Partnership Interests in Commercial Real Estate Ownership

April 9, 2012

I am interested in what my clients would like to know about how difficult it is to own commercial real estate in the current market.  Many of them may need space for their business and some are thinking about how to diversify their investment portfolio.  Small transactions are hard to come by and in many cases require more capital than many of us have access to.

Combining forces can give us the financial ability to consider a larger dollar transaction that may have more appeal in the market as an investment choice.  It may also allow an individual business owner a choice to locate in an area of their business market that would not be available to a smaller user/owner.  There may not be a 5,000 square foot office building along the choice corridor of the city.   However, there may be a 20,000 square foot building that has a layout which is conducive to being a home for four different businesses.

I see two different primary ways to consider ownership.

  1.  Legal/financial concerns and benefits
  2. Practical aspect of owning property with another individual

Legal issues are primarily concerned with the way the partnership is put together and how it is dissolved when someone wants out.  In between times, the issue is more of how the operating needs of the entity are covered. (Ie –who is responsible for what)  Valuation methods and buyback procedures need to be agreed upon and updated regularly.

The practical considerations of this transaction need to be considered when matching up users who must have compatible uses and needs in a shared building.  What services can possibly be shared for economic reasons?  How definable does the space need to be?

A professional management arrangement may be critical for this type of project to succeed.  The same holds true for accessing the services of real estate experts to put this transaction together.

Because we are involved in the commercial real estate markets on a daily basis, it is difficult to know what other details or talking points should be addressed.  If you can think of things that need to be covered on this subject, I would appreciate hearing your thoughts.  Our office is going to try to put together an informational seminar next month to provide an outline of information that could benefit someone who is considering this type of action.

I will appreciate your comments!

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BMO Harris Bank white paper – Midwest Commercial Real Estate Market

April 5, 2012

The Midwest continues to see signs of commercial real estate improvement in 2012. John C. Wise, Director of Commercial Real Estate Heartland Region of Harris Bank, discusses these improvements in a new white paper entitled “Navigating Challenges and Opportunities in the Midwest Commercial Real Estate Market.” The white paper also includes: midwest CRE market projections, trends and opportunities.

Here is the link: https://resourcecenter.bmoharris.com/sites/default/files/BMOHB_WhitePaperCRE_0312_v4-low.pdf

The Take away points from the white paper are:

Midwest commercial real estate markets will improve across all sectors in 2012, albeit at different rates.

Demand for medical-related space in the Midwest will remain generationally strong as boomers reach retirement age and utilize more medical services.

Midwest multifamily unit supply will continue to rise in response to falling vacancies and rising rent levels.

Retail space demand improvement is directly correlated with improved tenant sales and consumer confidence.

Demand for multitenant office space remains tepid, especially in secondary Midwest MSAs; significant new office construction remains several years in the future.

Financing recently provided for speculative modern bulk industrial buildings signal new investor confidence resulting primarily from sub 6 percent vacancy levels in several Midwestern submarkets.

Distressed note/REO availability will accelerate in 2012 and peak in 2017 as overleveraged properties are jettisoned by CMBS special servicers and banks seeking to recoup capital


What we can do

April 3, 2012

We offer a full line of commercial real estate services including those for the investor. Some things to consider when you are investing in either commercial land opportunities or completed projects include:

The term “commercial real property” includes parcels, with or without buildings, used for business or retail purposes. Investment in commercial real estate involves a significant cash commitment and investors typically work with partners or investment groups to purchase larger commercial properties. Investors also work with experienced commercial real estate agents and a title agent trained in commercial property work

In the commercial real estate market, property values are so much larger than most residential transactions, you’ll be looking at much bigger profits. This also means somewhat higher risk, which in can turn means larger rewards.

If you want to build significant wealth investing in commercial real estate, it’s going to require that you take the time to think things through and work with the right company to guide you thought the process.

Commercial deals take longer than single-family houses do. They take longer to purchase, renovate, and get sold. This is not necessarily a bad thing, but something to keep in mind so that you don’t get impatient or rush into a bad decision.

A licensed Realtor can provide current knowledge of the market, experience in negotiating sales prices and contract terms and the strategy know-how in pricing your offer. The real estate agent also offers exclusive access to a market of commercial properties.

Visit www.realestateomaha.org and www.propertybanc.com for more information