Make It Rain!
CCIMs share tips for weathering the transaction dry spell.
“Now is the new normal,” says Garry E. Adams, CCIM, CPA, president of Capital Realty in Sherman Oaks, Calif. And he’s right. While commercial real estate professionals may fondly recall the lush green years before 2008, those good times aren’t returning soon, according to economic forecasts.
On this long trek to recovery, it’s time to adjust or be left in the dust. Instead of watching their sales commissions shrivel, brokers and other CCIMs are using their knowledge and experience to find new revenue streams. Adams, for example, combined his real estate expertise with his accounting credentials to offer cost-segregation services. “This service provides the highest return on investment I have ever seen. I am able to demonstrate at least a 100 percent return in the first year.”
Adams isn’t the only one providing tax services for property owners: Kathleen Yonce, CCIM, president of Key Real Estate Services in Boca Raton, Fla., has affiliated with Tax Engineering Associates, which offers tax consulting for property owners nationwide. Her goal is twofold: increase the number of services she can offer to her existing clients and tap into TEA’s national exposure, “widening the reach of our client base significantly,” she says.
Like Yonce and Adams, other CCIMs are discovering revenue-producing wellsprings to counteract the effects of this transaction dry spell. They offer a few more ideas to help get — and keep — the cash flowing.
Leverage Your CCIM Designation.
“Wearing your CCIM pin is like wearing a Rolex watch,” says Neil Victor, CCIM, a Sperry Van Ness adviser in Huntsville, Ala. “It may not be mentioned in conversation but it is certainly noticed.” Victor wears the pin to every event and signs all his documents with CCIM after his name. “My designation has put me on the top of the list when financial institutions seek an expert opinion in my market,” he says. And one thing has led to another: His broker opinions for banks and mortgage companies have resulted in distressed property listings and management assignments.
“The CCIM designation serves as a great source of credibility. It continues to open doors for us,” says Jason S. Baker, CCIM, a principal with Baker Katz in Houston, who, along with partner Kenneth Katz, CCIM, has remained focused on retail investment sales. They also have formed an investment fund to purchase and redevelop shopping centers. “We’ve taken an existing strength and put it to work in an economy that is ideal for investing,” Katz says.
Tapping the CCIM network also pays off, says Gregory Fitzgerald, CCIM, of Tri-Oak Commercial Group in Canton, Ga. As of May, Tri-Oak had closed 19 retail investment transactions, five of which closed in less than 11 days. “Our best relationships come from networking with CCIMs here in Georgia. It has proven very helpful in continuing to transact in this environment,” he says.
Break Old Ties.
Sometimes what worked before just doesn’t cut it in the new economy. T. Sean Lance, CCIM, managing director of NAI Tampa Bay in Seminole, Fla., dissolved a partnership of more than two years with two partners and instead concentrated on developing a variety of different income streams. “My success can be directly attributed to the breaking of my partnership arrangement, cutting expenses, developing new revenue sources and, not only getting my CCIM designation, but putting it to good use.”
Lance has been successful providing due diligence services for out-of-state buyers. “Because there are so many distressed assets that have significant deferred maintenance issues, buyers from outside the marketplace are looking for local experts to be their ‘boots on the ground,’
” he says. Typical assignments include unit-by-unit inspections of hospitality or multifamily assets. “Depending on what the client wants, these fees can range from $20 to $30 per unit — $2,000 to $3,000 for a 100-unit property,” he says.
Invest in Properties.
There’s a concept — practice what you preach! Thomas Bellanca, CCIM, RPA, principal broker for Dulles Corridor Real Estate in Aldie, Va., has invested in real estate near future transit stations.“I’ve built up a portfolio worth $5 million in residential properties that generate cash flow.Combined with continued brokerage activities, these properties will give me my best year since 2005.”
Craig Melby, CCIM, SIOR, president of The Melby Group in Brevard, N.C., also took his own advice. “We found a great commercial site — a closed gas station — at a great price and no buyer, so we decided to figure out what to do with it while we had it under contract. An analysis of the market revealed the area could use another car wash. So we got into the car wash business.”
In addition to buying properties, being your own landlord maximizes your ROI in down markets, says William T. Adams, CCIM, CRB, president of Adams Commercial Realtors in Atlanta. His office space is rent-free since his tenants’ rent covers mortgage and overhead. “I even reduced the amount of space that we occupy and rented it out to others,” he says.
Diversify, Diversify, Diversify.
Mark Lee Levine, CCIM, MAI, CPM, CRE, (and more), professor and director of the Burns School of Real Estate at the University of Denver, has garnered a string of designations in his 40-year career.
“Diversification is the key,” he says. “I have practiced this position all my working life.” A state-certified appraiser, property manager, investor, teacher, author, attorney, and consultant, Levine generates fees, contacts, referrals, and business from all of his areas of expertise. And, he adds, “the CCIM designation has been a big part of my ability to enter some areas that would have been difficult to address.”
Looking at the big picture often causes people to ignore the little things that count — like their cell phones. Lance saved $600 a year by making sure his cell phone plan matched his calling needs. Adams now employs his IT consultants on an as-needed basis instead of on retainer. Victor turns down about three listings a week because the realistic income potential is not there for him. It results in a big savings in signage costs and “frees up time to concentrate on real income opportunities.”
The two things Lance won’t cut? Market research and marketing. “These are two mission-critical items,” he adds.
Work for Lenders.
To quote hockey great Wayne Gretsky, “You always want to be where the puck is going to be.”
“We saw the puck landing squarely in the lender corner,” says Robin L. Webb, CCIM, CPM, CRB, managing director of Coldwell Banker Commercial NRT Florida in Maitland, Fla. In 2009 his company leveraged its huge Florida presence and successfully marketed 158 bank assets and anticipates closing around 250 asset sales with bank clients this year. “Additionally we are providing receivership and expert testimony to the banking community,” he says.
Joseph C. French Jr., CCIM, a senior investment adviser with Sperry Van Ness in White Plains, N.Y., also became a receiver in several states and started a management company. “This allowed me to be of service to lenders from the day of default. We now have cash flow from broker opinions, receiverships, and monthly management fees, with hope of some additional brokerage business.”
Share Your Opinions.
Whether you call it a broker opinion of value or broker price opinion, it’s putting your experience and knowledge to good use. Since moving into distressed assets, Lance has completed more than 50 BPOs at $350 to $1,000 per assignment. “The CCIM designation has added to my credibility and I can provide detailed reports and analysis using all of the tools offered through CCIM,” he says.
Save Your Clients Money.
That’s easy to do as a tenant rep, says Todd Walsh, CCIM, of the Colorado Group in Boulder. “In our market, tenants can expect to save on average 10 percent to 20 percent by renegotiating or shopping for new space.” Tenants’ drive to trim budgets has boosted Walsh’s lease and sales transactions by 30 percent this year.
Lowering clients’ property taxes is another revenue stream, says Andy R. Fishler, CCIM, an adviser with the Boerke Co. in Milwaukee. Appealing tax bills helps his clients “save money on any vacant space and lowers the taxes that pass through to tenants, improving tenant retention,” he says. “Property owners pay us a one-time fee of one-third of the taxes saved for that year. Given the tenant retention and sometimes increased rent on renewals, we’ve been very successful.”
Find New Clients.
A focus on valuation consulting led Lee Y. Wheeler III, CCIM, president of NAI Fidelis in Beaumont, Texas, to become a regular vendor for a privately owned hospital seeking evaluations of medical office space. In addition, “Credit unions have become a major player in commercial real estate lending. When deals are below a certain amount they like to utilize a broker opinion of value,” he says.
While it’s hard to identify where new clients will come from, it’s always good to keep your networking apparatus in place in your local market as well as reaching out to other markets. Steven Jacquemin, CCIM, SIOR, of S.J. Financial Group in Ellisville, Mo., has had success networking with CCIMs through the MailBridge program. “I represent a purchaser who is looking to buy properties with long-term government leases. MailBridge has been a great resource.”
Adjust Your Thinking.
Although the bottom has been reached in some sectors and markets are slowly starting to turn around, the game has been changed forever, most experts say. Commercial real estate professionals must adjust to the idea that this profession will continually evolve. As in other industries, technology will play a larger role in marketing and probably in sales. Many CCIMs have shifted marketing dollars from print to online as a great savings. Others have found it a good time to bring new talent on board. “We saw the downturn as an opportunity,” says Katz of Baker Katz in Houston. “We invested in people who would not have been available if it weren’t for this economy.”
Others have used this down cycle to learn about new business areas. “I’ve undertaken roles in the property management department of my firm, helping facilitate the building of common area maintenance reconciliations, as well as assisting in the management of a few bank-owned properties,” says Tara Duncan, CCIM, a broker with Compass Commercial Real Estate Services in Bend, Ore. “This has been a great way to understand the property management side as it relates to the leasing and sales of properties.”
New lines of business also change the way clients perceive you. Wheeler also works with clients lowering property taxes: “It continues to build our reputation as the commercial property experts,” he says.
But the best way to survive a downturn? Take your cue from the Boy Scouts and be prepared. “This is my fourth real estate depression,” says Adams in Atlanta. “This business is cyclical. You need to plan accordingly.”