By Don Logay

On February 1st, 2009, ELAN General Contracting Inc., headquartered in San Diego, California, began a unique commercial retail design/build project 2,800 miles away in the fashionable SoHo district of Manhattan in New York City.

The challenge was to create a contemporary flagship retail store for Crocs, Inc. footwear in what was originally an 1818 Federal-style house. The three-story structure located at 143 Spring Street (at the corner of Wooster) had a rich 192-year history. Originally built as a single-family residence, it underwent substantial changes in form, use and occupancy over the years and in 1850 was expanded and converted to a commercial structure. The building underwent six renovations in all, with the most recent tenant being a neighborhood Bar-B-Q restaurant.

Two years of pre-planning and preparation by designers, architects and project managers had already taken place since lease signing to ensure transforming such an aged building into a basically new structure would blend both new and old in a look and manner that was suitable to the historic SoHo “Cast-Iron” District, which is now closely governed by the NYC Landmarks Preservation Commission.

Note the key word: “Suitable.” This is a primary consideration that any contractor, owner or tenant must be aware of, and must keep in mind, and will have to deal with when considering, planning or completing a commercial retail design/build project that falls under the classification of “Historic Restoration.”

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The commercial real estate industry honored 14 commercial properties with The Outstanding Building of the Year (TOBY) Award yesterday at the Building Owners and Managers Association (BOMA) International’s annual conference, held June 27–29 in Long Beach, Calif. This year, a record 94 buildings competed for an International TOBY award.

The TOBY winners were recognized for excellence in office building management and operations in specific categories of building size or type. To win the international award, the office buildings first won both local and regional competitions. Judging was based on community impact, tenant/employee relations programs, energy management systems, accessibility for disabled people, emergency evacuation procedures, building personnel training programs and overall quality indicators. A team of expert industry professionals also conducted a comprehensive building inspection.

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Delinquency rates continued to increase in the first quarter for all commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.

The delinquency rate for loans held in CMBS is the highest since the series began in 1997.  Delinquency rates for other groups remain below levels seen in the early 1990′s, some by large margins.

Between the fourth quarter 2009 and first quarter 2010, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 1.54 percentage points to 7.24 percent.  The 60+ day delinquency rate on loans held in life company portfolios increased 0.12 percentage points to 0.31 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.16 percentage points to 0.79 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.05 percentage points to 0.24 percent.  The 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.32 percentage points to 4.24 percent.

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By Chris Miller, MBA

Specialized Wealth Management

It seems that mistakes made by businesses and investors are always repeated again sometime in the future.  I have named this phenomenon “Short Economic Memory.”  Economic bubbles seem to happen every decade or so; where consumers are willing to pay high prices without concern for how those assets will sustain those prices.  Remember tech stocks with P/E ratios of 700?  Apartment buildings with 3% Cap Rates?  These bubbles “burst” when the underlying assets could not sustain the values that were paid for them.  The ensuing collapse caused some economic pain.

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Two Organizations May Look Great Together on Paper But Bringing Them Together After a Merger or Acquisition Is Another Story

On paper, two organizations may appear to be a perfect match. But bringing them together in the “real” world after a merger or acquisition can present opportunities and challenges, which can ultimately make or break a newly combined organization’s success in the future. Not only are companies uniting their strengths for a bigger and better organization, but they are also integrating different visions, practices, philosophies, cultures, leadership and employees.

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By Kevin Williams

Why invest in real estate at all?  After all, we could put our money into bonds and collect the interest.   Unfortunately, the value of a dollar decreases over time.  If a solid piece of real estate is our investment vehicle, its value will increase during its holding period while at the same time providing income.  Real estate’s down side includes the fact that it requires a considerable upfront investment, a constant positive cash flow and usually, it cannot be quickly sold.  On the other hand, about 90% of America’s millionaires made their fortunes in real estate, and 1031 exchanges allow for a deferral of taxes, so let’s look at some legal and financial aspects of these offerings.

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by Thomas J. Lucier

The most common mistake that many beginning real estate investors make is that they pay too much for property. Fact is overpaying for property is often cited as the number one reason why so many newcomers fail to make it as profitable real estate investors. That’s because most beginning real estate investors are woefully undercapitalized, and they don’t have the deep pockets that are needed to subsidize their overpriced real estate investments.

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QUESTION:   For many years, I have been living with my sister and her husband in an apartment they rent.  The property manager knows I live there, but I pay rent to my sister who pays the property manager.  Much to my surprise I learned the hard way that my sister had stopped paying the rent and that an eviction case had been filed against her and her husband.  I only found out when I came home one day and found a sheriff’s notice on the front door stating that we would be physically evicted in five days.  I never received any court papers and when I asked my sister for the court papers, I saw that I was never named as a defendant in the court case.  I didn’t do anything wrong here and I wonder if I can continue to live in this apartment.

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If a property owner has a growing number of properties, it’s inevitable that a day will come when they ask, “Should I outsource the day-to-day operations of my business to a property management company?”

Deciding when to outsource and which company to hire is one of the most important business decisions a property owner can make. Choose wisely, and an owner will be rewarded with the peace of mind that comes with responsible property management. Choose incorrectly, and an owner will be working harder after hiring a property management company.

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QUESTION

Seems like every time I turn around, there is another state or federal program threatening to fine me into poverty in the event I don’t comply with some new requirement.  The most recent seems to be this EPA rule regarding renovation repair and painting.  I’m an owner of a fourplex, built in 1968, what does a guy like me have to do to stay solvent and out of jail?

ANSWER

The latest iteration of the EPA’s 2008 implementation of the Lead Safe Practices legislation requires that after April 22, 2010, property owners who renovate, repair or prepare surfaces for paining in pre-1978 housing or space rented by child care facilities must be certified and follow lead safe work practices required by the EPA’s Renovation, Repair and Remodeling rule.  There is a form involved, training, and of course a fee, and yes penalties for non compliance are severe.   Not all housing built prior to 1978 contain lead, in fact only 24% of homes built between 1960 and 1978 contain lead, 69% of homes built between 1940 and 1960, and 87% of homes built prior to 1940.  The lead safe maintenance practices are required unless your property has been tested and certified to be lead free.  For many owners, it may be less burdensome and more cost effective to hire a certified inspector or risk assessor to determine if the property has lead or lead hazards.   After April 22, 2010 ensure that your contractors are certified in lead safe practices, and follow the lead safe procedures.  Expect to pay a little more for prep, performance of any repairs, and clean up.  As any disturbance of six square feet of interior space, twenty feet of exterior space, will invoke the practices requirements, it will be an issue that all owners and contractors must be very familiar with.  You can get complete information at  www.epa.gov/lead/pubs/renovation.

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