I wanted to share with you what I like to call the “Seven Commercial Real Estate” Commandments:
1. Commercial real estate is a local business
There is no substitute for local market knowledge. Local operators will outperform investors who do not intimately understand the market.
2. Commercial real estate is a full-time business
There is no such thing as effective, part-time real estate. Competent professionals must constantly monitor and oversee properties to ensure that the value of each asset is maximized.
3. Creating value is essential
The highest, most profitable segment of the commercial real estate deal process is to find assets below replacement cost and then create value through professional, active management.
4. You make your money on the buy
The single most important key to success in a particular deal is buying at the right purchase price.
5. Middle market assets generate superior returns
Middle market deals are too large for poorly capitalized local operators–and too small for large institution personnel–to manage effectively. Superior, risk-adjusted returns are found in the middle market.
6. Access to capital is imperative to success
Commercial real estate assets need constant funds for building expenditures and new leasing expenses. Institutions with personnel who have access to new debt and equity will outperform smaller operators who are without the same access to capital.
7. Self-management is vital to success
Ownership can be the greatest performance incentive. We believe the most effective manager of an asset is its owner. This applies to leasing, property management, and asset management.