Category: Services

Due Diligence Explained

Due diligence typically involves reviewing and gathering a variety of information about a property, including financial records, legal documents, appraisals, and physical inspections before a buyer or seller enters into an agreement. The role of a commercial real estate agent in the due diligence process is to act as a facilitator, helping to gather and organize information, and to serve as a resource for the buyer or seller as they assess the potential risks and liabilities associated with the purchase or sale of a commercial property.

Due Diligence

Our job is to facilitate transactions for either buyers or sellers.

Due Diligence for Buyers

From the buyer’s perspective, due diligence is an important step in the process of purchasing commercial real estate because it helps them make an informed decision about whether to purchase the property and to understand the potential risks and liabilities associated with the purchase. Some specific tasks that may be involved in due diligence for a commercial real estate transaction from the buyer’s perspective include:

  • Reviewing financial documents, such as tax records, budgets, and income statements, to assess the financial health and performance of the property.
  • Examining legal documents, such as leases, contracts, and deeds, to understand the property’s ownership and any legal liabilities or obligations associated with it.
  • Conducting physical inspections of the property to assess its condition and identify any potential issues or repairs that may need to be addressed.
  • Reviewing environmental reports and assessments to ensure that the property is in compliance with local and national environmental regulations and to identify any potential environmental hazards.
Due Diligence for Sellers

From the seller’s perspective, due diligence is the process of providing information and documentation about the property to the potential buyer. The seller is responsible for disclosing any known issues or problems with the property, as well as providing any relevant financial and legal documents for the buyer to review. In addition to providing information to the buyer, the seller may also want to conduct their own due diligence on the buyer. This could involve reviewing the buyer’s financial situation and ability to purchase the property, as well as their plans for the property once they take ownership.

Our associates at Kelley Commercial Partners have the experience and knowledge to ensure seamless property transactions for either buyers or sellers. If you’re considering the acquisition of a property or the sale of property, consider representation from our team. Contact one of our experts today.

Rising Interest Rates Present Opportunities for Commercial Real Estate Investors

rising interest ratesWhen interest rates rise, it can potentially make borrowing more expensive for commercial real estate investors. This may lead some investors to shift their focus to properties that have stable, long-term cash flow, as these properties may be able to generate enough income to offset the higher borrowing costs. However, rising interest rates can also create opportunities for certain types of investments.

One potential opportunity for commercial real estate investors when interest rates rise is to focus on investments that are relatively insensitive to changes in borrowing costs. For example, properties with long-term leases or properties that have stable, predictable cash flows may be less affected by rising interest rates.

Another option for commercial real estate investors is to invest in properties with strong demand, such as properties in high-growth areas or properties that are leased to creditworthy tenants. These properties may be able to command higher rents, which can help to offset the higher borrowing costs associated with rising interest rates.

Investors might also consider exploring alternative financing options, such as private lending or crowdfunding, which may offer more favorable terms than traditional bank financing.

Finally, commercial real estate investors might negotiate interest rate swaps or caps with their lenders, which can help to mitigate the impact of rising rates on their investment portfolio.

For nearly 40 years, Kelley Commercial Partners has helped provide clients with a competitive advantage. We have the knowledge and experience to help clients navigate through the ever-changing market. Whether you are new to the commercial real estate market or an experienced investor, we are here to help you meet your real estate goals. Contact us today.

Tenant Estoppel Certificates

Are you a tenant? A landlord thinking about selling? Or an investor looking to buy a leased property? If you have answered “yes” to any of these questions, it is important that you understand what a tenant estoppel certificate is and the benefits and protections it offers.

What is a tenant estoppel certificate?

A tenant estoppel certificate is a legally binding document signed by a tenant verifying the current status and terms of a lease and specifying any modifications to the original agreement, defaults by the landlord, or other issues relating to the lease. Typically, an estoppel certificate is requested by the landlord as part of the due diligence process before closing on the sale of a property. This statement of facts regarding the lease and the premises estops either party from making a claim that contradicts those facts post transaction.

Tenant Estoppel Certificates Include

If you lease, own, or want to purchase a tenant-occupied property, it’s important to understand how a Tenant Estoppel Certificate can protect you.

Most commercial real estate lease agreements include a provision requiring a tenant to complete an estoppel certificate within a specified amount of time after receiving the Landlord’s request. However, only a landlord wishing to sell or refinance the property would request the estoppel. If a lease does not have a provision requiring a tenant to complete an estoppel certificate, it is in the best interest of the tenant to carefully review and complete the estoppel certificate to verify all pertinent lease information.

Why sign a tenant estoppel certificate?

From the tenant’s perspective, an estoppel certificate informs and certifies to the purchaser of the property (i.e., the new landlord under the lease) and, in the event of financing, the lender of any existing issues they will need to address after closing. For lenders and purchasers, the estoppel certificate verifies information presented by the landlord regarding the tenant, the premises, and certain material terms of the lease, which helps prevent any costly surprises after closing.

As a full-service commercial real estate firm, Kelley Commercial Partners provides landlord and tenant representation. And no matter which side we represent, we are committed to successfully guiding you through the process from the beginning through closing. For all your commercial real estate needs, let us be your partner to success.

Kelley Kolettis Designs opens at The Shoppes at Rodney Parham

Kelley Kolettis Designs

Over the last 13 years Kelley Kolettis has progressed from art student, to experienced designer, to successful entrepreneur with her very own design firm, Kelley Kolettis Designs. The Shoppes at Rodney Parham became KKD’s newest home base in February 2022. “We were so pleased to work with such a talented member of the business community and help her find the perfect space for her firm,” said Cheryl White, senior property manager.

Kelley has a wide range of experience working in several different areas of the design world from furniture design, kitchen and bath renovations, commercial office layouts, and event planning, but her current focus and specialization is now on residential design and small commercial projects. Her busiest months are November and December when she is busy decorating homes and businesses around central Arkansas for the holidays.

Shoppes at Rodney Parham

Kelley Kolletis Designs, 10020 N. Rodney Parham, Suite 6, Little Rock. Illustration by Ellen Yahl

Kelley is available by appointment to meet with you at the studio located in Suite 6 of the Shoppes where her unique and sophisticated style are on full display. If you can’t get to her studio, Kelly offers virtual consultations as well. She is eager to share what she’s learned over her many years of experience and is always willing to answer questions or recommend one of her trusted tradesmen to help you get the job done. Her design studio also features a gallery of works by local artists’ if you’re looking for some color to add to your walls.

“We know that Kelley has many years of success in her future, and we wish her all the best on her journey,” said Brooke Miller, agent and partner.

If you’re looking for space for your business to call home, browse our properties or contact one of our trusted agents at 501.375.3200.

Commercial Real Estate Leases: The Basics

Leases: The Basics

 

Whether you are a property owner with leasable land or space or an individual looking for space to lease, it’s important to know the basics of the types of leases that are most common in the commercial real estate world.

Gross Lease

In a gross lease (also known as a full-service lease) the tenant pays a flat monthly rate while the landlord remains responsible for all operating costs of the property including taxes, insurance, and maintenance, as well as other expected costs, such as janitorial service. Because landlords must cover all of the property’s operating costs, the rental rate for gross leases is generally higher than for a net lease. In exchange for paying a higher rate, the tenant has the security of a fixed monthly rent payment, minimizing the possibility for variations in their operating costs, making budgeting more predictable and less complicated.

Net Leases

Net leases shift some or all the operating costs associated with a property to the tenants, and tenants are responsible for that cost in addition to their regular rent. There are three types of net leases: single, double, and triple. Tenants with a single net lease are responsible for one of the operating costs associated with the property, generally the property taxes. With a double net (net-net) lease, the tenant assumes the cost of two of the operating costs, generally the property taxes and insurance. With a triple net (NNN) lease, the tenant assumes all of the property’s operating costs, which include taxes, insurance, and all maintenance costs. Lastly, there is a variation of the triple net lease called absolute net lease (also known as a bondable lease). This type of lease relieves the property owner/investor from all financial obligations and risks associated with the property, including taxes, insurance, structural maintenance, and debt liability. All those obligations are passed on to the tenant normally in exchange for a lower base rent.

Benefits of Net Leases

From the landlord’s perspective, entering into a net lease can simplify the management and operation of the property, which can be especially beneficial if they own multiple properties. Furthermore, net lease rates are typically made for longer terms, which gives the landlord the benefit of long and stable income from the property.

Because net lease tenants assume more of the unpredictable costs associated with maintaining the property, their base rent is often at a reduced market rate. This can mean considerable savings in rent over the long term of the lease. While annual rent increases may be built into the lease agreement, they usually remain below the rate one would pay with a gross lease.

Ground Lease

Yet another variation of a net lease is a ground lease. An owner with undeveloped land may enter into a ground lease in which the lessee agrees to incur the cost of developing the property (i.e., construct a building or business on the land) and in exchange, pays only a NNN lease on the land. Ground lease terms are long, generally 50 to 99 years, but when the lease term ends, the ownership of the both the building and the land revert to the owner.

Negotiating a Lease

Before entering into a lease agreement as “lessor” or “lessee”, know your options so that you can benefit the most from the deal. Agents at Kelley Commercial Partners have the knowledge and experience to walk you through the process and negotiate with your best interests in mind.