Tuesday, March 8, 2011

Operating Distressed Commercial Real Estate Assets as Economy Recovers

REW headshot city ST. PETERSBURG, FL --- For investors with cash, the economic recession is rife with opportunities, allowing purchases of office, retail, industrial and multifamily properties at discounts that range from 40 percent to 60 percent and more.

But managing those assets as the economy recovers will be more difficult than the already challenging distressed acquisition process, says Rachel Elias Wein, AIA (top left photo), who heads WeinPlus Associates in St. Petersburg.

“It’s pretty common now among investors’ circles, a lot of companies are acquiring loans for distressed assets at significant discounts,” Wein said.

“But the key to those opportunities is managing the assets as the economy recovers. Management practices in the recession are different. The economy has evolved, and asset management practices that don’t evolve are likely to fail,” she said.

In a growth economy, asset managers can afford to take a laissez-fair approach to their tenants, focusing only on rent collection.

“In a recessionary economy, landlords have to help facilitate their tenants’ success,” Wein said.

Property owners must create an environment where their tenants can flourish, Wein said.

“You’ve got to look at tenant sales. Are you helping them to get open faster so that they can utilize their free rent period?

Are you helping them through the permit process and the construction process? Once they are open, are you giving them the resources to be able to reduce their operating expenses and their CAM charges? How are you helping them to be more successful?” Wein said.

Tenant renewals are a major concern as well. “It costs significantly more to bring a new tenant into empty space than to keep an existing tenant,” Wein said.

Successful asset managers incentivize the outcomes they want,” Wein said.

“It’s not enough to say that you focus on renewals, a lost existing tenant is far more valuable than a potential new tenant. If you want to not only increase value, but also preserve existing value in your portfolio, than you need to incentivize your team to produce those results,” she said.

 “Property management and leasing practices will prove to be the deciding factor that determines whether a distressed asset venture succeeds or fails, it’s up to the owner to set the stage for their team’s success,” Wein said.

For more information, please contact:

Rachel Elias Wein, AIA, Founder / Principal, WeinPlus, 727-386-9346, http://www.weinplusassociates.com/;
Larry Vershel or Beth Payan, Larry Vershel Communications 407-644-4142, lvershelco@aol.com

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