From the day it opened for business in Fort Myers, Grubb & Ellis|1st Commercial has operated in a way that distinguishes it from other commercial real estate brokerages in Southwest Florida. In just one year, its unique approach to serving clients has helped a growing number of commercial owners and financial institutions face a challenging real estate market.
Partnerships
Unlike its more traditional counterparts, Grubb & Ellis|1st Commercial encourages seasoned commercial agents to join as partners. According to the firm’s founders, this gives agents a vested interest in the success of their clients.
“Because agents are the individuals making money for the company, we believe they should share in the decision-making process, as well as the profits,” says Jerry Messonnier, one of three founding partners. The other partners are Bob Johnston and Richard Clarke.
Since opening in March 2008, Grubb & Ellis|1st Commercial has added a number of partners and associates, most of whom are well known in Southwest Florida commercial circles. Bob White, CCIM, SIOR, is a prime example. White has worked in the commercial business locally for more than 30 years and says he joined Grubb & Ellis to better serve his clients.
“This company provides the type of support and national exposure that my clients appreciate,” says White. “I’m really proud to be part of such a quality team.”
Agents Derek Bornhorst and Mary Kazor cold calling for new tenants
The firm’s roster also includes respected industry veterans Chuck Smith, Charles Jans and Rich Sommerville, as well as Steve Shelton, Derek Bornhorst and Mary Kazor. Because of them, Grubb & Ellis|1st Commercial is affiliated with professional organizations such as The Society of Industrial and Office Realtors (SIOR), Certified Commercial Investment Member (CCIM) and the National Association of Industrial and Office Properties (NAIOP).
“The opportunity to be partners attracts agents of the highest caliber because it offers them higher commission splits and greater control of their destiny,” adds Johnston. The Grubb & Ellis name further sweetens the deal.
Sectors & Specialists
Johnston says that a distinguishing feature of Grubb & Ellis|1st Commercial is that its agents specialize in specific market sectors, primarily industrial, office, retail, land and investments. “Real estate is a specialty business. We disagree with generalists, who handle all types of transactions across many sectors. The industrial market is very different from the retail market.”
Johnston says that each market sector requires a thorough, working knowledge of the many things that make it unique. “Industrial space, for example, requires a complete understanding of sprinkler systems, overhead door size, ceiling clearance, electrical power and zoning, as well as market inventory.
“Unless you specialize in a specific commercial sector, how can you recognize the best value for your client? Committing 100% of our time and resources to one sector means we are giving our clients our best, which they deserve.”
In some cases, Johnston advocates narrowing specialties down to even more specific categories. An office specialist, for instance, might consider only selling medical office buildings. “It doesn’t cost clients more to work with a specialist,” adds Johnston. “But without one, it could cost them plenty.”
Office
Charles Jans, Partner
Jans, a long time Fort Myers resident, joined Grubb & Ellis|1st Commercial in January as a partner and office specialist after serving as vice president for McGarvey Development Company for the last 10 years. During that time, he leased more than 1.5 million square feet of office and flex space.
According to Jans, now is the time to prepare for the future and take advantage of “exceptional” buying opportunities. “As real estate market conditions improve, the office market will be poised to expand in Fort Myers along the I-75 corridor and key interstate interchanges,” he says.
In addition to office sales and leasing, Jans is overseeing development of a full-service, commercial property management division.
Retail
Chuck Smith, Partner & Steve Shelton, Associate
As leader of the Grubb & Ellis retail team, Smith says that finding viable tenants for clients’ shopping centers is the primary goal this year. “While vacancies are a particular challenge in today’s retail market, we have the experience to help our clients find new tenants and retain existing ones.”
Doing so typically means interviewing two or three times as many potential tenants as was common just a year ago. “We are committed to putting in the extra hours and exploring all avenues to secure the right tenants for our landlords.”
Often, it is more cost effective to work with existing tenants than to face vacancies and long searches for new tenants. Accordingly, the group proactively consults with owners to identify and rectify tenant issues before problems escalate. “Not only are we helping our clients survive the economic downturn, we’re positioning them to thrive when the market rebounds.”
Smith acknowledges that even though this is a difficult market for sellers, “there are buyers out there for the right property in the right location.” In fact, he recently secured contracts on two vacant retail locations within 14 days of their listing dates.
“Accurate pricing is the key to successful sales,” he adds. As a result, he and Shelton spend considerable time researching individual markets and working with clients to determine the optimum price for each listed property.
Land
Rich Sommerville, Partner
Sommerville came to Grubb & Ellis|1st Commercial as senior vice president last October after a stellar 12-year career with a major international real estate firm. During his 22 years in the business, he has received many awards, including top producer globally in 2002. That year, he brokered the $42 million sale of 969 acres in Naples — the largest land sale in Southwest Florida history.
Two years later, his $64 million in residential development land sales garnered him the #4 producer spot worldwide. Other honors include his induction into the prestigious Legend Society, which represents one half of one percent of agents worldwide.
According to Sommerville, today’s market holds opportunities for the savvy investor seeking commercial real estate at deeply-discounted prices. A sample of industrial properties includes: Never-occupied CBS buildings available for less than half of replacement cost; well-maintained apartment complexes at below-replacement cost; and partially-entitled parcels at I-75 interchanges at “prices that would make a three- to five-year hold very realistic. It’s an incredibly opportune time to be a buyer.”
Industrial
Bob Johnston, SIOR/Founding Partner; Jerry Messonnier, SIOR/Founding Partner; Derek Bornhorst, Partner; Bob White, CCIM, SIOR/Partner; and Mary Kazor, Associate
“We don’t expect opportunity to come to us. We find it.” That’s the credo of the industrial team, headed by Johnston and Messonnier. Together, the team has more than 70 years of commercial real estate experience.
The team members agree that succeeding in the current industrial environment requires much more than salesmanship. “Industrial specialists must possess the expertise to see the ideal shape of the transaction and then create a strategy to make it happen,” says Bornhorst.
He adds that it’s important to stick to the basics of selling. Besides making hundreds of calls each week, team members keep in frequent contact with both new and established clients.
National developer EastGroup Properties recently awarded the industrial team the listing on phases one, two and three of SunCoast Commerce Park on Ortiz Avenue in Fort Myers. The project contains more than 200,000sf of dock high, concrete tilt-up buildings with an additional 1,044,650sf planned.
Opportunities for Growth
While some commercial firms are retracting in response to the sluggish economy, Grubb & Ellis|1st Commercial sees great opportunity for expansion.
Earlier this year, the company unveiled its Special Assets Group to work with banks and other owners of investment properties (see story on page 46).
Also, under the direction of Charles Jans, the firm recently launched a property management division. “We work closely with real estate owners, investors and portfolio managers to develop programs that focus on cost-efficient operations and tenant retention,” says Jans. Because a property’s performance correlates directly with the success of its tenants, “we focus on courting and retaining tenants that add value to the asset.”
Services include business plans, on-site management, marketing and leasing strategies, comprehensive reporting tools, contract management and lease administration. The company also addresses the physical and financial aspects of investment property ownership, including routine maintenance, emergency response, and complete accounting and reporting services, among other things.
“Most investors share the goal of earning a profit,” says Jans. “As specialists, it’s our goal to help them realize theirs.”
Special Assets Group Distinguishes Loan Value from Market Worth
Richard Clarke and Jerry Messonnier performing due diligence on asset pool
Just as commercial growth followed the proliferation of rooftops, so has the commercial bust in the wake of the home mortgage meltdown. As a result, the number of bank-owned assets continues to skyrocket, leaving many lenders wondering what to do next.
That’s where Grubb & Ellis|1st Commercial’s Special Assets Group (SAG) hopes to help. Headed by commercial brokers Jerry Messonnier and Richard Clarke, SAG was created earlier this year specifically to provide strategies and solutions to banks and other clients with non-performing loans and REOs.
“The first step is to help the banks identify what they have by analyzing the asset or portfolio of assets,” says Clarke. “Step two is to help the lender figure out a potential exit strategy, be it immediate, short-term or long-term. Ultimately, the banks decide what to do. We just provide them with the information they need to make an informed decision.”
Clarke and Messonnier are well qualified for the task, with experience that transcends their extensive knowledge of the local market. Both have MBAs and master’s degrees (Clarke’s in engineering and Messonnier’s in tax accounting), and both are well acquainted with what happens when commercial loans go bad.
Spanning two decades, Clarke’s career in commercial real estate and development includes acquisitions, dispositions, leasing, build to suit and asset management. Before relocating from southern California to Fort Myers in 1996, Clarke was the CEO of an architectural interior design firm. More recently, he spent several years as vice president of development for Opus South Corp. in Estero.
“I definitely bring more of a property owner/developer perspective to the team,” which helps when working with clients to dispose of their properties. It also helps that Clarke worked with the Federal Deposit Insurance Corporation (FDIC) as a consultant in the mid-1990s to dispose of assets that remained after it disbanded the Resolution Trust Corporation (RTC), formed in the wake of the savings-and-loan debacle. The portfolio included a wide range of income-producing real estate, including retail, office, industrial and mixed-use properties.
Messonnier also has a multi-faceted perspective on the commercial industry, including 15+ years making commercial loans on behalf of banks in Louisiana, California and Florida. In the 1990s, he was involved in the underwriting, purchase and sales of approximately $750 million of commercial properties owned by banks, savings & loans and the RTC. He has been a commercial broker in Southwest Florida since 2001.
Messonnier says that it is critical for banks to obtain a high level of local expertise when they’re trying to place a value on assets they never intended to own or manage. Furthermore, he says that in a market where accurate comparables are hard to come by, a typical appraisal isn’t enough. The market value of a retail center, for instance, can vary greatly depending on location, year built, tenant mix, current (and potential future) vacancy and other factors. “You have to compare apples to apples,” says Messonnier. “Not all shopping centers are created equal.”
The growing inventory of vacant space can further distort property values in the eyes of buyers and sellers alike. That’s why SAG created a model that considers the lease-up period, broker commissions and tenant improvements, as well as the carry costs (taxes, insurance and CAM charges).
“Based on the math, we can determine a value and advise whether it’s in the bank’s best interests to keep the asset or if disposition represents the least amount of loss,” says Messonnier. Using the same methodology, SAG can determine whether or not a buyer can get a reasonable return on investment.
Also, because of its affiliation with Grubb & Ellis, SAG has access to national programs that help clients dispose of notes and REOs, and expose their properties to a much larger audience than most local brokerages can. “There are buyers of notes and buyers of REOs out there, but right now they’re in a wait and see mode, hoping that the longer they wait, the lower the prices will go. It’s our job to help them make a move and understand why now is the time, whether they’re buying or selling.”
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