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Commercial Investments

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An older presentation. I no longer represent GMAC, but the data is still good.

Published in: Business, Economy & Finance
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Commercial Investments

  1. 1. GMAC Real Estate Commercial Property Investment types Michael Fisher
  2. 2. Commercial Property Classes <ul><li>Different from Commercial RE Types </li></ul><ul><li>Retail / Shopping Centers </li></ul><ul><li>Office </li></ul><ul><li>Industrial </li></ul><ul><li>Multi-Family </li></ul><ul><li>Hospitality </li></ul>
  3. 3. Building Classes <ul><li>Applies mostly to office – sometimes multi-use, multi-family, and shopping centers </li></ul><ul><ul><li>Class A+ - Landmark property </li></ul></ul><ul><ul><li>Class A – Built since 1980 of steel & concrete, usually 5 or more stories and quality construction </li></ul></ul><ul><ul><li>Class B – Usually renovated in good locations – could be wood frame, smaller size, or older </li></ul></ul><ul><ul><li>Class C – Older, unrenovated, average to fair condition. </li></ul></ul>
  4. 4. Investment Types <ul><li>Land to develop </li></ul><ul><li>Engineering Completed </li></ul><ul><li>Vacant Building </li></ul><ul><li>Troubled – bad environment, low vacancy </li></ul><ul><li>Repurposed – was something else </li></ul><ul><li>Mis-Managed – great potential, underutilized, high vacancy, low rents </li></ul><ul><li>Investment Grade – high occupancy, market or higher rents </li></ul>
  5. 5. Land To Develop <ul><li>Most challenging </li></ul><ul><ul><li>Happening in Hampshire </li></ul></ul><ul><ul><li>Rezoning </li></ul></ul><ul><ul><li>Subdividing </li></ul></ul><ul><ul><li>Government Approval </li></ul></ul><ul><ul><li>Tests – soil, traffic, environmental impact </li></ul></ul><ul><ul><li>May have community challenges </li></ul></ul><ul><li>Benefit – Considerable appreciation over cost of land </li></ul>
  6. 6. Engineering Completed <ul><li>Approvals mostly completed </li></ul><ul><ul><li>Ready to build – drawings and tests completed </li></ul></ul><ul><ul><li>Cost of construction </li></ul></ul><ul><ul><li>Requires permits, and inspections </li></ul></ul><ul><ul><li>Still need to find tenants </li></ul></ul><ul><ul><li>Requires different funding – construction loans, bridge loans, etc </li></ul></ul><ul><ul><li>Usually Class A or B when completed </li></ul></ul><ul><li>Benefits – great increase in value of property after construction completed </li></ul>
  7. 7. Vacant Building <ul><li>Construction completed or older building with no tenants </li></ul><ul><ul><li>Interior build-out usually needed to accommodate tenants </li></ul></ul><ul><ul><li>Renovation Costs </li></ul></ul><ul><ul><li>Very old buildings can have high restrictions </li></ul></ul><ul><ul><li>Marketing costs to find good tenants </li></ul></ul><ul><ul><li>Can be hard to find funding </li></ul></ul><ul><ul><li>Class B or C depending on location after occupancy </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Quicker turnaround on your money with tenants </li></ul></ul><ul><ul><li>Increase in overall value of property </li></ul></ul><ul><ul><li>Benefits the community </li></ul></ul>
  8. 8. Troubled Building <ul><li>Bad environment, low occupancy </li></ul><ul><ul><li>Cost of attaining new quality tenants </li></ul></ul><ul><ul><li>Can fix occupancy issues, cannot fix environmental issues </li></ul></ul><ul><ul><li>Best for someone who knows the neighborhood well </li></ul></ul><ul><ul><li>Class C usually </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Usually cheap </li></ul></ul><ul><ul><li>Can get quick turnaround with raised occupancy </li></ul></ul><ul><ul><li>Benefits the community </li></ul></ul>
  9. 9. Repurposed <ul><li>Previously designed for another purpose </li></ul><ul><ul><li>Warehouse conversions </li></ul></ul><ul><ul><li>Military bases </li></ul></ul><ul><ul><li>Can be costly </li></ul></ul><ul><ul><li>Class C usually – Can be Class B </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Acquisition costs can be low </li></ul></ul><ul><ul><li>Great appreciation </li></ul></ul><ul><ul><li>Benefits the community </li></ul></ul>
  10. 10. Mismanaged <ul><li>Low occupancy, low rents </li></ul><ul><ul><li>May need to renovate to justify market rents </li></ul></ul><ul><ul><li>Marketing costs to raise occupancy </li></ul></ul><ul><ul><li>More common than you think </li></ul></ul><ul><ul><li>Can be Class A, B, or C </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Easy to accomplish </li></ul></ul><ul><ul><li>Low relative cost </li></ul></ul><ul><ul><li>Increased value to building and community </li></ul></ul>
  11. 11. Investment Grade <ul><li>Full or near full occupancy, market rents or better, good construction, good areas </li></ul><ul><ul><li>Higher acquisition cost </li></ul></ul><ul><ul><li>Lower returns on your money </li></ul></ul><ul><ul><li>Typically Class A </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Least amount of risk </li></ul></ul><ul><ul><li>Easier to manage and maintain </li></ul></ul><ul><ul><li>Very popular with Institutional Investors </li></ul></ul>
  12. 12. Closing <ul><li>Commercial Real Estate project to fit your investment goals and experience </li></ul><ul><li>Pros and Cons to every Real Estate Investment </li></ul><ul><li>Great referral for me </li></ul><ul><ul><li>Anyone who wants to explore Commercial RE investing </li></ul></ul><ul><ul><li>Shopping center owners or buyers </li></ul></ul><ul><ul><li>Business owners who want to own and don’t know the risks and rewards. </li></ul></ul>

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