How to Prospect for Commercial Real Estate

The answer to how to prospect for commercial real estate in order to find a real estate investing opportunity can be as easy as turning on your computer or driving around town or picking up your cell phone. The best sources for locating properties are:

Commercial Brokers

Local brokers can be found by driving around or through commercial areas and taking down the information on the “For Sale”, “For Lease” or “Space Available” signs. You can then call the broker directly or visit the website if it was listed on the sign. Another way is to enter “Commercial Real Estate Brokers” in your search engine and check out the websites you come up with to find someone in your local area.

Although in most areas of the country there is not an MLS (Multiple Listing Service) for commercial properties like there is for residential properties, commercial brokers have their own listings of properties for sale, as well as a database of properties that other brokers have for sale. They will have properties locally as well as nationally. Utilizing a broker usually does not cost you anything as a buyer because the brokers will typically be compensated by the seller. In cases where the buyer does pay all or part of the commission, it is worth the cost if the broker has found you a great deal and probably saved you more than the cost of the commission.

Internet Sites

A number of good websites can lead you to potential commercial property deals. The most well known are Loopnet and Costar, which are similar to a multiple listing service for commercial properties. To find other sites such as CIMLS is to google “Commercial Real Estate For Sale”. Please note that most of the sites will ask you for a city or state. You can usually narrow your search once you are onto the site.

You can also go directly to the websites of national commercial brokerage firms where you can see their listings and get valuable market reports. The beauty is that if the property you’re looking for is no longer available, you can sign up for property availability alerts or contact one of the brokers directly. By talking with a broker, you may find that the property you were checking on is no longer available, but that they are getting ready to list another property that may meet your criteria.

Real Estate Investment Clubs

Most of the larger cities in the U.S. have a number of local real estate investment clubs. These groups provide great opportunities to network and meet with other investors who have a similar interest in commercial property. The members typically include just about everyone: beginning as well as seasoned investors, brokers, attorneys, title company officers, appraisers and others who make their living from the various real estate investing professions. Most of these associations meet once a month to discuss current events, share information and have an expert speak to the group.

To find clubs in your city, enter “real estate investment club” in your search engine or try going onto the National Real Estate Investor Association website and then search for the nearest club in your area.

Newspaper Ads and Publications

You can often find owners of commercial properties who want to sell by looking at newspaper classified ads and real estate publications ads. Magazines that are good are Real Estate Forum and publications by France Publications. Newspapers can include your local paper, The Wall Street Journal, The New York Times and the Los Angeles Times.

Other Sources

Others who may be able to assist you in your search include your own personal network of contacts, a local realtor or the realtor you bought your house from, your banker, your attorney or your accountant, any of whom can possibly assist you in your search.

Whatever you do, have fun learning how to prospect for commercial property. Talking with others increases your knowledge and expands your network.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me, I truly want to help.  My way of giving back is to give away my knowledge.  Thank you for reviewing this blog.

Exit Strategies in Commercial Real Estate|Buying with the End in Mind

One of the most important things that you can do when you purchase a property is to think about your exit strategy. You should have more than one exit strategy when you purchase an asset and you should think about the worst case scenario which will involve “how do I exit this under-performing investment?”.

Originally most people think that they will own the property forever and you may very well do that. However, I suggest that you review each of your properties on an annual basis to make sure that they are meeting your current investment and personal goals. Priorities in life will change over time and your investments should adjust with those priorities.

I believe that one of the best investment strategies that you can have is “buy low and sell high”. This would mean that when you are at the height of the market you would sell your property or properties, hold the cash in a low risk investment, keeping your money liquid and then get back in when the real estate market is down. You will probably be into your new properties for less than you were into your previous properties. Remember that you make your most money when you have bought the property at its lowest point.

Following are some exit strategies for you to think about when you purchase that special investment.

STANDARD SALE BY HIRING A REAL ESTATE PROFESSIONAL

The first exit strategy is the one that most people go through which is to hire a real estate broker and sell the property. You will want to calculate your breakeven point taking into consideration not only the amount of money you have invested in the property, but also the liens, commissions and closing costs. Plan and discuss the sales strategy thoroughly with your broker, and have him run the comparable sales in the market so that you can price your property accordingly.

Remember the 80/20 rule when it comes to brokers. The rule is that 20% of the brokers do 80% of the sales. Look for that broker in the 20% arena.

To help your broker get the most offers and to maximize the sales price, it‘s a good idea to spruce up the property and/or stage it. Aim to look better than your competition.

FSBO – FOR SALE BY OWNER – SELL IT YOURSELF

Your next exit strategy might be to sell the property yourself. You can save some commission money; however, in commercial real estate I always suggest that you add the commission money into the sales price and let a broker handle things. Doing it yourself will take some time and work from you as you will need to come up with a marketing strategy. If you do belong to an investment club or are well connected in the commercial real estate community, then you may do well to put a marketing strategy together and do it yourself.

The marketing strategy should include these four essential components: defining the investor or buyer, understanding your competition, clearly presenting the benefits that you are offering and structuring your pricing and terms.

PROVIDING SELLER FINANCING

The third exit strategy that you might want to consider is Seller Financing. The benefits of seller financing include:

  • receiving monthly payments without having to worry about all of the ownership issues such as procuring tenants, maintenance issues, etc.
  • deferring taxes as you will only have to pay taxes on your yearly gain (check the current tax laws with your accountant on this)
  • makes the property easier to sell as the new buyer won’t have to go out and get a new loan
  • draws more potential buyers as some buyers won’t qualify for a traditional loan due to income documentation, self-employment or minor credit blemishes
  • provides a greater likelihood of getting full market value for your property
  • gives you a liquid asset as you can sell the note at a later date also giving you an opportunity to strategize or plan for the gain
  • allows you to receive a higher interest rate on your money than if you put it into other things such as bonds, savings accounts, etc
  • provides the peace of mind that your security is the real estate that you have owned and thus know quite a bit about
  • saves you money on the closing costs

The major negative of seller financing is that you may have to go through the foreclosure process if the buyer defaults, and the house may need repairs once you have foreclosed. If you are going to do seller financing I suggest that you get at least 10% down, run a credit check on the buyer so that you understand your risks and have the loan secured by the property.

UTILIZING A LEASE OPTION

Another exit strategy is to utilize a Lease Option. In this scenario, you put the tenant in a lease with the option to purchase the property at a set price at a future date. At a minimum, the monthly rent should cover your monthly costs and you should require a non-refundable deposit that is applicable to the purchase price for the option right. The pluses to this strategy are:

  • it’s a great strategy in a slow market where you would have to take a loss if you sold the property today
  • this type of tenant will typically take better care of the property
  • you may not have to pay a real estate commission if the tenant buys the building

The negatives are (1) if the market goes up and you have to sell it at less than market as you cannot sell it to anyone else during the option period;  (2) your current mortgage may have a “due on sale clause” and this event may trigger that clause.

DO A 1031 EXCHANGE

If you have done a great job with your investment and you are looking at substantial capital gains if you sell the asset, you might want to consider a 1031 exchange. This is the Unites States government’s way of allowing you to exchange all or a portion of your capital gains through the purchase/exchange into another property. There are many guidelines and rules to follow in this process, but they can be well worth looking into as you can “move up” in your investments through time without paying taxes until you fully divest yourself of the investments.  You may also be able to pass them along to your heirs “tax free”.

DECLINING GROWTH

If your strategy is to get into properties, fix them up or re-tenant them and resell it, your financial model will tell you when to sell. A property’s internal rate of return is a metric that tracks the total return of the investment over its holding period. As you stabilize the property, its income goes up and the rate of return goes up with it. Once you’ve gotten the property optimized, it earns a good return, but the rate stops going up. At that point, you’re no longer creating value, and it’s probably time to sell.

BALLOON PAYMENTS

Most owners hope to pay down their loan every year while growing their income and the property’s value. The longer you own it, though, the less of an effect these changes have on your overall position. For example, if you have a 20 percent equity position and it goes to 22 percent, it’s a 10 percent increase while going from 50 to 52 percent is a 4 percent increase. Many commercial real estate mortgages call for balloon payments between seven and 10 years into the loan. Given that the loans are inconvenient and expensive to refinance, the balloon payment due date is an excellent time to take your money out, reinvest it by trading up into another property and start again.

CONCLUSION

As you can see, there are many exit strategies. The key is to have a few in mind when you purchase the property and to review your goals each year to make sure that your portfolio is performing as your current goals require. I’ll leave you with the thought “Always buy with the end in mind” and you will always sell with a clear profit.

As I say throughout my blogs… if I may be of assistance with your real estate questions, please contact me.  I truly want to help. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.

Why Invest In Commercial Real Estate?

“It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, and I just love real estate.” -Donald Trump

Let me ask you a very simple, yet profound question: Why would you invest in real estate? Understanding the answer or answers to this question will help you along your investment career.

The following are a few common answers I have picked up on when I see this question asked:

Top 5 Financial Reasons to Invest in Real Estate

Let’s first look at the top 5 reasons to invest in real estate from strictly an investment standpoint:

1. Cash Flow – whether you buy with all cash or use today’s favorable financing with a low mortgage payment, positive monthly cash flow will occur when the monthly rent is greater than the monthly expenses. This gives you a monthly income from your real estate investment.

2. Appreciation – Appreciation is the increase in the property’s value, which generally occurs over time and can also be increased by an investor who adds value to the property through repairs and/or enhancements. This is also a great way to create equity in the property.

3. Depreciation – Even with an increase in the property’s value, the government allows owners a tax deduction on their property after they’ve owned the property for at least a year. This annual deduction is called depreciation which when added to the equation, protects the cash flow so that you receive some or all of it tax free. If you are an investor with an income from other sources such as a regular job, it can protect all or some of that income from state and/or federal income taxes. If you really want to understand how great this is, talk to an accountant.

4. Tax Benefits – In addition to depreciation, an investor can usually claim the interest portion of his monthly mortgage payment as a tax deduction.

5. Leverage – Leverage is a very powerful reason for investing in real estate. If an investor used 100% cash to acquire a house worth $100,000, and the house increased in value by $5,000 in one year, then the investor made a return of 5% (assuming no other costs in this case). However, if the investor obtained 80% financing, only $20,000 cash would be required at the closing table, and a bank or other lender would loan the remaining $80,000 to acquire the property. Assuming the same $5,000 increase in value, the investor’s cash contribution of $20,000 would yield a 25% return on investment ($5,000 increase in value divided by the $20,000 investment) in the same one year period of time.

With the above example, if the investor is able to bring in even a conservative amount of cash flow per month of $200, this will result in an additional $2,400 per year added to the increased appreciation. Your return for the year would now be $7,400 ($5,000 appreciation plus $2,400 cash flow) and your return on investment would now be 37% ($7,400 divided by $20,000). Even if the property value stayed stable with no appreciation, you would still see a positive return on your investment of the $2,400 in cash flow with a return on investment of 12%.

Adding to these benefits the low interest rates for financing and you can see how easy it is to accumulate wealth and become a successful investor.

Major Personal Reasons People Invest in Real Estate

Freedom:
Frankly, this is why most people start investing in real estate. They get star struck with the idea of riches that would give them the freedom to stop working for someone else. They may have a great job that they absolutely love that pays the bills but they still want to achieve long-term freedom. Or they may want extra money to eventually travel and do the things they want to do. And, if you buy and hold cash flow properties over time, sacrificing and delaying gratification, in five, ten or twenty years, you should have a pile of monthly cash flow and be able to attain that desired freedom.

Control:
Some investors I speak with want real estate to give them some level of control over their financial lives because, let’s face it, we have zero control in financial investments outside of real estate investing. If you invest in the stock market or money market funds, you don’t have any control over the return you may make on them. With real estate, there are things that you can do to control your return on investment as shown above.

Alternatives:
For some investors, real estate is nothing more than a portion of their overall investment portfolio. Perhaps you have divided your portfolio to include mutual funds, stocks, and real estate investment, etc. Or maybe you’re looking to achieve higher returns out of your cash through active management.

Career, Job, or Escape:
A few investors look at real estate investing as a career or a chance to own their own company. Others look at real estate as a means to eventually replace the job or career they may currently hate. And I’ve also seen many dive in head first, as if they’re running away from something versus running towards something.

Creating Value or Thrill of Hunt:
Many investors love the thrill of the deal and love telling you about the thrill of chasing a deal down or their last remodel. They pursue that addictive feeling and are always looking for the next rush or opportunity to turn another ugly duckling into a beautiful swan.

Options:
After many years of real estate investing, I have come to realize that in the end people love investing in real estate because it has given them so many more options. They have the options of continuing to work their current job, buying real estate as a full time career, and/or traveling, etc. The more they invest the more option doors open.

The Real Reason to Invest in Real Estate

People fall hard for the sexy pitch of earning freedom. Frankly, freedom is good but I think what people are really after is options. I believe that is why they keep working so hard to find the next deal, to find the next investor, and to keep building their growing portfolio.

Some might think freedom and options are the same things. But to me, freedom really means that they can stop doing something while options mean they can do other things. Having lived through this realization, I can tell you firsthand that having options is even better than having freedom. I would say you get freedom first, and then you build or acquire options.

As you read this, I hope you will be honest and figure out what Real Estate Investing means to you. I suspect that no matter why you think you are investing, if you peel back the onion, you are really looking to create options for you and your family.

Good luck in your investing, no matter your reasons!

As I say throughout my blogs, if I may be of assistance with your real estate questions, please contact me…I truly want to help. My way of giving back is to give away my knowledge. Thank you for visiting my blog.

No Money Down Commercial Real Estate Deals

I am frequently asked if you can buy commercial real estate with no money down. My answer is yes, you can buy commercial real estate with no money down, however you need to be careful and conservative in your approach. The other big thing that you need is your creativity.  There are several no money down concepts including seller financing, using other people’s money, taking on a partner, utilizing home equity loans or lines of credit, wrap around financing, lease with option to buy, using private or hard money, assume some of the sellers debt, wholesaling properties and financing to 100 to 110 percent of the cost of the property through private lenders or USDA or VA loans. In the commercial real estate market, the two most common are seller financing and using other people’s money.

Seller financing is where the seller carries back a portion of or the entire purchase price. This is common in a market or economy where the banking industry has strict lending requirements making it very hard to get a loan.  When you approach a seller about carrying back financing you will want to point out to them the advantages of seller financing which are: they don’t have to take all of the gain immediately, they can delay some of the gain as you make your payments, saving them some taxes on the gain, the note you negotiate can be sold at any time if they want to get out of it for any reason, you can pay them a higher interest rate than if they put the money in the bank or invested it in bonds, they will have the real estate as security for their note and they can potentially save money on closing costs.

Using other people’s money is where you find an investor or investors who will front you all of the required money. The investors can be a family member, a friend or a business acquaintance. The investor is usually looking for a certain percentage return or ownership or both.  As you can see, the investor can be a lender and/or a partner, based on their wants and needs.  Using this method, in the beginning you will be pledging a lot of your profit, however as you get experience and a solid track record, you will find that you will keep more of the profits for yourself.  This method also requires that you put together a buying strategy and an exit strategy as your investors will want to know how long you will need their money and the return that they can expect.

One of the keys to no money down deals is that you need to bring something to the table.  Some of the things that you can bring are your time, your experience, your creativity, your intelligence, your connections, your education and/or your confidence.  As you do deals, all of these areas will grow, along with your bank account.

In my opinion, the best properties to do a no money deal with are those that have upside potential such as properties with 30% or more vacancy, properties with rents 40% or more below market, properties that you can expand because there is excess land or you can expand upward by adding levels and/or properties that have poor management where you can substantially cut expenses. These types of properties typically assure you that you can create immediate equity and/or cash flow through fixing a problem.  In other words, this is where you utilize your creativity to solve a problem that a particular asset has.  You need to learn how to see problems as opportunities.

I do not suggest that you buy a property for no money down that has a small initial return or breaks even or loses money on a monthly basis even if the property gives you tax advantages and cash flows after the tax advantages. If for some reason something goes wrong with the property and you have to put money into the property you will not appreciate this investment.

One of my favorite quotes when talking about no money down deals is “If you don’t think that you can do a no money down deal, then you can’t”.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me.  My way of giving back is to give away my knowledge.  Thank you for reviewing this blog.

Commercial Real Estate Lenders|Loan Criteria

The first thing that the commercial real estate lender does is determine if the loan fits into the lender’s risk guidelines and to gauge the risk the loan will present in terms of potential default. The greater risk that a loan possesses, the higher the reward or interest rate the lender will charge, and the more stringent the lenders guidelines will be for the loan.

To do this, every aspect of the loan is examined by the lender’s underwriter – the quality of the building, the income stream, and the quality of the borrower.

However, the property’s merits matter more than the borrower’s qualifications. Some of the items the lender considers are:

Curb appeal
The commercial real estate lender rates the property according to its current physical condition.

What is the “curb appeal” of the building or how does it look? Example: In the event of a foreclosure, an ugly building would be harder for a lender to sell than an attractive one, increasing the risk to the bank.

Tenants
Who are the tenants and how long are the existing leases?

If the tenants leases are expiring 30 days after the loan closes, that represents more risk to the income stream of the building than leases that expire in three years. An example: a Home Depot as an anchor tenant with a long-term lease would score more points than a Dollar Store, which is typically on a shorter term lease.

What is the quality of the tenants, or their financial strength?
A project with Kmart as a tenant would have seemed very strong – until Kmart went into bankruptcy and closed locations. A space the size of Kmart is hard to rent out, which makes those buildings harder to sell at the price the lender needs to cover the defaulted loan.

A commercial real estate lender also reviews how long a tenant has been in business.

Remember, like any investor, a lender making a commercial real estate loan is making a risk/reward judgment.

The Borrower
Who is the borrower? While the key to commercial real estate loans is the net operating income the building produces, the quality of the borrower does come into play. An underwriter wants to know credit scores and whether the borrower has late payments, particularly on mortgages. Mortgage lates will be the death knell of a loan for a majority of lenders.

The lender will also look at a borrower’s liquid assets to determine their ability to come up with cash in emergencies, the borrower’s net worth, and the borrower’s experience.

But keep in mind that while the borrower’s financial strength comes into play, it’s priority number 3 after the property’s income and the quality of the property.

Quality of the Lease
A commercial real estate lender determines the quality of the lease by looking at number of years on the lease, renewal options, rental increases and whether the tenant reimburses for property taxes, insurance and maintenance.

Historical Performance of the Property
Lenders rate the quality of a property by how well it has been operating in the past. A lender usually favors a property that has at least 12 months of stable operation. They will also look at the occupancy history of the property as well as the market occupancy of similar properties in the area. The higher the occupancy, the lower the risk.

Debt Service Coverage Ratio (DSCR)
The major question a commercial real estate lender asks is: Does this building’s income service the loan amount with an appropriate level of debt service coverage?

To answer this question, the underwriter first determines the current Net Operating Income (NOI):

NOI = Gross rents – operating expenses

The operating expenses include property taxes, building insurance, building utilities, 5% of gross rents for vacancy, and 5% of gross rents for management of the building.

To determine the DSCR, the underwriter then uses the following formula:

DSCR = Net Operating Income (NOI) ÷ Annual Debt Service

The typical minimum level for debt service coverage is:
1.2x for multifamily properties
1.25x for other commercial property types

As a side note, consider the risk/reward thinking that goes into a lender’s decision based on DSCR. All things being equal, what represents a more attractive commercial real estate loan scenario, strictly according to DSCR: 1.25x coverage or the same building at a 1.35x coverage?

Sounds simplistic, but of course the higher coverage is better because it provides more of a cushion for the borrower who has to pay the debt service and creates a better situation for the lender in the event they have to foreclose and sell the building.

Loan amount vs  LTV
Loan to value (or LTV) is not a term that a commercial underwriter really considers when making a determination on the dollar amount of the commercial real estate loan that will be offered for a purchase. The key determination is going to be how the income of that building will service the debt of a certain loan amount.

Loan to Value Ratio = Mortgage Amount ÷ Appraised Value of Property

Of course, other factors, such as an outside appraisal, come into play when an underwriter is calculating loan amount, but DSCR is going to be the key number. Without a coverage ratio at an acceptable level, the other factors become irrelevant.

Cap Rate (Capitalization Rate)
The Cap Rate is used by the underwriter, as well as the investor or borrower, to get some idea of the value of the building and whether it has a good chance to appraise at an appropriate value. The Cap Rate for the given area can be used in conjunction with the NOI of the building.

Cap Rate = Net Operating Income (NOI) ÷ Actual Purchase Price

If you are trying to determine a Cap Rate for the market, contact a local commercial real estate appraiser or contact a local commercial real estate broker that specializes in the type of product that you are purchasing.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me, I truly want to help. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.

Glossary of Commercial Real Estate Terms

Administrative Fee: Typically, a fee paid as part of the CAM expense. Usually 10% – 15% of the CAM expenses, not including real estate taxes, assessments or insurance.

Attornment: In the event a mortgage holder forecloses on the landlord, the tenant will recognize the change of ownership and the new landlord.

Build-to-suit: Method of leasing property in which the landlord makes improvements to a space based on the tenant’s specifications. The cost of construction is generally factored into the lease terms. Most build-to-suit provisions apply to long term (10-year)leases.

CAM charges: Common Area Maintenance charges including parking lot maintenance, landscaping, common area lighting, etc. Based on actual expenses and apportioned among all the tenants. CAM charges are quoted as $/SF and based on rentable square footage. Typically paid monthly based on estimated costs for the year. At the end of the year, actual CAM charges are calculated and a credit or debit is passed on to the tenants.

Capitalization Rate: Net operating income (NOI) divided by the purchase price.

Cash on Cash Return: Cash Flow Before Taxes (CFBT)/initial investment. Best indication of the quality of the investment.

Credit-tenant property: A single-tenant commercial property occupied by a tenant who has a credit rating by Moody’s or Standard & Poor of BBB or better.

Debt Coverage Ratio: NOI/loan payment. This is what your banker will want to know before lending you money for the investment.

Discount Rate: Rate of which future cash flows are discounted (devalued) per year.

Double Net Lease (NN): In addition to a fixed monthly rent, tenant pays property taxes and insurance.

Escalation clause: Clause in a lease that allows the landlord to increase rent in the future. Rent increases dictated under an escalation clause may be charged in various ways, including:
• A fixed increase over a definite period
• A cost-of living increase tied to a government index, such as the Consumer Price Index (CPI)
• An increase directly related to increases in operating the property

Estoppel: Clause in the leases that states that if the landlord sells or mortgages the property, the tenant agrees to sign an Estoppel certificate that acknowledges the tenant’s current lease. The Estoppel usually includes the rental amount, remaining time on the lease including options to renew, outstanding rental payments due, lease amendments and any other important items in the lease. Typically, when an owner plans on selling the property, the buyer’s lender will require the tenants to sign an Estoppel Certificate.

Exclusive Use Clause: Provides protection in the shopping center for their right to sell a specific product(s); the landlord may not lease space to any tenant that sells those items.

Gross Lease: Tenant pays a fixed monthly rent.

HVAC: An acronym for “heating, ventilation and air conditioning” system.

IRR (Internal Rate of Return): Calculated by setting NPV = 0 and finding out what the discount rate would be. Use a calculator to do this calculation.

Lien: Legal claim filed against a property for payment of a debt or obligation. If a property owner fails to pay a creditor, for example, the creditor can place a lien on the property. A lien can halt the sale of a property.

Liability Insurance: Tenant will be required to carry an insurance policy in an amount of generally two to four million dollars and name the landlord as additional insured.

Load Factor: If the tenant has rights to hallways, elevators, restrooms outside their space, lobby, etc., the landlord will determine how many square feet of this area exist and prorate it to the other tenants. The tenant will pay rent on their prorata share of this number when the landlord calculates minimum rent.

Management Fee: Part of the CAM expense. Calculated as a percentage of the gross rents for the space (5% – 10%).

NPV (Net Present Value): Method for calculating the present value of future cash flows. Useful for comparing different investments and their returns. Most calculators provide NPV calculations.

Optimum Holding Period: Number of years to hold a property in order to maximize ROE. After this period it’s best to sell or exchange the property.

Percentage Rent: In addition to Minimum Rent, tenant will also pay a percentage of their sales volume as additional rent. Typically, when a tenant reaches a specific sales volume, the tenant will pay the landlord an amount over and above a specific figure. Example: if a Tenant’s minimum rent is $100,000/year and they have a 6% overage clause, the calculation is: $100,000/6% = gross of $1,666,666. The tenant would be required to pay the landlord 6% of the amount that exceeds $1,666,666.If the tenant did $2,000,000 in sales, $2,000,000 – $1,666,666 = $333,333 x 6% = $19,999 additional rent paid to the landlord.

Projected Gross Operating Income: Property’s annual income if all spaces were rented and all of the rent actually collected, minus an allowance for vacancy and credit loss.

Prorata (pro rate): The percentage of space occupied by a tenant as compared to the total space available for lease in the development. Example: if the total space in the center is 5,000 square feet and the tenant leases 1,000 square feet, prorata share is 1,000/5,000 = 25%. The tenant is then responsible for 25% of the total expenses of the development.

Recapture: The right of the landlord to cancel a lease with a tenant in the event a tenant desires to sublease or assign its lease. The recapture allows the landlord to lease the space directly to a new tenant and hot have the existing tenant assign or sublease to a new tenant.

Rentable square feet: Total square feet used to calculate the rent rate; may include an apportionment of lobby, hallways and other areas in the building available to and used by all the building tenants. Expressed as a multiplying or load factor of Useable SF. Example: Rentable SF = Useable SF x 1.15 (multiplying or load factor)

Return on Equity (ROE): CFBT/equity. Equal to Cash on Cash the first year, then decreases because your equity grows faster than NOI (due to depreciation and mortgage retirement).

Right of First Offer: Before offering a space or property for sale on the open market, the landlord or owner is obligated to offer the property first to a specific party.

Right of First Refusal: Allows a tenant the first opportunity to lease space if the landlord has a qualified party ready, willing and able to lease the space. The tenant can accept the other party’s offer amount which he will pay to the landlord or decline to lease the space.

Sale-leaseback: Transaction in which an owner sells a property to an investor who then leases the property back to the original owner under prearranged terms. Sale-leaseback deals offer the original owner freed-up capital and tax breaks and the investor a guaranteed return and appreciation.

Sublease: Lease given by a tenant for some or all of a rented property. For example, if a tenant rents 20,000 square feet but ends up needing only 10,000 square feet, they may want to sublet the extra space for some or all of the remaining term of the lease, providing they continue to occupy and pay rent for the property.

Subordination: Tenant agrees that the lease is subordinate to the mortgage. If the property is sold, the new owner cannot cancel the lease and the lease is in full force and effect. The lender’s position is not affected by the change in the tenant’s lease. In the event that the property is foreclosed, the lender may either keep the lease in effect or terminate it.

Triple Net Lease (NNN): In addition to a fixed monthly rent, tenant pays property taxes, insurance and common area maintenance.

Useable square feet: Total square feet within the walls of the space being leased. Actual space available for Tenant’s exclusive use.

Utility Costs: In larger spaces, utilities are separately metered and paid by the Tenant. In small spaces, utilities may not be separately metered and are apportioned among all users.

Vanilla Shell: Landlord provides the space with walls ready for paint, concrete slab floors, drop ceilings, lighting, air conditioning and heating, electrical panels, bathroom and electrical outlets per code in the walls. Does not include floor covering, wall covering, or any additional interior walls.

Yield Capitalization: More complex form of income capitalization which looks further into the future and attempts to estimate return over a projected holding period (typically 10 years).

Cost Segregation|Can It Cut Operating Costs on Commercial Property?

Saving money through creative financing, good management or cost segregation is always a good thing.  It doesn’t make any difference where the savings or increased value comes from, it only matters that you realize the gains.  This blog will attempt to answer your questions about cost segregation.

Here’s a video that should help you understand cost segregation and I’ve answered some specific questions below. (Please note that I’m not endorsing the company represented in the video, but am referring to them for general information purposes only.)

Cost Segregation (CS) – what is it? CS can help lower your business costs, and could also assist with jobs retention. The process involves a review of your business operations to separate items that are subject to long-term depreciation from those that are eligible for shorter-term depreciation through the IRS. For instance, your computer mainframe will not necessarily be subject to the same depreciation schedule as the ceiling, doors, fixtures, etc. Simply put, accelerating the asset depreciation on Federal taxes can save businesses money.

Depreciation through Cost Segregation is based on whether specific items (inside the building) were built pursuant to code requirements, or are for technology, service, treatment, aesthetic, or other purposes. Building-related items are typically subject to a 39-year depreciation schedule; non-code items can be eligible for five, seven, or 15-year depreciation. The result of segregating these costs could be significant for your business.

What types of properties qualify for cost segregation?

Real property eligible for cost segregation includes buildings that have been purchased, constructed, expanded or remodeled after December 31, 1986. Any size property will qualify. A study is typically cost-effective for buildings purchased or remodeled at a cost greater than $200,000.

When is the best time for a cost segregation study?

The best time for a cost segregation study is the year the property is placed in service by the current taxpayer, but it can also uncover retroactive tax deductions for older buildings which can generate significant short term benefits due to “catch-up” depreciation. Whether new construction or acquisition, it is generally most beneficial to maximize depreciation deductions from year one.

How much does a cost segregation study cost?

The classic answer is…it depends. The fee for a cost segregation study can vary greatly depending on the property type, size and complexity as well as the quality of the provider and their work product. The good news is that fees have come down considerably over the past four or five years. A study that would have cost $30,000 or more 5 years ago will probably price in the $10,000 – $12,000 range in today’s market.

How much should I expect to save with a cost segregation study?

It is not uncommon for a cost segregation study to generate hundreds of thousands or even millions of dollars in net present value savings. The average study will allocate, or reallocate in the case of a look-back study, anywhere from 20 – 40 % of the depreciable cost basis to a shorter life. For every $100,000 moved from 39-years to 5-years the 10-year net present value savings is approximately $28,000 (based on a 40% tax rate and a 6% discount rate). The 40-year net present value saving is approximately $20,000.

Hopefully, this blog has answered some of your questions about cost segregation.  If this looks like it could work for you, I suggest that you discuss this with your accountant or if he can’t help you contact a specialist in this field.  Sometimes our accountants aren’t as aggressive as we would like them to be.  As you can see, this could cost you vital money and be the difference between a money making or losing investment.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me.  My way of giving back is to give away my knowledge.  Thank you for reviewing this blog.

10 Ways To Increase Your Commercial Property Value

If you own commercial real estate, I believe that the ten best ways to increase their value is through rent increases, operating expense decreases, making improvements to the property, adding amenities or exploring other income producing ideas, review/challenge the existing property taxes, change the management company and/or leasing company, change the zoning or use of the property, have tenants pay for the utility costs, divide the property and creatively negotiate the leases whether they expire now or later.

1. Increase Rents

  • Increase below market rents when leases expire: Review the market to determine the average rent; if you are below the average for your type of property, increase the rents accordingly. Increase the rent over time for existing tenants; however, when renting a vacancy, charge at the new increased rate. You can check rental rates by going online to search for “rent rates” or by contacting a local property manager or leasing company in the area.
  • Expand existing tenants into larger space.
  • Improve credit-worthiness of tenants when filling vacant space (improves the cap rate) by marketing vacancies to regional or national tenants.  You don’t necessarily need to increase the rent, you should be able to sell the property at a better cap rate with better credit tenants.

2. Decrease Operating Expenses

  • Compare your expenses to market: Review all of your expenses carefully and analyze them on a per unit basis and a cost per square foot basis, as these are industry standards. Compare each expense with your other properties. Talk with your property manager or a local experienced property manager to compare with other properties in the area. If some of your costs are higher than the standards, you’ll know you need to explore ways to decrease them.
  • Competitively bid all of your contracts, including insurance.
  • Convert gross leases to net, double net or triple net leases.

3. Make improvements to Your Property

For office buildings, shopping centers and industrial buildings, cosmetic improvements can make a big difference – and may enable you to increase the amount of rent you charge. Give the exterior a makeover, improve the lobby, or repave the parking lot to enhance the property.

In the case of apartment buildings, you’ll get more mileage out of fixing up the interiors, installing new appliances, or doing a landscaping face-lift.

4. Add Amenities or Explore Income Producing Ideas

Amenities you might add:

• concierge services
• a fitness center
• a conference room
• a business center with a fax machine and copier
• a coffee bar

Income producing ideas include:

• renting your roof space for cell towers
• adding a laundry room and coin operated machines to an apartment complex
• renting your common areas for art shows, car shows or kids rides.

5. Property Taxes

Get an appraisal for your property and appeal the appraised amount if the appraisal is lower. Retain a real estate attorney who specializes in tax appeals to assist you, or hire one of the companies that get paid based on the savings they get for you based on the appeal.

6. Change Management or Leasing Companies

Sometimes all that’s needed is looking at your property through a new pair of eyes. Different energy or philosophy can add value to your property. New managers or leasing agents may be able to give you ideas on increasing income, decreasing expenses and giving your property a fresh, new look and feel.

7. Zoning or Use Change

Changing the use of a property can significantly change the value of the property. Examples are:

• changing an industrial space into a retail use
• renovating a hotel to apartments
• adjusting regular office space to medical office space

8. Have Tenants Pay for the Utility Costs

If you are paying for the electricity, gas and/or water usage in office buildings or apartment complexes, look into separately metering or sub-metering the utilities, and pass the costs on to the tenants.

If you have a boiler, you may want to install baseboard heating in each unit so the tenants can control their heat and pay for it.

9. Divide Your Property

If you own land, breaking it down into smaller parcels can get you more per acre or square foot. Also, you could put in roads, add utilities, or entitle the property, all of which can substantially increase the value of the property.

10. Negotiate Existing Leases

If you are trying to sell the property or borrowing money on the property, it’s better to have long term leases in place. A five or ten year lease with rent increases is worth more to investors and lenders than a one year lease. Renegotiate or extend existing tenant leases to maximize the value of your property.  Whenever the tenant asks for something that is not your obligation, it can be a time to negotiate something out of the lease.  In other words, if they ask you for something, it’s time to ask for something back.  Improve your leases whenever you can.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me.  My way of giving back is to give away my knowledge.  Thank you for reviewing this blog.

Selling Commercial Property|Preparing a Real Estate Marketing Plan

Commercial real estate marketing involves the disposition of your property. And if you have invested wisely, worked smart, and created value – and inflation and appreciation have played their roles – then it’s time to sell your commercial property and harvest the wealth you have built through property equity.

You must now make the decision of what you want to do with the profits. You can take the money, pay your taxes and run. You can exchange the property to push the taxes to a later date. You can offer financing on the property so that you receive an income without worrying about managing the property. Or, if you have your business in the property and you need cash, you might want to consider a sale leaseback.

Whatever you want to do with that equity, your next step is to create a sales promotion that attracts buyers who will pay the price you want. You can develop the strategy on your own or you can work with a commercial real estate broker to come up with a commercial real estate marketing strategy. Either way, you need to be involved in the strategy decisions so that your property stands out and attracts buyers.

The first thing that you must do is to offer your property at a price that your target market will pay and at a price that provides you a profit. You shouldn’t stroll down the path that others go on by marketing your property at a price that accomplishes neither a buyer’s goals nor your goals. Rather, design a value proposition that attracts, persuades and closes the perfect buyer.

This value proposition integrates four essential elements:

(1) the investor; (2) your competitors; (3) the benefits that you will be offering; (4) your pricing and terms.

The Investor

Which investors should you appeal to? A few types of investors include:
• no cash buyers
• no credit buyers
• first time investors
• lease-option purchasers
• professional investors
• specific product investors
• conversion specialists

Your Competitors

Who are your potential competitors? Competitors can include:
• foreclosures
• new buildings
• distressed sellers
• sellers who carry financing

You need to understand your competitors’ locations, their features and benefits, and their pricing and terms.

Benefits Offered

What benefits and features should you emphasize and offer for effective commercial real estate marketing? Examples include:
• special landscaping
• unique architecture
• ability to expand the property
• special touches
• interior improvements
• seller financing
• strong appreciation potential
• positive cash flow
• low cash requirement
• minimal management
• tenant pays all expenses

Pricing and Terms

Here you need to compile your information and then compare and contrast, mix and match the different types of potential benefits, potential investors and potential competitors to arrive at a price and terms that provide the targeted buyer a great competitive value and provide you the profit you seek.

How you answer these questions will determine how successful you will be in selling your property at a realistic price to a targeted investor in a reasonable period of time. You achieve these results by asking players in the market, inspecting, comparing and contrasting properties, discovering the properties that sell fastest and at the best prices, reading articles on property renovation and thinking about what features/benefits/contract clauses will provide you a competitive edge against the other properties and a cooperative edge with your buyer segment.

As you can see, selling your property is not just about putting up a “for sale” sign and taking the calls if you plan to get the maximum for your property in the shortest amount of time. It’s about developing a commercial real estate marketing plan for your specific property. Knowing your property and your market are the keys to success.

Once you have identified potential buyers for your property, gained an understanding of your competition, defined the benefits of your property and determined the pricing and terms that you want, it’s time to develop a real estate marketing plan.

Here are the next steps in the selling process that you need to do to get the maximum price and the quickest close:

Staging the property
Stage the property keeping your potential buyer in mind. If you’re selling a luxury property, then make sure that your property is fixed up to match that buyer. If, on the other hand, you’re selling a lower end property, clean the property up so that it shows well, but don’t go overboard.

At a minimum, the property should be safe to show and cleaned up. Most retail spaces should be put into a “vanilla shell” condition for showings. Office spaces should have the carpets and windows cleaned and the walls repaired. Industrial spaces should be made safe and clean throughout. Landscaping should be free of litter, pruned and spruced up.

Advertising the property
• Signs on the property – Signs should be done professionally and the contact numbers (telephone and email) should be clearly spelled out. Some of your best prospects come from sign calls, so make sure that you return all calls promptly.
• Fliers describing the property, including its features and benefits – Fliers should be printed or designed for internet marketing, and the strong selling points about the property should be emphasized.
• Local advertising – Local advertising can include newspapers and other local publications.
• Internet advertising – Internet advertising as part of the real estate marketing plan can be done through such companies as LoopNet, CoStar, Catalyst, eProperty and a host of other sites for selling commercial property.
• Mailers to potential buyers and brokers – Mailers can include fliers mailed and/or emailed to all potential buyers and brokers in the market.

You can also attend local, regional and national conventions and meetings where you will find opportunities to market your property. Another resource is broker and/or investor meetings which are held monthly in almost every local area.

Lenders
While you don’t need a loan to close the property, it’s wise to have a couple of lenders review the property to give you an idea of lending programs that might be available for potential purchasers so you can refer them and possibly close the sale faster. Prequalifying the property is always a good idea as part of the real estate marketing plan.

Due Diligence
Put all of the information together that will be needed for the buyer’s due diligence. Having this ready to go once you have signed the purchase contract can save you time in getting the property closed and keep things running smoothly.

Pre-Qualify Buyers
Have a system in place so you can pre-qualify the buyer prior to getting into contract. Understand their motivations, their ability to finance the property, and their history of closings.

Doing the above items should help you to maximize your sales price and to have a smooth closing.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me, I truly want to help. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.

Letter of Intent to Buy Commercial Real Estate

A letter of intent (LOI) is the initial offer to the seller of a commercial property that you want to buy. The commercial real estate letter of intent should tell the broker and/or seller that you’re a serious buyer who is ready to close at the price and the terms you have spelled out, provided that you can work out the details of a contract. Your letter of intent should get the ball rolling.

The main purpose of a letter of intent is that it’s a simple, time efficient way to get the basic points of a deal down. Besides, a one or two page document is easier to get a seller to agree to right away so that you can go on to making the deal. The disadvantage is that you don’t have the property under contract until the formal agreement is fully executed, thus make sure that you get the formal contract out quickly.

The easiest way to explain a LOI is to give you an example of a standard one as shown below, however please note the following as it relates to the LOI:

The opening clause lets them know that you are a serious buyer. I always suggest that you put in and/or his Assignee so that you can assign it to a company or LLC that you might want to set up or in case you have a problem trying to close this deal, you can either partner up with another party or assign the Contract and probably make some money on the assignment. There are many ways to make money in real estate and assigning contracts is one of them.

Under Property Description, do as thorough a job describing the property as you can.

Your due diligence period should be the amount of time you anticipate that it will take you to do your inspections. Make sure that your period doesn’t start until the seller has given you all of the required information and that it is acceptable only in your discretion. You will also want to waive these rights or accept the information in writing only.

Your deposit delivery and closing timing are negotiable, but should be reasonable.

The loan contingency usually will prompt a discussion with the seller wherein they will want to know if you have a good source for a loan or if you have received loans in the past, etc. You should be ready to convince the seller that you are experienced at getting loans or that you have a broker that is experienced.

Closing costs are a negotiated item typically based upon what is normal in your particular market. You can ask an escrow officer or a real estate broker in your area about this.

One of the most important clauses in the letter of intent is the clause spelling out that the letter is not a contract and not legally binding until a contract is fully executed.

As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me, I truly want to help. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.

SAMPLE LETTER OF INTENT

Date:
Seller or Seller’s Agent Address:
Re: LETTER OF INTENT FOR THE PURCHASE OF (Subject Property):

Dear [Name]:

This Letter of Intent sets forth the terms and conditions upon which [Name of Buyer] and/or his Assignee will purchase the above-referenced property. It is understood that this constitutes an expression of our intent only and that any final and binding agreement shall be subject to the preparation, negotiation and execution of definitive legal documents (hereinafter referred to as the “Purchase and Sale Agreement”). Subject to the foregoing limitations, it is our intention to enter into a Purchase and Sale Agreement that contains, among others, the following terms and conditions:
1. Purchaser: _________________[Name of Buyer] and/or his Assignee or Nominee.
2. Seller: __________________[Name of Seller]
3. Property Description: (Address) __________________________together with any and all improvements therein and all of Seller’s right, title, and interest in all common areas, amenities, appurtenances, fixtures, chattels, and all personal property and the underlying fee land (collectively referred to as the “Property”). Seller shall sell Purchaser a 100% fee simple interest in the Property. Assessor’s Parcel Number: ________________.
4. Purchase Price/Terms: The Purchase Price of the Property shall be $___________, all cash. The Purchase Price shall be adjusted in accordance with generally accepted accounting procedures and customary real estate practice for pro-rations, credits and other adjustments, including, but not limited to, credit to Purchaser for security and other deposits paid by tenants.
5. Purchase and Sale Agreement: Seller and Purchaser, shall in good faith, prepare and execute a mutually acceptable Purchase and Sale Agreement within ten (10) business days after Seller has accepted this Letter of Intent. Seller shall not accept any offer with respect to the sale of the Property during the duration of the contingencies.
6. Other Conditions: Conditions precedent to closing this transaction shall include:
A. Due Diligence Period: The satisfactory approval of Purchaser’s inspection of all aspects of the Property during an investigation period of ___________ (__) days (the “Due Diligence Period”), which will commence on receipt of all of the due diligence materials (“Due Diligence Information”) shown on the attached Exhibit A. Within ten (10) business days after the execution of the Purchase and Sale Agreement, Seller shall make available to Purchaser the Due Diligence Information. Review and acceptance of Due Diligence Information is subject to the approval of Purchaser, in its sole and absolute discretion.
B. Title/Survey: Seller, at Seller’s expense, shall cause the title company [Title and Escrow Company] to issue a preliminary title report (the “Title Report”), accompanied by legible copies of all recorded documents relating to easement, right-of-way, and all other matters of record affecting the Property. Seller, at Seller’s expense, shall cause to be delivered a current ALTA plat of survey of the Property, prepared by a duly licensed land surveyor acceptable to the Purchaser and the Title Company (“the Survey”). The Title Report and Survey shall be updated by Seller within ______________ (___) days of closing to the satisfaction of the Purchaser.
C. Deposits/Closing: An earnest money deposit of ________________ ($____________) to be held for the benefit of the Seller and applicable to the Purchase Price, shall be delivered to the Escrow Agent within two (2) business days of execution of the Purchase and Sale Agreement. The deposit will become nonrefundable only: (1) following Purchaser’s satisfactory review of the Due Diligence Information; and (2) upon delivery of title and survey to Purchaser’s approval. Closing shall occur within __________ (__) days following the end of the Due Diligence Period.
7. Financing Contingencies: This offer is contingent upon Buyer obtaining from an insurance company, financial institution or other lender, a commitment to lend to Buyer a sum equal to at least ______% of the Purchase Price, at terms reasonably acceptable to Buyer. Such loan (“New Loan”) shall be secured by a first trust or mortgage on the Property. If this Agreement provides for Seller to carry back junior financing, the Seller shall have the right to approve the terms of the New Loan. Seller shall have 7 days from receipt of the commitment setting forth the proposed terms of the New Loan to approve or disapprove of such proposed terms. If Seller fails to notify Escrow Holder, in writing, of the disapproval within said 7 days it shall be conclusively presumed that Seller has approved the terms of the New Loan.
Buyer hereby agrees to diligently pursue obtaining the New Loan. If Buyer shall fail to notify its Broker, Escrow Holder and Seller, in writing within ______ days following the Date of Agreement, that the New Loan has not been obtained, it shall be conclusively presumed that Buyer has either obtained said New Loan or has waived this New Loan contingency.
If, after due diligence, Buyer shall notify its Broker, Escrow Holder and Seller, in writing, within the time specified in the previous paragraph hereof, that Buyer has not obtained said New Loan, this Agreement shall be terminated, and Buyer shall be entitled to the prompt return of the Deposit, plus any interest earned thereon, less only Escrow Holder and Title Company cancellation fees and costs, which Buyer shall pay.
8. Conveyance and Encumbrances: The property shall be conveyed by recordable grant deed, free and clear of all liens and encumbrances, excluding: (a) real estate taxes, which shall be the obligation of the Seller until date of closing and subject to pro-ration; and (b) such liens and encumbrances as Purchaser elects to have remain against the Property.
9. Closing Costs: Seller shall pay the costs of ALTA title insurance, transfer or sales taxes, and any title curative work it elects to undertake. Purchaser shall pay recording fees, extended title insurance costs and all costs in connection with the physical inspection, accounting audit and other investigations made in connection with Purchaser’s due diligence review.
The Purchaser and Seller shall each pay for their respective attorney fees and out-of-pocket expenses. All escrow fees shall be paid equally by Purchaser and Seller, except as otherwise provided in the Purchase and Sale Agreement.
10. ADA: Please be advised that an owner or tenant of real property may be subject to the Americans With Disabilities Act (the ADA), a Federal law codified at 42 USC Section 12101 et seq. Among other requirements of the ADA that could apply to your Property, Title III of the ADA requires owners and tenants of “public accommodations” to remove barriers to access by disabled persons and provide auxiliary aids and services for hearing, vision or speech impaired persons by January 26, 1992. The regulations under Title III of the ADA are codified at 28 CFR Part 36. We recommend you review the ADA and regulations.
11. Hazardous Materials: Owner agrees to disclose to Broker and to prospective purchasers and tenants any and all information which Owner has regarding present and future zoning and environmental matters affecting the Property and regarding the condition of the Property including, but not limited to, structural, mechanical and soils conditions, the presence and location of asbestos, PCB transformers, other toxic, hazardous or contaminated substances, and underground storage tanks, in, on, or about the Property. Broker is authorized to disclose any such information to prospective purchasers or tenants.
12. Brokers: In the event [Name of Buyer] completes a successful purchase of the property, Seller shall pay ___________________ a sale commission equal to ____ percent( %) of the sales price. The sale commission shall be paid upon closing and through escrow.
13. Representation and Warranties: The Purchase and Sale Agreement shall contain such covenants, agreements, representations and warranties as Seller and Purchaser may agree upon, including but not limited to Hazardous Materials; Mold, Mildew and Fungus, etc.
14. Assignment: Purchaser shall have the right, after giving written notice to Seller, to assign its rights under this Letter of Intent and the Purchase and Sale Agreement to any entity controlled by, or under common control of, Purchaser.
This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party, either party may propose different terms from those summarized herein, or unilaterally terminate all negotiations with the other party hereto.
It is understood that the foregoing outline is not a binding agreement. Furthermore, it is understood that the purpose of this outline is to work toward acceptable terms by which to draft a Purchase and Sale Agreement which will be mutually acceptable to both parties. If the above terms are acceptable to Seller, please so indicate by executing below and returning the enclosed copy by the close of business [Date].
Sincerely,
AGREED AND ACCEPTED:

PURCHASER:
By:_______________________________
Its:_____________________________
Date:______________________
SELLER:
By: ______________________________
Its: _____________________________
Date: ____________________________
Attachment