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Jack Eimer: Why It’s Tougher to Get Deals Done Today

I don’t think I can remember a time in the industry's history that presented so many challenges to all transaction types. The days of the “lay down” and “sure thing” have all but vanished.
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Jack Eimer

The other day I was visiting with one of our junior producers at Transwestern who asked me a somewhat rhetorical question: “Has commercial real estate always been so difficult?” With my years of experience, wisdom, and abundance of grey hairs, I was about to respond, “You think this is difficult, you should have been around back in…”

But the honest answer is, I don’t think I can remember a time in the industry’s history that presented so many challenges to all transaction types. The days of the “lay down” and “sure thing” have all but vanished.

Think about it: To get a lease done today, not only do you have to focus on the credit of the tenant, but you have to underwrite the landlord and his ability to provide TI dollars, pay commissions, operate the facility, and keep the building off the courthouse steps.

We read that there are a “zillion” dollars of equity sitting on the sidelines for office acquisitions in Dallas-Fort Worth. If this is true, then why do we often hear many investments sales pros around the city lament about the lack of credible buyers bidding on their projects? Who would have thought that with our meaningful job growth, institutional buyers would deploy their capital to the coasts?

And remember that awful term “recourse debt?” Well, its baackkk!! It is almost impossible to structure debt for acquisition or development without some form of repayment guarantee, whether it’s a “personal guarantee” or a guarantee from a true credit facility. And however it is accomplished; lenders are demanding that borrowers take majority of the risk associated with an investment—not the lender.

And how about preleasing? In the past, that term usually referred to the amount of leasing secured during construction. However, today it takes on a whole new meaning. The majority of new office towers that have been announced in the downtown and Uptown markets will require 35 percent to 45 percent of preleasing before construction can commence. These are not letters of intent; fully executed leases, containing all the contingency clauses necessary for a building not yet built, add another significant degree of difficulty to an already complex process.

Nope, it’s not my imagination! Getting transactions successfully completed is tough today. One thing is for certain, though; I’m sure glad I reside in the DFW market and have the opportunity to go to battle daily with my friends and partners at Transwestern.

Jack Eimer is Central region president of Transwestern. Contact him at [email protected].

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