With over 200 state and local government initiatives supporting “high performance” green building, one of the biggest challenges faced by owners and tenants alike is overcoming the issue as to who pays for, and who benefits from, these green improvements. While no single solution exists for every problem, strategies are emerging to manage many landlord/tenant issues.

In response to the complex legal and practical landlord/tenant issues, BOMA (The Building Owners and Managers Association) has published BOMA’s Guide to Writing a Commercial Real Estate Lease, Including Green Lease Language. A link to the book can be found here.

Since the financial implications for tenanted properties are quite significant, green lease language will likely become more and more commonplace and standardized as the industry matures.

-Jonathan Fischer, MAI

Jonathan Fischer, MAI, is a Managing Director in NAI Global’s New York City office and works with investors and financial institutions as a member of NAI’s Special Asset Solutions group.

Like it or not, there is very little that a property owner can do about the market.  The mistake that is too often made is to ignore the market and to make decisions based on expectations that are inconsistent and unrealistic to market conditions. Transaction volumes, cap rates, operational trends, financing terms and conditions, to name a few, are for the most part determined by the market.  Although a property can perform within a market range, optimizing all aspects of your properties operations and marketing will for the most part only get you a value within that market determined trading range.  Unfortunately, no matter how good of an operator you are, you do not control the market. Therefore, the prudent owner will value their property and the probability of terms and conditions of a sale within a market determined range.

At the property level, an owner can influence their property value in any market.  A careful analysis of the property to determine its operational efficiencies and performance relative to market can be very revealing.   Areas that can accrete value to a property include 1) capitalization structure, 2) effective marketing, 3) appropriate branding, 4) quality management, 5) efficient site utilization, 6) innovative concept development, to name a few.  It is within the control of an owner to analyze each of these components, including their relative cost and their probability for success.  The results of such an analysis can greatly help one to make an “informed decision.”

Lastly, personal or corporate circumstances can often dictate a priority in the sales process that may have little to do with the property.  However, such circumstances may override the valuation component of the decision to sell process and need to be recognized accordingly.

So should you sell your hotel in this or any market?  My recommendation is as follows:

Objectively assess your personal and corporate circumstances.  How are the need to sell and the corresponding timing intertwined with your financial objectives for the property? Are you a seller regardless of market conditions or possibly a seller at a specific pricing threshold?  What are your ‘non-property related’ critical objectives? Clearly identify these objectives and prioritize them accordingly.

Secondly, carefully review the market.  Know that your property disposition results will likely fall within the statistically significant range of market conditions.  Is that range acceptable?  A quality appraisal or an opinion of value from hospitality professional can greatly assist you in this process. 

Thirdly, evaluate your property and its operations.  Are there areas that you can improve performance or maximize value.  What is the cost and time to accomplish this? Are there quick operational improvements at your disposal?  Can you develop your way to profitability within your existing circumstances?  Throughout this part of the process, it’s critical to balance reality and practicality with creativity and desire.  Keep asking yourself if the issue at hand is reasonably within your control.  Are the targeted improvements achievable, consistent with the market and within your capability?

Lastly, bear in mind that the market is always changing.  A well thought-out disposition strategy will include contingencies for ever-changing marketing conditions.

-Paul Reitz

Paul Reitz, CCIM is Senior Vice President of Investment Services at NAI Global and is a hospitality specialist in NAI Global’s Special Asset Solutions and Investment Services groups.

NAI Global, the world’s premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide, announced today it has formed a new business unit to address growing client demand for Project Management Services.

Operating within NAI’s Corporate Services group, NAI Global Project Management Services offers comprehensive project management solutions from initial strategic planning through to build-out and move-in. David Melina and Fred Tuck, industry veterans with over 55 years of combined experience, have joined NAI Global to lead the new operation. They both are based in NAI Global’s New York City office.

Focusing primarily on corporate clients and retailers, NAI Global Project Management Services will assist clients in facilitating design/build transactions, site survey and assessment, interior architecture and space planning, FFE procurement and installation, clean-up/clean-out and security for new tenanting, project construction audits and emergency preparedness. The Project Management Services team also works with lenders and financial institutions to perform physical due diligence, identify and assess risk, mitigation and restoration.

“Project Management has become an essential component of most corporate requirements and one of the fastest growing areas in corporate real estate services,” noted NAI Global President & CEO Jeffrey M. Finn. “David and Fred have worked on hundreds of projects individually and as a team, bringing more than $500 million in construction and renovation projects to completion for clients across the U.S.  We’re fortunate to have such an experienced team to expand our capabilities in this important area.”

Melina joins NAI Global with more than 30 years of experience in construction and portfolio management. The former CEO of Costas Kondylis & Partners LLP, Melina provides real estate capital advisory services for clients. Tuck joins NAI Global with more than 25 years of experience in construction management, owner representation, general contracting and consulting and forensic services to ownership of every commercial real estate asset class. Formerly with Costas Kondylis & Partners LLP, Tuck provides design/build services expertise, working with clients to guide the construction process from start to finish.

Headquartered in Princeton, New Jersey, NAI Global manages a network of 325 offices and 5,000 professionals in 55 countries across the globe. For more information on NAI Project Management Services, visit http://www.naiglobal.com/services/Project_management.