Let’s get started with GSA properties as promised-
All I can tell you is that I really like the United States Government as a tenant, they are very demanding, but I like the stability, strength and return that goes with it.
All I can tell you is that I really like the United States Government as a tenant, they are very demanding, but I like the stability, strength and return that goes with it.
Let me start by telling the downside and that is that GSA will not sign a contract for more than 10 years firm or a 5 year firm with an option to 5 more years.
“So, what is it that you like so much about GSA? “ you might ask, well you have to pick your investment very carefully and by that I mean you will have to analyze and understand the way they think, the way they operate. In a nutshell,the GSA will put out for bid a request to obtain and get into a building within certain specific coordinates and once a government approved contractor gets that bid awarded he will proceed to build their structure according to their specs. The tenant will then request the TI’s which will get paid back to the builder/landlord as a loan with interests and everyone is happy.
GSA does pay premium rent but the owner has to be ready to take on any issues or problems that may arise 24/7 so property management is somewhat tough, but any of this buildings can generate a NET CAP of 8%+ and that is what I like about it !!! Also what I like is that more often than not I have seen the GSA as a tenant in certain buildings for more than 3 decades !!
GSA does pay premium rent but the owner has to be ready to take on any issues or problems that may arise 24/7 so property management is somewhat tough, but any of this buildings can generate a NET CAP of 8%+ and that is what I like about it !!! Also what I like is that more often than not I have seen the GSA as a tenant in certain buildings for more than 3 decades !!
When it comes to analyze these type of investments you have to look at several factors such as size of land for them to grow without moving, services around the building such as fast food chains, bus stops, also amount of interior improvements paid by them, all of these issues are closely related to the possibility of the tenant wanting to move to another location at the end of any of the terms of the lease; would it be really feasible to move at a lower cost than renewing one more time the lease contract?
Remember, just because it’s the US Government does not mean they do not get treated as any other VIP tenant, VIP but nevertheless a tenant- One catch is that you have to go thru their bureaucracy to get approved as a buyer/landlord and also if you want to take on the property management you need sub-contractors that could get approved by them to enter their facilities, after all you are dealing with national security.
I recently sold a building where the tenant is one of the largest government agencies and it was a beautiful transaction, a few weeks later after the transaction closed, the insurance company notified me, as I was listed as the new landlord’s liaison since they are from out of the US, that the tenant was complaining about the concrete car stops in the parking lot that their own customers damaged with their cars, my buyer is a client located overseas as I just mentioned, I had to contract someone, get him approved and replace or repair those car stops all before the Irene storm was due to hit us (which it never did down here in South Florida anyways), the total cost was less than $500 and I got it done in less than a week but this building is producing a net revenue of 8% on year 1 with yearly escalations and the likelihood of the tenant moving to another location is close to “zero” -
So.... to finish up this series of “In times of turmoil” I want to conclude by saying that some people may look at it as there’s no hope, I look at it as a great opportunity to make a lot of money.
Courtesy of Jim Watson/AFP/Getty Images
Remember one thing and that is that a lot of the big companies out there were founded in times of financial turbulence, think of 3M, GE, Apple, HP, KRAFT...these guys are part of the backbone structure of our economy, capitalism at its best. There is always a great opportunity to make it, especially in times of turmoil, take advantage of it since it will last a little longer. This year, 2012 we might see a little bit of improvement, but remember that it is usually the case during election years; unemployment rate it is still in the red, CPI and PPI still show no significant inflation and interest rates are still at an all time low, altogether it is not such a good overall scenario; the road to recovery will be long so if cash is king keep it safe, invest it into something that is stable and low risk.... your grandchildren will thank you for it!
Remember one thing and that is that a lot of the big companies out there were founded in times of financial turbulence, think of 3M, GE, Apple, HP, KRAFT...these guys are part of the backbone structure of our economy, capitalism at its best. There is always a great opportunity to make it, especially in times of turmoil, take advantage of it since it will last a little longer. This year, 2012 we might see a little bit of improvement, but remember that it is usually the case during election years; unemployment rate it is still in the red, CPI and PPI still show no significant inflation and interest rates are still at an all time low, altogether it is not such a good overall scenario; the road to recovery will be long so if cash is king keep it safe, invest it into something that is stable and low risk.... your grandchildren will thank you for it!
No comments:
Post a Comment