Posted by George Kostruh on October 22, 2007 at 10:11:53:
Dear Ms. Janet,
We offer to sale our object in Czech republic. Area c. 9. 000 square meters. Built-up area c. 40% . It is object of the former brewery built in 18. Century. Price c. 1 million EUR. The object and the surface is very advantageous to commercial occupancy.
Placing Holesov, region Zlin, middle town.
now the time to buy office buildings? - Posted by Bob
Posted by Bob on February 08, 2004 at 15:31:17:
High vacancy rates suggest that it’s a good time to buy, given the distress it causes and high potential upside, but prices are also sky-high, which rather dampens my enthusiasm (and makes no sense combined with high vacancy). Can somebody help explain this wacky market?
Re: now the time to buy office buildings? - Posted by Thomas Mote, CPM
Posted by Thomas Mote, CPM on February 18, 2004 at 23:23:59:
While I can agree with Ray and Bob on a couple of their points, there is a critical fact left out. Depending on your market, you are probably starting to see upward pressure indicators on rates in the 9-12 month range. For example, in the Austin markets, one of our major markets where we have about 2MMsf of office, we are seeing traffic increases and new lease deals we have not seen since mid-2000.
The RATES on the other hand, are nowhere near where they were, and this is good news for investors. As positive indicators for demand for space increase, you will see a significant lag in the market rental prices, depending on the amount of inventory to absorb, in your particular market. Call a commercial broker, ask them for a one-page sheet summarizing the latest quarters numbers, etc. and get them to put you on their mailing list. While their numbers are not always pinpoint accurate, they are close enough to give you a layman’s picture of the current market conditions.
In a market that is seeing positive demand, absorption, and trending toward pushing rates gently upward, that is the time to buy, all other things being equal. Be choosy! But also understand that there is great competition with institutional investors who are all looking for a 10% return or less. They don’t want to deal with smaller properties, and you probably do. Choose to fight on that turf, and you will find the fight much easier.
My general advice is to say, find the steal deal, look at a renov/flip/assign, and depending on the fundamentals, you have options to lease, lease to purchase, condo, etc. If you are looking for a larger deal (something above 100ksf), be patient. Don’t let yourself get excited about getting a “higher profile” property. There is much more pain to come for landlords who bought high in the market–many of which are leveraged and paying debt service with very little cash flow.
Advice–find the types of property, hone in on the smaller investors who bought between 1998-2001, and watch their buildings. Don’t be afraid to make an unsolicited offer–many times they don’t think they have any options, and an opportunity to get out might just be what they are looking for.
That is my two cents, for what it’s worth. Glad to help if I can in any other way.
Tom Mote
Re: now the time to buy office buildings? - Posted by ray@lcorn
Posted by ray@lcorn on February 09, 2004 at 08:51:50:
Bob,
“Wacky market” is a good description of the current disconnect between performance fundamentals and pricing. Its somewhat a function of supply and demand, a lot of money chasing relatively few deals. But there are other factors in the mix.
Several factors are influencing current pricing levels. Those include historically low finance rates, a flight of capital from the stock market, and the newfound stability in the commercial real estate industry provided by large institutional owners (REITs), as well as the rise of structured finance.
Is this a good time to buy? Only an understanding of your local market can answer that question. Not every market will recover, so the task becomes one of spotting the areas poised for growth. Buying any property at the bottom of a cycle requires first that you know where the bottom is, then have the staying power to ride the interim as the growth occurs.
ray
Re: now the time to buy office buildings? - Posted by Bob
Posted by Bob on February 19, 2004 at 05:17:55:
>But also understand that there is great competition
>with institutional investors who are all looking for a
>10% return or less. They don’t want to deal with
>smaller properties, and you probably do. Choose to
>fight on that turf, and you will find the fight much easier.
I figured as much. Fly under the radar, maybe find something overlooked by other small buyers who were looking for razzle dazzle.
Ever renovate a small garden office or something similar? Seems like a good opportunity for a small commercial wannabe. The thing is, older ill-maintained buildings are often surrounded by older buildings with merely adequate maintenance and similarly obsolescent style and features. How much does that limit the value you can add? What besides price draws office tenants away from the shiny new competition?
What’s the typical floor (in square feet and/or price) for institutional investors, under which they won’t buy?
>There is much more pain to come for landlords who bought
>high in the market–many of which are leveraged and
>paying debt service with very little cash flow.
I don’t understand. In a market generally trending towards lower vacancy, shouldn’t their pain (and motivation) be decreasing?
>Advice–find the types of property, hone in on the
>smaller investors who bought between 1998-2001, and
>watch their buildings. Don’t be afraid to make an
>unsolicited offer–many times they don’t think they
>have any options, and an opportunity to get out might
>just be what they are looking for.
What distinguishes those properties? “It’s pretty and I’d like to own it” seems a poor method of evaluation, and a distressed but not yet insolvent owner often doesn’t publicly wave a big flag.
Re: now the time to buy office buildings? - Posted by Bob
Posted by Bob on February 10, 2004 at 17:50:59:
>Not every market will recover, so the task becomes one of spotting the areas poised for growth. Buying any
>property at the bottom of a cycle requires first that you know where the bottom is, then have the staying
>power to ride the interim as the growth occurs.
Despite high vacancy, until pricing becomes more in line with fundamentals I’d agree that we’re not yet at a bottom. Of course, if vacancy rates go back down that may not happen. Sigh
Re: now the time to buy office buildings? - Posted by Thomas Mote, CPM
Posted by Thomas Mote, CPM on February 27, 2004 at 14:04:04:
Bob:
Great questions! Let me see if I can help with at least some of them.
RE: COMPETITION FOR INVESTMENT OPPS
Most institutional investors are looking for properties in the $20MM and up range. That is just a thumbnail as many of them specialize in smaller, larger–probably a good average figure. Most of the time, they are looking for some opportunities to syndicate loan packages, and their lenders/investor guidelines will drive that. There is not a universal, but if you are looking at anything over the $15MM range, you are probably in a horse race for lowest overall cap rate rather than what you are really looking for, which is a good value investment.
That being said, you can find out a lot about when the property was bought off of the tax rolls. Since most of the time you have to start with a general area or address, find an area of town that you know, and start with a property that IS attractive to you, but seems to not be performing (may not have any cars in the lot, looks bad on the outside like it’s not maintained well, etc.). If there is nothing wrong with the area, then you can probably assume that you have an owner that doesn’t know how to maximize returns on the property, and maybe even some tenants who are unhappy with the owner/landlord as a result. This is pretty common with small investors–they reach a point of financial fatigue (money pit syndrome), and either don’t have the capital or the will to make the property compete. Bingo–you found yourself a good one to pursue. You can get their name off of the same tax roll and send them a letter. What most people don’t do is followup when they are rejected initially. Figure something unique like offering to buy him/her lunch to discuss the neighborhood (as a fellow investor), and see what their interest is in keeping the property. Even if they are not interested in selling (everyone is interested as some point), they will probably know someone who is, and use that as good market recon for that area.
RE: LANDLORD PAIN AND DEBT SERVICE
The pain in a soft market (which most of us are in right now) comes from increased vacancy and decreased rates. With fixed costs for debt service, this translates into lower cash flow and lower ROI, which makes people start thinking seriously about those marginal investments they made at the top of the real estate cycle a few years ago (back when ANYONE could make money).
This is the period that separates the men from the boys. There is nothing wrong with picking the low-hanging fruit, just make sure you can know for sure what you are getting (diligence on an older property is critical).
Many times you can take a tired property and re-position it merely by painting, fixing the roof, and advertising under new management (sometimes all it takes is the latter, costing about $100 in printing costs). Tenants are often relieved, the market recognizes the visible changes, and if you can get the support of the existing tenants, you can turn a dog into a great investment.
I don’t know if that answers all of your questions, but I would be glad to help advise on specific aspects or discuss if that will be helpful.
Tom Mote
Re: now the time to buy office buildings? - Posted by George Kostruh
Posted by George Kostruh on October 22, 2007 at 10:13:10:
Dear Sirs,
We offer to sale our object in Czech republic. Area c. 9. 000 square meters. Built-up area c. 40% . It is object of the former brewery built in 18. Century. Price c. 1 million EUR. The object and the surface is very advantageous to commercial occupancy.
Placing Holesov, region Zlin, middle town.