Resi-Mercial
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Transcript of Resi-Mercial
![Page 1: Resi-Mercial](https://reader035.fdocuments.net/reader035/viewer/2022062709/5590b9521a28ab66258b4593/html5/thumbnails/1.jpg)
Residential/Commercial Transition
From the
Frying Pan into the Fire
Presenter – Roger Frost
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How will the day progress!
Breaks – lunch, potty etc
Methodology
Getting to know each other
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Who are we all
• Name• Company• Why are you here? i.e. what do
you want to get out of the session.
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Roger Frost
• President of Crown Realty LLC
• Ditto Crown Capital
• Ex Academic
• Ex Corporate Executive
• One-time sailor
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GOALSTo obtain a clearer
understanding of what commercial real estate is about so you can better serve your clients
To begin to develop a network of like minded folks so as to better serve your clients.
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It’s not about you!
• IT’S ABOUT YOUR CLIENTS!
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What is Commercial Real Estate?
Anything you can’t (legally) live in.Technically any residential property over
four units.NOTE: a portfolio of SFH used as rentals
is NOT considered commercial RE by HUD and thus Lenders.
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Types of Commercial RE
• Multi-family Fairly stableMany “tenants” –
spreads riskHighly regulatedFinancable – if pencilsPossibly
Condominiumizationable
Various sizes
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Types Continued:
•
Office
• Fairly stable
• Single user to many tenants
• Good financing
• Condominiumizationable
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Types continued: ……
• Hotels
• Flagged – unflagged• Location – very important• Investment grade – sometimes.
(How do hotel chains hold real estate? Answer – many don’t)
• Financing OKish• Various formats – condo hotels
etc
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Types Continued:
• Industrial • Special Purpose – often very.
• Small market
• Convert to ??????
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Types Continued:
•Health Care
• SNFs
• ALFs
• Hospitals
• Hospices
• Drug Rehabs
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Types Continued:
OTHERS
• C-Stores: Environmental issues especially with gas stations attchd
• Churches: and other Religious property
• Agricultural: Farms, forests, woodland etc
• Other Land: Development etc
• Marinas:
• Other: ????
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Types by Another Cut
•LOCAL: - SMALL STUFF FOR LOCAL FOLKS
•REGIONAL: I.E. LIKE State Wide
•NATIONAL: FOR THE BIG BOYS
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Why is Geography Important??
• Because ……..?
• ………. Licensing becomes an issue.• ………. Marketing becomes an issue.
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YET ANOTHER CUT …
• Owner / User• Multi-tenant• Investment
– Triple net leases: WALGREENS EXAMPLE– TICs ???????Tenants in Common – similar to fractional
ownership of residential property.(ISSUE – who sells – real estate brokers or investment advisers?)
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Aside Stage Left for a moment …
General Growth Properties – todays Washington Post
Circuit City
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NOT ONLY BUT ALSOSpecial Purpose VS General
Special purpose appeals to narrow market, specialized use like assisted living facilities, factories etc
General commercial real estate appeals to wide market – like apartments or offices.
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Issues for all commercial real estate!
• Value – both for listing and purchase• Third party reports• Financing• Listing• Contracts• MarketingThis is what we’ll be covering today!
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WHAT IS “VALUE” ?
Some form of measurement of worth NO SUCH THING AS “INTRINSIC VALUE”!!!!
Value is purely in the eye of the beholder
Today’s problem is no-one knows how to value things – houses, commercial real estate, toxic assets etc.
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Exercise – Valuing a Golf Course!
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Value Contd. - Commercial Appraisals
What is an MAI appraisal? Review examples Assumptions Exposure time Different value parameters
a) Income capitalization approachb) Sales comparison approachc) Cost approach
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Components of Commercial Value
Real PropertyFF&E
Business Value=
TOTAL MARKET VALUE(As Is)
QUESTION: What does a Lender lend on????
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Other Third Party Reports
• Phase 1 Environmental: See Example
Who is calling the shots – State and Banks
- USTs
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Other Third Party Reports
• Phase 1 Environmental: See Example
• Property Condition Assessment: Example
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And now for something completely different!!!
• FINANCING COMMERCIAL REAL ESTATE
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Issue # one ---
• Does it Pencil?
OR
How much debt can it support?What’s it’s Debt Capacity?
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Debt Capacity Calcs!
• Some terminology:-
- EBITDA – Absolutely NOT profit
Earnings Before Interest, Taxes, Depreciation, Amortization.
It represents the amount of cash available, or the businesses Cash Flow
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Debt Capacity Calcs!
• Some terminology:-
- EBITDA – Absolutely NOT profit
- DSCR -
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Debt Capacity Calcs!
• Some terminology:-
- EBITDA – Absolutely NOT profit
- DSCR - Debt Service Coverage Ratio
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Debt Capacity Calcs!
• Some terminology:-- EBITDA – Absolutely NOT profit - DSCR - Debt Service Coverage Ratio
This represents the amount of cash available for RE Debt Service.
Who determines the DSCR?Lenders!
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Debt Capacity Calcs!
• Some terminology:-
- EBITDA – Absolutely NOT profit
- DSCR - Debt Service Coverage Ratio
- Rate – Interest Rate.
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Debt Capacity Calcs!
• Some terminology:-- EBITDA – Absolutely NOT profit - DSCR - Debt Service Coverage Ratio- Rate – Interest Rate. - Term – When does it balloon- Amortization period – if fully amortized.
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Calculating Debt Capacity
Going through the numbers
Key Formula for Debt Capacity:-
Available cash (per mnth) divided by monthly payment on $100,000 loan
times 100,000
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Listings!
Nothing particularly different!•Special Contract for land
•All disclosures etc needed
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Listings!Nothing particularly different!
But Wait ‘till be go to the next page!!!!!
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MAKING AN OFFER!
• LOIs
• Letter of Interest• OR
• Letter of Intent.
See Example
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Contract to Purchase.
• State ones non-existent or useless
• Get Your lawyer to do one for you.
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Marketing your Commercial Listing!
MLS Pretty Useless – blasphemy!!!For sale offering – Riverdale
exampleE-Mail Flyers – getting your e-mail
addresses.Internet – Loopnet, Netlist etc.Signs – very important especially
for local deals.
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ANY QUESTIONS?
I’ll Try to Answer them
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That’s all Folks!
I hope: You enjoyed the
sessionLearned somethingAnd can now better serve your clients