17 Sep 2016
Case Study Permalink

Meissner Jacquét Expands Management in Kearny Mesa & Hillcrest

September 17, 2016
Property Name: Stonecrest Office Project
Property Location: 9640 Granite Ridge Drive, San Diego, CA 92123
Property Description: 40,000 Total Square Feet, Office

Located in the Kearny Mesa submarket of San Diego County, Stonecrest Office Project is a 40,000 square foot, 2-story, multi-tenant office building. With ownership, Mallard Creek Capital Partners, being located out of state, they sought a local, qualified commercial property management company to partner with that would be an extension of them by taking an ownership’s perspective of the project. Meissner Jacquét Commercial Real Estate Services was referred to ownership by local, respected vendors due to Meissner Jacquét’s strong relationships and network within the San Diego commercial real estate industry.

In addition to providing superior commercial real estate management services to the asset, Meissner Jacquét’s main objective is to create a long-term, stable environment in which the tenants can conduct their business while maximizing asset operating income. Positive tenant relations with the majority occupier of the building is achieved by meeting on a regular basis and forming a personal relationship. In addition, Meissner Jacquét will provide leasing agent coordination by ensuring that vacant space and common areas are maintained and kept in rent-ready condition.

IMG_0011

 
Property Name: Foley Uptown Retail Center
Property Location: 1202 – 1236 University Avenue San Diego, CA 92103
Property Description: 25,545 Total Square Feet, Retail
 

Located in the Central San Diego submarket, this 25,545 square foot, storefront, multi-tenant, retail center was purchased by local owner and developer, San Diego Income Properties, LLC, who sought Meissner Jacquét’s professional commercial property management services due to their experience managing retail projects.

Key ownership initiatives for this asset include preventative maintenance by implementing the property business plan and budget, vendor contract services by retaining professional vendors for cost-effective maintenance and tenant services, and achieving superior tenant satisfaction by attending to every detail and service issue from maintaining property curb appeal to maintaining the edge on the competition through accurately assessing and implementing capital improvements.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services has the knowledge and experience to provide commercial real estate solutions to retail centers, office properties, industrial parks, and commercial owner associations for institutional and privately-held investors, whether they be local, regional, or national. For more information, please contact Brent Williams at 858-373-1113 or [email protected], or visit mjcres.com.

17 Sep 2016
Perspectives Permalink

Electric Vehicles and Solar Roadways Are Coming Sooner Than You Think

September 17, 2016

Electric cars are quickly becoming mainstream – one in every 150 cars sold in the U.S is electric – and mass adoption is set to happen sooner due to advancements in batteries. Today’s electric vehicle goes for an average price tag of $33,000 and for about 100 miles on a charge. Soon that will change with Tesla Motors Inc.’s Model 3, an electric vehicle marketed to the masses at a manageable price of $35,000 and a range of more than 200 miles.

Although Tesla is the gold standard when it comes to electric vehicles, other well-known car companies – such as Chevrolet with its Bolt EV – are staying in step by offering electric vehicles that are similarly priced and with the same miles-per-charge, in an attempt to eliminate consumer’s fears of running out of charge mid-travel.

According to ChargePoint Inc., the world’s largest maker of electric-car charging stations, car companies are looking to electrify their entire fleet. However, in the short-term, the majority of green-minded cars will be plug-in hybrids, with both electric motors and gasoline engines. The transition from hybrids to full electric vehicles will help ease consumers fear regarding “range anxiety” and the competition among car companies will act to drive down prices. Volkswagon AG, BMW AG, Hyundai Motor Co. and Toyota Motor Corp. have all made promises to deliver a portion of their fleet as either plug-in hybrid or electric vehicles by 2025.

Of course plug-in hybrids require charging stations outside of the consumers’ homes in order to meet the demand of American commuters. The number of commercial charging stations are rising, ChargePoint is said to have 30,000 stations in its network – currently there are about 90,000 publicly accessible gas stations in America. What’s helping the growth of this initiative is the benefit charging stations can have to commercial property owners – including attracting customers, maintaining positive tenant and employee relations, and the relatively cheap cost to install.

Even though it appears there’s no reason for electric vehicles to become mainstream overnight, drivers won’t switch from gas to plug rapidly as the average American keeps a car for 11 years. However, when they’re ready to purchase a new car, there will be a variety of plug-in and electric vehicles to choose from at prices somewhat comparable to gasoline powered vehicles.

Going even further, technology is working on delivering “Smart Solar Roadways”. Emerging innovations in technology and engineering could integrate solar panels with road surfaces, creating streets and highways with embedded microprocessors and LED lights, which could be used to recharge electric vehicles as they’re traveling.  Current charge times for electric vehicles vary but it typically takes 30 minutes to an hour for a decent charge.

According to a recent Global Construction Review article, the first of these energy-generating photovoltaic tempered glass pavers will be rolled out in Missouri, along a section of the famous Route 66. Several European countries – including a Dutch consortium and the French company Colas – are also pursuing the development of solar roads.

In order to stay ahead of the trend, commercial real estate owners and operators should consider installing charging stations in their office and industrial parks and retail centers. As the next wave of innovation has already arrived.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services provides energy management and sustainability services to property owners and occupiers. We identify all opportunities to maximize an asset’s energy performance by securing efficient equipment and materials and accessing available incentives /rebates. For more information, please contact Allison MacDonald at 858-373-1354 or [email protected], Brent Williams at 858-373-1113 or [email protected], or visit mjcres.com.

 

Sources:

The Wall Street Journal

NAIOP Commercial Real Estate Development Association

24 Aug 2016
Case Study Permalink

Case Study: Practical, Proactive Solutions Eliminate Physical Plant Issues

August 24, 2016

A commercial property management philosophy that focuses on maintaining operational excellence through practical, proactive property solutions not only eliminates physical plant issues but achieves superior client and tenant relations.

Property Name: 10140 Mesa Rim Road
Property Location: 10140 Mesa Rim Road, San Diego, CA 92121
Property Description: Industrial, 41,034 Total Square Feet

 

Syko Properties, Inc., a private investment firm, contracted with Meissner Jacquét Commercial Real Estate Services to provide professional commercial property management services to 10140 Mesa Rim Road, a 41,034 square foot, single-tenant industrial property, located in the Sorrento Mesa submarket of San Diego County. Ownership was referred to Meissner Jacquét due to Meissner Jacquét’s delivery of superior commercial property management and financial and accounting services to an existing retail client, the owner of Scripps Ranch Village Shopping Center located at 9970-9996 Scripps Ranch Blvd., San Diego, CA 92131.

Investment Objectives

10140 Mesa Rim Road is positioned as a long-term hold asset and leased to a single tenant. Meissner Jacquét initially maintained a consultant role in advising Ownership as how to transition management from the tenant to the landlord. However, in order to achieve Ownership’s goals of eliminating deferred maintenance and positioning the property to be maintained in a Class-A condition, Meissner Jacquét was brought on for full-time management in July 2016.

Process

The current tenant’s assumption of the lease called for a conversion from a Triple Net (NNN) lease – where the tenant is responsible for their pro-rated share of the “triple net costs,” i.e., taxes, insurance, CAM, utilities, and janitorial – to a Full Service Gross (FSG) lease – where the triple net costs and any additional costs such as utilities and janitorial, excluding the costs of phone/data, are bundled into the base rent.

During the lease conversion process Ownership discovered multiple deferred maintenance issues that required immediate attention, including overgrown and failing landscape, ADA compliance issues of the walkways and parking areas, and negligent exterior window servicing. Meissner Jacquét was instrumental in assisting Ownership in identifying the necessary repairs and capital improvements, developing scopes of work, obtaining competitive bids due to purchasing power from trusted, insured vendors, and delivering project management services to ensure that all work is to be completed to the satisfaction of Ownership, while minimizing the potential impact on the tenant’s ability to conduct daily business operations.

Result

Meissner Jacquét’s experience managing industrial projects, their hands-on management style that focuses on preventative maintenance and their proven systems and procedures supports effective tenant relations and enables achievement of Ownership’s business plan and property goals.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services has the knowledge and experience to provide commercial real estate solutions to industrial parks, retail centers, office properties, and commercial owner associations for privately-held and institutional investors, whether they be local, regional, or national. For more information, please contact Allison MacDonald at 858-373-1354 or [email protected], or Brent Williams at 858-373-1113 or [email protected], or visit mjcres.com.

Sources:

Meissner Jacquét Commercial Real Estate Services

23 Aug 2016
Trends Permalink

Slow Job Growth Signals Weaker Office Absorption in Second Half of 2016

August 23, 2016

With U.S. monthly job growth vacillating between highs and lows, what does the office space demand forecast look like for the remainder of the year? According to Dr. Hany Guirguis of Manhattan College, and Dr. Joshua Harries of the University of Central Florida, the 2016 national office market forecast approximates absorption at 34.6 million square feet. While this may sound like a lot, it shows a decrease from 2015 where the national absorption of office space was 62.1 million square feet.

Investor sentiment is that the office market may have peaked due to lower GDP expectations where Gross Domestic Product (GDP) growth slowed to 0.5% in Q1 2016 with the forecast calling for it to remain low at 1% to 2% annualized growth, as well as declining corporate profits that have been falling since Q4 2015, and restrained office job growth due to nearing what economists consider “full employment”. Given these factors, commercial real estate investment strategies could be impacted by weaker office absorption.

However, looking past volatile trends, the job growth in the U.S. remains robust and points to slow but steady growth that is supportive of healthy leasing fundamentals. Despite the drop in tenancy in the second half of 2016, according to Cushman & Wakefield, rents jumped to their highest growth rate in seven years. This is due in part to new high-priced space coming to market, while popular submarkets and secondary markets continue to tighten.  Since tenant demand kept pace with new construction, office rents increased by 5.8% in Q2 to $29 PSF and new construction modestly expanded with 13M SF added to the national inventory.

While it is normal for commercial real estate market progress to ride the economic tides, the overall U.S. economic condition is more tenuous in mid-2016 that it has been in recent years. Even with this, office markets do not appear to be overbuilt nationwide. Although signs point to the economy approaching a shift, the forecast is not reflecting another recession or significant downturn but rather a flattening that could cause office demand to level off.

Summary

Meissner Jacquét Commercial Real Estate Services has mastered the components of asset management that directly affect an assets’ underlying value through our working knowledge of investment objectives and valuation, risk analysis, and leasing oversight. Securing tenancy in today’s competitive environment involves much more than responding to requests for information and negotiation. Contact Allison MacDonald or Brent Williams to learn how Meissner Jacquét’s leasing oversight services ensure that prospective tenants are attracted and retained through established leasing and marketing programs.

   

Allison MacDonald
[email protected]
858.373.1354

Brent Williams
[email protected]
858.373.1113

Sources:

Bisnow, Q2 Office Markets Showing Signs of Cooling

Bisnow, Top Economists Weigh in on June’s Jobs Report and What it Means for Real Estate

NAIOP, Office Space Demand Forecast, Second Quarter 2016

NAIOP, Has the Office Sector Peaked?

23 Aug 2016
Perspectives, Uncategorized Permalink

Tax Reform Blueprint Touts Pro-Growth but Could Hinder Commercial Real Estate

August 23, 2016

On June 24th, Paul Ryan (R-WI), Speaker of the House, and Kevin Brady (R-TX), House Ways and Means Committee Chairman, released their Tax Reform Task Force Blueprint for the GOP’s House majority that is aimed at providing a better way to create a fiscally responsible plan that is pro-growth. The GOP tax plan acts to start discussions on tax reform, as there has yet to be any specific legislative language drafted. However, the proposed changes could cause significantly negative impact on the commercial real estate industry.

The Blueprint is designed as a dramatic reform of the current income tax system that will address the current problems of slow growth, declining labor force participation, flat productivity, and weak investment. In an effort to alleviate these challenges, the plan proposes to reduce individual, corporate and pass-through entities – partnerships, LLCs and S corps – business tax rates, provide for full and immediate expensing of business investments, eliminate special-interest deductions and credits, and eliminate the export penalty and import subsidy, among other things.

The biggest take-away from the proposed reformed tax plan is that a cash-flow based taxing approach will replace the current income-based approach. Additional takeaways from the Blueprint include:

Simplification for Individuals:
• Simplify, flatten and lower tax rates for families and individuals by consolidating the current seven tax brackets to three
• Reduced and progressive tax rates on capital gains, dividends, and interest income
• Eliminate the alternative minimum tax (AMT) that requires computation of regular income tax and AMT and subsequent payment of the greater of the two
• Eliminate the estate tax and the generation-skipping transfer tax

Tax Rates that will allow for Growth of Businesses:
• Limit small business and pass-through income tax rate to 25%
• Reduction of the corporate income rate to 20%;
• Repeal the corporate alternative minimum tax (AMT);
• Full and immediate write off (or expensing) the cost of investments both tangible property and intangible assets;
• Allowance of interest expense deduction against any interest income, but no current deduction for net interest expense;
• General elimination of special-interest deductions and credits

Far-Reaching Tax Reform Approaches Allow for Global Competitiveness:
• Eliminates self-imposed export penalty and import subsidy by providing for border adjustments and switching to a territorial tax system
• Exported products, services, and intangibles won’t be subject to U.S. tax regardless of where they are produced, whereas imported products, services, and intangibles will be subject to U.S. tax regardless of where they are produced
• 100% exemption for dividends from foreign subsidiaries
• International tax rules designed to counter tax incentives to locate overseas will be simplified

There is much work to be done by the Committee on Ways and Means in building the tax reform legislation outlined by the vision reflected in the Blueprint in order to be ready for legislative action in 2017. Given that the Congressional Budget Office has not provided information on the likely costs or long-term budget impacts of the proposed changes, commercial real estate professionals should be aware of potentially unintended negative effects, such as follows:

• Changing the taxation of business interest could alter the underlying economics of commercial real estate transaction by potentially causing existing investment values to decline and discouraging future development;
• By replacing the current cost recovery systems with immediate and full deductibility of expenses could lead to tax-driven investment and development, rather than space delivery based on market demand.

What remains to be seen is how the presidential and congressional elections this November will impact the path of tax reform.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services has the knowledge and experience to provide commercial real estate solutions to retail centers, office properties, industrial parks, and commercial owner associations for institutional and privately-held investors, whether they be local, regional, or national. For more information, please contact Allison MacDonald at 858-373-1354 or [email protected], Brent Williams at 858-373-1113 or [email protected], or visit mjcres.com

Sources:

NAIOP Commercial Real Estate Development Association: Tax Blueprint Would Mean Big Changes for Real Estate

NAIOP Source June 28, 2016: House GOP Releases “Blueprint for Tax Reform”

A Better Way: Our Vision for a Confident America, Tax, June 24, 2016

26 Jul 2016
Perspectives Permalink

Brexit’s Impact on Commercial Real Estate

July 26, 2016

The U.S. commercial real estate industry has been enjoying a considerably positive run since the end of the Great Recession in 2009, according to the National Bureau of Economic Research. However, when the United Kingdom announced their decision to leave the European Union – playfully referred to as “Brexit” for British exit – it is unclear what the result will be on the U.S. economy and commercial real estate.

Analysts warn that London office values could plummet as much as 20% within the first three years of Brexit’s aftermath, which contributes to the growing fear that failure to control investor panic could throw the UK into a recession. In an effort to keep businesses in the UK, the nation’s Treasury chief said he plans to cut the corporate tax from 20% to 15%.

Immediately following the decision, stock markets around the world went sliding and with them came a strong concern of how it would impact the global economy. However, the initial shock of the Brexit vote is subsiding in the U.S. as stock futures slowly climb. The question still remains as to how Britain’s decision to leave the EU will impact the U.S. commercial real estate industry. The initial impact could have a positive short-term boost for U.S. real estate as capital gets redirected to the U.S. as a safe harbor due to London’s finance sector fleeing to mainland Europe, or negative with a European recession that could contribute to slow growth and continued low interest rates in the U.S.

The short-term uncertainty and market turmoil can be described as a “first order” impact – an overreaction that tells little about how markets will settle out in the long run – as coined by Georgia State University economist Rajeev Dhawan. A transition of capital is already underway, with investors looking to the U.S. instead of the former USSR, including many Middle Eastern investors who were previously comfortable with the British market.

Britain’s exit process will begin in October with negotiations and take place over the next couple of years, which may perpetuate the market uncertainty, and slow capital flow and cross-border deals – where trade with the UK makes up around 3% of overall U.S. trading. It is yet to be seen how U.S. commercial real estate will effectively respond to the dramatic shift.

Summary

Meissner Jacquét Commercial Real Estate Services, headquartered in San Diego, CA, aligns with their clients in strategic business decisions concerning their assets by understanding and achieving ownership goals. Meissner Jacquét’s oversight allows their clients to be confident that their assets are in capable hands. Contact Brent Williams or Allison MacDonald to learn how Meissner Jacquét’s platform can leverage your resources in a constantly fluctuating real estate market.

   
Allison MacDonald
[email protected]
858.373.1354		 Brent Williams
[email protected]
858.373.1113

Sources:

Meissner Jacquét Commercial Real Estate Services

BISNOW

26 Jul 2016
Case Study Permalink

Meissner Jacquét Expands North County Property Management Account with Washington Capital Management

July 26, 2016

Brent Williams of Meissner Jacquét Commercial Real Estate Services, with headquarters based in San Diego, recently expanded Meissner Jacquét’s commercial property management contract with Washington Capital Management, an investment advisory firm that services institutional clients, by adding 30,000 square feet to their existing 73,000 square foot management account of Paseo Carlsbad, an upscale, specialty-retail center optimally located in the North County submarket of San Diego. The expansion includes the addition of the restaurant pad that most recently held T.G.I. Friday’s and the Chevron gas station, both part of a 20 acre parcel located in Carlsbad, CA. With this addition, Meissner Jacquét now manages the South-Western retail corridor bordered by Paseo Del Norte, Palomar Airport Road and Interstate 5, and adjacent to the Carlsbad Premium Outlets.

Property Name:    Paseo Carlsbad Retail Center
Property Location:    850 & 890 Palomar Airport Road, Carlsbad, CA 92008 and
5613, 5617, 5621, 5625 Paseo Del Norte, Carlsbad, CA 92008
Property Description:     Retail, 103,000 Total Square Feet

Investment Objectives

Originally contracted in 2009, Meissner Jacquét provides professional commercial property management and accounting services to Paseo Carlsbad’s two-story retail center and restaurant out-parcel pads, including P.F. Chang’s, King’s Fish House, and BJ’s Restaurant and Brewhouse. Paseo Carlsbad is a collection of well-known retail brands, boasting such tenants as Corner Bakery Café, St. John Apparel, RoadRunner Sports, blended with salon services, fitness, sporting goods and unique boutiques.

Meissner Jacquét will provide construction management oversight by working with Ownership in the repositioning of the restaurant pad, one of the highest-profile commercial sites in the city of Carlsbad, into a new, hip restaurant destination that will complement local attractions such as The Flower Fields at Carlsbad Ranch, the Carlsbad Premium Outlets, LEGOLAND California, and the Carlsbad State Beach and Campground. The site is best known for the iconic faux windmill that identified the former Pea Soup Anderson’s restaurant and hotel that opened in the early 1980’s. Meissner Jacquét is excited to be involved in the repositioning and continued management of Paseo Carlsbad and believes that the repositioning of the restaurant space will significantly contribute to the already established Carlsbad retail, restaurant, and attractions district that enjoys nearly two million visitors a year, and accomplish Ownership’s investment objectives.

About Meissner Jacquét

Founded in 1992, Meissner Jacquét Commercial Real Estate Services has the knowledge and experience to provide commercial real estate solutions to retail centers, office properties, industrial parks, and commercial owner associations for institutional and privately-held investors, whether they be local, regional, or national. For more information, please contact Allison MacDonald at 858-373-1354 or [email protected], or Brent Williams at 858-373-1113 or [email protected], or visit mjcres.com.

 

Sources:

Meissner Jacquét Commercial Real Estate Services

26 Jul 2016
Trends Permalink

The Lowdown on Life Sciences and Biotech Leases

July 26, 2016

From regulatory compliance to owner-tenant collaboration, the life sciences and biotech industries present some compelling commercial real estate leasing opportunities and challenges. In order to maximize negotiating leverage and anticipate costly issues that could arise during a lease term, business owners who are looking to lease to companies in these sectors should keep some key issues and strategies in mind. Doing so will help owners effectively manage the lease from start to finish and will set the stage for a positive and collaborative relationship with their tenants.

Unique Challenges, Opportunities Abound

One area that presents both challenges and opportunities is the dramatically increased capital requirements for laboratory space, since improvements are frequently designed for a particular tenant and not easily reconfigured for other users. On one hand, negotiations can become extensive when determining who funds improvement costs, who manages the buildout and who owns the improvements at the end of the term (or who has to dispose of equipment that has become obsolete). However, this creates incentive to lock in a long lease term and renew in place.

In addition, tenants are often cash-rich and credit-poor, so securing the upfront transaction costs can result in letters of credit or other creative security options. Because of this, it is important to have strong default and bankruptcy provisions included in the lease.

In multi-tenant situations, additional consideration needs to be given to the control of hazardous materials within the project and the capacity for storage of waste. Manufacturing settings require specific monitoring and building management systems that often necessitate that tenants have control of the building management system, so building infrastructure and system capacity may need to be carefully monitored or even upgraded in order to accommodate this.

 The Legal Side of Life Sciences and Biotech Leasing

Life sciences companies are more heavily regulated than other types of users, and it is important to evaluate the specific uses and needs of the occupant and to check those against the applicable regulatory framework. This permeates many areas of the lease, from parking counts to hazardous materials storage and use, to zoning compliance.

Since the financial profile of life sciences companies is usually very fluid, understanding relevant lease provisions – specifically the assignment and subletting, default and security provisions – is crucial for any practitioner negotiating a life science agreement. Fortunately, given the nature of the relationship between landlords and tenants in this area, lease negotiations are typically collaborative.

An attorney’s primary concern in these scenarios is to ensure that the client understands the deal nuances, which they will be living with for many years, and that foreseeable risks are effectively managed or minimized. This is still a crucial role; the tenor of lease negotiations lays the groundwork for successful collaboration between landlord and tenant.

 Landlord-Tenant Collaboration Is Central

 Owners who lease to life sciences companies need to be willing to dive in and get to know their tenants and their tenants’ business. They should strive to develop sophistication in efficiently managing hazardous substances, larger draws on utilities, faster depreciation of building systems, and construction projects that go far beyond the typical office buildout. Being a passive observer will not work if an owner wants to lease to a life sciences company – the level of collaboration between landlords and tenants in the life sciences sector is much more critical than with other product types.

While many owners develop internal expertise in the unique aspects of ownership of lab buildings, they should also establish a reliable network of consultants to draw upon, and have a robust accounting capability in order to underwrite the credit of potential tenants and anticipate any impending defaults. A strong outside law firm and a solid consultant network help to ensure that both tenants and owners will be well informed and poised to effectively deal with those new regulations as they emerge.

 About CGS3

 Dawn Saunders recently joined Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3) – a San Diego-based commercial real estate law firm – as its newest partner. Her leasing practice encompasses an array of industries, including the rapidly growing biotech, life sciences, lab, and technology sectors. Additionally, Dawn is frequently sought to provide legal advice to clients on the real estate implications of transactions, including mergers and acquisitions, as well as related corporate financing and restructuring. To learn more about CGS3, contact Dawn Saunders at 858-779-1720 or [email protected].

 

Sources:

Crosbie Gliner Schiffman Southard & Swanson LLP (CGS3)

CGS3_LogoRGBwTagline_2000pxHorizontal

 

23 Jun 2016
Trends Permalink

Increasing Financial Regulations Signal CRE Professionals to Prepare

June 23, 2016

The commercial real estate finance sector has been cautious in regards to worsening conditions in the global economy and a slowdown in the U.S. economy.  Although investors feel that the market is holding, tightening lending and accounting regulations are putting more pressure on commercial real estate players.

Increased Regulation Signals Higher Costs for Borrowers

Since the recession, stricter lending requirements have come into place and are impacting the commercial real estate industry. Due to the Basel III regulation regarding high volatility commercial real estate (HVCRE) that took effect in early 2015, banks with over $500 million in assets, including savings and loans institutions, must allocate increased capital for certain construction and development loans.

This increased regulation placed on the lenders directly affects commercial real estate investors by translating into higher rates, more complex documentation requirements, and tighter terms. Instead of underwriting to pro forma with projected rent growth, many banks are now underwriting to current rental rates and reducing the loan-to-value (LTV) ratio to less than 70 percent, which is more conservative than the historical norm of 75 to 80 percent.

With many banks picking and choosing those with whom they’ll do business with, there has been an uprising of unregulated lenders – such as pension and private equity funds and life insurance companies – who are willing to lend, albeit often at a higher rate. This is a good option for those borrowers who require a speedy transaction.

New Accounting Guidance Affects Commercial Leases

In addition to the tightening lending environment, changes are also coming for commercial leases. In February of this year, the Financial Accounting Board (FASB) issued its Accounting Standard Update that becomes effective for public entities on December 15, 2018, and for non-public entities on December 15, 2019.  The main provision calls for all lease transactions with terms in excess of 12 months to be recorded on the balance sheet of the lessee (tenant). The Standard also acts to consolidate all of the various lease guidance that currently exists in the Accounting Standards Codification (ASC) 840, Leases, which includes accounting for sale-leaseback transactions and guidance on determining expected lease payments and lease terms.

The new standard has a relatively small impact on lessors (landlords) but will have a significant impact on any entity that engages in leasing activities due to the required detailed data for financial reporting and new disclosure requirements. For those entities that rely heavily on leasing for a major source of income it’s possible that classifications in the statement of cash flows may differ, while cash flows will remain the same.

Meissner Jacquét is a full service commercial real estate firm offering institutional-level financial and accounting services. Our accounting team is expert in commercial accounting methods and real estate transactions.  Meissner Jacquét delivers client-focused, scalable and innovative solutions, allowing our clients to leverage our resources.

To ensure you’re prepared for the coming changes in the commercial real estate finance sector, contact Brent Williams or Allison MacDonald to learn how our fully-compliant accounting software delivers the most advanced and accurate financial reports.

Brent Williams
[email protected]
858.373.1113		 Allison MacDonald
[email protected]
858.373.1354

 

Sources:

NAIOP Development, Summer 2016, Volume XLVII, No. 2, CRE Lending Environment Tightening

NAIOP Development, Summer 2016, Volume XLVII, No. 2, Accounting Changes Coming for Leases

Meissner Jacquét Commercial Real Estate Services

 

23 Jun 2016
Perspectives, Uncategorized Permalink

5 CRE Investing Strategies Learned from Monopoly

June 23, 2016

There are invaluable lessons to be gleaned from the seemingly childish board game Monopoly, such as buying a property in the right location, having large cash reserves, and diversifying your investments. When taking a deeper look at the game, commercial real estate investors are provided with some valuable, real-world investment approaches.

Location is paramount.

The majority of commercial real estate investors look at investments in prime and secondary markets as those that will reap the highest reward, but this might not always be the case. In the game, Monopoly shows that a smart approach is to purchase those properties that have the highest traffic – case in point, the orange properties, St. James Place, Tennessee Avenue, and New York Avenue. These properties are landed on the most frequently and are cheaper to build houses and hotels on, therefore the investor receives a steady income stream. However, in real life rolling the dice doesn’t always end positively, which is why investors must hedge their bets and mitigate risk by performing proper due diligence prior to any acquisition.

Cash reserves make for off-market opportunities.

When players in Monopoly sell properties to remain solvent, their opponents who are ready to buy with large cash reserves reap the benefits. This situation also proves true in real-life investing. In order to capitalize on off-market opportunities, commercial real estate investors must have access to large cash reserves. Besides providing opportunities for better price negotiation, cash reserves also allows commercial real estate owners to remain afloat during tenant vacancies or market downturns.

Diversification increases total returns.

Although the point of the game is to achieve pricing power by buying and building out as many properties as quickly as possible, smart Monopoly players know that a diverse investment strategy is key – investing in railroads and utilities create passive income while you wait for opponents to land on your properties. The same approach holds true for commercial real estate investors, where proper diversification increases total returns and lowers the overall volatility of a portfolio.

Timing and effective negotiation skills go hand-in-hand.

In Monopoly and real-life investing, timing is everything. That’s why calculating the perfect time to trade a property and effectively negotiating the deal can make for big wins. In the game it’s easy to negotiate a trade when an opportunity arises because there is no real money to lose.  However, behind the desk, the amount on the table is significant and can even put your livelihood on the line. That’s why smart investors will apply their Monopoly negotiation tactics in the board room when brokering a deal – they know that each deal takes a certain amount of finesse and the right amount of give-and-take to reach an agreement.

Have a long-term plan.

By setting a long-term goal and effectuating the plan, you set yourself up for success and can more easily navigate potential financial pitfalls and temptations along the way. In the game, every Monopoly player receives $1,500 at the start to invest with it as they wish. If a player has a goal to own all of the utility companies and railroads, they will be less likely to be swayed into buying other properties that fall outside of their plan. Just like in real life, commercial real estate investors should outline a long-term plan and nurture their nest egg through strategic investing practices.

Summary

To learn how to reap real-life investing rewards, contact Brent Williams or Allison MacDonald to learn how Meissner Jacquét’s commercial real estate services provide confidence, stability, and relevant solutions to commercial real estate investors.

Brent Williams
[email protected]
858.373.1113		 Allison MacDonald
[email protected]
858.373.1354

 

Sources:

Meissner Jacquét Commercial Real Estate Services

QuickLiquidity, 3 Things Investors Can Learn from Monopoly

U.S. News & Money Report, What Monopoly Can Teach You about Smart Investing

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