Written by Martin N. Burton Commercial Investment Real Estate July 2011
Business owners have been cutting expenses, reducing payroll, and trying to chase down new sources of cash flow for two years. Yet, as the economic recovery lags, many realize they need to do even more. But what is left to cut? Where can they find new streams of revenue?
Real estate is often a company’s first or second most valuable asset, so real estate-related moves have the potential to provide the biggest return on investment. Here are 10 original — and, in some cases, counterintuitive — strategies that commercial real estate professionals and their clients can employ to find additional savings and new avenues for cash flow, all based on real estate-related assets.
1. Pay 18 Percent Interest — and Save
Hard-money lenders usually are thought of as lenders of last resort, but savvy investors know when to use them as lenders of choice. Having a strong relationship with a private lender can help investors move quickly to seize fleeting opportunities before they vanish.
One client, a hard-money lender, helped a borrower pay off his $32 million loan two years early for just $21 million. The key was a quick closing. The original lender was struggling and needed to raise capital. It offered to cut the principal owed by the borrower in return for an early repayment. Scrambling, the borrower called up my client, who supplied half of the $21 million needed, secured by a first mortgage on the property, for 18 percent interest. The borrower supplied the rest of the pay-off amount, and the whole deal closed in three weeks. Within six months the borrower had refinanced with a new 6 percent loan. This was a win-win-win: The lender received immediate cash, the hard-money lender earned 18 percent interest, and the borrower not only saved $11 million but ultimately reduced its interest rate by four percentage points.
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Mike Stinson, a native of Monroe, Louisiana, is a graduate of Louisiana State University (LSU). A real estate licensee since 2004, Mike specializes in the sale and leasing of commercial real estate. A Designee member of the Certified Commercial Investment Member Institute (CCIM), Mike’s other professional memberships include Baton Rouge’s Commercial Investment Division (CID), the LSU Alumni Association, REALTOR Land Institute (RLI), an associate member of Louisiana REALTORS® (LR), and an associate member of the National Association of REALTORS® (NAR).
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).