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Funny Story About Real Estate Investing

Years ago, a New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted IF he could prove satisfactory title to a parcel of property being offered as collateral. No big deal; customary request.

The title of the property dated back to 1803. Instead of tracing title back 50 years, the customary amount, the lawyer traced it all the way back to 1803. This took him three months.

After sending the information to the FHA, he received the following reply (actual letter):

“Upon review of your letter adjoining your client’s loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin.”

Peeved, the attorney sent back the following (actual letter):

“Your letter regarding title in Case No. 189156 has been received. I note that you wish to have title extended further than the 194 years covered by the present application.

I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased, by the U.S., from France in 1803, the year of origin identified in our application.

For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France, which had acquired it by right of conquest from Spain. The land came into possession of Spain by right of conquest made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Isabella. The good queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus’ expedition.

Now the Pope, as I’m sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana. God, therefore, would be the owner of origin and His origins date back to before the beginning of time and of the world as we AND the FHA know it. I hope to hell you find God’s original claim to be satisfactory.

Now, may we have our damn loan?”

The loan was approved soon thereafter.

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Strategies for success

To succeed in this real estate market, investors and managers need a new kind of toolbox. While financial implements are still critical, more traditional tools of the trade, a hammer, paintbrush and the number of a good plumber, for example, have joined them.

As the industry experiences one of the worst downturns in decades, real estate investors and managers are reconsidering strategies for success. Many of them have embraced a back-to-basics approach that provides a path for staying strong in a difficult economy. A key part of that approach: actively maintaining their properties.

Gone are the days when making a profit in real estate involved a financial transaction and little else. Now, in an effort to remain viable, real estate professionals are focusing on 1) protecting and enhancing the value
of their assets; 2) adapting to a changed investment climate; and 3) reallocating precious resources.

And despite the rough sledding, there is a good likelihood that these strategies, taken together, will yield success. To be
sure, a meaningful recovery is not imminent. But there is a growing list of companies lining up to take advantage of the recovery when it occurs, giving perhaps the first indication that a slow turnaround may be beginning, at least in some sectors.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs in Boise, Meridian, Nampa, and the greater Treasure Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime Boise and Meridian locations.

Please check out The Sundance Company website to view property photos, search for office space or learn more about Sundance’s start-to-finish capabilities. If you prefer to talk to someone in person about your commercial real estate needs, then just give us a call at our Boise office, (208) 322-7300.

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Communication is the key

Communication may be one of the keys to helping retailers and developers cope with the current economic situation said speakers at the International Council of Shopping Centers’s RECon convention in Las Vegas that was held earlier this month. Read more about what some industry experts believe in the article below from GlobeSt.com.

The dramatic change in industry fortunes from last year’s event was noted by James E. Maurin, chairman of Covington, LA-based Stirling Properties, moderating a session at the Las Vegas Convention Center on how the crisis evolved and what lies ahead.
“A year ago, we knew we had some issues,” said Christopher Niehaus, a managing director of Morgan Stanley, New York City. “But in September, we experienced the collapse of the U.S. financial system.”
The credit and housing bubbles burst, hitting retail hard, while consumers reversed a period of low and negative savings.
“The consumer is going to be fairly muted for quite some time,” Niehaus said.
Unlike previous industry downturns, this current situation has several unique components: its worldwide reach, the lack of debtor-in-possession financing, and capital constraints, noted Charles B. Lebovitz, chairman of Chattanooga, TN-based CBL & Associates Properties.
“In the past, when CBL went to a lender, it wasn’t a question of getting the loan, but of the terms,” Lebovitz recalled.
Meanwhile, the closure of big boxes has had a dramatic affect on leasing. At year-end 2007, CBL had one vacant big box; at year-end 2008, the company had 50 empty boxes. The good news is that what financing is available is reasonably priced.
Companies today are looking at alternative uses for empty anchors, including educational facilities and home furnishings chains.
“How many golfers would like to play in 30 mile-per-hour winds? That sums up what retailers are experiencing,” said Donald Wright, senior vice president of real estate and engineering of Safeway, Pleasonton, CA.
The goal now is to survive.
“Right now, we’re marching in place, keeping our heads above water, keeping our organization intact and maintaining our properties,” Lebovitz said.
The company cut its RECon-related booth costs by 60% by eliminating private office space and reducing staff at the show. Corporately, it has reduced capital expenditures and some staffing. No new projects are being started this year, though four under construction are being completed.
“It’s an ongoing process,” Lebovitz said. “We don’t think the worst is behind us.”
Meanwhile, business must still be conducted.
“We’re going back to the basics: cost control, leasing,” Maurin said. “There are plenty of deals to be made, they’re just harder to do.”
The key is communication.
“Absolutely overcommunicate,” Maurin advised.
“The communication piece is a big deal,” Wright agreed. “If a retailer is struggling, it’s important to talk to the landlord.”
But that doesn’t necessarily mean an automatic rent reduction or deferral, at least without a few strings attached.
“We’re spending more time working with the retailers and exploring ways to [create] a win/win situation,” Lebovitz said. “We ask for a quid pro quo.”
The consensus, Wright said, is that once retail hits bottom, the industry will stay there for a while, forcing all to re-examine their models. Meanwhile, financial system losses continue to rise, from $1.4 trillion in the IMF’s semi-annual survey in October to $2.7 trillion in its April 09 survey.
“Government is a part of the solution, and the repairing of the balance sheet of the banks will be helpful,” Niehaus said.
Still, there is no quick fix. Wright predicted that it might take three to five years to clear up oversupply.
“The heard of the matter is that we’re still in a bad situation,” Niehaus said. “The economy is built on credit. If that dries up, everything stops. We have a massive pig working through the python. We’re only halfway there and we still have a long way to go.”