In a world of 24/7 connectivity and a glut of available high-tech tools and toys, TRI Senior Vice President Scott Vix just proved the enduring value of patience and persistence. Five years’ worth of these virtues, to be exact. Scott is an office and industrial adviser who worked with Hernandez Engineering starting in 2012 to find a location for their sizable San Francisco equipment storage yard.
The San Francisco land/industrial market is tight and finding a large undeveloped lot in the City was a challenge. “There’s not a lot of raw vacant land left in San Francisco and competition is fierce, but I was determined to get my client the space they needed,” he noted.
Just last month, Hernandez finally acquired the perfect 19,728-sf lot in Bayview for $1.55M. The property was formerly a rail spur, where train cars could be loaded and unloaded without disrupting traffic on the main line.
An annual operating budget for your income property is one of the many tools available for monitoring the income and expense of the asset, measuring its viability and success.
A “best practice” of property management companies is preparation and presentation of an operating budget for owner approval prior to the beginning of each calendar or fiscal year. A zero based budget, practical for reoccurring vended services, is most accurate. To begin the process, property managers request bids from several vendors for each clearly defined scope of services. This scope allows evaluation of bids/costs on an apples to apples comparison. Fluctuating costs such as utilities and non-reoccurring expenses such as plumbing or electrical repairs are based upon historical operations.
Income/Revenue may have several components; rent, expense recapture or CAM and perhaps tenant’s contribution toward marketing or tenant improvements. Owners differ in their desired reporting formats, many are satisfied with simply a Rent income line item, others (and TRI’s preference) is to report the Gross Potential Rent (actual rental income for the occupied space plus a market rate for the vacant space) followed by Vacancy and Free Rent then subtotaled as Total Collected Rent. This more descriptive approach to forecasting Income requires assumptions on roll-over of existing leases, new leasing activity, market lease rates and free rent terms. It also makes management and ownership aware of upside in improved occupancy and associated costs such as leasing commissions and tenant improvements.
Another component of Income is Expense Recapture under full service office leases and Common Area Maintenance or CAM’s under triple net retail and industrial gross leases. These are an estimate of the tenant’s proportionate share of operating expenses (defined by the lease) reimbursed to the landlord/owner. TRI has found many properties that we’ve taken over management leaving significant dollars on the table due to poor lease administration and collection of CAM’s.
Once Total Income and Total Operating Expenses are defined, the Net Operating Income (NOI) is the difference. Net Cash Flow may also be calculated by subtracting debt service from NOI. Further, capital improvements such as Tenant Improvements, major repairs, commissions, etc., can be forecasted and included in the annual budget.
This budget, once approved by the owner, is entered into the financial software and used as a comparison to actual monthly income and expenses for identification and explanation of significant variances.
Planning and measuring the success of your asset’s financial operations is one of the many services provided by TRI Property Management.
John Gallagher, CCIM, CPM
President, TRI Property Management
Henry specializes in Investment properties, including apartments, industrial, commercial and mixed-use developments. Henry has been associated with TRI Commercial since 1995 and has successfully completed sale and lease transactions in the greater Bay Area, and more particularly in the South of Market and Northern Peninsula areas. Henry is a member of the San Francisco Board of Realtors, the California Association of Realtors, and the National Association of Realtors.
By Lisa Brown | Reporter for Globest.com
SAN FRANCISCO—A trifecta of transactions that were all associated with a single Mission District property were marketed and closed by TRI Commercial/CORFAC International, according to president Tom Martindale, SIOR. The buyer of the building located at 2650 18th St. was Chai LP, a multi-generational, family-owned real estate investor based in San Francisco.
In the initial transaction, Jason James, senior adviser at TRI, marketed and subsequently sold the two-story, 34,400-square-foot, production/distribution/repair (PDR) zoned industrial building with 42 below-grade parking spaces. He represented the seller, 2650 18th Street LLC, in the $14.25 million deal, where the property was occupied by Weston Wear. James subsequently represented Weston Wear in its relocation to 389 Oyster Point Blvd. in South San Francisco, where it now occupies approximately 12,000 square feet.
While the Mission property was in escrow, James also leased the entire building to Zesty, a catering company that delivers, sets up and serves healthy restaurant-made meals to businesses throughout San Francisco. The company plans to take occupancy of its new space soon. Zesty was founded in 2013 and is backed by numerous Silicon Valley investors and venture funds. KQED,Heath Ceramics and HTC (designer of Android phones) are located across the street from the future Zesty headquarters.
James tells GlobeSt.com: “The active sale environment and the demand for such limited blocks of space is very indicative of what is going on with the market, there’s more demand than available space.”
James said that 2650 18th St. was offered for sale unpriced and during the listing period, there were many offers for the property from a variety of investors, as well as potential owner/occupiers.
“Given how hot the San Francisco market is and the highly desirable location of this property, I was not surprised by the level of activity the offering generated. It really could have gone in the other direction of being purchased by a developer with an eye toward adding additional floors to the site, but we found a local investor who wanted it as-is and a tenant that was willing to renovate the building on their dime,” he added.
As previously reported, a historic preservation effort includes a project in the Mission.
http://www.globest.com/news/12_1222/sanfrancisco/acquisitions_dispositions/More-Demand-Than-Space-in-SoMa-362769-1.html
