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Land & Industrial
Broad rent strikes would be disastrous
By Riley McKee, NAI Maestas & Ward Industrial Real Estate Advisors
An article featured in the executive desk of the 2020 Albuquerque Journal, Edition 4.27.2020
In an open letter addressed “To our landlords,” the CEO of The Cheesecake Factory announced that the restaurant chain would not be making rent payments in April due to extraordinary challenges the company has faced since the outbreak of COVID-19.
Other prominent retailers like Subway, Dick’s Sporting Goods and Staples have made similar pronouncements in recent weeks, as virus containment efforts have halted “nonessential” business activity. The justification provided is understandable. Closures mandated by state and local governments have all but eliminated the ability to generate revenue, a fundamental problem deserving of sympathy.
But glaring defiance of lease obligations is certain to inspire copycats. Tenants across the spectrum of property types — from well-known retailers to local apartment renters — now have justification to do the same. The nascent but very real threat of a widespread rent strike places our long-term economic future on a knife’s edge.
While the virus has felt allconsuming thus far, its negative impacts can be contained.
Medical professionals have become national heroes through tireless care for those infected.
Millions of Americans have willingly complied with social distancing guidelines. And thousands of business owners have put their life’s work on the line by yielding to emergency restrictions. These sacrificial efforts have resulted in a plateauing rate of new cases and deaths putting a gradual return to normal life in view.
On the economic front, relief efforts like the Paycheck Protection Program, direct payments to individuals, and expanded unemployment insurance have been tailored to offset losses.
These measures can be likened to storing the economy in a giant freezer, preserving and protecting it for a later date.
If the economy can be effectively “frozen” while the war against COVID-19 is waged, a brief thaw, so to speak, is all that will stand between the hardship of today and the prosperity of tomorrow.
But if healthy economic activities — and for that matter, the rule of law — are cast aside amidst the current panic, we face a difficult road ahead.
The most effective means of preserving economic health is to honor existing contractual obligations.
Growth and profitability benchmarks can be amended. Payroll concerns can be addressed by emergency loans. Furloughs and layoffs, though lamentable, are accounted for by expanded unemployment insurance and direct cash payments. Executives and senior managers — those most equipped to handle short term losses — can ride out an interim pay cut.
But the economy cannot survive a suspension of good faith, which is why The Cheesecake Factory’s decision is uniquely troubling.
Without minimizing legitimate challenges that tenants currently face, what is a better response? In a word, conciliation. Landlords are keenly aware of ongoing circumstances and the vast majority are willing to help. They have a meaningful interest in their renters’ survival beyond the crisis and know pushing too hard would be foolish. But they also have burdens and as May 1 approaches, grow increasingly nervous.
April rent figures were down, but a full month of virus containment measures since then portends an even lower collection rate. And a potential domino effect of disaster as one default triggers another.
Much has been said recently about “getting through this together.”
It’s an encouraging sentiment, but only to the extent it’s actually upheld. The Cheesecake Factory failed the test by unilaterally reneging its obligations in times of trouble, when many of its landlords would willingly have sought a mutual arrangement.
So for tenants who are able next month, pay your rent. For those struggling with a sudden loss of revenue, pursue relief programs to help bridge the gap. If your or your business is ineligible or still facing budget constraints, pay what you can. And if you find yourself out of options and out of cash, have a candid conversation with your landlord and work toward a bilateral solution.
By doing so, we can preserve the blessings of an economy — and society — built on trust.
Riley McKee is an industrial real estate adviser for NAI Maestas & Ward Commercial Real Estate.
The executive’s desk is a guest column providing advice or information about resources available to the business community in New Mexico.
NAI Executives Report from the Front Lines of the Coronavirus
By Erika Morphy of GlobeSt.com
April 1, 2020
The impact of the health crises on the commercial real estate industry has dramatically changed the industry’s landscape within the space of 30 days. With April getting underway, four NAI executives offered their perspectives on the impact of the pandemic and how they are addressing the challenge. These NAI officers have some of the biggest portfolios of managed properties in the company.
Brokerage Deals
“Most transactions near fruition are still being signed, with some tenants asking to push back start dates post stay-at-home orders, or landlords asking to push back on start dates when construction may be needed by the landlord as part of the deal. Other in-process deals are taking a ‘wait and see’ approach before they sign and some early stage deals are now frozen,” according to NAI Farbman President Andy Gutman, from Detroit, MI.
Dave Petersen, CEO of NAI Hiffman in Chicago echoed Gutman’s sentiments, adding that “it is a great moment to solve lease issues with rent requests that could include blend and extend term, adding personal signatures, gain improved security or other landlord rights as part of a negotiation. Empathy is important but the request for relief should not be a one-way discussion either.”
In Albuquerque, NM, “we are seeing some tenants ask to go month-to-month, as well as many deals going unsigned, with others stalling deals to the degree possible due to uncertainty,” said Debbie Harms, CCIM, SIOR, CPM and CEO of NAI Maestas & Ward.
Petersen pointed out, however, that “there is a great amount of focus being placed on electronic showings whether that’s the use of video conferencing platforms or actual video tours of the space available. Tenants still need space today and we have to use all tools at our resources to help the tenant and our clients to close transactions.
Click here for the rest of the Globe St. com article featuring rent relief, development slowly proceeding and what to do.
NAI Maestas & Ward is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.I
Portland-based Facebook subcontractor to expand with ABQ office
By Ron Davis – Technology reporter, Albuquerque Business First
February 7, 2020
Western Partitions Inc. is set to make its play in New Mexico by breaking ground on a new office space.
The Portland, Oregon-based drywall contractor that worked on Facebook’s Los Lunas data center plans to expand its full-time New Mexico operations by breaking ground Wednesday on a 9,000-square foot, at 511 Paragon Road SE.
Click here for the rest of the Albuquerque Business First story.
Learn more about Western Partitions and the future they see for New Mexico, click here.
“I believe that the opportunity for WPI to build in this location is not only as a direct effect of the Facebook impact in Los Lunas, but is also a direct result from the lack of industrial inventory in the Albuquerque market. This land is not only zoned for their use, but also has easy access to I 25. This property has gained much velocity as a result of those two factors…. in fact the 2 acre plot of land just to the west of WPI‘s property was sold in December because of the lack of inventory easily accessible to the interstate.” –Todd Strickland, NAI Maestas & Ward Director with the Office Team.
Expanding Horizons and Making Connections
Keith Meyer, CCIM, SIOR, recently expanded NAI Maestas and Ward’s real estate horizons with the referral though affiliated NAI KRAIN of Guanacaste, Costa Rica on a coffee and avocado farm in Grecia Costa Rica.
Jeff Goode of NAI KRAIN will be the Listing Broker, working with owners Dave and Angela Wohlert on the sale of their 10-acre coffee and avocado farm with support buildings and an 1,800/SF residence. Dave and Angela split their time between their East Mountain Albuquerque home and their farm, which is 5,000/SF up in the Costa Rica mountains overlooking the Central Valley.
“It has been a tremendous learning and life experience,” said Keith Meyer. “While there are many similarities in real estate practice between the two countries, there are also some profound differences.” As an example, there is no Title Insurance as we know it in Costa Rica. There is a 13% transfer tax as well. And everyone communicates using WhatsApp.
“Learning about the coffee and avocado business and processing was also fascinating. Because of the high altitude of this farm, they are doing some experimental work on new coffee strains for some of the leading global brands we all know.”
“It is a great part of our industry we can work with professionals and companies from all over the world, and I expect to see more of this in the future.”
Relationships are vital in commercial real estate – the best brokerage firms leverage them.
About NAI Global
NAI Global is a leading global commercial real estate brokerage firm. NAI Global offices are leaders in their local markets and work in unison to provide clients with exceptional solutions to their commercial real estate needs. NAI Global has more than 375 offices strategically located throughout North America, Latin America and the Caribbean, Europe, Africa and Asia Pacific, with 6,000 local market professionals, managing in excess of 1.15 billion square feet of property and facilities. Annually, NAI Global completes in excess of $20 billion in commercial real estate transactions throughout the world.
NAI Maestas & Ward Commercial Real Estate completed 408 commercial transactions in 2019 for a total commercial transaction value of $321 million.
Sustainable textile manufacturer to open NM production facility
By Collin Krabbe – Technology reporter, Albuquerque Business First
January 24, 2020
A textile manufacturer is bringing production to New Mexico following an expansion.
Green Theme Technologies Inc., which is working to commercialize a sustainable and more effective method of textile production, is looking to start production in Rio Rancho following a move into a 7,500 sf space, 4132 Jackie Road.
Click here for the rest of the Albuquerque Business First story.
Learn more about Green Theme Technologies and the future of textiles that is water-free.
“NAI Maestas & Ward Advisor, Riley McKee led the effort to find the appropriate site for Green Theme Technologies, 4132 Jackie Road. In a tight market, he was able to find an uncompromised solution which we believe will allow this industrial manufacturer to flourish. We have also created a wonderful opportunity for the cash flow minded investor to purchase the entire deal.” – Jim Wible, NAI Maestas & Ward Director with the Land and Industrial Team.
NAI Maestas & Ward Advisors, Keith Meyer, Jim Wible, and Riley McKee worked with both Green Theme Technologies and the landlord to finalize this lease.
The property is now on the market for sale, presenting a compelling opportunity for investors seeing high-quality industrial assets with strong credit tenants.
Click here to see the property flyer.
CCIM 2019 Deal of the Year Under 1 Million
Engineers Secure Owner-User Investment
RhinoCorps Ltd. has relocated within a building they recently purchased located at 1128 Pennsylvania St. NE, Albuquerque, NM 87110.
Shelly Branscom, CCIM, and the late Rich Diller, CCIM, SIOR, of NAI Maestas & Ward began representing the building for lease in 2013. The Seller was a California investor whose spouse passed away just months after purchasing the building. While Albuquerque has experienced an improvement in the real estate climate over the past several years, some owners have felt the lingering effects of the economic downturn on their properties. This building was no exception. Although multiple suites had been leased between 2013 and 2016. When the property was brought to the market to sell in 2014, 1128 Pennsylvania St. NE was in need of updates and additional tenancy to attract a motivated buyer. After many years of carrying the asset with 20-40% vacancy, the property eventually went back to the bank. The brokers continued to market the building to several existing tenants. RhinoCorps expressed interest and the building went under contract in May 2018.
“The Inspection process proved taxing, but we came to a resolution and the buyer expanded in the building, occupying all of the remaining space.” stated Shelly Branscom, CCIM.
The transaction provided an opportunity for RhinoCorps to become an owner-user. This small, local firm provides software and simulation engineering services to many government entities including the U.S. Air Force, Sandia National Laboratories, and NASA, among others.
Representing the seller, Shelly Branscom and Rich Diller worked with the buyer’s broker, Richard Hanna of Hanna Commercial, to finalize the sale of the office property. Sitting on an acre of land, the 15,800 SF, two-story building has excellent visibility from Pennsylvania St. NE and Mountain Rd NE. The building boasts many nearby amenities with proximity to Albuquerque’s Uptown and easy access to Interstate-40.
1128 Pennsylvania was awarded the 2019 CCIM Deal of the Year Under $1,000,000 this past October at the 2019 Intersections Conference held at Sandia Casino.
NAI Maestas & Ward is a full-service commercial real estate company serving
New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.
CCIM 2019 Deal of the Year Over 1 Million Dollars
On November 12, 2013, an Albuquerque business owner plead guilty to defrauding the Service-Disabled Veteran Owned Small Business Program (SDVOSB), a VA initiative that gives preferential treatment to veterans applying for federal contracts. By falsely claiming his stepbrother—who was in fact a disabled veteran—held an ownership stake in his company, he fraudulently secured $11 million worth of federal contracts and was sentenced to five years in prison.
This tragic lapse in judgement resulted in the shuttering of an enterprise that operated a sprawling facility (about 32,000 square feet of buildings on 16.5 acres) on Albuquerque’s Southwest Mesa which manufactured large concrete vaults for mausoleums. It was an enviable operation in its prime, but lengthy prison sentences are not good for business and the property quickly went into foreclosure.
For the next several years attempts were made to liquidate the property, but a number of unique circumstances prevented this from happening. For one, the surrounding area was transforming. The heavy industrial operation originally occupied a rural area but was now surrounded by residential developments. Secondly, the property could not compete with comparable sites that possessed better truck access to interstate exits. A 3.5-mile stretch separates the site from I-40, which proves especially lengthy during rush hour.
Furthermore, the property’s scale and uncommon attributes rendered it difficult to find a user that could make use of it as is. Initially brought to market at $4,100,00 the price dropped 25% to $3,125,000 when no progress was made. Then, copper thieves performed their regrettable task and subjected the property to another 20% reduction. Four years later a last-ditch effort to sell was made via an auction—even that did not work.
When Maestas & Ward’s industrial team (Keith Meyer, Jim Wible, Riley McKee) got involved the property was a shadow of its former glory. Years of inattention, several bouts of theft, and nature’s course of action turned it into an overgrown, graffiti tainted shed.
The M&W industrial team understood that a healthy dose of realism had to be injected into the seller’s expectations for any chance of a sale being consummated. After a detailed analysis, it was determined that only the land carried value. The improvements—or what was left of them—would require significant rehabilitation, perhaps at a cost that exceeded the acquisition cost. To their credit, the seller heeded this advice and agreed to market the property at $1,800,000—56% below its original value.
Due to favorable market circumstances and the significant value-add opportunities available, the property quickly generated attention. Within a few months it went under contract to be purchased by an industrial user. However, the surrounding area’s evolution from industrial to residential/retail shuttered the deal as the buyer was unable to secure a zoning certification for their use. Transactions falling through are disheartening but what proved most concerning was the realization that an obviously industrial site might not be able to be sold as such.
Surprisingly, a more viable opportunity quickly came along. A charter school developer and his brokerage team shrewdly discerned that this defunct industrial site, while far from ready-made, conferred multiple advantages from its proximity to major thoroughfares (Coors and Old Coors), location in a dense residential neighborhood, and lower acquisition cost on a per foot basis. A purchase agreement was quickly negotiated, but the story was far from over—several hurdles remained.
The first involved a zone change. Educational uses were not permissive in the subject property’s M-1 zoning designation which made a retail/commercial designation necessary. The brokerage team coordinated with a reputable architect to prepare a thorough, compelling argument for why the subject property’s highest and best use had shifted. Industrial uses no longer fit a neighborhood dominated by residential and retail developments. The county zoning board was sympathetic to these arguments but consented unanimously when it was revealed a highly successful charter school was the intended buyer.
The second hurdle involved environmental concerns. Though the seller had procured a Phase I ESA that reported no Recognizable Environmental Conditions (REC) as recently as January 2016, when that same assessor revisited the site to refresh the report, they changed their tune. Claiming that the property’s decades of heavy industrial use warranted further testing they refused to uphold the previous report’s conclusions. Both buyer and seller were understandably aggrieved but informed guidance from the brokerage team kept things on track. An extension was agreed to and further environmental testing yielded no RECs, just as the initial report indicated.
Then came the most unexpected hurdle of all—the cause of which remains unclear—a fire in one of the warehouse buildings. Having navigated so much thus far this felt like the ultimate injustice. Once again, the brokers provided reasoned guidance and ultimately it was agreed that the seller would file a claim with the insurance company and direct the funds to the buyer post-closing which occurred at long last on December 13, 2018.
Many lessons can be pulled from this account. The prime takeaway, however, is the vital contribution of experienced brokers in a transaction with so many hurdles. From valuation to marketing strategy to negotiation to a zone change hearing to coordinating with environmental engineers to dealing with the most unexpected acts of God, the brokers involved patiently bridged the gap between a lifeless non-performing asset and the thriving charter school it is today.
1255 Old Coors was awarded the 2019 CCIM Deal of the Year Over $1,000,000 this past October at the 2019 Intersections Conference held at Sandia Casino.
NAI Maestas & Ward is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.
NAI Maestas & Ward’s Industrial Team wins award for expertly-facilitated complicated transaction
ALBUQUERQUE, N.M., Nov. 1, 2018 – At the “Intersections” commercial real estate event held on October 25, at Sandia Golf Club in Albuquerque, the NAI Maestas & Ward Industrial Team (Keith Meyer, Jim Wible & Riley McKee) were presented with an award for “The Deal of the Year” (under $1M). Following is the story of the transaction and the benefits of working with experienced commercial real estate brokers.
The problem-solving ability of a commercial real estate broker is often underappreciated. Those outside the industry have a tendency to wrongly assume the profession involves little more than posting a sign and waiting for a buyer. The reality is different. There are many hurdles standing between a property’s entry to the market and a successful closing that require effort, expertise, and patient resolve to overcome. The sale of 4950 Jefferson provides an excellent example.
As a 19-year old executor of her father’s estate, the seller faced many challenges in disposing of the primary asset—a 6,000 square foot warehouse on 1.5 acres that her father, who died unexpectedly, had used to operate his automotive repair business. She had no experience in commercial real estate transactions, a $450,000 mortgage balance, and a tenant that could no longer pay rent. Without other assets to draw from, the property had to be sold quickly to prevent default.
M&W’s industrial team (Keith Meyer, Jim Wible, & Riley McKee) faced a unique dilemma. The property had to be priced in a manner that would generate a quick sale, but the mortgage balance and all closing costs had to be covered by the sale proceeds. After completing a thorough market analysis, a value was determined that would require strong efforts, but likely result in securing a buyer within 90 days.
This strategic positioning combined with targeted marketing efforts resulted in six offers being received within two weeks. Their similarities prompted a “best and final offer” request to all interested parties each of whom followed up by substantially raising the purchase price. But the eventual buyer’s offer was clearly superior. An unrivaled set of terms was assembled which—most importantly—included a quick cash closing that would extinguish the mortgage before unpaid monthly payments accumulated.
The seller was thrilled but her excitement was quickly doused by a surprise—a $175,000 surprise. The estate’s attorney discovered that the deceased party had an extensive unpaid tax balance which the IRS was aggressively seeking.
At the agreed upon sale price there was enough to cover the mortgage balance and closing costs but nowhere near enough to satisfy the IRS lien. After scrambling for a solution, the brokers were connected to a tax attorney that specializes in IRS settlements. She was optimistic a resolution could be secured but provided no guarantees and indicated that the IRS might assume all sale proceeds. To move forward with the settlement process, a 45-day extension to the purchase agreement was agreed upon.
During this period uncertainty abounded. The seller, set to satisfy her father’s debts and net a sizeable, sum, now faced the prospect of a blocked sale. The buyer, after a lengthy search in a tight market, faced losing the property that best met his needs. And the brokers, after employing their collective expertise, ingenuity, and effort to get to this stage faced the prospect of an indifferent third party shuttering it all.
A little over a month later, positive news started rolling in. The IRS agreed to allow the sale to go through on condition that all net sale proceeds be applied to the lien. The seller would be relieved from the mortgage obligation, any future IRS Liens, and ultimately received a share of sale proceeds for her and her minor siblings. Only one item was excluded from the settlement—NM Gross Receipts Tax on services rendered by the brokers. A small price to pay to ensure completion of the transaction, the commission was reduced to cover this cost. A successful closing followed soon afterward.
Multiple hurdles stood in the way of completing the sale—so many that, without the guidance and expertise of competent brokers, it’s unlikely the sale would have finalized. This transaction provides an excellent case study on the value of a real estate broker whose ability to influence sale proceedings extend far beyond putting a sign up at a property. Beyond merely brokers, we are advisors and consultants helping our clients navigate any challenge they may face related to real estate.
Jim Wible, NAI Maestas & Ward Director, on the transaction–
Q: Does this deal reflect any current trends or challenges in Industrial real estate?
A: “Yes the strength of the market and the speed and demand demonstrated that we have a current shortage of this type of real estate today — Industrial properties of 5,000 to 10,000 SF with yard space. This is the type that a small business owner can purchase with an SBA loan and occupy comfortably. We are needing to now find a way to construct this type of product.”
