Four Steps to Success By: Jim Rohn

April 21st, 2014

Let me pass on to you these four simple steps to success:

Collect good ideas. My mentor taught me to keep a journal when I was 25 years old. I've been doing it now all these years. They will be passed on to my children and my grandchildren.

 

1. If you hear a good health idea, capture it, write it down. Don't trust your memory. Then on a cold wintry evening, go back through your journal, the ideas that changed your life, the ideas that saved your marriage, the ideas that bailed you out of bankruptcy, the ideas that helped you become successful, the ideas that made you millions.

 

What a good review; Going back over the collection of ideas that you gathered over the years. So be a collector of good ideas for your business, for your relationships, for your future.

 

2. Have good plans. Have a good plan for the day, a good plan for the future, a good health plan, a good plan for your marriage. Building anything is like building a house—you need to have a plan.

 

Now here is a good time management question: When should you start the day? Answer: As soon as you have it finished. It is like building a house, building a life. What if you just started laying bricks and somebody asks, "What are you building?" and you say, "I have no idea." Don’t start the house until you finish it. Now, is it possible to finish the house before you start it? Yes, but it would be foolish to start before you had it finished. Not a bad time management idea. Don't start the day until it is pretty well finished—at least the outline of the day. Leave some room to improvise. Leave some room for extra strategies, but finish it before you start it.

 

And here is the next piece that is a little more challenging: Do not start the week until you have it finished. Lay it out, structure it, then put it to work. Then the next one is a little tougher yet; do not start the month until you have it finished.

 

And finally the big one, don't start the year until it is finished on paper. It's not a bad idea, toward the end of the year, to sit down with your family for the family structure plans, sit down in your business for the business plans, sit down with your financial advisor for your investments and map out the year... properties to buy, properties to sell, places to go with your family, lay out the year.

 

3. Learn to handle the passing of time; It takes time to build a career, it takes time to make changes, so give your project time, give your people time. If you're working with people, give them time to learn, grow, change, develop, and produce. And here is the big one... give yourself time. It takes time to master something new. It takes time to make altered changes and refinement in philosophy as well as activity. Give yourself time to learn, time to get it, time to start some momentum, time to finally achieve.

 

4. Learn to solve problems; business problems, family problems, financial problems, emotional –challenges for us all. Here's the best way to treat a problem: as an opportunity to grow. Change if you have to, modify if you must, discard an old philosophy that wasn't working well for a new one. The best phrase my mentor ever gave me was when he said, "Mr. Rohn, if you will change, everything will change for you." Wow, I took that to heart, and sure enough the more I changed the more everything changed for me.

 

So learn to master good ideas, have good plans, handle the passing of time and solve problems, and you will be on your way to more success than you could ever imagine!

Coldwater Creek To Liquidate, Close Its More Than 360 Locations

April 21st, 2014

Coldwater Creek, a specialty retailer of women’s apparel, jewelry and accessories, filed a Chapter 11 voluntary bankruptcy reorganization petition and announced plans to wind-down its operations.

 

The Idaho-based firm operates 334 premium retail stores, 31 factory outlet stores and seven day spa locations throughout the U.S. As of the filing, the firm employed 339 full and part-time employees in their corporate headquarters in Sandpoint and 5,571 full and part-time employees in its retail stores, spas, design center, call center and distribution center.

 

Coldwater Creek is seeking bankruptcy court approval to conduct chain-wide store closing sales and liquidate inventory, property and leases. Store closing sales are expected to occur prior to the Mother’s Day weekend, which historically is a peak sales time for the firm.

 

The news was not a major shock for retail analysts who had been watching the chain struggle through the recession, said Garrick Brown, research director for Terranomics. “After unsuccessfully seeking a potential buyer as early as late last year, they had been out trying to find additional financing to deal with their looming debt issues,” Brown said. “Sadly, there were no knights in shining

armor riding to their rescue.”

 

Coldwater Creek was a retailer with a decidedly mid-America, middle class clientele and had been dealing with the one-two punch of their target consumers having downsized and a strong encroachment of e-commerce, Brown noted. “Knowing bad news is coming certainly doesn’t lessen the blow,” he said. “This is clearly bad news for landlords.” Coldwater Creek stores generally range between 4,500 and 7,000 square feet. Assuming an average size of 5,750 square feet, this comes out to about 2.2 million square feet of space coming back to market. Outlet centers will be fine-most will backfill this space quickly. Trophy malls will do the same. It is Class B and C locations and weaker lifestyle centers that might face a challenge.

 

 

Price Momentum Continues to Build for Commercial Real Estate

April 21st, 2014

This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides more evidence of two broad trends in the commercial real estate investment market: the continued strong demand for top quality institutional-grade assets by big investors, and widening investor demand for mid- and lower-quality commercial property as the pricing recovery extended to smaller markets and secondary property types.

 

Based on an analysis of 1,028 repeat sales in February 2014 and more than 125,000 repeat sales since 1996, the CCRSI found commercial real estate prices registered broad gains during that month. The two broadest measures of aggregate pricing for commercial properties within the CCRSI-the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index-gained 1.1% and 1.7%, both reached double-digit growth over the previous 12-month period.

 

The value-weighted U.S. Composite Index, which is more heavily influenced by high-value property sales that have seen prices skyrocket over the last two years, has risen to levels not seen since early 2008, reaching to within 5% of its pre-recession peak.

 

Meanwhile, the equal-weighted U.S. Composite Index, which is more heavily influenced by the more-numerous lower-value trades, remained 22.3% below its prior peak. However, pricing for lower-end properties appears to be gaining momentum. The index made its strongest annual gain in February 2014 since the current recovery began, advancing by 15.7% over the last 12 months as investors continued to expand their buying activity in non-prime markets.

 

The momentum shift to lower quality and smaller properties also appeared in the recent growth of the General Commercial segment, which grew by a similar 15.7% over the previous year, while its counterpart, the Investment Grade Index, advanced by an equally strong 15% over the same period.

 

In reporting on commercial property pricing trends, CoStar's CCRSI made note of the continued positive net absorption across the three major property types - office, retail and industrial - which totaled 378.2 million square feet, a 15.3% increase from the prior 12-month period. Consistent with recent pricing trends, net absorption within the General Commercial segment rose 48% during the same period, compared with a 5% annual gain for the same period in the Investment Grade segment.

 

In keeping with the pattern set in previous years, the number of properties trading hands over the first three months of year is typically one-third lower than year-end sale volume. However, despite the slowdown, the CCRSI noted that transaction activity through February 2014 suggests that the year as a whole will be very active for commercial real estate investment. Having racked up a composite pair volume of nearly $10 billion through the first two months of the year, 2014 has already exceeded first quarter 2013 totals.

 

 

Number of Paid Off Homes Fall in Colorado

April 21st, 2014

According to the Colorado Division of Housing, the number of home loans paid off in Colorado fell 49 percent from the first quarter of 2013 to the first quarter of 2014.  The report found that approximately 50,000 deeds of trust were released during Q1 2014, the lowest quarterly total recorded in any quarter since the division began collecting data in 2008. Roughly 98,000 deeds were released during the first quarter of last year.

 

The release noted, "Typically, a release of a deed of trust occurs when a real estate loan is paid off whether through refinance, sale of property, or because the owner has made the final payment on the loan. Decreases in release activity occur as refinance and home-sale activity decreases, and rising release totals typically indicate increases in the demand for home loans and real estate." Release activity also fell from the fourth quarter of 2013 to the first quarter of 2014, dropping 19.6 percent.

 

During the fourth quarter of last year, approximately 62,000 deeds were released. "This is the fourth quarter in a row of declines in release activity, and it looks like the most recent refinance boom is already over," said Ryan McMaken, an economist with the Colorado Division of Housing. "Mortgage rates are still low compared to where they were in 2008, but we've seen some significant increases in rates since 2012."

 

Trends in activity varied across the state, although 21 surveyed counties reported decreases in release activity from Q1 2013 to Q1 2014. The largest decrease in activity was reported in Broomfield county, where release activity decreased 61.5 percent. The smallest activity was in Eagle county—21.1 percent of homes were released. "Release activity is still relatively strong in some high-income areas and places with strong employment," McMaken said.

 

 

Sale Leaseback (SLB)

April 21st, 2014

A Sale Leaseback (SLB) may look and smell like a sale, but in truth … it’s a form of off-balance-sheet financing.   An SLB is consummated when a company sells its real estate for cash and simultaneously signs a long-term lease with the buyer.  The major benefit of SLB financing is unlocking trapped capital allocated to a typically illiquid asset—single tenant real estate.  Some of the major advantages of an SLB are:

  • Provides maximum proceeds of 100% of appraised value (opposed to 60%-80% LTV in a traditional financing).
  • Unlocks corporate capital trapped in real estate for a competitive cost compared with the blended cost of both debt and equity capital.
  • Provide longer-term capital (15-25 years) than is available from traditional debt sources (3-10 years).
  • Result in off-balance-sheet treatment for generally accepted accounting principles (GAAP) purposes with no restrictive covenants (for now, assuming new FASB regulations won’t screw that up!).

 

Companies utilize this form of financing for a variety of reasons because the cash proceeds that are a result of an SLB usually have no limit on the expenditure (hmm….really, no limit?).   Some of the more common reasons why companies have participated in SLBs are:

  • Pay down Debt
  • Finance Operational Growth and Investment (i.e.: construct new facilities, purchase new equipment, invest in new technology, etc.)
  • Reallocate Capital into Other Business Sectors
  • Mergers and Acquisitions
  • Executive and/or Management Restructuring
  • Buy-Back Company Stock

 

Who are the buyers of these Sale Leaseback transactions?  A block of the buyer market is individual investors who are looking to park 1031 income.  However, the lion’s share of the buyers belong to Real Estate investment Trusts (REITs).  Just in case you don’t know, a REIT is an investment vehicle (either publically traded or non-traded) that allows John Doe to invest into commercial real estate properties.

 

REITs are surging after one of the worst downturns in commercial real estate in a generation.  REITs outperformed the broader equity markets again last year as mall and shopping-center REITs were among the top-performing sectors amid rising retail sales and an economic recovery.

 

Now be aware—just because you may own an operating business and own the real estate that you occupy, that doesn’t mean you qualify for an SLB and can free up trapped capital to go to Vegas.  Most REITs (and 1031 buyers) thoroughly review your historical financial statements and balance sheets.  They want to make sure that your business has been successful and will continue to be successful throughout the 10-, 15-, 20-, or 25-year lease term that the seller enters into.

 

Typically the stronger the financials, the lower the cap rate that is awarded on an SLB.  All buyers (REITs and 1031 investors alike) have different risk profiles.  Some groups enjoy the credit of Walgreens, CVS, Walmart—but they are happy with a 5 percent and 6 percent return.  There are a plethora of investors looking for middle market companies with $5mm to $150mm in revenues to enter into SLBs with, but are aiming to yield higher returns—say 8 percent to 10 percent.

 

With an abundance of capital on the sidelines looking to make good investments, how do you select which buyer is best to facilitate your Sale Leaseback?  Will the buyer be a REIT or Private Investor?  What is the investors underwriting criteria?  How will the investor value my real estate? 

 

The SLB marketplace is fairly efficient when it comes to pricing properties that are occupied by tenants that have an investment grade credit rating.  On the other hand, a majority of SLB properties are occupied by non-investment grade tenants.  Therefore, selecting a real estate professional who has a solid understanding of the SLB market is the best way to ensure your potential transaction is closed as quickly and efficiently as possible.

Contact: NEEDFUNDING@CFOCAPITALPARTNERS.COM