Critical Thinking

Tenant Perspective Part 3

3. Landlord net operating income With greater competition for key properties, prices are rising. Purchase prices increase, but institutional and private investors still seek to maintain their prior returns on investment capital. The primary goal is to increase revenue. Return is derived from cash flow, principal payments over time, and the ultimate sale of the asset. Net Operating Income (NOI) impacts both cash flow and the value of the asset. Base rent increases are not the only way a landlord can improve revenue. Increased occupancy, parking charges, specialized services including after-hours...

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Tenant Perspective – Part 1

FIVE FACTORS THAT COULD LEAD TO $5 COMMERCIAL REAL ESTATE RENTS 1. Rising interest rates: Rising interest rates and corresponding rental rate increases have a direct impact on tenants. Tapering off from its policy of quantitative easing, the Federal Reserve has reduced its purchases of assets from $85 billion to $75 billion per month. Further tapering is expected to cause interest rates to rise. Twelve months ago, 30-year mortgage rates stood at 3.2 percent. In April 2014, rates are up to 4.4 percent, and over the next few years we may see further increases of up to three percent...

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Tenants Perspective – Five Factors

The goal of this special report on the Five Factors That Could Lead To $5 Rents is to help commercial real estate tenants foresee their future rent or lease exposure and to communicate practical strategies to maintain, or limit increase in the cost of leasing space in the Los Angeles market and throughout the world. Click Here for Part 1 Click Here for Part 2 Click Here for Part 3 Click Here for Part 4 Click Here for Part 5 For more information or to answer questions please contact. Forrest Blake | Senior Vice President SVN | Commercial - DTLA 800 South Figueroa Street, Suite...

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COMMERCIAL LEASES CHANGING TO A LIABILITY ON THE BALANCE SHEET IN 2019

COMMERCIAL LEASES CHANGING TO A LIABILITY ON THE BALANCE SHEET IN 2019 Presented by: Forrest Blake | Vice President | NAI Capital | 818-933-2365 | fblake@NAIcaptial.com | Lic # 01054174 Anyone who signs more than a 12-month lease and is in an executive position needs to read this and future articles on this subject. This change will have a dramatic effect on your financial statements. Tenant’s must book there lease obligation as a liability on balance sheet. I wouldn’t sign a new lease without understanding the impacts of these new requirements. The first time I wrote about this...

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How to win the rental rate guessing game

How to win the rental rate guessing game By: Forrest Blake | Senior Vice President | SVN Commercial | 310-850-2381| Lic # 01054174 Commercial real estate spins like the wheel on a gaming table! You see leasing signs prominently posted in front of every commercial building. Your last leasing broker just called for the first time in 3 years with his best guess rent number. The media continues to talk of a strong commercial real estate market and increasing rental rates. You get 10 calls each week from brokers saying they “know the best deal.” …And your landlord just called to say you don’t...

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YOU’RE BEING BLUFFED IN YOUR LEASE NEGOTIATIONS AND IN POKER

YOU’RE BEING BLUFFED IN YOUR LEASE NEGOTIATIONS AND IN POKER This strategy applies as much to negotiations as it does to playing poker. In every deal there comes a time when you just do not have the needed leverage, although you feel confident you could overpower the opponent and win anyway. Other times you may feel you are being pushed around—or, bluffed—by the other side of table. There are many times in Commercial Real Estate leasing where the landlord tells the tenant they have another tenant who is negotiating for the space. On a renewal, they may say there is a tenant who wants to take...

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EFFECT OF A BAD COMMERCIAL REAL ESTATE LEASE

EFFECT OF A BAD COMMERCIAL REAL ESTATE LEASE Commercial Tenants must continually ask themselves: “What actions do I need to take to improve my leased facilities?” Executives must dedicate time and effort to do this analysis, and must include both the financial and functional aspects. I know, this may distract key individuals within the company from the day-to-day operations. However, the benefits will far outweigh the time investment.  Tenants in a commercial real estate lease cannot settle for average. An average lease can quickly turn disadvantageous when you do not exercise the proper...

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Below Market Office Lease Renewal

Below Market Office Lease Renewal Below market transactions don’t happen by chance. Tenants aren’t given large quantities of free rent, tenant improvements and/or rental rate reductions because they paid their rent on time or ask nicely. There is a defined process to establish leverage with relocation options, collect information to gain leverage and close a deal that surprises even the best negotiators. Should I renew my lease or relocate? This choice must be made about every five years by tenants. The line of thinking is often difficult since it will have a material effect on the company’s...

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Proposed Tax Plan from Trump

It doesn't matter if you are a Trump supporter or a Clinton supporter. Now that Trump is President, it is good to understand the proposed tax changes. For individuals: Tax rate simplification from today’s 7 brackets to 3 brackets (12%, 25% and 33%) Retention of favorable tax treatment on capital gains and qualified dividends Repeal of the 3.8% tax on net investment income Elimination of the Alternative Minimum Tax (AMT) Cap on total itemized deductions to $100,000 for single filers and $200,000 for joint filers Increase in the standard deduction to $15,000 for single filers...

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Is More Sublease Supply The First Sign Of A Downturn?

APRIL 21, 2016 | BY KELSI MAREE BORLAND LOS ANGELES—Sublease space is up 10.7% from last year, and with rents continuing to rise, this could be signaling a change in the market, Forrest Blake and J.C. Casillas of NAI Capital says in this EXCLUSIVE interview. LOS ANGELES—The supply of sublease space is up 10.7% from the same time last year, but asking rents haven’t fallen, according to a report from NAI Capital that GlobeSt.com has obtained exclusively. The report shows that sublease available space has increased slowly over the past year, while rents have also continued to rise, and as a result,...

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