Los Angeles Commercial Real Estate News

FORTUNE — Hilton Worldwide recently announced plans to return to the public market, after The Blackstone Group (BX) took the hotel giant private in 2007.

The private equity firm is eager to recoup some of the $26 billion it paid for the chain just before the credit crunch. Whether Blackstone will be successful remains to be seen, but the initial public offering comes as the hotel industry, and more broadly, the commercial real estate market, turns around.

Less than four years ago, lawmakers and executives warned that the market for hotels, malls, apartments and office buildings would be the next to collapse, after countless homeowners lost their homes to foreclosures. While prices across the commercial real estate declined almost 40%, it never quite crashed like the housing market. Yes there were foreclosures and defaults, but not to the scale of housing.

There are a few reasons why the crash never came, which also help explain how commercial real estate has recovered much faster than the market for homes. Unlike residential, the commercial market didn’t bubble up nearly as much as housing; it was not nearly as overbuilt, either.

MORE:The barbarians are still at the gate

This had a lot to do with timing, says Casey Mulligan, economics professor at the University of Chicago. The boom in home construction took workers, materials and land away from the commercial sector. It was only after 2005, when the housing market bubble burst, that more of these resources freed up and construction projects started picking up — but that was short-lived since the financial crisis shortly followed.

While there were defaults, the commercial market didn’t see nearly as many foreclosures as the housing market. Joblessness and plummeting home prices led many to miss mortgage payments, which led to the wave of defaults. Commercial properties saw similar price declines, but unlike residential properties, owners enjoyed continuous flow of income by way of rents from tenants. This gave owners struggling with the credit crunch considerable relief.

“There were defaults in the commercial space, but it didn’t hit the heights seen in the single-family market,” says Susan Wachter, real estate and finance professor at the University of Pennsylvania’s Wharton School of Business. Rather than a wave of defaults, the real estate crash triggered a wave of workouts whereby banks renegotiated the terms of loans, sold to new owners or took the properties over. Private equity firms also swooped in and bought up distressed properties.

“Any solution did not trigger excess supply in the market,” Wachter adds. “It was almost a nonevent in the commercial space.”

MORE:More Americans pay mortgage first again, then credit cards

On average, prices regained all the ground that was lost during the downturn, according to the monthly index by Green Street Advisors that tracks commercial real estate prices. While office industrial buildings have a ways to go, prices for apartments, high-end malls and strip centers are well above their prior peak.

Hotels, in particular, have recovered in big ways as stocks soar and the economy improves. And Hilton’s move to go public is the latest example. With hotel stocks close to a five-year high and revenue and profits growing industry-wide, investors are taking advantage of the stock rally to sell assets.

Hyatt Hotels (H), the chain controlled by Chicago’s Pritzker family, raised $1.09 billion in an IPO in 2009; it rose 12% on its first day of trading. Since the IPO, shares have gained 77%.

Caesars Entertainment (CZR), the casino chain that also operates hotels, sold shares to the public last year, after private-equity owners Apollo Global Management LLC and TPG Capital took the company private about four years ago. Since the IPO, shares have risen 81%.

The crash in commercial real estate may or may not have happened, but if it did, it probably wasn’t as bad as many thought.

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Los Angeles Times

By Martin Eichner
September 20, 2013, 8:16 p.m.

Question: My partner and I went to check out a vacant apartment in a very attractive local rental community. We met with the management’s leasing staff in the community’s leasing office. We were happy with the rent amount and the other basic terms they described verbally, including a one-year lease. However, when they asked us to sign the lease we saw that it had a lot of pages with many terms and conditions. We asked if we could take a copy home to review before we signed it, but the leasing agent said no, because the lease was a proprietary document. Basically we were told to sign immediately if we wanted the apartment. We were told a copy would be sent to us after we signed.

We decided to go ahead and sign because we believed there was a law that allowed us to rescind the lease within three days, so we would be safe if it turned out we didn’t like the lease details. As three days were passing, we asked for our copy but did not receive it. Then when we tried to notify management that we were rescinding the lease under the three-day rule, they told us there was no such law. We have moved into the community because we didn’t want to lose our deposit, but we still don’t have a copy of the lease even though a month has passed. Were our rights violated?

Answer: Unfortunately for you and your partner, you were relying on a very common misconception when you assumed you had three days to cancel the lease you signed. Certain contracts such as consumer contracts are by law subject to a right to rescind within three days after execution, but there is no such right under the laws governing residential rental agreements. You were bound by the lease as soon as you signed it.

Also, there is no law that obligated the leasing staff to allow you to have a copy of the lease before you signed it. However, their failure to allow you sufficient time to review the document prior to signature should have been a red flag for you.

Civil Code Section 1962 does require your new landlord to provide a copy of the signed lease to you within 15 days after you signed it. Since it has now been more than 30 days since you signed your lease, your new landlord has violated this statute. Section 1962 does not, on its face, render the lease void for failure to comply with the duty to provide a copy.

However, you should document the landlord’s failure to comply with an email or letter demanding a copy. The landlord’s failure to comply, combined with the failure to allow you a sufficient opportunity to review the document, will give you a strong argument that the many detailed provisions in the lease form are not enforceable against you.

Eichner is director of Housing Counseling Programs for Project Sentinel, a Bay Area nonprofit. Send questions to info@housing.org.

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Inspiring communication can elevate people and communities. It changes the way we feel and take action toward a better future.

The secret to inspiring others is connecting an idea or a vision with a sense of urgency to make a difference. Great leaders leverage their message and story in one way or another to make a connection and compel change.

Leadership is the understanding that everything communicates.

Everything we do or say has an important message to convey, whether you like it or not.

We can either make choices in advance about what and how you’re going to communicate or react to what others do. It is

As a leader you need to discover your true message and be crystal clear on your platform for change, vision, and call to action before you start trying to inspire others. It will evolve as you learn, but you can’t lead unless you have a starting point to help focus those important communication values.

Inspiring Leaders persuade better
Few people care about the “how” until they understand the “why” they are doing what they are being asked to do. People want to understand the benefits and the costs of joining you as leader. What’s in it for them? Or is it all about you? People get inspired when they know why you want to talk about your initiatives and ideas that will improve their lives.

Inspiring Leaders tell powerful stories
Inspiring leaders are great connectors. They communicate through story telling. Facts and figures are not enough to navigate people into a better journey. You must share and relate stories to the heart.

When leaders communicate, the most important thing people want to know is, “Where is your voice?” Why should I listen to you?

Inspiring Leaders welcome feedback
Great leaders take the time to listen deeply. They dig below the surface to help their relationships take a meaningful journey of understanding and trust. The only way you are going to cultivate that is by being open to feedback and let people have a point of view.

Does that mean that there won’t be disagreements? Probably not. However, Inspiring leaders inspire others to share and even sometimes encourage a different point of view

Some of the most important decisions in our history were made not by one person but opposing views on a particulate topic.

Inspiring Leaders encourage the best in people
When you focus on people’s talents and strengths, you are paving the way for leadership. You are coming from a place that cares and continuously looking out for the best interests of others. Inspiring leaders understand that people have something to offer. They drive and engage in people’s contributions.

When other people flourish and shine, so is the leader. Their success is your success.

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Part of being a responsible adult is planning for the future. Most of my family’s plans for the future have been based on getting out of debt now and setting up our retirement savings. If you’ve been following my blog, you know that we have been making changes to our 401K and investments since 2008. Just click on the category links for “Retirement” and “Wise Investing Made Simple” to read my older posts, such as “Choosing the Best Investment Strategies” that I wrote about a year ago.

Once we’ve started on the basics of planning for retirement, we are ready for the next step, checking out the different investment opportunities. Today’s financial marketplace has many different ways to earn a good return on investments, including:

life insurance,
mutual funds,
bonds,
trusts, and
real estate.

We have been particularly interested in commercial real estate, which can be anything from buying or building a small strip shopping center, an office building or multi-family properties.

The U.S. economy is slowly recovering and this has signaled changes in the banking and mortgage industries. Record low interest rates on loans for real estate are starting to rise, and demand for rental housing continues to grow. Even the Federal Government’s web site for FreddieMac mortgages endorses buying apartment buildings in most metropolitan areas as a good investment. Established in 1970, Freddie Mac makes mortgages possible for one in four home buyers and is one of the largest sources of financing for multifamily housing. Their website shares a wealth of information on investing in apartments, including information about qualifying for their loans, market insights and checklists.

Digging into more information on investing in apartment buildings, I’ve found advice from many sources and have learned a lot already. Successful investing in commercial real estate, and especially multi-family properties, depends upon three things:

Finding The Right Property
The Right Location
The Right Financials

Finding the right property is the most time consuming and challenging part, but some people consider it the most fun. You get to meet many different professionals, from commercial real estate brokers to property management companies, appraisers, insurance agents, attorneys and mortgage brokers.

We will start our search for the right property by conducting an overview of the existing market and property owners. Companies that are proven successful in owning and managing apartment buildings, such as Post Brothers in the Philadelphia area, can be good role models but might also be good candidates for considering a purchase offer. I found their story intriguing, starting with the fact that their company really was founded by and is run by two brothers.

Post Brothers Apartments is a good example of a company which manages properties and their web site describes how each one was selected and is maintained on certain criteria, such as:

strength of community
tenant focus
local resources/neighborhood
green initiatives and eco-friendly
accessibility to transportation options

As an investor, I would mirror the Post Brothers business model and task my commercial real estate broker with finding properties like theirs to tour as a good investment prospect. I especially like the many steps they have taken to be green, such as all Energy Star appliances in each unit, and meters so tenants can see for themselves have much energy they use.

Then it all comes down to the financials. If you like the property and believe it can make money for you without requiring a lot of additional capital investment, the next step is to prepare and submit a Letter of Intent (LOI) to gain access to the property’s financial and records. If everything checks out, making an offer to purchase puts you on the path to a multi-family property owner!

Find commercial properties for sale in Los Angeles at http://www.enconcommercial.com

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In case one of you are considering investing directly in to commercial real estate arena, this article is for you, based on what I learned from my friend and doing some feasibility study over net and talking to other people. If you would like to buy commercial real estate, you can do it here.

20 Tips for Commercial Real Estate Investment –

1) From the start, make it clear to yourself that you are an investor and certainly not a ludicrous accumulator of commercial properties. Remember that the concept of establishing commercial real estate investments is to generate abundant profit. So, if you do not produce any profit when you resale, then that only means to say that you only possessed a property and did not invest.

2) Find out if you and the commercial properties are completely and personally protected prior to purchasing. This is to protect you from any lawsuit.

3) Accept that commercial real estate deals do not really provide you handsome profits overnight. These properties are commonly a bit difficult to sell but once they have great attraction, they can bring greater rewards. So, be patient and do not rush in making unfavorable decisions.

4) Carefully study all property types and pick your own corner based upon your comfort zone and whatever shall aid you obtain your profit objectives without much hassle.

5) Always remember that there is a learning curve whenever you experience spending more of your time in concluding a particular deal. Things will for sure fall into place once you perform exceptionally well.

6) Make sure to keep more contacts in your network who understand what you are searching for to buy or sell.

7) It is important for you to consider reserving more seed money since the initial down payments are generally of a greater percentage as compared to family house loans.

8) Devote more time in determining deal partners or private lenders to back you up. These may provide the credit or money necessary to buy high value commercial property and you may allot with an agreed percentage of the earnings from the sale.

9) Only work with expert real estate agents, an well-experienced professional who can answer questions which may arise while assessing commercial properties or purchasing them, shall help you immensely. Make sure that you also understand all the regulations and laws in force in your state and city.

10) In this type of business venture, it is best to think long-term; that is, you must be ready to hold properties with a minimum of ten years.

11) Be practical and ask yourself important questions like what’s your time worth? Prior to putting your money down, carefully ponder about how much work you’re prepared to do and how much you’ll contract out work.

12) Of course, you have to learn and understand by heart the tax codes.

13) Aim attention at one investment type at a time. This is primarily valuable when you’re first starting out; you must concentrate on one type of investment such as land, apartments, retail, offices etc.

14) Think about environmental issues such harmful waste problems. Take note that property owners have the main responsibility for repairing such problems, although the present property owner didn’t actually cause them.

15) Consider getting a mentor so you can acquire ideas from his/her mistakes and for you to understand the whole thing that revolves around in commercial real estate venture.

16) If you’re in a partnership deal, see to it to fund your deal with a non-recourse loan. Non-recourse discloses that you are not personally guaranteeing the loan; that is, it enables you to be withdrawn from the loan in case the partnership went sour and, in case the property did not succeed, it won’t be obligated to you personally.

17) Understand that each property comes with a lifetime. In short, every building needs repair and restoration, so see to it that you secure a long-term plan to manage such repairs.

18) You must know how to recognize an excellent deal. The most exceptional deals are the ones you can easily walk away from.

19) Your top priority should be to set parameters so you must master how to map out a plan of effective action.

20) The most practical strategy to assess and determine a commercial property is to review the neighborhood it’s in, by searching for vacancies, making conversations with neighborhood owners and going to open houses.

Some additional tips on commercial real estate deals are here also you might not want to miss out on this gigantic post about 100 ways to make money by real estate investing.

For me, I want to first start with investing in rental property which is meant for personal usage. If I can handle that then I may consider venturing out in to commercial real estate investment.

Readers, if you’re a commercial real estate investor, do share your experience with us.

SB is a husband and working as a software professional for a Fortune 100 corporation in Florida. Thanks for visiting the blog.

Posted from WordPress for Windows Phone http://www.enconcommercial.com – Find warehouse and office space in Los Angeles for lease or purchase.

September 11, 2013 Real Estate Money Bulldog
We are all on the lookout for ways to make our money work harder for us these days. If you are fed up with the low interest rates given by banks and the risks associated with the stock market then maybe you are tempted by the idea of buying commercial real estate? If you are then here are some of the points you might like to consider.

The Purpose of the Investment

There are a few different reasons why you might want to buy a commercial property. For a start, if you plan to run a business out of it then buying a property outright is going to be a lot more profitable for you than leasing one for a long time. Paying the rental amount every single month is something which is going to eat into your business profits. Of course, leasing also means that at the end of years of paying for a premises you will have nothing to show for it.

Even if you aren’t going to work from it, though, it can still make sense to buy a slice of commercial real estate and let it out to someone else. This is similar to buying a residential property to let out, in that your original investment grows over time as the property rises in value. Meanwhile, you can be cashing in with the rental money every month for it as well, making it something which starts to earn you money right away.

The Length of the Investment

Another issue which you need to think about before making any sort of investment is how long you want to hold onto it for. Property investments of all types tend to perform better when they are viewed as something which you are going to hold onto for a relatively long period of time. However, it has to be said that commercial real estate values can rise sharply enough at times to make a short period of investment something worth doing. As with every property you buy, it all comes down to buying and selling at the right time. Ideally, you will have enough financial freedom to not have to worry about having to sell it other than when the time is perfect for you. Selling any sort of property under pressure usually means not achieving the best possible price for it, and that is something you will definitely want to avoid if you want to make as much from your investment as you can.

Conclusion

There is no doubt that buying commercial real estate is a great idea in a lot of situations. If you are going to need commercial premises to work from then buying one is definitely the smart approach, which is going to save you a lot of money. If you are just looking to make a good investment with your money then it could be right for you as long as you find the right deal. At the moment in the UK, commercial property prices are starting to rise again, with July 2013 marking a third consecutive (modest) increase. There is a feeling among some analysts that prices are still very much on the low side and that further growth is due. Like any other type of property investment, markets can rise and they can fall. This means that investing in property is something which is best done when you are looking for a long term way of growing your cash, rather than a quick profit. Having said that, if you can lease it out in the meantime then this is going to make sure that your profit isn’t entirely dependent upon the price you sell for.

Hi everyone, I’m Adam the founder of Money Bulldog and I hope you enjoyed this post! You can stay updated with new posts by following us on Twitter, Facebook or subscribing to free emails

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Your landlord may ask for a security deposit to assure that cash will be available if you fail to pay the rent or don’t make other payments required under the lease. Unlike residential landlords, who in many states may not ask for more than two or three months’ rent as a deposit, commercial landlords may set whatever deposit amount they want. You may be able to negotiate the dollar amount and more favorable terms if you are a desirable tenant with impeccable credit and business history (especially if you are renting space that has been vacant a long time).

Unless the lease provides otherwise, the landlord may not increase the deposit during the term of the lease, and you may not use the deposit to cover the last month’s rent. Your landlord will typically return the deposit at the end of the lease, minus any deductions, such as for damage repair.

Where the Landlord Will Keep the Deposit

No law requires the landlord to put it into the bank or pay you any interest the deposit earns. Ideally, the landlord will put the deposit in a separate account (not commingled with the landlord’s other funds) in a federally-insured bank and give you the interest, but that’s up to the landlord (and your bargaining power).

How the Landlord Will Use the Deposit

Landlords often deduct from the deposit at the end of the tenancy—to cover damage that you haven’t fixed or outstanding rent. However, landlords may also use this money during the tenancy. A typical deposit clause will state that the landlord may use the deposit if you fail to pay money you owe under the lease. When the landlord dips into the deposit to cover unpaid rent or another default, you will typically have a set amount of time to replenish the deposit (try to get as much time as possible to do this).

Breaking an important term or condition of your lease—a default—also constitutes grounds for termination of the lease. Can the landlord use the deposit and terminate? Unless the deposit clause clearly states that the landlord can’t do both, that’s what might happen. In fact, you’ll want to go further and require the landlord to first look to the deposit to make up for any monetary default on your part—in other words, you don’t want the landlord to have a choice of curing the default or terminating the lease. If the deposit can cover the money you owe, you’ll want a provision in the lease that there will be no termination. A landlord who agrees to this provision will probably insist that this cure right will be extinguished if your defaults are large and/or frequent.

When the Landlord May Use the Deposit

You won’t want the landlord to be able to dip into the deposit, perhaps without even telling you, every time you owe a payment or are late with rent. At the very least, bargain for a notice and cure right—a promise that the landlord will alert you before using the deposit and give you a few days to come up with the money. For example, if you’re going to be slightly late with the rent because a large account will be late paying you, you’d want the landlord to notify you before taking the rent out of the deposit—so that you can redouble your efforts to collect on that overdue account.

Landlords sometimes take money from a security deposit not only when the debt is clear and undisputed, but even when the very existence of the debt is in question. For example, suppose the two of you are engaged in a dispute regarding the proper calculation of common area maintenance (CAM) costs. If the rent clause doesn’t require that these disputes be mediated or arbitrated, the landlord might simply satisfy the claimed debt from the deposit. To guard against this end run, negotiate for a clause that allows the landlord to use the deposit only when you’ve failed to pay an undisputed debt (one you don’t contest) or an adjudicated debt (one that was the subject of court proceedings and was reduced to a judgment against you).

This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman

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Common area maintenance (CAM) costs are something that is negotiated between a landlord and a tenant of commercial space, and oftentimes the lease terms amount to hidden costs for renters. Three ways tenants can reduce or avoid these costs is to 1) designate who will pay how much for the landlord’s repair work on the premises, 2) negotiate down management fees and 3) make sure there are CAM caps in place to incentivize the landlord to keep his or her own costs down when managing the property. For more on this continue reading the
article from Blue MauMau.

While there are many business factors and legal points to consider when negotiating a commercial lease, in today’’s uncertain economy, the “”bottom line cost”” of the lease often tops the list of concerns for a commercial tenant. You are probably aware that most commercial landlords pass the cost of all repairs and maintenance of the premises and the common areas to their tenants. Tenants often find, however, that their CAM charges are more expensive than anticipated. While there are many factors that need to be evaluated and provisions that need to be negotiated in a commercial lease, as you head into negotiations, arm yourself with these three tips for keeping your CAM charges in line with your expectations.

1.
Landlord’s Work. When you negotiate your lease, you may designate certain things for which you, the tenant, will be responsible and certain other things for which the landlord will be responsible. For example, you may agree that the roof is the landlord’’s responsibility. Be careful! Just because you designate that the roof is the landlord’’s responsibility does not mean that the cost of the landlord’’s roof repairs and maintenance are not going to be passed back to you in CAM charges. Careful analysis of the entire lease and the addition and subtraction of specific language in multiple provisions are necessary to ensure that you won’’t be bearing the burden of these costs. In the example of the roof, you would want to specify that the landlord, at its sole cost and expense, will repair and maintain the roof in good condition and replace the roof as needed. You would also want to carefully review all provisions that discuss common area maintenance charges and/or additional rent and ensure that these provisions specifically exclude any costs related to the roof. Additionally, you would want to carefully review any provisions regarding charge backs for damage caused by you to ensure that the landlord’’s ability to blame you for damage to the roof (like from your HVAC contractor) are limited and that the landlord must engage in some form of dispute resolution before
charging you for a repair. Finally, you will want to make sure you have distinguished CAM charges from capital improvements and expenditures which the Landlord may be required to make. If you need assistance in ensuring that your commercial lease properly places the cost of the landlord’’s work on the landlord, contact CBL.

2.
Management Fees. Many commercial leases include a management fee of some percentage (usually 3-5%) that the tenant agrees to pay for property management. When objections are raised to this fee in negotiations, the landlord often explains that the fee is necessary to pay for the salaries and overhead of those folks who manage the property. Watch Out! You will want to make sure you are comfortable with how the percentage is calculated and that the landlord isn’’t double dipping. The landlord will likely want the management fee to be a percentage of gross payments, gross receipts or gross revenues. If you agreed to a management fee of 4% of gross revenues, your base rent just went up by 4%, your insurance just went up by 4%, your real estate taxes just went up by 4%, and all your maintenance and repair costs just went up by 4%. You may also find that you are actually paying an extra 4% on top of the property manager’’s salaries and overhead because the language defining CAM allows the landlord to charge you for salaries, utilities and office space, in addition to the management fee. Careful analysis and drafting of the language defining additional rent and common area maintenance costs are necessary to ensure that the management fee is fair and reasonable and doesn’’t result in an unnecessary payment by you. If you need assistance negotiating the management fee or CAM provisions of your lease, contact CBL.

3.
Caps. If you agree to pay “all costs and expenses paid or incurred by the landlord at its election in connection with the premises,” what incentive does the landlord have to keep costs to a minimum, particularly if as discussed above, the landlord’s percentage management fee increases with increased CAM costs? You might consider requiring the landlord to produce and attach as an exhibit a specific, categorized budget for CAM for the first year. You might also establish an approval process for any expenses that cause either the entire budget or any category to exceed a specified cap or you might negotiate an absolute cap and provide that the landlord will bear any and all costs that exceed the cap. Another possibility is to consider agreeing on a flat fee for CAM, rather than a reimbursement. This would give the landlord the benefit of any savings but would provide you with a firm budget. If you would like to discuss options for bringing your CAM costs under control, please contact CBL.

This article was republished with permission from Blue MauMau.

Before founding Clapp Business Law, LLC, Ms. Mary M. Clapp served as general counsel for Incredible Pizza Franchise Group, LLC, an international franchisor of 50’s themed family entertainment centers.

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The Smartest Tips In Commercial Real Estate

By Jacklyn Evans

A person that is new to the realm of commercial real estate will need quite a lot of knowledge before getting started. One great way to learn is to seek a collection of excellent tips that provide a wealth of information on the concepts involved. The following collection of tips can help the beginner become a pro in the commercial real estate market.

Take photographs of the property. Be sure that you have any and all defects present on the pictures you take (things like holes, discoloration, or spots).

When purchasing any type of commercial property, pay close attention to the location of the real estate. Consider how the neighborhood will affect business. Look at similar neighborhoods to determine the likely growth trends over time for your property’s neighborhood. You need to be sure that in five to ten years later, the area will still be growing.

TIP! Examine socioeconomic conditions in the neighborhood you’re thinking of purchasing commercial real estate in. Pay special attention to the unemployment rate, and the average income level in your property’s neighborhood.

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