For Sale or Lease, 2827 Rupp Drive, originally built as a single-tenant facility for IBM Corporation in 1969, functions equally well as a multi-tenant facility due to its flexible floor plans and generous 3.4 per 1,000 SF parking ratio.
The property is located within the Triangle Office Park on Fort Wayne’s northeast side offering convenient access to Route 930/East Coliseum Boulevard and Interstate 69. The property is less than one mile from the prestigious campus of Indiana/Purdue University and is in close proximity to numerous restaurants (Hall’s Triangle Park restaurant is within walking distance) and retail shopping centers including the only enclosed super regional shopping center within 100 miles, Glenbrook Square Mall.
The property offers approximately 72,000 square feet of excellent office space with great views and 13,000 sf per floor. It has very flexible design features and would be a great new location for an owner-user.
The first floor entrance lobby, the second floor elevator lobby and the elevator cabs have been completely renovated from floor to ceiling. All this, including great visibility and access from SR 930 (approximately 45,000 cars per day), and ample parking makes 2827 Rupp Dr. something to see. Call us for a personalized tour, 260-489-8500.
A sale/leaseback may seem like a difficult puzzle to put together but in reality it is very simple. It is a transaction wherein the owner of a property sells that property and then immediately leases it back from the purchaser. The idea is to get the original owner’s capital into their hands while allowing, through a lease agreement, the owner to retain possession and use of the property in a seemingly seamless transaction. To the outside world, the business of the owner goes on without interruption. There are several types of property that could be involved including equipment but here we are talking about commercial real estate or the actual “bricks and mortar”.
In this type of transaction the seller attains a lump sum of cash (IE: equity) quickly and the buyer acquires the property along with a favorable long-term lease at terms acceptable to the seller/tenant and buyer/landlord. The lease amount provides usually monthly income which covers the purchaser’s costs and both the buyer and seller end up in a win/win arrangement.
There are just as many pitfalls associated with this type of transaction as in any real estate sale. Both parties need to meet with their respective consultants and/or advisors to be sure the sale meets their needs including tax consequences on their individual tax returns. The seller’s credit rating is also very important so the risk of “tenant” failure is minimized. The maintenance of the property usually remains with the seller but the buyer needs to be sure everything is maintained properly, ordinary wear and tear accepted. The documentation needs to include all the agreements and the understanding of both parties; plus, their respective responsibilities need to be spelled out so no misunderstanding happens down the road.
We, at Sperry Van Ness/Parke Group, can put the puzzle pieces together in a way that surmounts any problems and will make sure everything fis together for all parties. Give me a call to see if this works for you.
The availability of inexpensive money from a variety of capital sources, both large and small, has fueled the more than $29 billion of confirmed single-tenant investment sales year to date.
Continued uncertainty with the stock market, together with lower yields available from more traditional investments and the relatively poor performance of multi-tenant retail, investors have been turning to the more predictable cash flow and returns associated with net-lease property. Lenders and funds have responded accordingly.
“The ‘buy’ side is being driven by the non-traded public REITs that raise funds from individual investors through broker-dealer networks,” said Scott E. Tracy, founding principal Corporate Partners Capital Group in Los Angeles.
Cynthia Shelton, director, investment sales at Colliers International in Orlando, confirmed that interest from 1031 buyers for single-tenant properties is strong. “There is lots of interest in these properties as it’s a rush to safety and returns that are better than T-bills and mutual funds while not as risky as stocks. Many restaurant franchisees are also coming back to the market with sale leasebacks. Individual investors are taking money out of other investments that are not getting the return that they can get in real estate. Many institutions and individuals are paying cash and financing after the close. Some are getting 50% to 60% loan-to-values with 20- to 25-year amortizations and 5- to 10-year terms depending on the tenant and term of the lease.”
Capital is coming from several sources: the private equity investor who needs income, the institutional investor who needs to stay in real estate but desires to reallocate its holdings to diversify risk and several private equity groups that are raising funds in the market promising adequate returns with low risk.
In a recent article in Forbes concerning office and retail leasing, Jim Blasingame had this to say:
In most markets, one of the sectors that a small business can get a good deal on these days is commercial office and retail space. Whether you need more room or a better location, now is probably a good time to think about finding and negotiating for those new business digs.
Focus on the initial steps of commercial real estate leasing fundamentals that will help you find and compare leased space that works for you.
1. Don’t stop looking until you find at least two or three places that work. The extra shoe leather will pay negotiating dividends later.
2. Don’t sign any lease until you know the entire expense picture, including maintenance, which we’ll cover next time.
3. Avoid emotional attachment until after you’ve negotiated lease terms you can live with. At this point, the only emotion that should enter into your decision is whether customers will get excited about the location. Love is for lovers – this is business.
4. Ask for a pro forma copy of the lease as soon as possible and read it. Commercial leases are like belly buttons – each one is different.
5. Create a comparables analysis in an electronic spreadsheet that allows you to compare the details of prospective properties. The basics include: leased square footage, unit lease price, incremental expenses (including maintenance), lease term required (how many years), plus pros-and-cons notes about each property. The notes will come in handy later if you need a tie-breaker when you’re making the final decision.
The only disagreement I have with this article is – who should be doing all the work. Call Sperry Van Ness/Parke Group and let us do all the fact finding quickly and efficiently. We have the market data and the expertise to weed through all the information available in order to find the right space for your business. We will prepare a specific analysis containing all five points (and more) made by Mr. Blasingame. The exception is that we have the thick soles so we will use our “shoe leather” to get the job done. This is what we do.
Click here for the full article from Forbes.com.
If you have an investment property to sell, or are looking to add to your portfolio, please contact me at (260)715-0626 . Especially need NNN properties.
The Real Estate Roundtable has released their 2011 policy agenda and it provides meaningful insight from the leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms. The article is very interesting and discusses how the economic recovery is, at last, gaining traction. The nation’s commercial real estate sector – hit hard by weakened business demand for office, retail, warehouse and hotel space, and the virtual shutdown of two major credit sources – is also on the mend, but not yet out of danger.
To read the entire article visit the Real Estate Roundtable Website: http://www.rer.org/Advocacy/2011_Policy_Agenda.aspx.
Are you looking to own or lease a new office building in Fort Wayne, Indiana? I have the perfect opportunity for you – the highly visible “Culligan Insurance” professional office building on Lake Avenue. With long-term tenants in place, a cap rate of 12.69%, and historically low interest rates you can invest for your future. The price has just been reduced so call me today for a investment summary on this property.
Call my office, 260-489-8500, or visit the property website for more information: http://sale.svn.com/colligan.
Most of the readers of this article know that the residential real estate market more often than not serves as a harbinger for commercial real estate. By paying attention to the residential markets, it is often possible to predict, with reasonable accuracy, the state of the commercial markets 18 to 24 months out – this is both a curse and blessing. While commercial real estate professionals may have foresight as to what markets will be doing in two years, there is often not much that can be done to prevent what is coming. Good or bad, commercial real estate lags residential, which means that when residential markets begin their upswing, commercial real estate will too, just more slowly. The purpose of this white paper is to put forth a balanced discussion about some of the present happenings in the residential markets. It is my hope that doing so will stimulate thought and debate which will help you be better positioned for the future.
While I’d like to say that the residential market has hit bottom, and that things have begun to turn, I’m not sure that’s accurate. There is no doubt that some would argue that the residential markets have found there bottom, but there are clearly things happening which may drive the industry even farther into decline. The recent foreclosure freeze, being led by banks such as Bank of America, JPMorgan Chase, and Ally, may or may not help the markets. Most are saying that it will not and that it’s only a temporary fix. Either way, commercial real estate professionals need to be aware, proactive, and preparing for the ramifications of this event.
The fact that myriads of foreclosures are happening around the country is something that need not be discussed. What does need to be vetted though is that the foreclosure freeze has come about because of the rush banks were in to get paperwork through, which resulted in homes being wrongfully foreclosed on, even those who had gone through a loan modification. What’s worse is that the foreclosure freeze has brought home sales to a screeching halt once again. Distressed properties account for almost a third of the residential market and freezing these prevents thousands of people from buying and selling their homes. This is not good in a struggling market that needs an increase in commerce.
In addition to the banks halting the foreclosure process, attorney generals in all 50 states are now involved in the situation. Each state is wanting to protect their homeowners and requiring other lenders to get involved in the freeze. Although done through good intentions, requiring a freeze on foreclosures is only an artificial fix that will only produce short term results and could cause more damage in the long-run.
The worst part of the foreclosure freeze is that it has caused buyers to be skeptical of taking out loans on top of lenders raising loan requirements. Although the freeze is done out of a legitimate concern for their customers, it has cast another shadow on the already dark economic state. Many have stated that they feel this freeze will extend even further any hint of recovery.
So how does all of this affect the commercial real estate market? What does a residential foreclosure freeze and yet another hit on the lending industry mean for commercial real estate in the next couple of years? Well, commercial real estate is already feeling the crushing weight of this economy with almost $1.1 trillion in commercial loans and $211 billion in apartment loans being held by U.S. banks.1 All of this attention on the foreclosure process can only mean more attention on loan documents in the commercial real estate world. This has actually already started. In a recent study by PricewaterhouseCoopers LLP, 900 commercial real estate professionals were surveyed as to what they believe will happen with the overwhelming amount of special assets. The survey found that only 7% of those surveyed believe the current policy of simply extending loans to defer losses, otherwise known as “extend and pretend,” will continue in 2011. 63% of respondents believe loans will be modified or amended to put more assets back into performing status. The other 30% believe distressed assets will be foreclosed on or sold by borrowers.
These results show that much attention is already being given to the dire situation of commercial real estate. Professionals know that something needs to be done with all of the distressed assets on the market and soon. Banks have too many non-performing assets and they are gasping for liquidity. It is not my intent to make any judgments toward the political aspects of amending loans in order to jump start the monetization of non-performing assets. The intent is to look at the pros and cons of such actions. It’s important to discuss this issue as the latest foreclosure freeze is a heavy reminder of the fact that commercial real estate is in just as bad of shape, if not worse, and we cannot, as 63% of professionals believe, keep extending and pretending.
Amending loans, as PWC’s report has shown, is right around the corner. What are the benefits of modification and what are the downsides? Well, the first thing is that non-performing assets can, with a stroke of the pen, immediately begin generating operating income. Modification can also free an asset up to be sold, which also provides much needed liquidity. With this influx of cash, owners can begin to pursue other deals, giving a spark to their industry. Most people would agree that loan modifications are a viable tool, but they should only be used under specific circumstances. What circumstances entail a loan modification is another topic, but all that to say, amending loan documents is not an off-the-wall answer to the increasing trouble of non-performing commercial real estate assets.
The problem is, someone is still going to have to pay. Even with the adjustment of principles, it only serves to create an artificial solution. Debt doesn’t just vanish, and thinking that a loan modification erases it, is wrong thinking. The economy is going to absorb the non-payment and it’s not going be revived by artificial solutions. In addition, those who have been paying off their loans get no reward while those who are behind get an adjustment for being behind. Essentially, loan modifications reward wrong behavior.
Amending a loan is no small thing when the debt in question is large, as is the case with most commercial real estate loans. Actions such as government mandated loan modifications are part of the reason for the creation of the Tea Party and have been referred to as just another form of social engineering. Free-marketers argue that lenders should neither extend nor amend, but allow the realities of the market determine the outcome. If a property owner defaults, the asset should be foreclosed on, and the foreclosing party then remarkets the asset putting it back in play. This is the foundation for the argument against loan modification.
Whether you are a property owner, in good standing or not, a lender, or any professional in the commercial real estate industry, you need to be thinking about the possibility of a large, national issue, surrounding the foreclosure or loan modification/extension of commercial real estate properties. You must plan ahead, far ahead, during times like these.
Lastly, regardless of your feelings about the topic of this article, there is no reason to become passive in your efforts. There are many opportunities in commercial real estate. And, with loan modifications on the horizon, there is going to be a rush of distressed assets on the market. Banks are going to want to sell their properties before having to modify agreements on them. It may be wise to seek opportunities to grow in order to provide more liquidity. Nobody thinks that by doing nothing, they will somehow have the money they need to pay off debt. Everyone’s situation is unique, but everyone will be affected by a shift in policy to “extend and amend.” Do your research and consider your options. Don’t get caught off-guard by what is happening in the residential world. Be prepared.
Feel free to contact me with any questions you have about the changes up ahead and what options you have moving forward. My contact information is listed below.
About the Author:
Sperry Van Ness/Parke Group is a full-service real estate firm with over 30 years of experience focusing on brokerage, leasing, property management, facility maintenance, asset management, development and consulting. At Sperry Van Ness/Parke Group, it’s all about quality and customer service with our clients. Further, we provide concierge services, 24/7 emergency staffing, and unique solutions to your everyday needs that set us apart from the rest.
Copyright © 2010 | Sperry Van Ness / Parke Group This Office Independently Owned and Operated All information presented by Sperry Van Ness has been obtained from sources deemed reliable. Sperry Van Ness makes no representation with regard to the accuracy of the information contained herein.
1 Henry, D, & Levy, D. (2010). Commercial Mortgage Default Rate in U.S. More Than Doubles. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/news/2010-02-24/commercial-mortgage-default-…
3450 Stellhorn Road, Fort Wayne
Office condo for lease in College Park! 1,100 SF available with Stellhorn Road frontage. Contact Neal Bowman or visit the listing website for more information. Lease Website: http://lease.svn.com/collegepark
On December 17th, President Obama signed into law a massive bi-partisan tax package that included no increase in the Carried Interest or Developer’s “Promote.” This carried interest or promote has been a fundamental part of real estate partnerships for decades. Investing partners grant this interest to the general partners to recognize the value these partners bring to the ventures as well as the risks they take. Current tax law treats this carried interest as a capital gain, as it represents a return on an underlying long-term capital asset, as well as risk and entrepreneurial activity. Although the House attempted to re-tax this gain as general income (a much higher percentage), the Senate removed this from the Bill that was signed by President Obama.
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