate sector, and investors are beginning to consider how many of the macroeconomic risks impact it. For example, on December 9, 2010, Britain’s parliament passed a bill to TRIPLE university tuition, which was quickly followed by students rioting in the streets, setting fires, and shaking up a royal evening. These events caused sophisticated investors to begin asking questions about U.S. student housing: 1. Are U.S. universities at risk of having similar riots? If so, which ones? 2. What is the present and future of government’s role in funding higher education? 3. How does increasing tuition and fees impact student housing investment? The answer to the first question is yes — students rioted at the University of California-Berkeley campus in March 2010 over a 32% tuition increase. Government’s role in funding education is a complex question. In a democracy, a minimum level of education is necessary for the creation of productive citizens. However, education’s benefit not only accrues to the individual, but to society as a whole, so the public financing of university education allows high achievers to become business, social and political leaders that benefit all …

Renata Simril After personnel, real estate costs are typically the greatest expense for public entities. If you’re a public entity, a broker who serves public entities or a real estate professional looking to enter into this broad sector, now is the time to maximize one of the most powerful tools in a public institution’s arsenal: the real estate portfolio. State of the Market During today’s challenging economy, public institutions — cities, counties, states, ports, airports, universities, hospitals and not-for-profits — are under greater pressure to maintain service levels even as their resources become increasingly limited. According to the National League of Cities, for example, U.S. cities in 2009 faced an estimated budget shortfall of nearly 3 percent of their general fund budget. Results from a 2010 survey of federal, state, city, county and other public sector leaders — the breakdown of respondents included city/municipal (39 percent), state (14 percent), federal (13 percent), county (11 percent), quasi-governmental (11 percent) and other entities (12 percent) — to gauge the impact of the recession on public sector budgets and programs, as well as to identify emerging challenges and opportunities, confirmed that government budgets are strained and public officials are looking deeper than ever …

Chris Brockman With an estimated $300 billion in real estate loans coming due in each of the next 5 years and tenant demand that is flat in most markets, many shopping center owners are looking for creative alternatives to selling their holdings at a loss or simply handing them back to their lenders. One solution may be to sell off part of the center in order to raise capital to help refinance the balance of the property. However, that may be easier said than done. Developers and secondary purchasers often do not anticipate having to sell off their centers in pieces and do not structure their underlying documents accordingly. But if you find yourself in that situation, the first two things you need to do (whether you represent the seller or the buyer) is: 1) confirm that local laws allow the center to be sold off in pieces and 2) take a look at the various recorded documents which impact the site. Assuming for the moment that the laws of the local jurisdiction allow the center's owner to sell a portion of the center, and that the requisite cross-easement documents have been recorded to account for access, utility service and …

Pat Feeney It’s been a bumpy couple of years for Phoenix commercial real estate in general, but thanks in part to what some people are calling the California Effect, the Valley’s industrial market’s year-end net absorption stats are poised to wind up in the plus column for the first time since 2008. The California Effect refers to the impact of companies relocating from California or seeking a close-enough alternative to service Los Angeles/The Inland Empire. Although not entirely responsible for distribution buildings leading Phoenix industrial market activity this year, the increase in attention from these types of big-box users has been particularly noticeable. Even more encouraging is the fact that passage of Arizona’s tough new immigration law, SB 1070, has not had the negative effect on the market that some people feared. Not only has it not stemmed the flow of companies wanting to set up shop here, it’s not even been part of the conversation with most decision-makers. According to Joseph Vranich, an Irvine, Calif.-based business relocation expert who tracks the California outmigration trend, Arizona is the second most attractive state in the country for companies moving from or cancelling plans to locate in California. Texas is No. 1. …

Charles C. Pilchard The most recent Financial Accounting Standards Board (FASB) draft of proposed lease accounting changes and its potential adoption would have a severe impact on real estate owners, lenders and occupiers. While FASB is moving quickly to implement this draft aimed at greater lease transparency, several areas must be clarified now to avoid misinterpretation and to ensure adherence and accurate reporting. More importantly, adoption of this draft will result in substantial time investment by tenants, real estate owners and service companies, and lenders both at inception and on an ongoing reporting basis. Occupiers would immediately feel the impact of the accounting changes as leases will have to be capitalized, including future estimated renewals, contingent rents and, possibly, operating expenses and real estate taxes. The capitalization of leases will do three things: 1) it will result in higher front-end lease costs; 2) it will require constant re-evaluation of contingencies in light of changing market conditions and business objectives; and 3) it will impact financial ratios, loan covenants and EBITDA (earnings before interest, taxes, depreciation and amortization). Faced with whether to enter into longer-term leases that result in greater reportable liabilities, tenants will naturally move to shorter leases and likely …

Tony Thompson September 14, 2010 marked the 50th anniversary of real estate investment trusts, or what is more commonly referred to as REITs, in the United States. Originally signed into law in 1961 by President Dwight D. Eisenhower, REITs buy, develop, and operate commercial properties such as office buildings, hotels, medical facilities, shopping centers and apartment buildings. REITs offer investors the opportunity to invest in income-producing hard assets and are typically more accessible to a much broader range of investors as compared to traditional real estate ownership. But why should investors consider REITs and other alternative investments, given the wide range of investment products available today? Real estate and other hard assets have proven to be a valuable addition to an investment portfolio, often reducing volatility and increasing total returns. According to the NCREIF Property Index, which reflects returns on investment-grade, income-producing properties, the total average annual return from January 2000 to December 2009 was 7.3 percent. Conversely, during this same time period, the stock market was sitting in negative territory and the S&P 500 index produced an average annual return of -0.95 percent. Various studies, which have compiled data from the S&P 500, the Federal Reserve Database and NCREIF, …

H. Ronald Klasko With traditional sources of capital unavailable, the EB-5 immigrant investor program has attracted great interest among commercial real estate developers. Specifically, many real estate developers have chosen to form “regional centers” to attract tens of thousands of foreign investors willing to invest $500,000 for the opportunity to obtain green cards for them and their family members. In fact, the number of regional centers has expanded five-fold to more than 100 in just the last couple of years. This article will discuss the requirements of the EB-5 program and the advantages and disadvantages to developers of forming regional centers to attract EB-5 capital. The article will also discuss other options available to developers, such as having a development project “adopted” by an existing regional center, purchasing a dormant regional center and attracting foreign capital through a pooled investment opportunity without a regional center. Background of Regional Center EB-5 Program The EB-5 program enables foreign nationals who invest $500,000 or $1 million (depending upon the geographical area of the investment) to get green cards for themselves and their immediate family members. In order to qualify, the investment must create ten full-time jobs for U.S. workers. In 1994, Congress created …