Productive Week

Last week was a great week to reflect on. Not only did I open approximately $10 Million in new escrows, I enjoyed making multiple new business relationships that may lead to more business. The other factor is that the people are really nice and I also want them to be new friends.

Every Tuesday and Thursday I host a sales training meeting. Last Tuesday we had a presentation from Angelica Quintero of Bank of America. She has been doing business with Anthony Behar (one of our associates) for some time now. Her discussion was an update about the SBA and the loan programs at BofA. Thursday's meeting was a presentation by attorney Peter Niemiec, whose specialty is environmental real estate law. This was a vibrant meeting and the discussion flowed. We are often faced with changing laws and issues regarding our brokerage of industrial and commercial real estate. Peter was a fun and very informative expert and all of our associates enjoyed his presentation.

On Wednesday for lunch, Anthony and I were guests of the Clark Trevithick law firm at their offices on Wilshire Blvd. We met with four of their top attorneys, Robert DeMeter, James Arico, Scott Page and Kevin Fiore, and they were a lot of fun. It turned out that I knew Kevin from multiple deals where he represented my client, who owns many Downtown Los Angeles properties. Lunch was a whirlwind of discussion about mutual clients and marketing strategies in this unique time for real estate.

On Friday, Brad Ross and I had a meeting with the accounting firm of Harley Ellis Devereaux. If you want to see an amazing build-out of office space, venture over to their offices at 601 S. Figueroa St. All I can say in one word is wow. We had a very special lunch at the California Club and discussed networking, marketing, and projects and clients that we had direct and indirect history with.

In between these meetings were other enjoyable and various discussions and meetings with our clients and my sales agents. The team efforts here at Major Properties continue to produce results with completed transactions in this challenging market.

Life's Lessons

Last night I got a frantic call from my sister, the mother of my nephew Jeremy (20). He was in the hospital with what was thought of as a stroke. It was just the previous Saturday night that Jeremy and I hung out and went to see Get Him to the Greek. It was a stupid but enjoyable funny movie about nothing really. Something to laugh about and enjoy with a friend.

So this morning, after my boxing workout at 7 am and a quick shower at my mom's house, I rushed out to see Jeremy. It seems that he did not have a stroke, but did need tests to see what made him dizzy when he fell last night. He also has slurred speech (maybe it was the Dodgers blowing the game that caused him to have a medical episode). All kidding aside, when I got to the hospital he was unconscious as they wheeled him back to his room. When he woke up he was mobile with no apparent side effects, and I was relieved. When my wife Theresa showed up, I took off as things were looking good (pending the results of the tests).

Prior to Saturday night, I had been traveling with Theresa. We went to Washington DC and helped my son Sam get settled into his apartment for his two-month government internship. Then we came home for 3 days and left for Portland, Seattle and Victoria Canada. When we finally got home, I felt like I was gone for months. We did so much and had so much fun. But it was so nice to get back home. I missed everything about L.A.

When I left the hospital, I visited my Dad's resting place (it was just down the road). I wanted to say hi and share with him stories about my life. I wound up thanking him for all the wisdom and life lessons he shared with me. The last lesson that he shared is an inspiration that continues to be a teacher for me. It is what he left as a message to everyone he ever had the pleasure to share a moment of his life with:

Glad you came by. Be a winner.
Think creatively and help others.
You must try in order to enjoy tomorrow.
I taught my wife, 4 kids and grand-kids to analyze, be creative and be honest.
Don't be greedy.

I have come to respect my Dad more and more even with him gone. Sometimes we don't appreciate the people in our lives until they are gone. His lessons are so ingrained in me that I find myself asking "What would Dad do in this situation?" The answers come from his interactions with people. He expected much from everyone he did business with, and he made them stand on their own with his support in the background. He made all of his partners wealthy and had their unending respect. I watched him in business give those with questionable character enough chances and rope so to speak until he made a decision to continue to do business with them or move on.

We are in uncharted waters with the current economy. And in those waters we are all in the same boat. Some with more or less resources than the other, but what we do have is our character. There will be some people that can not deal with the "new reality", as my friend Sam Rosenwald calls the current market. They will look for quick money or choose dollars over relationships. This is common during times of trouble and fear. It is in these times that our work ethic, our loyalty and honesty are challenged most.

Having a mentor like my father made the difference for me to do what is right and stand for something. This is why Major Properties, a 47 year old firm, still stands tall today. The foundation was built with integrity and out of respect I vow to preserve those values and dreams. This is what clients of up to 50 years remember, and why they continue to call our firm again and again. They all know that we will take their interest first, and over time we will help them profit with sound advice to get through these stormy waters.

I will pray today that Jeremy is okay and will back on the pitcher's mound soon. Thanks for reading and have a great and safe remainder of 2010.

The Instability of Stability

Just the title can cause confusion.

We are in the third year of this commercial and industrial real estate down cycle, and confusion is key. The marketplace has accepted the current economics, whether it be the business world, investors, users, etc. Like any group of interconnected beings, the business world has adapted and it is fascinating to me.

Business continues to be done despite the current economic crisis. Sophisticated buyers (and those not so seasoned) are jumping into the market at prices they know deep in their souls will be taking another hit. A hit down that will cause their investments to not show returns for quite some time.

There is a massive amount of foreign money, pooled monies, syndicated private money and corporate money. Some are moving on deals while others are sitting on the sideline. The good news for us is that deals are getting done. Of coarse, the volume is down but we are making a living.

Property values are under pressure from the marketplace and the recent months of stability are starting to crack! This will be good for first time home buyers and owner/users of real estate, but my advice is to wait and be patient with your cash, because the future is going to have amazing opportunities. You will want to reserve your cash for that special deal or deals, pending your appetite and abilities to purchase.

My recommendation is to look for deals that have the following characteristics:

1. Below replacement cost
2. Below market cost
3. 10% cap rate or better without leverage
4. Good location
5. Have the ability to hold if you lose the tenant or the rent drops 50%

This downturn will continue for quite some time. It is important to protect your ability to function without pressure from bad tenants and continued decline in values. For a more detailed discussion about how you might be affected, and how you can profit from this market, please contact me.

A Broker's Worth

I am still amazed when a potential client decides to go on their own and try to represent themselves in real estate deals.

After 25+ years practicing industrial and commercial real estate, I am aware of the many perils that can derail a transaction, from property details to government regulations. I also know that I possess the negotiation skills that can make or save a client's fortune.

For instance, last year I had a deal in escrow and my client decided to meet with the buyer, without me being there. I did not know about the meeting until way after the event took place.

In that meeting my client negotiated a reduction in price from $11.5 million to $10.95 million. The problem, which I explained to my client, is that he did not get a $500,000 non-refundable deposit for a consideration for the reduction, nor did he get a complete waiver of due diligence. Well, you can guess what was coming in a few weeks and did.

Against my advice, my client met again with the Buyer and this time he got the price lowered to $9.5 million. The deal did close and I think that the property today is worth maybe $5 million. The point of this discussion is that we probably could have gotten the deal closed at $11 million as we would have made the first reduction with a released funds deposit as consideration and waiver of the due diligence.

Emotions play a large part of business deals. It is important to have professional representation working for you to save you from yourself.