This was shot while tooling down Interstate 40 between Flagstaff and Kingman, Arizona. It’s all part of a new feature for this blog entitled CRE Road Kill. Stay tuned for more CRE Road Kill.

The International Council of Shopping Centers (ICSC), publishes a “Shopping Habits Report” in the first quarter following the end of a calendar year.

As a retail leasing specialist, I digested the entire 2009 report, subtitled, How the Recession has Impacted Consumer Shopping Habits, and discovered that indeed center owners need to be on top of the consumer game.

The “2009 Shopping Habits Report” contains invaluable information about the future consumer trends that will impact center owners, whether large or small in size.

You can read the report for yourself and draw your own conclusions. However, three things stuck out to me in the report:

• 58% of consumers believe their income will stay the same or become significantly less in 2010
• Most consumers have and will continue to throttle their discretionary spending through 2010
• Strip centers and “Lifestyle Centers” attract the highest frequency of repeat traffic

For those of you who are my clients, I want to briefly focus on the strip center/lifestyle traffic models, which run in the 70-75% repeat traffic level. In 2010 and 2011, my Company, is seizing on the concept of “life-styling” centers that have a higher than normal tenant mix by creating “Center Websites” that serve as a marketing destination point for Broker and tenant inquiries and present a center personality to the viewers.

I am working with clients to help them discover and communicate the flavor and theme of a center to prospective tenants via a unique center website. Village at the Boulders is an example of a “Center Website” that communicates lifestyle and quality of tenant mix. It’s hard work to create this themematic message but the end result is an organic marketing message that can serve the leasing needs, tenant needs and of course, the pride of belonging to the mix.

For owners who have nominal number of national brands or, none at all, the concept still has credibility to the leasing and promotional effort because local strip centers that serve small businesses, pizza outlets, exercise studios, coffee shops and an ethnic restaurant can create a local lifestyle image.

The sites also serve as the focal point for Broker-to-Broker dialogue. One of the most powerful features of the “Center Website” is its “PULL” or “SEPARATION” feature. Owners are looking for ways to differentiate their properties and this is but one way to do so.

The spending habits of consumers will continue to remain in flux until we see a restoration of confidence in the economy. In the meantime, I continue to ask my Owner/Clients to look at “out-of-the-box” models that can create more leasing opportunities and a higher consumer traffic count.

In addition, larger centers NEED and SHOULD create center marketing events that can draw large number of consumers to their centers in order to provide exposure and predisposition for repeat visits.

My team at Arizona Commercial is looking at marketing models that join the “Center Website” to tenant exposure, high traffic consumer events and thus create the old fashioned “Win-Win-Win” for owners, tenants and consumers.

“DOWNLOAD THE 2009 SHOPPING HABITS REPORT” and above all, read it and find ways to recreate your marketing approach for 2010-11.

One thing that will not work is sitting still.

Many businesses predicate and sustain their business model on the economic relationship they have with their lease. When the line of profitability intersects the economic demands of the lease, business owners are faced with tough decisions…so, too are Owners.

Truly, a lease is a function of sound business planning and, in these days, may prove pivotal with respect to sustaining profitability. Revenue for some businesses has decline by almost 30 percent, a huge and life-threatening decline for just about any endeavor.

My Property Performance Analysis (PPA) was orignally designed to assist owners with assessing their property performance and financing options in this “vicious market” but I am extending it to a new approach that assists tenants with evaluating their lease, lease options and streamlining their lease.

The Tenant PPA looks at a number of factors from the Tenant’s side of the relationship, then seeks to formulate a strategy of lease modification that will prove accepatable to the Lessee and Lessor. Some of the components of the Tenant PPA are:

1. Financial review of business performance
2. Creation of ecomomic model for lease performance
3. Streamlining the lease to cycle through the downturn

Bottom Line. As a result of the Tenant PPA, rental rate modification may result if supported by the financial analysis. The Owner maintains leased space with creative offsets to the streamlined lease that serve as incentives against a space “going dark.” These incentives may include early renewals, extensions and rent adjustments associated with positive market and business performance improvements.

The Cost of Going Dark. Going dark is expensive. Re-letting space in a highly competitive market is costly, time consuming and almost always results in revenue decline when measured against a well drafted lease modification.

When an Owner/Tenant relationship is economically strained beyond the breaking point, our position at Arizona Commercial is a simple one, keep the lights on! In a rapidly appreciating market with vacancies below seven percent, this would not be the normal case. However, these are not normal economic times and the decision to execute a Tenant PPA may be in the best interest of the Parties.

Three suites are currently available and are priced at $9.50 per square foot, triple net with graduated annual rent incentives and half rents for qualified tenants. Download the flyer.

Owner is offering graduated lease rates with half-rent incentive for qualifying tenants. Download the flyer.

Watch the short video below to preview this property

For more information about this property, contact Donald Teel by email or, if you prefer by calling 928.777.8100. Visit CommercialWebPage.com. Download the flyer.

Posted by Donald Teel, Arizona Commercial

Taking the guesswork out of commercial real estate investment requires more than a hope, a prayer and signature.

The genesis of commercial real estate investment is found in the analysis of the basic math surrounding the transaction. Costs, cash flow, depreciation, appreciation, money in and money out. Math is the science of the deal.

While the origin of commercial transactions is found in the science of basic mathematical functions, the art of performance is found in the crafting of the document; this is the model. Well crafted documents are extensions of the numbers and the intentions of the principals.

If there is to be any semblance of predictability of performance such must be memorialized and embedded in the language that constructs the investment, i.e., the purchase agreement or lease agreement.

Then too, the document’s credibility is only as good as the integrity of its signatories; their motivations. They who sign are those who are called upon to act in accordance with their written promises.

Summary: the deal is as good as the numbers (the Math), the performance is as good as the document (the Model) and the execution of the promises is only as good as the integrity of the principals (the Motives). Upon these three the investment hinges.

The numbers are the science, the document is the art and the performance is the warranty. Upon these three the deal hinges and the door of performance opens and closes.

I have seen and written a lot of documents. In my career I have seen short documents that were good and long documents that were bad. There have been times when the short word accomplished as much as the long word and vice-versa.

Good numbers, contrary to the opinions of some of my contemporaries, are seldom the guarantor of performance. My experience has shown me, countless times, that the integrity of the transaction is always found in the fulfillment of the promises of the principles and this only as a result of superior documentation, whether short or long.

In retrospect, I have seen great documents backed by great numbers end in disaster due only to the diminished capacity, whether intentional or not, of a Principal Party to perform as promised. Lawyers want us to believe that documents are everything. I have seen good deals with superior documents go south because of bad intentions.

Nothing can overcome a Principal with a misguided principle, no matter the document, no matter the math.

Then too, I have seen miserable documents when placed in the hands of principled Principals run their course without incident.

After more than two decades I have learned that the math, the model and the motives are the three inseparable ingredients of any commercial real estate transaction; the most powerful being the later.

To me, this is the holy trinity of real estate investment and one cannot function without the other two.

Upon these three the deal hinges.

It is not that I am reluctant to be completely transparent with a client. That is the easy part. The difficulty lies in communicating to commercial property investors that they may be facing a new commercial reality.

Our new commercial reality contains several characteristics that make buying and selling, leasing and landlording and other forms of investment more precarious than perhaps in times past.

Heads I Win Tails You Lose

Commercial real estate values are tipping and for some investors it doesn’t matter what side of the coin comes up.

In a majority of major commercial markets commercial property is softening and for those who purchased in 2005-2007, things may be less than stellar. This is also true of commercial real estate markets like Prescott, Arizona.

Owners who purchased in the 2005-07 framework invested at the top of the market…they bought high.

Commercial Investment Reluctance

Investor reluctance is a second factor impacting the answer to the “What do you think my commercial property is worth?” question.

We are in the shadow of hesitation. Lack of confidence is creating a wait and see menality for some investors. This simply means that commercial property owners will need to be more creative with respect to how they attract tenants and buyers.

Commercial Financing Rules

Lenders are implementing both new and more stringent commercial property financing rules. It is simply more difficult to find funding than it was in 2002-2006 and lenders are burning through spreadsheet analysis in an attempt to only fund the most promising and secure loans.

Yes, lenders are lending! But lenders are lending more cautiously and they are less willing to bet on traditional performance with respect to property appreciation. In fact, they are factoring in depreciation based upon performance actuaries present in the market.

All is not lost. We are simply in need of a dose of creativity with respect to investing and divesting of commercial property.

Need new strategies? Call me at 1-877-380-1000 or, if you prefer, you may email me.

2997 Centerpointe East, Prescott, Arizona - Newer Industrial

This is but one example of the tenant-investor opportunities available in the central and northern Arizona market areas.

Centepointe East features the newest industrial property opportunities in the market and this piece is the most affordable of them all.

Property Description:

New free standing industrial building with 3 overhead doors, good parking, in new business park. Ask about Owner terms for potential purchase.

Location Description:

Located off Highway 89A between the communities of Prescott, Prescott Valley and Chino Valley, easy access to 1-40, and 1-17

Lease and Purchase Information:

There are three suites available within this building; Two 1,500 s.f. and one 2,000 s.f. Best of all they are priced at an amazing $0.25 per s.f. per month, plus NNN. In addition, this property can be purchased with a potential seller financing.

Contact me about this property or email me. If you prefer, you may call me toll free at 1-877-380-1000.