Quest for the Right Deal

By Joseph Chavez, President, Lee & Associates Investment Services Group: In CRE, the search for the right deal is the quest of every player in this business. But what constitutes the right deal?

Joseph Chavez

In commercial real estate, the search for the right deal is the quest of every player in this business. But what constitutes the right deal? And will you know it when you see it? The product of the search can take many forms including a buyer in an exchange, the broker with the new client, the old established client, the banker with money to lend, and of course, that property owner looking to upgrade or even accumulate more. With so many looking, how can everyone find IIT? Are only the lucky ones having success? Judging from the comps and trends, it appears everyone is finding some right deals. Transactions in almost every market and every product type are at paces, which have many flabbergasted. Most primary market areas have recovered to pre-crash heights and show promise for even more escalation. Interest at suppressed levels and the whisper of increase only fuel the fury to make sure deals are done expeditiously.

Factors Leading to the Right Deal

To some it’s the right cap rate, price per unit, price per sq. ft. or GRM, while to others it could be the leases in place for the right term and right tenant. How does the investor navigate the matrix to find these just right parameters? Connections. If the investors are plugged into the right connections, they are the ones finding the right deals.

The Facilitators

The brokers develop the relationships needed to drive the markets that are composed of the deals. Now that’s not to say every transaction is a deal, or every broker has the right connections or even the right experience. So finding the right deal encompasses finding the right broker for the deal. Having a broker specialized and knowledgeable in a given market for a particular product type is paramount. If the quest is for a multi-family building, then an apartment broker is the answer and if it’s an office project then the office specialist is your man, or woman, and so on for all the product types. What we find, though, many times is the investor who relied on that referral from a family member or friend who said they know “a guy,” found their broker had no experience in the right product—it was a residential broker selling apartments or NNN broker selling industrial. To find the right deal, that piece of gold treasure that every investor looks for, one must first find the right miner, the broker who specializes in and knows his market.