Money Buzz 03/02
Commercial real estate for cheap; the dangers of friends and family as investors; and the risks of biotech stocks
The Least Lease
The flip side to the economic downturn is that commercial real
estate is suddenly very affordable, says John Robbins, principal at
San Ramon, California-based Kabler/Robbins Commercial Real Estate,
who notes that prices have plummeted as much as 50 percent in the
last year in some markets.
Even if you're locked into pricey office space, there's
hope, says Alan Whitson, corporate facilities consultant and CEO of
Newport Beach, California-based B. Alan Whitson Co. In a down
market, it's never too early to open negotiations. "If
you're in year three on a five-year lease, you can negotiate to
extend for another five-year term at a lower rate," Whitson
says. "Landlords are pretty smart--they know 70 percent of
something is better than 100 percent of nothing, and they're
looking for a stable income stream."
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To win a better deal, come to the bargaining table prepared.
"Know the market rates and what perks you can push for,"
says Whitson. "With negotiating, you don't get what you
deserve; you get what you negotiate."
More Than Friends
When capital is hard to come by, entrepreneurs often have better
luck raising cash close to home. But hitting up friends and family
can backfire. "The same issues you have with any investor get
compounded when you're borrowing from someone you'll be
seeing at the dinner table every night," notes Herb Kozlov, a
corporate finance attorney with New York City-based Parker Duryee
Rosoff & Haft. "In the end, you may trash an important
personal relationship."
Formalizing the transaction can help guard against friction down
the road. "You want to be clear," says Kozlov, who
advises creating an explicit loan agreement. "For example, is
it a loan to the company or a loan to you personally that you are
obligated to pay whether or not the business works?"
Boston-based Circle Lending offers an economical online service
enabling would-be borrowers to create and administer loans with
family and friends. "We charge a one-time start-up fee of $49
and 3 percent of each loan installment," explains Jill Miller,
"and then we basically take care of the transaction." In
addition to documenting loan agreements, Circle Lending enables
borrowers and lenders to track and manage their transactions
online, offers direct debit and deposit services, and sends e-mail
reminders to borrowers when payments are due. Beats hearing it from
your mother.
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