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The iPad is changing commercial real estate.

For decades, technology has been increasingly making business development easier for real estate professionals.  This time, Apple is making its mark.  I have recently spoken with several real estate brokers from top firms who have told me that they are now using their iPad for successful canvassing.  Below, we will walk through how to successfully canvass and then discuss how the iPad can serve as an ace in the hole.

• Step 1 – Capture information.

For an office broker or agent, canvassing is the art of knocking on doors of companies in office buildings to learn more about their real estate needs.  Specifically, a hungry tenant representative agent/broker will try to learn when a company’s lease expires or if the business is looking to move offices.   The end goal of canvassing is to set up meetings and eventually represent the tenant against the landlord in lease negotiations.

• Step 2 – Store data and follow up with a letter.

Now that you have the pertinent contact information and date of lease expiration, this data should be stored in an online database that you can easily access and monitor.   Most canvassing experts also follow up with a form letter about their tenant services in an effort to “warm” up an ensuing phone call.  Any excuse is more effective than the true “cold call”.

The efficient broker will keep a file on each building he canvases.  The tenant data should be kept in a detailed building floor plan, also known as a stacking plan, which covers the lease details of every tenant in that building.  This allows the agent/broker to really understand the makeup of the leases and activity at a given property.

• Step 3 – Follow up with a phone call.

Now that the prospect has probably read your letter, you have an excuse to follow up with a phone call and dig deeper into their real estate needs.  The better you know the real estate market for the area, street, and building where the business operates, the more knowledgeable you will sound.  If you can provide deal information on neighboring tenants or buildings, you will really grab the potential clients’ attention and prove you can add value.

Enter the iPad

The iPad can be a true game changer for a canvasser.

To begin with, the iPad is small and light enough that it can fit comfortably into your briefcase or bag.    In the past, agents visiting with companies for a second cold call had to do their best to remember both the leasing decision maker and the lease status.  Often times, that meant typing up notes the night before or memorizing key details to be fully prepared.

Now, with the iPad, brokers have their entire contact database at their fingertips, complete with notes regarding previous phone calls and leasing activity in neighboring spaces.  Post visit, you can also immediately add data to your CRM management system, following your canvass visit.   The iPad can save you the time of preparing the night before, and it can also streamline your data collection process.

And finally, the iPad is a sleek piece of hardware that makes you, as a broker, seem cutting edge.  With new apps popping up all the time (Loopnet has launched their own iPad app), one can be certain that the iPad will be even more helpful in serving real estate clients moving forward.

Sal Provenza, Ignite Career Training Instructor and Real Estate Veteran

Sal Provenza is Principal at CWP Advisors in Newport Beach with over 10 years experience in real estate development, brokerage, finance and distressed assets.  Sal teaches development and finance at the Ignite Commercial Real Estate Boot Camp.

1)  How did you get your start in real estate?

[Sal] After a few drafting courses in high school, I decided that helping create new buildings (and later neighborhoods and cities) would be a rewarding career.  I went to architecture school and worked for a couple architects in North Carolina when I graduated.

After designing office buildings, retail stores, hotels, and public sector buildings, I became more involved in larger planning efforts, including New Urban master plans.  I liked seeing the land developed according to plan and knew the developer was at the center of the process.  The architect I worked for was kind and introduced me to his clients in an effort to find me a role working for a developer.  I worked for a national real estate developer who provided me tremendous opportunities to learn each facet of the development process.  After earning my MBA from USC and a great ten-year tour of duty in development, acquisitions, finance, and management, I was prepared to start my own firm, CWP Advisors.  I now have a platform to maximize the value of the knowledge and experience for lenders, owners, and developers.  Much of our time is spent managing distressed assets. However, the end is near, and we are well-positioned for the recovery.

2)  When did you realize that this was the industry for you and that you would make a career out of it?

[Sal] I have been intrigued by the built environment since I was very young.  Once I realized that real estate developers were at the center of new project development, I knew the role of a developer was for me.  With so many moving parts from land use approvals to project financing to construction to sales and marketing, it’s hard to imagine doing anything else.

3)  You were at Toll Brothers for the boom and then the real estate bust.  When did you see the writing on the wall?

[Sal] I worked for a very conservative company, and we discussed affordability and the effects on demand often.  In 2005, we had stopped acquiring new land parcels for development because the market was overheated.  While I was managing projects and keeping an eye on new opportunities, I started to call banks.  I called hundreds of banks to introduce myself and let them know I was interested in purchasing land that they might get back through foreclosure.  At that time, most lenders did not have a REO department.  It took some time to see the market catch-up, but it always does.

4)  You are now a Principal at CWP Partners.  Can you explain your firm’s range of services and what you spend your time doing each week?

[Sal] CWP Advisors is a real estate advisory firm providing receivership, management, and brokerage services to lenders, servicers, investors, and developers with holdings in the west.  I am responsible for receivership and brokerage, and my partner is responsible for asset management and brokerage.  We spend most days managing distressed assets under receivership and looking for new opportunities for developers. Lately, we have spent many days consulting developers, hedge funds, and private equity groups on how to find, invest in, and develop new projects.  We like to keep one foot in the recession and one foot in the recovery.  No matter which way the market goes, we’ll be able to fill our days.

5)  What is your advice to the career changer or college student trying to break into commercial real estate?

[Sal] Find a company who is interested in investing in you.  Smart companies invest in their people through education.  Look for signs that encourage that behavior.  In-house training programs, tuition reimbursement, and a culture that values on-the-job training are a good start.

6)  What has been your secret to success as a real estate professional that has allowed you to run your own business before age 35?

[Sal] I’m passionate about hard work, and I am always learning more about real estate.  I love what I do, and I want to do it for a long time. Keep that in mind, and the success will follow.

Los Angeles Commercial Real Estate Set for a 2011 Rebound

“We are definitely flattening out,” said Joe Vargas, Cushman & Wakefield area manager.  Now that lease rates have taken a considerable dip, companies are starting to sign new leases to make the most of the low rates.   Vacancy is currently standing at 19.6% in comparison to 18.5% from a year before.

In Century City, one of the core office corridors in Los Angeles, buildings saw 200,000 square feet of negative absorption (click to read a previous post about negative absorption).   The average asking rent for 2010 was $2.34 down $.07 from the previous year, displaying that the market still is correcting.

In speaking with retail landlords and brokers, it appears that leasing activity at shopping centers has also picked up.  Whereas in 2008 and 2009 deals simply weren’t getting done, towards the end of 2010 vacancies were starting to get filled, although hefty tenant improvement dollars were often required from landlords.

Across the board, economists and prognosticators are expecting a brighter 2011.  Only time will tell if the recovery we are expecting takes place although many believe it might be 2012 or 2013 until commercial real estate kicks into another boom.

Absorption is used to describe the occupancy of vacant space in a given market.  When a company leases space, they technically “absorb” it.   For example, if a small city has 100,000 square feet of vacancy and a law firm rents 25,000 square feet, they have absorbed 25% of the market vacancy.  However, if the entire market consists of a total of 2,000,000 square feet, this means that the law firm absorbed (25,0000/2,000,000) 1.25% of the total market space.

Negative Absorption -- Common In Down Markets

So what is Negative Absorption?

Negative absorption can result from two different circumstances.

Negative Absorption – Type 1:  One type of negative absorption occurs when more companies leave a market than enter a market.   These are called tenant losses.

Let’s look at a market in which 10 companies enter a market and lease an average of 5,000 square feet each.  These businesses have absorbed a total of 50,000 square feet. If 12 companies leave the market than there is negative absorption of 10,000 square feet (60,000 square feet of office rental leaves the market, whereas only 50,000 new office rental entered the market).

Negative Absorption – Type 2: The other type of net absorption can result from new deliveries of space.  If four office buildings with an average of 50,000 square feet are delivered in 2010, the market now has an additional 200,000 square feet to lease up.   If only 80,000 square feet of companies enter market and no companies leave the market, the market has a negative absorption of 120,000 square feet (200,0000 new delivery – 80,000 new market entrants).

Negative absorption is a critical term to understand in commercial real estate.  To learn more about commercial real estate check out the Ignite Commercial Real Estate Boot Camp (http://www.ignitecareertraining.com/course/ignites-commercial-real-estate-boot-camp).

Condominiums Converted to Apartments in Charlotte, NC

However, what happens when the market and economy turns sour?  Now individuals cannot afford to pay $400,000, or even $300,000, which is the cost the developer has invested per unit.   In this situation, developers need to make a decision.

Should they sell for less than $300,000 and lose money on each unit?  Or, should they turn the condos into rental units and wait for property values to appreciate again?   In today’s market, more and more developers are trying to stave off the recession by converting condos to rental units, thus generating cash flows and keeping their creditors at bay.

In the article below from the Los Angeles Business Journal, a developer is featured who had to exactly this – complete a short sale to get out of an investment and probably avoid problems with investors/lenders.

http://labusinessjournal.com/news/2010/nov/15/condos-go-rental-market-weakness-persists/

Due to weak condominium sale prices, a good 30-40% off of their peak in 2007, Magnolia Nest LLC decided to unload the property for $10M less than their initial asking price.  For now the new buyer will convert this property to apartments with the potential of once again making the units condos down the road.

Whenever condo sales take a nosedive, the logical transition is to convert condo units into for-rent apartments.

According to the LA Business Journal (LABJ), office product continues to see vacancy rise.

In Downtown LA, vacancy increased 10%, the San Fernando Valley saw a 15.9% increase, the South Bay witnessed a 6% increase and West LA was hit with a 14.9% increase.

In addition, non-residential building contracts dropped 15.6%, whereas residential contracts stayed flat.

These numbers prove that office buildings may still continue to get hit before the situation gets better.

Industrial product, on the other hand, has already seen marked improvement.  Downtown/Central LA saw 4% decrease in vacancy and the San Gabriel Valley vacancy dropped nearly 12%.

Lending Starting to Turn the Corner

It appears as though the equity markets are beginning to come back around, with construction lending up nearly 11% since the start of 2010.   Property acquisition lending is also up 26.3% meaning that more investors are making transactions, coupled with the fact that banks are providing financing to help these deals get done.

Robert Half International Signs a Major Westwood Lease

The LABJ also reports that Robert Half International has signed a lease for 11,094 square feet at 10960 Wilshire Blvd in Westwood.  The deal is for 10 years at just below $3.00 psf, for a total value of $4.1 million

During the 20-hour training sessions spread across 4 days, the Boot Camp covers:

• Commercial real estate industry trends and overview
• Commercial property management
• Commercial brokerage
• Development
• Commercial real estate finance
• Multi-family residential
• Networking / Leadership / Real Estate Careers

Ignite also has a solid list of industry veterans – each with over 10 years of experience – leading the courses.  To see a list of the instructors and their career accomplishments, please check out the following link:  http://ignitecareertraining.com/instructors

Who Should Take The Course? We all know that in today’s market many companies have cut back on in-house training or simply don’t know where to turn to get their employees up to speed on the real estate market.  The Boot Camp is ideal for:

• entry-level agents, property managers or consultants
• residential agents looking to break into commercial real estate
• office managers, researchers, marketers and administrators who want to bolster their industry knowledge
• new hires
• individuals looking to make lateral transitions within a real estate company

Our upcoming course begin on February 27 in Orange County.  We are offering a $200 discountoff of the base price of $997 for signups before February 15, 2011 if you use the discount code:  Property.

Or refer a friend with discount code “REFERRAL” and Ignite will send you a $100 referral check in the mail!

If you have any questions please contact us at 1-800-990-9653.   SIGN UP TODAY AND SAVE!

Neal Perlmutter, CEO

Ignite Career Training

In order to work in real estate finance and acquisitions, it is important to get a grasp on the following key concepts.  – Written by Ignite Career Training Co-Authors, Chad Pittman and Neal Perlmutter

Internal Rate of Return (IRR): This is the average compounded return to the investor over the lifetime of the project.

NPV and IRR: Two key terms to know understand if you want to break into real estate finance.

Net Present Value (NPV):  This is a measure of the value of a project in today’s dollars based on discounting at the investor’s hurdle rate.  If a project has an NPV greater than 0 then it has exceeded the investor’s hurdle rate and the investor should proceed with the project or investment.  NPV can also be used to calculate the maximum purchase price that an investor can pay for property to meet their hurdle rate.

IRR versus NPV and Their Limitations: It is important to understand the key differences and limitations for these valuation tools.

• IRR is a tool that is used for comparing unlike investments.  In contrast, NPV simply tells an investor whether or not they should proceed with a certain deal but does not directly compare the expected benefit of two deals.
• IRR assumes that any cash that comes out of the project in the life of the project can immediately be reinvested at the rate of return the project provides.  The problem with this assumption is that most times cash cannot be reinvested immediately; thus the actual return on investment is lower than IRR.
• NPV is calculated in terms of a monetary value whereas IRR is always calculated as a percentage.
• NPV can be tricky because you have to determine the correct discount rate.  As soon as the discount rate changes, the end result of the analysis will change; sometimes a slight altering of the discount rate can change a positive outcome to a negative NPV.

It is key to work with the concepts of NPV and IRR to understand the fundamentals of real estate finance.

Many people have the incorrect notion that the purpose of the informational interview is to get them hired.

Not the case.

Image borrowed from smallbusiness.aol.com

Early on in the conversation job seekers make the mistake of asking the person they are meeting if their company is hiring.  This can be a major turnoff and can potentially make the contact not want to help the job seeker out.

Informational interviews are just that – an opportunity for you as a job seeker to ask questions about the other person’s career and try to establish some direction based on what they teach you.

Somebody is taking time out of their busy schedule to help you with your job search, but typically not to hire you.  However, in the event that you are a) well prepared b) ask good questions and c) make a connection with this person, doors will begin to open up.  In some cases, yes, the informational interview will lead to a real interview.  But more times than not, the informational interview will end with this person connecting you with other people in their networking that might actually be hiring.

The key is to humble and inquisitive in an informational interview.