Re: Retail Vacancy - Any Ideas?

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Posted by ray@lcorn on July 08, 2009 at 08:33:47:

In Reply to: Re: Retail Vacancy - Any Ideas? posted by Bill Taylor on July 04, 2009 at 23:04:30:

Hi Bill!

Long time no talk.. hope you and yours are well. How's Indy weathering the storm so far?

In filling vacancies we're doing the same thing, with a slight twist. We only take equity positions in businesses that are synergistic with our real estate activities, e.g. a marketing supply company, an IT firm, etc. Taking a page from the Warren Buffet model, we look to invest in businesses that have a good niche and management that will stay in place. We tailor the terms of the investment to the situation, but the common thread is that the business will locate in our buildings.

In the same vein, I wrote in my book about bartering space for services. Not every business qualifies as a potential investment candidate, but can provide services to our real estate company in exchange for space. For example, we have an interior design company as a tenant and employ their services throughout our portfolio, including a makeover for our corporate offices.

I'm also looking at several franchises. I don't generally like investments that require active day-to-day management, but in slow times like this there can be very attractive deals struck for strong brand names. I plan to get them up and running in buildings we own, then sell the businesses to the managers subject to long-term leases in the real estate. Then we'll have the option of holding the RE or selling into the single-tenant NNN market. I've always been a fan of multiple exit strategies and a control freak, and this strategy meets both criteria!

These approaches also open the door for us to look at acquiring properties with high vacancies at significant discounts. A turnaround plan can be executed quickly and is not as dependent on recruiting outside tenants because we fill the vacant space with tenants we control. It takes double due diligence in the market analysis, but the end result will be a double payoff.

Just some thoughts... I'd love to hear from others who are using creative ways to fill vacancies, especially in office and retail properties.

ray

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