124 replies to this topic

[Urbanistco]

The question about how much a developer puts in is obviously related to his track record but 99% the banks ask for a personal guarantee anyway which is why many developers use the holding companies as a shield to their personal assets, sometimes even this fails in court.

 

On projects I've done, I always go for a subject to rezoning. The larger developers sometimes opt out of this due to their Council connections or confidence in the process.

 

The golden rule used to be 33% land acquisition, 33% construction/entitlement/33% profit. Economic times have changed it, now often what separates successful projects is land acquisition because construction costs are almost fixed. Another crucial factor is holding costs...on larger projects, if you don't option the property, you can be paying $20,000 month in holding costs while you wait 2 years for rezoning.

 

For me, 15-20% is yellow, proceed if your project is dialed in. 20-25% is green light for go. Anything above 30% is a special project... 

[MarkoJ]

The golden rule used to be 33% land acquisition, 33% construction/entitlement/33% profit. Economic times have changed it, now often what separates successful projects is land acquisition because construction costs are almost fixed. Another crucial factor is holding costs...on larger projects, if you don't option the property, you can be paying $20,000 month in holding costs while you wait 2 years for rezoning. 

 

On concrete condo projects land is under 10% from what I can tell?  Bosa paid $6 million for the Promontory site and that has to be grossing close to $80 million?  

[concorde]

there is no magic rule of thumb for land value as part of your final cost.  How can you use a 10% factor when you are building a 5 storey building vs a 25 storey building

[Mixed365]

Its pretty slow around the forum these days so if you want to ask any questions about commercial or multi unit residential real estate ownership, development, etc I can answer them on a general level

When you are developing a commercial building and/or part of your building is commercial what goes into choosing a commercial brokerage firm? 

Looking around town you obviously have Colliers, Cushman and Wakefield, CBRE, DTZ - but what really differentiates them? Is it more the commercial broker themselves that you go after and not so much the firm?

 

[concorde]

^I have relationships with all of them and they are all pretty much the same.  Colliers is the big boy, but DTZ, CBRE, Cushman are all offering incentives to draw you away from each other.  Frankly in my opinion, they are all lazy and charge exorbitant fees to do little work

[Szeven]

How accurately are commercial listings priced? Is it safe to say that all the big brokers understand the economics of the different situations and properties? Do they sometimes not consider all the possible options and leave an abnormally large return on the table for someone who knows more?

[Urbanistco]

By the time a site hits a broker, it's has usually been passed over a few times by people more connected then you (or I). In my opinion, good ol land acquisition is still what separates the men from the boys.

[Szeven]

By the time a site hits a broker, it's has usually been passed over a few times by people more connected then you (or I). In my opinion, good ol land acquisition is still what separates the men from the boys.

 

Insider trading type situations are what separates men from boys in every industry. I was just wondering if maybe the metrics used by some dont consider certain uses, and therefore there are special situations from time to time.

[Mike K.]

Wouldn't insider trading in a real-estate sense mean someone is a financial winner and someone a financial loser? If you're planning to sell your property wouldn't you want it on the market where your asking price may be paid as opposed to striking a back room deal that could mean you're missing out on some serious money? I dunno...

[Szeven]

Wouldn't insider trading in a real-estate sense mean someone is a financial winner and someone a financial loser? If you're planning to sell your property wouldn't you want it on the market where your asking price may be paid as opposed to striking a back room deal that could mean you're missing out on some serious money? I dunno...

 

I was thinking along the lines of someone selling property based on all known public information, but the insider purchaser buying the property knowing that a zoning change/change of OCP/variance issue is a sure bet.

[Mike K.]

Well, see the thing is it's never a sure bet, not unless you're in cahoots with elected officials. Any developer worth his stripes will know what we can realistically expect and won't shoot for the moon. The sale price of the land, generally, reflects the up-zoning opportunity already. Many landowners will rezone the parcel before selling it and realize a much higher profit.

[SamCB]

I'm looking for a small commercial storefront space for a new business - approx 400 sq ft would be perfect. I haven't had much luck finding the right downtown space by contacting the commercial brokers, and frankly there isn't much space available in this size range. Most of what's available right now is too big. 

 

Is there any trick to finding what i'm looking for? Maybe contacting building owners directly?

I'm on spacelist and icx every day. Maybe you guys have some insights...?

[Mike K.]

400 square feet is very small and in high demand. Depending on what sort of business it is and what you'd like to do with the space (and how much money you have for tenant improvements) you may want to contact developers with newly built retail space to see if they would be interested in dividing an existing retail space. Union (Anthem Properties), Mondrian (Alpha Developments), Argus (Fort Street Properties) and the upcoming Janion (Reliance Properties) would be good places to start, although the latter won't be available for lease until at least early 2015. Era (Concert Properties) will be finishing early next year.

[Urbanistco]

Well, see the thing is it's never a sure bet, not unless you're in cahoots with elected officials. Any developer worth his stripes will know what we can realistically expect and won't shoot for the moon. The sale price of the land, generally, reflects the up-zoning opportunity already. Many landowners will rezone the parcel before selling it and realize a much higher profit.

 

Contrary to belief, many landowners are terrified of the entitlement process and this is why the brokers are cut out. Mom/Pop landowners have three options:

 

1. List with broker, pay commission, realize a lower profit, and avoid rezoning

2. Sell to a developer with a slight land lift (unzoned)

3. JV with a developer at assessed value for a share in the project

 

Option 3 is how some developers exclusively operate. When they JV with a land owner, they shoulder no holding costs and the deals are almost always subject to rezoning with time options built in favor of the developer. The owner gets a larger share of the land lift and the developer mitigates his risk. Sounds easy but getting people to agree is the challenge, hence the skill of land acquisition is often what separates folks.

 

There is no concrete way for any particular situations...I've structured deals with first right of refusals built in, land trades, ALR land swaps, transfer of development rights the list goes on and goes. You just gotta find out what works for who you are trying to extract from. Sometimes the cash talks method is all that works.

Edited by Urbanistco, 09 July 2014 - 08:47 AM.

[29er Radio]

SamCB, the reality in this town is that despite ALL the for lease signs up, once you decide on size, location and budget you might have 2-4 choices at any one time, especially in retail. If you want to do food/beverage, then the list gets smaller. I think you can message me on this site and I might be able to help you depending on what you are looking for or at least help you feel like you

aren't going crazy because you cant find what you want. 

[VicHockeyFan]

400 square feet is very small and in high demand. Depending on what sort of business it is and what you'd like to do with the space (and how much money you have for tenant improvements) you may want to contact developers with newly built retail space to see if they would be interested in dividing an existing retail space. Union (Anthem Properties), Mondrian (Alpha Developments), Argus (Fort Street Properties) and the upcoming Janion (Reliance Properties) would be good places to start, although the latter won't be available for lease until at least early 2015. Era (Concert Properties) will be finishing early next year.

 

Ya, 400 is pretty small, even for downtown.  But if you have money, someone might divide up a bit.  

[29er Radio]

How accurately are commercial listings priced? Is it safe to say that all the big brokers understand the economics of the different situations and properties? Do they sometimes not consider all the possible options and leave an abnormally large return on the table for someone who knows more?

 It is very hard to "steal" land. Quite often someone does profit from a site that the previous owner does not, but that is most often a case of further effort not free uplift on the value. Free rides are very rare. And there is a skill set attached to convincing a bank to lend you money for commercial property and that skill alone deserves compensation.

[concorde]

I'll agree it is very hard to get the inside track on public land since everything is under careful watch from outside groups these days.  There is no law that I am aware of that allows me to get private land for what I consider to be a better deal, but that's also how you create enemies.

 

400sf is a very small piece of space and I would never consider dividing a space up, it costs too much money and I would have to charge an large premium.  Even if I was to do that at the end of the lease how likely am I to find someone who wants that small a space.  There is a unique building over in the Fernwood square that offers tiny little spaces, I remember going to a place called Twoonie Tacos several times and it couldn't have been much bigger than 400sf.  

 

As for how accurately commercial real estate is listed, I am not sure if you mean raw land or retail office space?  Usually I tell the listing company how much I want to lease the space for.  They tell me if that's realistic, we haggle, and then advertise and wait for offers to come back.  For the most part the listed price is pretty close to what you get, but it all comes down to supply and demand

[VicHockeyFan]

400sf is a very small piece of space and I would never consider dividing a space up, it costs too much money and I would have to charge an large premium.  Even if I was to do that at the end of the lease how likely am I to find someone who wants that small a space.  There is a unique building over in the Fernwood square that offers tiny little spaces, I remember going to a place called Twoonie Tacos several times and it couldn't have been much bigger than 400sf.  

 

But you'd probably always say that in most cases, you'd get more rent from 2 x 400sqft. than 1 x 800, but you also create twice as much work/potential vacancies and your two 400's might be less fiscally resource deep, so turnover might be higher too, so it's more like 3x the issues...

[concorde]

But you'd probably always say that in most cases, you'd get more rent from 2 x 400sqft. than 1 x 800, but you also create twice as much work/potential vacancies and your two 400's might be less fiscally resource deep, so turnover might be higher too, so it's more like 3x the issues...

Yes, I can't argue with what you are saying, but it also comes down to overall value of the building.  you will get more sale value if you have several high end tenants like large national chains like Royal Bank, Starbucks and Shoppers Drug Mart than a Twoonie Taco, XXX Video and Bob's Pizza.  Potential buyers want to see tenants that can pay their rents on time every month who also have the money to invest $500k or so into their stores and compliment your property

 

No disrespect intended to anyone wanting to rent 400 sf, but they likely don't have a lot of money so I would be concerned their rent may be late or they might not invest the proper money into the space to make it look good.