Need Opinions On How To Find A Particular Property
I know a guy who's looking for class A commercial properties that are not on currently on the market. They have to be high $$$ properties preferably $10 million or higher. How would I go about finding these? Then If i do find one, what do I ask for compensation? Please Help me with this one.
This is a tough question oddly enough because there is not really enough information here. You know a guy who buys commercial properties over $10 million. Not on the Market doesn't mean anything other than he thinks hes tied into the realtor network. Unfortunately for you almost everything in this range is listed with a broker if the guy wants to sell. So that is going to make life more difficult.
So, what kind of commercial properties? Apartments? Shopping centers? Malls? Industrial/warehouse? What are his investment criteria? Does he buy on cap rate? If so whats his hurdle rate? Does he have greographic restrictions? Does he do development deals or only buy up and running properties?
Without having some idea of the answers to these details your question comes off as not sufficiently informed to be worth spending a lot of time on. Sorta like telling me you've got a friend in the entertainment business looking for venues. Makes a big difference if your friend is a classical violinist or Michael Eisner.
So, what kind of commercial properties? Apartments? Shopping centers? Malls? Industrial/warehouse? What are his investment criteria? Does he buy on cap rate? If so whats his hurdle rate? Does he have greographic restrictions? Does he do development deals or only buy up and running properties?
But seriously thanx a lot for taking the time to respond King, I really appreciate that. I'm gonna ask the guy the questions you asked me, and see what I get from that.
I was told he wants Industrial, or apartment buildings w/ 100 units or more, I don't know what cap rate means, or hurdle rate, and I wasn't informed of any geographic restrictions. I don't believe it matters if they are development deals either. So I don't know much yet ! So shoot me!
Glad to have been of help. Don't feel bad about not knowing. And a word of caution. There are lots of "guys" out there who claim to do big deals like this but mostly are a waste of time. Don't spend too much time chasing smoke for this guy.
If you're going back to ask questions, here are a few more:
Does he do these deals himself or does he broker them to other investors? How many deals did he do in the last year? How will he compensate you if you find something?
The idea is that he has to teach you enough about his business that you will recognize the kind of deal he will do when you come across it. After that its only a matter of getting out there and bumping into people who happen to have that kind of deal for sale.
this is exactly what he told me:
-Looking for just about any type of "Class A" commercial leased
investment, 90%+ leased
-Shopping centres, office buildings, industrial, single tenant or
multi-tenant, large apartment buildings
-Properties should include a good representation of national well known
tenants on long term leases
-Location can be anywhere in the US or Canada, prefer the larger urban
centres
-Would consider smaller cities in the right situation (i.e. Home Depot
or Walmart 20 year lease)
-Minimum $10 million per property, prefer much higher, mega deals for
portfolios into the hundreds of millions or even billions is very
possible
-My contacts include direct connection to the buyer and also several
commercial realtors that have clients with deep pockets
-A few examples of potential buyers are European and Israeli merchant
banks, pension funds, REITS, and other institutional investors
-Potential properties should NOT be listed on the open market nor been
shopped around.........if they are already on the market and have been
shopped around then my best principal contact and best broker contact
will have no interest in the property
-It is possible to deal with a broker on the seller side but only if he
is direct to the vendor
-For NYC, will look consider just about any type of property, does not
have to be "Class A"
-As far as compensation, I would suggest we decide this on a case by
case basis........for example if it was a $20 million dollar deal and
the seller would pay us 1% for consulting services and research
assistance, then that would be $200,000 to split
-Lastly, I can assure you that these contacts are very serious
purchasers and have very deep pockets for the right deal, they are
willing to pay market price and not looking to steal anything
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I'm deleting your duplicate of this post in the Deals in Progress Forum, Investor because to post in that forum you have to be a principal in the transaction (rule # 4 of the Deals in Progress special rules. And its sorta also a violation of rule #3. ) No hard feelings, really, and we'd like to help you pull this off.
Let me acknowledge that you are a little out of my league here. While I do, on occasion, stumble across deals of the type you describe I mostly avoid them because they are a little "thin" for me and require a lot more staff (not to mention dollars) than I am willing to invest in to manage.
That said, and based on my limited experience in such matters, how about helping me out a little more in understanding your contacts criteria.
Why is he so adamant about properties that are not on the market and haven't been shopped around? Most of the property at this level is held by portfolios just like his. In other words, there are no amatuers in the game at this level. So if they want to sell they are going to know who to contact: the handfull of brokers that specialize in this kind of property. If your guy so much wants to buy why is he closing off the one major source of product?
What is your investors source of funds? Does he manage for a pension fund? Private investors?
What cap rate does he buy at? What kind of product does he already own?
Hey King, Here is the response I got to your last question for me!
There are a number of reasons for wanting "off market" properties. I
have summarized some points:
-In many cases, large commercial properties are bought and sold without
ever being advertised or shopped around. The large firms such as CB
Richard Ellis or Cushman & Wakefield have their "A" list of clients
that
they give a first chance to when these properties become available.
So,
any properties that they post on their web page or other internet
advertising sites are properties that their top clients did not want.
So, in effect these are the "left overs" and we aren't getting a look
at
the "cream of the crop"
-There are always exceptions, but generally speaking the properties
that
have already been shopped around and not scooped up have something
wrong
that make them less than an ideal investment. This could include a
variety of things such as unfavourable terms on mortgage that must be
assumed, short amount of time remaining on leases to key tenants,
credit
worthiness of anchor tenants less than ideal or location
-My best broker contacts do several hundred million dollars of deals
per
year. However, they absolutely refuse to look at properties that are
already listed by the major brokerage firms. This is because the large
brokerage firms usually will not co-operate and split the sales
commission with another broker. Also, usually the large firms require
the name, address etc of the potential buyer before they release any
information. This is because they put the buyer's name and address
into
their data base and then send them info on future
properties..............in effect they try to take the buyer's business
away from the other broker by trying to deal directly and cut out the
other broker out
-It is possible for us to deal with a broker on the seller side but the
ideal situation is if he/she is with a regional firm as opposed to one
of the large national brokerages. Also, they must be direct with the
owner, no broker chains, this is a major turn off to many.
As far as cap rates, that is really decided on a case by case basis.
For example, a shopping centre in a major city such as LA or NYC is
going to command a much lower cap rate than a shopping centre in a
small
city in South Dakota (no offence!!) Also, the other key factors are
the
quality of the anchor tenants as well as time remaining on leases to
anchor tenants. For example, it makes a huge difference if the
shopping
centre has a Walmart with 18 years remaining on a 20 year lease as
opposed to a shopping centre with only 8 years remaining on lease.
I am not a manager for any of my buyer contacts. I strictly do the
research for them to find suitable properties. Some of my buyer
contacts are principals that already own a few million sq ft of
properties. Other contacts are with brokers that have contacts to
Pension funds, REITS, Arab clients, Isreali and European buyers.
Maybe brokers of land and commercial real estate do things differently in TX.
In PA, it's not unusual for brokers and agents to get paid by the buyer in land deals or commercial deals where there's no commission being paid to the buyer's broker. It's simply a cost of doing business for the buyer to compensate the broker.
Insofar as the listing brokers wanting buyer names and addresses before they will release info, I think someone is pulling your leg. If a broker has a signed agreement to exclusively represent a buyer, the agreement should provide for compensation being paid by the buyer to the buyer's broker. Also, the listing broker has no right to the buyer name & address info prior to an offer being submitted by that buyer.
If the listing broker tries to circumvent the buyer's broker and the buyer buys the property, the buyer will still have to pay his broker in accordance with the terms of the written representation agreement he has with his broker.
Sounds like your broker contacts are all contacts for buyers. Interesting because the name of the game is getting the inventory.
I would've been better off reading the encylopedia! LOL. Thanx, but I guess its time for me to hit the books because that was extremely confusing.
I'll make it real simple.
RE brokers representing buyers can be paid by their buyer-clients. They don't always have to be paid by the seller.
Listing brokers aren't entitled to buyer name and address until offer is submitted.
The name of the game is finding sources of inventory, not sources of buyers.