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Michael S. Schimmel Although, historically investors view real estate investment trusts (“REITs”) as relatively constant, the downward trend of the real estate market and the decimation of nearly 50 percent of the value of the stock exchange over the past year has drastically impacted even fundamentally sound companies. The combination of market uncertainty and lack of consumer confidence, coupled with the fact that some believe the United States has officially been in a recession since December of 2007, helps to demonstrate the vulnerability of every aspect of the real estate sector. This article briefly explores certain basic fiduciary duties that directors and trustees of public REITs owe to the company. While many consider the concept of fiduciary duties straightforward and simple, it is quite the contrary. In fact, this aspect of corporate governance has an extensive body of case law, countless volumes of secondary sources and treatises, and most notably, a highly complex intricate web of both federal and state statutory laws. Since REITs acquire, manage and/or invest in real estate assets or loans that are secured by real estate and simultaneously issue shares in these investments to shareholders, various duties and responsibilities attach to the individuals managing and overseeing …

Jerry Wit Companies seeking new office or flex/office space typically invest a great deal of time and money visiting potential sites, comparing the price per square foot of competing buildings and analyzing tenant build-out and moving expenditures. But many do not devote equal care and effort to designing the most cost-efficient space plan, which could save thousands of dollars annually in rental costs. A quick review of the math brings this into clearer focus. ABC Technology Company wishes to lease 10,000 square feet of space at One Main Street at a cost of $25.00 per square foot. The amount invested annually in this lease represents $250,000. However, creative space planning serves to reduce the size of the conference rooms, eliminates awkward corridors and downsizes the break room so only 8,000 square feet is now needed by ABC. The cost of the annual lease shrinks to $200,000 per year and, over the course of a 5-year lease, $250,000 is saved. Small ways to save big How can your company accomplish what ABC did? For starters, start the office search and space planning process early. Depending on the size and complexity of the tenant build-out that is needed, budget approximately 10 weeks …

Tipton Housewright I attended Easter services at a grocery store. But it’s not what you think; communion was not served in the wine aisle. Actually, the space was once a grocery store, but now it is a thriving 30,000-square-foot church with an attendance of approximately 1,000 people per week. Until just a few months ago, it was a vacant anchor space in a declining suburban strip shopping center. Now it has colorful interiors organized in a lively, contemporary and very functional way. The concrete floors have been stained and left exposed. The ductwork and steel structure have been painted black. And there’s plenty of parking out front. This was a win-win for the landlord (he sold the space to the church), the church (their total cost of purchase plus improvements was less than half the price of comparable new construction), and the community (they have a thriving church filling a once-derelict piece of real estate). As the recession has plowed through the retail industry, it has left in its wake an unprecedented number of store closings. Many once-thriving brands have had to reexamine their real estate needs and close a large number of stores or simply close the entire chain. …

Stephanie Mayhew Specht In the last year, the financial markets have essentially done a 180, and according to Bobby Bakchi, chief executive officer of Hybrid Capital Markets, things are going back to the basics — the way they used to be. Before the recession gripped the commercial real estate market, the appetite for financing was enormous and generally the conduit market was the way to go. However, that market is now shut down and many in the industry wonder if any form of it will ever come back. Bakchi believes that the most problematic issue with the conduit market was the complete and utter deterioration of underwriting standards, coupled with the fact that rating agencies that were supposed to be watch dogs for the industry were just not doing their job. “As a result, people thought that they were buying one thing and they really were getting something else. There was a lack of transparency, which made it difficult for the rating agencies to accurately rate these assets,” says Bakchi. With the conduit market shut down and the fact that many of the bigger banks have pulled back on lending, more and more people are turning to their local and …

Scott A. Fisher and Abe J. Schear If you are a retail landlord in today’s market, you are reluctantly answering any phone call, e-mail or other tenant communication. That caution is realistic because you may justifiably believe that every communication from a tenant is a request seeking a rent concession. A year ago, a landlord would generally have likely met a tenant’s request for a rent concession with rejection and perhaps scorn. Rental rates were stable, if not rising, and tenants were plentiful, or so it seemed. Unfortunately for landlords, times have changed. Rents are falling, replacement tenants are fewer, and landlords are determined to maintain occupancy. As a result, tenants are literally lining up at their landlords’ doors seeking rent concessions. Some tenants aren’t even asking and, notwithstanding that it is a default, are simply sending in reduced rent with a note that they need to immediately “reduce occupancy costs.” Landlords are trying to resist this troubling trend, but are increasingly being forced to acquiesce to this new reality. The purpose of this article is to provide landlords with a checklist, which outlines key issues that should be considered in connection with tenant requests for rent concessions. While each …

Randall Shearin Sperry Van Ness has formed an Asset Recovery Team, a group of its advisors who operate nationwide as a team specializing in the various areas of distressed properties. The team’s members include everyone from receivers to brokers who specialize in monetizing distressed or troubled real estate assets. The group has a number of goals. First among them is finding situations where it can assist in providing solutions for the owner or the lender. Second, the group is identifying companies who are looking to buy properties out of foreclosure or pre-foreclosure situations. Thirdly, since SVN is a company of smaller companies, the SVNART team was formed to create a best practices knowledge bank for all members. The SVN Asset Recovery Team met in Washington, D.C., on February 12 for a day-long session to share ideas and experiences and meet the alliance team members. Shopping Center Business was invited to attend to see how one company is evolving to the changing industry. Many of Sperry Van Ness’s advisors are actively engaged in the disposition or renegotiation of many distressed commercial real estate properties nationwide. In fact, SVN expected between 30 and 40 advisors to attend the Asset Recover Team originally. …

Levi Reilly, PE, LEED AP The first green lawsuit associated with lost tax incentives was filed in Maryland, and subsequently settled out of court in 2007. Insurance providers are rolling out specific programs to cover green real estate projects including coverage for failed green products, unrealized tax credits, cost premiums to rebuild green after a loss event, and adverse publicity for green projects. Over the past few years we’ve all heard about the benefits of building green, but with new regulation and financial incentives driving green buildings, it’s important for owners to understand the risks of building green. RECENT REGULATION Many communities across the country are mandating green buildings in the permitting process or implementing financial incentives for green buildings. Regardless of whether these programs are permitting or incentive-based, we are seeing a paradigm shift within sustainable design from a voluntary effort to a regulatory/incentive driven process. One of the communities that is pushing for a financial incentive program is Portland, OR. The city is proposing a feebates program for new real estate projects. The feebates model requires developers of conventional buildings to contribute money to a fund, while developers of green buildings are allowed to withdraw money from the …

Todd Goulet The consequences of the credit crisis — massive layoffs and downsizing — are hitting the multifamily market with a one-two punch. Sandwiched between reduced demand and increased supply, many apartment building owners are seeing decreased cash flow in this economy. Even for owners of apartment buildings with sound fundamentals, the quest for capital remains a challenge. Now many apartment building owners who attempt to refinance debt are finding that traditional wells of capital have dried up. GOOD NEWS FROM FANNIE MAE AND FREDDIE MAC But there is good news in this sector: agency financing through Fannie Mae and Freddie Mac. Despite the dire headlines and government intervention last year, the agencies continue to provide capital, and banks that have strong relationships with the agencies can continue to lend to apartment and senior housing facility owners of properties with good fundamentals. While some apartment building owners have been reluctant to deal with Fannie Mae and Freddie Mac, fearing miles of red tape and an impenetrable government bureaucracy, tough times require open minds for new solutions — and the processes at the agencies are a lot simpler than many building owners realize. The concern is understandable, but it is important …

Stephanie Mayhew Specht NAI Global and Higgenbotham Auctioneers International have joined together to bring a new kind of auction to the marketplace — the Commercial Property PowerSale. The PowerSale has all of the components of a traditional auction, but this new program provides sellers the benefit of an aggressive marketing campaign, access to all of NAI Global’s local agents for first-hand information on properties up for bid, as well as multiple ways to take part in the auction process. According to Jeffrey M. Finn, president and CEO of NAI Global, the PowerSale is based on a model that has proven successful in similar market cycles. “It is a very important program and a process in a market that is at a disequilibrium where the gap is substantial to establish a forum and a mechanism to create a market. The goal of the PowerSale is to create a liquidity in the market where it does not exist currently,” he says. “By bringing highly motivated sellers and aggressive bidders to the table in a critical mass, the PowerSale creates substantial awareness and a forum to establish what value is today.” The PowerSale auction series, the first of which is set for May …