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

Establish Buying Criteria

Once you narrow down a product type and area, you should establish buying criteria. You must decide upon, among other things, project size, in terms of acquisition price and square footage, for example, over $3,000,000 and in excess of 50,000 square feet, as well as the number of required tenants and lease expiration concentration. What are the ideal specifications? There is no right answer to this question. This is what makes a horse race. What works for some parties may not work for others. Some buyers are risk-averse as well as management-averse and, hence, desire stable single credit tenant properties on long-term leases; other players seek multitenant projects with staggered leases. Do you seek to acquire properties with an upside, which usually translates into a modest to large vacancy factor and/or below market rate leases, or are you seeking more stabilized assets that may be 100 percent leased and therefore contain less risk? Understanding your company's niche or perceived niche in the marketplace is crucial. Are you set up to tackle problem properties that might need an extensive facelift or have toxic issues or are on unfavorable ground leases, or is your organization more geared to purchasing quality, 100-percent-leased “trophy” properties? These types of questions must be addressed, because the more definitive your objectives are when interfacing with real estate brokers or sellers, the more efficient you will be in culling out those projects ...