Top Five Ways To Make Your Lender Your Partner:

February 8, 2010

This year, the builders left standing won’t necessarily be the ones able to build the best homes – but the ones able to build the best case.

The case, that is, for partnership…with their banks. As a developer you’ll be best served if you enter into 2010 with a new mindset regarding bankers: bankers of 2010 are not just your lenders. They’re your partners.

Work with them. Bankers are looking for ways to cut their losses. If you have a compelling idea, they’ll listen. Give them rational reasons to be receptive to your plans. Consider these five ideas:

1. Take a higher interest rate on loan renewal, but have some of it accrue. Recently I’ve seen more than a few banks accept these terms. Banks, more than anything, want to have a performing loan. Accruing interest and collecting some interest is better than nothing.

2. Defer points and refinancing charges to the back end of the deal. Again, many banks will welcome this as an acceptable alternative to NOTHING. Put it on the table, see what they say. You have nothing to lose.

3. Add new capital to the deal. Banks love new capital. Do whatever it takes to find an investor by offering to pay 20-25% returns. That’s high, but sometimes you have to be willing to pay returns in order to get returns. If it keeps you in the room, it’s worth it.

4. Use your history to prove your future. Don’t overstate your pro forma. Banks respond to sober truth and facts, today more than ever. Be ready to back up your claims with plenty of objective justification. Modest expectations based on solid evidence are far more attractive to banks than grandiose speculations based on gut feeling.

5. $plit profits. An offer to spread the wealth is the ultimate form of making your bank your partner. Your lender is looking for a reason to be in the deal. If all else fails, splitting profits might be the ticket. If it buys your project another lease on life, it’s worth it.

It’s a fact: banks are literally becoming developer’s partners. Perhaps it’s happened before over the years, but not to the large degree that I’m seeing it today. Keep this “partnership,” concept firmly in mind, and let it set the tone for your dealings with lenders going forward.

Good luck, and let us know if you have any questions – or if you can share any brilliant new ideas about partnering with lenders that have worked for you.

GB

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Chicago’s Real Estate Forecast And Why You Should Ignore It.

February 4, 2010

Found an interesting read by Dennis Rodkin in Chicago Magazine’s online version of the monthly “Deal Estate,” column. A collection of quick, mostly unsettling sound bites overheard at the Chicago Association of Realtors (CAR) economic forecast panel for 2010, which met January 28th.

Many of the sound bites involve the accurate (but not-so-original) notion that the economy is bad…and it will be slow to recover.

I have respect for the experts quoted – their perspectives are valuable to all of us. But somehow the tenor of Rodkin’s compilation reminded me of how much my team and I bristle at the constant repackaging of negative information.

Exchanging factoids about just how “bad,” things are has become a guilty pleasure for many in real estate, and possibly an unproductive one.

Here’s one (I can’t resist):

There were fewer permits to build new homes in the eight-county metropolitan area this year than permits issued for Will County alone in 2005.

Wow. Another way to meditate on how “bad” things are – by way of comparing everything to Will County in ‘05. I could give you hundreds more like that – but I don’t see the point.

There’s nothing better than awareness. Knowledge is power. But when we obsessively gaze at things through the most disturbing lenses possible, we’re doing it to build a case for inaction, or to paint ourselves as victims. We’re venting when we should be invented. Here’s another:

In 2009…

…foreclosures, short sales, and bank-owned sales made up 40 percent of sales of single-family homes and 24 percent of condos…

Yikes! What do you DO with that information? (Aside from saying “yikes.”)

Here’s what you do: keep it productive. Let it guide your business decisions. Let it direct the relationships you forge with lenders. Let it lead you to new opportunities.

Don’t fall into the trap of using statistics to build a case for you to feel powerless. That’s the enemy of progress in real estate.

I saw a brilliant billboard on the Kennedy Expressway this week. It said: “Recession 101: Bill Gates started Microsoft during a recession.”

Amen to that. Try to see the tremendous opportunity between the lines. If you don’t, someone else sitting next to you at the forecast panel will.

There are opportunities, there are answers, there is hope. That’s the attitude that made ‘09 a fantastic year for Garrison Partners and our clients. It can work for you, too.

For concrete techniques to improve your outcome in 2010, read the new Garrison Insider entry slated for this Monday: “Top Five Ways To Make Your Lender Your Partner.”

GB

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Trend In Residential Real Estate: Think Small

January 26, 2010

The NAHB has released data about the incredible shrinking American home. You can read the full article on The Wall Street Journal’s website, here.

2009 was a big year for small:

“The era of easy money is over. You really have to think before you go out and decide you need that five-bedroom, five-bath home,” said Rose Quint, the NAHB’s assistant vice president for survey research. “Couple that with the energy [cost] concerns of consumers today and I think we will continue this trend.”

It reminds me of another “small movement,” dating back to 1959: the Volkswagen Beetle. Smart marketing touted the financial, practical and image-related benefits of owning small. But there was nothing small about that marketing approach – it translated to big sales.

As marketers in real estate, it’s our job to turn this current real estate trend toward small into something big.

Like Volkswagen, we need to package “small,” and make it appealing. Real estate marketers have been doing this for years by using words like “cozy,” in advertisements. We have to go beyond that.

Today small means power. Small means ownership. Small means freedom. Small means lower carbon footprint. Small is nimble, sane, sensible. Small, in terms of living space, can have tremendous caché if we market it properly.

For some developers, building smaller homes means the hope of turning a profit on new construction – even in this economy, when standing inventory makes such a thing seem impossible. That’s a perfect example of turning the trend toward small into something big.

As marketers and real estate consultants, it’s not enough to merely embrace the trend. We have to harness its power and translate it into better products, smarter marketing and more sales. That’s exactly the kind of challenge we love at Garrison Partners.

Size may not matter as much right now. But sales still do.

GB

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Be Cautious of Cautious Optimism!

January 22, 2010

An article posted by the NAHB today reports that the mood of attendees at this year’s International Builders’ Show was cautiously optimistic.

I was there, and the energy was indeed more upbeat. The networking and communicating is great for the industry, and there’s a certain power in numbers, a sense of energy that breeds cautious optimism.

But I saw something else at the IBS show. Something very good for the industry: rational optimism.

Rational optimism bases your expectations on what you KNOW to be true.

Cautious optimism limits your expectations because of all the unknowns involved.

Rational optimism is earned by seeking out the projects you can grasp fully and get excited about. Putting in honest work and street-level research and taking your best shot, no regrets.

Cautious optimism happens when you lack information. It’s a result of moving forward into the unknown too quickly for your confidence to keep up with you.

Rational optimism can save the residential real estate industry.

Cautious optimism threatens to hold it back.

I’m involved with several projects right now for which I can be rationally optimistic. They’re the only projects I’m willing to take on. I’ve discovered that you can hold yourself to this standard EVEN IN THIS ECONOMY. In fact, it’s more important now than ever.

For banks, receivers and developers in particular, rational optimism is the holy grail. In order to achieve it, intelligence gathering techniques and depth of insight have to adhere to a new standard. Well, new to some. To us, it’s business as usual.

OK, admittedly, I can recall a few times in 2008 where I indulged in cautious optimism. However, I’m very optimistic it won’t happen again. (Rationally so.)

Garry

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Gary Benson To Speak at The International Builders’ Show, Las Vegas, 2010

January 15, 2010

I’ll be in Las Vegas next week to coach a session entitled: How to Get Started in Developing Apartments and Condos, Pt. 4: Managing & Marketing, at the International Builders’ Show.

To read the details, click here.

Date: Thursday, January 21
Time: 10:00 am – 11:30 am
Location: North 259

The bottom line is that “getting started,” involves knowledge of marketing and management. (My forte.) That is, without these skill sets at the outset of your journey, you won’t get anywhere. So I’ll be discussing some of the basics.

WHY someone would want to get started in real estate development right now is another story. Whoever is teaching that course has their hands full.

In any case, what happens in Vegas will NOT stay in Vegas, it will be reported right here so check back. I’ll let you know what I learned at the show and share highlights on the blog.

Garry

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Garry Benson Quoted In Crain’s Chicago Business Article About Cabrini-Green redevelopment bailout.

January 12, 2010

It’s been said that Crain’s Chicago Business is “where the who’s who view what’s what.” So it’s with great pleasure that I’m once again quoted in a Crain’s article.

…in order to overcome the market-rate anxiety of participating in the social experiment,” says Garry Benson, president of Chicago-based residential marketing firm Garrison Partners, which has worked on two other mixed-income projects near Cabrini-Green. “If you start off having to offer below-market value, when the market drops, you can’t drop your prices below your costs.

Last time I was in Crain’s, readers posted some rather spirited comments in reply. Here’s an example:

Garry Benson, are you insane?

I love questions like that. Which is why I responded with a blog post on December 7th. You can scroll down one entry, it’s my mini-manifesto on why things might, MIGHT, be turning around.

To read full Crain’s article on Cabrini Green bailout (if you’re in Chicago real estate, you probably should) click here.

Garry

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Garry Benson: Are You Insane?

December 7, 2009

“THE MARKET HAS STOPPED GOING DOWN!” Skeptics today see those words as the sign of a charlatan or snake oil salesman. And it’s no wonder, developers and marketers have been crowing this claim like clockwork since the beginning of the collapse in late ‘07.

Two weeks ago I hazarded those same powder-keg words in a very public forum – a Crain’s article. But I based my observation on HARD FACTS and observations after witnessing 43 units (over $11 million dollars worth of real estate at about $278 per square foot) sell in 90 minutes. 90 minutes!

Yes, it was an auction. And yes the average purchase was 25% below last asking price. But the sheer momentum indicates something exciting is afoot. Namely that SOME people are very interested in buying real estate again.

Garry Benson: Are You Insane? That was the question posed on the Crain’s comment board by one Ryan C, arguing that I sound like a “snake-oil salesman,” as if I had some sinister ulterior motive, as if we in the industry are all in cahoots trying to hypnotize the buying public with disingenuous bullishness.

My answer to you Ryan is if I’m insane, it’s the good kind of insane…insane for loving this topsy-turvy industry, even the downturn, because the challenges energize the hell out of me. I don’t make my declarations lightly. If there’s a “buy now!” conspiracy going on, I’m not part of it. In fact, half my day is spent advising certain clients NOT to buy, at any discount.

And stop focusing on the deep discount, Ryan. It’s the fact that people bought at all. A good old-fashioned buying frenzy. That speaks volumes about that particular market, and other related markets, in my opinion.

My opinion doesn’t matter? Fine. But look at the CASE-SHILLER Home Price Indices that have shown an upturn in most major markets. Does it mean we’re in for sunny skies in Detroit? No. (Let me know if you want a link to the study, I’ll email it to you.)

FINAL ANALYSIS The auction is merely proof of this: some people are buying up real estate AGAIN, with a hunger and urgency I haven’t seen in a while. These are our SAVVIEST buyers and they are not waiting. I’m clearly not alone in thinking things have stopped going down, Ryan. I’m joined by a mob of people who put their money where there mouth is to the tune of 11 mil.

Ryan and other detractors, let me know your objections to my logic, if any, and I’ll be happy to continue this conversation right here.

Best,

Garry

For more information about our services, please visit our main website at www.GarrisonPartners.com or call our corporate office at (312)750-1610.

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Condo auction sets pace with 62 sales in one afternoon

November 17, 2009

“It’s a declaration that the market has stopped going down,” says Garry Benson, Garrison’s president and CEO. “This proves that once you establish in the minds of the public a price/value equation, there is absorption.”

To read the entire article at Crain’s Real Estate Daily, click here.

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A Philosophy For The End Of ‘09:  Harness The Hysteria and Know Thyself

November 9, 2009

SocratesI’ve got some bad news and good news.

The bad news: we’re seeing lots of hysteria among bankers and developers right now.

The good news: we’re seeing lots of hysteria among bankers and developers right now.

Yes, hysteria can be a GOOD thing. It sure beats the paralysis, denial and blaming we saw so much of in the first half of the year.

HYSTERIA breeds ACTION, because hysteria doesn’t mess around. Hysteria knows that doing nothing spells disaster.

The action to take right now is to actively KNOW THYSELF. Hold up a new mirror. Forget your stories, biases and pre-conceived ideas of what your property is and what it’s capable of doing. Throw away your old pro forma. Everything is different now.

Deals today either have hope or they don’t. If you’re still living with a wait-and-see attitude, now is the time to step up and say no more.

You have three options:

1. Stay the course while making adjustments. Look at your property as if it’s new. Rethink your product and your market and make it work. The buying base is out there and it’s so damn narrow. Look at it with a microscope, because like an uber-virus it keeps changing and morphing. Who’s actually buying? Do we have the right amenities? What should our pricing be?

2. Radical adaptation: a condo becomes a rental building. A hotel becomes a condo. Take a fresh look at what you have to work with. What efforts and infrastructure can you  SALVAGE and parlay into a new kind of property?

3. Cut your losses. Unleash this puppy and move on. It’s sad, but it’s better than doing nothing. The earlier you accept defeat, the easier it is to minimize the damage. You’ll be happier afterwards, like a weight has been lifted and you can plot a new course, having maximized your outcome.

Your product is either a 1, 2 or a 3. If you don’t know which, you’re not alone. We’ve been all over – projects from the South Loop to the Gold Coast, from Boston to Idaho both downtown and burbs – helping people discover if their project is a one, two or three, and helping them plot a course. They’re sick of being in the dark. “Know thyself,” is becoming very popular.

Find a third party to hold up a mirror. My partners and I used to work on the development side of the deal with big companies with huge portfolios. That’s where we learned the business. WE GET IT. We’re wired to make your problems our problems.

If you can’t use us, find someone like us – seasoned site advocates, not a mere brokerage with broad listings and a sales-only mindset. If you have a question or just want some clarity, post a comment or contact me. That’s what this blog is all about.

Embrace the hysteria, folks. ’09 is coming to a close. The future of real estate belongs to those who dare to be self-aware RIGHT NOW and perform the proper analysis and diagnostics needed to move boldly forward.

Good luck and Godspeed,

Garry

For more information on Garrison Partners’ services, please visit www.GarrisonPartners.com

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The Two Most Important Words In Real Estate: Grand Opening.

October 29, 2009

For more information on Garrison Partners’ services, please visit our website at www.garrisonpartners.com

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