“If you set an unreasonable
expectation, you are not
going to be successful.”
That all leads to a second three-step dance,
Reiff adds. “You need to get the borrower (or
bank) to accept reality in regard to pricing, find
a buyer willing to step into the current market,
and then keep everyone together while hoping
the market doesn’t shift even more.”
In Tampa, Edward Miller, SIOR, CCIM,
managing director and principal with Colliers
International, along with his partner, Dee
Seymour, another SIOR member, closed on
three buildings in July and another earlier in
the year. “We only take on things that will
sell. We have a 100 percent track record of
selling things we take. If you set an unrea-
sonable expectation, you are not going to be
successful.”
Miller’s secret sauce in the very depressed
Tampa market is first to focus on existing prop-
erties that are well positioned for manufactur-
ing or bulk distribution. And secondly, he says,
the seller has to understand the true value and
possibilities of the building in question.
“You need to be ruthlessly clear-eyed and
clear-headed about the direction you want to go
and indicate that clearly to the seller; otherwise
you set the wrong expectation at the beginning
of the relationship,” Miller says.
What’s reality in Tampa? Answer: 50-60
percent off peak pricing.
“We are beginning to see transactions
again,” says Miller. “We are seeing more buyers, typically end-users, and sellers who are
willing to adjust the sale price to the market.”
End-User Predominance
Things are not good in Tim Ruffin’s town,
Reno, Nevada. Tim Ruffin, SIOR, CCIM, is
senior vice president at the Reno office of
Colliers International, and he looks around at a
city with an unemployment rate above 14 percent and an office building market at 22 percent
vacancy. Yet, he feels fortunate because he has
been able to move property, one recent closing
and two more buildings in escrow.
“The people that are buying now are end-users who want small buildings and are paying
cash,” he says.
Even making those deals were tough because
they were on properties taken back by banks.
But like Miller in Tampa, Ruffin believes the
only way to survive is to be somewhat ruthless.
“We don’t take listings unless the sellers use
our numbers; otherwise it will waste both our
times,” he says.
A lot of banks try to go to market with an
older appraisal, which is no longer relevant as
markets move so rapidly. “Once we secure the
listing, we expect the bank to go to the market
at real value,” he says. “If they go to the market
with the old appraisal, the property will sit and
lose opportunities.”
Going to market at real value is the key,
because he cautions, “If you misprice your
property today, you will only chase down
value.”
Echoing Ruffin in Reno, John Stacy, SIOR,
president of J.P. Stacy & Co. in Prairie Village,
Kansas, a suburb of Kansas City, reports, “The
only properties that are trading in this market
are those that are used for business.” In other
words, it’s a cash-in-hand, end-user market in
the Kansas City area as well.
Nevertheless, Stacy has been working with
an investor who has been involved in non-Kansas City deals, one of which was an office
building in Michigan that sold at 50 percent of
peak.
“You have to understand what the mar-
ket conditions are [at the location] where the
property is. You have to do your homework,”
says Stacy “I worked with another SIOR in
Michigan, a guy that I had a lot of confidence
in. Still, if the bank doesn’t come forward,
nothing will happen. This particular bank ini-
tially wasn’t as cooperative in the beginning as
they were at the end. But, cash speaks. Throw
in cash and say you’ll close in 30 days and peo-
ple will listen.”
In fact, that deal was a short sale. “We
bought it for much less than what they had it on
the market for and less than what was owed,”
Ruffin notes.
Working With Banks
The good news is that a number of regional
banks have come around to the concept that it
is better to actively sell off their portfolios of
foreclosed properties and take the lumps now
rather then wait around hoping the market will
stabilize in the near future. In fact, better times
for commercial real estate could be a long time
coming.
Zion Bancorporation in Salt Lake City has
turned to a local company, Innovision Property
Group, to help them sell assets across the
country.
“Zion has taken a proactive position in
writing down balances and getting properties
into the market at actual prices,” says Michael
Jeppesen, SIOR, CCIM, Innovision Property’s
