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.