When it comes to due diligence, commercial real estate properties are a completely different animal from residential properties in regards to assessing value. That may seem like stating the obvious, but it is easy to overlook the many details that come into play.

For commercial real estate, value is determined in an inverse proportion to the degree of risk inherent to the continuance and stability of the income stream from the property. And of all the commercial property types, perhaps none is more complex in evaluation than a multi-tenant property, either office or retail.

The function of due diligence is to verify, verify, verify.
One of the first steps in your due diligence checklist should be the tenants of your potential investment real estate property.

Comprehensive due diligence services are Investment Analytic Group’s specialty. The IAG team has performed due diligence on commercial real estate valued at more than $1.2 billion including retail, office, industrial, and multi-family properties across the United States. We guide the process, keep clients involved as much as they prefer and, most importantly, communicate with you every step of the way. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction and quality due diligence contributes to superior returns. Whether analyzing office, retail, flex, industrial or multi-family properties, a thorough evaluation in the beginning helps the investor realize projected returns.

Tenants
Review and confirm the terms of all leases, paying particular attention to co-tenancy clauses, which are common in retail properties. These allow retailers to reduce the base rent, eliminate base rent and pay percentage rent based on sales, or terminate a lease when an anchor tenant or another identified tenant exits the property. Other items to take note of include “early outs,” which permit tenants to terminate leases in advance of normal termination dates, downsizing rights that allow tenants to reduce the size of the leased premises, tenant bankruptcies, and claims by a tenant against the landlord.

Require estoppel certificates from each tenant. This item usually is subject to negotiation between the seller and buyer as to the number of estoppel certificates required and, if less than all, from which tenants (anchors, occupants of more than a certain number of square feet). It also will indicate whether the seller is in default.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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Clients new to the world of commercial investment real estate may be salivating at the thought of a market filled with undervalued properties that can be had for amazing prices. Do them a favor and inject a little reality into their dreams of market domination. Remind them that distressed properties are called distressed for a reason: Although the term may fit the seller’s frame of mind and circumstance, buyers should realize that such properties often have tenancy and deferred maintenance problems. Fully occupied, class A assets rarely come on the market — even if the owner has financial problems. And if they do, well, take a number and join the other buyers who are probably willing to offer the asking price, if not more.

While today’s market offers plenty of opportunities in distressed properties, buyers must conduct in-depth due diligence to determine what a property is worth. Before clients agree to a purchase price they think reflects a property’s distressed condition, offer them this checklist of items to consider along with an appreciation of what can happen once the acquisition has closed.

Commercial real estate should be approached like any other business in that you need create a clear vision, a sound strategy, and demand precise execution to come out on top. Examine any successful commercial real estate investor and to the one you’ll find that they have surrounded themselves with professional advisers whose sound counsel they rely upon to avoid the ever increasing number of mistakes that can be made in this market.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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Investment Analytics Group (IAG) is committed to registered representatives and financial advisors – and to the established relationship you have with your clients. We believe that mitigating an investment’s downside and seeking the best possible solution through a proactive approach, rather than a reactive approach is the key to a successful outcome. At IAG we can help by offering the following services:

* Lease administration/audits
* Financial modeling and repositioning strategies
* Property operations/asset management
* Accurate budgeting and budget reviews
* Continuous communication and efficient operations
* Disposition services
* Lease, ground lease, rent roll and operating analysis
* Post acquisition value creation and revenue/NOI maximization strategies
* Optimization of capital structure to include debt equity and hybrid financing
* Ownership structure analysis for all types of transactions including REIT, Tenant in Common (TIC), joint venture, and other single purpose entity structures

We see the big picture and we are your partner. At IAG, we can help maximize the overall performance of properties by bringing knowledge and experience in property management, leasing, lease administration, acquisitions, and due diligence, enabling us to develop and implement ownership solutions to achieve the objectives in operating and leasing property.

If you have a distressed real estate investment property or just want us to look at the performance of your property please contact us at your earliest convenience.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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At Investment Analytics Group (IAG), we understand that some REO (real estate owned) departments are overworked and understaffed. We understand the sense of urgency to move toward disposition. However, we also recognize that proper asset management preserves equity.

There are inherent REO complexities which include the risk exposure of non-performing assets and the potential high costs associated with holding REO properties. More importantly, at IAG we understand how all of this impacts operations and the financial picture – market-to-market and property-to-property. Our focus is to help you craft a strategic action plan that meets your time requirements, which could result in minimized losses and a quicker sale when the asset has been positioned appropriately. Options to examine include repositioning strategies, capital improvements, lease-up activities, improving operational efficiencies, refinancing debt, or best positioning the asset for optimal sale in a down market. IAG will use its experience and understand of market variables to recognize and derive a property’s potential.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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An asset that is not generating an expected or necessary return is considered an underperforming asset, and is not exactly going to give you nights of peaceful sleep. While the asset may produce income for the company or person possessing it, the income may not be sufficient and is certainly less than expected causing even more restless nights.

If you have an underperforming asset, the team at Investment Analytics Group (IAG) can assist in finding the most profitable and sensible solution to your underperforming asset. Some possibilities that we will proactively engage in include:
– Avoiding lender liability suits. We will assist in the negotiation of a pre-workout agreement to minimize risks that can arise due to misunderstood verbal statements made in workout negotiations. Often times institutions find themselves the victims of claims that oral agreements, representations or waivers made in the course of a workout entitle the borrower to rights or damages never contemplated by the lender upon entering workout negotiations.
– Analyzing and summarizing all relevant information on the loan, the borrower, the collateral and relevant documentation and history. In addition to gathering all loan documents, promissory notes, guarantees, evidence of advances and notices, a complete written history of the loan will be prepared including the borrower’s financial statements, tax returns, litigation history, and credit rating.
– Working with your legal counsel, Investment Analytics Group will work with your in-house legal department or outside counsel to protect information gathered from being used as evidence in any future litigation.
– Determining the value of the project or property. IAG’s property valuations include: DCF modeling, NOI analysis, cash flow projections, risk and return analysis, occupancy cost and marketing opportunity analysis, budgeting updates and reconciliations, and cap structure evaluation. We also take a close look at the project viability, including non-financial factors such as the debtor’s track record, integrity, character, and business planning ability.
– Documenting the transaction completely. Once negotiations have resulted in a restructuring or workout, all aspects of the agreement will be thoroughly and fully documented.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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Do a Google search for Tenant-in-Common (TIC) & bankruptcy and you will definitely get more stories than you would have a year ago. The TIC industry has suffered some catastrophic blows and has left many TIC investors scrambling to figure out their next step. If you or your clients have distressed Tenant-in-Common (TIC) properties then you need to call or email Investment Analytics Group (IAG) to learn how IAG can help protect your client’s TIC real estate investment.

Investment Analytics Group (IAG) is committed to registered representatives and financial advisors – and to the established relationship you have with your clients. We believe that mitigating an investment’s downside and seeking the best possible solution through a proactive approach, rather than a reactive approach is the key to a successful outcome.
* Lease administration/audits
* Financial modeling and repositioning strategies
* Property operations/asset management”
* Accurate budgeting and budget reviews
* Continuous communication and efficient operations
* Disposition services
* Lease, ground lease, rent roll and operating analysis
* Post acquisition value creation and revenue/NOI maximization strategies
* Optimization of capital structure to include debt equity and hybrid financing
* Ownership structure analysis for all types of transactions including REIT, TIC, joint venture, and other single purpose entity structures

Investment Analytics Group (IAG) can help maximize the overall performance of properties by bringing knowledge and experience in property management, leasing, lease administration, acquisitions, and due diligence, enabling us to develop and implement ownership solutions to achieve the objectives in operating and leasing property. Call or email us today to learn how we can help.

About Investment Analytics Group
Established in December 2006, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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There’s Value in Real Estate – An Article from The New York Times

The last thing most people are thinking of investing in right now is real estate. The collapse of residential values stung almost all homeowners. And the commercial market, from offices to shopping malls, is full of uncertainty as unemployment rises and consumer spending continues to be weak.

Greg Rand, managing partner at Better Homes and Gardens Rand Realty, a brokerage in the suburbs north of New York, even has a theory to guide investors. He calls it “house rich.”

Simply put, the days of buying almost anything and watching it appreciate are over. Those who want to make money in real estate now will have to do extensive research and expect to hold the property for at least a decade.

The crux of the idea is not buying a distressed property but “finding your Florida.” By that he means investing in a piece of real estate, be it residential or commercial, in a hard-hit place that has to rebound.

“Florida is in a storm right now,” Mr. Rand said. “It’s overdeveloped, overspeculated and overleveraged.”

Yet, with 78 million baby boomers expected to retire in the next two decades, the state’s long-term prospects are solid: a good proportion of them will want to be someplace warm and sunny when they stop working.

Mr. Rand is not alone in this. Some of the biggest players in real estate see opportunity around the country.

“We are now looking at one of those rare opportunities to invest in commercial real estate,” said Hessam Nadji, managing director at Marcus & Millichap, a commercial real estate investment adviser based in Encino. Calif. “There are plenty of properties in the $5 million to $20 million range, whether they’re apartments or shopping centers, that are located in places where supply is constrained.”
He added that these otherwise solid properties were for sale now because losses elsewhere were forcing their owners to raise money.

While many investors may not believe that real estate is returning as a steady, performing asset, the following criteria can guide those ready to re-enter the market.

Investing in real estate has always carried risk. But where many people went wrong was in taking a house vanity approach — they bought their dream home without knowing how its price compared to either historical levels or the prices in nearby neighborhoods.

Mr. Rand tells the story of the Trump Tower, in White Plains, which he represents. When the sales office opened during construction, buyers focused on the penthouse condominiums with views of Long Island and New York City. At that time in 2004, the going price for 2,200 square feet on a high floor was around $1.8 million, he said. That would seem to be a deal for a buyer in Manhattan, 30 miles south, but in White Plains, few single-family homes had ever sold for that much.

He said investors who bought units on lower floors — priced closer to $700,000 — did much better. The reason was that their fixed costs — mortgage, fees and taxes — were lower, which meant they could attract a larger pool of renters to cover their investment.

The lesson here was that anyone who really knew the White Plains market would have been more hesitant in buying a $2 million apartment as an investment. “The key is due diligence over sex appeal,” he said.

What makes or breaks any real estate investment is fixed costs. Investors need to know how they are going to cover the amount they have to pay, whether the property is rented or not.

In Trump Tower, the monthly fixed costs for the penthouse apartment were $11,100 with an expected rent in 2005 of $8,000, Mr. Rand said. On the lower floors, the costs and expected rent were the same, both about $5,000.

Any experienced real estate investor will tell you there are times when even the best properties, whether apartments or shopping centers, have vacancies and that means some of those costs fall on the investor.

This sounds obvious, but from 2005 until early last year, there were plenty of amateur investors who only realized this after their tenants left.

What signals a return to understanding that basic principle is a return of savvier investors.
“A lot of people who are coming back into the market that I’ve known for decades are saying the market is normalizing again,” said Harvey E. Green, president and chief executive at the commercial real estate brokerage Marcus & Millichap, and a 40-year veteran of the real estate market. The years “2005, 2006, and 2007 were the frothiest part of the marketplace, and these people stepped out on the sidelines.”

In other words, the smart money is back after years of watching. Consider the South Florida market again. Many people who got caught had visions of renters covering all the costs on properties they bought. When renters became scarce and values plummeted, these investors did not have a backup plan. A better way is to set a goal for the investment. Do you want to add to your cash flow immediately or can you afford to take a longer view of 10 to 15 years?

If your goal is to make money now, you will probably have to buy an older property and fix it up. This requires a more active role, and still, the return will not be what it was at the peak.

Mr. Nadji said investors in Class B commercial real estate — solid but not marquee properties — can expect returns in the high single digits. But most of those properties are not likely to appreciate in value for two or three years.

With a longer view, the options change. Ruth Trettis, a broker at Premier Properties in Naples, Fla., said one investor bought nine homes, worth more than $32 million, in the last year in Port Royal, the town’s most affluent neighborhood. Another investor bought three homes in Port Royal worth $14 million over a single weekend in May and a fourth one last month for $13.5 million (it was listed at $19.9 million).

So far, she said, neither buyer has done anything with the properties. Even though both bought these houses at steep discounts, the costs of just holding them are immense. But they clearly have a long-term goal and a belief in the area.

Real estate is like every investment today. Experts and amateurs alike have strong opinions on what will work and what won’t.

The message within the real estate market itself is mixed. Last week’s report on flat home sales from April to May seemed to be heartening, but it was misleading. Homes sell better as the weather warms up. The better indicator of a bottom will come when year-on-year numbers are flat, and those have yet to appear.

The one upside is inflation, or at least the fear of inflation. Hard assets like real estate historically do well when there is inflation.

What this means is the longer your time horizon for investing in property, the better your chance of achieving real returns.

“Real estate was never a short-term investment,” Mr. Green said. “It was just in that frothy market.”

In this sense, the one certainty is that the age of the flipper is behind us.

About Investment Analytics Group (IAG)
Investment Analytics Group (IAG) was established in December 2006 ago to provide integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services. Our business model and services are not reactionary to what many other firms consider “opportunity” in this current distressed environment. For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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Once Investment Analytics Group (IAG) is contractually engaged as your Land Manager, we take responsibility for the following:
• The strategic planning and oversight of your investment: The IAG strategic plan includes all market research and statistics which are customized for the specific property and the surrounding area. This research and our valuation results are provided to investors and are paramount to the sound strategic plan for the property.
• Maintenance of LLC’s and annual reporting; coordinating an LLC replacement Manager
• Coordinating TIC Owners and LLC Member communication and decision making including annual budget, lease administration (if applicable), potential sale of assets
• Coordinating easement purchases / municipal administration / eminent domain matters
• Disseminating and maintaining organizational documents
• Preparation and filing of tax returns and distributing K-1’s to LLC Members
• Assistance with property tax filings and payments
• Preparing year-end tax letters summarizing income and expenses for the owners
• Assistance in maintenance of individual TIC ownership structures (e.g., SPEs)
• Properly maintaining certain tax exemptions (like agricultural)
• Providing convenient and consistent access to property status communications, quarterly and annual reports and financials, annual budgets, reporting for taxes, the annual strategic plan and approved budget
• Facilitation of approvals for new leases, sales of assets and other services as mutually agreed or as needed.
• Administering any current leases-in-place, performing basic accounting.
• Hiring and supervising local brokerage specialists, when requested, or as needed.
• At the owners’ direction, introducing potential, select development partners to bid the continued entitlement and enhancement of land assets.

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Comprehensive due diligence services are Investment Analytic Group’s specialty. The IAG team has performed due diligence on commercial real estate valued at over $1.2 billion including retail, office, industrial, and multi-family properties across the U.S. We guide the process, keep clients involved as much as they prefer and, most importantly, communicate with you every step of the way. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction and quality due diligence contributes to superior returns. Whether analyzing office, retail, flex, industrial or multi-family properties, a thorough evaluation in the beginning helps the investor realize projected returns.

Due Diligence Checklist

Tenants – Review and confirm the terms of all leases, paying particular attention to co-tenancy clauses, which are common in retail properties. These allow retailers to reduce the base rent, eliminate base rent and pay percentage rent based on sales, or terminate a lease when an anchor tenant or another identified tenant exits the property. Other items to take note of include “early outs,” which permit tenants to terminate leases in advance of normal termination dates, downsizing rights that allow tenants to reduce the size of the leased premises, tenant bankruptcies, and claims by a tenant against the landlord.

Require estoppel certificates from each tenant. This item usually is subject to negotiation between the seller and buyer as to the number of estoppel certificates required and, if less than all, from which tenants (anchors, occupants of more than a certain number of square feet). It also will indicate whether the seller is in default.

Existing Indebtedness – Buyers may be able to assume an existing mortgage or other debt, but they should expect lenders to re-underwrite the terms, which may result in higher debt service, a shortened maturity, and increases in the real estate taxes, insurance, or tenant improvements impound or escrow accounts. In addition buyers must pay an assumption fee and the debt holder’s counsel fees and costs. As a condition to assumption, lenders may insist on a guarantee of all or a portion of the indebtedness.

At the same time, buyers can negotiate deferring interest payments, principal or both; reduction in the principal amount of the debt based upon the value of the property; a change in the interest rate; and reductions in the real estate tax, insurance and/or tenant improvement impound or escrow accounts.

Appraisal – A current property appraisal should be obtained. The appraiser will value the property using comparable recent sales, replacement costs, and capitalization of income methods. In the current economy, the first and last of the three methods may not be completely reliable as to value. With few recent sales of commercial properties other than foreclosures, relying on comparable sales is questionable, while the lack of activity has resulted in uncertainty as to the interest rate to be used in the capitalization of income method.

Physical Condition – A licensed engineer’s inspection should confirm the property’s repair and maintenance needs, both long term and near term, as well as estimates of these costs. There may be a difference between what the seller thinks is necessary and the associated costs and what the engineer thinks is necessary.

Violations of Laws – To obtain proper assurances that the property is fully compliant with applicable laws, codes, and regulations, including zoning and subdivision ordinances, contact the local governing bodies with jurisdiction over the property. If the property is not compliant, find out from local officials if the violation must be fixed in advance of closing and ask the engineer what it will cost.

Environmental – A current phase 1 environmental site assessment is a requisite to a commercial real estate acquisition. If the inspection reveals environmental problems, a phase 2 assessment may be required. Existing and prospective environmental remediation plans must be taken into account, in terms of time frame and costs. An environmental expert can assist on both of these items.

Title and Survey – Does the seller have the financial ability to satisfy all of the liens and judgments that the buyer does not intend to assume? In addition, covenants and operating agreements with third parties regarding access and maintenance of common areas must be carefully reviewed and the terms confirmed, particularly regarding who bears the cost of maintenance and repairs. Also, obtain estoppel certificates from third parties indicating that there is no default on the seller’s part.

Litigation – Does the seller have the ability to settle existing litigation that could delay the closing or result in a new judgment lien filed prior to closing?

Service Contracts – Is the seller current in payment and is each contractor willing to continue providing the agreed to services on the same terms and conditions following closing?

Management – Will the buyer manage the property or hire a third-party management company? Consider engaging the management company currently handling the property to continue, even if the company is owned by the seller. Determine general management and lease-up fees, owner termination rights, and controls over rent receipts and the use thereof by the manager.

Once the due diligence is completed, the buyer should re-examine the financial model used in deciding on the purchase price. Make sure clients have a due diligence or other out in the purchase agreement that allows them to re-negotiate the purchase price in light of the findings.

About Investment Analytics Group
Established in 2007, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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Investment Analytics Group (IAG) was contacted by one of the nation’s largest real estate investment firms specializing in tenant-in-common (TIC) syndications to conduct property level due diligence services for the Center Point Business Park.

Center Point Business Park is a three-building, 173,710 square-foot office portfolio in Columbia, South Carolina. The tenants include Intel Corporation, Bell South Advertising and Publishing, Alltel Communications, ETC Deltacom, Sedgwick CMS, Lanier Worldwide, and All State Insurance.

Investment Analytics Group (IAG) was contacted by one of the nation’s largest real estate investment firms specializing in tenant-in-common (TIC) syndications to conduct property level due diligence services.

About Investment Analytics Group
Established in 2007, Investment Analytics Group (IAG) provides integrated commercial real estate advisory services to investors. Our core services include asset level due diligence, asset management, financial modeling, feasibility studies and other related advisory services.
For more information visit us at www.iagroupllc.com or contact us at 208.846.8476 or info@iagroupllc.com.

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