Download - Commercial Investments
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GMAC Real EstateCommercial Property Investment types
Michael Fisher
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Commercial Property Classes
Different from Commercial RE Types• Retail / Shopping Centers• Office• Industrial• Multi-Family• Hospitality
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Building Classes• Applies mostly to office – sometimes multi-use,
multi-family, and shopping centers– Class A+ - Landmark property– Class A – Built since 1980 of steel & concrete,
usually 5 or more stories and quality construction– Class B – Usually renovated in good locations –
could be wood frame, smaller size, or older
– Class C – Older, unrenovated, average to fair condition.
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Investment Types• Land to develop• Engineering Completed• Vacant Building
• Troubled – bad environment, low vacancy• Repurposed – was something else• Mis-Managed – great potential, underutilized,
high vacancy, low rents
• Investment Grade – high occupancy, market or higher rents
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Land To Develop• Most challenging
– Happening in Hampshire– Rezoning– Subdividing– Government Approval
– Tests – soil, traffic, environmental impact– May have community challenges
• Benefit – Considerable appreciation over cost of land
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Engineering Completed• Approvals mostly completed
– Ready to build – drawings and tests completed– Cost of construction – Requires permits, and inspections– Still need to find tenants
– Requires different funding – construction loans, bridge loans, etc
– Usually Class A or B when completed
• Benefits – great increase in value of property after construction completed
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Vacant Building• Construction completed or older building with
no tenants– Interior build-out usually needed to accommodate tenants– Renovation Costs– Very old buildings can have high restrictions– Marketing costs to find good tenants– Can be hard to find funding– Class B or C depending on location after occupancy
• Benefits– Quicker turnaround on your money with tenants
– Increase in overall value of property– Benefits the community
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Troubled Building• Bad environment, low occupancy
– Cost of attaining new quality tenants– Can fix occupancy issues, cannot fix environmental
issues– Best for someone who knows the neighborhood well– Class C usually
• Benefits– Usually cheap– Can get quick turnaround with raised occupancy– Benefits the community
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Repurposed• Previously designed for another purpose
– Warehouse conversions– Military bases– Can be costly– Class C usually – Can be Class B
• Benefits– Acquisition costs can be low– Great appreciation– Benefits the community
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Mismanaged• Low occupancy, low rents
– May need to renovate to justify market rents– Marketing costs to raise occupancy– More common than you think– Can be Class A, B, or C
• Benefits– Easy to accomplish– Low relative cost– Increased value to building and community
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Investment Grade• Full or near full occupancy, market rents or
better, good construction, good areas– Higher acquisition cost– Lower returns on your money– Typically Class A
• Benefits– Least amount of risk– Easier to manage and maintain– Very popular with Institutional Investors
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Closing• Commercial Real Estate project to fit your
investment goals and experience• Pros and Cons to every Real Estate Investment • Great referral for me
– Anyone who wants to explore Commercial RE investing
– Shopping center owners or buyers– Business owners who want to own and don’t know
the risks and rewards.