The Port Strategy Fallacy – It’s the Deal That Counts.

The Port Strategy Fallacy – It’s the Deal That Counts.

Posted on by Jim Klein

Both brokers and investors tout the strengths of investing in markets with a vibrant harbor and airport. This has been a pronounced strategy from at least 1997 when container imports began increasing beyond incremental growth. Many institutional investors have dubbed this the Gateway Strategy. But grand proclamations like these normally lead to increased competition amongst buyers and lower returns. If history is any lesson, the money was made by the first round Buyers who purchased these distribution buildings at distress. It was the following group who used port dynamics to justify their high purchases and are now sitting with vacant and poorly leased properties at rents vastly below proforma. In retrospect, it was the deal strategy that made investors money. Being located by the port was secondary.
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Economic Development in Greater Los Angeles

Economic Development in Greater Los Angeles

Posted on by Jim Klein


More so than ever before, cities are vying for companies that create jobs. There’s the policy aspect that favors clean and green jobs. Then there’s the backroom bargaining that favors successful outcomes. Companies that can offer employment would do well to study some of the recent newsworthy examples. They include the failed attempt by Los Angeles to attract AnseldoBreda, local jostling to snare Tesla Motors, competition for Eli Broad’s museum, Los Angeles Stadium in the City of Industry, and the smaller manufacturing deals coming through the CRA of Los Angeles. Each one is fairly lucrative to the company and does not necessarily fit any set model. They are similar to the large retailers, like Costco or Walmart, who were able to negotiate attractive packages for redevelopment funds, property tax breaks, and property development benefits. I haven’t seen any studies if these retail developments met city economic expectations, but certainly the recent raise in sales tax makes up any marginal differences. It pays to understand the multitude of incentives available from local, state and national agencies.
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The Year Ahead – 2010

The Year Ahead – 2010

Posted on by Jim Klein

General Sentiment

To judge the health of the industrial market, I rely on activity reports from fellow brokers. Across the board, its been obviously weak. Most of my peers are squeaking out a living from short term leases and renewals. Sales and investments are moribund. There’s a bit of government support and stimulus work for those in the pipeline, but not enough to have a broad impact. Many agents have left the business. Most of my broker friends anticipate the same for 2010. We may be nearing the bottom of the cycle, but most sellers and banks are not willing to accept the greatly reduced prices.


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Finding Deals In Foreclosure Land

Finding Deals In Foreclosure Land

Posted on by Jim Klein

Foreclosure pricing has set the tone in the residential market. While we remain in Foreclosure Land, everyone wants a bargain. This way of thinking bleeds to what was once the “normal functioning” market. Many are anticipating the same will happen in the commercial area. But whether in good markets or bad, the same thing holds true. It’s hard finding deals and it takes ingenuity to make them work. Now more than ever, a tenant is the critical ingredient in almost every purchase.
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Foreclosure Land

Foreclosure Land

Posted on by Jim Klein

It’s late in the Summer and temperatures are hitting 100 degrees. A few people are setting up large beach umbrellas in a tall tree planter. Others are unfolding beach chairs. Someone is dragging a large cooler full of beverages and food for the day. It’s not an unemployed broker’s beach paradise, but the west steps of the County Courthouse in Norwalk – the largest property auction of our lifetime. On an average day $30 Million of Trust Deeds are sold. The daily street auction is unsanctioned by the government and there is no institutional oversight. Day after day, it is the lender’s clearinghouse of foreclosed mortgages where clever real estate buyers stuff their portfolios full of cheap property. It’s a feeding frenzy of real estate bargains that may never be repeated.

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Industrial Property Recession

Industrial Property Recession

Posted on by Jim Klein

Industrial property in Los Angeles is suffering for three major reasons. Poor business conditions, an unfavorable societal environment, and a credit freeze. As these trends continue, business will be conducted under recessionary circumstances.  Meanwhile, new attention will be drawn to overcoming the current malaise by innovations in financing, industries, investors, and deal structures. Until then, it’s simple. Owners will drop their prices.

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At the Edge and Stagnation of Valuation

At the Edge and Stagnation of Valuation

Posted on by Jim Klein

The business of real estate is close to an end. Developing, investing and lending have all halted except for the most secure or distressed situations. An enormous swath of the industry is mothballed like an auto plant in the summer. Just like autoworkers, real estate practitioners are wondering if production will re-open. Lending divisions, development companies, land developers, and acquisition departments are closed until further notice. The biggest fallout is people we have all known for many years that are deciding what to do for the future.

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The New Language of Industrial Real Estate and Its Pitfalls

The New Language of Industrial Real Estate and Its Pitfalls

Posted on by Jim Klein

Over the past 20 years, the decision matrix for locating a warehouse has grown so complicated that only a few real estate brokers have the ability to communicate on a technical level with clients.  Many warehouse companies require labor studies, network rationalization models, transportation studies, and warehouse design.  Many large brokerage companies have complied by starting practice groups within their firms or have hired talent outside to provide these services. Professionals that talk this new language are generally at the forefront of controlling the relationship. 

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Be Nice To Your Tenant and Industrial Lands

Be Nice To Your Tenant and Industrial Lands

Posted on by Jim Klein

The market has shifted and building owners can’t act like they are solely in control. It’s not that vacancies are so high, but business expansion and leasing activity has reduced to a crawl. Many tenants want to stay put and extend their leases until business comes back. Smart landlords are willing to grant these short term extensions rather than have an empty building.

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Things Are Changing……

Things Are Changing……

Posted on by Jim Klein

Everyone has an opinion about where we are in the real estate cycle. Home builders and residential lenders see this as a crisis. Commercial brokers nationwide talk about a slow down. Just this month I have seen a lender take over negotiations in a land sale, a substantial money default on a development deal, and a newer investor unable to replace his interest only loan. We are also receiving calls from sellers who passed on our “low” offers earlier in the year and a few landlords are complaining about tenants getting behind in their rent. So far, most of the problems are related to financing and over-optimistic projections. Still, this a lot of personal incidents in a short period.
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