MRG Company Blog

2012 Crystal Ball MiBiz Issue

Sun, 19 Feb 2012 12:29:48 -0500

2012 Crystal Ball MiBiz Issue

2011 RECon Asia Not Worth the Trip

Fri, 11 Nov 2011 22:52:00 -0500

ICSC SmartBrief recently reported that “Retail, developer executives flock to RECon Asia” (http://bit.ly/t24Jy3), which was anything but the case, from my perspective.

This year’s ICSC Event, “RECon Asia”, in Shanghai on November 3rd and 4th, offered limited booths, primarily comprised of China-based developers, property managers and vendors like architects. More importantly, I didn’t find a single American or European retail brand in attendance, although I’m sure a few attended. Most importantly, “flock” is definitely not an adjective that I would have used when describing this event.

This conference was considerably more expensive than ICSC’s Annual Conference in Las Vegas, with maybe one twentieth the typical number of deal making booths as ICSC’s mid-winter conference in Chicago. I attended this conference in support of marketing a couple of new outlet mall developments that we’re currently working on in China, in which I was mainly interested in connecting with a few American and/or European retailers interested in expanding in China. Other than the panel discussions, the deal making hall was literally worthless and took all of 20 minutes to tour.

ICSC needs to do a much better job of preparing its members for what to expect at their overseas conferences, at least until they gain more credibility overseas, so that others don’t make the same mistake that I did by attending future non-events like this one.

On a more positive note, China’s growing at an unbelievable rate currently and the population is clearly spending their new-found wealth. American retailers need to seriously wake-up and pay attention to what’s going on in Asia and jump onto the bandwagon! More to follow…

The Turnaround Management Association’s next West Michigan...

Mon, 16 May 2011 23:42:00 -0400

The Turnaround Management Association’s next West Michigan Event will be:

“Emerging Trends in the Distressed Commercial Real Estate Market”

With Panelists … .

Sam Cummings, Managing Partner, CWD Real Estate
Emily Michael, Vice President - Special Assets Group, Comerica Bank
Chris Nagorski, President, Skyline Property Group
John Wheeler, Principal, Orion Construction

This event will be held this Tuesday, May 17, 2011, at the University Club of Grand Rapids, located at 111 Lyon Street, NW (10th Floor of the Fifth Third Bank Building), Grand Rapids, MI

Networking & Cocktails start at 4:30 PM
The Panel Discussion starts at 5:00 PM
Then - Hors D’oeuvres & Cocktails until 7:00 PM

Cost for Members $20.00; Non-Members $35.00; & Students $15.00

Its Spring! I really love the changing seasons in Michigan....

Sat, 07 May 2011 17:33:00 -0400

Its Spring!

I really love the changing seasons in Michigan. Spring has to be my favorite with the grass turning a deep green; the birds returning and making new nests; the geese teaching their babies to swim; and the fruit trees afire with blossoms! Plus, its nice to lose the coat and drive with the windows down again.

Join Us for Arbor Day at Creekside Commons!

Thu, 28 Apr 2011 00:18:00 -0400

This Friday, April 29th, which is Arbor Day, Creekside Business Center and Midwest Realty Group are both planting and giving away 500 two-year old sapling White Pines. Please stop by and talk to Heidi, Holly, Megan or Carrie, at Creekside Business Center, if you would like to help us plant these trees or take some back to your office or home!

We’ve been celebrating the environment all April. Earlier this year, we had Creekside Commons Business Park and its two multiple tenant buildings SERF Certified (www.SERFgreen.com) to recognize our development efforts as being environmentally responsible. We are also working toward the EPA’s new EnergyStar certification for both buildings.

Please come help us celebrate the environment and to enjoy the beauty of Creekside Commons in the spring; a family of baby gosling chicks just hatched! And while your there, help us plant some trees around the property lunch will provided by Midwest Realty Group at noon! Otherwise, please feel to stop in Friday for a free tree while they last.

For more details, please call the office at 269-321-5000 for more details.

Sincerely, Rick

Building Green Chicago Conference & Expo

Tue, 19 Apr 2011 21:15:00 -0400

We joined Joseph Maguire and the “SERF Team” (www.SERFgreen.org) from Lansing, Michigan, at the “Building Green Chicago Conference & Expo” in Chicago today. This was an interesting conference with discussion topics and vendors focused on new environmentally-sensitive building components, energy saving ideas and new initiatives, and valuable peer-to-peer discussions.

The Keynote Address was made by Ms. Susan Hedman, the EPA’s Region-5 Director. I was encouraged to learn about the number of different initiatives the EPA is working on to encourage environmentally responsible development! Ms. Hedman noted that the EPA recently launched a new “Energy Star” certification system for commercial buildings. You can find supporting tools, energy reduction ideas, and certification tools on their web site at: www.EnergyStar.org, under “Portfolio Manager”. It was also interesting to learn that this certification is an annual rating process, which gets systematically more difficult to achieve as new Energy Star certified buildings enter the program.

SERF was a program sponsor for this year’s Building Green Chicago Conference. They were able to use this conference to share their green building certification model with a number of new Chicago area building owners, engineers and architects.

Adversity or Adventure-what's it going to be?

Mon, 15 Nov 2010 12:15:00 -0500

Who gave you the best piece of life advice and what was it? “My father-in-law, a successful German Chicago businessman, attorney, accountant, developer and author. He once asked me: ‘What’s it going to be today, adversity or adventure?’ “As a young man, I was struggling to overcome a situation that was so stressful at times that I was unable to work. My father-in-law’s advice of choosing each day whether you’re going to let the ‘adversity’ of the day rule, or choose ‘adventure’ and to watch God at work in your life, has honestly become the most fundamentally freeing advice I’ve ever been given, which I have been quick to share with others.”

Quoted from Sunday’s Kalamazoo Gazette. Sunday, 11-14-2010, Business Section by Alex Nixon.

Read the full story @ MLive

As a commercial property developer and an individual...

Sun, 07 Nov 2010 18:27:00 -0500

As a commercial property developer and an individual that believes in environmentally responsible development, the whole LEED Certification (Leadership in Energy and Environmental Design) for commercial buildings has left me completely frustrated due to its complexity, relatively high cost to achieve, and the fact that this certification can actually create more waste and cost than it actually saves or benefits?!

In the 2005 article “Is LEED Broken?”, by Jerry Yudelson, PE/MBA, Jerry specifically addresses some of the more common issues and complaints with the LEED certification process. This is one of many articles that have been published on this topic more recently.

So where does that leave developers and building owners who still want to build and operating their property in a “green” fashion? Not in a good place after attempting to achieve the LEED standard only to find yourself several thousands of dollars later that it’s cost-prohibitive to complete.

At the recent Midwest ICSC Conference in Chicago (October 2010), an all-new green building certification was unveiled in an effort to provide a solution for all of those interested in building new or renovating existing structures in an environmentally conscience way without creating undue waste, or spending so much money to complete that the certification is simply not worth it.

This new standard is referred to as “SERF”, which stands for the “Society of Environmentally Responsible Facilities” and provides the resources and forums to help interested parties promote and share methods to cost-effectively achieve Practical Environmental Stewardship™. This certification is not about rolling out another exclusive club that’s too costly to join, but rather about helping educate and involve everyone in our collective responsibility to become more environmentally responsible in property development, renovation and on-going management.

After a detailed review the standards established by SERF; discussing these standards with a couple of our building architects and civil engineers; and personally meeting with Joseph Maguire, the founder of SERF, regarding their standards and the catalysis behind developing this certification, I have decided to fully support this organization and begin to work toward the certification of our different property holdings.

Please watch for future posts on this topic as our team becomes more involved with this important movement and as we achieve certification on our first few structures.

Look Closely at Real Estate Partnership Agreements

Sun, 07 Nov 2010 12:22:00 -0500

Many investors didn’t know what a “capital call” was just a few years ago, but today they’re pretty common with real estate investments and have become the source of numerous partnership arguments and break-ups.

A capital call occurs when a property investment, like a retail strip center, runs short of operating capital sufficient to cover all of its obligations. How can this happen? Simple, (1) a tenant or two relocates from the property; (2) income falls below scheduled operating expenses; (3) extended vacancy eats up any excess operating account balances; and then (4) additional capital is needed to cover monthly shortfalls, or even to fund property improvements required to secure a new replacement tenant.

This may not seem like a big issue, but if the property is owned by a partnership with multiple investors, especially now while money is tight and when not all of the investors have the same liquidity, problems begin to crop-up. This is further complicated when market values of these investment properties drop 35% to 60% and the value of the specific investment property is arguably less than the existing debt.

No problem yet? OK, now let’s assume that one or more of your partners refuse to participate in funding their share of a significant capital call - can you see the remaining partners having difficulty funding more than their share of this event in order to protect the investment, their loan guarantees, and/or maintain their credit ratings? How about when they have to fund this capital call for an investment property that is valued significantly lower than the mortgage?

I could complicate this scenario significantly further with other real world challenges, but you probably get the idea of just how stressful this can be on a real estate partnership trying to make effective decisions in a difficult economy, while balancing these decisions with the added personal conditions of select partnership members. In summary, it can be a real mess!

In many cases, issues like these are addressed in painstaking detail in the partnership operating agreements, especially dealing with the death of a member or how to handle members that default in their obligations to the partnership. However, if you’re involved in an older, more closely-held, real estate partnership, you may be surprised to learn just how poorly these scenarios may be addressed and the actual financial exposure than poor partnership agreements can have on their investment members.

By and large, my real estate partnerships have been a very positive experience and have afforded me an opportunity to meet and form relationships with a number of wonderful individuals. Like with anything, the devil is in the details, and you need to make certain that your agreements (i.e. operating agreements, loan agreements, lease agreements, construction agreements, etc.) are worded and structured properly. In addition to the agreements, you need to manage your group’s affairs professionally and maintain a high level of transparency and communication in the management of the partnership. Like in marriage, even this will not solve every issue that comes up, but it does provide a great foundation to effectively deal with problems when they occur.

Who’s the Kid and Why’s He Smiling? This photograph...

Wed, 03 Nov 2010 01:47:00 -0400

Who’s the Kid and Why’s He Smiling?

This photograph was taken at the final “Mr. Kalamazoo” contest, which was an annual Kalamazoo event held at the State Theater for many years running. It was essentially a congeniality contest with a 4’ tall trophy and a host of other prizes.

Because this was the very last year of the contest, which by the way I won, I still hold the title of ”Mr. Kalamazoo” today! I actually prefer the title “Mr. Fabulous”, which a satisfied client recently coined after I successfully helped them to complete a complicated lease negotiation, but that’s another story.

After closer inspection of the outfit, which by hind-sight I’m certain my parents forced me to wear that day, I’m actually surprised that I wasn’t crying?! Who wears polished white patent leather shoes with a large-checked sport coat anymore? Definitely a fashion oversight…

This year’s Annual Midwest ICSC Deal-Making Conference in...

Sat, 30 Oct 2010 07:40:00 -0400

This year’s Annual Midwest ICSC Deal-Making Conference in Chicago was “uneventful”. While definitely better attended than last year’s (2009) conference, the retailer turn-out was very light and the booths were dominated by Illinois-based municipalities seeking to attract additional retailers.

Some of the retailers included: Menards, Cash Store, Dollar General, Family Dollar, CVS, Burger King, Big Lots, Meijer, 7-Eleven, AutoZone, Famous Footwear, Dollar Tree, Goodwill, Great Clips, Jimmy Johns, Sally Beauty Supply, SuperValu, Walgreens, and Subway, to name a few.

Notwithstanding the anticipated light turn-out, our team continues to participate in this key networking event because of the importance of maintaining relationships within our industry and to constantly be establishing new ones, both of which are critical to being effective within the retail sector of our industry. Plus, you never know where your next transaction will come from.

Surprisingly enough, we were able to touch base with a national retailer on an impromptu basis at this year’s conference, which generated a new long-term build-to-suit/leaseback arrangement, which paid for the entire event!

We also learned about a new Michigan-based green building certification “SERF” that’s being rolled out specifically for those commercial property owners interested in renovating and bringing their existing facilities up to green standards that wont break the bank. You can find SERF at http://www.serfgreen.org/.

Rick DeKam of Midwest Realty Group was featured on the cover of...

Mon, 25 Oct 2010 14:53:12 -0400

Rick DeKam of Midwest Realty Group was featured on the cover of the fourth quarter issue of Transactions, a commercial real estate feature produced by MiBiz.

Seek Advice When You Can't Pay Your Investment Property Mortgage

Sat, 04 Sep 2010 21:51:00 -0400

For some, the embarrassment of not being able to pay your monthly mortgage payment is so condemning that you would never think to ask for help in solving the underlying problem or to seek advice regarding alternatives you may have in working with your lender to solve this problem. However, there’s almost always a variety of solutions if you approach this matter properly.

The first step to getting back on the right path is understanding why your current income will not service your debt. Did you pay too much for the property? Have your operating expenses increased to a point where your tenant income is not adequately covering the same? Is it a vacancy problem or are your tenants not paying their contracted rents? Have your mortgage terms changed recently?

Outside of freestanding single-tenant net-leased facilities, most income property is subtly, but regularly, changing and being impacted by influences like the market, the economy, age, design, the environment, and other similar factors. As such, you must continually adjust your investment to these influences to maintain optimum net income and property value. Unfortunately, most investors fail to make these adjustments and after time these investments become vulnerable.

The current economic downturn has effected a substantial number of income property investors. I would venture to guess that anyone with a 50% or less equity position in their income property going into 2007 has been severely impacted by the current market contraction and has even found it difficult or even impossible to renew their existing mortgages when they expire.

When you find yourself in this situation, it pays to get qualified advice to avoid making additional mistakes and potentially risking the loss of your property (and potentially thousands of dollars of invested capital) before considering the tax impacts of these losses, which can also be substantial! Depending upon your specific situation, there can be many different solutions if you’re proactive and willing to address these issues before you get too far down a negative path with your lender. This is definitely not a time to bury your head in the sand; rather, developing a proactive and strong relationship with your lender, and keeping in touch with them regularly regarding changes in your property’s financial and physical condition, is an important first step in effectively working through these current market adjustments and surviving foreclosure.

Keeping your head in the game, taking the time to regularly plan and forecast through changing conditions, establishing operating and refreshment reserves, and regularly communicating with your lender, are all sound practices to help you avoid falling victim to market downturns.