Wish You Could Go Back to Preschool?

Did you ever wish you could go back to preschool? Those carefree days of fingerpainting, show and tell, field trips; and who couldn’t use some nap time. In New York, adults pay $333 to $999 to re-create the preschool experience. Well, we have a better idea. Why not own your own preschool. It may cost a bit more at $3.5 million, but it’s a great investment opportunity presented by Capital Business Solutions and Stigliano Commercial Real Estate.Education has become big business. The preschool industry continues to grow rapidly due to the demand created by dual income households, and the increased realization of the importance of early childhood education. Between charter schools, private schools, and preschools, we are seeing tremendous investment in education properties. Charter schools and preschools with Voluntary Pre-Kindergarten (VPK) programs also receive some of all of their revenue from the government which is very attractive to investors. School buildings also attracting some impressive prices per square foot (see below) and have become prime triple net investment targets similar to a Starbucks, Wawa or Walgreens, selling at cap rates of 6 to 7 percent. The U.S. Bureau of Labor Statistics projects that education will be one of the strongest sectors for employment growth through 2020.The Learning Experience, founded in 1980 in Boca Raton, is a prime example of how child care has become big business. The company was sold in 2014 to New York-based private equity fund Quad Partners and Palo Alto, California-based Norwest Venture Partners. They recently leased a 39,000 sf corporate headquarters here in Deerfield Beach. Their school buildings have become prime triple net investment targets similar to a Starbucks or Walgreens, selling at cap rates of 6 to 7 percent based on the stability of the industry and the financial strength of the tenant. The Learning Experience’s long-term plan is to have 30 to 40 facilities in South Florida.

Other major national players in the industry include Kindercare, Learning Care Group (La Petite, Tutor Time) and Bright Horizons. But the business remains primarily fragmented among local entrepreneurial owners. According to IBIS World, only 7.3 percent of the $48 Billion in industry revenue is generated by the top four providers in the market.  So for those entrepreneurial owners, Capital Business Solutions is marketing an 11,000 sf preschool on 2+ acres which generates $750K per year in revenue with room to grow. Contact us for more information. Do you own a preschool? We are also working with some active buyers looking to expand their operations.

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Downtown Fort Lauderdale Riding Wave of New Development

I continue to write for the South Florida Office Brokers Association (SFOBA) blog at www.sfoba.com . Here is my recent article on new development in Downtown Fort Lauderdale:

Special thanks to Laurel Oswald, Jon Blunk and Joody Andre at Tower Commercial Real Estate for a great lunch, some amazing views and a super presentation by Jenni Morejon of the Downtown Development Authority. Tower hosted our May 11 meeting at the Tower Club at One Financial Plaza.

If you missed the presentation, shame on you. The good news is that we have Jenni’s presentation here on the blog.  The bad news is that I wasn’t able to save you a piece of cheesecake.

Some of the highlights:

Over $2 Billion in post-recession investment is either planned, completed or under construction in the CBD. This includes the new 750,000 sf County Courthouse, 11,200 residential units, 1.5 million sf of office, 433,000 sf of retail and 1,200 hotel rooms. In addition, the new wave streetcar project is in the works with service to start in 2020.

While supply will be increasing with the new development, strong demand has driven residential rental rates up by 40% over the past five years and Class-A office rental rates are up by $4 over the past 12 months.

We are looking forward to more on the CBD market next month when Stiles presents details on their new downtown mixed use project.

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Florida House Votes to Reduce Sales Tax on Office Rents – Here’s How to Eliminate it Completely

Here is an update to last week’s post:

Good news for Florida Businesses – yesterday, April 26, 2017, The Florida State House of Representatives voted unanimously 117-0 to pass  HB 7019, which among other things reduces sales tax of commercial rents from the current 6% down to 4.5 percent in 2018 and 2019 and 5.5 percent in 2020 and thereafter. The bill still needs to be approved by the Senate.

From the bill starting on line 478:

Section 16. Effective January 1, 2018, paragraphs (c) and (d) of subsection (1) of section 212.031,Florida Statutes, are amended, and paragraph (e) is added to that subsection, to read: 212.031 Tax on rental or license fee for use of real property.— (1)(c) For the exercise of such privilege, a tax is levied at the rate of 5.5 percent, except for the period beginning January 1, 2018, and ending December 31, 2019, during which period the tax shall be levied at the rate of 4.5 percent, of and on the total rent or license fee charged for such real property by the person charging or collecting the rental or license fee.

For a typical office tenant paying $25 per square foot for 5,000 square feet, the 1.5% reduction equates to $1,875 per year, enough to pay for a couple of lunches and trips to Starbucks. But Florida remains the only state to charge sales tax on rent. And yes, because real estate tax is included in rent, Florida businesses will continue to pay tax on tax. No complaints here, though, Florida is still one of only seven states with no state income tax, so we have only enhanced Florida’s status as a great place to do business. Thanks to Rick Orr of totalcommercial.com for passing this information along to me.

This brings me to my final point – how would you like to pay no State income tax and no sales tax on rent? Buy an office condo in Florida. I have 7,032 to 17,958 square feet of office condo space available in Boca Raton.  

 

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Happy Tax Day! Here’s a Legal Way to Stop Paying Tax.

This gallery contains 3 photos.

First an apology – I can’t help you with the IRS, but I do have a way to reduce your taxes. Florida is the only state in the US that charges sales tax on office rent. The tax is assessed … Continue reading

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A Great Future-Proof Business – And No, You Don’t Have to Do Windows

One of the big challenges I see every day in business brokerage is whether a business is viable for the future.  Major retailers continue to shut down.  The taxi business is giving way to Uber and Lyft.  The printing industry faces challenges from electronic documents and e-readers. The travel industry has been transformed. Your local Blockbuster has given way to Redbox and streaming video. And how will the world change when cars drive themselves?

My buyers are looking for sustainable businesses that they know will exist for the next 5, 10 or 20 years. Which brings me to an indisputable fact…Windows get dirty.  It is perfectly clear (pun intended) that regardless of how you get from point A to point B, how you listen to music, or where you buy your new ipad –  that the windows in your house, your favorite restaurant, and even your recently closed Sports Authority are going to get dirty. And even when they get cleaned, they are going to get dirty again.

Wouldn’t it be great to own a great window cleaning company with loyal long term clients with recurring business?  Add to that a territory that includes some of the most affluent zip codes in the US with thousands of luxury homes and upscale businesses. And they all have windows that will continue to get dirty. And the other great thing –  the Seller manages the company from the office.  Employee responsibilities include labor, collections and sales via self-managed teams. So you can own the company even if you don’t do windows… We have a great business listed for $250,000 generating an owner’s benefit of over $80,000.  Click here for a nondisclosure form and we’ll get you a full package.

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How to Save a Million Dollars on Office Condo Fees

In my other blog articles, I’ve shown how office condo ownership can provide significant savings over leasing. Here, I’d like to show how some office condos provide more savings than others.  In this case, a $7 savings on condo fees provides the same benefit as purchasing for $100 per square foot less. On a 10,000 SF space, that savings can equate to $1 million.

 Whether you own or lease, there are basically two components of occupancy cost:

(1)The net rent (leasing) or debt service (owning); and
(2) the operating expenses (leasing) or condo fees (owning) which for purposes of this discussion include real estate tax.

congress-corporate-boca-901-main-122Looking at the office condos I am marketing at 901 Clint Moore Road in Boca Raton, the condo fees are $4.33 per square foot. Real Estate Taxes are estimated at  $2.62. One of our primary competitors has condo fees that are over $11 per square foot, or over $7 more than ours. Their taxes run about $1 per sf higher than ours as well.  The total difference is close to $8.50, but let’s use a conservative $7.

Assuming we borrow $180 per square foot for 25 years at 5% interest, our annual debt service would be $12.63 per square foot.  Excel formula ( =pmt(0.05/12,300,180)*12 ) Add $4.33 in condo fees and $2.62 in taxes and we get a gross cost of occupancy of $19.58. (electric and janitorial are billed separately) By the way, the net rental rate on comparable space in the market is $15, well more than the debt service to a buyer.

congress-corporate-boca-901-59If we borrowed at $180 per sf at our competitor’s property, our gross cost of occupancy increases from $19,58 to over $27. This is still well below the top rental rates in Boca Raton which in some cases exceed $50 gross. But the $7 savings should get your attention. You do get more amenities for the $7, but is it really worth it?

So how can $7 per SF save you $1 million? If we wanted to finance $100 in property cost at 5% over 25 years, our monthly payment would be $7.02 per square foot. Excel formula ( =pmt(0.05/12,300,100)*12 )  Therefore by saving $7 in condo fees, your cost of occupancy is the same as it would be if you payed $100 less  per square foot for the property. If you were to purchase 10,000 square feet, that savings would be $1 million.

Insert your disclaimers here – your mileage may vary and this admittedly may stretch the bounds of logic. But the numbers certainly support the claim. Regardless of your interpretation, there are significant benefits to office condo ownership and even more benefits if your office condo has competitive condo fees.

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EB-5 Visa Program Extended – S. Fla. EB-5 Investment By the Numbers

eb-5-visaThe EB-5 Visa Program has become a key source of capital for South Florida Real Estate Development. The program was scheduled to expire on Friday September 30, 2016, but was just extended through December 9 as part of the same Continuing Resolution bill that will keep the government funded through the same date. The program has created thousands of jobs and billions of dollars in foreign investment. But it has also been susceptible to fraud with investment funds going to affluent areas rather than underserved markets, and allowing rich investors to jump the line to gain citizenship. The extension does buy Congress a little more time to develop reforms to tweak the program so it can better achieve its intended goals.

Thanks to our friends at The Real Deal and The Master Brokers Forum, here is a look at South Florida EB-5 Investment by the numbers, showing the positive impact EB-5 has had on our community. Read More While the EB-5 program has it’s share of issues, there is no doubt that it is creating jobs and capital investment in our area.

Capital Business Solutions ranks among Florida’s leading Business Brokerage Firms and  has affiliates across the globe. We represent buyers and sellers of businesses and commercial properties. We provide opportunities for your clients to enter the US via acquisition of businesses or commercial property under the EB-5 or E2 programs. Looking for a business to purchase? Are you looking for a way to get into the US through capital investment. Do you have a client looking to do so?

Take a look at these business opportunities.

 

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5 Reasons to Reconsider the Office Condo Market (Part 1 of 3)

This is part one of a three part series on office condominiums. With the economy improving and the office market on the rebound, office condominiums are once again making sense to corporate occupiers.  The commercial condo market is a niche market consisting of only a small fraction of the entire inventory. Office condos generally gain popularity when rental rates are increasing and companies try to lock in their real estate costs.  The market reached its peak in 2005-2007 as office vacancies declined to historical lows and rental rates escalated rapidly. As the economy hit the brakes in 2008, rental rates nosedived and leasing office space made more sense than owning. Fast forward to 2014 and we see vacancy rates declining, rental rates trending upward and  office construction at a near standstill while interest rates remain historically low.  At Brenner Real Estate Group, we are expecting an increase in demand for office condominiums and are considering converting Cypress Commons (pictured below), one of our investment properties to a condo. Here are a couple of our prime commerical condo listings in Fort Lauderdale and Boca Raton. Is the market ripe for a new wave of office condo conversions and new development? Continue reading

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Prose And Condos – Is an Office Condo Right For You ? (Part 2 of 3)

This is part 2 of our 3 part series on office condos. Click to Read Part 1: 5 Reasons to Reconsider the Office Condo Market

OK, I admit it, But I just couldn’t resist going with this title. With interst rates remaining historically low, property values still below peak levels and consumer confidence on the rise, business owners are asking once again:

               Is owning my space right for my business ?

It should be noted that this comparison holds true for commercial condos as well as owner occupied buildings. It’s really not a simple answer. It involves an analysis of the business, the owner and the market. There are benefits to owning as well as leasing. It is ultimately your decision as to what is right for you. Making the right decision involves weighing the pluses and minuses of the two alternatives, something I call “prose and condos.” Continue reading

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Does it Pay to Buy an Office Condo? Part 4 of a 3-Part Series

The third and final installment of my 3-part series on office condos (click for Part 1 and Part 2 on the Brenner Blog) was entitled “Does it Pay to Buy an Office Condo,” a detailed financial analysis of commercial condominium ownership. When I initially tackled the subject back in 2013, there was already a strong argument for ownership. But more recently, a potentially game-changing new financing program makes it virtually a no-brainer for many firms.

While the 90% financing available through the U.S. Small Business Administration provided the opportunity for many companies to own their facilities, the newly unveiled 100% program opens the door to ownership for many more. Continue reading

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An Afternoon in Crocker Raton

This is something I wrote for The South Florida Office Brokers Association (SFOBA) blog and also published on www.breg,net. Over 300 of the top Commercial Brokers in South Florida are SFOBA members. We share deals and information at our monthly meetings with an average attendance of around 70. We also have some great guest speakers and can pass along some useful information.
sfoba logo

And for some shameless self promotion – you don’t need $340 million to own some great office space in Boca Raton. I have up to 18,000 square feet of great office condo space and you can own it for less than the price of leasing!

The South Florida Office Brokers Association meeting for June 2015 was held at One Town Center, the former Tyco building located within the complex now known as Boca Center. Our guest speaker Angelo Bianco of Crocker Partners told us that most locals still know Boca Center by its former name.

 The iconic mixed-use complex located along Military Trail south of Glades Road in Central Boca Raton contains office space, a Marriott hotel, and upscale shops and restaurants. It has been used as a case study by the Urban Land Institute for excellence in a mixed-use project. The property was originally developed by Crocker and Company back in the mid-1980s and is still widely known by its original name, Crocker Center.Boca Center Aerial

Over the years, the buildings were sold to Teachers Insurance and Annuity and Met Life. But over the last 12 months, Crocker Partners has invested more than $340 million in Boca Raton, reacquiring the shops and towers at Boca Center, The Plaza and One Town Center. Just north of Boca Center, Crocker also acquired the 277,000 sf One Boca Place, the longest and largest office building in the market. So even if Boca Center is not renamed back to Crocker Center, the running joke is that maybe the city should be renamed Crocker Raton.

What is not a joke is that Crocker Partners now controls 94% of the vacant Class-A space in the Boca Raton office market. According to Mike Erickson of CBRE, who leases the Boca Center properties for Crocker, “office rental rates north of $30 per sf triple net (which is over $40 including operating expenses) are the new normal in Boca Raton. Vacancies are down and construction is flat so we are going to continue to push rental rates.”

In order to justify the higher rental rates, Crocker Partners will be upgrading the properties to compete in today’s market. One Town Center will be positioned to continue to appeal to private equity firms. The Plaza, the black office tower anchored by Wells Fargo, will be modernized and positioned as an ultra high-end concierge building targeted toward upscale local tenants. It will be priced at a monthly dollar amount rather than per square foot.”A contemporary building with timeless appeal” said Bianco. All of the buildings will also offer valet parking.

The biggest changes will involve the retail space,which will be re-oriented for street visibility. “Don’t turn your back on the street” said Bianco. The restaurant space at Boca Center will surround an obianco crockerpen courtyard to COCcreate more of a synergy, and a gym and a spa will be added to the hotel’s lower 2 floors.

Plans also include the addition of multi family units to the project to capitalize on the current urbanization trend. The idea according to Bianco is to combine the upscale shopping experience of Miami’s Bal Harbour shops or Palm Beach’s Worth Avenue with the trendy local appeal of Delray Beach’s Atlantic Avenue.

Will Crocker be able to raise the bar on rental rates in Central Boca? Can they repeat their earlier success with an updated Boca Center? And will the City Council consider renaming the City Crocker Raton? We’d like your opinion.

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Welcome !

Welcome to my personal blog space at Ken’s Trends. I’ve been active in the South Florida Commercial Real Estate Market for 30 years and blogging in various places since 2010. I thought it would be a good idea to be able to put all of my ideas in one place. I’ll be re-publishing some of my old pieces and adding new ones as we go.  Stay tuned !

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My First Blog Post June 29, 2010 – A Community

This was a concept I came up with in 2010. We changed our focus from a building full of tenants to a community of companies. We used the concept to build a pretty nice portfolio of a million square feet of commercial space. Much later, a company called WeWork leveraged this concept into a $20 billion valuation… 

In my 11 years as Vice President of Leasing and Acquisitions, our corporate tagline has been “A Portfolio of Office, Retail and Industrial Properties.” We’ve made a subtle change in our tagline, but this reflects a significant change in our focus. Our new tagline is “A Community of Office, Retail and Industrial Properties.”

A tenant networking breakfast in our building courtyard in 2012. That’s me in the blue shirt.

With a portfolio, the focus is on return on the real estate investment. That involves minimizing cost while maximizing revenues. On the cost side, there is the temptation to cut corners and reduce expenses, but you simply cannot take that approach and expect to maintain tenant loyalty.

We realized early on that a relationship-oriented tenant-driven approach was the key to our success. By providing an attractive work environment, excellent service, and responding to tenants as their space needs change, we have always outperformed the market and developed long term mutually beneficial relationships with our tenants.

But in today’s challenging economy, we have realized that we have to be something more, and we are now taking that concept one step further. The concept of community has long applied to the residential market, but not to the commercial market. People like to live and share with like-minded neighbors, which enhances their quality of life and gives them roots in their community.

In traditional office settings, major corporations are stacked one above the other, which doesn’t do much to facilitate a sense of community. We believe our properties are different. We cater to a local upscale entrepreneurial clientele. A majority our tenants are local professionals or family businesses with less than ten employees. The person you meet on the elevator is generally not some mid-level manager, he or she has probably the owned of the business for 10 years or is related to the owner.

Not sure if these guys read my blog, but they leveraged this concept into a $20 billion valuation.

We believe the opportunity for our tenants to interact with like-minded entrepreneurs and share business opportunities provides tremendous value for our tenants and for our properties. If the CPA in Suite 107 refers a client to the Financial Planner in 1122, that may generate enough revenue to pay the Financial Planner’s rent for the year.

Our mission for 2010 and beyond is to facilitate the sense of community among our tenants, create business opportunities and add value to our buildings through these activities. Technology will play a major role. The explosion of social media like Facebook, Twitter and YouTube gives us an outlet to tell our story and exchange valuable information through words, pictures and video. But there is no substitute for face to face interaction. Toward that end, we are facilitating tenant events, small group meetings and encouraging one on one meetings between tenants.

This is a new concept in commercial real estate and we are in the pioneering stages. We are actively seeking contributions and feedback from our tenants as it is truly an interactive effort. For our community concept to work, it takes leadership from the landlord and cooperation and effort from the tenants. We believe that the effort will be worthwhile in developing business for our tenants which in turn helps to keep our tenants profitable and provides incentive for them to stay with us long term. You will be hearing our marketing and social media specialist who will be spearheading this effort to create “A Community of Office and Warehouse Properties”

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