COMMERCIAL REAL E ESTATE BOR LLI 50 insider Fall 2007 Issue number 7 Y E A R S www.borelli-inv.com Local Commercial Real Estate Market Largely Unaffected by Residential Difficulties BORELLI Vacancy Rates and Late Loan in commercial real estate vacancy rates in Silicon Valley Commercial Real Payments Among Lowest in 5 Years; Silicon Valley, according to a Grubb & Ellis Estate Market at a Glance report. Vacancy rates for the Valley as a Tighter Money Creating Some whole have broken through the 10 percent • 5.67 – 6.76 million sq. ft.: range Challenges threshold for the first time in several years, Y A R S of 2006 qrtly.Egross absorption1 spurring the construction of new office • 5.71 million sq. ft.: 1st qtr. 2007 Unless you have been stranded on a desert space. In the meantime, according to the gross absorption1 island lately, you are no doubt aware of the same Grubb & Ellis report, lease rates for turmoil that has been created in the resid- • $2.2 billion of venture capital premium Class A commercial space rose ential real estate market by the relatively invested in 1st qtr. 20072 nearly 6 percent in the most recent quarter, large numbers of nonprime mortgages while lease rates for Class B space have • 21,500 new jobs added in that have defaulted over the past year. increased approximately 3 percent. 12 mos. ended 3/30/071 The difficulties have impacted home loan borrowers, lending institutions, investors Clearly, this is not the case for residential • 4.4% unemployment rate in 3/07, in subprime mortgage securities, and the property, where recent defaults have driven down from 4.6% in 2/071 various financial markets themselves. But home prices considerably lower, and reduced what has remained largely untouched to- loan availability as lenders try to increase liq- • .03% delinquency on comml. date has been commercial real estate. Even uidity as quickly as possible. real estate loans, lowest in 5 yrs.3 with the recent announcement that the deal • Less than 10% vacancy rate on “From our vantage point, the commercial to buy Carl Berg’s $1.8 billion Mission West comml. real estate4 and residential real estate markets are apples Properties’ portfolio of commercial real and oranges,” said Tom Purtell, chief operat- • 6% increase in rental rates on estate had fallen through due to the inability ing officer of Borelli Investment Company. Class A office space4 of the prospective buyer to secure financing, “Occupancy rates on the properties we the commercial real estate market remains • 3% increase in rental rates on manage have remained historically strong in strong and largely untroubled. Class B office space4 in both up and down markets for more than “Thus far, the fallout from the subprime 25 years. This most recent turmoil is primarily Sources residential loan crisis appears to have had impacting only the residential side of the 1 Colliers International 2007 1st Quarter Report a limited effect on the local commercial industry. For our properties, lease rates are 2 Dow Jones Venture Capital 3 California Mortgage Banker Association real estate market,” said Edwin K.S. Ryu, still rising, our commercial condominiums are 4 Grubb & Ellis principal and co-founder of Legacy Wealth selling well, and there’s very little weakness.” Advisors, LLC, a San Jose-based investment advisory and wealth management firm. What It All Means While taking a wait-and-see approach or Underpinnings Still Strong making low offers on desired properties may In examining the commercial real estate be a viable approach in the current residen- market, virtually every pillar supporting tial real estate market, it is not likely to be a the industry in Silicon Valley remains solid. successful strategy in commercial real estate in Silicon Valley, according to Ryu—who • Recent earnings reports by Silicon Valley was recently selected as one of the top 150 leaders such as Cisco Systems and Apple financial advisors to doctors in the nation have been almost uniformly positive. by Medical Economics magazine. • Unemployment rates in the Valley have “Value comes from scarcity, and there is only been trending steadily downward, even so much commercial real estate available as job creation rates have been rising. here in Silicon Valley, perhaps the choicest • The conversion of older R&D and industrial place in the world to do business,” Ryu space into residential space in large areas remarked. “There will continue to be cycles, of the Valley coupled with comparatively which we need to understand and respect. little new construction the past few years But in the long run, I view the overall market has resulted in a shrinking supply of as a bullish one.” commercial space. For further details or to review the latest Increasing demand in the face of a decreasing commercial real estate information, contact supply has led to significant declines Tom Purtell at (408) 453-4700, or e-mail firstname.lastname@example.org. A members-only club for your car. And you. Borelli Investment Company Begins Presales separately metered, and individually climate- controlled condos are available. Borelli At Club Auto Sport in North San Jose Investment Company, the developer of the project, is also offering turnkey units with Innovative Concept Offers Commercial Condominiums standard or customized interiors. with Concierge Services and an Exclusive Club for Because owners are purchasing space—not Car Enthusiasts leasing it—they receive a number of benefits: • Quick, but secure 24x7 access to vehicles Some people who possess a true passion for view some of the club members’ most • Control over occupancy costs auto racing or a love of vintage automobiles notable cars on display or to cheer on their • Ability to customize the space in any become serious car collectors. In the past, favorite drivers and way desired, subject to Club Auto Sport these growing collections have in turn race teams. created growing problems for their owners. bylaws One of the biggest benefits of Club Auto Where does one store all these cars? • Potential long-term appreciation Sport is the wide variety of services available Stashing autos at friends’ homes or in “Plus, if the space is being purchased as to save time. Need to have one of your cars parking garages typically proves to be an part of a business, owners enjoy significant detailed, taken in for service, or filled up impractical and expensive proposition. tax write-offs,” Borelli commented. “These before you come to pick it up? Want your Now, there is Club Auto Sport—Silicon RV cleaned out, the tanks serviced, the refrig- benefits include cost segregation, the Valley’s first purpose-built commercial erator turned on, and the fuel and oil $112,000 Section 179 tax incentive, interest condominium facility designed for racing checked so it’s ready to go? Our “arrive-and- deductions, and other write-offs.” and car enthusiasts—with a full line of time- drive” services are for you. Plus, owners can Construction won’t start until early fall, with saving concierge services and an exclusive have their cars delivered to their homes the first units available in late spring of 2008. club for owners. whenever they wish. All they have to do is call However, presales are already underway, with the Club Auto Sport concierge to arrange it. Phase I approximately 30 percent sold out. The two-building, 120,000 square foot complex at 521 Charcot Avenue in North Club Auto Sport’s banquet and hospitality Club Auto Sport is truly a new concept San Jose—which is being developed by a facilities will be some of the best in the area, in commercial condominiums, with Borelli partnership led by avid car collectors and making the club ideal for charitable, political, Investment Company, a trendsetter in vintage racecar owners John Davis, Ralph corporate, or social gatherings of all kinds. business condominiums, guiding the Borelli and long-time local racecar driver, IRL Ample onsite parking will accommodate up development. and CART team owner, John Della Penna— to 100 cars outside the security gates for visi- will be undergoing $15 million in renova- tors. The complex’s central location in the “People who are passionate about auto racing tions. When completed, it will feature a clean Golden Triangle makes it easily accessible for and car collecting have had few options in high-tech design, 10,000 square foot state- owners and invited guests via I-880 or Hwy the past,” remarked John Della Penna, of of-the-art showroom and lounge area for 101 or 237, or even flying in to Mineta San Della Penna Motor Sports. “Club Auto watching televised motor sports events, Jose International Airport—five minutes away. Sport is a unique place for cars—and their a large conference room with audio and owners.” “Club members will be able to participate video conferencing, banquet and hospitality For more information about Club Auto Sport, in organized automobile and racing-related facilities, sophisticated electronic security contact Ralph Borelli at (408) 453-4700, or activities,” noted John Davis, founder of with CCTV inside and out, and automated e-mail email@example.com. Air Systems, Inc. and president of Davis roll-up truck doors hidden from the street. Motorsports. “These could include instruc- “We think this is an exciting concept that tional track driving days, touring events, will appeal to the many successful business celebrity guest appearances, dinners, or people in and around Silicon Valley who have high-profile charity events.” become car collectors,” said Ralph Borelli, CEO of Borelli Investment Company. “Club Benefits of Condominium Ownership Auto Sport provides safekeeping for an Buyers at the Club Auto Sport condominium owner’s cars, together with unique service complex can purchase as much or as little and social components. There really is space as needed, with units from 800 to nothing like it in Northern California.” 10,000 square feet. The smallest units will accommodate up to 4 cars, and more if The Place for Auto Enthusiasts stacking systems are used. All units have Club Auto Sport promises to be a gathering full-height demising walls, with built-in place for fans of racing’s top Formula One, ventilation systems. The complex meets the IRL, Champ Car, NASCAR, and other strictest building codes, including the latest events—as well as dedicated car collectors. fire protection systems. Owner amenities can Condo owners will be able to store and care include private bathrooms (in addition to the for their cars in the purpose-built units, get- building’s common restrooms with showers), ting together in the showroom or lounge to kitchens, offices, and more. Utilities are Borelli’s Exclusive Lease vs. Buy Calculator Borelli’s Exclusive Lease vs. Buy Calculator • Enter the required information. This can include information about your current Right on the Money with Buyers lease including size of your space, current rent, operating expenses, and scheduled rent increases; the purchase price, closing Perhaps you’ve heard about one of the Introduced in May, the Lease vs. Buy costs, and mortgage information for your hottest trends in commercial real estate: Calculator is available to anyone considering proposed purchase; association dues and office condominiums. And perhaps you’ve the purchase of an office condominium. any other costs; your state and federal tax wondered whether buying an office condo- You can easily do it yourself from the rates; and estimated annual appreciation. minium might be the right move for you and comfort of your home or office, or one of your business. But how can you know for our professional sales representatives will • Then, click “Calculate”. sure? How can you really “run the numbers” be happy to walk through it with you. In seconds, you’ll have a real set of numbers and compare buying versus continuing to based on your specific situation that will help “Deciding to buy rather than lease office lease your office space? you make a more intelligent decision about space is a major financial decision,” said Now there’s a fast, easy way to make a Tom Purtell, chief operating officer of Borelli whether to lease or buy your office space. “real-world” comparison for your specific Investment Company. “We wanted to ensure “With summer coming to an end, now is the situation with Borelli Investment Company’s that our clients had all the tools they needed time to start doing your year-end tax plan- exclusive online Lease vs. Buy Calculator. to make a well-informed choice. The Lease ning,” Purtell noted. “If you want to be able vs. Buy Calculator has been very well- to make any substantial moves to reduce received since we introduced it last spring.” your tax liability for 2007, there’s no time to To use the Lease vs. Buy Calculator, all waste. Purchasing property is one of the best you have to do is: ways to reduce taxes, while acquiring an asset that historically has appreciated over • Go to www.borelli-inv.com time—in good markets and bad.” • Click on the icon for “Lease vs. Buy? — For more information about the Borelli Run the numbers” Lease vs. Buy Calculator, contact your • Select the Borelli office condominium Borelli sales representative or Tom Purtell property you’re interested in by calling (408) 453-4700, or you can e-mail firstname.lastname@example.org. • Select a specific unit for sale Borelli Property Management Services Extend Beyond Silicon Valley Borelli Investment Company is well-known for its high-quality property management services. Borelli’s professional property managers work closely with owners to set rents and efficiently lease space, maintain and improve properties, respond to tenant requests, and keep the books in good order. Borelli now manages Clients know they can count on high occupancy rates and proper positioning multiple properties in to maintain value over time in up markets and down. Tracy, Turlock, Stockton, Elk Grove, and West Sacramento. What you may not be aware of is that Borelli to minimize risk, reduce operating expenses, Investment Company provides its property and increase the long-term asset value management services not only here in Silicon of properties located up and down the Valley, but also in other markets throughout Central Valley.” Northern California. A good example of the benefits Borelli A Growing Central Valley Portfolio provides can be found at the 250,000 square foot Countryside Plaza retail center One of Borelli’s hottest growth areas in in Turlock. When Borelli was selected as recent times has been the Central Valley. property manager in 2004, Countryside Plaza Borelli now manages multiple properties in relationships or negatively impacting had not increased its lease rates in years. Tracy, Turlock, Stockton, Elk Grove, and West occupancy. We have also begun a program The prior owner had been hesitant to do so, Sacramento—among other Central Valley of planned improvements to ensure that because he was skeptical that rates could towns and cities. The holdings include retail the center is always well-maintained and be raised without causing long-time tenants centers, a variety of office buildings, and modernized.” to move out. Borelli managed an increase industrial properties. in rents to market levels and maintained Property Management Everywhere “California’s Central Valley is experiencing virtually 100 percent occupancy during the Wherever you decide to buy, contact rapid growth,” said Buddy R. Parsons, adjustment period. Borelli if you need professional property president of Borelli Investment Company. “It simply didn’t make sense to leave rental management. For more information about “Many of our clients are interested in taking rates unchanged,” Parsons explained. “By Borelli’s professional property management advantage of the attractive ownership oppor- acting on the owner’s behalf, we were able services and pricing that pays for itself, tunities there. Once they have purchased a to negotiate appropriate increases for ten- contact Buddy Parsons at (408) 453-4700, property, they need to work with someone ants without hurting the owner’s established or e-mail email@example.com. they trust to manage it. We have the ability l Staff Spotlight Lynn Hawkins Executive Assistant and Sales Associate Background: Brought 22 years of experience in commercial real estate and commercial mortgage banking to her position at Borelli Investment Company. Expertise included commercial brokerage and sales in the East and Southeast, including loan originations, underwriting, processing, servicing, and loan closings. As group vice president, managed loan portfolios as large as $6.5 billion encompassing nearly all 50 states. Born and raised in Baltimore, MD. Attended the University of Maryland with a concentration in computer science and business management. Meet Lynn Hawkins, executive assistant Held a broker's license in GA, a sales license in VA, and is currently a licensed real estate and sales associate for Borelli Investment salesperson in CA. Is active in numerous industry organizations including BOMA, NAR, the Mortgage Bankers Association, the National Association of Female Executives, and Company’s brokerage, special projects, the Reebok Professional Instructor Alliance. and development group. Since joining Responsibilities: Handles every condominium transaction, from purchase contracting Borelli in 2002, Lynn has worked side- through escrow closings. At the Capitol Auto Mall, moves each deal from lease LOI by-side with Larry Bengiveno in the to signing. marketing and sales of nearly 100 Borelli Business Philosophy: “I am committed to achieving a win-win in every deal I touch. business condominiums, handling re-sale Meeting the client’s objectives and expectations, and staying within the guidelines and goals of the company, can be achieved through clear communication and a high level listings and property management at of professionalism.” these projects, as well as the marketing Secret to Success: “Lynn focuses on providing personalized service and assistance to our and leasing of space at the Capitol Auto clients, from the moment they are going into contract until the close of escrow,” said Mall Plaza retail center. Tom Purtell, Borelli Investment Company’s chief operating officer. “In staying connected throughout the process, Lynn always strives for the highest in customer satisfaction.” Inside this Issue Local Commercial Real Introducing Club Auto Borelli’s Exclusive Property Management Estate Largely Unaffected Sport, a members-only Lease vs. Buy Calculator Services Extend to by Residential Difficulties club for your car. Central Valley And you. Borelli Investment Company Phone: 408-453-4700 PRSRT STD 2051 Junction Avenue, Suite 100 Fax 408-453-5636 U.S. Postage San Jose, CA 95131-2100 firstname.lastname@example.org PAID San Jose, CA Permit No. 1513 Borelli Investment Company has provided a full range of commercial real estate services to clients in Northern and Central California for 50 years. We provide services for: • Property Management • Sales & Leasing • Land Sales and Repositioning • Investment • Asset Management • Property Development • Construction Management • Court-Appointed Receiverships BORELLI • Prime Syndicated Investment Opportunities More information about Borelli Investment Company’s servicesYmay beSobtained by calling (408) 453-4700 or E A R visiting www.borelli-inv.com.
Pages to are hidden for
"Lease Vs Buy Calculator"Please download to view full document