CRE Report 04.16.12

May 10, 2012 at 12:18 pm | Posted in Radio Show Reports | Leave a comment
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Commercial real estate investment returns

Bob – Walt let’s talk about Commercial Real Estate Investments returns today.  How do you size up a commercial real estate investment, to make sure it’s analyzed correctly?

Walt  – There are two significant elements you need to consider in determining a successful commercial real estate investment, and they are cash flow and return on investment.

It’s all about cash.  Cash flow is King, at least for some people.  When going into a commercial investment it’s critical to analyze all the expenses including, vacancy loss and the cost of vacancy’s impact on the investment, creating a replacement reserve to plan to replace major items in the

Photo Credit: http://jdfletcherassociates.com/blog/?p=371

future, on going maintenance items, advertising, tenant repairs and one of my favorites, lease commissions.  It is critical to analyze all the costs associated with the property because every dollar that goes on the expense line is a dollar that disappears from the profit line.  So you can create cash flow by raising rents, closely monitoring expenses and or by putting more cash in to the deal.

Bob – Where does the property appreciation show up in that investment analysis?

Walt – Well it really doesn’t in that scenario. And interestingly, it doesn’t come into play in one of the most popular method of investment measurement, which is the capitalization rate or cap rate, which basically analyzes the investment based on one year of net operating income and also

assigns a risk factor to the asset to determine the value.

Another popular and more comprehensive analysis requires looking at the internal rate of return of the property or IRR, which takes into account the purchase price, the current financing on the investment, all income and expenses, property depreciation, and a sale price at the end of a determined time frame usually five years.

Said again, the IRR calculates the dollars in the investment and creates a return calculating the purchase price, annual cash flows and eventual sales price.  We can analyze the return on the cash flow or the appreciation or a combination of both.

Bob – Walt, that sounds like a very detailed approach to analyze a commercial real estate investment, can this be done on any type of income property, regardless of the value of the property?

Walt – It can and it is a great way to analyze commercial investment real estate.  Owners of commercial investment real estate want to know what their property is worth, and the IRR is an excellent way to value all aspects of the property and based on those numbers the Internal Rate of Return is going to provide an excellent analysis of the property’s return to the investor.

Bob – Walt how can people reach you to talk about commercial real estate?

Walt – Thanks Bob, Walt Arnold, 256-1255, website, waltarnold.com also follow me on Twitter or become a fan on Facebook.  If you have a question about your real estate property values, give me a call for a free property evaluation. Thanks Bob, have a great week.

CRE Report 03.12.2012

March 12, 2012 at 11:50 am | Posted in Radio Show Reports | Leave a comment
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Where are all the jobs?

Bob – Walt you mentioned attending the Urban Land Institute Luncheon last week and some of the interesting trends they talked about, can you tell us about some of those trends.

Walt – Yes thanks Bob, good morning. Urban Land Institute presentation discussed some trends that will affect commercial real estate.  One trend that is developing is “Less is Better”. Tenants and owners are beginning to squeeze more out of every square foot of space in every type of commercial space. This efficiency means less square footage, but it also is about creating environments that are multi-dimensional, adaptable and create a greater intensity of use.

What does that mean?  It means we are going to see office and commercial space that aligns itself with this work from anywhere, at anytime, 24/7 workforce and we will see changes in spaces that start to reflect this change in mobility and adaptability more and more.

Bob – The name of the presentation is” Where the Hell are the Jobs” (NOTE–Soften it if you want).  Did you get an answer?

Walt – The world is obviously getting smaller and we have seen globalization of capital, instant technology and labor.

Workers will need college education with degrees for New Mexico to gain substantial job growth in this new economy. We are competing with 49 other states for global markets.

The majority of jobs are going to be in Medical, Education, Healthcare, and customized manufacturing.   Meds and Eds is a phrase you will start to hear more often.

So for real estate investors, commercial buildings with those types of tenants are going to be less risky and hopefully more profitable.

Bob – Anything else for us today?

Walt – For all the Boomers get ready for extended employment! 40% of Boomers say they don’t have enough money to retire. So Bob, make sure you take care of that golden voice of yours, you might need it a while!

The Boomers are going to ramp up Senior Housing requirements for the next several years and Albuquerque has already seen strong growth in the Senior Housing and Assisted Living markets.

With declining home ownership rental-housing demand will continue to grow and the demand for rental units will remain strong for the next few years. Think about stricter mortgage requirements, more waves of foreclosures and many families rethinking the costs of home ownership will keep the demand for apartments strong.

Bob – How can people contact you to discuss commercial real estate?

Walt – Thanks Bob.  Call me, Walt Arnold at 256-1255, become a fan on Facebook, follow me on Twitter or visit my website waltarnold.com for current listings in the Abq area.  Sperry Van Ness is a full service commercial real estate company helping Landlords and Tenants solve space and lease requirements, investors maximize their cash flow and rates of returns through investment in commercial properties and through our professional property management we help owners maximize cash flows and preserve assets. Hey Bob, happy first Monday of daylight savings time. I’ll talk to you next week.

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CRE Report 10.10.11

October 13, 2011 at 9:52 am | Posted in Radio Show Reports | Leave a comment
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Columbus Day Investing Advice

Bob – Walt what is going on in the commercial real estate world?

Walt – Good morning Bob!  Happy Columbus Day!  Christopher Columbus was born in a middle class family in Genoa, Italy.  He had a passion for navigation and sailing as a young man and traveled extensively visiting Africa and the Mediterranean.  Columbus spotted land on October 12th, 1492, which became the discovery of the New World.    He also continued to sail to the Americas and eventually made four trips to the Americas ending with his final voyage in 1502.

That is just a little Columbus Day trivia, Bob.   It is interesting to note Columbus’s perseverance in talking to the right people and trying to put together the right deal to help him accomplish his vision.

Which is a lot like real estate investing.  You have to have a plan, you need to be committed to the plan and you have to see it through.  There will be some rough times but if you execute the objectives carefully the rewards could be great.

Bob – Walt, but Columbus had some failures.  He had a hard time selling his plan to Kings, Queens and countries until Spain said yes to him, he had to abandon the Santa Maria when it ran aground, he had a tough time as a governor in the New World and he spent a year in Jamaica after his ships rotted.

Walt – You know your history and yes he did have some failures but he was in the right place at the right time. And that brings me back to commercial real estate.  The discovery of America would certainly have taken place within a short time span from 1492.  It’s all about timing!

With investments in commercial real estate it is so much about timing, and now is the time to consider investing in commercial real estate.  Values are down significantly from the 2007-2008 highs.  There is an opportunity in this market to acquire outstanding values in real estate, but you have to have a plan. It is similar to Columbus, he had a vision for what he wanted to happen and he pursued it with great passion.  Did he have some up and downs, sure he did but he kept his focus and today we celebrate his day, Columbus day.

Bob – Walt hat else do you have for us and how can people get a hold of you today?

Walt – Thanks Bob, call Walt Arnold at 256-1255 or check us out on the web at waltarnold.com.  At Sperry Van Ness we have the experience and resources to help you navigate these difficult Commercial real estate waters to help people find great values in today’s commercial market.  Give us a call and we can set up an appointment to show you how.  Thanks for the time today Bob, have a great week.

CRE Report for 08.22.2011

August 22, 2011 at 10:07 am | Posted in Radio Show Reports | Leave a comment
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Good Construction News and Investing in Commercial Real Estate

Bob – Walt, what is going on in the commercial real estate world?

Walt – Good morning Bob!  I wanted to give a little perspective from our SIOR NM chapter meeting last week and what’s happening with some local businesses that are directly tied to commercial real estate in this market and fortunately it’s somewhat refreshing.

On the construction side, Dave Doyle of Enterprises Builders said they are busy, although the size of the work is less than what it used to be, the work under half a million dollars is active. Dave said construction costs today are at 2005 levels.

One area Dave talked about was the costs of construction materials.   Copper, sheetrock and metal are all still at high levels.

So there is construction going on in our local market, not necessarily new buildings but there is construction work.

Mike Kelly, a commercial lender said he will do more loan volume in the next few months than he did in the last 2 years.  Interest rates remain low and there is movement in the lending market and lenders are starting to get back in the game.

So that is a little good news for Monday morning.

Bob – Walt, with the significant up and downs in the stock market, investors must be thinking about moving in back into real estate as an investment vehicle.  Are you starting to see that in your business?

Walt – With money market rates at .02 percent, commercial real estate is an investment that is definitely worth considering.  There are going to be some great opportunities in real estate.  With professional advice from a CRE broker like the brokers at Sperry Van Ness we can help investors make the right choices in analyzing and acquiring the commercial real estate, manage the asset (if necessary) and develop an exit strategy to sell the asset at the right time.

Bob, 10 year treasuries are at 3%.  Pre tax yields for real estate, on average are currently at almost 10% and the opportunities to invest in real estate are continuing to show themselves.

So give me a call and let’s develop a plan to capitalize on the commercial assets coming to market.

Bob – How can you help people with the risks associated with purchasing commercial real estate? There are still risks that investors have to deal with in this market.

Walt – There are risks and that is why it is important to go through a process to determine how much risk a person wants and put together a plan to analyze the risk, to evaluate the preferences in property type (office, industrial, retail multi-family, self storage, land, hotel motel) and that’s where Sperry Van Ness has the tools, experience and brokers to help through the process.

Bob – How can people contact you?

Walt – Thanks Bob, Walt Arnold 256-1255, waltarnold.com also visit me on Facebook or Twitter. Thanks Bob have a great week.

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