Are you asking these questions?

What is the environment for rental rates?
What factors are most important when considering a move?
Should I consider purchasing a property?
Is commercial real estate a good investment?
What about Property Taxes?
Should I sell my real estate now?
How much equity do I need?
What about Interest rates?
Can a receiver sell the property?
My loan documents give me a right to the assignment of rents, why do I need a receiver?

What is the environment for rental rates?
Currently, rents are fairly flat in most sectors. However, they are, for the most part, significantly lower than five years ago. If your lease is coming up, now is a good time to review. Even if you feel that staying in your current location is your best option, Shepherd Group can assist in renegotiating your lease, which may result in savings for you.

What factors are most important when considering a move?
There are several factors that should be considered and they vary from business to business. Obviously, rent is a significant issue but there could be equal or more important factors including: does the current space work for my business now? Have circumstances changed that cause my space to no longer work for me? Does the location of my customers, suppliers and employees impact a move? As you get close to the expiration of your lease you should address these questions.

Should I consider purchasing a property?
For many businesses, purchasing makes sense, – if your business is stable in size and number of employees, you have a good location, etc. And with interest rates relatively low, owning your space can be cheaper than renting. Lenders tend to offer more favorable terms for owners / users than for pure investment real estate. Also, in many cases SBA loans are available which make acquiring business use property more affordable. Shepherd Group will review lease versus purchase as part of our analysis.

Is commercial real estate a good investment?
Real estate can be a good investment and can make for a good compliment to other investments and a good way to diversify your portfolio. Currently, property values are stable, but considerably lower than the values from five years ago. So now could be a good time to acquire investment real estate. The key issue is to properly underwrite and analyze the investment. You could also place your business in a property you purchase for investment resulting in potential tax savings and cost reduction. Shepherd Group provides in depth analysis of any potential real estate investment.

What about Property Taxes?
Property taxes are one of the most significant costs associated with commercial real estate. In many cases, property taxes exceed all other operating costs associated with real estate. Even as property values have fallen, property taxes have increased. A thorough review of assessed values and tax rates is a necessity in considering whether to lease or purchase real estate. Assessments and tax rates vary from city to city and county to county as well state to state. Shepherd Group will review assessments and taxes and where appropriate can help to reduce property taxes.

Should I sell my real estate now?
It depends. If the real estate is used for your business and your needs have changed (the space no longer works for you, you need access to capital, etc.), it may be it is a good time to sell; but be mindful that values are generally lower now than they were in 2004-2006. Also, debt balances and prepayment loan costs need to be considered. For investors, selling a property and trading up can make a lot of sense, especially considering the buying opportunities available. There also could be some tax benefits from selling investment real estate now.

How much equity do I need?
For Owner/occupied properties (typically more than 50% occupied for business use), equity requirements range from 10%-20% (10% for most SBA loans). For investment real estate, the equity requirements are 20%-35%, depending on the property type, location, investor experience, and balance sheet. Multi-family investment properties typically require less equity than other commercial investments. Shepherd Group can help investors sort through the details and develop a plan of action.

What about Interest rates?
While slightly higher than in 2010-2012, interest rates are still relatively low (less than 6%). Over the long term, interest rates will probably rise, but if you are looking to buy in the near term, you should be able to lock in the lower rates for about five years.

Can a receiver sell the property?
Typically, a receiver cannot sell a property while the property is under receivership. (Receivers are typically charged with maintaining the property, collecting rents, paying bills, basic maintenance, and leasing vacant space.) However, in some cases, as part of the receivership a receiver may be charged with disposing the property or the plaintiff can petition the court to have the receiver sell the property through a process called “A Receivers Sale.” If the judge approves the plaintiff’s request, then the receiver can sell the property. One advantage of a receiver’s sale is that the lender may avoid being on a direct chain of title. Another advantage is that the foreclosure process may be expedited. Obviously, if the receiver is a licensed real estate broker, he can manage and sell the property and the property becomes REO. Shepherd Group has worked on several receivers’ sales as well as manager/seller agent for REO properties.

My loan documents give me a right to the assignment of rents, why do I need a receiver?
While technically a lender can get the rents paid directly to the lender if the borrower has defaulted on the loan payments, as a practical matter, the borrower will most likely stop paying operating expenses. Typically, building services would be suspended; it will not be long before tenants stop paying rents. So you still do not get any cash and the property suffers. A receivership is generally the most efficient plan to keep the property operating as smoothly as possible. An alternative to a formal receivership is for the lender to go with a mortgage in possession (MIP) and have a professional manager take control of the operations. Shepherd Group has substantial experience as both a receiver and as a manager for MIPs.