Thursday, March 28, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "The most important trip you may take in life is meeting people half way." Henry Boyle
Quote of the Day!
"The most important trip you may take in life is meeting people half way."
Henry Boyle
Henry Boyle
Monday, March 25, 2013
Great Investment Opportunity in Self Storage Market!
A recent article in The Wall Street Journal
by A.D. Pruitt reports a growing demand for a surprising class of
commercial real estate. Self storage, although a quiet and small
market, has, "became more popular over the past few years after catching
the eye of a growing number of private-equity investors and
entrepreneurs who, armed with cheap financing and dwindling options for
high-yielding investments, started bidding up properties," according to
Pruitt's article "Self Storage Gains Cachet as Values Rise."
A recent sale of self-storage properties by Acadia Realty Trust for $300 million has gotten a lot of attention recently because of the exceptionally low 5.5% cap rate on the deal. A 5.5% cap rate is interesting to investors because, " As the amount that an investor is willing to pay for a building rises, the cap rate falls. In other words, falling cap rates means rising values." The Acadia sale, along with a few other transactions, have had, " cap rates...similar to those on trophy office skyscrapers and upscale apartment buildings."
A couple of things contribute to the growing popularity of self storage; first, there is the perception that consumers will always need storage options regardless of the economic climate. Another contributing factor is the relatively small supply of storage space and the conservative building plans for the future. This lack of supply, and therefore competition, means that raising rents is a fairly common and painless concurrence. " Landlords...have been raising rents 5% or higher over the past couple of years on existing tenants."
This trend of rising rental rates and increasing value for self storage commercial real estate might not continue forever, but for the moment self storage is one of the hottest games in town.
Compass Commercial Real Estate, based out of Winter Park Florida agrees with The A.D. Pruitt Report. Compass Commercial manages and sells Commercial Real Estate throughout Orlando and the Central Florida area. Mike Sigrist of Compass Commercial Real Estate says they have a facility in Kissimmee name "The Attic Self Storage" that is available and it would be a fantastic investment opportunity for any investor. The asking price is $995,000 and Mr. Sigrist say's that is a steal for any investor right now. You can see the facility at www.theatticfl.com
Mr. Sigrist states there has been an upswing in the Commercial Real Estate market in the last year, we are very excited about the future of Commercial real Estate and the investment opportunities we can take advantage of as well as our clients can take advantage of for 2013. Please visit Compass Commercial Real Estate to see more investment opportunities!
A recent sale of self-storage properties by Acadia Realty Trust for $300 million has gotten a lot of attention recently because of the exceptionally low 5.5% cap rate on the deal. A 5.5% cap rate is interesting to investors because, " As the amount that an investor is willing to pay for a building rises, the cap rate falls. In other words, falling cap rates means rising values." The Acadia sale, along with a few other transactions, have had, " cap rates...similar to those on trophy office skyscrapers and upscale apartment buildings."
A couple of things contribute to the growing popularity of self storage; first, there is the perception that consumers will always need storage options regardless of the economic climate. Another contributing factor is the relatively small supply of storage space and the conservative building plans for the future. This lack of supply, and therefore competition, means that raising rents is a fairly common and painless concurrence. " Landlords...have been raising rents 5% or higher over the past couple of years on existing tenants."
This trend of rising rental rates and increasing value for self storage commercial real estate might not continue forever, but for the moment self storage is one of the hottest games in town.
Compass Commercial Real Estate, based out of Winter Park Florida agrees with The A.D. Pruitt Report. Compass Commercial manages and sells Commercial Real Estate throughout Orlando and the Central Florida area. Mike Sigrist of Compass Commercial Real Estate says they have a facility in Kissimmee name "The Attic Self Storage" that is available and it would be a fantastic investment opportunity for any investor. The asking price is $995,000 and Mr. Sigrist say's that is a steal for any investor right now. You can see the facility at www.theatticfl.com
Mr. Sigrist states there has been an upswing in the Commercial Real Estate market in the last year, we are very excited about the future of Commercial real Estate and the investment opportunities we can take advantage of as well as our clients can take advantage of for 2013. Please visit Compass Commercial Real Estate to see more investment opportunities!
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "Business is a series of great opportunities brilliantly disguised as impossible situations." -Unknown-
Quote of the Day!
"Business is a series of great opportunities brilliantly disguised as impossible situations."
-Unknown-
-Unknown-
Friday, March 22, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "If you have the courage to begin, you have the courage to succeed." David Viscott
Quote of the Day!
"If you have the courage to begin, you have the courage to succeed."
David Viscott
David Viscott
Thursday, March 21, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "It is not death that a man should fear, but he should fear never beginning to live." Marcus Aurelius
Quote of the Day!
"It is not death that a man should fear, but he should fear never beginning to live."
Marcus Aurelius
Marcus Aurelius
Tuesday, March 19, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "If you don't like something, change it. If you can't change it, change your attitude". Maya Angelou
Quote of the Day!
"If you don't like something, change it. If you can't change it, change your attitude".
Maya Angelou
Maya Angelou
Wednesday, March 13, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "There are only two basic ways of establishing competitive advantage: do things better than others or do them differently." Karl...
Quote of the Day!
"There are only two basic ways of establishing competitive advantage: do things better than others or do them differently."
Karl Albrecht
Karl Albrecht
Tuesday, March 12, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "You can turn painful situations around through laughter. If you can find humor in anything, even poverty, then you can survive it.&qu...
Quote of the Day!
"You can turn painful situations around through laughter. If you can find humor in anything, even poverty, then you can survive it."
Bill Cosby
Bill Cosby
Friday, March 8, 2013
Compass Commercial Real Estate: Quote of the Day!
Compass Commercial Real Estate: Quote of the Day!: "The life you have led doesn't need to be the only life you'll have." Anna Quindlen
Quote of the Day!
"The life you have led doesn't need to be the only life you'll have."
Anna Quindlen
Anna Quindlen
Compass Commercial Real Estate: Net Lease Alternative
Compass Commercial Real Estate: Net Lease Alternative: Net Lease Alternative For investors considering NNN Properties but who would like to invest less capital (cash) and still have little to...
Compass Commercial Real Estate: Lease Types
Compass Commercial Real Estate: Lease Types: Lease types Absolute Triple Net (NNN) The tenant pays operating expenses such as maintenance, repairs, taxes and replacement for the e...
Compass Commercial Real Estate: What is a Sale Leaseback?
Compass Commercial Real Estate: What is a Sale Leaseback?: What is a Sale Leaseback? A Real estate sale leaseback is when a business sells its commercial property for current market value and the...
Compass Commercial Real Estate: What is a Ground Lease?
Compass Commercial Real Estate: What is a Ground Lease?: What is a Ground Lease? A ground lease is a method for separating ownership of the improvements (building) from the ownership of the u...
Compass Commercial Real Estate: What is Built to Suit?
Compass Commercial Real Estate: What is Built to Suit?: What is Build-to-Suit? In a build-to-suit the landlord builds the improvements for the tenant and the tenant leases them back typically ...
Compass Commercial Real Estate: Determining Cap Rates for NNN Properties
Compass Commercial Real Estate: Determining Cap Rates for NNN Properties: How are Cap Rates Determined for NNN Properties? Some of the major considerations when calculating Cap Rates for NNN Properties are: T...
Compass Commercial Real Estate: How are NNN Properties Valued?
Compass Commercial Real Estate: How are NNN Properties Valued?: How are NNN Properties Valued? NNN Properties typically are valued using their Capitalization Rate also referred to as Cap Rate. NNN Pro...
Compass Commercial Real Estate: What are NNN Properties?
Compass Commercial Real Estate: What are NNN Properties?: What are NNN Properties? NNN Properties are typically free standing buildings that are leased to tenants for a 10 to 25 year term. NNN P...
What are NNN Properties?
What are
NNN Properties?
NNN Properties are typically free standing buildings that are
leased to tenants for a 10 to 25 year term. NNN Properties offer the benefit of
little or no management responsibilities as the tenant pays for all, if not
most of the expenses. The investor receives their rent with little to no other
involvement.
Tenants in NNN Properties are divided by both quality and type of
businesses they are in. Qualitatively NNN Properties have either credit or non
credit tenants. The most desirable (least risk) NNN Properties have investment
grade (rated BBB- and better) credit tenants.
Non credit tenant NNN Properties have tenants that are not credit
rated. These tenants frequently are regional or local businesses or companies
that are unrated. Some tenants are considered credit worthy yet are unrated
because they carry no debt on their books. Click Tenant Ratings for list of tenants for NNN
Properties.
Who Buys
NNN Properties?
NNN Properties are appealing to those who wish to have outright
ownership of their commercial real estate investments and have little to no
management responsibility. The alternative ways of owning non management
commercial real estate would be to own a security in the form of a mutual fund
or REIT or invest in fractional ownership Tenant in Common properties.
A major advantage of 100% direct ownership is control and the
ability to defer future capital gains by doing a 1031 exchange when the
property is sold. For many investors the lack of immediate liquidity inherent
in NNN Properties is offset by the lack of volatility NNN Properties offer when
compared to a securitized investment. Investors should carefully consider their
need for liquidity when considering investing in NNN Properties.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
How are NNN Properties Valued?
How are
NNN Properties Valued?
NNN Properties typically are valued using their Capitalization
Rate also referred to as Cap Rate. NNN Properties cap rates reflects the value
of a stream of economic benefits discounted for time and risk. Generally this
is computed as a pretax cap rate using the Net Operating Income (NOI) for NNN
Properties.
NOI is income less all expenses before debt service. The Cap Rate
is the NOI divided by the purchase price for NNN Properties. Conversely the NOI
divided by the Cap Rate will equal the purchase or selling price.
Example of Cap Rates for NNN Properties:
NOI = $100,000/10%=$1,000,000 Purchase or Selling Price
NOI = $100,000/$1,000,000=10% Cap Rate
NOI = $100,000/10%=$1,000,000 Purchase or Selling Price
NOI = $100,000/$1,000,000=10% Cap Rate
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
Determining Cap Rates for NNN Properties
How are Cap Rates Determined for
NNN Properties?
Some of the major considerations when
calculating Cap Rates for NNN Properties are:
- The credit worthiness of the
tenant.
- The length of the lease,
typically 10 to 25 years.
- The type of lease, triple net
(NNN) or double net (NN). See below for definition.
- Type and frequency of bumps or
increases if any in rent.
- Cost of financing
- Strength of the demographics of
the property location
- Nature of the improvements. Are
the improvements easily converted for another tenant or are they special
purpose that would require significant expense and time to convert before
re tenanting?
- Age and condition of the
improvements
The more positive the above factors for NNN
Properties, the lower the Cap Rate or the higher the value of the property
related to its income stream. Conversely if the above factors for NNN
Properties are weak the Cap Rate will be higher and the resulting value will be
lower reflecting the greater risk of the investment.
It is important to remember that markets are
not perfect and low Cap Rate NNN Properties are not necessary a lower risk
investment, they could simply be a bad investment that is over priced. Astute
investors seek NNN Properties that are mispriced in their favor, namely a
higher Cap Rate for a property that has lower risk factors.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
What is Built to Suit?
What is
Build-to-Suit?
In a build-to-suit the landlord builds the improvements for the
tenant and the tenant leases them back typically on a Net Lease. The Net Lease
rent payable by the tenant is a function of the construction and financing
costs of the project. This arrangement allows the tenant to move in and occupy
the property with zero initial cost.
The Net Lease rent is fully deductible over the lease term, making
the tenant's after-tax cost less than with alternative forms of asset-based
financing.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
What is a Ground Lease?
What is a
Ground Lease?
A ground lease is a method for separating ownership of the
improvements (building) from the ownership of the underlying fee (ground).
Typically ground leases are long term Net Leases where the tenant pays all
expenses except debt service. Any financing for the improvements are paid for
by the tenant. In some cases the ground lease is subordinated to the debt on
the improvements.
On unsubordinated ground lease, no lien is placed against the fee
simple title to the land. Instead, the leasehold estate is the primary security
for any debt on the improvements. There is no depreciation with the ownership
of a ground lease.
Many investors favor ground leases because they don't need to use
their own funds to build the improvements yet end up owning the improvements on
termination of the lease. When the Net Lease ends the improvements revert to
the owner of the ground lease the owner benefits from the full rent for both
the land and the improvements.
Tenants like ground leases because they reduce the tenant's cost
of development by eliminating land acquisition costs. A long term Net Lease
provides predictable rent payments that are deductible by the tenant for
federal and state income tax purposes.
Typically ground leases are
long term Net Leases and include set rent escalations, foreclosure rights and
reversionary right (improvements revert to owner of ground lease
at termination of the lease).
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
What is a Sale Leaseback?
What is a
Sale Leaseback?
A Real estate sale leaseback is when a business sells its
commercial property for current market value and then leases it back typically
using a Net Lease. The seller retains the use of their real estate and frees up
capital which can be used to invest back into the business. Real estate sale
leasebacks are popular because they generate capital for immediate use within
the business.
A long term Net Lease on a sale leaseback create a predictable
rent that is deductible for federal and state income tax purposes Some
businesses do sale and leaseback transactions for equipment as well. Types Net
Leases
NNN Properties are generally categorized as either true triple net
(NNN) or double net (NN). The distinction between NNN and NN leases is an
important one as can be seen in the following definitions.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
Lease Types
Lease
types
Absolute
Triple Net (NNN)
The tenant pays operating expenses such as maintenance, repairs,
taxes and replacement for the entire property, without limitation. The owners
pay the mortgage only. This is the type of lease that most investors expect
when purchasing NNN Properties.
Bond Lease (NNN)
A bond lease is a slight variation on the true triple NNN lease
because the tenant is required to absolutely comply with their rent and
operating expense obligations regardless of extenuating circumstances affecting
the property (i.e. Even if the property is under eminent domain proceedings).
Double Net Lease (NN)
Similar to NNN leases but with additional owner responsibilities.
The owner is generally liable for the structural components of the building
such as the roof, foundation, load-bearing walls and parking. Leases will vary
so they should be carefully read.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
Net Lease Alternative
Net Lease
Alternative
For investors considering NNN Properties but who would like to
invest less capital (cash) and still have little to no management
responsibilities Tenants in Common (TICs) are a good option to consider.
Advantages of Tenant in Common are the lower minimum investment
(starting at $50,000); prepackaged financing (if any) and due diligence
material. Because Tenant in Common is a deeded interest in real estate and not
a security like a mutual fund or REIT they qualify for 1031 exchanges providing
they follow IRS Rev Proc 2002-22.
The most frequent objection to Tenant in Common ownership is that
Tenant in Common owners have a proportionate vote on major ownership issues as
opposed to 100% owned NNN Properties.
Tenant in Common investors can invest in fractional ownership in
NNN Properties and other multi tenant real estate. A major advantage of Tenant
in Common ownership is the ability to reduce overall risk by diversifying into
a number of investment properties.
J. Michael Sigrist
Compass Investment Properties, Inc.
861 W. Morse Blvd. #250
Winter Park, Fl. 32789
Office 407-647-5111
Fax 407-629-9220
Cell 407-953-2605
Tuesday, March 5, 2013
Compass Commercial Real Estate: Quote of the day!
Compass Commercial Real Estate: Quote of the day!: "Ability may get you to the top, but it takes character to keep you there." John Wooden
Quote of the day!
"Ability may get you to the top, but it takes character to keep you there."
John Wooden
John Wooden
Monday, March 4, 2013
Compass Commercial Real Estate: Quote of the day!
Compass Commercial Real Estate: Quote of the day!: "Tomorrow is a mystery. Today is a gift. That is why it is called the present." Eleanor Roosevelt
Quote of the day!
"Tomorrow is a mystery. Today is a gift. That is why it is called the present."
Eleanor Roosevelt
Eleanor Roosevelt
Friday, March 1, 2013
Compass Commercial Real Estate: Quote of the day!
Compass Commercial Real Estate: Quote of the day!: "Some succeed because they are destined to, but most succeed because they are determined to." -Unkown
Quote of the day!
"Some succeed because they are destined to, but most succeed because they are determined to."
-Unkown
-Unkown
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