VOLUME 3 • 2014
MICHIGAN’S RETAIL SPECIALISTS
BROKERING OVER
NE IG H W C EN TL RI TE I VE R FE RT O W N
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150 SHOPPING CENTERS
WWW.KEYSTONECRES.COM 248-356-8000
When it comes to advising our real estate clients we’re all in
It’s time to count on more. From our integrated business systems and tools, to our dedicated teams of experienced attorneys and professionals, our full-service real estate legal team never stops delivering the results you deserve.
Contact Paul Magy (248) 988-5844 or pmagy@clarkhill.com
PRINCIPALS’ LETTER
Annual Update
I
t’s an exciting time to be in commercial real estate. As the economy continues to improve we continue to evolve and capture the opportunities that are available. 2013 was a banner year for Keystone and many of our clients. We continue to grow in all aspects of the business. Our tenant representation division is on a roll. In the last 12 months we have successfully helped dozens of new tenants enter the market and expand their concept. In addition we joined the Site Source retail brokers network giving us 35 affiliate offices around the country to better service our clients nationwide. We have also focused on our landlord representation division adding tools to market our inventory more effectively. Our investment sales have always been an important aspect of our company. This phase of our business has had the most significant changes with more investors getting back in the game and financing loosening up. We continue to be on the forefront of these opportunities. Additionally, our management division has become more efficient to allow it to continue to grow at a steady pace. Last year we moved into our new building in Farmington Hills, hired a marketing director and strengthened our bookkeeping department with the addition of a full time CPA and two new staff. As I write this introduction we are working on a new website to make it easier for our customers to navigate and search our available properties. With this launch we will implement new social media efforts to further expand our reach. As with any successful company, our people are the core of making great things happen. We have an impressive team here who enjoy coming to work every day. This attitude is reflected in all of our relationships. Our clients continue to refer us to their friends and business associates. Our advertising partners featured in this magazine continue to be an integral part of our family. We encourage you to reach out to any of them to help service your needs. Once again, we have put together a full list of articles that we hope you find intriguing and relevant to our industry. Topics include: updates on the trends in the market to details of the new happenings in certain Detroit proper submarkets. One perennial favorite is the “New and Expanding Tenants” page featuring some local but now many new national tenants entering Michigan. Other topics include investment sales and financing, insurance, environmental, legal updates and more. If you have questions please feel free to reach out and ask. Please get to know each of our sales associates throughout the year as we would like to get to know you better and be sure to look for our client appreciation events this year planned in May, July and September.
Matthew D. Berke Gregory S. Newman Principal Principal
2 Keystone Commercial Real Estate • 248.356.8000
Ryan Kattoo Principal
The Keystone Commercial Team
MATT BERKE
RYAN KATTOO
GREG NEWMAN
mberke@keystonecres.com
rkattoo@keystonecres.com
gnewman@keystonecres.com
Principal
Principal
KEVIN BERKE
Senior Sales Associate kberke@keystonecres.com
CRYSTAL KAJY Bookkeeping
ckajy@keystonecres.com
RYAN DUFF
Senior Sales Associate rduff@keystonecres.com
SHANNON AZZO
Administrative Assistant sazzo@keystonecres.com
Principal
FERRIS HAMAMA
Senior Sales Associate fhamama@keystonecres.com
MEAGAN LYLES
Director of Marketing mlyles@keystonecres.com
SAM BERKE
Bookkeeping sberke@keystonecres.com
Our Mission Statement Keystone Commercial’s mission is to answer the needs of our clients, whether they are retailers needing to expand, landlords seeking qualified tenants to maximize the value of their real estate or investors seeking income properties. We offer our clients the market knowledge and expertise that it takes to succeed in a competitive business environment. Keystone Commercial is a major factor in southeast Michigan real estate investment sales, leasing and property management of a diverse portfolio of open-air neighborhood shopping centers from 10,000 to 500,000 square feet. The success we have achieved is a result of our unwavering focus on our clients’ needs and we promise to always give our clients prompt, professional service.
www.keystonecres.com • Keystone Commercial Real Estate
3
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9
Contents VOLUME 3 • 2014
9 Commercial Real Estate Market Forecast
14
15 Non-Traditional Retail Tenants Find Unconventional Homes 17 Climate Change in Financing 18 Phase I ESAs and Vapor Intrusion — The New Measure of Protection 28 S ales Taxes and Real Estate: What We Do Not Collect Could Cost Us Dearly
42
31 P roper Insurance for commercial property 37 Detroit Revival 42 Using social media in Commercial Real Estate 51 Investment Sales 53 A Broker’s Guide to Retail Development
51
58 New + Expanding Tenants 62 Conforming Leases: It Seemed Like a Good Idea at the Time
ACKNOWLEDGEMENTS Published by Keystone Commercial Real Estate Articles written by Constance Crump, 734.665.2985 Graphic Design by Echo Publications, Inc., 248.582.9690 Information Contained herein was obtained from sources deemed to be reliable but is not guaranteed. Subject to prior sales, change of price or withdrawal. www.keystonecres.com • Keystone Commercial Real Estate
5
www.keystonecres.com
ANN ARBOR
CHALMERS PLACE 3365 Washtenaw Ave At U.S. 23
AUBURN HILLS
5,574 SF
Matt Berke
BAY CITY
(2) 1,630 SF
Ryan Kattoo/ Matt Berke
1901 S. Euclid Ave Euclid & Salzburg Road
AUBURN HILLS PLAZA 605-635 S. Opdyke Road N of South Boulevard
805-4,000 SF
Matt Berke
BELVIDERE, IL
BELVIDERE PLAZA 342-390 Chrysler Drive At Pearl Street
5,000 SF
Matt Berke For Sale
BERKLEY
BERKLEY VILLAGE CENTER 3656 W 12 Mile Rd Btwn Phillips & Oakshire
951-1,308 SF Retail 2,489-8,000 SF Off./Med.
Greg Newman
6 Keystone Commercial Real Estate • 248.356.8000
OFFICE SPACE 2200 Holland St Eton
BIRMINGHAM Former Contractor Yard
Greg Newman
248-356-8000
BRANDON TOWNSHIP
EAGLE POINTE PLAZA 1764-1786 S Ortonville At W Glass Rd
BRIGHTON
1,200-6,00 SF
Ferris Hamama
BRIGHTON
BOARDWALK PLAZA 5757 Whitmore Lake Rd SE corner at Grand River
Matt Berke
BROWNSTOWN 9,500 SF
Greg Newman
BURTON
BURTON PLAZA 3147 Dort Highway Btw Atherton & Bristol
3,000 SF
BRIGHTON COMMONS 8671 W. Grand River
1,400-6,629 SF
Matt Berke
18590 Allen Rd Allen Rd & Sibly Street
CHERRY OAKS PLAZA 42484 Cherry Hill Rd NWC at Lilley
4,680 SF
Ferris Hamama/ Greg Newman
CANTON 1,300 SF
Ryan Duff
www.keystonecres.com • Keystone Commercial Real Estate
7
www.keystonecres.com For Sale
CLINTON TOWNSHIP
STONEGATE COMMONS 37551 Harper (N OF 16 Mile)
1,260-8,620 SF
Ryan Kattoo/ Matt Berke
CLINTON TOWNSHIP
REGIONAL CENTER 35375 S Gratiot NWC of Gratiot & 15 Mile
2,400-23,390 SF
Greg Newman/ Kevin Berke
COMMERCE TOWNSHIP
COURTYARD 46670 Pontiac Trail E of Beck Rd
8 Keystone Commercial Real Estate • 248.356.8000
CLINTON TOWNSHIP 37561-37601 Gratiot Ave N of Metro Pkwy
6,000 & 4,248 SF Outlot
Greg Newman
COMMERCE TOWNSHIP
MAPLE PARK PLAZA 1001 Welch Rd Welch & Maple Rd
2,600 & 1,200 SF Endcap
Ryan Duff
DEARBORN
1,400+ SF
Ryan Duff
COLONIAL SHOPPES 1300 N Telegraph Btw Cherry Hill St & Ford Rd
1,520 SF
Matt Berke
Commercial Real Estate Market
Forecast T
he clouds are clearing for the Metropolitan Detroit commercial real estate market. All signs point to expansion and optimism. From homes to hotels, retail to transportation, the scene looks good. Retail is strengthening with tenants expanding and competing for new developments. For more details, see our story on new and expanding retail tenants in this issue. Retail Development Arbor Hills is a retail and restaurant plaza, the largest retail development constructed in Ann Arbor in more than a decade, according to The Ann Arbor News. The 90,700 square foot center opened in August 2013. It has 18 tenants including Lululemon, Running Fit, Anthropologie, Arhaus Furniture, Brooks Brothers Flatiron Shop, J.Jill, Zola Bistro, V2V, Pizzeria Biga, and The North Face to name a few. A dozen new shops and restaurants are slated for a Pittsfield Township “downtown feel” center in the outlot of Meijer off I-94 at Ann Arbor-Saline Road. Pittsfield Place will hold Five Guys Burgers and Fries, Eyeglass World, Sport Clips, Subway, Carrabba’s Italian Grill and more. Construction will launch this spring. In southwest Detroit, business leaders have announced Vernor Square, a $15 million,
60,000 square foot retail project. The site includes renovation of the 35,000 square foot former DPW building. The rest will be new construction, all hosting a mix of local and major retailers plus artisans. The success of the Gateway Marketplace with Meijer’s first store ever in the city of Detroit will definitely spark interest. This 340,000 square foot development at the corner of Eight Mile and Woodward has attracted national users such as Marshalls, Payless Shoes, K&G Fashion, SVS Vision, PNC Bank and others. Look for retail to blossom along the new M1 light rail route, set to open in 2016. Eleven stops along three miles of Woodward Avenue include: Larned St., Campus Martius, Grand Circus Park, Foxtown, Sibley St., Martin Luther King Blvd., Canfield St., Warren Avenue, Ferry St., Amtrak and West Grand Blvd. We are also seeing a myriad of new “pad
www.keystonecres.com • Keystone Commercial Real Estate
9
site” developments. These typically range from 10,000 -30,000 square feet. They are often in larger power center environments or in front of anchors such as Meijer, Lowes and Menards. The success of these depends on continued interest from tenants looking to expand. However, currently there is no shortage of interest for the right property.
Hotel development Led by the Cobo Hall expansion, downtown hotels are opening in historic buildings a la the Book Cadillac. More will be coming with the huge 45-block mixed-use development that will accompany the new hockey arena. Financing is in process for two more downtown boutique hotels. The Detroit Economic Growth Corp. tracks projects in the expanded central business district – Downtown, Midtown, Corktown, Rivertown and Eastern Market. It has eyes on the $82 million renovation of the 135-room Aloft Hotel opening in the David Whitney Building later this year. Many niche hotel developers want to
open near the refreshed Cobo Hall. A 75-room, $23-million boutique hotel has been announced for the former firehouse on Larned Street at Washington Blvd. to open in 2015. The former Pontchartrain Hotel has reopened as the 367-room Crown Plaza Detroit Downtown Convention Center Hotel. Construction will start next year on Wayne State University’s 410,000 sq. ft. $60 million mixed-use project; currently, hotel operators are being vetted. One of the most quirky proposals is a $4 million, 36-room boutique hotel near Eastern Market. It will recycle steel shipping containers to attract visitors looking for a unique experience. A Hyatt hotel may be in the works for Main Street in Royal Oak. The 126-room Hyatt Place in Novi and a 115-room Holiday Inn Express and Suites Detroit in Troy will open this year. Also in Novi, the former Novi Expo Center has been redeveloped to include a $100 million hotel and commercial space. In Troy, a Hampton Inn & Suites and a Hilton Garden Inn are proposed for the north side of Big Beaver west of I-75. Two more hotels – a Fairfield Inn and
10 Keystone Commercial Real Estate • 248.356.8000
Townplace Suites by Marriott – are on the boards for 14 Mile Road and Stephenson Highway. Holiday Inn Express opened recently on Stephenson north of 14 Mile. In West Bloomfield a new Hampton Inn is scheduled to open in 2015 at the intersection of Northwestern Hwy. and Orchard Lake. The same development has a phase II hotel planned for later in 2015. We will likely continue to see new hotel development in and around the state of Michigan.
Residential development Many residential communities that were halted during the recession are back in development. All southeast Michigan counties are reporting huge increases in residential development permit applications. From downtown where many old buildings will become new again to the suburbs where there are mixed use projects and entire subdivisions under construction. Home prices are on the rise and the apartment occupancy continues to maintain high levels.
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12 Keystone Commercial Real Estate • 248.356.8000
www.keystonecres.com
DETROIT
Ferris Hamama/ Ryan Kattoo
3444 Joy Rd. Joy Rd & Dexter
DETROIT
2,000 SF
3,000 SF
5459 Vernor SEC at Junction
Greg Newman For Sale
DETROIT
DETROIT
LA PLAZA MERCADO 4627-4639 Vernor Hwy SEC at Lansing
1,426-3,575 SF
Greg Newman
4,000 SF
18200 Plymouth At Southfield Fwy
Ferris Hamama
For Sale
DETROIT
Auto Repair Space
8113 W Eight Mile Rd East of Wyoming
Matt Berke/ Greg Newman
14 Keystone Commercial Real Estate • 248.356.8000
DETROIT
NEW DEVELOPMENT 13031 West 7 Mile Road SEC at Outer Drive
Up to 6,500 SF
Kevin Berke
Non-Traditional Retail Tenants Find
UNCONVENTIONAL HOMES
A
crafty property owner is willing to adapt. As the economy rebounds we have learned some unconventional ways to fill difficult to lease or even obsolete retail space. Some of those businesses are new to retail centers; others are trying out these alternative locales by moving into retail space. Such tenants can attract many families and drive in traffic. Among the possibilities: Self storage, gun ranges, black-light mini-golf courses, senior centers, walk-in medical clinics, plasma centers, a fencing academy and an indoor trampoline center. We’ve seen them all signing leases in spaces like former grocery stores or power-centers that once hosted big box tenants. The spaces are available because of changing shopping habits, fading consumer demand, big-box closings and retail overbuilding. Rents may be lower than traditional retailers pay but can be a source of revenue and a traffic generator. CoStar Group, the real estate research company, reports that day care centers are locating in industrial parks to attract parents working at companies nearby. Charter schools are also strong contenders for similar space, CoStar said. As department stores give way to online shopping, landlords are considering new anchors, from Gold’s Gym to Bass Pro Shops. Power centers are filling up as store closings tail off and new tenants enter the market for both vacant big-box space and in-line stores, attracted by good traffic and demographics. CoStar’s 3rd quarter 2013 Retail Review and Outlook noted the changing complexion of the power center market, as well as rapid improvement in fundamentals. Falling vacancy rates in power centers are echoed in lower retail vacancies overall. Former grocery stores are attracting churches, tutoring centers and after-school instruction, such as Goldfish Swim School. Goldfish offers year-round quality swim instruction (goodbye, summer-only swim club.) Warm water and a stateof-the-art water purification systems appeal to parents and kids. Goldfish has eight Michigan locations. The Ann Arbor facility is located at the back of a small shopping center with plentiful parking, a popular local hardware and a locally owned natural-foods market.
Similarly, the franchised math learning center, Mathnasium, locates in large spaces formerly occupied by hardware or grocery stores. The national chain has 12 centers in metro Detroit. Clients range from pre-school to high school-age who usually attend one-hour sessions two or three times a week. Go-cart tracks prefer industrial parks for their low costper-square-foot. Laser tag facilities and movie theaters are leasing in malls, as landlords try to match industrial parks’ low rates. A karate school can be good for a shopping center. Parents shop while the kids take lessons at the dojo. Doctors and dentists with offices in shopping centers also leave time for parents to shop. The University of Phoenix is leasing mall space, providing good traffic for food courts as well as shopping. For the school, the location provides good visibility. Libraries and police substations may not pay top rent but drive traffic and offer a sense of community and safety. Health clubs are also growing users. Landlords must adapt and should prefer unconventional tenants to vacancies. www.keystonecres.com • Keystone Commercial Real Estate 15
www.keystonecres.com
DETROIT 6520-6526 Woodward Ave At Grand Blvd
DETROIT
3,382-10,000 SF
GRAND MEYERS 12555 W. Grand River Grand River & Meyers Road
3,900 - 28,979 SF
PUMPKIN PLAZA II 10770-10780 Gratiot Ave Gratiot And Conner
Matt Berke
DETROIT
MCSCHAEFER SHOP. CENTER 13503-13505/16890-16940 McNichols Mcnichiols & Schaefer (6 Mile)
DETROIT
Ryan Kattoo
DETROIT
FREESTANDING BUILDING 3800 West Vernor Hwy Gratiot and W Grand Blvd
1,200 SF
Matt Berke
12,350 SF
Ryan Kattoo/ Matt Berke
DETROIT
2,500-5,000 SF Greg Newman
16 Keystone Commercial Real Estate • 248.356.8000
FREESTANDING BUILDING 18251 West Warren Ave W Warren Ave & Rosemont
5,787 SF
Greg Newman
Climate Change in
Financing
THE DETROIT MARKET GETS A POSITIVE FORECAST
T
he climate is changing — the metro Detroit financing climate, that is. The market is stabilizing according to bankers and mortgage brokers familiar with Detroit. At the beginning of this year, Crain’s Detroit Business reported that banks are returning to commercial lending, making deals in commercial and industrial real estate as well as in the auto supply chain — all sectors that until recently were considered toxic. Sources quoted in the article said banks expect commercial lending to grow by 10-to-12 percent in 2014. “Nationally and locally, it’s as good in terms of financing availability as it has been in a long time - certainly prerecession and for all property types,” said Terry Halverson, senior vice president of Southfield-based mortgage broker Berkadia. In the last two or three years, it’s gotten better from a buyer’s perspective. Lenders have become more willing to lend in Michigan, relaxing their underwriting standards, making more reasonable loans Traditional investment sales are now outstripping distressed-property sales for shopping centers and apartments. Retail property sales are primarily power centers, grocery-store anchored centers and unanchored strip centers. Michigan’s continued positive trend in income and growth – gradual but encouraging – means the market for all property types is getting better, although in some areas the office market is still distressed.
Lenders can include insurance companies and so-called conduit lenders, also called CMBS lenders. They typically make larger loans than community banks or credit unions, which are also becoming more active in
commercial loans. “The biggest sign of improvement is that more banks are active in lending,” said Michael G. Sarafa, president and CEO of Farmington Hills-based Bank of Michigan. Bankers have learned a lot in the past five years. Conditions for making loans have changed. The goal is to keep them from making the same mistakes again. But the industry is already seeing banks loosening up on their requirements – and that shouldn’t happen. Regulatory oversight of commercial underwriting
is strict – that has not changed, Sarafa said. What hopefully has changed for the better is that people should be following their own underwriting criteria. One definite red flag: pulling equity out of unrelated projects to fund real estate projects, using a loan on an existing business to fund a new business. People have to focus on the property they are trying to finance, not dig into wealth they’ve already created. We’re still not out of the danger zone of a double-dip recession. The interest rate environment is still unpredictable. The macro-economic picture from Washington is still unclear in terms of budget deficits and other issues, along with instability in Russia and Ukraine. “If it’s an experienced buyer, we want to see historical financials, strong cash flow. If the borrower is new, we want to see a solid business plan, strength in the guarantor, a strong franchise if it’s a franchisee,” Sarafa said. For the past few years, community banks wouldn’t touch retail, hotels or restaurants, but that, too, is changing. In the past strip centers and commercial real estate properties suffered with high vacancies. Now new centers are going up with strong tenant demand. In some categories national tenants are competing for the same space. Financing is available for most commercial products but it’s important to know where to go and who is lending for that type of deal.
www.keystonecres.com • Keystone Commercial Real Estate 17
PHASE I ESAS AND VAPOR INTRUSION —
The New Measure of Protection BY: NICHOLAS G. MALOOF, RPG, ESQ.
M
ost real estate developers, investors and brokers are familiar with the legal requirement to conduct pre-purchase environmental due diligence. The starting point for this due diligence has typically been a Phase I Environmental Site Assessment (ESA) recommended by legal counsel or required by the lender financing the deal. It is also an extremely valuable “good business practice” and can help prevent you from buying someone else’s problem and/or overpaying for the property.
ASTM E1527-05 and All Appropriate Inquiries For the past seven (7) plus years, the practice standard followed by most environmental consultants has been the ASTM1 E1527-05 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process published in 2005. 1ASTM is the American Society for Testing and Materials, now called ASTM International, is an organization of industry professionals that convenes committees for various test methods, specifications, guides, and practices that support industries and governments worldwide. The 2005 ASTM standard was intended to conform to the All Appropriate Inquiries (AAI) requirements spelled out under the 2002 Federal Amendments to CERCLA (a.k.a. Superfund). The 2002 Federal Amendments (“Amendments”) set up and/or clarified three defenses to liability under CERCLA, these being: (1) The requirements necessary to establish the Innocent Landowner Defense (ILD) under CERCLA; (2) The Bona Fide Prospective Purchaser (BFPP) Defense; and (3) The Contiguous Property Owner (CPO) Defense. These three defenses are collectively known as the Landowner Liability Protections (LLPs). The three defenses also constitute what is known as All Appropriate Inquiries (AAI). The AAI Rule is, “…designed to identify conditions indicative of releases and
threatened releases of hazardous substances on, at, in, or to the subject property.” The Amendments require that a purchaser of potentially contaminated property must conduct AAI into the prior ownership and use of the property prior to purchase in order to qualify for protection from CERCLA liability for cleanup costs associated with any contamination found on the property.
Vapor Intrusion and Due Care Compliance Over the seven plus years the 2005 ASTM standard was in-place, a small but vocal group of environmental consultants, legal counsel, lenders and regulators were pushing for additional changes to the standard to address an often overlooked pathway for migration of contamination – the Vapor Intrusion (VI) pathway. “What is the VI pathway?” you may ask and “Why does it matter to me?” A clear majority of consultants have historically assessed subsurface soil and groundwater in their subsurface investigations of suspected contaminated properties, but most did not actually sample and analyze the chemical vapors being generated from contaminated soil and groundwater as Michigan had a very complete set of Contaminant Concentration Lookup Tables generated by MDEQ that addressed this exposure pathway. Very rarely did contaminant concentrations exceed the then applicable MDEQ generic criteria. However, the certainty of fixed criteria was forever altered by dramatic changes to the interpretation of the Johnson and Ettinger Mathematical Model used to
18 Keystone Commercial Real Estate • 248.356.8000
create the generic criteria. USEPA found the model to be flawed and the MDEQ generic criteria related to the VI pathway was deemed to be inaccurate when dealing with properties that have shallow groundwater and that they did not appear to correctly address the risk involved in those circumstances. As the model did not apply in all circumstances, a new VI Guidance Document was drafted to address the risk of VI. MDEQ published this Guidance Document over a several year period. Each publication was an update to the prior with the final DRAFT Guidance Document being published in May 2013. The impact to purchasers and owners of contaminated sites is that the onesize-fits all model now only applies in certain limited circumstances. In addition, the USEPA and MDEQ are very concerned about the VI exposure pathway and human exposure to vapor phase contaminants. Due to the emphasis being placed on this issue, many financial institutions and other lenders have started requiring VI assessments as part of the due diligence and Due Care Compliance process in order to avoid having some type of liability upon foreclosure and/or having a liability event impact the ability of the borrower to repay the loan.
ASTM E1527-13 published in November 2013 The ASTM E1527-13 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process published in November 2013 and USEPA adopted the new standard on December 30, 2013. The new ASTM E1527–13 standard makes important revisions to the standard practice to clarify that, “…all appropriate inquires and phase I environmental site assessments must include, within the scope of the investigation, an assessment of the real or potential occurrence of vapor migration and vapor releases on, at, in or to the subject property.” Note that
this initial inquiry does not require actual testing. The addition of new terms and clarification of existing terms in the ASTM E1527-13 standard is intended to provide purchasers and other users of Phase I ESAs with a greater understanding of historical use of the property as well as prior known or suspected releases at a property and an improved basis for Due Care Compliance when addressing the current and future uses of the property. USEPA has stated that the clarifications and resulting additional information from the revised standard will, “… result in enhanced information on potential contamination for prospective purchasers.”
Conclusion Based on the foregoing, the new ASTM
E1527-13 standard will likely become the de facto standard adopted by most financial and other institutions. However, in order to achieve compliance with Michigan and Federal Law, the Phase I ESA Report must state compliance with both ASTM E1527-05 and E1527-13. In addition, as the amount of research and records review has increased under the ASTM E1527-13 standard, expect an increase in professional fees as well as the time necessary to obtain or review the additional records to comply with the ASTM E1527-13 standard. Based on the level of effort required, expect fees to increase between $150.00 and $500.00 over and above the cost to conduct an ASTM E1527-05 Phase I ESA report. In the event a VI issue is identified and physical testing confirms the VI pathway is complete, there are remedial measures
Environmental Services
• Phase I & II Environmental Site Assessments (ESAs) • Baseline Environmental Assessments (BEAs) • Subsurface Hydrogeologic Investigations • Site Investigation & Closure • Brownfield Redevelopment Tax Incentive Consulting including TIF, RLF, Grant & Loan Assistance • Asbestos & Lead Based Paint Surveys • Compliance Audits • Merger & Acquisition Advisory • Litigation Support
that can be implemented to mitigate the potential dangers. These can range from coating the floor with a vapor barrier coating such as Retro CoatTM to installing vapor barriers under new construction to sub-slab depressurization systems for new and existing structures. It is important to note that as these are new and constantly evolving guidelines. It is important that you use a qualified and experienced environmental consultant that understands how to navigate the process and provide cost effective and meaningful advice. Nicholas G. Maloof, RPG President and General Counsel Associated Environmental Services, LLC
Land Development
• Pre-development Feasibility Studies • Rezoning Application Preparation & Representation • Entitlement Process Consultation & Management • Community Impact Studies • Environmental Impact Studies • Groundwater Capacity Studies
Real Estate Consulting
• Site Selection & Acquisition Assistance • Pre-foreclosure, Foreclosure and Receiver Consultation • Site Disposition Assistance • Building Hazard Assessment
Call Nicholas G. Maloof at (248) 203-9898 or email ngm@associatedenvironmental.net
6001 North Adams Road, Suite 205 Bloomfield Hills, Michigan 48304
www.associatedenvironmental.net
Servicing the entire United States www.keystonecres.com • Keystone Commercial Real Estate 19
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20 Keystone Commercial Real Estate • 248.356.8000
MI - 02/2014
248-356-8000 For Sale
DETROIT
FOWLER BUILDING 1225 Woodward Ave Btwn Grand River & State
DETROIT 4,500 +/- SF
Greg Newman
DETROIT
RIVERTOWN PLAZA 3151-3177 Jefferson Ave NEC of Mcdougall
1,288-2,575 SF
Greg Newman
FARMINGTON
1,740-2,310 SF
Greg Newman
FARMINGTON HILLS NORTHWESTERN HWY LAND NEC Northwestern Hwy & 14 Mile
19001-19005 Mack Avenue NWC of Mack Ave & Moross
12.9 Acres SF
Greg Newman
FARMINGTON VILLAGE COMMONS Grand River Ave E of Farmington
540-10,250 SF
Matt Berke
FARMINGTON HILLS 31000 Northwestern Hwy Northwestern Hwy & 13 Mile
1,330-3,168 SF
Matt Berke
www.keystonecres.com • Keystone Commercial Real Estate 21
www.keystonecres.com
FARMINGTON HILLS
FORMER HOUSE OF FABRIC 38285 Northwestern Hwy SE of Orchard Lake Rd
FARMINGTON HILLS
1,828 SF
Greg Newman
FARMINGTON HILLS
BANK OF MICHIGAN 30095 Northwestern Hwy Inkster Btw 12 & 13 Mile Rd.
281-4,500 SF
Ryan Kattoo/ Matt Berke
FENTON
FENTON GALLERIA 1421-1451 N Leroy Btw S Long Lake & North Rd
982-5,000 SF
Matt Berke
22 Keystone Commercial Real Estate • 248.356.8000
CONCORD CENTER 24345-24367 Halstead Road E. of Grand River
1,200 SF
Greg Newman
FARMINGTON HILLS
AMERICAN AUTO VILLAGE 38410 Grand River Ave Btwn Haggerty & Halsted
FENTON SQUARE 235 Leroy At Main Street
1,200-2,200 SF
Kevin Berke
FENTON 800-2,450 SF
Matt Berke
248-356-8000 For Sale
FERNDALE
801-803 W 9 Mile Rd W of Livernois Between Beaufield & Dover
HALLWOOD PLAZA Clio Rd NEC Pierson
3,035 SF
Greg Newman
FLINT 1,974-23,866 SF
Ryan Kattoo
FRASER
MARCIN PLAZA 31896-31938 Groesbeck Hwy Groesbeck Hwy & Masonic
2,500 SF
Kevin Berke/ Greg Newman
EASTRIDGE COMMONS 3701 LAPEER At I-69
MONTEREY PLAZA 34521 Utica Road Btw 14 Mile & 15 Mile
FLINT
FRASER
2,933-72,334 SF
Ferris Hamama/ Matt Berke
1,200-2,400 SF
Kevin Berke/ Matt Berke
FRASER
FREESTANDING BUILDING 32000-32004 Utica Rd At Utica & Masonic
3,100 SF
Kevin Berke/ Greg Newman
www.keystonecres.com • Keystone Commercial Real Estate 23
248-356-8000 WWW.KEYSTONECRES.COM
248-356-8000
FRASER 32008-32056 Utica Rd At Utica & Masonic
1,400-2,800 SF
Kevin Berke/ Greg Newman
GARDEN CITY
CHERRY HILL-VENOY 32550-32630 Cherry Hill Rd at Venoy
(2) 1,200 SF
Kevin Berke/ Ryan Duff
GARDEN CITY
1,243-2,308 SF
Kevin Berke
GARDEN CITY 6527-6543 Middlebelt Rd N of Ford/Maplewood St
FRASER
PARKSIDE PLAZA 16704-16724 15 Mile Rd 15 Mile Rd & Garfield
REGENCY SQUARE 27501-27581 W Warren Rd At Inkster
925-1,155 SF
Matt Berke
GRAND BLANC 900-2,700 SF
Ryan Duff
1.29 Acres Pad Site
1040 E. Hill Rd At Hill Rd & Fenton
Kevin Berke/ Greg Newman
www.keystonecres.com • Keystone Commercial Real Estate 25
www.keystonecres.com
GRAND BLANC
Kevin Berke/ Greg Newman
1040 E. Hill Rd At Hill Rd & Fenton
HAMBURG PLAZA 7480 M-36 W of US-23
1,000-3,500 SF
HAMBURG
GRAND BLANC
NORTHPOINTE COMMONS 5414-5452 Saginaw At Dort Highway
1,500 SF
Ryan Duff
HIGHLAND PARK
1,600 SF
Matt Berke
MODEL T PLAZA 14100 Woodward Ave At Manchester Street
3,500-10,800 SF
Ferris Hamama For Sale
HIGHLAND PARK
HIGHLAND POINT PLAZA 12007-12029 Woodward Ave Acrs From City Hall (Elmhurst)
HIGHLAND PARK
1,600-5,000 SF
Matt Berke
26 Keystone Commercial Real Estate • 248.356.8000
12921 Woodward Avenue Btwn Avalon & Buena Vista
.87 Acres
Greg Newman
248-356-8000 For Sale
HIGHLAND PARK 12891-12897 Woodward Ave SWC of Woodward & Avalon
HIGHLAND PARK
5,000 SF
Greg Newman
HIGHLAND TOWNSHIP
HIGHLAND PLAZA 1340-1444 S. Milford Rd At S Milford & Lone Tree Rd
.62 Acres
Greg Newman
HOWELL
450-2,550 SF
Ryan Duff
KEEGO HARBOR
ACROSS FROM ST. MARYS 3399 Orchard Lake Road At Commerce Road
VACANT LAND 16121 Woodward Avenue SWC of Woodward & Moss
SEARS RETAIL CENTER 4173-4207 Grand River Se of Latson
1,800-10,240 SF
Greg Newman
LAKE ORION
725 SF
Greg Newman
BALDWIN CROSSING 1015-1083 Baldwin Rd At W Clarkston
1,000-4,000 SF
Ferris Hamama
www.keystonecres.com • Keystone Commercial Real Estate 27
SALES TAXES AND REAL ESTATE:
What We Do Not Collect Could Cost Us Dearly by Paul Magy, Principal, Clark Hill PLC
D
evelopers and retailers, investors in shopping center real estate, indeed anyone having anything to do with the shopping center industry, have cause for anxiety and concern. As society looks more and more to technology to aid in the shopping experience and the internet for the actual transaction, retailers are looking very critically and cautiously to their space needs now and in the future. Technology and internet sales for all of its positives (and there are many) is creating havoc in future planning, shortening lease terms, reducing space requirements, places a premium on negotiation of “exit strategies” and is a real danger to our communities in job losses too. This has become most obvious in sectors directly involved with or replaced by technology and areas where products may be considered commodity items that do not require the touch and feel of the shopping experience for the purchase decision. Even more problematic is that under current law, sellers of retail products on the Internet (click retailers) are not required in most cases to charge and collect sales taxes on purchases. This gives a competitive price advantage to Internet retailers and actually creates a tremendous burden on traditional main street or shopping center retailers (brick retailers). How? Most states require a purchaser of a product “on-line” or out of state to pay a “use-tax” as part of their annual state tax return, if they did not pay a sales tax in the transaction. Would you be surprised to know that most people who do not pay a sales tax on line also do not pay the required use tax? Some consumers see an opportunity wide open to them and an automatic 6% - 12% discount (or more) in the amount of the sales tax avoided. Click retailers can also calculate the sales tax “savings” and provide the consumer with “free shipping” to create an even greater incentive to the consumer to make the purchase at a click, not a brick retailer. More problematic still is that the word “showrooming” has entered the modern lexicon to the detriment of the brick retailer. Showrooming is the act of going to a brick and mortar retailer, involving a salesperson to obtain information, have the touch and feel experience (e.g. try on the shoes, point and shoot the
28 Keystone Commercial Real Estate • 248.356.8000
camera, try out the speakers, etc.) and then leave the store to make the purchase on-line. Variations on showrooming include the customer using the barcode scanner on their cell phone to locate the exact product online and shamelessly purchasing it on the spot from the click retailer and have it conveniently delivered to their home. Can you imagine the customer even asking the salesperson to look at their phone to make sure they are ordering the right product on line? So the brick and mortar retailer is acting as the showroom (paying rent and real estate taxes), supplying a personal sales experience (e.g. hires and trains staff to keep customers from too long a wait), making the case for the sale, but not getting the sale. What is fair about that? Interesting too is that this sales tax “loophole” discriminates against the poor and the elderly. In order for a customer to take advantage of not paying the required tax, a customer has to have access to the technology, the knowledge how to use it and credit cards. Therefore, the people who would most benefit from the “better price” or the convenience of home delivery are least able to obtain it. Of course, brick and mortar retailers, like every segment of the economy need to be in a constant search for improvement, innovation and maintaining a competitive advantage. That is how
our society and economy has continued to grow and advance. The problem is when government unfairly advantages one sector of the economy or way of doing business over another. Not only is the brick and mortar retailer being treated unfairly, but state and local government is missing out on billions of dollars in uncaptured revenue! The U.S. Department of Commerce announced in February 2014 that in the U. S., total e-commerce sales for 2013 were estimated at $263.3 billion, an increase of 16.9 percent from 2012. Total brick and mortar retail sales in 2013 increased 4.2 percent from 2012. E-commerce sales in 2013 accounted for 5.8 percent of total sales. E-commerce sales in 2012 accounted for 5.2 percent of total sales. These numbers have been steadily increasing in each of the last 10 years and there is no reason to believe that trend will stop. Lost revenue to the states in 2013 alone is estimated at $15 billion dollars. Of course, politics always has a role to play. Collecting the tax on internet sales is being attacked by its opponents as a “new tax.” Thus, politicians not wanting to be seen as increasing taxes or imposing new taxes are concerned that their opponents will label them as such. Because taxes are actually required to be paid on all purchases, it is not a new tax and requiring click retailers to collect sales taxes is just a matter of fairness. To be effective, sales taxes must be collected at the time of sale. It is actually a burden on the consumer to try and keep track of every purchase and then pay a tax on it. That is exactly why states have required that sales taxes be collected at the point of sale by the traditional retailer. Our state sales tax collection system has simply not kept pace with modernity and technology. It is not that in most cases consumers are trying to avoid paying a tax, it is just too much to expect of individual consumers to track their internet purchases differently than every other kind of purchase and the amounts claimed by the average consumer may be underreported. Since states do not have the resources to properly enforce the tax, this goes unchecked and spending more money on enforcement is not an efficient solution. It is not really a sales tax loophole. A tax loophole is a legal way that a taxpayer can avoid a tax. This tax is due. States are missing out on the revenue because they do not have an effective system in place for collecting this tax. The controversy over collecting sales taxes on remote sales has been going on for years and involved catalogue sales long before internet sales became the behemoth it has. It is not that states do not want to collect the revenue, it is that the U.S. Supreme Court has stated that it requires an Act of Congress to allow the states to collect a sales tax from a business that does not have a physical nexus or relationship with that state. That is where the politics come in. After more than 20 years of trying to find a solution, the time has come. The U.S. Senate passed the Marketplace Fairness Act in 2013 with a bipartisan majority of 69-27. The hope is that the House of Representatives will act similarly. The Marketplace Fairness Act would require internet retailers and catalog companies to collect sales taxes regardless of whether
they have a physical presence in a particular state. The company merely charges and remits the same tax that the consumer would originally pay in their state. It would all be done electronically. Imagine that! The law recognizes the availability of the technology to easily accomplish this, provides the technology to internet retailers without charge and contains some exemptions. Passing the law may merely require a willingness to explain that this is a matter of fairness to all retailers and that the advantage provided to internet retailers by failing to keep up with technology is damaging to local merchants and local economies. Is that courage or just patience, wisdom and good communication skills? Is that too much to ask? If you are a developer, retailer, broker, investor in shopping center real estate, or anyone having anything to do with the shopping center industry, you should care. The competitive disadvantage and danger to brick and mortar retailers creates havoc in future planning, shortening lease terms, reducing space requirements, places a premium on negotiation of “exit strategies” and is a real danger to our communities in job losses too. Indeed, with billions of dollars missing that could be available to states for repair Paul Magy, and maintenance of roads, bridges and aging Principal, Clark infrastructure, let alone education, this is a Hill PLC concern for everyone!
www.keystonecres.com • Keystone Commercial Real Estate 29
www.keystonecres.com For Sale
LANSING
PENN MILL PLAZA 6030 Pennsylvania (S) Pennsylvania And Miller
LIVONIA
FOUR OAKS PLAZA 8811-8899 Newburgh Rd Newburgh & Joy Rd
MID-EIGHT PLAZA 29109 8 Mile Rd SEC of Middlebelt
LENNOX TOWNSHIP
1,500-4,350 SF
Matt Berke
1,300-7,800 SF
Ryan Duff/ Greg Newman
LIVONIA
VACANT LAND 26 Mile & County Line NW Quad. of 26 & Country Line
LIVONIA
CONCORD PLAZA 16112-16184 Middlebelt Rd Between 5 Mile & 6 Mile
LIVONIA
1,080-3,200 SF
30 Keystone Commercial Real Estate • 248.356.8000
Matt Berke
17.5 Acres
Kevin Berke/ Greg Newman
LIVONIA-FIVE PLAZA 28423-28519 5 Mile Rd Btwn Inkster & Middlebelt
1,200-6,000 SF
Ryan Duff
1,100-8,200 SF
Ryan Kattoo/ Matt Berke
Proper insurance for commercial property F
or most business owners, commercial property is the company’s largest asset. One large uninsured loss can be a major blow to company finances, said Jason A. Vandeberghe, commercial lines sales specialist at Fenton-based Brown & Brown Insurance. For new investors, properly insuring a commercial property can be daunting. It’s important to find an agency experienced in writing commercial insurance. Choosing the right carrier is as important as determining the right amount of coverage. Insurance is no place to skimp. Underwriting standards have tightened over the past few years. “There’s a lot more field underwriting: Insurers send out a loss-control rep who looks at the tenants in a building. If they don’t like the exposure one tenant brings, they may reject the whole building,” he said. Covering the property is the first task; which can occur in a number of ways. For example, coverage level may be set by the lender. The carrier rates the building based on square footage, construction type of the building (such as frame or masonry), age and uses. These all come into play when the carrier determines the cost per square foot for replacement. New investors sometimes confuse market value and replacement cost.
In the current Michigan market, the cost of replacing a damaged property is often higher than its purchase cost. Policies are typically written for one year. Some carriers offer a threeyear rate lock. The policy term is one year but the rate remains the same for three years. The second part of commercial insurance is liability coverage. Most policies begin at $1 million. How much insurance do owners need? There are a few different ways to figure out liability limits. Owners often separate their personal liability from that of the business. In most cases, they need to cover the total assets of the business, at least the replacement cost of any building(s.) Another option is to look at worstcase scenarios. Certificate holders, the bank, tenants, even vendors may require a given level of liability coverage. Other important coverage categories include business income coverage including loss of rent. If damage to the building makes it necessary for tenants to move out, the coverage replaces lost rent. Another important aspect is ordinance and law coverage. It provides for rebuilding in accordance with current building codes rather than simply returning the structure to its pre-disaster state. Rebuilding older structures may mean electrical, HVAC and
plumbing upgrades if the municipal codes require it. Some community codes require a building with a given level of damage (50 percent, for example) to be demolished and rebuilt to current standards. That may mean tearing down parts of the building that suffered no damage. Ordinance and law coverage pays for the additional cost of any new code requirements. Michigan is one of the most cost-effective insurance premium states in the union because we have the lowest catastrophic risks. Flood insurance is becoming more and more available at reasonable prices. Even experienced investors may not know that damage that comes from water seepage or wind-driven water is usually NOT covered, he added In the Michigan market, vacancy rates may affect coverage, depending on the carrier. If building occupancy falls below a given percentage of the total – typically 70 percent – for 30to-90 days, some coverage, such as theft and vandalism, may be taken away for the entire building, not just the vacant portions. This often undervalued part of this business is not something to mess with. Please be sure to educate yourself and consult a professional to make sure you’re covered in the event of a loss.
www.keystonecres.com • Keystone Commercial Real Estate 31
www.keystonecres.com
LIVONIA
PLYMOUTH SHOPPES 29195-29215 Plymouth Rd Middlebelt Road
2,000 SF
Ryan Kattoo/ Matt Berke
LIVONIA
PLYMOUTH SQUARE 31151-31229 Plymouth Rd Plymouth & Merriman
LIVONIA
1,260-1,400 SF
Kevin Berke
MADISON HEIGHTS 28913 John R Rd At John R Rd & 12 Mile
LIVONIA
540 SF OFF./1,200 SF RET. BUCKINGHAM PLAZA Ryan Kattoo/ 27450-27610 Schoolcraft Rd Schoolcraft & Inkster Road Greg Newman
3,741 SF
Greg Newman
MADISON HEIGHTS
2,000 SF
Ferris Hamama
32 Keystone Commercial Real Estate • 248.356.8000
FORMER KRISPY KREME 27695 Grand River S of 8 Mile Road
1321 W 14 Mile Rd At 14 Mile Rd & Stephenson hwy
1,600 SF
Matt Berke/ Ryan Kattoo
www.keystonecres.com • Keystone Commercial Real Estate 33
www.keystonecres.com
MONROE
MILFORD
MILLPOND PLAZA 283 Summit Rd N of Downtown Area
BECK VILLAGE PLAZA 30560-30700 Beck Rd S of Pontiac Trail
1,409-2,700 SF
Matt Berke
NOVI 1,200-10,000 SF
Ryan Duff
NOVI
MAPLE PLACE PLAZA 31146-31202 42151-42181 14 Mile Rd & Novi Rd
NEW DEVELOPMENT 1295 Stewart SEC of Telegraph & Stewart
OAKPOINTE PLAZA 22002-22264 Novi Rd S of 9 Mile Rd
6,800 SF
Matt Berke/ Ryan Kattoo
NOVI 3,000 SF
Greg Newman
NOVI
1,200-1,400 SF
34 Keystone Commercial Real Estate • 248.356.8000
Ryan Duff
SHOPPES AT THE TRAIL 31120-31208 Beck Road SEC of Pontiac Trail
1.23 Acre Outlot
Ryan Duff/Matt Berke
248-356-8000
NOVI
SHOPPES AT THE TRAIL 31120-31208 Beck Road SEC of PONTIAC TRAIL & BECK RD
OXFORD MILLS 1350-1500 S Lapeer Lapeer & Drahner
BIG BOY 955 Lapeer Rd NEC at Drahner
OXFORD
1,500-7,290 SF
Ryan Duff/ Matt Berke
1,200-20,000 SF
Ryan Duff/ Greg Newman
OXFORD
OAK PARK
PARK PLACE 22100-22150 Coolidge Between 9 & 10 Mile
5,000-10,200 SF
Ferris Hamama/ Greg Newman
OXFORD
OXFORD TOWN CENTER 971-985 Lapeer Road NEC of Drahner
1,200+ SF
Ryan Duff
PITTSFIELD TWP.
4,800 SF
Ryan Duff
PITTSFIELD CROSSING 4860 Washtenaw Ave W Golfside Drive
1,500 SF
Kevin Berke/ Greg Newman
www.keystonecres.com • Keystone Commercial Real Estate 35
TC
Title Connect LLC Providing Title & Escrow Services Nationally
Contact
JEFF GUNSBERG Principal/Director of Business Development for your Commercial Title Orders Title Connect Supports
28470 W. 13 Mile Road, Suite 325 Farmington Hills, MI 48334 Ph (248) 642-3256 • Fx (248) 642-0935 C (248) 563-7919 • order@title-connect.com
36 Keystone Commercial Real Estate • 248.356.8000
Detroit Revival N
eighborhood by neighborhood, district by district, Detroit is coming back. The first new office building in nearly 10 years is set for the central core. The city’s central market will implement a new tax-capture district for improvements. Blight-fighters are targeting Brightmoor, a once-fading neighborhood far from the core. Midtown continues to build on its early recovery with more retail and restaurant growth. One of the city’s most visible eyesores, the former Packard Plant between I-94 and East Grand Boulevard, now belongs to a Peruvian developer. At 3.5 million square feet, it’s a steal at $405K -- maybe. It’s certainly among the lowest cost-persquare-foot stats in the county. Even the city’s bankruptcy has its upside, The Wall Street Journal said in an Opinion video posted on its web site last December. “Detroit can now begin to rebound, to get a breather on its obligations and begin to rebuild. Everyone who’s in the public sector has a stake in arising Detroit,” said James Freeman, WSJ assistant editorial page editor. “It’s good for future employees as well. It’s a win for the city.” This, our most recent issue of Keystone Magazine, says good things about Detroit real estate. Sample our stories on financing, selling and investing
in commercial retail property, insuring commercial property and more. We’ll update you on the latest moves of the Ilitch family and Dan Gilbert, arguably Detroit’s two leading real estate investors. Check out our guide to new and expanding tenants in the market – all in this issue of the Keystone magazine. Here we’ll focus on neighborhood revival beyond downtown and Midtown
– although plenty of good things are happening in those two spots as well. “Through strategic place-making efforts, we’ll make it inviting for businesses to relocate in the city and create more residential opportunities for people who want to live in Detroit. Right now, the attention is on our downtown area but investment will spread to neighborhoods.” said Malinda L. Jensen, director of business development for the Detroit Economic Growth Corp.
Eight Mile Road + Woodward Avenue A new Meijer store – the first in Detroit — opened last year in the Gateway Marketplace, a new shopping center near the former Michigan State Fairgrounds. Meijer fills 215,000 of the center’s 325,000 square feet. The center will hold 40 tenants when fully leased. Current stores include second anchor, Marshalls; McDonald’s; K+G Superstore; Petco; Payless Shoes; SVS Optical; Dots; PNC Bank; Subway; and Wingstop. An investor group that includes Magic Johnson is working on a plan to build a 1 million-square-foot mixed use project on the fairgrounds site. Senior living facilities, single and multi-family housing, medical offices, entertainment, retail, restaurants and a transportation hub are in the $160 million mix.
Highland Park Highland Park is a city within the boundaries of Detroit. This city stretches Woodward Avenue from McNichols to just south of the Davison (the country’s first freeway). A future automotive welcome center in the former Ford plant on Woodward is the aim of a soon-tolaunch $7.5 million capital campaign. Across the street, the Model T Plaza built
www.keystonecres.com • Keystone Commercial Real Estate 37
on the former Model T plant is almost fully occupied; Curis Development redeveloped the former Sears site into a successful retail center anchored by Aldi.
Rivertown This area along Jefferson from E. Grand Blvd to the Rencen continues to spark development on the riverfront. A $60 million project with retail and 500 residential units is planned for Atwater and Franklin Streets. The five block area will be built in two phases. When the first phase is complete, it will hold nearly 300 rental or condo units. The same developer, McCormack Baron Salazar, is part of a planned $28 million makeover of the Strathmore Hotel in Midtown. The nearby Globe Trading Co. Building, once a shipping company maintenance depot, will become an educational and recreation center for the Michigan Department of Natural Resources following a $13 million renovation as part of the new Milliken State Park. The Detroit Free Press reported that the General Motors surface lot next to RenCen could be redeveloped as a parking deck with retail, restaurants and office space. The Freep also reported that the 40-acre Uniroyal factory site on Jefferson Avenue west of the Belle Isle Bridge is still an active redevelopment site for a mixed-use project to launch next year.
Brightmoor
pipeline, according to Techtown’s web site. The program works with businesses with high growth potential or those in danger of folding. In Brightmoor, that help ranges from new signs, microfinancing for kitchen updates and a new van for a ribs restaurant, to web site tune-ups, wholesale sales development and removing parking meters in front of other businesses. Last October, Techtown Detroit received a three-year $800,000 grant from the US Department of Health and Human Services to expand SWOT City Detroit into three more neighborhoods: the East Jefferson Corridor, Grandmont Rosedale and Osborn. Techtown is targeting neighborhoods that do not receive the same resources and support as downtown Detroit or Midtown.
Eastern Market Eastern Market is a well known farmers market attracting 45,000 people each Saturday. Among other initiatives, the market will open on Sundays and Tuesdays, seasonally. Pedestrian improvements, blight remediation and a possible connection to the Midtown Loop Greenway bike path are also in the works. There are also plans to pioneer a Targeted Redevelopment Area, intended for brownfield improvements, similar to a TIF district. It wants to expand development at the edges of the market area and attract new businesses in the
Helped by Techtown Detroit, Brightmoor, a westside neighborhood at Lahser near Grand River, is stabilizing. Techtown Detroit’s SWOT City Detroit program provides technical assistance to existing businesses and recruits new businesses to fill neighborhood gaps. One new business has launched in Brightmoor and six more are in the
38 Keystone Commercial Real Estate • 248.356.8000
entire area. The tax-capture fund may yield as much $50 million over 25 years.
Boston Edison The once-proud neighborhood north of downtown along Woodward Avenue is rich in history. This area boomed in the early 20th century mainly due to the burgeoning automobile industry. The area was home to pioneers such as Walter Briggs, William Fisher, Henry Ford, Sebastian Kresge, Ty Cobb, Joe Lewis and Barry Gordy to name a few. MLive.com calls the Boston-Edison district a “fast-rebounding central Detroit neighborhood, where turn-key homes can be listed in the $100,000 range.” That’s an incredible deal for the amenities offered by these gracious homes. Capitol Park The triangular park was the 19th century center of Detroit commercial life. In 2012, the DDA launched the redevelopment of three buildings on Griswold Street facing the park: the Capitol Park Building, the former United Way building and the Farwell Building. The neighboring Griswold Building and the 1215-1217 Griswold Building are also being renovated into market-rate apartments. The David Stott Building has been a hot potato with several owners and failed redeveloments. Last October, it was purchased by a Shanghai firm and may become the buyer’s local headquarters, as well as offices and possible residential conversion.
Jefferson Village East Jefferson Avenue along the Detroit River between RenCen and the Grosse Pointes is a study in urban contrasts. Historic buildings lead into some seedy areas that abut lovely residential neighborhoods. Through the efforts of many civic and economic development groups, the area is recovering and adding retail and restaurants, as well as renovated vintage apartment buildings such as the Alden Towers. Proposed protected bike lanes, parking lanes and reduced traffic lanes at
the eastern end of the area are aimed at making the corridor safer.
Market with the CBD, according to the Detroit Free Press.
Paradise Valley
Cadillac Square
This area east of downtown was known for its contribution to Blues, Big Band and Jazz from the 1930’s-1950’s. Many exciting renovations have taken place over the last decade. If a recently hired consultant concurs, Detroit could follow other urban areas and remove the I-375 freeway from the heart of the city. It could become a pedestrian-friendly parkway connecting Lafayette Park and Eastern
This historic park is located on the east side of the Central Business District. Meridian Health Plan will move into a new $111 million, 16-story 320,000-square-foot office to be built on the Monroe block across from Compuware headquarters. First floor retail and a wrap-around 1,000-car parking deck will face Campus Martius. These are just a few examples of the revitalization of neighborhoods beyond Downtown and Midtown. As more businesses are attracted to Detroit the rejuvenation of surrounding neighborhoods will continue.
Gilbert-Ilitch updates TWO DETROIT BILLIONAIRES CONTINUED to reshape the Motor City in 2013 and look likely to continue their buying and developing ways this year. The Detroit News pegs their combined downtown investment at more than $2 billion. Dan Gilbert, 52, has invested in a huge portfolio of downtown buildings. Mike Ilitch has placed his bet on a singular huge project, the $650 million hockey arena and surrounding blocks on the Cass Corridor. Mortgages and pizza stoke their financial engines: Quicken Loans for Gilbert and Little Caesars for the Ilitch family. Increasingly, real estate is a driver for both investors. Both believe in community and have given money for the M-1 light rail system. Mike Ilitch, 84, owns the Detroit Tigers and the Red Wings. Although his health is not what it used to be, his family including wife Marion and son Chris continue plans for a new hockey arena and giant mixed-use development. The new arena will cover
650,000 square feet and cost $450 million, funded by a mix of public and private money. It set to open in 2017 or 2018. The DDA will own the new arena. Olympia Development of Michigan (ODM) will hold a 35-year lease. After the Red Wings vacate their current home, Joe Louis Arena would be demolished. The new arena will seat 18,000 with an attached 500-space parking deck. Nobody’s speculating on where the other 17,500 hockey fans will park. It will have 10,000 square feet of retail and restaurants. The Detroit Free Press reported that ODM will pay $11.5 million annually toward retiring the bonds that will fund arena construction as well as pay for construction cost overruns, maintenance, repairs and security. The city’s only direct contribution to the project will be selling 36 blighted parcels of land on the Cass Corridor for $1, the Free Press reported. The surrounding 45-block entertainment district would fill in empty parcels with $200 million in
private development of residential space, retail, restaurants and offices. Gilbert’s Rock Ventures paid $50 million for the failed Wayne Country jail replacement last year. It will add $500 million to create 1.7 million square feet of housing and entertainment, including 700 residential units and hotel rooms with 200,000 square feet of retail and parking on the 15.5 acre site. He also bought the adjacent Greektown Casino and hotel and a handful of smaller properties, bringing his downtown portfolio to 40 buildings. Not content with buying buildings and filling them with employees and outside tenants, Gilbert dreams of creating a pedestrian friendly downtown with great quality of life and an attractive environment for businesses and their employees. He’s also said he’ll announce his plans for the vacant site of the former J.L. Hudson flagship this year. The Wall Street Journal reported last December that Gilbert’s investment has had a knock-on effect, with both local and outof-town investors bidding and winning downtown properties.
www.keystonecres.com • Keystone Commercial Real Estate 39
www.keystonecres.com For Sale
PONTIAC
PERRY & JOSLYN PLAZA 745 N Perry St Perry Rd And Pontiac Rd
5,000 SF
Kevin Berke/ Ryan Duff
PONTIAC 1461 Baldwin Rd At Baldwin Rd & E Walton
REDFORD
HERITAGE PLAZA 14625-14825 Telegraph Rd S of 5 Mile
1,800-2,800 SF
Greg Newman
2,650-15,420 SF
Greg Newman/ Kevin Berke
40 Keystone Commercial Real Estate • 248.356.8000
PONTIAC
VACANT LAND Perry Road Perry Rd And Pontiac Rd
TEL-HURON PLAZA 3-71 S Telegraph Rd Huron (M59)
15.916 Acres
Greg Newman
PONTIAC 2,000-6,263 SF
Ryan Duff/Matt Berke
RICHMOND
LENOX SQUARE 66751-66901 Gratiot Ave 31 Mile & Gratiot
1,300-13,000 SF
Ferris Hamama/ Matt Berke
248-356-8000
ROCHESTER HILLS
JOHN R CENTER 819-965 Auburn Rd Auburn Rd at John R Rd
ROCHESTER HILLS
1,760-7,837 SF
Ryan Kattoo
ROSEVILLE Greg Newman
ROYAL OAK
AVENUE SHOPPES 29486 Woodward Avenue N of 12 Mile
7,200 SF
Kevin Berke/ Greg Newman
ROSEVILLE
6,000 & 2,000 SF 26447-26451 Gratiot Ave
CROOKS CORNER 2086-2256 Crooks Rd Crooks & Avon Industrial
GRATIOT CROSSING 32901 Gratiot Avenue Corner of 14 Mile
SAGINAW
1,560 SF
Matt Berke
COTE CORNERS 3570-3580 Bay Rd Btwn Shattuck & McCarty
1,210-10,910 SF
Greg Newman
3,811-6,663 SF
Ryan Kattoo/ Matt Berke
www.keystonecres.com • Keystone Commercial Real Estate 41
USING
SOCIAL MEDIA IN COMMERCIAL REAL ESTATE
S
ocial media is not new – but it is newly useful as a business tool. For the commercial real estate industry, social media fills a longtime goal of marketers – integration across many platforms. Reaching clients, finding a broker or flying through a property via video has never been easier. Social media has been an established business tool for some time but it’s really coming into its own for commercial real estate. Companies are using blogs to feature properties for sale or lease and using YouTube to offer tours of commercial space. Social media can integrate various aspects of marketing so clients and potential clients can really connect with the company. A print ad suffers in comparison to a broker on YouTube providing a personal biography, a company profile AND a 3-D tour of a property, all in minutes. Blogs linked to web sites are one of the most valuable tools. With a subscribe button and cross-promotion by email, CRE professionals can reach thousands of clients and potential customers. It’s important to balance time spent on social media with potential return. Part of the magic of the web is its power over time – harness that power for your viewers, not for yourself as a content creator. At Keystone Commercial Real Estate, Marketing Director Meagan Lyles features individual properties in emails, directing readers to Keystone’s web site for more details and images. Popular cross-posting tools such as Hoot Suite save time by automatically putting the same information on Twitter, LinkedIn and Facebook. Social media boosts the value of a company contact database when integrated with email marketing. Emails spotlight individual property offerings. The blog gives additional details and images, as well as access to complete lists
of properties on offer. Filters can sort by property type, size, location and a myriad of other criteria. Digital advertising and marketing is more cost effective than traditional advertising avenues, which can be expensive. Digital reach is potentially much broader, given the rise of mobile connections. Digital reach does not mean breaking the marketing budget. It’s a matter of budget rebalancing – digital marketing doesn’t have to cost more. It’s reallocating spending among different platforms. Social media requires adding varied content regularly to keep your viewers from becoming jaded. Be diverse in what you send out. Don’t just stick to property listings. Company or community events are equally useful and keep emails from being boring. Younger social media users are most attuned to visuals – images and videos. Older users still want traditional social media – especially Facebook and LinkedIn. Facebook is user-friendly. If you haven’t used social media before, it isn’t hard to figure out. All social media platforms are useful because everything you do affects your
42 Keystone Commercial Real Estate • 248.356.8000
search engine ranking – the all-important search engine optimization (SEO.) Being visible online provides value by boosting your company position in search results. Although social media platforms such as photo bulletin board Pinterest may not seem like an obvious business-to-business tool, posting a few pictures will influence the company SEO. After a slow start, Google Plus and Google Places are starting to engage business users. More than 99 percent of searches start on Google. Google Plus and Google reviews are great tools for business to business users, including offering webinars, Meagan Lyles said. Hash tags are very important, Lyles said. Twitter started the hash-tag phenomenon. Hash tags allow viewers of social media posts to access posts more broadly. They are now integrated with Instagram and Facebook. If you search using the hash tag #commercialrealestate, every posting on the topic will appear. You can use hash tags in your posts to attract searchers making general inquiries. It’s best to use key words that people use to search: #realestate, #brokers, #commercialbuilding, for example. Social media is a natural sales tool for introducing services. A simple video, conducted by an expert from your company can explain services to viewers and build your brand. Showing what you do is better than telling. Sharing knowledge helps build community with viewers. This part of the business is not going away. It is an ever-evolving activity. If your plan is to wait until you are an expert and completely understand it, you will never get involved. Get your feet wet by opening a Facebook page for your company or posting a blog but be sure to get in the game.
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www.keystonecres.com • Keystone Commercial Real Estate 43
www.keystonecres.com
SANDUSKY
SANDUSKY PLAZA 545 Sanilac Rd M-46 And Gates Road
SHELBY TWP.
2,000-34,138 SF
Ryan Kattoo
SHELBY TWP.
UTICA HEIGHTS CENTER 46691-46863 Van Dyke Rd N of Hall Rd
BROOKSIDE CENTER 51061-51083 Mound Rd N of 23 Mile Rd
(1) 600 - (2) 1,600 SF
SOUTHFIELD
1,600-3,200 SF
Ryan Kattoo
9 & BEECH PLAZA 23023-25828 9 Mile Rd NWC of Beech
Ryan Kattoo
1,200-3,000 SF
Ryan Kattoo/ Matt Berke For Sale
SOUTHFIELD
COUNTRY VILLAGE PLAZA 20097-28903 Evergreen SWC 12 Mile
700-7,777 SF
Ryan Kattoo/ Matt Berke
44 Keystone Commercial Real Estate • 248.356.8000
SOUTHFIELD
VACANT LAND 9 Mile Rd 9 Mile Rd & Beech Daly (NEC)
1.43 Acres
Ryan Kattoo
248-356-8000
SOUTHFIELD
HARVARD ROW 21700-21800 11 Mile Road Lasher
1,560-39,647 SF
Matt Berke/ Ryan Kattoo
ST. CLAIR SHORES
HARPER RETAIL CENTER 24235-24311 Harper Ave N of 9 Mile
1,440-9,300 SF
Ryan Kattoo/ Matt Berke
SOUTHGATE
SOUTHGATE GALLERIA 15201-15461 Dix Toledo South of Eureka
1,350-6,075 SF
Matt Berke
STERLING HEIGHTS
MORVIAN PLAZA 14402 15 Mile Rd And Morivian
1,000-2,200 SF
Ferris Hamama
For Sale
STERLING HEIGHTS
TARGET AND LOWES OUTLOTS 2378-2474 Metropolitan Pkwy SEC of 16 Mile & Dequindre
1.56 Acres
Kevin Berke/ Greg Newman
STERLING HEIGHTS
NOTTINGHAM SQUARE 43683-43893 Schoenherr Rd At Canal
1,470-3,200 SF
Matt Berke/ Greg Newman
www.keystonecres.com • Keystone Commercial Real Estate 45
46 Keystone Commercial Real Estate • 248.356.8000
www.keystonecres.com
STERLING HEIGHTS
FIRST CENTER PLAZA 13205-13325 14 Mile Rd at 14 Mile 7 Schoenherr
1,200-18,000 SF
Kevin Berke
STERLING HEIGHTS
KEY BANK PLAZA 38021 Mound And Foxhill (16 1/2)
STERLING HEIGHTS
4,040 SF
Ryan Kattoo/ Matt Berke
WASHINGTON PLAZA 33102-33178 Dequindre Dequindre & 14 Mile Road
900-2,200 SF
Ryan Kattoo
STERLING HEIGHTS
1,400-2,800 SF
PINE BROOK PLAZA 5625-5655 18 Mile Rd West of Mound
Ryan Kattoo/ Ryan Duff For Sale
STERLING HEIGHTS
NEW DEVELOPMENT 16 Mile & Dequindre At SE Corner of Metro Pky
TAYLOR
1,500-11,300 SF
Kevin Berke/ Greg Newman
48 Keystone Commercial Real Estate • 248.356.8000
VACANT LAND 16700 Allen Rd
0.2 Acres
Ferris Hamama/ Greg Newman
248-356-8000
TAYLOR
1,000-6,000 SF
Greg Newman/ Ferris Hamama
16700-16940 Allen Rd
TAYLOR
A.H.L PLAZA 25241-25251 Eureka Road E of Beech Daily
800 SF
Ryan Kattoo
For Sale
TRENTON
TRAFFORD SQUARE 3000-3146 Van Horn Road NWC of Van Horn & Fort St.
TROY MAPLE PLAZA 72-74 Maple Rd NWC at Livernois
2.57 Acre Outlot
Matt Berke/ Greg Newman
TROY
TRENTON
TRAFFORD SQUARE 3000-3146 Van Horn Road NWC of Van Horn & Fort St
730-40,000 SF
Matt Berke/ Greg Newman
WALLED LAKE 793-5,668 SF
Ryan Duff/Matt Berke
MAPLE PLAZA 1124-1198 Maple Rd
4,550-32,000 SF
Matt Berke/ Greg Newman
www.keystonecres.com • Keystone Commercial Real Estate 49
www.keystonecres.com
WALLED LAKE
BARCLAY PLAZA 1320 S Commerce Rd SEC at S Commerce
WARREN 1,320-3,960 SF
Ferris Hamama
WARREN
WARREN
4,000 SF
WARREN SHOPPING PLAZA 13384-13470 Schoenherr SWC of I-696
5,862 SF
FORMER UNITED WIRELESS 32064-32066 Van Dyke Ave S of 14 Mile
Ferris Hamama
22500 Van Dyke
WARREN
SCHOENHERR 13 PLAZA 30830 Schoenherr Rd SEC at 13 Mile
21588 Dequindre Between Myers & 8 Mile
2,000 SF
Ferris Hamama
5,000-23,800 SF
Matt Berke/ Ryan Kattoo
WARREN
Ryan Kattoo
50 Keystone Commercial Real Estate • 248.356.8000
4,920 SF
Greg Newman
Investment Sales T
raditional investment sales rising prices. One thing hasn’t changed: are back. It’s one of the Commercial real estate is still the most significant shifts in the domain of veteran investors, not recovering commercial real estate newcomers. market. After the past five years in Just driving down the street you which roughly 80% of sales were can see that once-empty centers are distressed properties and only 20% filling up. There’s some confidence actual straight sales, the proportions there. Lots of (new) tenants are have reversed. expanding in Michigan. It’s time to be “It’s definitely changing around. on the forefront as we start to move There is not as to a traditional much distress as market. Many developers are there was. Values If you are are increasing. selling, there filling a niche market of Occupancy is are many ways underserved new retail. increasing. The to groom your economy is investment turning around,” said Jeff S. Gunsberg, property for the sale beyond the usual principal of Title Connect LLC. cosmetics, said Ryan Duff, retail “Things are good, moving along. specialist, of Keystone Commercial The market is in transition right Real Estate. now, moving from distressed business Those usual cosmetics — which to standard business,” Gunsberg apply to any category of real estate — continued include simple curb appeal items such Title Connect is a title insurance as fresh paint, clean windows, bright agency based in Farmington Hills. lights, groomed landscaping and wellFounded in 2004, it has five metro maintained parking lots. Detroit offices and a new branch in Long-term grooming includes: Florida. leasing out the space to high-quality Lower inventory is one factor in tenants to the best of your ability —
nationals or the best chains in the market; looking at your lease rates compared to the market; and making sure your tenants’ interiors are clean and well-maintained. Good interiors support the property in the sale. Cap Rates for net leased properties continue to break record lows. McDonalds, Walgreens, CVS, Chase Bank and 7-11 are just a few that have been at the forefront of these net leased investment sales. After going through five to six years of little-to-no development many developers throughout the country are filling a niche market of underserved new retail. The demand particularly in Michigan for good retail space at “Main & Main” has spurred these new small developments. Many of these are quickly being sold shortly after completion. Cap Rates for these are extremely dependant on credit and lease term. As always any investment contains different levels of risk versus reward. Be sure to educate yourself on these to best match your investment with your desired outcome.
www.keystonecres.com • Keystone Commercial Real Estate 51
www.keystonecres.com For Sale
WASHINGTON TWP.
AVA CENTER 65885 Van Dyke Rd North of 30 Mile (Westside)
WASHINGTON TWP.
1,316-6,431 SF
Greg Newman
WATERFORD
WATERFORD VILLAGE SHOPPING CTR 1,275 - 5,100 SF 5570-5640 Dixie Hwy East of Andersonville Kevin Berke
20,979 SF
Greg Newman
WATERFORD
COLONY SQUARE 935-981 Huron St (M-59) SWC at Telegraph
1,000-7,000 SF
Ryan Duff
WATERFORD
WATERFORD
MEADOWRIDGE PLAZA 1348-1492 Scott Lake Scott Lake & Watkins
VANESSA CENTER 65800 Van Dyke Rd N of 30 Mile
800-10,000 SF
52 Keystone Commercial Real Estate • 248.356.8000
Ryan Duff
M-59 PLAZA 7370-7580 Highland Rd NEC at Williams Lake Road
1,190-11,119 SF
Ryan Kattoo
A Broker’s Guide to Retail Development
T
here is an impressive burst of new retail development spurred by an exciting increase in retail demand. Being a successful broker involved in one of these new retail strip centers is really about the art of setting expectations. Sophisticated buyers and sellers are professionals and know how to navigate through the process. Less experienced developers and sellers need direction from their brokers to establish reasonable expectations about the outcome. Brokers need to help get everybody on the same page whether it’s price or timing. They can help all parties understand what it takes to put a development together. They buyer will likely need support from their brokers to accomplish the myriad of details that make a development happen. The broker must understand typical due-diligence issues which include leasing and economics, restrictions, zoning, entitlements, title, survey and environmental. For a development deal to coalesce, the developer needs time to find tenants who will lease the new space. Some developers may be developing a site for a specific user in mind but will still need to go through an approval and lease process. Tenant demand is what sparks retail development, so good brokers will put together the several pieces of the puzzle to make a deal. They match tenant demands with a site and developer, making sure everything can come together. Tenants don’t care if it’s a new development or an existing site if other criteria match: population, income levels, traffic counts,
co-tenants’ and competitor sales. In selecting a site, the broker must understand the economics of each situation to better guide the client. A broker with deep knowledge and experience will have an advantage creating opportunities. Land use approvals for new developments depend on successfully negotiating the civic approval process. Some determining factors include zoning; do you have ability to develop by right, or will you need rezoning, a variance or a special-use waiver? It takes time to work through the planning and zoning process. Recently, the Detroit suburban market (Troy, Southfield, and Bingham Farms) has seen strip centers being built in front of office centers. Selling off a little pad in the front, with an abundance of parking, seems desirable. Such centers are not part of original site plan, so the lender may become part of decision-making. It can be done but can pose its own set of obstacles. Other contingencies may include, anchor tenant approval, Reciprocal Easement Agreements (REA), which can dictate what can and cannot be done, or deed restrictions. Environmental considerations may also figure into the mix, for example, if the proposed site is assembled from several former industrial pieces. Brokers can find ways through the process. An inexperienced seller may not realize asking for the deal to close in 30 days means a lower price because the buyer is taking more risk. It’s best to avoid a situation where the buyer is under contract with terms that won’t close. If you are a broker that wants to make new developments part of your business model then educate yourself on the process.
www.keystonecres.com • Keystone Commercial Real Estate 53
www.keystonecres.com
WAYNE 5752 Merriman Rd S of VanBorn
WEST BLOOMFIELD
1,600 SF
BLOOMFIELD AVENUE SHOPPES 6041-6363 Haggerty Rd North of Maple Road
1,500 SF
WEST BLOOMFIELD TOWN CENTER 33096 Northwestern Hwy Orchard Lake
Ferris Hamama
WEST BLOOMFIELD
WEST BLOOMFIELD
ROBINS NEST Northwestern Hwy Nwstrn Hwy & Orchard Lake
Matt Berke
WESTLAND
WESTLAND
WAYNE ROAD PLAZA 892-910 South Wayne Rd S of Cherry Hill
1,460 SF & Up
Greg Newman/ Matt Berke
850-2,000 SF
Matt Berke
54 Keystone Commercial Real Estate • 248.356.8000
1,500-7,673 SF
Ryan Kattoo/ Matt Berke
WESTLAND SHOPPING CENTER 1,100-16,480 SF 6503-6631 N. Wayne Road S. of Warren Road Matt Berke/Ryan Duff
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www.keystonecres.com
WESTLAND 8035-8045 Middlebelt Rd Middlebelt & Ann Arbor Trl
WESTLAND
1,000-2,000 SF
TALL OAKS PLAZA 6019-6095 North Wayne Rd. North of Ford
1,400-5,700 SF
MERRIMAN PLAZA 8208-8244 Merriman Rd NEC At Ann Arbor Trail
Ryan Duff
WESTLAND
WESTLAND TOWN CENTER 1909-1989 / 35501-35507 Wayne Rd & Ford Rd (SWC)
WESTLAND
Ryan Duff
WESTLAND
PALMER VENOY PLAZA 1912-1956 Venoy Rd Palmer & Venoy
2,540 SF
Kevin Berke/ Matt Berke
56 Keystone Commercial Real Estate • 248.356.8000
1,000-2,400 SF
Ryan Duff
2000+ SF
Ryan Kattoo/ Matt Berke
WESTLAND
ARBOR TOWN SQUARE 29101-29365 Ann Arbor Trail SEC at Middlebelt
2,691-2,490 SF
Greg Newman
248-356-8000
WESTLAND
ARBOR TOWN SQUARE 7838-7540 North Middlebelt SEC at Ann Arbor Trail
WIXOM
1,681 SF
Greg Newman
WIXOM PLAZA 47300-47528 Pontiac Trail NWC of Beck
2,550 SF
Ryan Duff
10 Ways to Know You Are a Broker
1 2 3 4 5 6 7 8 9 10
The solution to every problem is “we’ll figure it out.” You can’t shop in a mall without redesigning it in your mind.
WYANDOTTE 2,300 SF
537-541 Eureka Road At Fifth Street
Kevin Berke
You never really take a vacation…you just move your office to the beach for a week!
The accountants try to keep you out of trouble but you never pay attention to them.
The only time you are really going to find peace is when you “rest in peace.”
Many of your best deals are the deals you didn’t do.
You are a victim of the love-hate relationship between retailers and developers. You know the phrase “and that’s final” means at least another 10% is available.
You need to put Ritalin in your coffee every morning to keep you calm.
FORT GRATIOT 4025-4055 24th Avenue At Kraft Road & 24th Ave
18,600 Existing Space 5,481 Proposed Outlot
Talking on the cell phone while driving, drinking coffee and taking notes is not multi-talking — it’s just normal.
Greg Newman www.keystonecres.com • Keystone Commercial Real Estate 57
New + Expanding Tenants Wow — just wow. Nearly 100 retailers have announced plans to debut or expand in the metro Detroit market.
M
etro Detroit retail is back, as the southeast Michigan economy becomes more robust. The vacancy rate dropped by .2 percent to 9.5 percent and new absorption was positive, according to CoStar’s Fourth Quarter 2013 Market Report. Ten retail buildings with 60,000 square feet of space debuted in the quarter, with 78,000 square feet under construction, CoStar reported. Average rental rates were $11.89 per square foot in the market, compared to a national rate of $14.59. The national vacancy rate decreased to 6.6 percent for the quarter. Even some of the most established markets are seeing growth. Loads of retail projects are open or under construction in or near Oakland Mall in Troy and in Madison Heights. A Starbucks/Qdoba Mexican Grill duo has opened on a mall outlot on 14 Mile and John R. Both companies are
58 Keystone Commercial Real Estate • 248.356.8000
seeking more Detroit locations. Near the same intersection, Jersey Mike’s Subs and Chipotle Mexican Grill are on the scene next door to Aio Wireless. A freestanding Sleep Doctor mattress store is open on W. 14 Mile Road. Category growth is strong for fastcasual restaurants and fast food. It will be no news to our readers that unusually cold temperatures and big snows have kicked the stuffing out of eating out. In a recent national survey, 51 percent of consumers in the study anticipate dining in restaurants more often this spring and summer.
THEY’LL HAVE PLENTY OF PLACES TO CHOOSE FROM. Burgers are classic, Five Guys Burgers and Fries and Bagger Dave’s continue to grow while newcomers Halo Burger, Basement Burger and Smoke Burger seek new locations. On the fast food front, Culver’s,
home of the butterburger and frozen custard, wants to add to its 41 Michigan locations. Livonia is coming soon. The traditional fast guys, McDonalds, Burger King and Wendy’s also continue to expand Livonia–based Just Baked, a specialty cupcake shop and bakery has 18 locations and wants more. It’s joined by Tim Horton’s, Dunkin’ Donuts, Panera Bread, Biggby Coffee, Starbucks, Einstein Bros. Bagels in seeking new locations. Two local family restaurant chains are poised for expansion: Honey Tree and Red Olive Family Restaurants. Leo’s Coney and National Coney will bring more hot dogs for Detroit. Frozen yogurt will be represented by new Menchies, Red Mango, Pinkberry and Orange Leaf stores. Bonefish Grill recently opened in Troy, along with sister chain, Carrabba’s Italian Grill, which is also headed for Ann Arbor. Quaker Steak & Lube, Outback Steakhouse, Applebee’s, and Buffalo Wild Wings will expand. Happy’s Pizza and Pub is a pizza and sports gastro pub from the company that operates Happy Pizza. Panda Express plans five store openings this year. Big Salad will add to its five existing stores with two more on the boards. Piada Italian Street Food – one of Nation’s Restaurant News’ five Hot Concepts – is looking to add to its Michigan roster. Fresh Thyme Farmers Markets will open 60 stores in the Midwest, including Michigan. The Phoenix-based start-up combines the feel of an outdoor farmers market with a full-service natural foods grocery. Barbecue will never go out of style.
The Syracuse-based Dinosaur Bar-BQue restaurant chain will bring its ‘que and biker-bar presence here this year. More contenders in the ribs and pulledpork sweepstakes: Dickey’s Barbeque Pit comes from Dallas with Texas-style hickory smoking, free ice cream and kids-eat-free Sundays. Woody’s BBQ plans 100 barbeques across southeastern Michigan. The Florida chain offers two formats, 2,000 sf-3,000 sf and up to 7,000 sf. Old Carolina Barbecue Company has opened in Ann Arbor, its first location outside of Ohio. Subs continue to dominate the sandwich market, with Firehouse Subs, DiBella’s, Jersey Mike’s, Potbelly, Penn Station, Subway and Jimmy John’s all on the move. Blaze Fast-Fired Pizza lets customers build their own pies and flash bakes them in 180 seconds. Four locations have been announced in Livonia, Madison Heights, Birmingham and Ferndale, with four more in the works. PizzaRev also offers a customized pizza line with wood-fired readiness in three minutes. Veteran Pizza Hut is also expanding with new carry-out and delivery locations. Tampa-based World of Beer, a craft beer haven, is open in Ann Arbor and looking for more locations. Qdoba and Chipotle also continue to grow throughout Michigan.
FASHION AND BEAUTY These categories includes Ulta, Five Below, Luv Nails, Rue 21, Famous Footwear, Dress Barn, Maurice’s, Eyeglass World, men’s big and tall store Destination XL, and Body Central. Health and wellness is a strong category as well. Retro Fitness, Anytime
Fitness, Planet Fitness, LA Fitness and Pro Martial Arts Karate build you up. ATI Physical Therapy and Accelerated Rehab bring you back. Aspen Dental and Vitamin Shoppe make sure you’re in the peak of health. LaVida Massage, Massage Green and Massage Envy want to make their rubdown goodness even more available in the market. Afterwards, stretch out for a nap at Mattress Firm, Sleep Doctor and Pure Sleep, all seeking to help Detroiters sleep better with more stores. Services and technology providers are also expanding. Advance America (payday loans and cash advances), Aio Wireless, Verizon, Sprint, T-Mobile and AT+T are all looking for locations. Cabela’s, Menard’s, Tractor Supply Company and Dick’s Sporting Goods want to have a bigger presence. Pet Supplies Plus and Pet People will promote pet ownership and rawhide bones for all. Art Van plans to have a dozen more stores by year-end. Party City Retail will convert temporary Halloween pop-ups into permanent Party City locations. LaZ-Boy has launched three new stores in Sterling Heights, Novi and Troy. Dollar and discount stores keep on growing: Family Dollar, Dollar Tree, Dollar General, Ollie’s Bargain Outlet and Big Lots are looking for the next new opportunity. Finally, Air Time Trampoline and Game Park is looking for 30,000 square foot sites for its wall-to-wall trampoline parlors. Educational tutoring companies are still expanding including Kumon Learning Centers, Mathnasium and Sylvan Learning Centers.
www.keystonecres.com • Keystone Commercial Real Estate 59
TENANT REPRESENTATION We help you find the best site • Analyzing the area through demographic maps, reports and traffic counts • Comparing the market rates to your estimated rent budget • Researching and mapping competitors • Driving the area to find spaces of interest • Contacting landlords for space coming available • Calling on Available signs • Communicating with the Commercial Brokerage community • Touring the spaces that are of interest to you • Preparing a non-binding letter of intent
www.keystonecres.com • 248-356-8000
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CONFORMING LEASES:
It Seemed Like a Good Idea at the Time by Paul Magy, Principal, Clark Hill PLC
F
or those with multiple properties and the possibility of having the same tenant at more than one location, the temptation to “conform” leases can be quite powerful. “Conforming leases” is the name given when parties agree to use the same lease form or terms from one deal as the lease terms they will use for a subsequent deal. It is also a term used too loosely. Under the right circumstances, it can certainly be a great idea. It can reduce the amount of time for negotiations, reduce legal fees and reduce the time needed for a store opening. However, like many ideas that sound good, there are complexities that require deeper consideration. For instance, if there is more than one prior lease between the parties, which one do you use? Whose form was it? Was the negotiation of that lease everything that you wanted it to be? Thinking back, could it have gone better? Was there any point you “gave in” on to get the deal
done, but normally would not have? It is important to look carefully and reexamine that last deal before you agree to implement the same terms. Agreeing to “conform a lease” could give away a bargaining advantage or worse, place one party or the other at a strategic disadvantage. Other considerations in determining whether conforming a lease makes sense include: (a) the desirability of the location might affect the leverage that one side or the other could have had then or might be giving up now, (b) the circumstances at the time of the last deal and whether either party had pressure being placed on it to get a deal done, such as debt service coverage ratio or co-tenancy, (c) whether you or the other party may have been in a weaker financial condition at the time, or (d) whether a property was being positioned for sale or financing at the time, to name a few. The new location may also have a
62 Keystone Commercial Real Estate • 248.356.8000
variety of other issues that will need to be addressed and could be a concern for one party or the other. These include: municipal requirements or existing REA or PUD agreements related to signage, parking ratios, height restrictions, drive thru lanes, protected areas and others. There may be other issues related to cotenants that may have intersecting use rights such as exclusives with carveouts for incidental uses or older variety restrictive use clauses that may prohibit certain forms of non-traditional retail. To be safe, if the parties will be “conforming leases,” they should try to use a recent lease. That increases the likelihood that those familiar with the deal will be available to discuss or review the finer points if any arise and the same attorney can be used to see that the lease is truly being conformed. The newer lease is also more likely to have been updated to the state of the art in lease negotiations. The business points on a particular
transaction may cause some heartburn when trying to conform leases. The parties should try to find a lease with similar business points so that most of the language in the lease will still make sense to include. For instance, why use a lease from a turnkey, triple net deal with percentage rent at a power center with multiple outlots as a model for a deal that is gross rent including fixed CAM at a neighborhood center that is being delivered as-is and that has a sales kickout clause? Each of those leases will have different types of provisions and will have been negotiated to address different concerns. It is also important that the parties have the same understanding of what “conforming leases” really means. It is not uncommon for parties to renege on the effort to conform leases when a party realizes during the drafting phase that they do not really want to agree on a particular point again and tries to explain why that should be an exception from conforming. The problem is that creating one exception leads to others. After all, why should one party be able to make the deal better for themselves (retrading) when they feel justified and not
the other? What then is signed for an “ Conforming” is not a happens is an escalation opinion on whether term to be taken lightly. conforming leases in the time for the negotiations as business on a transaction will Just as it is important points are reopened be advantageous to to determine whose and the expense of the you. Once you have drafting goes up as agreed to a form or lease form will be well. By the time that to the concept of used as the starting happens, the parties are conforming, it is sufficiently far along virtually impossible point, each party must and invested in the to extricate yourself decide that the deals transaction that neither without jeopardizing really wants to walk the deal. No matter are similar enough and away from the deal, but what, before agreeing other factors warrant the deal may become a to conform leases, it very different one than is important to review conforming. it started. the lease intended to “Conforming” is not a term to be be the model carefully and to compare taken lightly. Just as it is important to it to its original form to see what was determine whose lease form will be used negotiated away in the first place in as the starting point, each party must the original or latest deal. Only in decide that the deals are similar enough that fashion can you fully and other factors warrant conforming. see what was originally Otherwise, what may start as a hope to traded away to make the expedite preparation of a lease and reduce last deal. It could be a expense may turn into quite the opposite. dangerous mistake to agree The more the respective deals have in to conform leases without Paul Magy, common, the more that “conforming” having given it the careful Principal, Clark may be possible. Your attorney should analysis, thought and Hill PLC be consulted before the Letter of Intent review it deserves.
www.keystonecres.com • Keystone Commercial Real Estate 63
KEYSTONE
2014 CALENDAR
of EVENTS
MAY 2014 May 7 CCIM Spring Mixer Bar Louie 44375 W. 12 Mile Rd., Novi, MI May 9 BOMA Trade fair Eastern Market, Detroit, MI May 19-May 24, 2014 Recon The Global Retail real Estate Convention Las Vegas Convention Center Las Vegas, NV May 27-May 30, 2014 Mackinac Policy Conference Grand Hotel, Mackinac Island, MI May 29th Keystone Commercial’s Client Appreciation Event Socialight Cigar Lounge & Bistro West Bloomfield Township, MI
JULY 2014
July 8 CCIM Picnic at the Park Comerica Park, Detroit, MI July 23 Keystone Commercial’s Networking Event Prime 29 West Bloomfield Township, MI July 24 Michigan Idea Exchange & Alliance Program Rock Financial Showplace, Novi, MI
AUGUST 2014
August 5 Chicagoland Retail Connection Hyatt Regency McCormick Place 9300 Bryn Mawr Avenue, Rosemont, IL August 19 OH/WV/Western PA/IN Idea Exchange Hilton Columbus At Easton 3900 Chagrin Drive, Columbus, OH
SEPTEMBER 2014
Keystone Tigers Game Outing Comerica Park, Detroit, MI September 10, 2014 Chicago Deal Making Vertigo Sky Lounge 660 North State Street, Chicago, IL September 27, 2014 Michigan Retailer’s Breakfast Birmingham, MI October 7, 2014 Chicago Deal Making Navy Pier 600 East Grand Avenue, Chicago, IL
NOVEMBER 2014
November 5-8 ULI Fall Meeting McCormick Place 2301 S. Lake Shore Dr., Chicago, IL
DECEMBER 2014
December 9 New York National Conference New York Hilton & Towers/ Sheraton New York & Tower 1335 Avenue of the Americas, New York, NY
ADDITIONAL KEYSTONE EVENTS TO COME… 64 Keystone Commercial Real Estate • 248.356.8000
Keystone Commercial Real Estate 31000 Northwestern Hwy., Suite 200 Farmington Hills, MI 48334
www.keystonecres.com 248-356-8000
MICHIGAN’S RETAIL SHOPPING CENTER SPECIALISTS