Birmingham, Alabama Commercial Real Estate

The Real Estate Expert: Social Media & Networking

2009-07-14T14:07:00.002-05:00

I just got back from an awesome conference put on by @infomediadotcom about social media. I thought I new it all about Facebook, Twitter (I'm @sam_duffey), and blogging. As it turns out I like many of us merely scratch the surface of these incredible tools.

For instance, what do you post in Twitter? Is it personal, fun, business, or serious? It really doesn't matter, but any entity no matter if it's one person or a multi-national corporation, needs to have a plan. Hmm... Let me think here. What posts would be most beneficial to my targeted clients and therefore place me in a favorable disposition from their perspecitve? (1) my listings, (2) local news especially that which is associated with real estate, (3) closed transactions, and (4) new developments to name a few. I initially vowed not to post personal items like, "I'm going to play golf" or "I'm itchin' to take some pics of The Vulcan". However, I changed my mind and believe that in good taste and infrequent occurance, I believe that folks like to know I am or you are human.

So now that I blog, LinkedIn, Facebook, and Tweet, is there any way to organize or manage them all?

To sum it up, though not easy to accept by all, social media is a very true trend and will continue to shape how we communicate and relate now and in the future.

What-ya-doin'

2009-07-09T14:45:00.002-05:00

What-ya-doin'?

I get that question a lot these days. Maybe it's from a concerned friend, co-worker, boss, or colleague. Every body seems interested in the market. It doesn't really matter which market - stocks, bonds, currency, real estate, they just want to know. I happen to work in real estate and thus ends up being the topic of conversation.

When a talk to folks about such a general topic I have learned that most folks don't really know what's going on but some are better actors that others. I hear that, "this is the worst I've ever seen", or "the worst is over", or I can see the light at the end of the tunnel", or "hang on, it's going to get really bad". ALL coming from pretty smart folks.

What have I learned? I've learned that the news is a bad thing to watch and here say is merely that. So what if it's a good market or bad market, I have a choice and that is to get in the fight or sit back and watch. I tell myself everyday, "Sam, you know the results you'll get if you just sit around. Don't be a statistic." Self, that's good advise!

So what-ya-doin'? Well lately, instead of over 80% of my transactions coming from the sales side of things, I've been attending to more leases. I am still serving the clients who are selling property and we have not slowed down on the marketing of their asset, but leases transactions have become a little more available in the "credit crunch".

Thanks to all the folks who read this and give me feedback! Maybe today no matter what position you hold, you'll be encouraged to simply do your job and not be distracted by the world around you.

Real Estate Update: National Trends

2009-06-24T09:50:00.001-05:00

I heard this morning that home sales transactions are up and average home values down. I suggest that the gap between buyer's and seller's is narrowing.

Real Estate Strategy: Should I Partner?

2009-06-12T15:06:00.003-05:00

I get this question a lot as I help "investors" in real estate. You see, I believe whether you are a user of real estate or a hands-length investor, if you are buying real estate, it is an investment -- therefore, you're an "investor". Some transactions could use more capital than what one party has or desires to use for the purchase. If more capital is needed, then the options are more leverage or more equity.

Sometimes even if the deal is leveraged to the max, one single investor just cannot come up with the required equity. Then his or her option is to raise more money through additional owner/members. When dealing with other investors you might want to consider the following:

How much do I know about my partner?

Do they have experience in dealing with real estate?

Does he have the financial strength to back up his obligations?

Are our goals in alignment?

Who makes decisions? How are they made?

What if there is a conflict? How is it resolved?

That is not a conclusive list of questions, and frankly in most cases you and the partnership will draft a business operating agreement. The operating agreement spells out in some detail the processes that the partnership should follow as they own the investment. Basically, it is important to not enter into a partnership relationship lightly. Partnerships have opportunities for conflict. However, if operated properly, partnerships offer a way to buy larger properties or diversify a portfolio.

Today, investors are facing very difficult lending conditions and partnerships offer some benefit to the lender. For example if the loan is issued joint and severally, then the lender is secured by all parties who sign the note. Additionally, loans are typically not leveraged as high today as prior, so more equity is required. If you are like me, my pockets only go so deep.

Real Estate Facts: Industrial, Manufacturing Index Update

2009-06-03T14:04:00.000-05:00

The manufacturing index compiled by the Institute for Supply Management (shown below) shows an improving industrial climate since just before the turn of 2009. This index can be used to show future need for industrial real estate like office/warehouses, distribution centers, and manufacturing facilities.

While the chart shows a national perspective, the climate here in Birmingham, Alabama does not see to have fared as poorly up to the 2009 point. According to the Graham Report, Birmingham's industrial buildings and service center buildings had an increased occupancy where bulk distribution and office/warehouse products showed decline.

In spite of continued negative media space, there is hope of improvement in the near-ish future. If the demand for space in Birmingham keeps with the national upward pace and developers don't rush to oversupply, the industrial market should firm up and create opportunity for conservative new development within a reasonable time frame. I am hesitant to call a time yet since the national curve has just made the turn, but once we get twelve or so months of positive demand, we should be able to better predict supply opportunities.

How to be an underdog.

2009-06-01T08:50:00.004-05:00

"He wasn't even on the radar!" I thought after reading about the number one seeded Rafael Nadal's defeat against 23rd seed Robin Soderling. I am not an avid tennis follower but I know this shouldn't have happened. After all we're not talking about college basketball where a "Cinderella story" is commonplace.

After reading about the unexpected match, I began to think about attributes that contribute to an underdog's success.

First, you need to believe. Believe in your abilities to win. Not necessarily the whole match, but one stroke at a time. Focus on the task in front of you that is accomplishable. After all, great success is merely many smaller successes that reach a collective result.

Next, the underdog is unaware of his underdog-ness. He isn't listening to the media, fans, or even a teammate who is talking about "reality". The reality is either you will win or lose, and you might as well try to win.

The underdog is a student of his game. He finds a weakness in competition that no one else has found or validated. He exploited the weakness for wins.

Finally, he just hits it over the net. A few weeks ago, I heard an interview of world renowned tennis coach Nick Bollettieri. When he was asked about the best thing an amateur player can do to improve his or her game, he instructed to worry about getting the ball over the net and in the back court time after time. Eventually, your opponent will mess up!

If you are a practitioner in real estate these days you might feel like an underdog. It doesn't matter if you're a broker, manager, or equity investor. You are pounded with folks telling you about the severity of the market. I confess, I have been a Debbie Downer myself. In spite of the broad brush of negativity, you must believe. Really? We are talking about real estate here... In America... Real estate is probably one of the oldest industries since we always use it even in agrarian times and America who is even still one of the best economies in the world.

Be aware of your surroundings, but don't give in to being an underdog. If you are a broker, find the "value add" that you offer and tell your story. If you are an investor, find a deal. The deal may look different than it did a few years ago. That's okay, you learned something about qualifying a good deal; now implement it for success.

Study your client and find out what his or her needs are. Then as mentioned above, add value to their business. Don't get stuck thinking that you can promote or complete a deal the same way you did before. Times change and it's time to be agile. Learn from history and innovate the future!

Finally, "hit it over the net". Show up and keep playing. There are deals to be done, do you want to be included? Folks, I am speaking to myself here. Some days I don't want to show up, I would close a deal for a warm lunch! Keep playing. If you don't try, you know what you will get. Investors and brokers this is for you both; KEEP HITTING THE BALL!

The Real Estate Expert: Organizational Hat

2009-05-27T09:12:00.004-05:00

Continuing my series about the different attributes of a commercial real estate agent, I want to talk about the organizational aspects of a transaction. If you remember, a few weeks ago, I told you about the marketing mind of an agent. We discussed the standard of care (if you will) and additional marketing features that might help promote certain properties.

This posts is about orchestrating a transaction. Notice that I used the word orchestrate instead of organize since looking at most realtor's desk the last word that comes to mind is organized. I used the word orchestrate because at some point the agent has procured a transaction to be placed under contract or under review (lease). At that time it is very important that the agent place himself or herself as the hub of information flow. During the contract and due diligence phase of a transaction, many new professionals enter into the picture. Those include architects, lawyers, title underwriters, surveyors, contractors, and bankers to name a few. All of which are vital to the closing of a successful transaction.

During this time of fulfilling obligations set forth in the contract and testing certain properties of the site, organization is key. The agent must be knowledgeable and equipped to gather and distribute information in a timely manner to the right people. The agent is also expected to understand what is required to satisfy the contract and reach the closing table without unnecessary delay.

In addition to the normal package of items required to close that are pretty much consistant in most transactions, some deals have unique or unusual items. For instance, investment properties require subordination agreements and estopples from tenants, or new construction needs certificate of occupancy before a tenant can move in.

In summary, it is critical to be organized during the contract phase of a transaction. I timely and satisfied contract makes it MUCH easier to reach the closing table with a win/win attitude from all parties involved.

52% Hit (in the stomach), Birmingham Alabama

2009-05-22T12:15:00.002-05:00

Birmingham area commercial sales volume down 52%! The Birmingham Business Journal reports that the total volume of closed sales in the first four months of this year are half that of the first four months of 2008. Argh! Thanks to our loyal clients and diligent agents I know of at least one deal of the "dozen or so" over $1M was generated by Coldwell Banker Commercial.

Source Article

Birmingham Politics: One Man's Defeat is Another Man's Victory

2009-05-17T12:04:00.005-05:00

I'm sure you've heard that one man's trash is another man's treasure. Many smart businesspeople have made fortunes of turning trash to profit.

Well I'm not going to discuss trash or treasures, but rather victory and defeat. You can't have victory without someone being defeated and you can't have defeat with a victor. This week in the final sessions of the Alabama State Legslitature a bill written to renew the Jefferson County occupational tax failed to pass. The existing bill and it's proposed replacement is designed to tax the workers who are employed in Jefferson County (Birmingham).

Why this tax must have been implemented in the first place? Why tax employees when they pay sales taxes on goods and services during the work week or their employee pays business taxes on licensure and or profits? Furthermore, we all know that to keep good employees the employer within Jefferson County has to compensate for the occupational tax anyway by higher wages or footing the bill itself.

With a little common sense thought, it doesn't take long to come up with a reason for the tax. Jefferson County was loosing residents (property tax revenue) to neighboring counties like Shelby and St. Clair. Instead of fixing the problem or the reason for the flight out of Jefferson County, county leaders chose to tax those who work there. So let me catch up here... No solutions just new bills to compensate. Okay.

By the way, we know it's not the entire county that's a flop since within Jefferson County there is some of the most desirable cities in our area if not region.

So you're a commercial real estate guy where's the link you ask. For years, I have noticed commercial agents advertise their properties with the benefit of "no occupational taxes". Many of which were located just across the border of Jefferson County. If this is an advertising point, it must be a big deal to businesses looking for space and maybe a deciding factor.

Well, let me turn this one around Mr. and Mrs. County Commissioner or Employee of Jefferson County who desprately wanted the tax bill to pass, you might be eliminating one of the deterrants of new business in your district. Woah! What a tought, reduce a tax, encourage business growth, more sales and profit, more tax.

In honor of fair reporting, why might the occupational tax be reasonable. Well, Birmingham is the hub of most commercial activity. The hub serves as the driving force behind axial growth beyond the county boundarys. Therefore there are some who use the commercial benefits of the city center, but don't pay their share of tax to keep it up i.e. streets, sidewalks, sewer, and etc.

Hence, a tax on the workers in the jurisdiction would generate the needed income to keep the services up that the commercial users depend on.

So in conclusion, only time will tell, but maybe this tax reduction will help make the city center aka Birmingham stronger for it's employees or it may put Jefferson County in bankruptcy.

The Real Estate Expert: Marketing Hat

2009-05-10T09:42:00.003-05:00

As realtors we wear many different hats to serve our clients. Sometimes we wear our analytical hat, while other times it's the organizational one. Maybe it's negotiating, planning, or managing as well as many others. Today I'm going to talk about marketing. When I'm wearing my marketing hat I am thinking about finding a prospect to fill a need of the client. I am going to speak from the agents perspective, but if you are an owner and don't use a realtor, you can still apply.

First, each project we market is different. Period. I along with our staff develop a plan that is unique to each site wheter it's for lease or sale. I goal of the plan is to do those tasks that have the highest probablity to locate the desired prospect.

To make our processes more streamlined we do have a baseline group of tasks that we do no matter what. Some of those include, internet advertising where prospect usually go for infomation, create a take away piece to leave with prospects, and signeage for most cases.

The next step is to identify those tasks that might be uniquely beneficial to a certian site. That may include:

Gap analysis
Broker luncheon
Direct mail
Postcard campaign
Targeted business lists
Helieum Balloons

The sky is the limit and this is where we have a little fun trying to figure out the best ideas.

So what do you think you can do will have the best opportunity to show your offering to a prospect? Also ask yourself why you think it will be effective. Have you identified a targeted group that is appropriate for your space or building?

Finally, don't be afraid to try something new. Some of the simplest ideas have been very effective. For example, we started putting flyer boxes on some of our properties. Residential realtors have been doing this for years, but few commercial agents understood the value of immediate information in the prospect's hands.

Every project big or small needs a plan and measurable objectives to be met. Once you have organized your campaign, you are on the way to a successful transaction.

Alabama Labor Employment (non-farm)

2009-05-08T09:30:00.003-05:00

The Real Estate Expert: CAP Rate is a first year return or yield

2009-05-06T15:34:00.004-05:00

Okay so I'm done with the housekeeping for a while, but I wanted to share with you a quick note. Today I had lunch with a buddy of mine that is also a blogger. He's recently hooked on to the tribe of followers of this site. Anyway, today he was giving me a critique of the blog. He said that he liked the blog but was confused about all the info. He said, "you sound really smart".

Well, thanks! That's one of the points. Sound smart. That way, those who read might one day need my brokerage service. Really though, the goal is not primarily to "sound smart". This blog was started to inform the community of brokers, users or real estate, and investors about trends and market events related to real property. I didn't imagine that someone not knowing the real estate lingo would find there way to the site.

That said, in addition to the figure filled market analysis and nerdy lingo, I intend to have a few "beginner" posts every now and then. Heck, even the pros need a lesson in the basics occationally.

Jonathan, thanks for the insight even if you didn't mean to!

Housekeeping

2009-05-01T10:29:00.002-05:00

Hey ya'll all is well here in Alabama. The sun is warming up and on the border of being HOT. When it's cold, we want it to warm up, and when it's hot, we want it to cool down. The moderate seasons just seem to go by too fast.

For those of you who are new to the group, I post about commercial real estate and many times specifically about the Birmingham, Alabama market. I usually update posts once a week, but to save you time, subscribe me to your RSS feeder. I've got a link to the right here and I think it is compatable with google reader, bloglines, and many others.

Thanks for your visit.

Auto Bailout, Again, Again

2009-04-30T10:03:00.002-05:00

Today the White House announced that Chrysler will finally be declaring bankruptcy. Well, duh! The only people who didn't see this coming was those on Capital Hill and The White House. Those with an ounce of common sense recgonized that bandaids aren't the best cure for a cut femoral artery. Chrysler was just too far gone. Now if Chrysler doesn't sell as many cars, maybe Ford, Chevy, Honda, Toyota, or others might sell a few more. I don't see Americans ceasing to move things and themselves around anytime soon.

After tea parties are all quited down, maybe Capital Hill and The White House will finally recgonize that throwing money at private and/or public business is not the answer. Capitalism will eventually work. It is what makes this great country such a land of opportunity.

Mr. and Mrs. congress seat holder, please focus your efforts on making a fiscally sound budget and positioning our tax structure where it acutally has the most benefit to the federal treasury. I promise it's less of a rate than you think.

Calling All Retail Building Owners!

2009-04-13T13:53:00.002-05:00

Here are ten strategies that Heidi Stout Tretheway shares in the most current issue of Knowledge-Leader magazine.

Shift your expectations. Market conditions may substantially change rental rates.
Be prepared to adjust rent. This may be the key to maintaining a tenant's momentum through the 2009 holidays.
Consider short-term opporutnities. Renogotiate or replace the tenant in a stronger market.
Reevaluate operations. Is it possible to cut operating costs to shave dollars off the common area maintenance charges?
Partner on tenant improvements. Many tenants with exceptional credit - and virtually all those lesser-rated - arestruggling to secure loans for TI.
Don't compromise. Unsavory tenants could pollute your existing mix.
Hoard cash. Your lender may require a cash infustion to rebalance the equity equation.
Find new sources of revenue. This might include advertising, kiosks, hosting special events, or reciprocal parking arrangements.
Focus on demographics. Understand your center's psychographics and demographic, and doggedly pursue merchants who are the best fit.
Get help. Your tax, legal and real estate advisors can suggest teh best path to repositioning or restructuring your property, debt and tenant mix.

Source: Knowledge-Leader

National CAP Rates

2009-03-27T07:00:00.001-05:00

National Strip Center Snapshot (Commercial Real Estate Investment Mag.)

	4Q08	4Q09
IRR	8.49%	8.34%
Overall CAP	7.49%	7.24%
Market Rent Change	2.33%	2.86%
Marketing Time	6.39 mos.	6.25 mos.

Korpacz Real Estate Investor Survey

National Capitalization Rates
4Q08

	Overall CAP	Change for Last Quarter	Change for Next Six Months
Apartment	6.13	27	42.5
Warehouse	6.73	10	47.5
Regional mall	6.96	18	57.5
CBD office	7.14	10	52.8
Strip Shopping Center	7.49	16	45.8
Power Center	7.57	40	65.8
Suburban office	7.59	25	65.9
Flex/R&D	7.76	16	59.4
Net lease	7.85	20	NA

Korpacz Real Estate Investor Survey

Don't forget as did I, that a positive change in CAP rate is a decrease in value.

Update on CAP rates.

2009-03-25T13:59:00.002-05:00

Alright, so about this time last year I reported on my observance of a decline in CAP rates for investment properties. You can get the article here. I was thinking that there has to be more to the story than just observing a general decline in values. In fact there is. I've noticed that some segments in the investment property markets have moved at different speeds than others. For instance, locally, I've seen single-tenant buildings with high credit tenants reduce in value at a rate less than multi-tenant strip shopping centers. Furthermore, as you can imagine, residential development land is off the charts.

Landlords, you're not left out of this content either. While a slow economy has put downward pressure on much business growth, tenants in our local market have been resistant to reduce space or move. Instead, they are opting to renew their existing spaces and maybe even negotiate a little concession. The good news is that the developer community has been somewhat observant and chosen not to build new buildings until the dust settles. Therefore, those entities who own stabilized properties, you have likely not seen too much distress.

So what can we take away here? Well, keep looking at the news only because we as professionals are expected to understand current events. However, dig a little deeper, you might just find a glimmer of hope and prosperity. Who would have thunk it?

The Real Estate Expert: Real Estate is Foolproof

2009-03-13T12:02:00.004-05:00

"Real estate always goes up", my client says.

"Bull crap!"

Who ever said that real estate always goes up anyway? Sure you can't reasonably make more land which makes it a limited resource unlike the U.S. Dollar (ha!), but why does that make it a fool proof investment as some believe?

Real estate is a great investment. As a matter of fact, one of the best in my book. The mistake is when one believes that they can pay anything for an asset and it will be worth more tomorrow. B.O.G.U.S. I tell you. You made an ill-advised and uneducated decision.

Here's why. Over a reasonable amount of time the overall real estate market does trend toward consistent increases year after year. So... Yes, real estate (general) is a great investment.

Here's the catch though. Local markets can move inverse to the state, national, or global market. Things can happen to shift populations to and from certain local markets therefore greatly impacting the real estate market and valuations.

And... Drumrollllllllll... You CAN pay too much for a property even in a stellar local market.

So Mr. Real Estate Guy, what are you saying?

Well, consider the following tips:

(1) Do your research on any investment whether it be stocks, bonds, or real estate.

(2) Do your research on any investment whether it be stocks, bonds, or real estate.

(3) Do your research on any investment whether it be stocks, bonds, or real estate.

(4) Hire professionals to assist you. Engineers, title companies, attorneys, accountants, and of course an excellent real estate agent.

(5) Know your goals for the investment and understand how the asset will fit into and accomplish your them.

(6) Know your exit plan before you buy.

(7) Know an alternative exit plan before you buy.

Warehouses On the Mend

2009-02-27T15:12:00.004-06:00

Hey you! Yea you! The one who's been listening to Fox News, or CNN, or whatever your poison. The world is not coming to an end. Sure, our economy has changed more for the worse than better. Sure, as citizens we are having to make lifestyle changes. Okay I hear you and understand... I'm feeling the same. However, all is not bad. As a matter of fact, I just updated my chart for manufacturing index and realized a nice surprise, manufacturing has increased after a six month decline. Now if one was to evaluate our market then they would use lots of factors and I can do that, but then what would I have to write about the next time! If you are interested as many have already requested, email me and I'll send you my entire real estate dashboard with many charts. My email is sduffey@eysterproperties.com and put "Dashboard Request" in the subject line.

May 30, 1997

2009-02-20T10:57:00.001-06:00

The last day the Dow Jones Industrial Average was where it is today.

Auto Bailout, Again

2009-02-18T09:58:00.003-06:00

I know this isn't really about Alabama or even commercial real estate, but dang, I just had to put my two cents in. I just read that GM and Chrysler are asking for more bailout money. I called it in an earlier blog posts (HERE) and again (HERE). Maybe I'm not such a dumb guy after all.

Anyway, when will it stop. If you have a bad business plan no amount of capital injection will ever solve the problem over a long term. Sure, free money is great! I'd love a million bucks. Anybody... Anybody... But, if I go squander it on bad investments i.e. expensive boats, cars, and other crap - you pick your poison - I will soon run out. The same is true for a business. I'm not saying that GM or Chrysler are spending money on junk like boats and cars, but they clearly need to revamp their plan. I mean, I may not be such a dumb guy (see first paragraph), but I'm no genius either, but if you spend more than you make, there is no profit. If there is not profit, you may want to change something to make a profit, right?

I also remember a Chinese proverb that I once thought was in the Bible... "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

Birmingham Metro Gross Production

2009-02-13T06:00:00.002-06:00

CLICK IMAGE TO ENLARGE.

The Real Estate Expert: Bottom Fishing

2009-02-11T15:39:00.005-06:00

Big fish are at the bottom right?

I hear of that these days. Speculators seem to be diligently searching for the bottom of the market. I deal in real estate, but many markets are performing similarly these days so the same applies.

First, is a bottom bad? Not necessarily. It creates a great environment for the purchase of undervalued assets. I know, I know, I'm an optimist! However, the truth is, a lot of folks have made fortunes by purchasing assets at just the right time.

Next, is seeking the absolute bottom the best strategy? Possibly not either. By the time the bottom actually hits much of the quality product has been picked off by other buyers. Therefore, one strategy is to intentionally seek out the "pre-bottom". Hmm, sounds easy right? Likely not. However, if timed right, you may see a short-term decline but over a longer term the high quality asset tends to survive better in all market conditions.

Remember, this analysis is part science and part artform. There are moderate amounts of fact that support instinctual assumptions to gauge the peaks and valleys. Also remember perfection is not the goal. The odds are against you, but a skilled analysis will get you close enough for successful investing.

Birmingham Quick Facts

2009-02-04T13:07:00.000-06:00

(1) Mountain Brook, a Birmingham suburb, is the tenth most likely town to be hit hard by the financial crisis. The basis of this claim is that 18.66% of the population is employed in the FIRE sector. If you are not familiar with the definition of FIRE, it is Finance, Insurance, and Real Estate. (Source: Business Week)

(2) Birmingham, Alabama is the second highest multi-family market based on most-improved annual effective rental rate growth which is 2.00% from 3Q07 to 3Q08. (Source: Axiometrics)

The above facts were taken from the Commercial Investment Real Estate magazine January/February edition. This is a publication fo CCIM candidates and designees.

Birmingham, Ala. Real Estate Transactions: Redmont Closes Mountain Brook Deal

2009-01-26T09:44:00.001-06:00

24 historic apartment units in Mountain Brook, Alabama changed ownership Wednesday. Redmont Properties, the purchaser, owns other similar properties in the Mountain Brook and Homewood neighborhoods.

We closed the transaction after a little over a year of marketing. However the bulk of prospect activity came after reducing the price from $8.5M to $4.9M. While the former price might have worked well during a flurry of condominium conversions, that market has cooled and therefore, the property was better positioned as a asset/investment sale.

Mountain Brook boasts one of the highest per-capita income levels in the whole United States making it an extremely desirable market for investment.

Redmont purchases Mountain Brook complex, Birmingham Business Journal