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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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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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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