Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

This Book Is about Center B Properties

The focus of this book is value-added properties: Identifying value-added real estate, discovering creative strategies to enhance the value of a project, and executing those strategies. Usually, everything else being equal, the property with vacant space will sell for a higher cap rate than the real estate that is fully leased. The seller will argue that, given the upside potential in Center B, the buyer should pay a higher price. In a 100-percent-leased center the only way to go is down, in other words, to lose occupancy.

Again, in this example, there is not enough information about the two centers to make an informed decision. Possibly Center A is also a value-added B type of property. For example, possibly the rents are significantly under market so as to afford a buyer the opportunity to work the center when leases turn to significantly increase cash flow. However, in general, it is Center B that has the clear potential to grow and increase its value through leasing the vacant space.

Typically, when a property comes on the market, multiple potential buyers view the offering. The successful real estate player analyzes the project, figures out a game plan to increase cash flow, and then, taking the cost of his strategy into account and factoring in an acceptable yield, makes an appropriate offer.

The strategy to enhance cash flow might involve altering the physical elements of the project. The alterations might be as simple as adding attractive ...