Tampa Commercial Real Estate | Florida Commercial Property

Starbucks, Pei Wei, Qdoba and La Septima in Hillsborough County, Florida

You are starting to imagine every aspect of the new restaurant you are about to open, the satisfied customers, the busy tables and the waiters buzzing round ensuring everything is perfect. You can visualize the space, where the kitchen is in relation to the dining area, where you’re going to greet the multitude of guests and how the menu is going to get them coming back again and again. But prior to thinking about all the operating details of your restaurant, the most important decision that you will make in regards to success or failure of your concept will be the site you chose.

How can you be sure you’re not paying too much? Do you fully understand Common Area Expense charges (CAM) and rent increases?   What is your total financial liability for the space?  Is it easily accessible for your potential clientele?  Do they even live in the area?  What is the demographic make up of the location?  There are so many questions that need answered.  We are going to try to shine some light on these important discussion points on restaurant site selection that you may or may not have considered.

The location selected will impact on the following:

- Worker availability

- Investment from lending institutions

- Parking availability and accessibility

- The sale of alcohol

- The type of customer

- Construction or remodelling costs

- Local ordinances, state and federal laws

- Rent, taxes, insurance, and other business expenses

AND, most importantly,

- Your ability to survive and succeed

Lease. Start-up businesses rarely want to sign long term leases.  While understandably wanting to limit downside risk, if you don’t enter in to a multi-year lease and you are successful, the Landlord will gain leverage on the negotiations going forward.  Be careful of landlords that ask for rent and a percentage of your profits.  While this can be an attractive option for starting out, the terms can also be more expensive in the long term.

Do you fully understand what the excess charges are in the lease (CAM)?  Are the center’s CAM charges in line with the others in the area?  Are there built in profit centers in theCAM? CAMshould be a pass through expense, but it is not uncommon to see landlords pad this number with excess fees and potentially transfer non-operating expenses through to the tenant.

Zoning Restrictions.  The local zoning and planning board will provide information on whether the site can even accommodate a restaurant.

The shape of your lot or building. Can people drive in and out easily? Does the shape obstruct visibility from the street?  Will the garbage man have trouble emptying your dumpster?

Consider how many seats you can fit in your restaurant. Does the building face directly in to the sun?

The sale of alcohol. Unless you definitely will not be selling alcohol, you must be sure you can obtain an alcohol license for your restaurant.

Utilities. Do you have enough power?  A painful lesson would be to find out after you legally commit to a lease that there is not enough to handle the electrical load.  This is an important and often confusing area. It frequently requires that you seek the advice of an architect or engineer to look in to the situation to ensure the power is adequate for your business. The same goes for the gas, sewer and HVAC system.

In the City Center. If you decide on a location in a downtown area you may have to make some serious building modifications to your HVAC system to ensure you are meeting all necessary regulations. Exhaust vents, precipitators, sewer and grease traps are often not as easy to fit as you may think and can cost far more than you originally budgeted for. Consider your logistics carefully. Will trucks be able to make deliveries without encountering difficulties? What about trash collectors?

Speed of Traffic/Accessibility. Put yourself in your customer’s shoes.  Can they enter your site without causing an accident?  Are they driving so fast that they can’t see your sign?  There is a reason that the national chains favor intersections and areas close to traffic lights.  Is there a median separating you from one side of the traffic.  This might not be an issue if you are on the right side of the road for your particular concept (i.e. an Einsteins Bagels can be perfectly at ease on the inbound side of morning traffic towards a concentrated work area)

Parking. Always study parking arrangements for your site. It is vital that you have enough spaces to allow for a full restaurant. Depending on the concept, most restaurants sites should not be less than 6 spots per 1000 sq feet.  Many restaurants need at least 10 spots per 1000 sq ft.

Previous Ownership. Always investigate what the location was before. Did it go out of business? If so, why? What do the neighbors have to say about it? What suggestions can they give you as to how to improve it? Can you speak to the old tenants?

Visibility. If potential customers are unable to see your site clearly, this is a serious problem. Where possible, you want your building to be visible from both sides of the street. There are laws as to what signs you can use, so make sure they do not violate billboard ordinance.

If you have decided on a site in a shopping centre, give serious consideration to end locations over mid strip locations and a corner lot (if out on the street) is always preferable to a middle-of-the block site.

Signage.  Front facade signing that can be seen from at least 100 to 200 feet away is essential.

Interior design flexibility. Even if an attractive location is a peculiar shape, it does not mean you have to reject it before conducting further review. It is prudent to think about how best to utilize space, interior ergonomics and what sections of the location are best for which job. It can actually help if you plan to expand at any point. A particular room may not be especially useful to begin with, but further down the road in business it could be.

Accessibility. All accesses within your building, be it the restaurant area, emergency exits or the parking lot, should be easy to get in and out of. Look out for sections that could be problematic. Try to think of it from a car and pedestrian standpoint. Is there anything that could seriously affect your trade? Construction works, high speed traffic or awkward intersections are all things to be concerned about.

Remember that the Americans with Disabilities Act (ADA) requires businesses to provide ramps for handrails, wheelchairs, handicapped parking spaces and accessible toilets. This is important in order to avoid a visit from the Department of Justice and definitely something you want to discuss with the landlord at time of negotiation and not after the lease has been signed.

Restaurant Density/Clusters.  Where are the other restaurants and town? While competition around clusters can be fierce, there is already an established client path.  This might mean a shorter period to break even.  However, you had better be ready!  Do a GAP analysis to see if there is a need for your concept.  If there are too many similar concepts, the competition with established kitchens might be too much to overcome.

Location, Location, Location. Seems simple enough.  Go to where there are people….LOTS OF THEM!

Demographics. Who is your clientele?  Where are they located?  Can they afford your food?  Will they even LIKE your food type?

-Singles

-Families

-Office personnel

-Retirees

Pull demographic data and make sure it is a fit.

Second Generation Space.  There are only two ways to obtain a new site.  One is to occupy an existing structure (second generation).  The other is to build from the ground up.  Understand that even poor concepts can exist for long periods of time in a great location.  Second generation spaces are very tempting, because the hood, traps, and permits are already in place.  But you need to consider that a second generation might have serious logistics or visibility issues that caused the previous restaurant to leave the location.

Summary.  It’s an exciting time to be opening a new restaurant location, but besides the restaurant operations, the location of your restaurant might be the single most important action you take in regards to the success or failure of your new concept. Many exceptional concepts fail to succeed not because they don’t have the right concept, but rather select a location that is not ideal for the concept.  Overlooking any slight detail, law or structural defect could be detrimental to your business and your bottom line.  While there are many more details that need your attention than what is listed here, hopefully, we have provided you with some things to think about with your search.  Best of luck!

Need to talk to us? 813.514.1070
or email by clicking HERE!

USA Visas: Restaurant Investments

Need to talk to us? 813.514.1070
or email by clicking HERE!

ICSC Florida 2011

It was my first trip back to the annual Orlando conference in three years.  Since the beginning of the 3+ year old downturn in the real estate market, I, like many of my colleagues, had steered clear of the conference, deciding not to invest the time or money in the face of stiff economic resistance and little chance for deal consummation. While the economic ice appeared to be cracking several quarters ago, I thought it was time for me to make like Punxsutawney Phil and explore the Spring thaw.

Here are a couple of my thoughts of the conference and an overview of the first session of the day on Monday, the Florida Regional Overview.

• Conference planners estimated that there was an increase of 10% in attendance from the previous year.
• The gloom and doom was gone from the last time I attended in 2008.  I am not sure what that means other than perhaps people are becoming more comfortable with the new norm.
• The mix at the Expo appeared lighter than usual with developers and heavier than usual with brokers.
• One of the reasons I have enjoyed this conference in past years was the introduction to new technology and services.  With brokers and developers having less disposable income these days for technology investment and retailer expansion muted, it should come as no surprise that the conference was almost devoid of new technology.  Some of the well known established service providers apparently decided not to attend either.
• Most of the Economic Development teams in the State were present.  Hillsborough County, City of Tampa and Tampa Bay Partnership were noticeably absent.  Orlando had a terrific booth, full of education about how to invest in the area and what incentives are available.
• Miami seems to be recovering faster than the rest of the State.  The weak dollar has definitely been a help with foreign investors from Brazil and Europe.

All that said, the mood was upbeat and optimistic.  While deals are hard to come by, many were out with their wish lists, trying to find the perfect match.  I hope it was a productive conference for all in attendance.  I know I was glad to feel like I was officially back in the game.

Here are some photos from the Facebook page of the good folks at ICSC…

************************************************************

Florida Regional Overview

Monday, August 22, 2011

8:00 am – 9:00 am

Mayor Richard Crotty, former Orange Count Mayor

“Government needs to have more efficient regulation as opposed to less regulation.” Industry is unified in Central Florida unlike in other places in the State….Amway Center was used as an example.

Kieran Quinn, from Guggenheim Partners,

Florida has not done a great job of creating careers in Florida. Great universities… but not a great job of keeping graduates.

Regarding Real Estate:  Retail on “First and Main” is not much of a concern.  Demand will always be there.  Office is on shaky ground.

Tim Becker from the University of  Florida,

Capital markets are going to be shaken up by S&P downgrade, Politics, Europe etc.

CMBS Origination will not reach $50 billion this year. There was a big hiccup due to political impasse and economic uncertainty.

Life Insurance companies will be overweight real-estate, if stock market continues to drop. This will slow activity and take key buyers out of the market.

Q2 dip in UF sentiment, due to capital markets and political uncertainty. Fundamentals are pretty good actually, compared to previous years.

Innovation Square is the most exciting project in the State…it has the concept of creating careers for people in our State.

"Juniors" Break Out Session

Suk Sing from Darden

Tertiary malls are having the most problems.

Restaurants, entertainment and fitness centers, which are activity based, are highly valued.  Retailers want shoppers to stick around. The longer they stick around, the more likely they are to buy at other shops.

There is an oversupply of secondary and tertiary space with a shortage on prime locations. There is an increased focus on second generation space.

Land Assemblage is back.  In-Fill skills are important.

Lenders are very focused on leases right now. Deals are taking two years to complete because of increased scrutiny from government and lenders.

Hot retailers like Wawa, Desigual, Lulu Lemon are expanding.  Globalization and more specialization is what is happening in retail.

Need to talk to us? 813.514.1070
or email by clicking HERE!

1. Thinking Space is a Commodity – In commercial real estate, square feet are not created equal.  Load factors, functional obsolesce and poorly laid out floor plans can quickly diminish actual value to the tenant.
2. Thinking Rent Is an Absolute Measure – There are a lot of factors to consider when comparing price per square foot.  Electricity, Janitorial Expenses, and Common Area Maintenance charges are just SOME of the factors that come in to play.  Full service (Gross Leases) are supposed to include all expenses.  In triple net leases, all expenses are passed through to the tenant.
3. Not Understanding Rentable vs. Useable Square Feet – Useable Square Feet (USF) is the space within the walls of your unit.  Rentable Square Feet (RSF) is USF plus common area space that is outside of your suite, but is accessible to and from your space (i.e. hallways, corridors, bathrooms, foyer, etc). In office space, there can be a significant difference between USF and RSF.  With a free standing building, the difference is negligible.  It is important to know, because a lot of common space can be of no use to you or your business, but yet you pay for it on a monthly basis.
4. Not Planning for an Exit Strategy or the Future – What happens if you have to leave the space before the end of the term?  That rate that was negotiated for 5 years might not seem so great if you have a hiccup in your business and need to downsize.  Negotiating a shorter term lease might have made the rent more expensive in the short run, but limited your downside expense in the longer term.  Clauses that allow for subleasing can mitigate risk.  What about if your business out grows the space?  Can the landlord accommodate your need for additional space without you having to break the lease?
5. Not Allowing Enough Time – If you wait until the last minute to search for a space, not only will you have trouble finding that perfect space for your business, but by waiting, you transfer negotiating leverage to the landlord.
6. Not Utilizing a Professional Team – Unless you are in the real estate business, you probably only become familiar with the market when your lease is up or you acquire more space.  Attorneys, commercial real estate brokers, architects, and insurance agents work with real estate every day.  They can assist to guide you away from some very expensive mistakes.
7. Poor Site Selection – Location, Location, Location ….its not just about being situated in a visible location for your clients.  Ingress and egress should be considered as well as distance from your employees when selecting property.
8. Not Paying Attention to the Fine Print in the Lease– Do you understand how the landlord is calculating Common charges?  Is it fair and reasonable?  What about the other clauses, such as parking, access to the building after hours, insurance, use and exclusivity?
9. Underestimating the Condition of the Premises or Access to Utilities– How you would like to run a technology company that doesn’t have access to the Internet?  Or a flower company housed at a location in which the AC constantly breaks down?  Check to make sure that the space can accommodate your business and mission critical features actually function.

Need to talk to us? 813.514.1070
or email by clicking HERE!

1.  Alienating Tenant Brokers – Brokers are not afraid to share opinions of properties and landlords with their colleagues.   Defaulting, negotiating down after the fact, or slow paying on commissions is a sure fire way to retard future leasing efforts.

2.  Overly Complicating the Lease – Everyone acknowledges that it is important to have a solid and secure lease, which fairly lays out the intentions of both the tenant and landlord.  In every tenant’s mind though, there is an invisible line in the sand in which “enough is enough.”  If the lease provisions and clauses become onerous or tilt too heavily in the favor of the landlord, it can be difficult to consummate the deal.  Placing the tenant in a defensive posture is no way to complete a deal or forge a lasting relationship.

3.  Over Estimating Property’s Value – Having a run down of competitive ask/receive rates is only part of the process in pricing a property.  Someone, usually an unrelated third party such as a broker or colleague, should provide the owner with an unbiased estimate of competitive value.  Pricing the property from the outset is important.

4.  Nit Picking on the Deal – Many a deal have been killed over seemingly minor issues, based on the perception that too much had been acquiesced earlier in the negotiation.  Sometimes a little perspective is necessary.

5.  Failure to Properly Investigate the Tenant’s Creditworthiness. Provided that it adds value, personal guarantees or large deposits can make the deal more attractive to the landlord.

6.  Failure to have a Strategic Leasing Plan and Sticking with the Plan. If the idea is to have a Class A building, then lease to Class A tenants with a compatible Class A mix.  Reaching on a tenant that is outside of the box can alienate other tenants and lead to an increase in vacancy.

7.  Failing to Create a Value-Added Message – This is the building’s elevator speech…the message that can be told in the short time period that it takes an elevator to go from one floor to the next.  “This is a great building because……..”  It might sound hokey, but everyone from listing and tenant brokers to maintenance staff will understand how to sell and service the building based on what the perceived value of the building is.

8.  Lack of Attention to Details – Cluttered common areas, shoddy landscaping and wilting decorative plants in the lobby can create negative attitudes from current tenants and place downward pressure on asking rates for prospective new tenants.

Need to talk to us? 813.514.1070
or email by clicking HERE!

Attendees: Eric Odum and Brian Willis, Esq. Becker & Poliakoff

Date: September 27, 2010

Subject: Hillsborough County Transit Referendum: Additional One Cent Tax. What’s its Purpose? What does it mean to YOU!

EO: Good afternoon and welcome to the Market Minute. This is Eric Odum, I’m the broker for Net Lease Commercial Advisory. Today we have with us Brian Willis who is the attorney with Becker and Poliakoff, and also a member of the Citizens Advisory Board for TBARTA. Welcome Brian.

BW: Thanks for having me, Eric.

EO: Absolutely. This video is going to be the first of two parts. The first part of our discussion is going to be based primarily on the initiative…..what it entails, where the routes are and what-not. The second part, there’s obviously a penny sales tax that’s involved and some controversy behind the penny tax, …..So what we’re going to try to do in the second part, is talk about some of those issues with the penny tax and also the transportation initiative to help explore how much this makes sense for our area. The penny tax is a sales tax, correct?

BW: Yes, it’s a sales tax. It would be one cent additional, right now we’re paying 7%, it would bring it up to 8%, but it’s really an investment that goes to fund improvements and rail is what everybody really associates this with. But a large portion of the funds are also going to go to fund improvements to the bus system through out the county, as well as road improvements and places that aren’t necessarily in middle of the city, but also the outside regions of the county.

EO: Now, when is this vote coming up?

BW: Vote is going to take place on the ballot in November. I think it’s November 2^nd or November 3^rd, right around there. Of course now there is early voting, so vote on it a couple weeks before hand.

EO: Ok, so let’s talk a little bit about light rail versus high speed rail. Light rail is part of this initiative, is high speed also? How does the high speed rail…

BW: Yes, it’s a frequent question that I get. High speed rail is NOT part of this initiative. It’s not part of what the one cent would go to. High speed rail is a done deal. It’s being funded by stimulus dollars.  The Federal Government is coming in (to help fund it) and that’s going to connect Tampa to Orlando at speeds over 160 mph. Light rail which is what a portion of the one cent investment would go to is going to be local. It’s going to connect…..the initial stages at least, will connect the airport, West Shore to downtown, and downtown North up to USF, beyond to the Cross Creek area, and eventually be part of this regional system that is going to be operated by TBARTA in the long run.

EO: So the high speed rail is coming, it has nothing to do with the penny tax, its coming regardless of the outcome of the penny tax vote in November. The penny tax vote in November is going to include rubber on road transportation initiatives as well as the light rail. Is that a good description?

BW: Yeah, yeah, that is absolutely correct.

EO: Ok.

BW: And it’s important to clarify how they work together. The one cent will not go to the high speed rail. They all work together because the high speed rail is going to come in and we’re going to have a transit center in downtown Tampa…..so the idea is that the downtown station for light rail will be part of this multi-modal transit station. There’s high speed rail, there’s light rail, and it’s going to be right across the street from where the Marion bus station is, so you’re going to have an integrated transit platform in North downtown. It’s going to let people come in from Orlando, from across the region, and connect.

EO: SO its going to be in-between the Marion, so its right around the old jail site, correct?….. The Northeast part downtown.

BW: Yeah, the Northeast part of downtown.

EO: By the ENCORE! Project.

BW: Just a little bit ways from the ENCORE! Project, so they’re taking advantage of that and they’re doing a mixed use walk able neighborhood that buys into these transit oriented development principles. So, that’s going to be a big part of this.

EO: Now, you’ve talked about TBARTA, you’ve talked about Hart, and I hear this name tossed around “Moving Hillsborough Forward,” what is that?

BW: ‘Moving Hillsborough Forward’ is a group that was formed by the Tampa Bay Partnership, and they are essentially, a political group that’s helping run the campaign for this one cent investment tax and I think the Tampa Bay Partnership is really important to the initiative because it shows that business recognizes the importance of this one cent investment.  What we’ve seen is that we’re losing our competitive edge to people around the country when their looking at where to locate their businesses. People at the Tampa Bay Partnership are putting the dollars to invest in this campaign so that we have this modern transit system.

EO: So, I’m hoping that there are a number of people involved in the process here that there’s some sort of greater initiatives, that there’s cooperation.  Frequently when you see a government agency, sometimes they don’t always play nice in the sandbox together, so hopefully there’s some sort of greater plan here, right?

BW: Yeah, there is. You’ve got TBARTA’s master plan that you can find on the TBARTA website, which is TBARTA.com, and that involves both this regional system which is made up of HART’s alternatives analysis study that’s going to take place and be funded by the one cent.  You’ve also got a Sarasota/Bradenton rail link that’s part of the TBARTA system.  Pinellas County is undergoing their own alternatives analysis study to look at how they could connect Clearwater to the Gateway area, to downtown St. Pete, as well as going over the bridge to link up and create an integrated system with Hillsborough County. And there are similar projects underway in Pasco with the rail line around the State Road 54/56 corridor and going North up to Citrus/Hernando counties. What we see is that there’s a lot of demand for getting people in and out of Hillsborough County, and we’re here, talking about this Hillsborough project,  we’re focused on it because we’re in Hillsborough, it is a part of a greater regional system, and not just TBARTA. It’s going to tie in the high speed rail, and then you have Sun rail in Orlando.

EO: How’s Pinellas doing?

BW: Pinellas is a couple years behind us. Hillsborough is ahead. They’ve got the funding in place to start what’s called their alternative analysis study, which is a process that Hillsborough started two years ago and is just about to complete, and that looks at the different possible rail alignments.  They set the corridor;  the corridor is Clearwater, Gateway and St. Pete. Then they look at what specific roads and what pathways within that corridor would be the most economically efficient pathways to go through. And that’s the process that’s being wrapped up in Hillsborough right now.

EO: Now, let’s talk a little bit about the real estate side of it, because most of the people watching this are going to be real estate folks or real estate investors, and they’re going to want to know ‘what’s in it for me’ and how can they take advantage of some of the opportunities that might be coming down the pipeline. You talked a little bit with me before we had this interview about a quarter of a mile ring, and half a mile ring, what is all that about?

BW: At TBARTA we’re spending a lot of our time on  land use issues, because what we’ve shown time and time again, is that transit initiatives like what we’ve got going on in Hillsborough County don’t succeed without land use changes to support the transit. And those land use changes help preserve single family(residences), the existing structure of the community, but you have changes within a quarter mile of the station, which is your core area. Then you have a ring that’s a quarter to a half mile out from the stop. The core area within a quarter mile is your core walking distance to the station. It’s designed to be high density mixed use development, so, shops, Starbucks, CVS, restaurants…

EO:      Condos

BW: Condos… absolutely…. in a dense development….. So places you can stay 24 hours and live, work and play.

EO: Typically, what does this do to property values that’s in around this inner dense core?

BW: There have been numerous studies on this and most of them find that you’re finding anywhere between four upwards of 15% increase in property values around the core. There’s a lot of demand for this type of living. It saves people money on their overall transit bill because they don’t necessarily have to have a two car household, and so people are willing to pay more to get into these areas, and businesses are willing to pay more to be there because of the presence of people and the ability to get workers to your shops.

EO: Ok. These rail lines – there’s been some discussion about the first line running up to USF and then there was some outcry that we need to be out to the airport first. Where are we now? What is the general consensus about where the first line is going to be laid?

BW: With the initial plans everybody was thinking it was just going to go from West Shore to Downtown.  There was some great public feedback, and it did a great thing because it got HART to reconsider, and now the first line includes Tampa Airport, West Shore. In fact, the airport has devoted land over that is going to allow them to accelerate their build up process. So, high speed rail we talked about earlier is going to be complete in around 2015, and they’re now looking at a time frame in 2015 to complete the Tampa Airport to Downtown leg of the transit project if the one cent passes.

EO: If the one cent passes…So, it sounds like its pretty much set then, that seems to be the most logical route and then later we’re going to continue up to USF.

BW: The idea is that you build them pretty consistently, it wouldn’t be that much later, but the idea is you do one phase at a time, first phase being the airport, second phase connecting Downtown, USF on to the Bruce B. Downs area.

EO: Terrific. Thank you again, Brian, I really appreciate your time in coming down and explaining some of this to us, it’s important that not just the folks that area associated with Net Lease Advisory know what’s going on, but also the general citizenry knows what’s happening so that we make the right decisions.

BW: Thanks for having me here.

EO: Appreciate it!

Need to talk to us? 813.514.1070
or email by clicking HERE!

Discussing SBA 504 Commercial Real Estate Loans

Finding Creative ways to Keep Business Moving in a Tough Economy

EO:      Welcome to another update on the market with Net Lease Commercial Advisory. Again, I’m Eric Odum, Principal at Net Lease Commercial Advisory and today, we have with us Scott Jacobsen who is with – why don’t you introduce yourself…

SJ:        NorthStar Bank, Commercial Banking Manager

EO:      Scott has been a banker in this area for ….gosh Scott, it’s probably been 22, 23 years now?

SJ:        At least…

EO:      So, you’ve been around a little bit and he (Scott) presented me the other day with an opportunity I thought was very interesting in the Commercial Real Estate market in terms of the financing.  Of course, there’s been a lot of discussion about illiquidity in the market.  We have our feelings about illiquidity.  It really has less to do, in my opinion, with the banks and probably more to do with the borrowers.  But, we’re going to talk about a program today that can help on some of those illiquidity issues.  So let’s talk about it.  It’s the Small Business Administration’s 504 Loan Program.  Why is this program a program that people should pay attention to, Scott?

SJ:        The 504 Program’s been around for a long time, as long as I can remember and there are some key components to it which if you don’t know it, is very attractive — One being the 10% equity requirement for the borrower, where most banks typically will require anywhere from 20 to 30% equity.

EO:      That has been going up recently (on traditional commercial loans), right?

SJ:        Yes, that’s been going up – banks are requiring more equity (on traditional loans).  Everybody knows rates are so low today and the SBA rates are very low as well, and the way the program is set up, the SBA takes 50% of the loan amount and actually fixes in a rate, and that rate is in the low 5’s (percent), and they lock that in for 20 years.  So you get a 20 year fixed rate on the SBA’s portion of the loan, which is half of it, and 40% portion of the loan which the bank holds is locked in anywhere from 5 to 10 years.

EO:      So you still have a balloon, its just there’s a smaller portion of the amount that’s going to be subject to the balloon.  The government portion is a 20 year fixed loan which is pretty attractive.  I know dealing with a lot of small business owners when they’re purchasing their property…physicians and lawyers too, their thought is that ‘gosh in 5 years, I don’t know what the interest rate, I want to be a little bit more sure about what my payments are going to be’ and this seems like a really good way to stabilize their payments over that period of time and not worry about the balloon, the adjustment, interest rate, that sort of thing.

EO:      Let’s talk a little bit about who you think might be suited for this type of a product.

SJ:        It can be and For-Profit business that…we’re going to look at underwriting this credit to typical standards, which would be: a business has to be performing well, even in this tough environment, has to be in business for at least 2 or 3 years, has to have a little equity in their balance sheet, and you know, doctors, professionals, manufacturing distributors, they all qualify.  Where this program is really helpful, is if there’s something with the credit that just doesn’t quite get the approval in a traditional manner; the SBA program can push it over the top, because the bank actually at the end of the day, the bank is in at 40% LTV and the SBA is in for 50% so the capital or the equity so that the bank’s first position is very well secured.

EO:      So the SBA is essentially taking away some of the risk of the bank which makes it a more attractive deal for the bank to go ahead and make the loan.

SJ:        Yes, absolutely.

EO:      I think you talked about there was a chiropractor you had worked with…

SJ:        Yes, we had a case here just recently….. we had a Chiropractor that owns a half dozen locations, sorry, leases a half dozen locations throughout Tampa Bay and felt like this was a great time to negotiate those leases to purchase and was a little concerned about putting 20 to 30% equity into the traditional financing and thought this SBA program would be a good avenue for him to acquire those offices, lock in a fixed rate for 20 years for half of it and take some of the risk out of the balloon which you mentioned could sometimes give heartburn to clients when they know there’s going to be a balloon after 5 or 10 years.

EO:      Great!  So let’s talk about in terms of size…can you do this with $10k, can it be $50mil, what are the size requirements?

SJ:        Minimum size is $125k and maximum is $10mil.  So it’s pretty wide – it covers most transactions.

EO:      Most transactions. In Tampa, your typical physician practice was less than $1.5mil. Certainly more than the $125k – it’s going to be right there. I don’t want to make this sound like it’s only for physicians, because of course, you guys have had experience with manufacturing companies and distributors, but it seems to me that the professional practices tend to gravitate toward this more. Maybe that’s because they tend to be more balanced in the Tampa Bay area toward the professional industries.

SJ:        Well particularly if you’re a physician or anybody for that matter – if you’re going to be in your building and be there a long term – one of the requirements is that you have to occupy at least 51% of the space so it’s an owner occupied facility that we’re talking about.  But if you’re going to be there for a while and if you’re going to pay somebody, you might as well pay yourself.

EO:      It’s not a speculative investment then, this is something for owner occupied’s, running their business, has a sound business, has an established business, so that is what this loan program is really all about.  Let’s talk about some of the folks that perhaps can’t get this loan, because we talked about who can. Let’s talk about some who can’t.

SJ:        The ones that jump out at you: If you’re a not-for-profit corporation, you do not qualify, and if it’s real speculative then you wouldn’t qualify either.  Those are really the two big ones, and there are a few other ones: gambling establishments.  You know!  .….the obvious ones that jump out at you.

EO:      Ok, very good.  So, how does this compare with the fees to traditional bank financing?

SJ:        The fees…… the SBA’s got some programs now that they’re reducing fees to make it more attractive for borrowers.  There is a little over a 2% fee on the SBA portion to run it through and so that has to be an embedded cost, so that at the end of the day, if the SBA’s running 20 years on their fixed rate portion at around 5.25% then throw another 2% of closing costs,  you’re going to be somewhere in the 7.5% range all in which is still very, very attractive.

EO:      Then you throw in the balloon-free government portion, the SBA portion of it and it becomes pretty attractive.  So you have the origination fees which are a down side, but then of course you get extended lower rates through the term….. even with the fees included, it’s relatively inexpensive debt.

SJ:        Now, you compare that – it you walked into a bank today and asked for a traditional owner occupied mortgage, putting 20 or 30% down, and look at a 5 year balloon, our rates would be somewhere in that 6.5% range fixed for 5 years, and we’re going to charge anywhere from .5pt to 1pt so your cost is somewhere in that 7 to 7.5% range anyway for 5 years, where you can lock in the SBA portion for almost the same time but for 20 years.

EO:      Great. Terrific.  Well, why don’t we just shift a little bit here and summarize.  In terms of why we want to do this or why we at least want to consider this is

1. the SBA’s guaranteeing it, so you’re able to be perhaps a little bit more aggressive on underwriting than you guys typically would be.
2. It’s only 10% down and the government portion of the debt is for 20 years amortization with no balloon.

So, those are certainly the benefits to it.  People that we’re looking for (the folks you want to try to lend to) they’re going to be anybody with a track record, purchasing real estate, between $125k and $10mil. Is there anything else that I’m leaving out here in terms of summarizing this program?

SJ:        We haven’t really talked about – but there is the opportunity of throwing some of the equipment into the acquisition purchase and roll that into the loan amount. So, if there’s a capital intensive business or any business for that matter, we can roll that cost into the SBA as well as a significant portion of the fees can be rolled into the SBA loan as well.

EO:      Oh, that’s nice.

SJ:        So, there’s some great creative ways to make this worth while, and if you’re a business owner that your in a lease and you have the option to buy out that lease, we’ve seen a lot of activity recently as people recognize it’s a good time to be a value shopper for real estate and if you can lock in these rates for long term, it’s a good time to move on it.

EO:      Good point.  Scott, I’d like to thank you again for taking the time today to talk to us, and hopefully you guys got something out of it.  If anybody wants to get in touch with you Scott, how would they reach you on this program?

SJ:        Call me at 813-549-5030, or you can email me.

EO:      NorthStar Bank is located in the Beer Can building in downtown Tampa.  Again, we appreciate you joining us today and hopefully you got something out of it.  Feel free to contact Scott if you’d like to have more info on the 504 SBA Lending Program. Thank you again, Scott.

SJ:        Thank you, Eric.

Need to talk to us? 813.514.1070
or email by clicking HERE!

I received a telephone call yesterday from a business owner 2 years in to a 5 year lease.  This is not an unusual occurance.  It happens frequently.  What made this unusual is the business owner (let’s call him Bob) had spoken with me over 2 years ago, inquiring about using our services to help them relocate their business in Tampa, Fl.

For whatever reason, Bob had decided to go it alone and not use our services.  Now, here he was 2 years later asking me what could be done to rework his lease.  Bob had negotiated a $22/sq ft lease, which would have been on the high side of his submarket as a modified gross lease, but not an unreasonable rate at all.

The problem was, he had negotiated a triple net lease and he was responsible for Common Area Maintenance (CAM) on top of the negotiated rate.  The CAM being charged was close to $6/sq foot and upon reading the CAM definition in the written lease, it was packed full of JUNK FEES!  In other words, CAM (which is supposed to be a pass through cost from landlord to tenant) was nothing more than a profit center for the landlord.   As a result, Bob was paying roughly 30% higher than the market rate and having a difficult time covering his rent.

The fact that we lose business to other brokers is no surprise.  It happens every day, but I am always perplexed when a buyer/tenant decides they can handle locating a property and negotiating a lease on their own.   Commercial real estate is not rocket science, but there are HUGE pot holes that tenants can hit, if they are not careful.  Most services of tenant/buyer brokers are usually paid by the landlord/seller, so it is always hard for me to understand why someone would decide to go it alone in an arena in which they (tenant or buyer) have limited experience, the stakes are high, the amount of market information available on commercial real estate to the general public is limited and the lease structures are complicated.

Here are some reasons why you should consider hiring a commercial property agent to help secure property:

1. Expertise. Good commercial property brokers scour the market on a daily basis.  They know the owner of many of the properties in the area and know how willing which landlords are to negotiate and which ones are difficult.

2.  Cost of Service. Typically, landlords have built in commissions for buyers and landlord representation.  If you elect to not have representation, the budgeted commission goes to the broker negotiating against you, not on your behalf.

3.  Time Savings. A good agent knows the market and does not have to start from scratch learning the good areas and good deals.

4.  Negotiation. Structuring leases or purchases can be complex.  It should help to have someone on your side of the table armed with knowledge on sound structure and market conditions.

5. Space efficiency. Some buildings are more efficient than others.  Common areas can consume enormous amounts of space and increase your rent dramatically.  A good agent can guide you away from buildings that have huge common area charges (or at least provide an apples to apples comparison) and provide additional insight on to how best to design office layout after you have decided on a location.

6. Data and Tools. Most commercial property agents spend hundreds if not thousands of dollars a month for reports and market data on sales and leasing trends in their markets.  This can be invaluable when making site selection decisions, discovering where your customers are and how best to logistically position your business.

7.  Integrated Services. Legal, interior design, office layout, architectural services.  Would you know where to go and who to trust to help you properly set up your business or practice?  Leverage the commercial broker’s network to help you accomplish your goals.

One final note: Please seek legal advice when buying and leasing.  It is not unusual for a 2000 square foot lease to run as much as $100,000 over the entire term. Relatively speaking, a quick review by an attorney can be well worth the investment.

Need to talk to us? 813.514.1070
or email by clicking HERE!

Discussion on Sale-Leaseback

More and more savvy real estate investors are turning to sale-leasebacks. A sale-leaseback is when a business sells its commercial real estate property to an investor with prearrangement to lease the property back long-term from the new owner/investor. The business receives the market value of the property and gains liquidity, while the investor earns a return on his investment from a credit worthy tenant with a track record and commitment to the property.

This audio intends to provide some guidance on what a Sale Leaseback is, why it may be important to consider and if your business or practice is a candidate.

Need to talk to us? 813.514.1070
or email by clicking HERE!

Source: Tampa Bay Business Journal

Vacancies in the Tampa office market climbed again for the 2nd Quarter of 2009 to 14.7%. Vacancies are up in industrial and retail, all which have shown consecutive increases since the 4th Quarter of 2007.   What is the best way to position your company and reduce your rental rates to take advantage of the current market situation?

Find out here:

Tenant Perspective - Q2 2009 - Tampa Commercial Real Estate

Tampa Market Q2 2009

813-514-1070

Tampa Offices for Rent

Need to talk to us? 813.514.1070
or email by clicking HERE!