Commercial Real Estate Financing

Commercial Real Estate Funding System

This online course teaches you more than anything you will ever learn about real estate Brought to you by master real estate guru Austin Davis. Austin has created a system to help you learn everything that you need to know about buying and selling real estate. A few years ago it was not a good time to let too many people in on the secrets of truly mastering real estate, but in today's economy this is the best time in history to be getting a whole lot done in the real estate market. This system has been carefully used and tested by Austin's private clients, and now it is available as an online course to you! You can learn everything that you need in order to start buying and selling amazing real estate, in just a few weeks. Get started now to get in on the secrets of this lucrative market! Continue reading...

Commercial Real Estate Funding System Summary

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Marketing Commercial Real Estate

Real estate, but the two represent different businesses. Marketing commercial real estate covers more types of services than residential real estate. For example, besides marketing and selling properties, commercial real estate practitioners may be involved in property management, property leasing, site selection, feasibility studies for developments, and investment analysis.1 Rewards for commercial real estate and residential real estate may differ. For example, the value of the average commercial sales transaction is more than twice the value of the average home sales transaction.2-3 In this chapter, you will learn how to apply the principles of marketing to increase your chances of success with commercial real estate. The next chapter focuses on how to implement your commercial real estate marketing strategy.

Commercial real estate practitioners differ markedly in the types of properties in which they specialize and in the

Types of Services Besides sales, often commercial real estate agents are involved with other services 20 percent of the commercial practitioners surveyed by the National Association of REALTORS called leasing their specialty, 9 percent named property management, and 7 percent mentioned property development. These functions are considerably different than those typically performed by most residential real estate agents. In this chapter and in Chapter 31, we will be discussing primarily property sales since property management, property development, and leasing are beyond what can reasonably Exhibit 30.1 Primary Business Specialty of Commercial Real Estate Practitioners Exhibit 30.1 Primary Business Specialty of Commercial Real Estate Practitioners Commercial property Office building sales Financial Analyses Commercial real estate agents require business financial expertise so that they can provide their clients with cash flow projections and other measures of financial return for the...

Commercial real estate purchases depend a lot on expected financial return

Use Analysis In many purchase situations, the commercial real estate agent will need to know not only the current use of the property but what else it might be used for. The best alternative use of the property may provide the buyer more value than the current use. For example, a golf course may be worth more as a site for a housing development than as a golf course. To determine the best alternative use, the agent first needs to have a knowledge of local zoning laws, what they allow, and what changes might be possible. You can expect zoning codes to vary widely by municipality so you should not make any assumptions about zoning without checking. The agent must also have imagination to see other possibilities for the property to convert an industrial building into loft apartments, for example.

Commercial Real Estate Situation Analysis

You begin to develop your commercial real estate marketing strategy the same way you usually begin a marketing strategy (Exhibit 30.2), with a Situation Analysis that covers All these areas have been covered several times in the book see for example Chapters 4 through 8 and the section on the Situation Analysis in Chapter 28, Marketing Residential Real Estate so we will discuss only a few aspects of the Situation Analysis that are specific to commercial real estate marketing. Exhibit 30.2 Marketing Commercial Real Estate Exhibit 30.2 Marketing Commercial Real Estate The customers you want to consider depend on the types of property in which you wish to specialize and the types of services you wish to provide. For example, if you plan to specialize in leasing office space in Class A (highest quality) multi-use buildings, the customers on which you focus will obviously differ from those on which you concentrate if instead you choose to specialize on selling small retail complexes such...

Segment Selection Chart

Can conduct the same analysis for each of your products and services, and summarize them all on the same chart. For example, if the real-estate agent were interested in expanding to services for commercial buyers involving, for example, office buildings or factory buildings, then those market segment opportunities could also be graphed on the same chart (Exhibit 10.3). That would provide an overview of all the market opportunities the realtor might pursue and information for allocating their resources.

Systems Buying and Selling

Systems selling is a key industrial marketing strategy in bidding to build large-scale industrial projects such as dams, steel factories, and pipelines. Project engineering firms must compete on price, quality, reliability, and other attributes to win these contracts. For example, when the Indonesian government requested bids to build a cement factory near Jakarta, a U.S. firm made a proposal that included choosing the site, designing the cement factory, hiring the construction crews, assembling the materials and equipment, and turning over the finished factory to the Indonesian government. The proposal of a Japanese bidder included all of these services, plus hiring and training the factory workers, exporting the cement, and using the cement to build roads and office buildings around Jakarta. Although the Japanese proposal was more costly, it won. This is true system selling The firm took the broadest view of its customer's needs and positioned itself as an economic development...

Product Differentiation

Other companies offer products that can be highly differentiated, such as cars, commercial buildings and furniture. Here the company faces an abundance of design parameters.11 It ean offer a variety of standard or optional features not provided by competitors. Thus Volvo provides new and better safety features, while Lufthansa offers wider seats to business-class flyers. In the United Kingdom, 1iitbread has targeted its chain of Brewers Fay re pubs at families. Besides the usual food and drink, most Brewers Fayres have a toddlers' area, a play zone for bigger children and a 'Charlie Chalk Fun Factory - a large self-contained area full ofgames, toys and adventure equipment'.

Effective sales people need to be able to handle rejection

Besides personal skills, marketing commercial real estate and marketing residential real estate are similar in that the marketing process is generally the same. Just as residential real estate agents target markets and position their services, commercial real estate agents must target markets and position their services.

Transform owner names into prospects

Unlike residential real estate, where often the home owner contacts just one agent, in commercial real estate, the typical seller may interview three or four agents before deciding on which one to choose for the listing.8 You need an effective presentation to persuade the prospective seller to list with you.

Be comfortable with the financial measures you use

You can start with the Multiple Listing Service and also online services (for example, LoopNet, CoStar, Property Line). You can follow up with calls on local experts such as local commercial property appraisers, local zoning board members, and local commercial bankers. Do not neglect talking directly with property owners to learn their views ofproperty values in your geographical area. (For a useful overview of developing CMA information, see Keim.14) Selling technique was discussed in Chapter 29. If you skipped that chapter, please go back and take a look for a more detailed discussion of selling. (For useful tips on selling commercial real estate, see Bowman.15)

Factors In Appraisal Corporate Publics

One company that systematically and continuously examines and serves the interests of its stakeholders is Corning. It cooperates with labor, promotes diversity, and goes out of its way to improve the community. For example, the company's partnership with the glass workers' union promotes joint decision making. Worker teams determine job schedules and even factory design. All U.S. workers share a bonus based on point performance. All managers and salaried workers attend seminars to build sensitivity and support for women and African-American coworkers. A network of mentors helps minorities (i.e., African Americans, Asians, Hispanics, and women) with career planning. Corning acquires and rehabilitates commercial properties, then finds tenants (some minority-owned) at market rates to locate their business there. It works to attract new business to the region and has invested in the local infrastructure by building a Hilton hotel, a museum, and a city library.

Business Buying Situations

New task The new task is a buying situation in which a purchaser buys a product or service for the first time (e.g., office building, new security system). The greater the cost or risk, the larger the number of decision participants and the greater their information gathering and therefore the longer the time to decision completion.6

Similarities

People successful at marketing residential real estate often succeed at marketing commercial real estate. That is because certain skills lead to success regardless of which business you are in. These skills include Selling Ability Effective sales people in any field know how to listen and learn from a customer, how to manage a customer 's expectations, and then present the customer with a solution to their problem that will lead them to make the purchase. Usually, such a person likes people and is able to empathize with people. At the same time, effective sales people do want to persuade others they want to get the close. While selling residential and commercial real estate may require different technical expertise, selling ability is a skill that is often transportable from one business to another.

Organization

Generally, a commercial real estate agent requires more skills than a residential real estate agent and so there is a longer list of potential strengths and weaknesses to consider when you evaluate your organization. In particular, While the customer and competitor analyses may be more focused in the commercial real estate Situation Analysis than in the residential real estate Situation Analysis, the Environment Analysis may be broader. You need to consider not just the economic health of neighborhoods you also need to evaluate the economic health of the geographic area in which you operate. That in turn will affect the markets of all kinds of commercial property such as office buildings, malls, and hotels. You should try to see if your geographical area has a master plan that you can review.10

Showing

Showing in commercial real estate involves showing the physical property, but it involves more. In particular, it is necessary to show the financial characteristics of the property and what the owner might expect. For sales, the agent needs to show key financial measures that demonstrate why this property is the best use of the buyer 's money. For income-producing properties such as retail centers and office buildings, you need to consider reporting various financial measures.9 However, over time, income and expenses may be expected to change. For example, if there are vacancies in an office building, retail center, or mul-tifamily building, you may want to understand the reasons and whether the vacancy rate should increase or decrease in the coming years. Location will not change, but economic conditions may change, and traffic flows and other factors that affect the property may change. (For a discussion of factors that affect commercial real-estate value, see Fisher.10)

Light Bulb

The proposal by Osram, a well-known German manufacturer, was a true green product. The Osram light bulb was a compact fluorescent bulb that could replace the traditional incandescent light bulb in specific applications. The unique aspect of this product was that while fluorescent light technology was commonplace (these long-tube lights were common in office buildings), only recently had the product been modified for use as a replacement for traditional light bulbs. The major benefits of fluo

Farming

Centers of influence include just about anyone you know or to whom you are related. You may not think that all of these people will help you market commercial real estate, and you would be right. However, there may be a time and a place where one of them might be in a position to provide you with a lot of help, simply by mentioning your name and giving your contact information to a prospective client. For that to happen, you need to be sure that they know what you do sell commercial real-estate and that they know how people can find you. Advertisements placed by other commercial real-estate agents or brokers can provide you with substantial lead information, especially if you are operating in an open listing market when many brokers can sell a property and if you can determine the property referred to in the ad. Ads placed by owners Check the Yellow Pages listings for shopping centers, hotels and motels, office buildings, and apartments you will often find contact information that...

Competitors

You will likely know your competitors who specialize in the same types of properties and services as you do. You may not know other commercial practitioners who are moving from neighboring specialties into your specialties or residential real estate agents who are beginning to sell commercial real estate. You need to be alert regarding who is being mentioned as different deals take place so you are always up to date knowing who your competitors are.

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