A repair in time saves nine down the road

A repair in time saves nine down the road
 
By Jodi Summers
 
Recently, we spoke about preventative maintenance for the rainy season … so continuing along that line of thinking, we thought we’d go one step further and talk about overall preventative maintenance for investment properties.

The art of preventive maintenance involves noticing small problems and fixing
them before major ones develop. Practicing preventive maintenance on your properties is like changing the oil in your car. By changing the oil at the recommended intervals, you will prolong the life of the motor. By inspecting and making basic repairs to your property, you can minimize your maintenance
budget.
 
According to Douglas D. Chasick, Senior Vice President of Professional Services,
CallSource, an effective preventive maintenance program accomplishes two goals:
 

1. By regularly inspecting and maintaining your buildings and equipment, you can avoid breakdowns. “For example, regular inspections of your air-conditioning units, filter replacements and coil cleanings all prolong the life of your HVAC equipment.”
   

2. Being thorough when making repairs can help avert more serious problems from occurring.
   

MAKE A LIST
First, identify what items need to be included in your preventive maintenance
program, and write down the list and what needs to be done to each item.
 
Your list may include:
 
* HVAC: Clean coils, change filters, oil motors.
* Rain Gutters: Inspect for secure fastening and clean.
* Roofs and Flashing: Inspect and repair.
* Water Heaters: Drain to remove deposits from the bottom of the heater,
which will corrode, and rust out the heater prematurely. Also, check the seams for leaks. In large buildings, boiler water should be analyzed by a laboratory to determine the need for chemical treatment, which minimizes the build-up of scale in the boiler that reduces efficiency and shortens equipment life.
* Plumbing: Inspect the underside of the building. Early detection will not only
reduce your water bills, but also reduce the damage from dry rot and the possibility of mold.
* Rooter the Common Drain Lines: Avoid big, smelly sewer back-ups by regularly
rootering the common lines. When a back-up is reported, attack it immediately.
* Elevators: Service companies offer contracts that range from providing minimal
service to full maintenance contracts
* Fire Extinguishers: Inspect and recharge.
* Smoke Alarms: Inspect and test battery.
* Photocells: Inspect, test and clean.
* Storm Drains: Inspect and clean.
* Lawn Sprinklers: Inspect, test, replace heads and reset timers.
* Exterior Doors: Inspect weather stripping, thresholds, hinges, door closers and locks.
* Balcony and Stairwell Railings: Inspect for secure fastening.
* Painting: Different exposure to the elements or patterns of use dictates that some areas need touch-up paint more often than others. Failure to treat wood when needed may result in unnecessary damage.
* Check Signage: Are the signs you posted still in place? Signs can disappear and you can become liable.
* Check Parking Areas: Look for debris, grease/oil spots, and unauthorized storage and/or vehicles. Look for evidence of leaks in the garage ceiling or walls. Inspect for cracks and potholes.
* Check Walkways and Driveways: Look for cracks, uneven surfaces and problem tree roots. Repair to avoid the lawsuits related to tripping and personal injury.
* Clean Out Dryer Vents: If you have residential units, this can turn into a pricey
headache if not done, and it can create a fire hazard.
* Exterior of Buildings: Inspect for wood rot, loose or damaged trim, paint deterioration and loose or damaged siding.
* Swimming Pool: Inspect filters and pumps, oil and adjust.
* Exterior, Common Area and Signage Lighting: Consider equipping the outside
lights on photocells instead of timers. You will be rewarded with lower utility bills and less maintenance.
 
Do a complete walk-through of the property, that will help you list everything to be included in your preventative program. When owners or managers feel that preventive maintenance is beyond their capability, they hire engineers to establish and implement a program.
 
“We nurse along about 100 buildings — it’s a super-handholding operation,” said
Arthur L. Spaet, president of Arthur L. Spaet and Associates, which handles maintenance programs.
 
MAKE A SCHEDULE
Obviously, to keep your property in top order, you will need to inspect various
aspects of your property on a regular basis. Ask the manufacturer, read the service book and talk to the subcontractors when figuring out how often you need to inspect each entity on your property that involves maintenance.
If you’re feeling inspired, add a frequency column to your list.
 
CHECK INSIDE THE UNITS
Experts suggest that an annual inspection of each leased unit is a good idea from a property maintenance standpoint. Check the smoke detectors for proper operation. Check for plumbing leaks, and areas that might need caulking or repair — running toilets, dripping faucets, walls, windows and ceilings.
 
COST-EFFECTIVE BEHAVIOR
Save time and money by having your service technician perform a “mini-maintenance” on additional units when they are completing a service request. After completing the service request, the service technician can check all faucets for drips, flush the toilets to see if they run, check all the window screens, graphite the locks, check the HVAC filter, etc. This “mini-maintenance” shouldn’t
take long and can be noted in the records.
 
CREATE A BUDGET
Bet you guessed that most preventive maintenance programs fail because of time and money. Your chances of success increase when you have a budget and then you divide that amount by the total number of units at the property to find out your “per-unit” cost.  Then, figure out approximately how much time is going to be involved with each expense.  
 
To come up with this budget, do similar research that you would do if you purchased the building — get a few years of financial statements and invoices together. Do you have common area maintenance fees? Do your CAM fees cover the preventative expenses?
 
USE RELIABLE TECHNICIANS
When implementing a maintenance regime, make sure you surround yourself with a reliable team. You don’t want your tenant calling you to fix the same problem again and again and again.
 
These items may seem costly and timeconsuming, but it is less costly and time-consuming  than allowing today’s crisis to determine your maintenance program. If you still aren’t convinced and won’t do everything, at least prioritize. Attend to the problems, which occur most frequently at a particular building.
 
For information on Southern California investment properties, there is a great website at www.SoCalInvestmentRealEstate.com. Jodi Summers is Director of the Investment Division at Boardwalk Realty. For your real estate needs, email
Jodi Summers at jodis@boardwalkrealty.com, or
call (310) 309-4219, or visit her website at www.santamonicalandmarks.com.

Chatsworth Industrial Park becomes $16M Industrial Condo Project

Chatsworth Industrial Park becomes $16M Industrial Condo Project

CHATSWORTH, CA-Buyers who plan to convert the 97,265-sf Nordhoff Industrial Park into 65 condominiums have secured $15.65 million in acquisition financing from Wrightwood Capital in a 24-month loan for the purchase and conversion of the industrial park. The property is an office/flex business park that was built in 1989 and consists of five multi-tenant buildings of one story each.

David Kadin, director of investments in Wrightwood Capital’s Newport Beach office, reports that the new owners plan to offer the condominium units for sale to owner-users and investors. The new owners are Sylmar-based Sheridan Ebbert and the Tarzana-based Viole Cos.

The property is in an area with a high concentration of retail, manufacturing, and distribution businesses, close to the Ventura, San Diego and Simi Valley freeways as well as nearby housing. Kadin sees the new project as well positioned in the marketplace because “the demand for office and industrial space is outpacing new supply, in part to the land constraints” noted Kadin.

Recent market reports show the Los Angeles County industrial market continuing to tighten, with construction increasing to meet the demand, both in terms of product for lease and product for sale, but a lack of land continues to limit the amount of new project that can be built. As a result, developers and investors have turned to redeveloping projects like the Nordhoff Industrial Park.
Excerpted from an article By Bob Howard of GlobeSt.com

Los Angeles Industrial Building Sells for $3.1M

 Los Angeles Industrial Building Sells for $3.1M

Private Group Nets Single-Tenant Property

You know it’s a slow news week when we share with you the information that Uptown Holdings LLC acquired the industrial property at 14104-14108 Towne Ave. in Los Angeles from an investment group led by Steve Eun Yi for $3.1 million, or about $77.50 per square foot.

The one-story building, completed in 1966, offers 40,090 rentable square feet, 4,150 square feet of which is office space. The building also offers five grade-level doors and a clear height of 18 feet.

FOREIGN INVESTMENT - Global Commercial Property Market Strong

FOREIGN INVESTMENT
Global Commercial Property Market Strong Investment in commercial real estate worldwide is rising at its fastest pace in 18 months, shaking off the pressures of high oil prices and investment competition from strengthening stock markets, according to the 2006 Global Investment Survey from the Royal Institution of Chartered Surveyors (RICS). Of note from the just released survey, the UK property market, although performing well, no longer leads the pack. Investor and business demand is picking up in other European centers, notably in Germany and Italy. The emerging markets of Asia and Europe led in business demand for commercial space in the second half of 2005. In India and China demand is driven by rapid economic expansion, while economic growth following EU membership has created high demand for office space in Eastern and Central Europe. Low interest rates have been the primary driver for growth, though the RICS chief economist predicts that by the end of 2006 interest rates will begin to rise across the eurozone, USA and Japan for the first time since the late 1980s. With global bond yields already on the rise in these three economic blocs, the property market will feel the impact as foreign investor interest cools. Read a report summary.

EVERYONE WANTS INDUSTRIAL REAL ESTATE

EVERYONE WANTS INDUSTRIAL REAL ESTATE

 
By Jodi Summers
 
Whew! Let’s rave - the demand for Industrial warehouse and distribution space has brought the national industrial vacancy rate down to a 5-year low of 9.7% - and a local vacancy rate of about 5 percent…and more space is coming to fill the need. The average vacancy rate in the nation’s 30 leading distribution markets at mid-year was down .8 percent to a solid 8 percent from the mid-year 2005 rate of 8.8 percent, observes the most recent Commercial Real Estate Outlook from the National Association of Realtor’s Commercial Alliance.
 
“Markets like Southern California, which are heavily dependent on distribution activity, have done well and will continue to do so,” confirms Jim Sullivan, principal at the real estate securities research firm Green Street Advisors. “The improving economy will only help that situation, which is already strong. Places like Dallas, which are more a blend of distribution, tech-related activity and manufacturing, have done quite poorly…particularly when it is so easy to build more industrial space in such a land-abundant market.”
 
In 2006, a record 204 million square feet of space will be added to the nation’s industrial real estate market. Much of this new space is designed to meet the needs of specialized warehousing and distribution industries and compliment the new trend of Just-in-time manufacturing (producing the necessary items in necessary quantities at the necessary time).
 
“The industrial markets have been in recovery for the past two to three years,” observes Eugene F. Reilly, executive vice president and president of North America for AMB Property Corp., a San Francisco-based industrial REIT. “It has been a slow but steady recovery, at least in terms of the fundamentals. One noteworthy piece of data has been the supply. Demand has progressively moved up, and last year we had record absorption. However, new product deliveries have been at 50% to 60% of what is typical for a recovery year. We are seeing less space coming onto the market.”
 
Locally, in SoCal, much of the warehousing is leveled and rebuilt once it becomes obsolete.  In secondary and tertiary markets where land values are lower and site remediation concerns are minimal, old industrial space is converted to other commercial or residential uses (think mixed use + loft space). New industrial development moves an exit down the freeway. The overall industrial vacancy rate in the third quarter of 2006 rests at 9.7% and is predicted to stay at this level until the end of the year.
 
National industrial vacancy rates have not been this low since 2001. Port markets (both traditional and inland) are experiencing the greatest demand for industrial space. The nation’s busy ports in Southern California are also fueling demand in major inland ports from Riverside to Albuquerque, N.M.
 
“While construction has picked up, it’s still very disciplined; demand still outpaces supply. And vacancies are still declining, but not by as much; at this point it takes a really strong demand to drive them down,” affirms Leonard Sahling, first vice president of the ProLogis Research Group.
 
The demand for just-in-time production and specialized distribution space that cannot easily be met by existing stock has increased. These two trends have caused an upswing in new build-to-suit industrial real estate. In addition, there has been an increase in the development of new speculative properties in areas where demand is highest, such as Southern California and South Florida.
 
As of the third quarter of 2006, the high rent markets include San Diego ($9.71/psf), Orange County, Calif., ($8.86/psf) and Los Angeles, ($8.15/psf).
Rent growth in 2006 is forecast to be approximately 1.5%, down from the 2.9% seen in 2005. Rent growth next year is predicted increase because of a slow down in new supply and an increase in demand.
 
Southern California will continue to be the high rent district for industrial space. By the end of 2007, gross rent in San Diego is expected to be $10.50/psf.
Through the third quarter, $23.6 billion worth of industrial real estate had traded hands. Pricing has increased, while cap rates have, essentially, remained flat. Overall cap rates for industrial properties are resting at 7.2%, down from the 8.5% in 2004. Pricing has increased in 2006, from close to $65/psf to $76/psf.
 
Large institutions (life insurance companies, pension funds, etc.) have accounted for more than one-third of the industrial property sales volume through the first three quarters of 2006.  In the Midwest, institutions have accounted for more than 60% of industrial transactions.
 
Real Estate Investment Trusts (REITs) have in been particularly active buyers of industrial real estate in the Mid-Atlantic region, where they account for almost 50% of all industrial investment transactions year-to-date.
 
“The industrial REIT group is populated by some extraordinarily excellent companies, but they are excellent for different reasons,” observes Sullivan. “ProLogis and Catellus, for example, are great developers: An improving economy, leading to more industrial demand, leads to new building demand, which plays to their strength. Duke would be in that group as well. Liberty is another name I would throw in. Centerpoint is maybe qualitatively the best real estate company in terms of development, redevelopment, leasing and property management…Finally, AMB is a company that has a portfolio concentrated in the key industrial markets: Seattle, Southern California, Atlanta, Dallas, Chicago, Northern New Jersey and Florida. They own property in the right places.”
 
The Australians have had an appetite for industrial property recently and accounted for the bulk of 2006 foreign investment.
 
The highest prices being paid for industrial buildings (outside of Manhattan) are in Northern Virginia ($193/psf), San Jose, Calif., ($178/psf), and Las Vegas ($159/psf). While industrial transactions in the San Jose market are in flex, the Las Vegas market, which is a major trade and distribution hub, is more warehouse/distribution oriented.
 
For information on Southern California investment properties there is a great website at www.SoCalInvestmentRealEstate.com.
  
Jodi Summers is Director of the Investment Division at Boardwalk Realty. For your real estate needs, e-mail Jodi Summers at jodis@boardwalkrealty.com, or call (310) 309-4219, or visit her website at www.santamonicalandmarks.com.
 
**
 
TOP INDUSTRIAL BUYER
LOWEST INDUSTRIAL VACANCY
Q3/2006 FORECAST
1) West Palm Beach, FL 2.6%
2) Los Angeles, CA 4.6%      
3) Fort Lauderdale, FL 4.7%
4) Miami, FL 5.0%
5) Orange County, CA 5.2%
6) Tampa, FL 5.5%
7) Long Island, NY 6.3%
Albuquerque, NM 6.3%
9) Ventura County, CA 6.4%
10) Riverside, CA 6.8%
11) Seattle, WA 6.9%
12) San Francisco, CA 7.2%
13) Tucson, AZ 7.4%
14) Portland, OR 7.6%
15) Orlando, FL 7.6%
USA National Avg. 9.7%
Source: Real Capital Analytics, 08/2006.
 
 

The next hot markets

The next hot markets

By Liz Pulliam Weston

In any boom market, true bargains get harder and harder to find. As prices rise, investors have two basic choices: Go along with the herd, or dig even deeper to find values others have (so far) missed.

If you’re sitting in a white-hot, overpriced real-estate market, you may despair of ever finding those bargains either as a house-hunter or as an investor. But deals still exist.

“In any neighborhood, there are unwanted properties, undesirable locations” that could be turned around, said real-estate expert Ilyce Glink, editor of ThinkGlink.com. Around any city, “there’s the town two towns over that could be today’s opportunity.”Find a loan that’s right for you at the Loan Center Then there are the less obvious places that have been overlooked or beaten down before suddenly springing to life. Witness this list of towns that were latecomers to the real-estate party but where values have recently zoomed:

12 fast-growing cities that are still cheap

City 1-year price rise 5-year rise Median home price

Phoenix-Mesa-Scottsdale, AZ 30.5% 67.3% $169,400

Coeur d’Alene, ID 29.0% 59.9% $169,000

St. George, UT 28.3% 47.7% $200,000

Pensacola-Ferry Pass-Brent, FL 25.8% 62.0% $131,100

Tucson, AZ 22.3% 61.4% $177,300

Lakeland, FL 19.4% 56.7% $108,000

Albany-Schenectady-Troy, NY 18.2% 65.2% $161,300

Jacksonville, FL 18.2% 66.9% $150,700

Eugene-Springfield, OR 17.4% 40.5% $164,900

Allentown-Bethlehem-Easton, PA 16.9% 58.2% $207,300

Charleston-North Charleston, SC 16.9% 49.2% $111,300

Wilmington, DE 16.2% 62.5% $180,000

USA national average 13.4% 68.3% $218,000

Source: Office of Federal Housing Enterprise Oversight, National Association of Realtors, local Realtors associations

SOUTHERN CALIFORNIA COMMERICAL REAL ESTATE CIRCA 2031…

SOUTHERN CALIFORNIA COMMERICAL REAL ESTATE CIRCA 2031…

 
There has been an impressive amount of construction in the United States over the last three centuries: All told, we’ve built more than 300 billion square feet of homes, offices, factories and other structures. New studies from the Brookings Institution and Virginia Tech urban planning professor Robert Lang, we’re about to pick up the pace — it will take just 25 years to erect the next 200 billion square feet. Here’s what they’re predicting for Southern California….

Trade with China through the country’s largest port, Los Angeles, will fuel a boom in logistics, warehousing and distribution centers for companies like Target. New military and space programs will do for the Southland what the Internet did for NorCal in the 1990s.

Key demographic shift: By 2020, male illegal immigrants from Mexico will likely make up more than 10 percent of the Southland’s workforce; no other megapolitan comes close to having this supply of cheap labor.

New growth industry: With freight volume projected to triple by 2030, warehouse builders will become the fastest-growing commercial developers in the region.

Best businesses to start: Upscale restaurants near I-15 in San Bernardino County, to give future suburbanites at taste of something better than fast food.

Best residential real estate bet: $325,000 still gets you a 2,300-square-foot house in Apple Valley, one of dozens of suburban boomtowns emerging east of Los Angeles.

Best commercial real estate bet: Parking lots in downtown Los Angeles for tomorrow’s high-rise redevelopments.

Government carrot: Billions in local, state and federal funding that will be used to build 150 miles of truck-only express lanes in Los Angeles, Orange County and the Inland Empire by 2020.

It’s already too late to… Buy raw land around Las Vegas for sprawl development; prices are soaring because it’s hemmed in by federally owned property.