Jonathan Alpert Discusses CFOs in a Private Equity World, in CFO Studio Interview with Andrew Zezas

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Shannon Corea
Shannon.Corea@RealStrat.com
732-868-0000 x117

Jonathan Alpert Discusses CFOs in a Private Equity World, in CFO Studio Interview with Andrew Zezas

(Somerset, New Jersey): Andrew Zezas, SIOR, host of CFO Studio, Publisher of CFO Studio Magazine, and CEO of Real Estate Strategies Corporation, announced today that Jonathan Alpert, CFO, appeared in a guest interview on CFO Studio. Mr. Alpert’s discussion delved into the world of CFOs in private equity. The 10 minute video interview and a full transcript are both available at www.CFOstudio.com.

In Mr. Alpert’s interview, he provides an interesting analogy by relating sales and finance to skeet shooting. In terms of the role of the CFO to his team, Mr. Alpert said, “He’s got to feed them the information and ammunition needed to hit that target.” Andrew Zezas offered, “The CFO’s role has become tremendously complex and diverse in recent years, whether it’s in mid-cap companies, publicly-held, privately-held, entrepreneurial owned companies, or private equity owned companies.” He continued, “As a finance executive and advisor, Jonathan Alpert is well known among his peers. He is a board member of the NJ Chapter of Financial Executives International. His vast experience in finance and strategy, his understanding of the importance of sales to any organization, and his business partner approach has propelled him as a thought-leader in the business community.”

Mr. Alpert’s Interview can be viewed at www.CFOstudio.com/JonathanAlpert.

About CFO Studio

CFO Studio spotlights New Jersey area senior finance executives, providing them with the opportunity to share their knowledge and communicate their perspectives on current economic, financial, operational, and business issues. Visit www.CFOstudio.com.

Funding for CFO Studio is provided by Real Estate Strategies Corporation, providing corporate real estate advisory and transaction services to CFOs, Management, and corporate Boards in New Jersey and around the United States.  Andrew Zezas, CEO of Real Estate Strategies Corporation, is the host and moderator of CFO Studio.

Join us every Friday morning at 10:30 AM EST to watch a new CFO Studio Video Interview!

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Copyright Real Estate Strategies Corporation 2011. All Rights Reserved.

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When Great Credit Can Be Bad!

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Every day, well-run companies strive to improve their credit ratings.  Banks search for companies to whom they wish to lend, based on their credit and many other factors.  Investors, landlords, business partners, companies selling products or services, rating agencies, and information consolidators, all spend countless hours analyzing the creditworthiness of companies, searching for the best and often deciding not to conduct business with those companies with poor credit.

So, great credit will put your company in a position of strength, right?  Well?  Great credit and a solid financial footing will certainly open doors that may otherwise be locked.  When acquiring real estate through lease transactions, great credit is what attracts landlords to certain tenants and affords those tenants better terms than their less creditworthy corporate brethren.  If your company has great credit, banks, investors, and others will race to do business with you at lower rates and on better terms than for other companies…right?  Interestingly, the answer is: “Not always!”

When could great credit get in your way?  That same great credit can become a 100 foot high obstacle when companies seek to sublease surplus real estate or assign leases that they no longer require.  With the growing amount of space offered for sublease or assignment, creditworthiness becomes a major issue.

A large focus of landlords is credit risk.  Since fewer and fewer companies actually have great credit these days, when a creditworthy tenant seeks to get out from under a lease by assigning it to another company, landlords will weigh the original tenant’s creditworthiness against that of the potential assignee.  Unless the incoming assignee’s credit matches or exceeds that of the original tenant, the landlord will likely do everything in its power to retain the original tenant in the liability chain and will not readily permit the original tenant to absolve itself of its obligation.  In fact, the landlord may not approve of the incoming tenant or the transaction at all.

From a risk management perspective, the landlord’s actions in this kind of situation are perfectly understandable.  Why would anyone swap bad credit for good credit, especially in the current economic environment where many seemingly good companies are now perceived as risky?

After reading the above, most finance executives considering acquiring real estate through a sublease or assignment transaction would likely start thinking about credit enhancement and additional security deposits.  At a time when sustainable and predictable cash flow is king and the risk of loss is high, additional security deposits won’t mean a thing to most landlords.

Think about it like this:  If a good credit tenant is permitted to be absolved of its obligations in exchange for a riskier tenant, and given that security deposits in commercial real estate transactions typically cover a small portion of lease obligations, what benefit would a landlord derive from any credit enhancement or additional security deposits?  Few, if any, commercial mortgage lenders would even consider authorizing a landlord to whom they lend to agree to replace the good credit of an existing tenant with the questionable or unproven credit associated with an incoming tenant.

How about credit enhancement?  The only way that credit enhancement would alleviate landlord and lender fears of increased risk and possible cash flow loss would be if either the outgoing original tenant or the incoming tenant guaranteed a very significant portion of a lease’s value, if not, the entire lease obligation, and could demonstrate the financial wherewithal to do so.  That’s exactly what most landlords would seek in this instance.  Unfortunately, guaranteeing an entire lease obligation would place the outgoing tenant right back at the starting gate of not being able to absolve itself of its financial obligations.  And, most incoming tenants are unwilling to make such a commitment.

After all, landlords are as much in the business of managing risk as they are in owning buildings, generating cash flow, deploying leverage, and building equity appreciation.  And, that’s precisely what landlords must do in the current economic environment to sustain themselves…manage risk very well.

This is a time, when companies are seeking to relieve themselves of surplus lease obligations, that a tenant’s strong creditworthiness will actually work against it.   In this environment, there are times When Great Credit Can Be Bad.  Alternative approaches to disposing of surplus real estate, including the use of lease renegotiations and other non-traditional approaches, may be a strong tenant’s best bet.

 

About CFO Studio

CFO Studio spotlights New Jersey based senior finance executives, providing them with the opportunity to share their knowledge and communicate their perspectives on current economic, financial, operational, and business issues.  By invitation only, CFO Studio promotes select finance executives, their ideas, experience, and insights, in a professional, tasteful, and low-key interview setting.  Topics include current and future trends in accounting, banking, business, corporate strategy, employment, finance, IT, operations, real estate, risk management, the economy, and more.  Watch interviews with noted area finance executives and learn how your peers are creating sustainable value for their companies!  Join the conversation or just watch, listen, and succeed!  We welcome your ideas for future interviews.  If you would like to appear on CFO Studio, please email or call our CEO, Andrew Zezas, at 732 868 0000 x111. Visit www.CFOstudio.com

About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to finance and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com. Follow CFO Studio at http://www.Twitter.com/CFOstudio.

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Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

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