Turning Your Leased Industrial Facilities into a Profit Center

Turning Your Leased Industrial Facilities into a Profit Center By George Livingston and Christie Alexander

Ed. Note: George Livingston is founder and chairman of NAI Realvest, based in Maitland, one of the most active commercial real estate brokerage firms in Central Florida. He is a principal of CommerCenters, LLC, which ranks as one of the region’s largest developers of industrial facilities.

According to current economic indicators---and most economists--- U.S. business and industry will likely show measurable signs of improvement in 2011. That means the window is narrowing on the opportunity for industrial firms to recognize significantly improved revenue from their leased facilities.

That may seem counter-intuitive at first. But the current economic cycle is rife with opportunity for successful enterprises with positive credit history. Your landlord is loath to admit it, but the fact is, your company---more specifically your leasehold obligation---is one of your landlord’s principal assets right now.

Nationwide, commercial properties---including the facilities you occupy now---have decreased in value as a result of the real estate decline and the accompanying recession. With regional and local market vagaries, all properties have suffered. As undercapitalized companies downsized or folded, vacancies spiked and rents from remaining tenants have not made up the difference.

That means the capital value of your monthly rent payment---the relative proportion of your landlord’s mortgage payment or ROI covered by your payment---is substantially greater than the numerical dollar value. Your landlord and your landlord’s lender are both eminently aware of this.

To the extent that you can turn that value differential into cash---or concessions---you can improve your company’s cash position.

But beware the window is closing. As the economy improves and more companies expand, the value differential will evaporate.

If your lease is due for renewal this year, current market conditions are even more favorable.

Landlords will agree to substantial concessions to retain a good tenant. Even if your lease is not due for renewal soon, negotiate now and offer to extend the term.

A reputable offer of terms and conditions from a new landlord will inevitably lead to stronger concessions from your current landlord.

From your current landlord’s perspective, the only meaningful differential is an estimate of your relocation costs versus his cost to lease the space to a new tenant.

Well-informed---and well-represented---tenants are cutting very good deals now with pragmatic landlords, fixing advantageous rates, lengthening lease terms and negotiating improvements and upgrades.

In the current market cycle, most companies will benefit from lease negotiations conducted with the expertise of a good tenant representative. Almost every commercial property firm today retains associates whose specialty is representing the interests of tenants.

Such specialists have the capacity to research properties, landlords and local market conditions, and know which concessions are most reasonable.

They also know the conditions landlords face. A newly built industrial property may have minimum lease requirements imposed by lenders, and thus might be more flexible granting improvements or upgrades than lower lease rates.

Landlords of older properties may be in a better position to wait out the recovery and thus be less inclined to negotiate generous concessions of any sort. A good tenant representative will know the inside story.

The end result is the same. Time is of the essence. Act now and you can lock in rates and terms that fit your business plan and substantially improve your bottom line.

ICI Homes Chairman Hosseini optimistic about housing recovery

ICI Homes Chairman Hosseini optimistic about housing recovery

DAYTONA BEACH, Fla. – April is shaping up to be the best month for ICI Homes sales in the last three years, Mori Hosseini, chairman and CEO of the homebuilding company told the national audience on CNBC’s daily TV show Mad Money hosted by Jim Cramer earlier this week.

Cramer has been insisting that the hard data supports his conclusion that the housing market will bottom out in June of this year despite continued media commentary to the contrary. So he decided to reach out to one of the nation’s hardest hit markets – Florida, and to one of the nation’s largest privately-held homebuilders to get his perspective. Hosseini and Cramer discussed the state of the industry.

"Prices of homes stopped dropping in February and the velocity of sales picked up dramatically,” Hosseini said. “We are cautiously optimistic that we are coming out of the downturn and the worst is behind us.”

Hosseini has good reason to be optimistic. Traffic to the ICI sales centers has spiked in recent weeks, he said.

“There is demand out there because we cut our prices to their lowest levels in many years. Savvy buyers recognize tremendous value when they see it, so they’re finally getting off the fence, taking advantage of historically low interest rates and getting back into the market…and that’s good news for us.”

When asked why he thought the media was under reporting this shift in activity, Hosseini explained to Cramer and his audience that the media has always been a lagging indicator in any building recovery and it may be six to seven months into the rise of activity before the media starts reporting positive news.

Cramer closed the segment lauding Hosseini’s positive comments which he strongly indicated supports his theory that the housing bottom is nearing.

For more information, contact:
Lisa A. Egle, Marketing Manager ICI Homes-Daytona Beach, 386-236-4273

Rosemary Messina, VP Sales & Marketing ICI Homes, 386-236-4231

Larry Vershel or Beth Payan, Larry Vershel Communications, 407-644-4142

About ICI Homes
ICI homes, ranks among the top 100 Builders by Builder magazine and is one of the largest privately owned homebuilder in the US. The 30-year-old firm builds new homes and resort facilities in the Volusia-Flagler region as well as Northeast Florida, Orlando and Tampa.