Wednesday, June 10, 2009

Office Space Leasing and Buying Expectations... set your bar!

At your next real estate event – be it a relocation, expansion/reduction, or simple lease renewal – one of your first decisions will be whether you should manage the process on your own or engage professional representation. Instead of listing the benefits of professional representation, I thought I’d illustrate with some recent real-world success stories from the technology team. As you read, you’ll get a sampling of what kind of deals and deal structures the market is offering right now. All of these transactions occurred or will occur in the current calendar year.

Midtown Relocation. We helped a technology company find Class A office space in midtown for less than $17.75 per square foot, full service. TI monies were also included, along with a period of free parking and an early termination option. Over the lease’s 3-year term, the client saved $70,000 in direct costs.

Northwest Metro Expansion. A growing office furniture sales company needed additional square footage, but their landlord did not have any space to offer. We were therefore asked to find an offsite location. A review of their existing space and lease led to different path, however. We found a single space to accommodate their full needs and negotiated a rent abatement that essentially effected a buyout of the tenant’s existing lease. Our client now has a single space that is larger than the combined footage of their old space and overflow need, they have another 6+ months to use their former space, and they’re paying roughly the same rent they had anticipated for the two disparate sites,

Northeast Metro Renewal.
A business services company was within 9 months of the end of their lease, and the economy had reduced their space needs by roughly one third. When originally approached about a space and rent reduction prior to the end of the term, the landlord offered to reduce the space size and to keep rent constant if our client would extend their term another three years. Through the Lynx process, we have succeeded in gaining the space reduction AND in negotiating a 14% rent reduction, plus one free month’s rent… with these benefits on track to begin in the 3rd quarter of 2009 (6 months prior to their anticipated lease expiration).

Short sale. We’re scheduled for closing on the sale of an office building in which the owner’s lender was seized by the FDIC. See the “Struggling Banks = Owner Opportunity” blog entry for the full story on this ongoing transaction.

Wednesday, June 3, 2009

Struggling Bank = Restructure your Mortgage?

Potential opportunity is brewing for property owners willing to keep an eye on their lenders. The top 50 troubled Georgia Banks were recently ranked. At every one of these banks the value of the “problem loans” exceeds the value of that bank’s available capital (tracked as the “Texas ratio”), and a short sale opportunity may present itself.

Before I go into how the opportunity presents itself, let me tell you that my information is not based on theory but upon real-world events described later in this posting.

The opportunity comes into play when the FDIC takes over the bank, also known as a seizure. The FDIC is not interested in owning real estate… they want their money back (or whatever portion of it they can get). The moment that you learn that your loan-holder is being seized, it is in your best interests to quickly get in a position to make a settlement offer. Even if a loan is performing, you can expect a settlement offer to be considered. The FDIC short-sale option will go away, however, once the loan is repackaged for sale.

If you miss the FDIC window, don't panic… there’s still another chance. Your loan will be packaged with other loans and the FDIC will sell the entire package to a third party. That third party will buy the package for pennies on the dollar against the debt portfolio’s face value and will then begin servicing the performing loans and attempting to collect on the non-performing loans. Your final chance to reduce your debt comes when you get this third party’s letter of introduction. If you have a way to quickly pay off a reasonable portion of your loan balance at that time, present that plan right away. The thinking here is that the third party has just spent a significant amount of money and will jump at the chance for a quick return on a portion of their investment.

How do I know this will work? Because I’ve been living in such a transaction for several months now (you didn’t think this process would happen quickly, did you?) and this exactly how it has progressed. When we learned of the seizure, we altered the property's marketing approach to garner an offer that would equip us to satisfy the loan balance. Because we didn’t have a list of troubled banks like the one below, this process consumed our first window of opportunity… by the time the owner met with the FDIC, the loan had been packaged and was scheduled to go to market. But the FDIC did confirm that they would’ve taken it if it had come in sooner. And as expected, the third party buyer was very interested in the reduced settlement offer. The end of the story? We're on the road to a closing!

I’ve left out a few details in the interests of time and of protecting our client’s privacy, but I’m happy to fill in blanks if you’d like to reach out to me.
Curious to know which Georgia banks are at risk? So was I. I originally got the list below from a proprietary source and weren't able to print it, but the Atlanta Journal-Constitution did us a huge favor by providing the information in their May 17, 2009 edition. To maintain the integrity of their reporting, I’m including it exactly as they wrote it. Forgive the small text, but it was the only way to fit it in the blog's format.

"Mounting bad loans and foreclosures landed more Georgia banks on a list of troubled institutions as measured by the “Texas ratio.” The formula, which dates from the savings and loan crisis centered in Texas in the 1980s, points to higher risk if problem a bank’s problem loans total more than 100 percent of its capital available to absorb losses. Atlanta-based FIG Partners calculated the ratios. "

Bank................................Location.......1Q09...4Q08
Security Bank of Gwinnett County....Suwanee........773%...335%
Southern Community Bank.............Fayetteville...532%...311%
Security Bank of North Metro........Woodstock......490%...236%
First Security National Bank........Norcross.......444%...340%
First Piedmont Bank.................Winder.........443%...373%
McIntosh Commercial Bank ...........Carrollton.....354%...229%
Neighborhood Community Bank.........Newnan.........353%...218%
Community Bank of West Georgia......Villa Rica.....293%...NA
First Coweta Bank...................Newnan.........291%...150%
Buckhead Community Bank.............Atlanta .......241%...165%
Chestatee State Bank ...............Dawsonville ...233%...231%
United Security Bank ...............Sparta.........217%...172%
Gordon Bank.........................Gordon.........210%...175%
First Commerce Community Bank.......Douglasville...201%...143%
Security Bank of Bibb County .......Macon .........187%...123%
Habersham Bank .....................Clarkesville...186%...167%
First National Bank of Georgia .....Carrollton.....176%...166%
Tattnall Bank.......................Reidsville.....163%...125%
Century Security Bank...............Duluth.........161%….131%
First Cherokee State Bank...........Woodstock .....159%...153%
Georgia Heritage Bank...............Dallas.........152%...156%
McIntosh State Bank.................Jackson .......147%...117%
Bank of Hiawassee...................Hiawassee......146%...114%
Security Exchange Bank*.............Marietta.......146% ...79%
Hometown Community Bank*............Braselton .....145% ...81%
Gwinnett Community Bank*............Duluth.........144% ...94%
Montgomery Bank & Trust*............Ailey .........143% ...65%
Peoples Bank........................Lithonia.......143%...162%
Bank of Lenox.......................Lenox .........142%...102%
First State Bank ...................Stockbridge ...142%...156%
American United Bank*...............Lawrenceville .139% ...79%
Douglas County Bank.................Douglasville...137%...121%
Security Bank of North Fulton* .....Alpharetta.....130% ...87%
Community Bank & Trust West Ga......Villa Rica.....130%...118%
Security Bank of Houston County* ...Perry .........128% ...82%
High Trust Bank* ...................Stockbridge ...126% ...59%
First National Bank of Griffin .....Griffin .......126%...126%
Community Capital Bank .............Jonesboro .....124%...131%
First National Bank of Barnesville*.Barnesville ..119% ...82%
Legacy State Bank...................Loganville.....118%...115%
North Georgia Bank .................Watkinsville...115%...104%
Farmers & Merchants Bank ...........Lakeland.......115%...121%
Peoples Bank & Trust*...............Buford.........115% ...92%
Oconee State Bank...................Watkinsville...113%...105%
Northwest Bank & Trust .............Acworth .......112%...102%
First Covenant Bank.................Norcross.......110%...108%
Bank of Soperton ...................Soperton.......107%...120%
Unity National Bank.................Cartersville...106%...108%
Providence Bank* ...................Alpharetta.....104% ...85%
* New on the list in the first quarter