CCSR, Inc. and Affiliated Companies

We developed the F.I.G.’.R.S. algorithm to impose (a semblance of) order on the sometimes chaotic process of buying, developing, or leasing commercial property.

Each step applies 

     – increasingly sophisticated analysis to 
     – increasingly specific and refined data to 
     – match resource commitments to 
     – your decisions’ inherent risk and “reversibility.”

The Marquis of Queensbury suggests that you “protect yourself at all times.” In each step, the algoritm identifies your exit strategies; the “3 Strategic Bs:” Bear On (go forward), Begin Again (go back), or Bail (exit). Here is how F.I.G.’.R.S.  works:

• Use market research or a formal ideation procedure to discover: What your market wants, what it needs, where and when it wants (and needs) it, and to identify opportunities to make the idea better.
• Use  database resources to determine that such a property exists, is for sale or lease (or can be developed), and can be converted or modified to fit the market's conception. Along the way, gain market insight about its highest and best use.
• Walk through the properties to identify obvious issues.
• Create a "placemat pro-forma" (rough financial model) to verify that the proposal makes business and portfolio sense and to evaluate its financial strengths and vulnerabilities.
• This is often the best point at which to engage the public and discover their attitude toward your project ideas. Review the local master plan to see if your project will disturb entrenched notions of what "should" be done with the properties you examine.
  

Exit plans don’t get much simpler than this! At this point you have not committed a lot of resources and have gained a good deal of market and financial insight. You have three choices: (Bear On) If you have identified properties that may (with some modification) fill your need, continue on with the “Investigate” step. (Begin Again) If you haven’t identified properties that may fill your need but are still hopeful, begin again. (Bail) If the hand has written “Abandon hope all ye who enter here,” revise your plans and expectations and start again.

CCSR always encourages you to make the Strategic B decision that is best for you. Some of your most successful investments will be those that never happened!

Investigate:

The “Investigate” step identifies options and sharpens your feasibility analysis.

• Consider how your project affects all the stakeholders (including the local populace and politicos).
• Seek their input, assistance, and support.
• Study and compile local and regional demographic and economic trend data. Determine how you will market your property. Consider alternative uses and marketing strategies.
• Develop a proposal and “mediate" it with friends, family, advisors, and stakeholders.
• Combine your demographic and economic data with operating cost data to develop a financial pro-forma. Test its sensitivity to: changes in basic variables; alternate use scenarios; financing assumptions, and; energy efficiency or environmental variables.
• Begin your Due Diligence. Identify negotiating points you will address during the “Get” step.
• Consider how this investment affects your other portfolio decisions. Does the vehicle (entity) you choose affect the investment parameters? Should you go it alone or syndicate?

CCSR’s network of professional contacts and access to specialized database information earns its keep in the “Investigate” step. Do you need an architect, appraiser, attorney, energy rater? We know several of each! We recommend that you get your accountant, architect, and attorney involved as early in this process as feasible.

You have done “the fun part,” expended a few more resources, and narrowed your choices to the most likely few. It’s time to consider the Three Strategic Bs (bear on, begin again, or bail) again. Bearing on requires increasing commitments and risk. You have two options to begin again: repeat the “Find” step or change your parameters and repeat the “Investigate” step. Your efforts may have created asset value (information is an asset) that allows you to bail and recover some of the funds you have expended.

Get:

In the “Get” step you create an option or offer to purchase, negotiate, perform due diligence, remove contingencies, finance, contract up, and close. This is, by far, the “scariest” and most complicated step in the F.I.G.'R.S algorithm.

Expect to do some, or all, of these “Get” functions simultaneously:

• Craft an option or an offer to purchase on terms that make sense. Include contingencies that insulate you from the things you don’t already know. Be prepared to field counteroffers, investigate their implications, and negotiate their terms.
• Contract for, perform, and evaluate a plethora of inspections, title searches, surveys, market studies, financial analyses, "Et cetera. et cetera. et cetera …" Renegotiate deal points as you learn more about the property.
• Decide how you will optimize debt & equity. What vehicle (entity) is best for your purpose: corporation, LLC, something else? Should you go it alone or syndicate? Work with your accountant and attorney to analyze options and draft the required documents.
• Establish lender relations, pitch your project, take and evaluate offers, negotiate and finalize your financing. Complex projects often require several rounds of financing {acquisition, development, construction, and permanent (“take-out”) loans} and multiple lenders or finance instruments {e.g. primary, subordinated, mezzanine, and gap financing}.
• Test market the project and pre-lease available space.
• Finalize your contractual arrangements with contractors, subcontractors, critical suppliers, and the whole host of people and companies that will convert the property that exists into the property you envision.
• Stay in touch with your stakeholders: investors, bankers, current and future employees, the local populace and politicos. Now is a good time to start negotiating contracts with your key operating personnel.

Eventually, you will either close on the property (bear on), decide to pursue other options (begin again) or run screaming for the exits (bail). Whatever you decide, CCSR offers input, oversight, knowledge and expertise, experience, and (occasionally) emotional support throughout the “Get” step. We marshal our contacts and in-house capabilities to help you make the right choices. (Need a good psychotherapist? -- We know a few of those too!)

Run:

In the “Run” step you system up, staff up, lease out, and make run-time decisions. Depending on the decisions and plans you made in the previous steps, the “Run” phase of your investment may last anywhere from a few days to a lifetime (or even beyond). Ironically, the one thing you probably can’t do during the “Run” step is “run for cover.” (Though, you can usually proceed calmly toward the exits.) You will do (a few) operational things repeatedly during the “Run” step:

• Collect and analyze market data: refine your business / investment / marketing model,
• Advertise vacancies, interview potential tenants, vett potential tenants, lease space, and collect rent,
• Routine maintenance, extraordinary repairs, and scheduled replacements,
• Advertise career opportunities, interview potential employees, vett them, hire them, train them and retain them,
• Develop accounting and management systems,
• Pay for it all, and
• Meet with the lawyer if it all goes bad.

While dealing with the operational details, you will also have to keep track of “big picture” issues:

• How does the property fit in your portfolio (or does it)?
• How does its performance measure up to your expectations and your competition?
• How do business, economic, investment, and social infrastructure changes affect your investment?
• Retain, refinance, syndicate, or sell?

Sell:

The “Sell” step is almost a mirror image of the “Get” step and often invokes “Run” step procedures as well. When you sell, you will evaluate the property, value it, list it, market it, receive and negotiate options or offers, close, and reinvest the proceeds or “say goodnight Gracie.”

Pre-sale evaluations employ a portfolio decision model that addresses your marketing, property improvement, and strategic options and ends with a retain, refinance, or sell decision. Note the similarity to the “Run” step. Often, the “Sell” step procedure differs from the “Run” step procedure only by virtue of its “reversibility.” The central concern in both cases: Can your resources be put to better use in other investments?

As Buyer, Developer, and Lessee representatives, CCSR is seldom directly involved in listing, marketing, negotiating, and closing investment property sales. We, rightly or wrongly, consider it a conflict of interest to represent both buyers and sellers, potentially in the same transaction. We will gladly assist you and your selling broker with the pre-sale analysis and re-investment decisions.

Credit where credit is due:

Our algorithm owes a great deal to James Graascamp’s pioneering 1981 work for the Urban Land Institute, Fundamentals of Real Estate Development and to Miles, Berens, and Weiss’s Eight-Step-Development Model outlined in Real Estate Development, also from the Urban Land Institute. (Take a look at our review of Miles, et. al.) We adapted their principles to develop a model that addresses the needs of our primary constituency: commercial investors, commercial owner-operators, and commercial developers.

Call us at (909) 625-0501, fill out our website form, or E-mail us (info@ccsrinc.com) to discuss how we can adapt this approach to your specific needs