Office leasing activity across the nation advanced in the first quarter, with tenants absorbing 5.2M SF, up from the negative 406K SF absorbed during the same period last year.

Read more:

https://www.bisnow.com/national/news/office/strong-q1-office-fundamentals-suggest-market-still-has-room-for-expansion-87522?rt=57392

Top 10 Mistakes Made When Buying an Office Condominium

Buying a commercial condo can be a great move for a business, from the tax advantages, cost savings and predictability in expenses, it makes sense in many situations. Here are ten pitfalls to avoid when buying an office condominium space.

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Lien Lesson

Good lesson on how thoroughly to conduct your due diligence on the financial side

http://folioweekly.com/stories/lien-lessons,18579

Should you stage commercial real estate? "YES"

Leasing improvements: If your goal is to lease your commercial real estate quickly and for an above market lease rate, you must invest some dollars placing the property in "rent ready" condition. The carpeting in the office should be replaced or at a minimum removed so that a prospective tenant knows that new flooring is in the plans. A fresh coat of paint throughout the office and warehouse brightens things and adds an air of new. All of the systems - plumbing, heating, ventilating, air conditioning, roof, sprinkler system, loading doors, electrical panels, fire alarm system should be checked and certified. The outside of the building is important as well. Remember, if your commercial real estate lacks curb appeal, the tour might hop-scotch your building for one that looks good. Paving, landscaping, and truck loading areas should be shored up and maintained during the vacancy. Most potential tenants have a limited imagination or patience for the way "things could be". Therefore, delaying the above could cause an occupant to bypass your building for another that is move-in ready.

Ongoing Risk Assessment is Important

Investors know that completing a risk assessment is an important part of acquiring any asset. Any pro forma, projection or budget is only as good as the assumptions that go into it (GIGO – garbage in, garbage out). The risk assessment is the validation process for those assumptions. Many risk assessment models have been developed, from the relatively simple to those requiring a supercomputer to complete.

I recently read a commentary by Joseph Ori, Executive Managing Director, Paramount Capital Corp., dated January 10, 2014 on GlobeSt.com titled "A Risk Assessment Program for CRE." He presents a simple to use risk assessment model that I applied to an acquisition analysis. It provided some good insights into the acquisition alternatives that are, granted, very subjective but in the aggregate paint an accurate picture of each property’s risk levels.

Ori identifies fifteen risk factors to be assessed on a scale of 0 (none) to 3 (high), not all of which are applicable to all properties. The fifteen factors are (with my additions in italics):

1.       Cash Flow Risk (volatility in the property’s NOI or cash flow)

2.       Property Value Risk (reduction in a property’s value due to physical or functional obsolescence)

3.       Tenant Risk (loss or bankruptcy of a major tenant)

4.       Market Risk (negative changes in the local real estate market, also called economic depreciation by appraisers)

5.       Economic Risk (negative changes in the macro economy)

6.       Interest Rate Risk (an increase in interest rates)

7.       Inflation Risk (an increase in inflation)

8.       Leasing Risk (inability to lease vacant space or a drop in lease rates)

9.       Management Risk (poor management)

10.   Ownership Risk (loss of critical personnel)

11.   Legal and Title Risk (adverse legal issues and claims on title)

12.   Construction Risk (development delays or cessation and payment defaults)

13.   Entitlement Risk (inability or delay in obtaining project entitlements)

14.   Liquidity Risk (inability to sell property or convert equity value into cash)

15.   Refinancing Risk (inability to refinance property)

To his list I would add one additional risk factor (although this addition could be considered a part of property value risk, I think it’s worth highlighting separately):

16.   Regulatory Compliance Risk (effect of environmental, energy and sustainability, ADA, etc. regulations)

But as Ori points out in his commentary, risk assessments should not only occur at the time of acquisition. They should be performed annually. Some of the reasons for annual risk assessments are that they guide ongoing decisions including, but not limited to:

·         Hold/sell a property

·         Refinance a property

·         Renew or not a management contract.

Now is a good time to initiate an annual risk assessment program for your property because some reminder events that you can tie to in the future are soon coming due:

1.       Annual financial reports to investors;

2.       Annual IRS returns; or

3.       County property appraiser returns.

In addition, a risk assessment should be conducted each time a property management contract is renewed to ensure that your property manager is addressing your property’s needs.

If you would like to discuss these thoughts in more detail, please contact me:

            Paul B. Hazlett
            Multifamily Investment Advisor
            Coldwell Banker Commercial - Benchmark
            904.421.8523
            PHazlett@CBCBenchmark.com

Beware of Corporate Records Service Scam

You may have recently received a letter from Corporate Records Service, soliciting for funds under the guise of providing a service for the recording of annual company minutes. They are asking that company shareholders, directors, and officers, submit their Annual Minutes Records, along with a check for $125.00, made payable to the Corporate Records Service, in order for them to, “satisfy the annual minutes requirements for your corporation.” (No later than January 30, 2013.)

This is a scam! It is not a requirement for you to submit your recorded minutes OR a payment to this company.

While you are required, under Florida law, to keep annual meeting minutes, you are not required to submit them or hire a company to prepare them for you. You may engage an attorney to prepare them, prepare them yourself, or use a company such as Corporate Records Service to prepare them.

If you receive, or have received, a notice from the Corporate Records Service, DO NOT be fooled into giving them information or sending a payment.  They try this each year when you are busy complying with tax items and hoping your will be tricked by their official looking notice.

Sister Cities International 2012 Annual Conference

Jacksonville had the distinct honor of hosting the 56th Sister Cities International Conference last week at the Hyatt Regency Jacksonville Riverfront.  The event moves to a different city around the world each year, and Jacksonville has never before hosted the event. 

The Annual Conference connects local leaders and motivated citizens who want to have a positive impact in their community and around the globe.  It is structured to provide an educational and interactive environment for networking, sharing best practices, engaging elected officials, having robust roundtable discussions, and gaining knowledge about the latest trends in diplomacy. 

A luncheon reception was held on Saturday at the Jacksonville Golf and Country Club that was hosted by the China committee of JSCA and Jacksonville Chinese Association.  This reception provided a very unique opportunity to network with delegates in person and exchange ideas about educational development, cultural exchange and international trading.  CBC Benchmark was very pleased to be a Gold Sponsor for this reception and to have representatives in attendance at this exceptional event.