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The Creed of Speed

It's easier to win a recording contract on American Idol than it is to get a good deal on a shopping center these days — if you're buying, that is. Institutional investors, individuals and REITs continue to bring satchels of cash to the retail real estate market, seeking steady returns.

With so many buyers chasing a limited supply of quality centers, competition for good ones has gone through the roof. “Prices have been moving upward, with cap rates moving downward for 18 months,” says Bernard Haddigan, director of Marcus & Millichap's retail group. “Buyers have to be more aggressive and use a variety of tools to entice sellers.”

Speed is one of those tools.

Increasingly, cash-rich investors are promising they can close their deals in 30 days or less — a blink of an eye given how many documents have to be prepared, leases analyzed and buildings inspected. The average retail close still takes 90 days to 120 days, according to Haddigan.

A handful of buyers are making a major effort to differentiate themselves on the basis of faster, smoother closings. The Inland Real Estate Group of Cos. and First Allied are two. Others include W.P. Carey & Co. and Commercial Net Lease Realty Inc.

Why the need for speed? Because in a hyper-hot market, sellers want to get to the close — and their cash — quickly and with a minimum of fuss. A sudden shift in interest rates, an unforeseen disaster such as the September 11 terrorist attacks, another deal by a competitor — all can suddenly make something that seemed a good deal untenable.


“We have a saying: ‘Time kills all deals,’” says David Bernhaut, executive director of Cushman & Wakefield's Metropolitan Area Financial Services Group in New Jersey.

Companies that know the value of speed, and can quickly solve whatever problems may arise en route to the deal being finalized, have an edge when it comes to doing business the next time around.

“It's such a competitive marketplace,” says Ed Glazer, president of Beverly Hills, Calif.-based First Allied Corp. “There are a lot of 1031 sellers who've identified properties they want to get into, and there are a lot of sellers who just don't want to tie up their property for 60 or 90 days.”

Adds Inland Vice Chairman Joe Cosenza: “The faster you perform, the better the other side of the table will respond on stuff that's needed, and the more likely they'll be a repeat seller someday in the future.”

Bernhaut of Cushman & Wakefield, which has brokered numerous sales to Inland, calls the ability to move quickly “a huge advantage.” Sellers, he says, don't like being strung out, especially when events beyond their control can change business conditions overnight.

In this electronic age, closing quickly has less to do with technology than it does with old-fashioned organization and hard work. It requires at least three things: organization, an experienced staff, and what may be the key ingredient — cash. First Allied, a family-owned investment trust with $500 million to spend, funds all its acquisitions internally. (The Glazer family also owns the Tampa Bay Buccaneers.) Inland, a private REIT, pays cash and, if necessary, arranges for financing later.

“Our offers are not contingent on any financing,” says Glazer. “It's the lenders that slow you down.” Indeed, instant financing is a compelling argument, says Haddigan: “That's one big headache sellers don't have to worry about.”

Even with cash in hand, it's not always easy to close a big deal in a month or less. That's where the organization and staff come in.

From Jan. 1 through May 19, Inland bought 93 separate properties from some 75 different sellers — a total of $1.12 billion in retail assets added to its portfolio.

That work was accomplished by six staff members, with another three to perform the due diligence — ordering appraisals, environmental studies, engineering reports and reading the major leases. There is also a property management staff to do inspections and an in-house team of 10 attorneys.

Sometimes it doesn't even take 30 days to clinch a deal. This spring, for example, Inland went from contract to closing on the Heritage Pavilion, a 263,000 square foot community center in Smyrna, Ga., in just 18 days. “We were on that like animals,” says Cosenza.

Haddigan says deals have been completed in 7 days or so — ”but the seller is going to pay a pound of flesh.” When a buyer drops everything else they're working on to close a sale, something has got to give, he says. But with all the competition these days, buyers are still paying a fair price — while doing whatever it takes to shave time off the process.

“As quickly as the seller gets us the information, we have the staff that we need to go through the materials,” says Glazer. “The biggest problem is usually not us, it's on the seller's side. We know we can act quickly, since we have in-house attorneys and staff, but sometimes on the seller's side the attorneys can get lackadaisical.”

Attaining maximum speed depends on the seller, too, Cosenza says. You need owners that are motivated and organized. “They have their leases ready to send out to us, they have all the documents ready,” he says.

Disorganized and unprepared sellers, of course, can stretch out the process. Sometimes a seller hasn't done the homework — perhaps by failing to keep the property survey current.

Then there are the hidden snags. “If the seller has environmental problems and you don't find out about it early, that will stall the deal,” Cosenza says. “If that's the case, we meet and find out how bad the situation is. Do we have to clean up a gas station mess? If so, we tell the seller, ‘Here's the problem and it has to be cleaned up.’ If a cleanup has to be done, that's going to drag it out.”


Both First Allied and Inland manage the properties they acquire, and both tend to buy and hold. “People call us ‘the black hole of properties,’ though I don't really like that term,” says Cosenza.

Glazer says First Allied, founded by his father and run by Glazer and five siblings, has hung on to some properties for 50 years or more.

As anyone who has ever had a sale fall apart at closing can attest, having confidence in the buyer brings value to the deal. “The first thing any seller wants to know is, ‘Are they closers?’ says Glazer. “The bottom line is, will the buyer be there at the closing with a check?”

Adds Consenza: “Once you get used to dealing with somebody, you tend to go with the sure thing even if you might think you're leaving some money on the table.”

By way of example, Inland was one of 32 bidders earlier this year for six New Jersey properties owned by Starwood Heller. “We were not the highest, but we had the best reputation for closing,” Cosenza says. Inland won the day — for $114 million.

“They did a lot of upfront due diligence,” says Bernhaut of Cushman & Wakefield, which represented Starwood Heller. “And there was no financing.”

First Allied owns properties in 20 states, mostly in the East — an eclectic collection of assets that include grocery-anchored or unanchored community centers, or ones where the anchor is closed. Most of Inland properties are east of the Mississippi, too, though the firm is considering a westward push.

“The common denominator is good location,” says First Allied's Glazer, who stresses the importance of the right demographics. “The reason we've been able to do so much business is that we can close quickly and give sellers what they want,” he says. “Most people have a use for the money lined up, and they want to know that it's going to be there.”

Of course, you can't do fast closes if you can't find properties to buy, and First Allied works hard on that part of its game, too. Staffers constantly ply the phones, write prospecting letters, throw networking events and schmooze brokers, all in search of an advantage over the competition.

Last year, for instance, the company invited brokers from around the United States to a weekend get-together in Tampa, where they watched a closed Bucs practice, played golf and got to visit the field.

The Glazers are in discussions to buy the Los Angeles Dodgers, which would provide even more schmooze potential.

Sometimes, Glazer says, a deal might result from a contact made years earlier. “Once a seller told me he had a two-year-old letter from us in a drawer, and that reminded him to call us when he was ready to do the deal,” says Glazer.

Real estate companies need the momentum of a shark to make the kill before a competitor, making buying a full-time sales job.

“Buyers are calling us by the minute looking for property,” says Marcus & Millichap's Haddigan. “They market themselves so brokers and sellers think of them first.”



Faster-turnaround of retail real estate deals. With too much money chasing too few properties, aggressive buyers need an edge. Speedy closings provide that edge.


Old-fashioned hustle, not newfangled technology, and deep pockets help a handful of real estate companies beat their competitors to the close.


Sellers appreciate the smoother process, giving fast closers an added edge when it comes to negotiating the next deal.


Nothing succeeds like success. Through May 19, Inland, a private REIT, closed on 93 properties worth more than $1 billion. Through early June, First Allied, a family-owned business, bought six properties worth a total of more than $80 million.

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