Let it snow, let it snow, let it snow

Not normally a huge fan of snow, having grown up outside New York City where snow accumulated and remained for weeks in piles where it had been plowed by the side of the road, encrusted with black tar and road debris. But a Saturday of huge wet snow flakes, accumulating about 4 inches, is a nice break especially when it's the first snow of the season. But Realtors don't get days off on weekends and was an excellent day to update marketing for listed properties and review a long, complex lease for a retail tenant client.

Picture is the front of my house in Virginia. Looks inviting!

No more smoking in Virginia restaurants

The new ban on smoking goes into effect tomorrow.

Effective December 1, 2009, smoking will be prohibited in restaurants that are open to the public with a few exceptions.

I noted recently in a restaurant near my house with a heavy smoking bar that they had installed a new ventilation system in the bar and were installing doors to enter into the bar. This is to be in compliance with the new law which allows any portion of a restaurant that is structurally separated from the non-smokers with its own ventilation system and at least one public entrance into the non-smoking area to be exempt from the new law. That is, you can smoke in those bars.

The law affects bars and lounges, since in Virginia, to receive an ABC license, the establishment must serve food and show a set percentage of food sales.

Bowling alleys, skating rinks and other places that have a snack bar are also affected by the new law. The ban also applies to hookah and cigar bars if they prepare food. Restrooms must also be smoke-free.

More information at Virginia Department of Health site,

Oh So Sweet It Is

When I took the retail listing earlier this year for the charming storefront on Battle Street in Old Town Manassas, I thought it would be fairly easy to lease. A 1000 SF retail space with an adjacent free parking lot in the heart of Old Town within walking distance of the train station. A dream location!

And it is. But the the economy was faltering, and new business owners hesitated to make lease commitments. I showed the space to coffee shop and ice cream parlor and gift store prospects, start-up companies flush with good ideas but short of confidence (not to mention working capital).

Until Ebony, owner of Oh So Sweet Treats: Sweet Treats For Your Sweet Tooth came along. I met her on a very hot day early in the summer season. We toured the space (not air conditioned that day!) and it was a love-at-first-sight experience. Ebony was already a successful business operator, baking and selling cookies, brownies, cupcakes and other sweets from her home, successfully operating as a mail order company. She was ready to take the next step and open a storefront gourmet bakery.

Over the years, I have seen disappointment on every side of the transaction when a deal does not work out. Owners are frustrated when a space does not lease or sell quickly, or worse when someone changes their mind early on (when contractually, they still can). Buyers and tenants sometimes lose out on what they deem to be the perfect location. Even before working in this business, I've always believed what's meant to be will be when it comes to matching the right property with the perfect user. And this was a perfect match.


The landlord was excited about Ebony's proposed use. They felt that a bakery would be an ideal complement to the neighborhood and their own newly opened Old Town Market next door. Ebony had her own vision of how her store should look, which included taking down and putting up walls, installing new flooring, painting, and ripping out a display shelf in the front window to create a sunny seating area. The landlord was willing to do much of the work for the right tenant, and Oh So Sweet Treats was that tenant.

I have visited Oh So Sweet Treats several times in the past few weeks. It's a welcoming establishment with earth-tone green walls, dark wood-grain flooring and a glass counter displaying an assortment of sweet treats. There are also tables set up (sans chairs, waiting for city approval! Come on, Manassas, if one can stand by the tables and nibble on sweets and sip coffee, let us sit).


I am a cookie lover, and on my first visit I purchased some amazing white chocolate chip cookies, moist and chewy with just the perfect balance of chips and cookie dough and macadamia nuts. Melt in your mouth may be a cliche, but there's no other way to describe how I savored the cookie experience.

I missed Historic Manassas Inc.'s Ribbon Cutting ceremony, but was there later in the afternoon and sampled some truly luscious cupcakes. Ebony's baked goods are up to even the most demanding and discriminating sweet tooth, such as my own, taking the satisfying-a-craving factor to a whole new enjoyment level.


Located at 9411 Battle Street in Manassas, Oh So Sweet Treats is open Monday to Friday from 9:00 a.m. to 6:00 p.m. and on Saturdays starting at 10:00 a.m. The staff are friendly and there are daily specials (advertised on Twitter, where Ebony has almost 1,500 followers!). Stop by for a real treat.

Are you ready to buy a commercial property?

By purchasing commercial property, you build equity in an appreciable asset that also offers multiple tax advantages and income-sheltering opportunities not available with leasing. But is it right for everyone?

Here is a list of factors to consider when evaluating the purchase of a commercial property, particularly an office or building, vs. leasing or continuing to lease.

FACTORS TO CONSIDER IN MAKING COMMERCIAL PROPERTY PURCHASE DECISION

Location/Site Considerations

• Is it in a thriving neighborhood?
• Is it in a commercial district that's popular and full of tenants, or half empty?
• Are prices trending up or down?
• Has the building been well-maintained?
• What business image equity does the building offer?
• How long you plan to stay in the space; will it be long enough for the property to appreciate in value? If not, could you easily rent it out to a tenant if you move?

Property Management

• Will you hire out property management or do it yourself?

Opportunity Cost

• What is opportunity cost of money used as deposit to purchase a building?
• What return would you expect to receive on that money compared to the return you would expect to receive if you invested the money back into your business or other investments?

BUY Vs LEASE CONSIDERATIONS

• Cash Outlay - Down payment of approximately 25% of the purchase price, depending on the lender and buyer’s credit, vs. lease space with good credit, typical outlay is the security deposit and first month’s rent

• Fixed vs. Variable Cost – With purchasing, costs more stable over long run, especially with long-term, fixed-rate mortgage. With leasing, the market dictates rent costs over the long term.

• Growth Considerations – Leasing allows more flexibility and fewer growth constraints for newer companies or those in high growth mode. If company is mature and stable, or buys bigger building and rents out additional space, buying can not only meet future space needs, but offers another source of income.

• Appreciation – In purchase, generate long-term increase in value through market appreciation.

• Tax Factors - Lease payments are usually fully deductible, but many expenses of owning office space must be written off over longer periods of time of up to 39 years. Depreciation on the improvement portion of the property and can usually deduct all interest payments. When considering the tax factors it is essential to consult an attorney and tax professional about the legal and financial considerations of owning office space.

Everyone Wants a Pool Table Until They Have to Cart it Away

Around 1992, shortly after we had the basement of our home finished, my husband and I went out and bought a pool table. It was one of the reasons we'd finished the basement! With three school-age kids at the time, we thought it a great addition to family fun and a draw for our kids to invite friends over. We purchased a functional-looking but high quality slate-top table.

The pool table fulfilled our wishes. I have fond memories of my father, now 87, playing pool with the kids when he visited. Although our oldest daughter, as she entered her teens, tended to go more to her friends' homes than bring them to ours, our middle daughter spent many nights and weekends during her high school years in the basement playing pool with friends. Our son did likewise, and continued through his college years to enjoy many games of pool when he came home with groups of friends.

The kids are all in their twenties now and have moved out of the house. My husband and I have basically ignored the pool table for a few years, as well as the basement with its horribly dated and worn blue rug, and white walls in desperate need of a paint job. So we decided beginning of this year to recarpet and paint. What to do about the pool table?

The carpet guy assured me his installers could move it and put it back, despite its weight. Since we weren't using the table, my husband and I were leaning toward selling it or giving it away. Not wanting to go through the whole craigslist thing, filtering calls and emails for a serious prospect, we opted for the latter--we'd give it away.

The title of this post says all. We discovered everyone wanted a pool table until they had to cart it away (and figure out where to put it). Took a while to find someone, as we say in real estate, who was ready, willing & able, but my painter's brother-in-law finally came and got it last month (actually 5 guys came and carried it off).

Why do I tell this story in a blog devoted to real estate topics? Last week I wrote about the office market heating up, and it continues to do so. I conducted several more office tours again this past week, had one lease proposal accepted by the prospective tenants, with another one requested I will send out Monday. So that's one office space leased and potentially a second.

These two parties plus several more who toured space last week were all exploring lease vs. purchase options. I know at least two were checking with lenders. There are buyers who want to purchase commercial property until they come up against the realities of lender requirements. Money is tight right now but hopefully it loosens up soon.

There are some qualified buyers out there, however. One closed on one of our office listings in Cascades Office Park in Sterling (below) last week.

One of my clients closed on an office condo in Springfield two weeks ago and an investor closed on another of our office listings (pictured below) last month, where I still have one more office condo for sale, btw.

This post wouldn't be complete without a picture of the newly finished basement (without the pool table!), with thanks to my awesome painter, Manuel Colcas of JMC Painting , who also installed the French door, and Mike Rokni of Chase Gallery Carpet and Flooring who did the carpet and tile work.

The Office Market is Heating Up

The office market is getting hot, hot, hot!

Since I work in many areas of commercial real estate, including office, industrial, retail and restaurant properties, I see firsthand the market waves in sales and leasing activity. Some weeks, all calls are for warehouse spaces; others retail. By far, the least amount of responses to our marketing since the beginning of the year has been for our office listings.

Until this past week. My phone has been ringing (as usual!) and most those inquiries have been about office space. On Wednesday I received two calls about Colonels Ridge from two different business owners who had toured the office park about six months ago. Each had put the acquiring-new-office decision on hold and are now ready to reevaluate making those moves. These two business owners were looking to lease space. I also showed office property to two other prospects looking to purchase. That's four office tours in two days!

Metro-Washington DC is largely driven by the government; since their fiscal year ends September 30, I have been told that money is becoming available to companies who derive their business from that sector.

John Stewart, an economist and Managing Director of Vantage Economics, a consulting firm, believes economically we have entered into a period of stabilization. Although unemployment will continue to be high for a while, the recession may be over. The Wall Street Journal reported this week that based on its latest quarterly survey of housing data, home sales were up compared to last year in Washington DC and Northern Virginia. Another report I read indicated a 3.7% price increase from April to May in the Washington DC metropolitan area, suggesting a recovery in the housing market here.

From my perspective, consumer confidence is back, reflected in business owners feeling positive about making long-term monetary decisions (i.e., signing leases, purchasing properties). I hope this trend continues.

REALTOR® Magazine-Daily News-Best Cities for Finding Opportunity

REALTOR® Magazine just posted the following question:
Where are the best cities to live in the US if you want to work hard and get ahead?

I was happy to see that metro-Washington DC made the list. The study, conducted by Forbes magazine, chose the top ten cities based on the number of Forbes' 400 best big companies and 200 best small companies headquartered in each. The study lists locations with high rates of small business successes, identifying what it considered places with the most opportunity.

I work with a lot of small business owners and have noticed the past month an increase in activity, i.e., number of listings I have leased or sold.

I had a 1,500 SF office listed for about half a year in Cascades Office Center, which leased two weeks ago.
And the charming 1,000 SF retail storefront on Battle Street in Old Town Manassas leased last week to the soon-to-opened Oh So Sweet Treats Bakery.

The retail tanning salon space I had listed for lease in Manassas Park Plaza leased in a week!

To me, this indicates consumer confidence is returning and underscores what I believe: Northern Virginia is a great place to live and work.

Best Cities to live to work hard and get ahead:
1. Houston
2. Dallas
3. Minneapolis
4. Pittsburgh
5. Boston
6. Washington, D.C.
7. Austin
8. St. Louis
9. Kansas City, Mo.
10. New York

Source: Forbes, Lauren Sherman (06/19/2009)
Article link:
REALTOR® Magazine-Daily News-Best Cities for Finding Opportunity

What it takes to succeed

Like many independent business people, I get together on a regular basis with other professionals to exchange ideas and contacts, in other words to network. Some of these meetings have a structured format, such as BNI; others are governed more by the members of the group. One of these networking groups I attend was started by my broker and business partner, Gayle Bailey. We meet twice a month for breakfast, with a guest speaker joining us for one of those monthly meetings to share an inspiring business success story.

Last week, Gayle challenged each of us in the group to share what we felt was the single most important quality that had contributed to our own success stories.

The business broker in our group, Jeff Neuburg, owner of Piedmont Capital Group, cited perseverance, his ability to overcome life's curves and to stay the path.

Our commercial lender, Byron Schulze with Virginia Commerce Bank , ranked honesty high on his list. If you always tell the truth to your customers, no matter how hard, you will earn their trust and retain their business.

John Richter, the attorney who owns and operates Provident Title and Escrow with his wife, talked about ethics, stating that your name is everything. If you lose that, it is difficult if not impossible to get it back, so you must always do the right thing to retain your good name.

Troy Toureau with First Potomac Mortgage , credited passion for his success in the mortgage industry. He elaborated, adding that he loves what he does and could not see himself doing anything else.

Gayle Bailey, Principal Broker and owner of The Bailey Team Real Estate , has earned his living for the past 35 years on close to a 100% commission basis. He said his ability to seize opportunity and always have options has been the #1 factor in his success.

I recognized my ability to multi-task, or as Gayle would say, have many "irons on the fire" as playing a large part in my success. It's all about juggling multiple transactions and simultaneously keeping track of numerous clients in various stages of their respective deals.

It was interesting to me that while each person identified a different trait, each of us in the room, successful in our own businesses, all share these same qualities. Integrity and hard work certainly come into play. But when you think about it, distilling the concept of success, passion may be the single most important ingredient. You cannot work hard and do your best for people when you are not fueled by passion.

Real Estate Investment for 2009

Investment sales in the commercial market are down. Banks have money to lend, but are looking for good cash flow and a solid down payment from the buyer, as I wrote about the last month. The National Association of Realtors® recently reported that some sectors of the investment market will come out better than others in 2009, quoting Ken Riggs, CRE, president and CEO of Real Estate Research Corp.

His Predictions:

Student housing. The combination of two factors—universities facing a financial squeeze and the surge of college-bound Generation Y members, the second largest demographic in the United States—creates strong demand for student housing.

Medical offices. Aging boomers and their readiness to spend on health care make this a solid investment, especially if located near hospitals and nursing homes.

Tax-credit housing. An unmet need for affordable housing, combined with the federal government’s willingness to provide funding via low-income housing grants and tax-exempt housing bonds, may make this an attractive niche for conventional multifamily developers.

Residential building lots. Smart developers are compiling parcels now so that approvals can be in place.

Neighborhood centers. Retail is risky at best, but people will always need staples, even in the tough times. That’s why neighborhood retail centers are a winner, especially in mature trade areas with a strong grocery or drug store anchor.

My Experience:

In 2004, when my son first went to Virginia Tech, my husband and I purchased a townhouse in Blacksburg which we rented out to 3 additional students (our son was the 4th tenant). The rents from the 3 students covered all our costs. Three-and-a-half years later we sold it for a decent profit. Had we decided to hold it, there is an excellent property management company in Blacksburg that does a great job. In fact, the party who purchased the townhouse was an investment buyer (former Tech student) who lives in California.

Health care industry continues to fare well. My clients who are in health-related industries, such as medical, dental, and all wellness type businesses (such as exercise including gyms, yoga studios & tanning salons) are prospering. Many report their earnings are up from last year, which shows that people do take care of themselves even when they don't eat out as often or cut back on non-essential purchases.

Builders are always looking for residential building lots especially in highly developed areas of Northern Virginia where such lots are hard to find, closer to to Washington DC.

Retail strip centers with long-term leases and solid tenants are a good buy. I also know of several with approved site plans ready for development, the land available for purchase.

There are some good buys out there!

Some Things Beautiful

I have been remiss in updating this blog, but I have also been very busy. This week alone I have been and am still in the midst of preparing and negotiating two sales contracts, both of which I represent the sellers, one letter of intent to purchase (I represent the buyer) and three letters of intent for leases (once again, tenant reps). There is a lot going on in my head!

My husband and I did take time out to visit Florida the week before last for a five day trip. I'd never been to Florida when it wasn't summer, i.e., humid and steamy. So it was a pleasant surprise to find South Beach (Miami) and Florida Keys to be 80 degrees, sunny, breezy and dry every day; 70 degrees, dry and breezy every night. We were extremely fortunate when it came to the weather.


We were also fortunate to stay at the Tranquility Bay Beach House Resort where you could see the sun set over the Coast Guard lighthouse every evening. These pictures remind me that no matter how busy you are, it's good to slow down a little and appreciate the truly beautiful things in life.

Grand Ribbon-Cutting Opening for New Businesses to Gainesville

I think I do what I do because:

1. I find it challenging,
2. I'm good at it, i.e., have met the challenge,
   
3. I enjoy helping people, and
4. I get to see the tangible results of my hard work.
   

Many of the people I work with are opening up new businesses and often are leasing or purchasing commercial space for the first time. It gives me a great sense of satisfaction to see them realize their vision and open their doors to the public. So I was particularly thrilled to attend the Prince William County/Greater Manassas Chamber of Commerce grand-opening ribbon-cutting event last Tuesday, co-hosted by the Haymarket Gainesville Business Association, for the business owners I worked with who are now located at the Piedmont Commercial Center in Gainesville.

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Kid Drop Zone AKA as The Nut House is a large indoor playground where parents can drop off their kids for a few hours. Parents have the options to drop and go, stay and play, or just hang out in our parents-only room. Here kids can do all the things they can't do at home such as jump on the beds and swing from the chandeliers all within a supervised environment. Their build-out, including all the things to climb up, jump on, slide down, or swing from, as well as the party and parent rooms, was done by John Parsons of Commonwealth Construction.

Run under the capable hands of husband and wife, Mike & Shelby, and their business partner, Jen, they have seven girls, ages 1 to 8, between them. They saw a need for the service they now provide: a fun but safe place to leave your children for a few hours while you run errands or enjoy a 'date night'.

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Brain Zoom is an extended learning center for children ages 3 to 11. They offer workshops that explore science and technology, foreign language, and healthful cooking (fun foods combined with nutritional awareness) as well as the more traditional math, reading and writing. Conceived by husband and wife, Patrick and Carolette, their business concept grew from their passion to create a stimulating, fun, creative environment to enhance a child's love of learning.


There are a number of rooms dedicated to these various themed activities, all organized, inviting and brightly colored. They also offer themed birthday parties in the party room, summer and holiday camps and a retail store full of creative play things. Their doors are now officially open!

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Zed's brother, Tam, who is also the chef, did the official honors at the ribbon cutting ceremony for Zed's Bistro and Wine Bar, for which a full review can be read here.

Working Together to Complete an Office Build-out

Some agents specialize as leasing reps, others as tenant reps. I work with clients on both sides of the transaction. It gives me a good perspective on landlords and tenants, and how each is willing to work with the other to make for a signed lease and a long-term landlord/tenant relationship. The experience served me well in the leasing of an office in The Ponds.

The Ponds is a commercial condominium development off Route 50 in Chantilly, Virginia. Gill and his family purchased their 1,900 square foot unit as an investment, but like many purchasers of small office condos, had little or no experience leasing out commercial space. When I saw Gill's For Lease by Owner sign in the window, the space had been empty for close to two years. I gave him a call and proposed working for him. I know the area and had successfully leased two other units in The Ponds.

Gill's unit was in cold dark shell condition. When I listed it the third week of July, I suggested Gill proceed with a standard office build-out. This can take three to four months to complete, and most tenants for smaller offices do not have the time to wait. They generally want to occupy the space within a month or two. Gill proceeded to contact a contractor to complete the build-out, which would include installing the HVAC (heating, ventilation, air conditioner) system, electrical panel, plumbing, drop ceiling and lighting, and interior walls to create offices and a kitchenette, as well as finish work (paint, flooring, etc.)

In the meanwhile, I met Bill. Bill's company had a small office in Washington DC, and they were looking to move to Virginia. The Tyson's area made the most sense, and he called on one of our office listings in Vienna. That office did not meet his space needs and we started to talk about what he was looking for. It has been my experience that company offices are usually geographically close to the company principal's home. Bill lived in Virginia Run and The Ponds is a few miles down the road. When we began to talk about Chantilly, Bill was open to the location.

Not only did Bill find the location ideal, his business model was such that he had time to wait for a build-out. He was also excited to custom design his new office. By mid-August, tenant and landlord had agreed to all terms and by early September the lease was reviewed and signed. Bill contacted several contractors for estimates, but ultimately decided to work with Gill's contractor. Casey Cao of NorthEast Construction Corporation in Springfield did an excellent job. He was knowledgeable of Fairfax County building requirements and brought the project in pretty much on-time and as budgeted.

The office had some build-out challenges. It is an irregularly shaped, interior unit with the only natural light coming from the front windows. Bill's design ideas included lots of interior glass to capture and maximize the available light. Some of his requirements were standard, such as a nice reception area, but he also had some special requirements, including a large computer room with additional A/C needs that could be 'showcased' and on display to his customers.


By early January, the final inspection from Fairfax County was issued, and Bill and his company, Francis & Goodwin, could move into their new office. Landlord and tenant had a good start to a long-term relationship as they worked together to get the office completed, and I know I had a hand in facilitating both that relationship and a successful build-out.

Lease-Back Deals on a National Scale

A few weeks ago I wrote about a sale/leaseback transaction we handled in Manassas, Virginia.

The New York Times has a recent article, "Cash Hungry Companies Turn to Lease-Back Deals" worth a read. Small to medium sized business owners are not the only commercial property owners exploring this option. The article reports that large corporations looking to divest themselves of their real estate holdings are turning to sale-leaseback deals to free up cash and pay down debt by becoming tenants of the real estate they formerly owned. AT&T and Deutsche Bank are two major companies who have successfully negotiated sale-leasebacks. General Motors was not.

The Real Deal, Mexican-style

You won't find El Vaquero West on the Internet. But you will find the newest Mexican restaurant, owned by brothers Manuel & Hector, on Washington Street (Route 55) in The Town of Haymarket across from BB&T.

I can't recall exactly when I met Manuel, probably well over a year ago. He owned and operated a successful restaurant in Orange, Virginia, and wanted to open up another one in the Northern Virginia area. Originally from Mexico, he and his brothers had grown up in the business, starting out in his uncle's restaurant in California. His cooking, he told me, was based on traditional family recipes; in other words, authentic Mexican.

Manuel liked Haymarket, but the available spaces at the time did not suit his needs. We broadened our search into Centreville & Chantilly, where I remember spending a very cold, very rainy morning driving Manuel around to orient him to where businesses were, where houses were and where competing restaurants were located since he knew nothing about Northern Virginia. We also looked at a few possible locations, but again, Manuel did not find them acceptable.

Over the next few months, I kept Manuel updated when new properties came on the market. His preference was for an existing restaurant. Last June I heard through the grapevine that the restaurant in the Washington Street location was going out of business, so I contacted the owner about its availability for lease.

Manuel liked the location of the building and the ambiance the restaurant offered, but he focused his attention on the kitchen. Most of the equipment was either old or not appropriate for his cooking needs. Although the kitchen would need to be redone, he wanted to be sure the existing ventilation system would pass inspection and he also wanted to find out what else would be required for an occupancy permit. I arranged for a meeting on site with the town's building inspector who walked him through all the code requirements, and requested and received the past year's health department reports. In late August, all terms agreed upon, the lease was signed.

All of our interactions and extensive lease negotiations were via phone and fax. Manuel does not have e-mail and he does not use the Internet. He conducts his business dealings like he cooks, in a traditional manner.

El Vaquero West #2 is now open for business under his brother Hector's expert management. My husband and I visited for lunch today and were given a warm welcome upon walking in. Although it was after 2:00 p.m., there were people seated as well as coming and going the whole time we were there. Tables can be pushed together to accommodate large groups and the food choices span 7 menu pages of Mexican offerings. A bowl of warm corn chips and homemade salsa kept us busy munching while we decided what to order. This is no easy task!

The service was friendly and attentive, the food piping hot and delicious, and the prices cannot be beat. Lunch specials start at an affordable $4.55. I tend to judge a Mexican restaurant by their guacamole, and here it is excellent. Also available are imported bottled beers, wine by the glass, and mixed drinks. Their specialty is margaritas! Hector told us they will soon offer beer on tap and the frozen margarita machine should up and running any day now.

El Vaquero West 2 is open 7 days a week, starting at 11:00 a.m. Most days they serve until 10:00 p.m. (exceptions are Saturdays until 11:00 p.m. and Sundays until 9:00 p.m.). You can find this new restaurant at 14910 Washington Street in Haymarket.Google Map

Lenders Weigh in on Investment Sales

Recently one of my clients, looking to sell an office condo, inquired:
"I'm wondering what rental income a prospective buyer would like to have for an office space based on comparable properties, and desirable Cap rates, which would then drive a buyer's offering price?"

In light of my client's question and last week's investment sale profile, I thought it would be useful to follow-up with a look at the viability of commercial investment sales in this economic climate. Since almost no deal is done without financing, I turned to some local lenders I have worked with and trust for insight and answers.

My questions to them and their responses below:
What sort of Cap rate is your bank looking for on an investment purchase and what sort of down payment for an investor these days? Also what lease term, as in years, would the bank require?

Andrew Fuller, VP, Virginia Commerce Bank:
Generally, for investors we're looking for 25-30% down with lease terms of at least 5-7 years with options. Leases should be seasoned for have some measure of financial depth or, we'll look to personal guarantees. A lot of banks are cutting back on investor deals these days altogether along with construction and other parts of the market like hospitality. In regards to Cap rates on investor properties, we don't have a maximum and don't generally use that when screening deals. I was told the CoStar report shows an average of about 7.5% for investor buildings/projects under 50K square feet.

Paul Flood, VP, M&T Bank:
Cap rates, that's a tough one... it is always an art rather then a science, but right now I would put it the high 7's, low 8's range for general use commercial property. As I'm sure you know money for commercial real estate investment is very tight right now. For me to get deal done, the borrower has to has to have sizable existing relationship with us or potential for it. Non-owner occupied commercial real estate loans are a defensive product for us, but if the situation is right we will do it to win a relationship. Down payment: I would normally tell you 25% and possibly stretch it to only 20% for a particularly strong deal, but in today's environment, you're looking at 30%.

Jeffrey Lee, VP, Access National Bank:
In general, we would look for a 75% loan-to-value, and a 1.25X debt service coverage. The lease term should be coterminous with the loan; in other words, if you are looking for a 5-year loan, the lease should be at least 5 years. The numbers vary based on the strength of the deal.

Andrew Brkic, VP, Bank of America:
Our options for investment property are few and far between at the moment. We're looking for a loan-to-value maximum of 65% and a Cap rate of 8-9% for non-0wner occupied real estate. In terms of lease requirement: 2 years or more. However, if a property has consistent historical lease income, i.e., 10 years with consistent rents, we will consider properties with a shorter lease. In terms of commercial space, owner-occupied is really our sweet spot and we can do those in-house at 80% loan-to-value, or 90% loan-to-value through the SBA 504 program.

To address my client's questions:
Overall none of the lenders have absolute parameters, just guidelines. A shorter lease can be acceptable with a tenant who's been in a property for many years and has financial depth and operating history. Exceptions can be made for an investor who puts down more than 25%, for example, so the debt service coverage is good, or for an investor who has good credit, outside income and solid financial position.

The National Association of Realtors®reports that the office market is feeling the impact of the recession, a result of high unemployment shrinking demand for office space. On the brighter side, the Washington DC metro market ranks 8th in the nation for lowest office vacancy rates due to one of the lowest levels of unemployment nationwide. Investment money appears to be out there for financially strong buyers and mortgage rates for commercial real estate loans are at historical lows.

Both these links, Cash Flow Analyzer and Advantage Software provide useful information on investment terminology. I include them not to promote the software products they are selling, which I've never used, but because they provide good explanations of Cap rates and other investment terms.

A Win-Win Commercial Investment Sale

Troy is a mortgage broker who I've known for years. He has worked with me on a number of personal loans, including a refinance of my home and a mortgage on an investment property I once owned near Virginia Tech.

In 2005, when the housing market was strong, he bought an historic brick building in the center of Old Town Manassas, Virginia, a walking city with an old-time Main Street USA feel. By day it is populated by small business owners, insurance agents and lawyers (due to the proximity of the courthouse), by night and weekends with tourists and families attracted to the family-run restaurants, arts and antique stores, and charming shops which line its streets, all of which are promoted by an active Old Town Business Association and Historic Manassas Inc., an organization dedicated to fostering business growth in the town.

With the changes and challenges to the mortgage industry, Troy needed to free up the cash he had invested in the building. In the spring 2008, he asked us to put it on the market for sale.

Consisting of 6,290 square feet on two floors, the building was originally constructed in 1918 and had been renovated in 1985. Troy occupied a suite of offices on the second floor, leasing out the remaining offices to multiple tenants. The majority of those offices were under lease, many occupied by long-term tenants. The building was ideally located within walking distance of the VRE (Virginia Railway Express) and a new five-story municipal parking garage.

Troy was willing to stay on as tenant or vacate, whichever the purchaser preferred.

The party who purchased the building had no plans to occupy it. He was looking for an investment property that offered a good cash flow. We calculated the rental income with Troy's company remaining as a tenant, deducted the operating expenses for the building, including utility costs, property taxes, insurance, and upkeep and repair, in order for the buyer to determine the net operating income (NOI). Factoring in his mortgage payments and tax benefits, the deal made financial sense to him.

We presented a contract with a leaseback provision, specifying the terms (rent and time period) under which the seller would enter into a lease with the buyer, which went into effect at the closing of the sale. The buyer was guaranteed a good income stream and return on his investment from the rental income from Troy's company and the other tenants.

We listed the property on May 1, contracted with the buyer on June 3, and the deal closed on June 30. The buyer was under a mortgage commitment deadline and needed to close quickly. Troy was happy with the sixty days list-to-close time period. In addition to staying in his offices and freeing up some cash, he realized a respectable profit on the sale of a building he'd owned for three years. A win-win situation for all parties!

Troy is Vice President of First Potomac Mortgage, located at 9116 Center Street in Manassas. Google Map

What a Difference a Mile Makes

There's that old adage in real estate: location, location, location. My experience working with Allison is another testimony to that truth.

Allison is one of the sweetest people you could ever meet. She has a ready smile that lights up her face when she sees you. Her business, like any business, relies on repeat customers. When I first met her, it was easy to see why people would feel at home in her store. As I got to know her better, I saw the determination with which she ran a successful business. When Allison wants something, she pursues it. And what she wanted was a new location for her store.

Anime World had been open for five years. Allison had a loyal customer base, but the store was located in a quiet strip shopping center that was difficult to access and off-the-beaten retail path. In recent months, some of the neighboring businesses had closed, surrounding her with vacant space. In addition, she was paying for about 500 more square feet than she needed. Allison contacted me mid-summer, about four months before the end of her lease.

I always like to visit a client's current location to get a sense of what works and doesn't work, and that is what I did in my initial meeting with Allison. I toured her store and we discussed her search criteria and requirements, including size, geographic location, amenities and business model. Allison's #1 priority was a more desirable location, but close enough so she wouldn't inconvenience her customers. She also wanted smaller space to better accommodate her store layout.

I found Allison a new location for her store in the Sully Place Shopping Center anchored by Lowe's & K-Mart. Her new store is about a mile from her old one, adjacent to a bank and offers greater visibility from the road. At just under 1,000 square feet, it is the perfect size to display her DVDs, comics, books, clothing and other Japanese animation merchandise she rents and sells. When I visited her yesterday, Allison welcomed me with her bright smile. She reported that all her old customers have followed her to the new store, which she opened just after Thanksgiving, and she is getting 3-4 new customers a day! They drive by, see her sign and wander in.

Anime World is located at 13881-F Metrotech Drive in Chantilly off Route 50. Google Map

Business Profile: Zed's Bistro & Wine Bar

Have you ever eaten Ethiopian food? I never had the pleasure until I visited the newly opened Zed's Bistro and Wine Bar in Gainesville, VA. What made this a special dining experience for me is that we sold Zed her condominium unit last year.

My business partner, Gayle Bailey, is a neighbor of Zed's and he introduced her to the Piedmont Commercial Center project. He knew she had been running a successful restaurant, Zed's Ethiopian Cuisine, for over twenty years in her Georgetown location in Washington DC, where she has served the famous and infamous, including politicians and movie stars. Zed liked the upscale concept of the center and was interested in the unique ownership opportunity the project offered for retail and restaurant operators. That is, she could purchase rather than lease her restaurant space, offering her the benefit of real estate equity and appreciation on her investment.

In addition to loving change and challenges, I also love learning new things. I'm a bit of an education junkie. Zed's deal provided a terrific educational opportunity for me. We sold her the space before the developer had broken ground on the project. The space was to be delivered as a 'cold dark shell'. A cold dark shell is basically a box without air conditioning, plumbing, electrical, sprinkler system, or lighting. This is an ideal delivery scenario for a restaurant.

Between signing the contract and closing on her purchase, Zed had a build-out to plan. I attended the initial meeting between her and Bob Dunning of Dunning Group Architects. Bob has a lot of experience in restaurant design, and his extensive knowledge of county building code requirements was apparent in that meeting. Among other things, he and Zed discussed placement of rooftop HVAC units (dining areas have different air conditioning needs than kitchens), location of her kitchen and all her equipment including sinks, walk-in refrigerators and freezers, stoves and cooking vents, and more. Listening to Zed's input gave me terrific insight into what it takes to run a successful restaurant; Bob's gave me county code requirements I could take with me to assist future clients.

Eleven months after completing her purchase, Zed's is open for business. I always tell my clients our relationship doesn't end at the settlement table. It gives me great satisfaction to support their businesses and watch them grow in their new locations.


Zed's is a warm, welcoming place, tastefully furnished, with an open kitchen so you can watch the chef cook. There's lots of natural materials like tile and granite, some nice artwork on the walls plus a few tvs for those so inclined. I don't recall the names of the dishes I sampled, but they were delicious. There were some shared appetizers, one with shrimp and the other with beef. Zed recommended the short ribs, but I am not a big beef eater, so I opted for the chicken dish. Everything came with a spinach and rice side dish and a rolled Ethiopian bread with the consistency of a pancake. Yummy! There are desserts on the menu but for me, the espresso made for a perfect lunch finale. The food had just the right spice (have I mentioned the sauce each dish was served in where you dip the bread?) and was unlike anything I'd ever eaten before. I cannot wait to return.

Zed's Bistro and Wine Bar is located at 6850 Piedmont Center Plaza in Gainesville, off Route 55 and across from the Haymarket Post Office, in the building behind US Tiger. Google Map

Happy New Year

In accordance with the tradition of New Year's resolutions, what better day than today to begin this blog. I am by career a real estate agent with The Bailey Team Real Estate whose business for the past two years has been primarily in the commercial market. I am by education and avocation, a writer. My published work can be found on My Personal Webpage. My goal for this blog is to combine my skills and talents.

In upcoming posts, I will highlight some of my clients and their businesses. So it seems appropriate today to relate a little about my road to real estate. As a younger mother with three school-aged children, I decided to return to school to finish up the college degree I hadn't earned in my youth. In succession, I earned three degrees: an Associates Degree in General Studies from Northern Virginia Community College in December 1993; a Bachelor of Arts in English from George Mason University in January 1996; and a Master of Fine Arts in Creative Writing, Concentration in Fiction, from George Mason University in May 2000.

Prior to finishing my MFA degree, I taught for two-and-a-half years at Northern Virginia Community College as an adjunct professor. As I have often told the story, a classmate called me on a Thursday to tell me the college was hiring, I interviewed on Friday, was hired on Monday, and walked into a classroom on Tuesday never having taught in my life. I love change and challenges. I can also be a terrific procrastinator and work best with deadlines. I had completed all the coursework for my MFA degree, but still needed to complete my thesis, a book-length work. The college would only hire me provisionally for a year without the degree. What better deadline could a procrastinator ask for?

After five semesters of teaching, I was ready for a change (especially from teaching that dreaded Freshman Composition class all students are required to take). I took a semester off and six months later realized I did not want to return to teaching. I answered an ad in the paper for a real estate transaction coordinator and began my new career path. I have thrived personally and professionally in this business.

Over the years, I started to acquire my own clients and found sales rewarding, leading me to move out of my office responsibilities and into sales full-time, which is where I am today. I work with many small business owners. My expertise and experience enables many of them to realize their professional dreams: opening a new store or restaurant in the perfect location; moving their office or warehouse to a better site.