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Lease Renewal Tips

by Chris Garcia, 8:59 PM on March 22nd, 2012, No Comments

Renewing your lease can be tricky, make sure you have done your homework and allowed yourself enough time to negotiate the best possible deal. Check out this article with some great tips:


February 2012 Market Update

by Chris Garcia, 5:16 PM on February 1st, 2012, No Comments

The overall market is improving steadily, and will continue to do so.  Absorption is expected to be over 800,000 SF for 2012.  United Health Group continues to acquire property while St Jude and Target are gearing up for large expansions with Target building 700,000 SF in Brooklyn Park.

Here is a brief overview of the Twin Cities office and
industrial market:


  • 484,000 square feet of positive absorption for 2011
  • Vacancy rate fell to 19.2%
  • Vacancy rate fell for the first time since 2006
  • Vacancy among class A properties is at 14.9%
  • 656,000 sf of positive absorption recorded for class A
  • Minneapolis CBD showed 116,000 sf of positive absorption showing
    positive absorption for the second consecutive year
  • Minneapolis CBD fell to 18%

Market rates were flat in 2011 and 2012 should see an increase.  Market-wide rates are $23 per square foot gross, versus $22.50 psf at year-end 2010.  There have been no new office buildings since 2009.


The industrial market is showing a 17% vacancy rate at this point.  Leasing activity was decent for
2011 with 600,000 square feet of positive absorption. Rental rates are also flat and average net rates are currently at $4.25 and $8.00.

There are no new multi-tenant projects under way in the Twin Cities however there are some build to suits. The BTS include a 300,000 SF building for Medline, 580,000 SF building
for Sanmar, and a 100,000 SF building for Tri-Star.


by JeffMinea, 7:06 PM on January 18th, 2012, No Comments

We all want to feel empowered in our decision making process no matter what the subject is, and when it comes to your property lease, here are 4 simple things to consider before you begin the process:


This time allows you to maintain leverage in discussions with your Landlord. Staying tight lipped could backfire if a neighboring Tenant needs more space, or the Landlord is allowed time to talk to a new Tenant. Result: your space could be leased out from underneath you- not good! Negotiating late usually sends a message that you are a “captive prospect” and you will get less and pay more.


Go to the listing agent’s website or www.mncar.org, or www.loopnet.com, to find out what the asking rents are currently for your building. In a soft market as we have had, the
asking rent may be less than what you are currently paying. This is a valuable piece of information as you frame your strategy for a lease negotiation.


There’s a good chance you are in a multi-tenant building, so getting to know another business owner/executive, who ideally moved in recently (or renewed), and getting their observations about likely concessions and rental rates will help you gain additional valuable knowledge.


Landlords want to know how your business is doing and without sharing financial statements (yet), you should be prepared to tell your story of longevity as a business, good payment history, industry competitive rank, and growth and other outlook items of interest. The more confidence they have in you, the better the concession package will be in the end. The other item of value is whether or not you are able to sign a 5 year lease or longer. This sets up the value proposition more than any of the others in a negotiation as it gives the Landlord the most value with their lender to name one example.


The above points will provide the litmus test for what strategy is best for you. For more suggestions on how to create your best lease strategy, please feel free to contact me at:
jeff@cgccommercial.com. 952-955-6196


Purchasing Commercial Real Estate Mortgage Notes

by Chris Garcia, 2:23 PM on November 12th, 2011, No Comments

Much has been talked about when it comes to distressed commercial real estate over the last few years.   More and more property has come to the market as a result of mortgage default.  In the last 12 months it seems even more property has gone back to the Lender.  As a Buyer you might be thinking, how can I take advantage of this?  There are 2 ways:

1. Wait till the bank forecloses on the property and puts it on the market.

2. Purchase the mortgage note before it goes into foreclosure.

Under the 2nd scenario, the Buyer purchases the distressed note from the Lender BEFORE the foreclosure process starts.  The discount is usually steep, anywhere from 40-70% off the market value. Reasons for this include:

  • Lender can get the real estate off their books immediately
  • Lender no longer has to go through the foreclosure process
  • Lender does not incur legal costs which can be heavy
  • Lender does not have to incur hold costs while the property is foreclosed and title is cleared
  • Lender does not have the uncertainty of knowing when the property will trade

Those are some of the reasons why the Lender is prepared to take a lower price on the property.  From the Buyer point of view, there are risks associated with the purchase, here are some things to think about before buying the note:

  • Most of these transactions are completed in cash and close in less than 30 days from the sale price agreement
  • Many Lenders will not negotiate the documents such as a Purchase Agreement
  • Legal costs associated with reviewing loan documents, foreclosure process, and the redemption period can be expensive. Speaking with Moss and Barnett they estimated costs can be anywhere from $25-100,000
  • Due Diligence can be limited, when purchasing real estate the due diligence period can range from 30-90 days while in this scenario that amount of time is much less and limited in the scope.  One example is environmental, likely you will be limited to the existing documents versus having the time to do your own investigations.

There have been some high profile transactions that have occurred this year, possibly the biggest being the 99,342 Square Foot (SF) Buffets Inc Headquarters in Eagan.  Here is Sam Black’s article from February of 2012 http://www.bizjournals.com/twincities/blog/real_estate/2011/02/former-buffets-hq-auction-set-to-begin.html.  The property had an assessed value of $9.5M.

Currently, there are a handful of notes for sale in the Twin Cities including:

  • 60,000 SF Office/Warehouse in Brooklyn Park
  • 231,000 SF Office/Warehouse in Edina
  • 54.000 SF Office building in Minnetonka
  • 55,000 SF Office/Warehouse in Edina

Having a team in place to complete this complicated transaction is important, some people to have on board include:

  • Attorney- absolutely necessary to have them review loan documents and assessing the risk before you start bidding
  • Broker- need to have an understanding of what the market value is and what you can purchase for to understand the upside in the transaction

Those two partnerships should get you on the right track.  Buying the commercial note can be risky but also provides the greatest upside potential.  In the economy we are in, there are some great deals available and this should be carefully considered.

Banking Rates

by Chris Garcia, 3:00 PM on September 13th, 2011, No Comments

Here is guest blog from US Banker Crista Lentsch:

Good Afternoon -

As you know, I consistently search for positive news to include
in my monthly updates.  I continue to see business owners investing in equipment
and property, financial statements that are improving and overall, a more
positive outlook than what the media tends to focus on.

Commercial Real Estate Rates as of 9/13/2011:

3 year term, 15 year amortization:

5 year term, 25 year
amortization: * 3.89%

15 year term, 15
year amortization:  *5.09%

of Credit:  Prime + 0.50% with NO FLOOR

Equipment Financing:
- Application Only up to $350,000 (dependent upon

- Purchase and

- New and Used

- Extremely Low Rates
Crista M Lentsch
US Bank –  Business
Business Banking Officer
Direct: 651/604-1633
Fax: 651/582-0416

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