Is your building still vacant? Ask MR BOB for answers!

You may have seen my recent column on going “NUCLEAR.” You see, I channeled Pat Sajak, creating my own Wheel of Fortune. The end result was a foolproof way to analyze the viability of a commercial real estate requirement. I’ll buy a vowel, indeed!

NUCLEAR: Need, Urgency, Catalyst, Loyalty, Expectation, Authority, and Resources – if reasonable considered – all allow buyers, sellers, tenants and commercial real estate professionals to “qualify” their need and proceed to a successful conclusion.

Many contacted me with their own acronyms. One actually from our neighbor, Rudy! I thought them column-worthy. So here it goes!

Our friends own several properties and the rent fuels their livelihood. When considering a buy, he and his wife use the acronym CLIP: Condition, Location, Income and Potential. This simple four-part system touches all the bases.

Condition: The current state of necessary improvements is a very important consideration. Many look at the roof and air conditioning as key components that can require significant investment in the future. However, things such as the parking lot, exterior appearance, plumbing, electrical and the nature of a property’s office improvements are also key.

Location: There are three things that matter in real estate, as we so often hear: Location, location and location. Yes! Even if a parcel is the “ugly duckling” of a premier neighborhood, can it one day be the “black swan”?

Income: Unfortunately, this element falls third in line – it really belongs first but then the letters would spell ICLP, which is not as compelling or easy to remember. But suffice it to say, income is critical!

Where is the rent compared with similar buildings? How sustainable is the stream? Sure, you may be looking at a multi-year lease, but if the tenant is gasping for air, you may have to replace the rent sooner than planned.

Few properly bake-in the true cost to replace a tenancy. Downtime, concessions, commissions and improvements all can diminish your future take and should be considered. Remember the condition? Yeah. You’re now competing with other options in the market. Best be spic and span!

Potential: In addition to the present income, where can you take the property in the future? I refer to this as the exit strategy. Will your family hold on and pass the holding along to your grandkids? Or is the idea to fix it and flip it? Can rents be raised? Will a freshening cause the occupant to renew? Is there excess land from which additional square footage can be added? Maybe the resident is your exit and is a prime candidate to buy. Be quite candid with yourself on this point.

Another really good mnemonic came my way last week. This five-letter assemblage can explain why your building remains vacant. Want to silence the crickets with the sound of commerce? Run through this list.

Market: If you own a vacant suite of offices, you’re faced with the uncertainty of a pandemic economy. Virtual work and stay-at-home orders have created a real dilemma for office occupants. Few know exactly how many square feet they need.

Case in point: Our operation in Orange is tooled for 50 in-house practitioners and staff. We own it, and we don’t want to relocate into a smaller suite. But, the reality is, we don’t presently use all of our space. So, what to do? This conversation is happening in boardrooms throughout the country. So with an office vacancy, the market is not your friend.

Rate: Does the rental rate or purchase price you’re seeking have any resemblance to the current comps? In an up-trending market, you can be bullish yet realistic. If things are going the other way, you easily can “chase the market down” by holding firm.

Building: Is your construction a warehouse with insufficient ceiling height? How about the corresponding loading? An abundance of office space within a building sans the appurtenant employee parking spots or windows to the outside world is not desirable. Finally, an address meant for manufacturing but without proper electricity will be quickly discounted.

Owner: Take a look in the mirror. Are you a good owner – fair dealer, concerned about the repair and maintenance of your properties, a “big picture” proponent who eschews the little stuff, and avoids extracting the last penny in favor of keeping your parcels rented? If you answered no to any – YOU may be the reason your structure is fallow.

Broker: How is your vacancy being marketed? Does your representative play nicely with others or is she egocentric and uncooperative? The commercial real estate community is a small one. We all know each other! Snakes are avoided. Fortunately, they are few! But, the reputation of the person whose sign advertises your offering is paramount.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. 

Powered by WPeMatico

Ladislav Kohn hired as hockey coach at Santa Margarita

Santa Margarita High has hired Ladislav Kohn as the head coach of its boys hockey program.

Kohn, a former NHL player who spent two seasons with the Ducks, was an assistant coach for the Eagles the past two years, including when they won their third national championship in 2019. He replaces Craig Johnson, who resigned in September.

“I am humbled and honored to be named as the new head coach for the SM Eagles,” Kohn said. “I’m looking forward to coaching this talented group of players and being a mentor to them on and off the ice.”

Kohn played for eight NHL teams during his 20 seasons as a professional player. He has been involved in California youth hockey for the past seven years.

“I am thrilled to hear that Laddy will be the next head coach of the ice hockey program,” said Johnson, who is now a consultant for Santa Margarita’s hockey program. “Laddy is a great person and coach who will continue to grow the program and be a great leader for all current and future players.”

 

Powered by WPeMatico

Some police agencies will not enforce new stay-at-home coronavirus orders, others will do so as a ‘last resort’

Law enforcement officials throughout Southern California said they do not plan on arresting people or issuing fines to those who do not comply with the state’s new late evening curfews, which were ordered to begin Saturday amid a surge of coronavirus infections.

Instead of incarceration or fines, the region’s largest law enforcement agencies said they plan to work with residents in educating them on the public health rules and are asking for people to voluntarily comply.

“Throughout the pandemic, the Orange County Sheriff’s Department has taken an education-first approach with regard to public health orders,” Sheriff Don Barnes said in a statement posted shortly after Gov. Gavin Newsom announced the new public health order.

The order applies to 90% of the state’s population, covering all counties under the state’s purple tier of restrictions, which includes Los Angeles, Orange, Riverside, and San Bernardino counties.

Under the order, which begins Saturday, most non-essential work, movement and gatherings of people are to stop between 10 p.m. and 5 a.m.

However, to keep resources available for other emergency calls, Barnes said, his department will not send its deputies to enforce these restrictions, particularly if the call is solely about a lack of face covering or social gatherings.

Riverside County sheriff’s deputies also will not respond to calls for service in calls about masks and social distancing, said Sheriff Chad Bianco, “to ensure constitutional rights are not violated and to limit potential negative interactions and exposure to our deputies.” Bianco also urged its residents to comply with Gov. Newsom’s orders.

Bianco’s department was slapped with an $18,000 fine earlier this week for violating the state’s COVID-19 regulations at one of its jails in French Valley, which is where a sheriff’s deputy contracted the coronavirus and eventually died. The department is appealing the fine.

In Los Angeles County, where on Thursday health officials announced a record-breaking 5,031 new COVID-19 infections, the highest daily number of the pandemic so far, law enforcement echoed similar statements of voluntary compliance.

Los Angeles County Sheriff Alex Villanueva said his department is also focused on educating residents and asking for voluntary compliance. He added that deputies could be asked to enforce the new rules as “an extreme last resort.”

Though the department plans to respond to complaints about social gatherings that are out of compliance, its patrol deputies will not pull people over or cite people for simply driving or walking amid the curfew hours.

An LAPD spokesman said he expects officers to respond to COVID-19-related calls with a similarly selective approach.

When stay-at-home orders were first issued in March, Los Angeles city officials encouraged people to comply and educate one another on the new rules, reserving enforcement to more serious situations.

Since then, the city has been among the most heavy-handed enforcers of public health rules in the region, utilizing municipal codes, cracking down on non-essential businesses that continued to operate or residents hosting large parties.


LAPD wearing masks due to the Coronavirus Pandemic walks past others wearing masks at Venice Beach in Venice on Tuesday, April 21, 2020. (Photo by Keith Birmingham, Pasadena Star-News/ SCNG)

In August, Mayor Eric Garcetti authorized the Department of Water and Power to shut off utilities to homes that continually flouted city orders banning large gatherings.

The directive came amid news of a large party hosted at a home along Mulholland Drive that ended with a fatal shooting, a series of large parties thrown by TikTok stars Bryce Hall and Blake Gray from their Hollywood Hills mansion, and a party at a bar in Hollywood, called the Sassafras Saloon that appeared to have been held in honor of law enforcement officials in which Sheriff’s deputies were possible present.

Hall and Gray face charges that carry hundreds of dollars in fines.

The city of Costa Mesa in Orange County made headlines in July when its city council said it was ready to enforce its mask or face covering mandate in some public places with threat of a ticket or possible fine.

Police have since arrested one individual for violating the order, a man who entered a grocery store on Newport Boulevard without a mask and refused to cooperate with store staff and later, law enforcement, said Roxi Ryad, spokeswoman for Costa Mesa police.

The city is also directing its officers to educate first, hoping that residents will comply with the orders, Ryad said.

A spokeswoman for the San Bernardino County Sheriff’s Department said officials are still reviewing the recent order and have yet to take a position on how the department will enforce it.

The order was announced Thursday as coronavirus cases surged statewide. The state reported more new infections in the past week than during any other seven-day period, and hospitalizations and deaths are increasing too.

Earlier this week, counties that had been previously in the less restrictive red tier, such as Orange County, were bumped into the purple tier, once again shutting down indoor operations for restaurants, gyms, movie theaters, and houses of worship.

“The virus is spreading at a pace we haven’t seen since the start of this pandemic and the next several days and weeks will be critical to stop the surge. We are sounding the alarm,” Newsom wrote in a news release. “It is crucial that we act to decrease transmission and slow hospitalizations before the death count surges. We’ve done it before and we must do it again.”

Powered by WPeMatico

Relocation advice for transitioning companies

In various columns, I’ve described several changes that occur during the life of a family operated business – specifically, manufacturing and logistics interests. These outfits are owned by your neighbors next door and employ millions around the United States.

Business transitions include acquiring a competitor, the death of a matriarch, exponential growth, loss of a key customer, sale of the operating unit via stock or asset purchase, or a move out-of-state. Sadly, it could also be the end of the road because of a changing market.

Last week, I met with three such companies all of which were experiencing a change. Below is the commercial real estate advice I gave them. You see, whenever a transition occurs, a commercial real estate requirement soon follows.

Better returns out-of-state

In 2014, a family-owned aerospace tooling entity was sold and the real estate that housed the company retained. A couple of years later, it was time to sell the buildings. Of concern was the new business owner ran the day-to-day differently. Could the rent be replaced if the group bolted?

The real estate was quickly sold and three investments were bought through a tax-deferred exchange. Then, as 2020 dawned, a decision to sell was made on one of three 2016 buys. After all, activity was robust, pricing was at an all-time high, and the going belief was higher returns and reduced taxes could be garnered out of California. Meanwhile, all of the partners had vacated the Golden State.

In addition, there was uncertainty with near-term rollover of half the tenancy. And if that wasn’t enough, after launching in February and just in time to receive a great offer, the novel coronavirus ravaged the national economy! The buyer paused and then canceled.

After the buyer exited due to all of the uncertainty, guidance was sought on which direction was best. We were able to provide clarity, create best in class collateral and re-launch the offering. The closing happened on time! The net proceeds of the sale allowed a 1031 tax-deferred exchange into properties in tax-friendly states and with a greater overall return and reduction of risk. The last of the four upleg purchases closed this week.

Structuring for the future

Maybe one of my favorite stories of owner-occupied commercial real estate enjoyed a new chapter this week.

Two of my dear manufacturing clients bought their business property in 1995. In the ensuing 25 years, exponential appreciation had occurred. By their admission, the address was worth three times the value of the business it housed.

Finally, a suitor for the company had gained favor, and a sale of the assets may occur soon. The terms and conditions of the leaseback are critical. Potential investors for their real estate holdings will look at the lease rate in comparison to the market, the length of the lease, and the maintenance expected of the owner.

Even if there is no interest in spinning the parcel today, these issues need discussion.

Everyone is agreeable – until they aren’t

One of my clients was approached by his neighbor. They struck a handshake deal. Unfortunately, the agreed-upon rate, term of lease, and extension rights don’t provide my client with a lot of latitude. He’s bound to dealing with the expanding neighbor if he wants or has to sell – at a pre-determined price and time.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.

Powered by WPeMatico

Updates: Chargers host Jaguars at SoFi Stadium

Justin Herbert and the Chargers (1-4) host the Jacksonville Jaguars (1-5) at SoFi Stadium after coming off a bye week.

The Chargers activated defensive end Melvin Ingram III and defensive tackle Justin Jones from reserve/injured list on Saturday. Both could be available to play Sunday afternoon.

The game begins at 1:25 PM today on CBS.

Live updates below:

A Twitter List by JHWreporter

Powered by WPeMatico

What COVID-19 looks like for those of us stuck in the middle class

It has been a little over seven months since the initial state lockdowns, and the focus on our Women Money and Mindset column this month is where we are now financially with the COVID-19 pandemic.

Most of the financial news right now seems extreme and unrelatable for most of us. For example, the wealth of U.S. billionaires increased by a massive $845 billion during the pandemic. At the same time, the number of those living in poverty has grown by 8 million since May.

So, how is COVID-19 affecting those of us who are not billionaires but who are also not destitute? Most Americans (58%) still consider ourselves to be part of the shrinking middle or upper-middle-class.

Those of us in the middle understand that the economy is not just about the stock market, although we most likely have an IRA or 401(k) and may own some stocks. We probably are not at risk of being evicted or losing work permanently, but we may be concerned about our ability to collect rents or might be worried if our businesses will fully recover. We may have suffered some losses this year and wonder if there are any tax breaks available, and we may have cut back on spending because we are nervous about future cash flow.

Here are some economic indicators and rates to focus on now for those of us in the middle.

The eviction rate

Some 12% percent of California renters have no confidence they can pay October’s rent, and an estimated 30-40 million Americans may be at risk for eviction once the CDC moratorium is lifted in January. Why is this a concern if we are not renters? Individual investors own forty percent of residential rental properties. These “mom and pop” landlords will struggle to pay their mortgages, utility bills, property taxes, maintenance costs, and other property-related expenses if their tenants cannot pay rent. Their inability to pay affects the overall economy and our property values.

If you are a landlord

With property taxes due in December, now is the time to determine what to do if your tenants cannot pay the rent.

Make sure to review eviction law changes. In California, the governor recently signed the “Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020”  that prevents evictions until after Jan. 31, 2021, and includes several new provisions that impact landlords. The law also provides new accountability and transparency provisions to protect “small landlord” borrowers who request CARES-compliant forbearance.

If you own commercial rental property, the new law does not apply to you but understand that many counties and cities also place restrictions on commercial evictions, with such protections often limited to small businesses and nonprofits.  Many California sheriff’s departments have also adopted policies declaring that they will not serve writs of possession during the COVID-19 emergency.

Your choices of what to do with a non-paying tenant are limited. You can forgive or lower rent payments even as your personal bills pile up, or hold firm, proceed with the eviction and risk the prospect of losing a tenant who may not be replaced for months or even years. The best solution might make you the hero and not the evil landlord: Work with tenants to see if you can help them apply for renter’s assistance so you can get paid. There are several local and state programs available.

Moving forward, review your property insurance policy with your agent or attorney to discuss lost rent coverage and business interruption insurance, especially if you own commercial rental property.

Interest rates

With interest rates being so low, now might be the time to refinance your rental or business property if it looks like cash flow might be tight. In fact, now is an excellent time to borrow in general, especially if your income was reduced in 2020. Most borrowing would be based on your 2019 tax returns. If there is a further economic downturn, or if the fed tightens credit, the ability to borrow later may not be as easy or inexpensive.

The unemployment rate

If you are a business owner and an employer, the unemployment rate should be of interest to you because it expresses the pool of employees available for you to hire. When unemployment was only 3.9 percent in September 2019, the number of candidates available, particularly as a small employer offering limited benefits, was restricted.

Now that the unemployment rate is 11% or more, the potential pool of employees available for you to hire just tripled, and the quality of the candidates has probably improved. It might be a good time to consider increasing staff if your company is recovering or if you want to grow.

If you did not take advantage of the Paycheck Protection Program, PPP, then you may be eligible for payroll tax credits when you hire or re-hire employees. You can even request payment now for employer payroll taxes you have already paid since March. For more information, visit IRS.gov/coronavirus.

Tax rates

If you sustained losses in 2020, it might make sense to file your 2020 taxes early in 2021 to carry back the losses to 2018 and 2019 to claim a refund of taxes paid.

If your income was reduced during 2020, it might also make sense to reduce or eliminate the payment of your fourth quarter estimated tax payments in January.

If you still need cash this year, consider taking out an early distribution on your retirement plan to cover expenses (or pay off high-interest credit cards you may have charged), avoid the 10% penalty with the Coronavirus exception, and possibly pay tax at a lower rate this year, if your income was reduced sufficiently. Talk with your financial advisor.

Make sure to book an appointment with your CPA or tax attorney before the end of the year to discuss tax and estate/gift planning opportunities if your taxable income and value of your business were reduced this year.

While we have received good news over the past few months that the stock market is recovering, companies are re-hiring, and the very rich are doing well, we also see unsettling news about lines at food pantries and businesses shuttering. The truth is we do not know what tax laws, economic policies (or federal relief efforts) are in store for us until well after the election. Until that time, pay attention to small steps you can take to secure your overall financial health.

Michelle C. Herting specializes in estate, trust and gift taxes, and business valuations. She has three offices in Southern California and is president of the Charitable Gift Planners of Inland Southern California.

Powered by WPeMatico

5 ways your offer can stand out in a hot industrial market

Industrial real estate — those buildings geared for manufacturing and logistics warehouse providers — is on fire in Orange County!

These are typically constructed out of concrete, located on little known city streets such as Blue Gum, Coronado, Carnegie, and Capricorn, and house companies that make and ship things. But, as the term “on fire” means different things to different folks not related to our industry, I believe it’s important to offer some context.

2020 – the year of the pandemic is now nearly 80% complete. Costco has Christmas decorations in stock, and socially distanced Halloween isn’t yet a memory. What? You’ve not yet strung your lights? But, I digress.

Since January, we’ve seen 15 sales for industrial buildings greater than 50,000 square feet within the Orange County’s 34 cities. These from approximately 868 existing units in this size. Excluded from these statistics are lease transactions – another conversation. But, in 2020, suffice it to say, 15 sales, 868 buildings 50,000 sf and larger – 1.7% of the base inventory sold.

Now, how many 50,000+ sale availabilities are there? Care to hazard a guess? If you guessed five, you’d be spot on. Viewed another way – only a bit more than 1/2 of a percent (five available out of 868 existing structures) is ready to receive your offer to buy.

To add some historical perspective, during the last pause in the action – 2008-2009 – there were 22 buildings for sale (50,000+) along La Palma Avenue in East Anaheim — ALONE! My, my. Look what 10 years of robust growth have done to our stable of sale availabilities!

You may be thinking, so what? What’s caused this and how does this affect my plans to purchase in 2021?

The causes are two-fold: increased demand and the lowest borrowing rates in decades — maybe ever! If your plans include testing the sale market in 2021, please be prepared for pitiful supply, intense competition, multiple offers and lenders that scrutinize every debit.

Please don’t enter the fray unprepared for the environment that exists in today’s sales market. Sure, you can consult with your banker and get pre-qualified, which, by the way, is a MUST. Maybe now is the time to wait. After all, can this overheated frenzy last for years? Leasing for a period of time until the fever ends might work out well. If you’re adamant about buying – have you considered these things?

Your representative

Recently, we found ourselves in competition for a site. Our buyers were well qualified and motivated. But, akin to straight A+ students competing for limited grad school spots, ALL of the buyers were well qualified and motivated. We won the deal based upon a 25-year relationship we had with the seller’s broker. He knew us, trusted our word and advocated for our buyer with his seller.

Your story

In today’s sales arena, the back story is critical. We came in second last week. Second is the first loser and doesn’t pay very well in commercial real estate brokerage. Why, you may ask? We got “out-storied.” Sure, I crafted the reasoning for pursuing the building along with our track record of successful purchases with this buyer. What won the day? The neighbor. It seems he’s been trying to buy the building forever. Tough to compete.

Your differentiator

We were honored to represent a family last month in their purchase of an income property. They didn’t need financing. Proceeds were in the bank awaiting the right deal. Short due diligence and a quick close could be accomplished. Also, we were prepared to offer the asking price and no one could touch us.

Intangibles

In the previous examples – intangible factors existed – a 25-year relationship, the neighbor as the buyer and tax-deferred exchange motivated capital. If you dig deeply into why one buyer was chosen over another, in many cases an intangible is a reason. Sometimes it boils down to a gut feel. Trust those!

Other directions

What alternatives are available with a lease? Maybe a short term with an option to buy can be structured. How about adjacent states of Nevada, Arizona or Oregon? We’ve witnessed several occupants exit California in favor of a tax friendlier area. Buildings are cheaper in some of our inland markets such as Riverside and San Bernardino counties – although the gap is narrowing.

Could you shorten a contingency period? How about paying cash today and refinancing later? Factors like these can give you an advantage.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. 

Powered by WPeMatico

Legal lessons from a pandemic: What you can plan for

I have been one of the lucky ones since the pandemic hit in March of this year. My loved ones are healthy, and my law practice is busier than ever. But I see the havoc COVID-19 has caused—I see it in my clients every day. I feel it myself sometimes, too.

It’s a sense of unease, of unknowing, and, perhaps most significantly, of a lack of control. It’s hard to plan for next week, let alone the future, when our environment, the advice from the experts, and indeed the outbreak itself, seems to change on a daily basis.  Can we take a vacation? Does it make sense to have a family gathering for the holidays? And if not now, when?

What we can plan for

That fear of the unknown and the need for control is why my office has been so busy. It’s that old saying, “only two things in life are certain: death and taxes.” Since I’m an estate planning attorney, I deal with both. My high net worth clients are concerned that if the election tilts one way, the very advantageous estate tax laws will change, and we’re busy doing planning and gifting to take advantage of current tax laws.

But everyone, no matter their net worth, is suddenly acutely aware of their own mortality, so we’re also busy with estate planning. Preparing for death or incapacity is one way of taking control.

Everyone age 18 and older needs a health care directive, a power of attorney, a HIPAA form and a will. If you own assets (that don’t have beneficiary designations) with a gross value of more than $166,250 in California, you should consider a living trust. A trust avoids the more costly and time-consuming probate process (especially in the times of COVID-19 when courts are working at a slower pace).

How to plan and take control

Hastily preparing estate planning documents due to sudden illness, travel plans or an unexpected change in life is not ideal. If the pandemic has you with more time on your hands, a more constructive use of that time — and a way to garner a little control — is to think about your estate planning and get it implemented. Spend some time thinking about these documents and the decisions inherent in this type of planning. The state of the world probably has you thinking more than ever about your values, and that’s imperative in estate planning.

We generally encourage clients to think about the next three to five years. If something were to happen to you (death or incapacity) in that time frame, what would be important to you? Don’t just think about who would inherit your estate—that’s often the easy part.

Decisions to be made

In the event you are incapacitated, who would manage your assets? Who would make personal decisions for you, such as where you will live, who your doctors will be, how your spiritual needs will be met? Do you have pets that need care?

It’s also a good idea to name alternates in case your first and even your second choice isn’t available (for example, you’ve named your spouse but you were both involved in the same car accident and he or she can’t act).

Advance Health Care Directives have received a lot of attention since the pandemic. Now, most everyone is familiar with ventilators and intubation, among other medical procedures. A health care directive allows you to state your preferences for those scenarios and others. Do you want life-sustaining treatment even if you’re in a condition considered irreversible? Do you want pain relief even if the medication shortens your life? Do you have any religious preferences that should be met, such as last rites? Do you wish to donate organs?

The agent named in your health care directive is also the person with the authority to carry out your post-death wishes, so be specific about cremation, burial, religious services, and the like.

Leaving a legacy

A living trust can be an ideal way to preserve a family legacy. When setting up a living trust, you decide on what you want to occur, and who you want to be involved in the event of your death or incapacity. You will decide who your beneficiaries will be (i.e. who inherits from you when you’re gone), whether you want assets going directly to those beneficiaries, or whether you want your assets held in a trust and distributed to your beneficiaries for purposes in keeping with your values.

For example, if education is important to you, you could structure a trust that provides the funding for education for your children, grandchildren, nieces and nephews (whomever you’d like) and reward specific goals obtained — cash distributions, for example, upon graduation from high school, college, or post-graduate work.

Your trust could provide for health care. If you have a special needs beneficiary, you may want to leave their gift in a special needs trust that provides for them but does not make them ineligible for government benefits. If a strong work ethic is important to you, your trust could provide for distributions to beneficiaries on a “matching” basis — annual distributions to match 50% of the beneficiary’s earnings, for example. A trust can likewise provide a supplement to beneficiaries who go into public service careers like teaching, law enforcement, or government work.

A sigh of relief

Often clients have trepidations about seeing me, and I get that. Seeing someone to talk about death and taxes is a lot like going to the dentist — you know you need to, but you suspect it will be painful. Think about estate planning instead as a way of formalizing your values and what you’d like to pass along to your beneficiaries. Think of it as a gift you are giving them.

If you think of estate planning as planning your legacy rather than as “death and taxes,” you will better be able to take control and plan for the future. Then, I suspect, you’ll be like many of my clients who are surprised at how relieved and how good they feel once the plan is completed. Of course, then I tell them they should come back for a review in three to five years, but that’s less painful. And won’t it be nice to think about the future again?

Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild” released on October 6, 2020.  You can reach her via email at Teresa@trlawgroup.net

Powered by WPeMatico

Got a vacancy? Here’s what to expect in a commercial real estate marketing report

Some of you reading this column own a company that occupies a building you also own. Others are involved in some facet of the commercial real estate profession – a broker, lender, architect, escrow holder, title officer, or contractor.

Still others might own a strip center, office building, or small industrial condo from which you derive monthly rent to supplement your income. (Hi, Rudy.)

Regardless of your angle – you’ve been on the receiving end – or have prepared – a marketing report. You see, when a vacancy occurs, a broker is hired to find a tenant or buyer for said vacancy. That is, of course, unless you choose to go it alone, which I strongly discourage — but I digress.

What information should expect from your broker in the report? I generally like to update three specific areas. Akin to a microscope zooming in – my reports start with the overall market conditions and zero in on specific recommendations for the assignment.

Market activity

The market in which your vacancy competes should be constantly reviewed by your commercial real estate professional. Let’s say you own an industrial building of 100,000 square feet that is 10 years old. How many spaces are available? What are the most recent comps? Speaking of comps, are they mainly sales or leases? What active requirements are circling?

Based on all of these data points, market conditions emerge from which decisions can be made. As an example: If you’re attempting to attract a tenant and the vast majority of recent activity is from buyers, you might consider altering your plan.

Conversely, if your asking price eclipses the market sales, you better have some staying power to allow the pricing to catch up. But if you find yourself in a downward trending time, you may wait a very long time.

Active interest

Who has inquired? Are they kicking tires or is there some motivation for their search? I try very hard to find out specifically which company is represented, what else they are considering, and why our building may or may not work.

Next steps

Fresh coat of paint? Add an office or two? Freshen the landscape? Lower the pricing? Offer some owner-carried financing? Offer something that others can’t — an option to buy as an example. All could appear in the recommendations to an owner of commercial real estate.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.

Powered by WPeMatico

Can 2020 get ANY crazier? Here’s a commercial real estate metaphor

Commercial real estate was business as usual with no recessionary storm clouds massing on the horizon. The drought was behind us, too, as we continued a relatively wet winter. Local sports teams were finishing strong. What was ahead? The opening of Marvel Land – Avenger’s Campus at Disney’s California Adventure. Summer vacations, kids starting their spring semesters, anticipating graduations. June weddings. Breaks in the work schedule to celebrate birthdays, anniversaries and national holidays.

Yep, that was our view of things to come back in January 2020.

But, in the ensuing gestation period, 2020 has eclipsed any year in recorded history for weirdness! Pandemic, 208,000 deaths, worst economic recession since the 1930s, upheaval in the streets, absence of civility in our public discourse, hurricanes, wildfires …

And just as we believed we’ve seen it all … BOOM! Our president and first lady and a host of their close encounters have been stricken by the hidden enemy – COVID-19. I’m not certain 2020 can get any crazier!

So, is 2020 somehow metaphorical for commercial real estate transactions? Maybe! Indulge me while I develop the conversation a bit more.

An unexpected turn

Purchasing commercial real estate for your business remains a great way to build legacy wealth for your family. I speak with many closely-held company owners who’ve created an entity to own their acquisition and then leased the purchased real estate to their corporate operation.

Some boast their locations are now worth more than the companies they host. Occasionally, I encounter the opposite – akin to the start of 2020 and what followed.

Take, for instance, the aerospace manufacturing group that tooled parts for jetliners. Things were peachy and operating from an owned location. Revenue was growing; the facility met their needs; commercial real estate was appreciating; many were employed; life was grand — until it wasn’t.

You see, although the owner of the business and real estate were similar, they were not a mirror image. Upon the untimely death of the founding patriarch, all manner of chaos ensued. Unbeknownst to the business operator – the son – title to their company site had been deeded to seven factions with disparate goals. Some wanted money, others needed money, while still others realized absent the building – where would operations continue?

Things got very ugly.

I’m pleased to report the aerospace firm is happily domiciled in a leased location and the building was sold. Oh, and that 2020 will end happily as well.

It really boils down to risk. Our president contracted the virus. Many test positive yet are asymptomatic. Was it a blatant disregard of safety protocols – masks, distancing, sanitizing – by a purported germophobe or simply a random occurrence? The arguments on either side are as numerous as viruses in a petri dish.

Suffice it to say – risks were taken. It may end badly. We pray not. Are there ways to minimize risk? Of course! Stay home, follow the guidelines, avoid human contact. Done. Sadly, many adopt a riskier approach – much like driving in and out of the fast lane on the 405 and exceeding the speed limit all while eschewing a safety belt – you’re increasing the odds of a catastrophic outcome.

How to avoid risk

Buy a building – at a safe social distance, no less – at cheaper than market comparable sales – for cash – no loans.

Plan to occupy it with your business. If you don’t own a company that can pay you rent – forget about buying commercial real estate. If you divest yourself of the company – sell the building as well.

Pay the taxes. Bank the profit. Done!

I’ve just described 3% of commercial real estate owners. The remaining 97% tend to take a bit more risk – albeit for a potentially greater return. Tantamount to playing Twister in a tsunami, the risk doesn’t have to affect life, limb or the pursuit of happiness – although some invest that way.

Examples of “going without a mask” in commercial real estate might be: borrowing more than the property is worth; buying an unsustainable income stream; investing in a special purpose building. You may end up just fine. Then again, you may have to quarantine for 14 days and hope for the best.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.

Powered by WPeMatico