Is Your Company’s Building in Financial Distress?

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Watch Andrew Zezas present components of “Defensive Opportunities on Corporate Real Estate” a presentation he gave to finance executives at an FEI continuing education event. Hear about the substantial risks and realistic short and long-term real estate opportunities that may exist for your company in the current economy.


Hear about the signs that the building your company occupies may be experiencing financial distress, and how to protect your company from risks associated with the landlord’s inability to operate or fund the building, foreclosure, tax sale, and more.

CEO of New Jersey based Real Estate Strategies Corporation, Andrew Zezas, SIOR, presents “Is Your Company’s Building in Financial Distress?” to finance executives at an FEI continuing education event.

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Another 18 Questions…This Time, For Your CURRENT Landlord!

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Is the Building Your Company Leases in Financial Distress?

Commercial real estate markets remain in turmoil and are expected to continue that way for some time.  Substantial risks exist for tenants and landlords.  As a prudent means of measuring and mitigating risk, CFOs should engage in discussions with their current landlords to assess the sustainability and long term viability of existing leases.

In a recent article, entitled “18 Important Questions CFOs Should Ask Before Renegotiating Commercial Real Estate Leases”, I provided a list of key issues facing commercial tenants when renegotiating leases.  In considering the need for finance executives to evaluate the risk profiles of existing commercial real estate leases, I realized that those same eighteen questions apply to this topic, as well.

Accordingly, finance executives, and their real estate and legal advisors, should conduct thorough due diligence on both the condition of the building and its landlord, in order to accurately assess the risk associated with commercial real estate leases.

Some important questions to be asked and answered, include:

1. Is the building solvent?

2. Is the landlord that owns the building also solvent?

3. How will the landlord guarantee its ability to fund on-going operational costs, capital improvements, legal and administrative costs, and others?

4. Is the landlord behind in the payment of the building’s real estate taxes, mortgage, utilities, or payments to service providers or vendors?

5. Has the mortgagee extended payment deadlines, permitted the landlord to make lesser payments, reduced the interest rate or monthly debt service amounts, or permitted anything that would otherwise put the landlord into technical or other default?

6. Has the lender threatened or begun foreclosure proceedings?

7. Has the tax authority threatened or begun property seizure proceedings?

8. Are any building tenants experiencing financial challenges that may put their solvency and / or tenancy into question, and negatively affect the building’s finances?

9. Are any building tenants planning on vacating or reducing their space?

10. When will the leases for the largest building tenants expire?

11. What is the building’s current value in relation to its debt?

12. When does the building’s debt expire?

13. Will the lender extend or renew the debt for an extended time period?

14. Is the debt on the building encumbered by any other property?

15. Does the landlord have the funds to make-up any difference between previous debt and current lender loan-to-value ratios?

16. What is the landlord’s planned exit strategy?

17. Has the landlord or its affiliates experienced a foreclosure, tax seizure, or been involved in a deed-in-lieu-of-foreclosure arrangement?

18. Have nearby buildings recently experienced significant vacancies?

Answering most, if not all, of the eighteen questions above would be prudent for any CFO whose company occupies commercial real estate.  A bad landlord report card won’t necessarily spell danger.  At the very least, such intelligence could provide guidance as to those steps a company might consider as a means of protecting its interests.

Engaging in conversation with landlords alone will not suffice.  Prudent CFOs will insist on landlords providing high-level access to their lenders, as well.

Solid investigative work by the company’s finance executive, its real estate and legal advisors, could win the day!

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.

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 financial 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 B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, 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.

www.CFOstudio.com

www.RealStrat.com

www.TheCFOsGuide.com

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

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18 Important Questions CFOs Should Ask Before Renegotiating Commercial Real Estate Leases

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Turning Risk into Opportunity – Lease Renegotiations

As a prudent means of reducing risk and cost, on both a cash and P&L basis, many commercial tenants have turned to renegotiating real estate leases.  Lease re-negotiations have become common, and can result in a company’s ability to reduce cost, mitigate risk, secure favorable terms, eliminate undesirable terms, secure cash and free rent, and achieve other financial benefits.  It is typical for commercial landlords to derive benefit from such transactions, as well, by virtue of extended lease terms, vacancy and risk reduction, recapturing of valuable space, and more.

Since many lease re-negotiations include short term space or cost reductions for tenants, renegotiated leases can also place greater financial strain on both a commercial building and its landlord.

Accordingly, finance executives,and  their real estate and legal advisors, should conduct thorough due diligence on both the condition of the building and its landlord, prior to renegotiating real estate leases.  Some important questions to be asked and answered, include:

1. Is the building solvent?

2. Is the landlord that owns the building also solvent?

3. How will the landlord guarantee its ability to fund transaction costs, such as cash and construction allowances, capital and leasehold improvements, legal and administrative fees, commissions, free rent, and others?

4. Is the landlord behind in the payment of the building’s real estate taxes, mortgage, utilities, or payments to service providers or vendors?

5. Has the mortgagee extended payment deadlines, permitted the landlord to make lesser payments, reduced the interest rate or monthly debt service amounts, or permitted anything that would otherwise put the landlord into technical or other default?

6. Has the lender threatened or begun foreclosure proceedings?

7. Has the tax authority threatened or begun property seizure proceedings?

8. Are any building tenants experiencing financial challenges that may put their solvency and / or tenancy into question?

9. Are any building tenants planning on vacating or reducing their space?

10. When will the leases for the largest building tenants expire?

11. What is the building’s current value in relation to its debt?

12. When does the building’s debt expire?

13. Will the lender extend or renew the debt for an extended time period?

14. Is the debt on your building encumbered by any other property?

15. Does the landlord have the funds to make-up any difference between previous debt and current lender loan-to-value ratios?

16. What is the landlord’s planned exit strategy?

17. Has the landlord or its affiliates experienced a foreclosure, tax seizure, or been involved in a deed-in-lieu-of-foreclosure arrangement?

18. Have nearby buildings recently experienced significant vacancies?

Answering most, if not all, of the eighteen questions above prior to engaging in lease renegotiation discussions with your landlord would be prudent.  And, such intelligence would provide guidance as to how, or even if, you should proceed in renegotiating your company’s commercial real estate lease(s).

If your landlord gets a bad report card, that may not be the end of your lease renegotiation efforts. At the very least, your approach may change and you might win more favorable and reliable terms, as a result. Or, you could decide not to attempt a renegotiation, and that it might be time to more seriously consider relocating. Either way, advanced planning and some solid investigative work will surely win the day.

About CFO Studio
CFO Studio spotlights 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 financial 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 B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, 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.

www.CFOstudio.com

www.RealStrat.com

www.TheCFOsGuide.com

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

###

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