Need: Office and Industrial Companies

Posted by: Dominic Brunetti

Vice President Office Properties
775 336 4674
dbrunetti@naialliance.com

During his career, Dominic has worked with clients such as: Centex Homes, CTX Mortgage, Landmark Homes, 1st Premiere Mortgage, AG Edwards, Alere Medical, CHSI Nevada, The CFO Group, Ameriwest Financial, North American Title, Andregg Geomatics, Manhard Consulting, HDR Engineering, State Farm, Gizmo Wireless, The Corner Doc, First American Title Company, Stewart Title Company, GI Consultants, The Hilton Foundation, Hartford, PC Doctor and more.

Last Monday, I met at the Economic Development Authorty of Western Nevada (EDAWN) to become part of an interim task force that will focus on marketing our community to California. EDAWN has done a great job over the past few years strategically marketing the benefits of the Nevada business climate and the Reno-Tahoe quality of life to Californian companies and executives. As we all discussed at the meeting, it is time to turn up the heat. Specifically for office and industrial companies, what recruiting tools would you employ?

The Fallacy of Distressed Asset Sales

Posted by: Scott Beggs
Investment Specialist
775 336 4644
sbeggs@naialliance.com

Scott joined NAI Alliance in March 2008 to assist the company with investment sales. Previously, Beggs spent over seven years with Dermody Properties as Vice President of Acquisitions and Port Management.

There is not an article on commercial real estate that does not mention the widely held belief that there is a title-wave of distressed deals that will be coming to market soon. But the price of anything is determined through the interaction of supply and demand. And this interaction cannot be avoided.

First to address the supply of distressed investments. There is absolutely no doubt in my mind that opportunities will soon emerge as the state of real estate pricing becomes obvious to owners, lenders and investors. Despite the likely growth in supply of these “distressed opportunities” I can envision a scenario where this supply is somewhat muted compared to the dire predictions of many. Banks may begin to work with owners and re-cast debt terms rather than bring the assets on to their balance sheets. Owners with additional equity who correctly have a long term view of real estate will add equity to the game in order to extend loan terms. Other owners will get in front of the situation and accept loses through a managed sale process rather than waiting until the debt maturity date. So while there is no doubt that the supply of distressed assets on the market will increase, it may not be as dramatic as some are forecasting.

Now to the more interesting side of the equation – demand. Many intelligent real estate investors have been preparing for this upcoming wave of distressed assets for some time now by disposing of weaker assets in their portfolio, lining up potential joint partnerships, retiring debt and otherwise scrubbing their balance sheets and preserving cash. These investors are waiting expectantly for the distressed deals to emerge. These groups are well-capitalized, highly-experienced investment firms with defined strategies for how they plan to execute their investment programs. Somehow, many investors with an appetite to buy distressed have the misguided and myopic perception that they are the only active buyers out there. These groups somehow fail to accept that they will have to compete with others for these opportunities. If distressed assets are priced low enough to provide a buyer with significant profit potential, then the pool of potential investors for that asset grows dramatically. A seller may very well be willing to part with an asset (or forced to sell) at a price that provides significant upside for a buyer, but if there are oversized profits to be made, there will likely be a variety of qualified and interested buyers. The winning buyer will have to be beat out these other suitors for the property. The selected buyer will have to provide an identified discretionary capital source, a strong demonstrated track record of closing deals, solid references from past sellers, and a willingness to outline the timeframe under which a sale can be completed. And if other investors are better, faster, stronger, etc., then that group is going to WIN the deal.

So yes, good deals will likely emerge. But just because a seller is “distressed” does not mean that potential buyers will not have competition. The interaction of supply and demand still exists – and there is demand for these investment opportunities.

Should Commercial Mortgage Backed Securities Be Mark-to-Market?

Posted by: Chris Shanks
Investment Analyst

775 336 4620
cshanks@naialliance.com

Chris is responsible for analyzing, valuing and marketing properties for the NAI Alliance Investments Team. He is also involved in the disposition and acquisition of investment properties for clients.

By definition a security that is mark-to-market is one that is valued continuously at a current market value. This accounting principle is what has arguably led to the downward spiral of the financial sector as well as the nationwide real estate market. Many companies who owned commercial mortgage backed securities (CMBS) have had to write down billions of dollars in assets because of the effects of subprime lending. Is it fair to value real estate the same as common stock?

Many will agree that a mark-to-market approach for real estate backed securities is not a perfect method, especially in light of what has happened in the last year. Many securities have the possibility of reaching a zero value, which is something that rarely, if ever, occurs in real estate. The main reason is that real estate has an intrinsic value; it costs money to be built, it is occupying land that is scarce, and it has the potential for future cash flows. Also, common stock trades on a daily basis in volumes that usually reaches into the hundreds of millions in transactions, a commercial real estate property may not trade hands for five years. The lack of real time data and an inherently lower standard deviation makes it difficult to truly value (CMBS) with a mark-to-market approach. I’m not naïve enough to say I have the answer and am ready to propose it, however I do think we need to take into account the nuances that separate the asset classes and devise a better method of valuation.

Don't Forget the Basics

Posted by: Scott Shanks, SIOR

Senior Vice President Office Properties Group

775 336 4671

sshanks@naialliance.com

During his career, Scott has worked with clients such as: Barnes & Noble, GM, Merck Pharmaceutical, Henry Schein, Home Depot and Ahold to facilitate their real estate needs.

In meeting with Landlords in recent months to give our marketing updates, the question that is most often asked is, “what are you doing in marketing my building that other brokers aren’t?” Immediately after that question comes the proverbial…think out of the box question. Well, the answer is we are doing both. In this day and age of high-tech computer marketing and the tools by which you can achieve marketing properties via web-based and media based vehicles, we are effectively implementing our property listings into technology based programs that effectively market our properties and get them in front of the eyes of the people that we want to attract to our listing opportunities. As effective as this may be, we also strongly believe that nothing replaces the ability to go back to the basics and simply do what is typically a tried-and-true practice of wearing out the shoe leather. Yes….cold calling. While everyone seems to be “tech savvy” these days, it seems that the younger generation of real estate sales and leasing professionals has forgotten how to simply press the flesh. In tough times, it’s even more important to have a pulse on the industry including; availabilities, rates, comps, sub-market data and who’s out simply “looking.” You will get more deals done, have a better working knowledge of the market place and impress your landlord with your blue collar work ethic in the market place by getting back to good old cold calling.