Maximizing Results in Real Estate Transactions: How To Plan, Where to Save and Where to Spend? (PART 1)

controlling costs

How many times have you or your company looked back at a transaction and winced at some of the expenses and fees paid to close the deal? Wondered aloud whether the performance of your team and associated vendors and other professionals was properly analyzed and carried out? Thought about how the deal could have been structured more efficiently and each step discussed more thoroughly?

These are just some of the questions commercial real estate professionals struggle with as they try to become more productive, efficient and profitable. As with any business transaction there is no magic answer or manual for how to get the most out of every project while controlling costs and staying true to the goals originally set for the sale, purchase, lease or other transfer of real estate interests. However, these issues arise in every economic cycle, transaction and business regardless of the circumstances.

This will be the first in a series of posts analyzing how real estate companies and related businesses can work together to achieve the goals for each project, while controlling costs and maximizing results. This week we focus on the front end ideas, goals, initial planning and lining up the team to best work on the deal.

1. Set Your Goals !

Sounds simple enough? Right?  But on how many occasions have folks jumped past this step too hastily and missed the opportunity to build the underlying foundation of the project they envision?  More than you would think unfortunately….

What are your goals – macro and micro?  A good place to begin is having honest discussions with the people and companies who will play a part in the transaction – investors, brokers, property management, appraisers, financial partners, lenders, architects, contractors, attorneys, vendors – and most of all your team members.

Factors to consider:

A. What is the ultimate “best” result?

B. How the Asset or Property to be assessed and/or assembled?

C. What is the 1000 foot view of the process?

D. What are the contingencies and downsides?

2. Who’s On The team ?

Sounds almost to obvious to ask? But never something to assume or gloss over.  The same group of folks who closed that massive portfolio purchase may not be the ones for the shop tenant lease negotiation. The people involved should have a distinct purpose in the process.  Many CRE matters need a single project manager, while others need more of a coordinating person or group.  Some deals may be more design/construction heavy, whereas others (especially when the business points have been negotiated to a large extent) may be more appraiser/attorney/lender focused.  Spend your time and your budgeted dollars where best allocated – not necessarily where most familiar or convenient (SEE more on this in the next post).

3. What is the Scope of Work and Role of Each Member?

Deciding this point carefully can make or break a project – period.  Everyone who has been involved in a commercial real estate deal knows that mis-allocation of responsibilities can be fatal to an otherwise successful project.

Some specific points:

A.  We are not in 2006, so take your time!  Create a realistic timetable.

B.  Be flexible with planning and procedure.

C.  Make sure you put the right people in the right role for their expertise (i.e. the financial piece needs input from the brokers, contractors and others, but the ultimate number crunching and decision-making should be handled by those withe skill of dealing with the investors and lenders).

D.   Be honest across the board about what each team member is doing and how/when they are be involved.  This may change as the deal progresses, but remember point (B) above: stay open to change!

Once your plan and team are in place, keep your eyes on the prize! The transaction should be successful. In this regard:

– Listen to your team members;

– Don’t do your own heart surgery (rely on the knowledge and skills of others);

– Ask questions; and

– Be open to suggestions and advice.

What’s your view on this approach? Weigh in!

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