Owner Pain = Tenant Gain

It has never been a better time to be a tenant. Assuming, that is, that your business is going well.

Commercial tenants are in the catbird seat, as my mother might have said, because they currently hold all the cards. Many building owners and management companies are facing economic struggles of their tenants, as well as their own. Keeping renters in office and warehouse buildings -- at a time when there is significant vacancy (depending on your geographic location) -- takes skill, creativity and an ability to think forward.

Many companies are in a tough time as sales are down, the economy is pretty rough, and the future is uncertain. As such, firms that have not closed may have downsized, and do not need as much space as they had previously. Building owners have had some tenant firms move for a better deal elsewhere, consolidate to fewer locations, or go out of business. The shedding of jobs, shelving of projects and hard look at space needs is creating opportunity for tenants.

Savvy tenants can capitalize on this recessionary period by taking advantage of attractive lease rates, thereby strengthening their long-term capital positions. End users increasingly are insisting upon the ability to audit leases as well as negotiate extensions and space give-backs, options that in the old days might have been categorized as "nice to haves" now being put in to the "must have" category.

Landlords increasingly are understanding this may be a long down cycle. And as they come under more lender pressure, there is more interest in coming up with flexible rent scenarios. In one case, I was at a meeting where a tenant -- another real estate company -- noted that the landlord came to them and asked if there was anything they could do to get them to stay, considering their lease was coming due. The real estate company said freeze rent for the next five years and to upgrade the offices. The landlord spent tens of thousands of dollars redecorating the offices.

If you are a tenant, you are in a stronger position to renegotiate the terms of your lease. If you have downsized and need less space, there is a lot of competitively priced space available. And this is in pretty much all parts of the U.S. But also, tenants should remember to keep in mind, or establish, worst case scenarios as they navigate this minefield. At issue, what to do in the unlikely event (though it is happening with with increasingly disturbing frequency) of the landlord turning the building over to the lender.

Of concern to building owners are new trends toward a more mobile workforce. Some companies are permanently shedding large office locations. In return they are utilizing smaller more flexible spaces where "road warriors" can come in, log on, hold a meeting, then move on.

It is a dynamic time for commercial/investment real estate. And for now, tenants can make themselves some incredible deals as building owners strive to be more creative and keep their occupancy rates high.

The Second Mortgage An Option In Tougher Times For Both Buyer, Seller

A lot of deals on commercial/investment properties of all sizes are including second mortgages these days. Why? Because there are fewer commercial lenders, and they are being tight-fisted about who they lend to.

They have that right. I wouldn't want to lend to anyone I didn't think was creditworthy, either. But the pendulum has swung too hard toward the "do not lend" side of the equation. As it sloooowwwwwwly moves back to the center, deals are getting done via other means.

The second mortgage, for example. And it benefits both buyers and sellers alike.

Here is the example. The seller carrys back a second mortgage for 10 to 20 percent of the purchase price, while the buyer obtains a new first mortgage. The buyer makes monthly or annual payments to the new mortgage company for the first, and a second payment to the seller for the second mortgage. Make sense? This approach makes it easier for the buyer to obtain a first mortgage, and the seller gets ongoing income in addition to the lump sum payment for the majority of the property.

In addition, there are "note brokerages" I have written about previously that have buyers for such private notes. In this case, the second mortgage is a note. You can sell the second mortgage to a third party at closing, or at some time in the future. The seller of the note would anticipate taking a much deeper discount on the second mortgage if they tried to sell it immediately. Unless it has "seasoned, the risk is higher for the purchaser of the second mortgage.

Just some points to consider as we hear from both buyers and sellers that they want to get deals done but cannot get banks to cooperate.

Are 'Sale-Leasebacks' The New Black?

Sale-leasebacks seem to be dominating commercial/investment real estate news these days.

Consider the following:

- HSBC Holdings -- the parent of mortgage giant HSBC -- is selling its New York City office tower for $330 million and leasing back space there.

- Retailer Tesco, the UK behemoth that owns stores around the globe, including the U.S., is conducting sale-leasebacks of a number of its stores.

Even government is getting into the act: The state of Arizona has approved a plan to auction its “State Capitol Executive Tower” in a 20 year sale-leaseback. The tower houses the offices of the secretary of state, state treasurer and governor and has an estimated value of $40 million. Why? The state's current budget shortfall, approximately $3.2 billion. Further, California has announced it plans to sell $2 billion (or 62% of Arizona’s budget deficit) worth of government real estate in a similar sale-leaseback. GlobeStreet.com reports that the City of Alexandria, VA, is contemplating a simliar plan with a large portfolio of its properties. In the Midwest, the city of Chicago has already made some moves. Several sale-leasebacks with the Skyway toll road, downtown parking garages and downtown parking meter system for $3 billion.

For investors, sale-leasebacks can be lucrative for both sides. They make sense for governments because they allow them to get cash now to pay off their debts while retaining the option to buy back the property in 20 years or so. Buyers like them (I have investors looking for buildings that house U.S. post offices) because the renters are the government (i.e. taxpayers), a tenant with a strong credit rating. In some cases, the return can be twice what the investor pays, say Globe Street analysts.

Interestingly, news reports also say international investors are "heavily intrigued" by these sale-leasebacks. This creates a bit of an irony, says Globe Street, because in theory, "you could have a U.S. State Capitol building owned by China."

Hmmmm.....

Shameless Self Promotion Follow Up

So here is the announcement that went out from the powers-that-be about my inclusion in a newly created Executive Advisory Council in the Prudential Commercial Columbus office.

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PRUDENTIAL COMMERCIAL REAL ESTATE ESTABLISHES COLUMBUS EXECUTIVE ADVISORY COUNCIL

(9/23/2009) COLUMBUS, Ohio – Prudential Commercial Real Estate today announced it has established a three-person Executive Advisory Council to oversee the activities of its Columbus, Ohio office.

“The Columbus office, with 21 agents, is one of the largest in our regional network,” says owner and managing broker David Mussari. “Agents Jack Turner, Tim Mehan and Brent Greer have emerged as office leaders, have proven track records, and provided wise counsel for the business on operations and personnel. These individuals will provide additional leadership to help guide our enterprise to the next level. I am extremely pleased with their selection and know they will provide outstanding counsel as we continue to grow our business.”

Turner, Mehan and Greer are charged with executing corporate directives within the office, working as a liaison with Blue Rock Midwest’s headquarters office in Cincinnati, helping manage and grow the office, allocating resources, helping resolve conflicts, and ensuring that Prudential Commercial remains compliant with real estate laws and company policy

Jack Turner is an investment and development specialist who chairs the Columbus office’s Investment Marketing Group. He has more than 35 years experience that runs the gamut: corporate real estate services: office, multi-family, retail and industrial properties, sale/leasebacks, buyer/tenant representations, market/feasibility analysis, and development services. Jack joined Prudential Commercial in 2008.

Tim Mehan has more than 30 years of comprehensive, in-depth experience in the real estate and development industry. His expertise covers site selection and acquisition, sales, leasing, contract negotiation and administration, budgets, cost containment, value engineering, contractor selection, compliance, zoning, and quality assurance. Tim is a Certified BOCA Inspector and an expert in energy efficient (green) buildings and energy efficient techniques. The chair of the Columbus office’s Industrial Marketing Group, Tim joined Prudential Commercial in 2008.

Brent Greer is a commercial/investment specialist with experience in multiple disciplines, but with particular emphasis on multifamily, office/retail and land. He is the immediate past president of Columbus Real Estate Exchangors (CREE), an organization of brokers and agents specializing in IRS 1031 tax-deferred exchanges, and sits on the City of Columbus Property Maintenance Appeals Board. Brent joined Prudential Commercial in 2006.

Prudential Commercial Real Estate is the fastest growing commercial network in the U.S., and a leading provider of commercial real estate services. Blue Rock Midwest has offices and agents in Columbus, Lancaster, Cincinnati, Dayton and Cleveland, Ohio, and in Lexington, Ky.

Visit the Prudential Columbus website at: http://www.prucomrecol.com/

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And so there it is. I'm honored to be one of three chosen by my peers to guide the office, and our continued growth.

New Bank Owned Properties Discussion Group on LinkedIn

Yesterday, I created a new discussion group on LinkedIn, the social networking site for business. The group is called: Bank Owned Properties Marketing Group.

The intent of this online forum is to facilitate discussions and problem-solving regarding bank-owned commercial/investment properties. The number of properties coming into the pipeline is increasing, as banks are being forced by federal authoritities to keep more cash on hand. That is causing debt to equity ratios to be changed, and lenders are telling borrowers, "wow you've been a great credit risk and we really enjoy having you as our customer, and your credit rating is still high and you've never missed a payment.....but we need $100,000 in the next two weeks or we have to call your note."

....Which it turning the commercial/investment real estate market on its ear. As a result, more investment properties are coming available, labeled as distressed even though it is an artificial tag foisted on them by rules that were changed even though owners were playing by the rules all along. Of course there are also properties coming available by way of foreclosure that were not properly managed, or because over-eager buyers jumped into the market not knowing what they were doing, or by borrowing funds at high interest rates.

Who's in charge now? Buyers, that's who. And more and more buyers are asking for info on distressed properties. At Prudential Commercial we are working to find buyers for bank owned properties (REOs). Which jump-starts lots of discussions.

...Which is why I created the new discussion/marketing/problem solving forum on LinkedIn. It will be a place where principals, as well as agents, can kick thoughts around.

Stop by if you have a chance and join in the discussion!

Ready Or Not: Here Come Green Tenants

A lot of property owners, particularly in office, for a long time scoffed at the idea that tenants would drive the changeover to buildings that are more energy efficient. Smart business owners have long focused on making their properties as efficient as possible, but when it made economic sense (mostly).

Today, with the adoption of the Energy Independence and Security Act of 2007, which requires that all new federal government leases be in Energy Star buildings, and renewals undergo energy-efficiency upgrades starting in 2010, building owners understand now more than ever that the "green" momentum continues. Similarly, many cities have green bilding and/or green lease requirements in place.

Which leads to an interesting observation by some experts -- that in some markets there will not be adequate inventory to meet the demand for green space as these conditions and interests kick in across the United States.

Stimulus finding from the Obama White House is supporting a variety of ventures related to commercial real estaet, including energy audits, retrofits, dvelopment and implementation of advance building codes, inspections and financial incentives for energy efficiency improvements.

Some of these requirements, in my opinion, are heavy-handed and designed to inflate the bureaucracy. But they are there. And even more interestingly, just as the employees of many companies will drive -- or nudge -- their employers to get involved in community programming, so is there growing interest in nudging firms to look at green initiatives as a way to do something for the community.

In fact, the New York Times in march 2009 reported on the growing trend of chief sustainability officers being added to exec rosters at numerous large corporations, including Sun Microsystems, Georgia Pacific and Dupont.

Whats next??????

Strategic Management of Tax Liability

In these pages I have talked much about IR 1031 tax deferred exchanges. A new vehicle on the market this year, approved by the Internal Revenue Service in a private letter of approval, is going to prove a valuable strategic option for owners of commercial/investment real estate.

Occasionally, an investor wants to divest of properties but knows their equity is so significant, that their appreciation is so significant, that they end up holding on and continue to trade up to avoid capital gains. Long the legal way to build significant wealth with investment grade real estate, there still was always that stumbling block of what to do if you decide to get out "before your estate is activated."

If you need a translation of what I wrote in quotations above, email me and I'll clarify.

Anyway, investors worry that they will get killed with taxes and have thought, "well I may as well just let my kids inherit my assets as stepped up value when I pass away."

A new product, The Deferred Sales Trust(tm), is providing a new exit strategy for those who wonder what to do down the road. On March 10 of this year, the Internal Revenue Service issued a highly anticipated Private Letter Ruling that addresses this new tax deferral strategy.

Deferred Sales Trusts provide you with another tax-deferred strategy to defer the payment of your capital gain income tax liabilities when you sell highly appreciated real estate, personal property, business interests or other assets. The Deferred Sales Trust gives you one more tax deferred strategy to choose from when planning the sale of a highly appreciated property or asset. The Deferred Sales Trust is a legal method that allows the seller of the property to defer capital gains taxes due at the time of sale, but over a period of time, even beyond that investor's lifetime. This trust is drafted pursuant to Section 453 of the IR code, just like an installment sale note.

Here is how it works: The investor/seller, "grantor," sells his or her commercial/investment property to a dedicated trust, which in turn sells the property to a buyer. An annuity is created and the seller receives income over time, and is taxed only on that income received during a taxable year. And just as the income is dribbled in, capital gains taxes are not charged to the investor/seller all at once, but also over time. There are no taxes to the trust on the sale since the trust "purchased" the property for what it sold it for to a third party. Best of all, from what I understand in my research, there is no interest or penalty on these deferred payments of the tax. An investor's capital gain is recognized, but it is deferred over a pre-determined period of time that the investor chooses in advance. Everybody wins.

As always, if you get involved in this type of transaction, beyond your experienced real estate investment agent, you should also consult with your attorney and tax professional to make sure you are covered on all bases.

The trust can make a cash sale, also. Sometimes, in order to spread out tax liability, an investor/seller will set up a payment schedule with the buyer ( particularly if the seller finances the transaction). The Deferred Sales Trust appears to be a strong option because invstors never know whether the outside buyer will make all the payments on an installment sale. And trust payments are designed by the investor/seller, or grantor. The investor designs the payment schedule, the payment start date, and amounts to be received, depending on their needs.

Best of all, my research is showing that whatever is left in the trust at the time of the grantor's death appears to passe to the beneficiaries free of estate and gift taxes. Secondly, this transaction does not appear to triger any gift tax consequences, no matter how much trust assets are worth. And third, as is usual, trust assets do not need to go through probate when the grantor dies.

If your commercial real estate agent, CPA or tax adviser go to look up this new tool in the IR code, they will not find the name Deferred Sales Trust, or DST. Those are trademarked names from Exeter Fiduciary Holdings. . However, all of the legal and tax authority used in this type of trust are in the tax code. This is not a loophole. There has been a provision for installment sales for many years in the tax code.

Finally, once the trust is set up, additional commercial/investment property can be sold to the trust.

For some really strong Q&A on the subject, go to http://www.exeter1031.com/. This company is one of the strongest qualified intermediary firms for executing 1031 tax-deferred exchanges. In fact, Exeter is the company that has trademarked the name "Deferred Sales Trust" and asked for this ruling on this new product. They are the company I would recommend if I had a client who wanted to go this route.

Thanks go to Jim Wootten of Standard Realtors for bringing this to my attention during a recent meeting. It really got me thinking about possibilities. For those investors who don't plan to let their existing trusts that hold real estate outlive them, and want to cash out now, this approach offers many strategic possibilities well worth exploring.

Coming Up

The latest tool for investors, a powerful approach for those who exploit the power of 1031 exchanges -- the Deferred Sale Trust.

An overview and its implications in the next few days. STAY TUNED!

Buy And Hold Strategy Is Nothing New

The biggest money, the largest portfolios, the greatest concentrations of wealth that have been built in real estate have come via "buy and hold" strategies.

This is hardly a new concept, and I have written about it at length. By buying "right," and holding, you take advantage of numerous positives: income, cost recovery/depreciation, equity buildup, appreciation, and leverage. And you have the further advantage of being able to utilize tax-deferred exchanges, indefinitely deferring payment of capital gains, as you move up into larger properties.

The idea of grabbing a building, or house, cheap, appeals to a segment of the buying community that, frankly, thinks smaller. They want to "flip" properties in order to pocket (hopefully) some quick cash. But they are unable to take advantage of any tax incentives that come with holding investments. Which is why, as I have said ad infinitum, this approach is not investing. It is gambling. Enough said.

But buying and holding is something that works in the stock market, as well. And interestingly, the authors of a story published at TheStreet.com (again) seem amazed that the returns are so much higher for shareholders when they buy and hold. Rather than buy and sell.

No kidding!

Unless your stock is in free fall and in danger of becoming worthless, and not just off by a quarter or a third, you should hold on to it. In most cases it will come back. Dollar averaging . . . buying some shares at this price, and then buying some more at that price, comes back in a positive way in most instances.

There is, however, one difference in the focus on investing in stocks and holding, vs investing in commercial/investment real estate and holding. Can you guess? Yes, its the tax-deferred exchange. I think everyone should have some money in stocks -- its part of that diversification. Eventually, even in a buy and hold strategy in the market, you will divest and re-invest. BUT, you cannot sell your stocks, and re-invest in another company's shares and avoid capital gains taxes. You will pay either short-term or long-term capital gains. Not so with income producing commercial/investment real estate.

Anyway, check out the story. Its a good one regardless.

401(k)s Decimated By Stock Crash

A report out today on TheStreet.com indicates that Americans with 401(k) retirement plans lost, all told, about $1 trillion in . . . THE STOCK MARKET CRASH.

For some time people have been saying 401(ks) were bad investments. I disagree. It is where that 401(k) money was invested that tanked, not the investment vehicle itself.

Nevertheless, the report says no one was spared. There was no where to hide as even mutual funds were impacted. In many cases, investors saw the value of their portfolios pushed back to values found 10 years ago, analysts say. Further, analysts are reminding investors what they forgot: that the 401(k) was never meant to be a primary investment tool. It is supposed to be a means for employer matching (for those employers still providing matching funds) and a way to defer income taxes on income.

So why do I bring this up? While commercial/investment real estate is experiencing its own pains at this time, values of properties that were bought at reasonable values, with reasonable leverage, are doing fine. Vacancy rates may be up slightly in some markets, and in some industry segments, but people owning income producing buildings do not have a situation where the value of their portfolio has dropped so precipitously that it is valued at a 10 year old price. In fact, with inflation starting to creep into the picture, some values are slowly rising here and there.

Of course, with this news come the usual call for "government oversight." Sigh . . .

Listen, if you want to be paid first, and not last, ownership in commercial/investment property puts you in charge. I have written on this before. And 401(k) funds can be rolled over into self-directed IRAs, and the IRAs pick up properties coming on the market at a bargain.

More to come on this . . .

Prudential Analysis of U.S. Market Illustrates Problems, Opportunities Facing Investors

As the economic spiral facing the United States markets appears to be slowing -- some suggest it is even bottoming out -- opportunities exist for both investors and owners alike, depending on the types of properties they either are acquiring or currently own.

I have written in these pages previously that multifamily is the only sector that seems to have some stability. Most of the others -- retail, industrial, office -- are hurting in different ways. Each of these situations provide significant opportunities for investors, who will be able to pick up somewhat discounted properties as pressure builds on owners to refinance (if they can) or deal with vacancy rates that cannot be sustained because of the cost of money when they acquired the properties.

As such, owners are selling, or will be selling, because of pressure from lenders or a wish not to deal with vacancies and tenants who are having a tougher time in their own industries.

With multifamily there also are some properties that will be coming to market around the nation due to lender standards (driven by the U.S. Treasury Department) demanding commercial borrowers to add additional capital or have their notes called. Though I am a fan of leveraging investments, those owners who are over-leveraged will find that this market and new government requirements being imposed on banks may be their un-doing.

Prudential Real Estate Investment, the equity management arm of our organization, has a new report out discussing the outlook for the market in the United States. In the quarterly report, analysts pretty much discuss much of what I have outlined in previous months -- only with a bit more detailed analysis. We are not yet seeing a lot of distressed properties come on the market, but we will. It will be an investor's dream scenario.

Interestingly, the multifamily market sector, while experiencing some hiccups, is relatively stable, depending on where you are in the nation. Some markets are stronger than others, but, in fact, multifamily is going to remain strong for another reason -- not just because people are losing their homes and need a place to live.

A new story published by Multifamily Executive magazine notes that with so little new multifamily product being built anywhere in the United States right now, pressure is on these properties and rents are stable and will soon be rising, if they aren't already. And all these factors are going to create a shortage of a new kind -- which creates opportunities for investors.

Low-income housing.

Whether it is multifamily, or single family, pretty much all indicators are pointing to as long as a decade of shortage of low-income housing. An opportunity for individual and corporate investors, in my opinion, as we will likely see municipally-funded low-income housing in decline. Cities and other government agencies are bankrupt, stretched beyond their limits. It will be more and more difficult for public funds to be earmarked for housing. That is, unless the Obama administration decides to allocate more funds from stimulus packages or other programs toward low-income housing.

I will write more on this in the coming days. I am still digesting the Multifamily Executive magazine piece, and will share more as I have thoughts on it.

If you have time, please take a look at the Prudential quarterly review of commercial real estate trends. It is a fairly succinct snapshot of the pitfalls -- and opportunities -- facing the investment real estate community.

Multifamily Staying Strong As Other Commercial Sectors Stagnate

A colleague noted in a recent meeting that new reports show all segments of commercial real estate are off. Meaning, transactions are down. The reasons are many . . . lenders tightening requirements, sellers thinking their properties were carved by Midas (think about it) . . . buyers only wanting to steal something, instead of pick up a good value.

The only segment that is holding its own is multifamily. And I have written on why this would likely be the case for more than a year. I won't bore you by repeating it all, but will provide a link to a story about the trend, and the reasons this is occurring.

Still, there are opportunities abounding in commercial investment real estate right now. I know real estate agents and specialists like myself who are picking up properties left and right. Or, if they can't afford what they want, they are pooling funds with other investment realtors and buying everything they can nail down. Group investing, we call it.

I'm jumping in as well. Working to convert equity in family land holdings into income-producing properties. Spotting the opportunities are like separating the wheat from the chaff. Its a bit time consuming but it can be done and the rewards are significant.

Keep an open mind. The more creative both buyers and sellers are willing to be, the better it is for all parties involved.

How Can Flipping Shows Still Be on TV?

Amazingly, there are still "flipping" shows on television, and there are still people pushing flipping. Though fewer shows are on the air, the fact that they are still there is making my blood boil again.


Do you know how any people are moaning the fact that they are in the mortage mess because they bought a house or little bungalow, all because someone told them they could make a quick buck that way, or because they watched one of these ridiculous shows?

Flipping houses is no different than trading commodities. If you have $20,000 or $30,000 that you don't care what happens to. That you could use to go to Las Vegas, and lose it all, and come back and say you had a good time . . . well then flipping is for you. But if you could not lose that much and smile, then you have no business flipping houses.

Flipping is not an investment it is gambling. Get it? Moving on . . .

Creative Financing Makes Good Investment Happen

We've all heard the phrase "creative financing" used in describing some of the horrors visited upon innocent borrowers, who blindly (Ohio is a Buyer Beware state, as are most) listened to fact-twisting lenders (there are actually only a few but they give everyone in this industry a bad name) who got them neck deep in financial crap.

Interest only loans. "NINJA" loans. Everything you can imagine was visited upon a handful of naive buyers who didn't do their homework, or didn't read the paperwork, or didn't take a calculator with them to see what might happen if they signed the papers.

And yet, many well-off investors have done well using legal creative financing to make transactions happen. Unfortunately, there is legislation in Congress that would limit some of this creativity all in the name of protecting consumers. The fact is, the people who wrote the bill don't understand commerce, or they don't like it.

Some provisions of the legislation actually will harm the commercial/investment real estate market even through it is aimed at protecting consumers. Confused yet? Frankly, I'm confused that the powers that be in Washington who purport to be smarter than everyone else are visiting this contrived piece of proposed law upon the public and thinking the usual that those in power think . . . "how can anyone possibly be opposed to this?"

In this market, creative financing is more important than ever. Exchanges are becoming more the norm than the exception. Offering in other land, properties or even chattel -- boats, cars, etc. -- is what is making deals happen. Lenders have so tightened the screws on borrowers that it has ground commercial real estate to a virtual halt. Not because the borrowers aren't good risks. It's because lenders are suddenly terrified of risk. Something that their entire industry is built on.

So it is up to creative real estate agents, and lenders who truly understand commerce (if a lender is even involved) to make a proposed transaction a reality. Second mortgages held by the seller are occurring with far more frequency. Land contracts are occurring with far more frequency.

Sellers who expect an all cash deal might still get it. But it will take longer. Or they might not get their price.

The watchwords in this environment are: Patience . . . and Creativity.

Shameless Self Promotion

Recently I learned I have been named to the city of Columbus, Ohio's Property Maintenance Appeals Board. This Board, comprised of seven representatives from around Columbus, meets monthly to review appeals by property owners who have been cited for violating Columbus Housing Code, Health, Sanitation and Safety Code, Streets, Park and Public Properties Code and the Nuisance Abatement Code.

I am the representative to the Board for the real estate industry, and my first meeting comes next Monday. I am truly honored to have been appointed to this post by Mayor Michael Coleman.

Most of all, I thank the late Bob White for nominating me to represent the real estate industry on this Board. It does important work and makes a difference. I will do no less.

Commercial R.E. Landscape Changing

The credit crisis has changed for the time being how commercial/investment real estate is bought and sold.

As one mortgage broker friend of mine opined at a meeting yesterday morning: "If you need to borrow money, bring cash!"

As silly as that sounds, its not far off the mark. The credit mess caused by the residential derivatives market virtually shut down the issuance of commercial mortgage-backed securities. Capital is scarce, and hard money lenders have emerged. Hard money lenders are private sources of revenue.

What is amazing in the credit controversy is how delinquencies rates on commercial loans remain low. Not unexpected. But change on the horizon is how they are rising. Increased defaults are frequently occurring, according to Realtors Commercial Alliance, even though payments are being made on a timely basis.

"Lenders are labeling loans as 'non-performing' because of a perceived decline in market-to-market collateral value, and demanding that borrowers come up with cash to cover the short-fall." Accordingly, says RCA, the number of defaults are increasing. This situation contrasts grealy with the situation facing homeowners in default, who most often could not pay their higher resetting mortgage payments.

So what to do? There still are great opportunities out there. Reconsider your source for investment funds. Self-directed IRA/401(k) monies can be used to invest in income-producing properties. Look at particular sectors in which to invest. As I have stated ad infinitum on this blog, multifamily remains a strong investment category. Home sales are at a 12-year low and foreclosure rates continue to rise but may be leveling off soon. As a result, the demand for rental units remains strong. Office and industrial vacancies will likely rise, but there still are good opportunities on the horizon.

I have real doubts about any net positive affect of the Obama administration's "stimulus package" upon commercial/investment real estate. right now, the public is learning that there are a lot of boondoggle projects in which stimulus money has been injected.

In talking to some potential investors recently I heard two reasons repeatedly being given as to why they are holding back on investing just yet. First, the belief that we have not yet hit bottom. Frankly, I think we are near that trough. I would get in now only if the price makes sense. Not necessarily that you can get a "steal," but that the numbers work and there is a strong upside when the economy recovers. Second, I have heard more than one person say they are waiting for interest rates to drop farther.

Sorry to bust your bubble on that one, but that ship has sailed. Interest rates are on the rise and will continue to increase over time. We also are facing the prospect of massive inflation, in my opinion, because of the spike in the money supply. By some estimates, there is four times the amount of money in the economy right now (can you hear the U.S. Mint printing presses running round-the-clock?) than at any time in recent history.

My advice? Hook up with a knowlegable real estate adviser, and look at a number of investment possibilities.

Foreclosure and Fairness

Here in the Buckeye State, lawmakers are moving a bill forward that would require property owners to notify renters if the property goes into foreclosure.

This is not the worst idea in the world, and stems from a growing multitude of renters, particularly multifamily and single family residents (I even read where this is affecting trailer owners in a mobile home park) who are being forced out of homes they don't own but have paid dutifully on through their monthly rent. Currently, at least in Ohio, there is no mechanism that forces a landlord to notify tenants that the property has gone into foreclosure, ostensibly giving them a heads up that their world may be changing.

It has passed the Ohio House of Representatives and is moving through the Ohio Senate.

Similar bills have either been passed or are being considered in a number of other states.

Responsible owners will have no problem with this measure.

Think About It

Any time you wisely purchase a piece of income producing property, you are enabling other people to make payments into your private pension plan.....

America On Sale

Is America for sale? Not in a bad sense, but for investors, this is a time of unparalleled opportunity.

There are bargains galore, and my good friend and colleague at Prudential Commercial, Tim Mehan, has penned a great piece on how people who recognize the economic signs are buying everything they can get their hands on.

As Tim says, "Some of the richest men in history made their fortunes in times just like this. The greatest factor in achieving their goals was, and is, overcoming fear. Fear will cripple even the best of plans, if not managed effectively."

Click here to read Tim's excellent essay, "America on Sale."

Private Investors Drivung Equity Market

There is money coming back into real estate investment. Funding sources that is. But make no mistake -- private investors are driving the equity market these days.

Small private equity groups are flooding the marketplace and investors are targeting cash-on-cash returns over internal rates of return, according to panelists on the equity investment session at the recent Apartment Finance Today Conference.

According to Apartment Finance Today magazine, the most active equity investors today are smaller private syndicators or funds raised more at the grassroots level in country clubs and other groups of wealthy individuals. In fact, a lot of money is being taken out of the stock market (what is left of investments there) and moved into private investments.

What is most interesting is that lenders have changed their tactics and are giving extensions. Plus the government is getting involved, says Eric Snyder a senior VP with Buchanan Street Partners, an investment management house. "I'm not sure the distress will be the level that is generally thought of." He suggests that the perception that distressed multifamily assets are going to flood the market is misplaced.

While more distressed assets may hit the market, lenders are trying a new model: "Amend, Extend, and Hope." Many of the distressed assets coming to market are on the low end. And lenders, who used to foreclose then dispose of properties, are instead moving to the above philosophy, tending to only bring to market low-end, Class C assets. Tyler Anderson at CB Richard Ellis' institutional group, says banks generally are not begging people to take these properties off their hands. Instead, they are "trying to figure out what the asset is, manage it as best they can, and sell it at the appropriate time."

Says Apartment Finance Today: "While some institutional buyers are asking for internal rates of return of more than 20 peercent over a five-year-term, the active investors today are focusing on cash-on-cash returns of between 8 percent and 12 percent."

Keep in mind this change is because cash-on-cash returns are easier to underwrite. They look at immeidate cash flow, as it works like a certificate of deposit (CD). When a bank pays a 5 percent return on a CD, it means you get 5 percent of the deposit amount. Internal rate of return (IRR) deals are more complex and underwrite for differeing amounts of annual cash flow.

The magazine piece agrees with my long-time philosophy -- Sellers should target cash-on-cash buyers, who will typically pay more for an asset than IRR driven investors.

401(k) Matches Dwindle

What happens when your employer reduces your 401(k) match? Well, not a lot, except that you are not building your retirement fund as quickly as before.

It also might be time to look at the funds set aside and determine if staying in the market is the best choice, or whether going another investment direction makes more sense.

Drops in the market have been one reason why investors have moved some or all of their 401(k) monies over to self-directed IRAs and invested in income-producing commercial/investment properties. Another is this latest trend of companies reducing or eliminating the matching funds.

So what's happening with your accounts?

In Ohio, Office Tenants In Stronger Position As Vacancy Rates Climb

This is not necessarily being repeated all over the United States, proving the adage that all real estate is local, local, local.

However, in much Ohio, particularly Central Ohio, office tenants are being offered significant opportunity for better renewal rates, being wooed to new office space, or even renegotiating existing leases. Depending on where you are, your economy and the amount of product available (leaseable space) dictates availability and per square foot rents.

When it comes to new space and early lease renewals, renters are in the driver's seat. Moreso in fringe areas of Columbus and suburbs where isolated office buildings that were to be the anchor for further development are, well . . . still isolated and often empty.

Unlike multifamily investment in the area, which is stable and lacking all the giveaways we used to see (free washers and dryers, free microwaves, free this free that for signing a lease), office owners are offering a number of incentives to get businesses to locate in their properties. This includes free rent for a certain number of months at the beginning of the term, low base rents and increases in amenities.

According to Schenk Company Inc., which represents tenants exclusively, in Central Ohio vacancy rates ranged from a low of 15 percent in southwest Central Ohio, to 15.1 percent in the central business district of Columbus, to highs of 23.9 percent in outlying (what I call fringe or edge) areas. Southeast Central Ohio had the highest office vacancy rate at 25.1 percent.

The key is knowing where you want to locate or expand your business. Pretty much everyone, with the exception of office operators who have high occupancy rates, is willing to be creative. Your experienced commercial/investment real estate agent can help you move through the minefield in tenant representation, and prevent office renters from making mistakes that could cost them later.

New Scam Hits Real Estate

Now the National Association of Realtors is the target. Well, actually, unwitting renters are the target, but legitimate Realtors might be dragged through the mud through no fault of their own on this one.

The National Association of Realtors' name is being used illegally as part of a property rental scam, according to the National Association of Realtors and law enforcement. In this scam, rental property is offered to consumers, who are led to believe that NAR is functioning as an intermediary to receive rental deposits from prospective tenants and, upon receipt of the deposit, to deliver the keys to the property to the tenant.

The tenant is instructed to send money via Western Union to NAR's purported agent, in the United Kingdom. If you have encountered this scam, be advised you may file a complaint with the Internet Crime Complaint Center, sponsored by the U.S. Federal Bureau of Investigation and the National White Collar Crime Center.

When this kind of stuff hits, it drives me crazy. For those who are considering real estate as an investment, are wholly invested in such, or who are tenants and who got burned one way or another, this kind of scam hurts everyone in the industry.

Definition For The Day

Here is a word that comes up from time to time, and buyers and sellers -- particularly investors involved in a 1031 tax-deferred exchange -- have wanted to better understand what it means.

The phrase is: "Subject To"

Here are two definitions:

a. The act of acquiring property with the existing financing and without formal assumption.

b. A term in a contract creating a condition which must be satisfied prior to the close of the transaction.

As an investor, be sure you are working with an experience agent who understands the intricacies of commercial/investment real estate.

My Brokerage Is Changing Its Name

Well, we are changing our name . . . slightly.

I am now part of Prudential Commercial Real Estate. Why,? you ask . . . Don't you know you are already with Prudential?

Of course I know! Its just that the letters "CRES" were part of the name until this week. It was confusing for many, as the acronym stood for "Commercial Real Estate Solutions." See the redundancy?

It may all seem silly and no big deal. Until you think about all the stuff that needs to be changed. Because it is a legal matter.

Anyway, I was out yesterday peeling vinyl off some signs at my listings. And I am in the process of making sure all of my online signatures, email, blogs and social network sites reflect the change as well. It all has to be done this week. Other silk screened signs may have white duct tape used to cover the letters no longer being used until new signs can be ordered. Hmmm....

For some it sounds simple. Its not. Thankfully its someone else's reponsibility to change over business cards, letterhead, envelopes, email addresses, office websites, remind agents to change their individual websites, marketing literature, bound property marketing packages, brochures, consumer guide's, investment discussion pieces, electronic presentations, etc., etc., etc.

Oh what fun . . .

Respectfully submitted,

Brent Greer
Prudential Commercial Real Estate

Financial Meltdown: The Villains Are On Your TV

As I sit here calmly . . . well, that is trying to be calm, I am choosing my words carefully.

Okay, here goes . . .

THIS IS WHAT I HAVE BEEN SAYING FOR MORE THAN A YEAR!!!!!

Whew! Now, with that out of my system, I point you toward a story that illustrates where a big chunk of the "housing crisis" eminated. It wasn't just financiers, or developers, or people in Congress who now say they have the answers, but were asleep at the switch when these problems bubbled up more than five years ago.

No, the problem -- is on your TV.

The idiotic "flip my house" shows, combined with the "get it for nothing" shows, competing with the "oh baby my house is worth a fortune" shows . . . THEY are a huge part of the culture today that doesn't understand why banks have tightened credit standards, or that their place doesn't appraise where they think it should. Viewers of these shows weren't investors -- they were gamblers. ARE gamblers. And they lost. Investors buy and hold and trade for long term wealth growth and to shelter taxes. Gamblers are looking for a fix for their cash habit. Something to put some extra bucks in their pockets, but didn't care about tax implications. Or that the false values that were being affixed to these properties would ultimately crumble because there was no foundation beneath them (like the construction metaphor?).

Read it. Understand it. Pass it on. Like I said early on, this is not news to me nor to regular CASH ON CASH readers. Old news. But for many, listen to hear any jaws dropping as folks who played this roulette wheel realize what they were a part of and how they drove the problem to become worse.

Now . . the writer takes a tongue-in-cheek viewpoint on this. He actually is being kind of silly with his story. But the guts of it are right on. These television shows encouraged people to drink the no-money-down koolaid, and many got hosed. How is that for blunt?

Okay, I'm off my soapbox now. . . .

Financial Humor

Okay, its a rough market out there. But here is a little financial humor to give you a chuckle, if even for just a moment.

*********

Definitions: The New Financial Jargon....

Bull Market -- A random market movement causing an investor to mistake himself for a financial genius.

Bear Market -- A six to 18 month period when the kids get no allowance, the wife gets no jewelry and the husband gets no "loving."

Value Investing -- The art of buying low and selling lower.

P/E Ratio -- The percentage of investors wetting theias the market keeps crashing.

Broker -- What my broker has made me.

Standard & Poor -- Your life in a nutshell.

Stock Analyst -- Idiot who just downgraded your stock.

Stock Split -- When your ex-wife and her lawyer split your assets equally between themselves.

Market Correction -- The day after you buy stocks.

Institutional Investor -- Past year investor who is now locked up in a nuthouse.

Profit -- An archaic word no longer in use.

********

Rolling your eyes, or chuckling at this point?

Either way, I would respectfully disagree with the last point. Profits are out there. You need to know how to find them. And understand -- and respect -- the difference between greed . . . and smart, planned growth.

MF Rent Stability Depends On Region Of Country

There is a report out today that states apartment rents are plummeting around the nation. Plummeting is too strong a word, and it is NOT in every area of the United States. The culprit: lower wages and job losses.

A report earlier this month stated a similar trend, but I would respectfully suggest that the authors need to do a better job of writing their stories. You cannot highlight a half dozen cities, all with unique problems facing them (big boom times, tons of construction and now construction layoffsl; or financial centers with financial execs and other employees being laid off; etc.) and say it is indicative of the entire nation. The trend depends on where you are talking about.

For example, there are many major cities that are seeing rents stabilize, not drop. True, shares in the largest companies that own high-end apartment complexes have been dropping. But that trend is not indicative of every apartment owner. Once again, it depends on . . . Location, Location, Location.

So for those flippers out there who were hoping to earn some cash flow while waiting out the market, you are out of luck (and you CoC readers know how I feel about flipping -- it is gambling and the consequences are now being felt).

The softening rent trend, where it is happening, is generally good news for potential renters. Property owners who know what they are doing can do some simple things to more than even out for any vacancies suffered over the long run. Its easy. Keep rents slightly under the market and do everything you can to resist the urge to increase them as high as possible. What happens? Your renters stay longer, thus evening out the situation.

A Grubb & Ellis report looking at 2009, focused on multifamily opportunities in Orange County, Calif., noted two contradictory trends (that I have been writing about for almost a year now).

As I have written in many previous CoC posts, the pool of renters is increasing because foreclosures forced more homeowners into apartments. In addition, many renters who had planned to buy either cannot, or are waiting for even more bargains in hopes that home prices will decline farther. Conversely, also as I have written, there is an increase in supply as more single family homes and condominiums that aren't selling are leased to renters, putting pressure on traditional multifamily. Interestingly, but not unexpected, many young people fresh out of college are having trouble finding work. As a result, they are moving in with roommates or moving (moms and dads, here is where you gasp) back home, decreasing the pool of available renters.

The bottom line: Prospects for the apartment industry in the long term are incredibly strong, despite islands of dropping rents in a handful of markets around the nation. Good management of a complex that is in a relatively stable market will not see "plummeting" rents, but a stabilization.

UPDATE......... I should have mentioned what is happening in Central Ohio since this area represents the majority of my business transactions. Multifamily in Columbus remains generally strong (remember what I said about regional differences?) due to the large pool of college students who rent here (an estimated 100,000). In addition, while apartment vacancies are expected to uptick just a bit, asking rents are forecast to climb nearly 2 percent, with effective rents edging up some 1.7 percent, according to market forecasts. Says one prognosticator, the Columbus apartment market will end 2009 "with healthier fundamentals than earlier in the decade."

More food for thought.......

So What?

Recently, some folks who work in the securities business have been suggesting it is insane to invest in commercial/investment real estate right now. Of course they have a vested interest in making such claims. And it might also be said that I have a vested interest in teaching investors the benefits of investing in income-producing properties.

With that said, here is where things stand now, nationally and regionally. Warehouse/industrial is off pretty much everywhere. Office is stable and declining somewhat nationally; in Central Ohio the office market is stable with a higher vacancy rate inside the 270 beltway (it has always been higher), and performing better in the suburbs. Medical/office real estate is booming right now. New hospital development has been frozen due to the downturn as developers weigh their options and figure out how to re-finance their loan packages. But medical office building development for outpatient programs continues to grow. Why? We are aging and there is demand for all kinds of medical and medicine-related services.

Multifamily continues to be strong in most sectors. Pressure is strong due to people losing their homes to foreclosure and needing a place to live, although there is minimal softening depending on your market due to single family homes being converted to short-term rentals to generate extra cash to pay the mortgage. Retail is in a slump and will continue to be a problem. The best opportunities in retail are to reposition distressed properties that have a strong upside.

The bottom line is do the numbers, run your analysis to see what works and what doesn't. Don't just look at cash flow, but after tax benefits as well.

Investors weighing their options right now need to keep this in mind regarding income-producing real estate: Themore people you have paying rent -- whether they be office tenants or multifamily residents -- the more people you actually have paying your bills and into your retirement pension. Every monthyou make a payment -- your net worth increases. The rent payments you receive, or the management company managing the property(s) collect for you, is paying for your net worth. The best manager of money is the one who is collecting other people's disposable income.

Think about it this way . . . if you work for someone else they are going to tell you what retirement you will have and what your income is. If you create your own revenue streams, you determine your income and what kind of retirement you will have waiting down the road.

Buying Stuff vs. Investing For The Future

Occasionally on LinkedIn, a social networking site for business, I will answer questions posed about real estate, or personal investing, or wealth management, etc. Recently someone asked about how to save money. I have had several emails and comments come to me from my response that I thought it worth revisiting here.

So what you will read first is the question as it was posed, and a clarification from the person seeking feedback, and then my response.

*****

"ARE YOU SAVING MONEY?

"The U.S. savings rate -- for reasons I have not been able to understand despite living in New York for 20 years -- was until very recently below zero. Are you now saving money? Why now? Why not before? What are you doing differently to find these funds?

Clarification added 8 days ago:
"OK, not to sound deliberately stupid, but saving -- to me -- means apportioning some of your income (not your home equity!) for the future, and especially for retirement. Other than Social Security (which some won't get) what else will people live on in old age? I do not get what exactly people are spending every single penny ON... "

I replied:

"I agree with xxxx. These numbers do not include pre-tax monies diverted to 401(k) plans, of which there are MANY. These numbers only look at money in bank savings accounts.

"Here are some ideas on saving -- Go out to eat less frequently. If you are planning to take the family out to the movies, and change your minds at the last minute, put those funds aside as if you HAD spent them at the movies. That is how you force yourself to save money. When you get your paycheck, pay yourself FiRST. Put 5 percent of your net pay into a savings account. If no other reason than for emergencies. But of those who don't save? What do they spend every penny on?

"Let me answer it another way. I have many people who tell me they wish they could get into investment real estate, but they never have any money. Yet they bring home all kinds of goodies and toys all the time. At the same time, I have people who ask me "who is your competition?" They expect me to name other large commercial/investment real estate advisers. They are surprised at my answer (which answers both questions): Wal-Mart, Panera Bread, Lexus, Harley-Davidson, Rolex, Best Buy, etc. Our culture is one of buying "stuff."

"It makes people feel good to have "stuff." Me? I would rather buy properties where my tenants' rent buys my stuff for me. But then...thats just me."

Food for thought.

The Vultures Are Coming Out

As the media and the incoming president continue their lockstep doom and gloom scenarios about real estate, the vultures are coming out. The fly-by-night gurus who hawk books with get-rich-quick schemes.

True, there are opportunities galore out there. But buying a book and following some of these strategies is a recipe for disaster unless you know what you're doing.

"Lock and Reassign" is the new catch phrase. Well, it isn't new, but it is what unsophisticated, first-time investors are latching on to as real opportunity. Only, while the get-rich-quick books and DVDs are still pushing flip straegies, those days are dead (hopefully). Essentially, the phrase means to lock in control of the property, then find another buyer -- reassign it -- before your original transaction closes. In theory and practice, you have two transactions, perhaps in a single day. Buy it cheap, resell it at a higher price. Pocket the difference.

Here's the other problem with that "great" approach. You are subjecting yourself to short-term capitals gains taxes -- the taxes that President-elect Obama says he is going to raise.

I will say this once more . . .

THE PATH TO WEALTH IS NOT TO FLIP. THAT ONLY PUTS SOME EXTRA CASH IN YOUR POCKET FOR THE SHORT TERM.

THE PATH TO WEALTH IS TO BUY AND HOLD, TAKING ADVANTAGE OF SEVERAL KEY ELEMENTS:

-- Income: Your renters (Office, Multifamily, Single Family, Warehouse, etc.) pay your bills for you.

-- Leverage: The bank does the heavy lifting

-- Appreciation: Investment properties will continue to appreciate

-- Tax Advantages: Deductions, depreciation/Cost-recovery

-- Hedge Against Inflation: Wealth forced upon property owner

-- Pull Money Out/Refinance: Tax free loan you never have to pay back (buy more property, take a trip, etc) because your tenants pay the note via their rent payments

-- Manageable, Controllable Risk: Which means no “flipping” (flipping is a way to part a fool from his money)

-- Mailbox Money: The investor uses low-cost, professional management to oversee the investment, and receives a check once a month or once a quarter. A truly passive investment that grows in equity and appreciation.

-- Group Ownership – Less upfront investment per person (100% Of Investment Goes Toward Property)

-- 1031 Tax Deferred Exchange: Trade up to larger properties with larger gross and net incomes, and pay NO Capital Gains Taxes indefinitely.

AFTER TAX RETURNS is what investors should be considering, but too many new investors aren't being made aware.

Right now, cash is king. Residential properties can be picked up for a song. Banks are finally starting to loosen up and shed inventory that has been forclosed. REOs ("Real Estate Owned" by the banks) have opportunity. And they can be found in neighborhoods of all income levels.

BUT, and this is a BIG BUT . . . investors need to think outside the box. There are plenty of investment opportunities besides single family residences, which continue to drop in price and value. It is definitely a good time to get in, but investors should not limit themselves to this single type of real estate. There are fantastic opportunities on multifamily, particularly in campus areas, small offices and more.

Tomorrow, I am going to write about cost segregation. I covered it in a rather simple way in an earlier post last year. I plan to go into far more detail about how this tool speeds up depreciation and puts additional after tax dollars in commercial/investment property owners' pockets every year.

The Looming Pension Implosion

The coming implosion of private and public pension funds may make the Fannie Mae/Freddie Mac boondoggle look like child's play.

A lot of people think their pension funds are safe. Well . . .

Anyway, this is worth reading. One of the reasons why commercial/investment real estate has been seeing a movement of pension and other retirement monies into well analyzed, properly managed investment properties.

The full story is at Reason magazine. Read it and pass it on.

Moving Up The Ranks

Business First of Columbus, a weekly business newspaper in Central Ohio, each year publishes something called the "Book of Lists." The book includes rankings of top businesses in a number of categories, such as financial planners, banks, insurance companies, etc.

The latest book is out, and our brokerage, Prudential CRES Commercial, has cracked the Top 10. We are ranked number nine. Last year we were ranked 16th. Actually we would be ranked higher now considering the growth we have experienced since the book went to print. The rankings are based on the number of licensed Central Ohio brokers and sales agents at the brokerage. Our growth is a testament, once again, to the late Bob White, whom I have written about a couple times recently. He knew how to bring in the best and brightest. And though he did not live to see our big jump up the rankings, he is responsible. Somewhere, he is smiling.

Also, a surprise. My colleague Nidal Saleh and I were named in the publication as the top agents in the company for 2008 in brokerage and leasing. A shock when you see your name in print and you had no idea ahead of time. A nice shock, though.

A Little Humor . . . 'What If?'

Time for a break from serious news and endless boo-hooing about the real estate mess. There are opportunities galore out there but you would never know it from the news coverage.

This is a vid that has been making the rounds on the internet. It brought back the memory of a sketch on SNL years ago ..... speculating on what the outcome might have been had Emperor Napoleon had at his disposal -- a B-52 bomber.

So I give you the story of one man's experience as the residential real estate bubble bursts around him . . .




Oh BTW, in case you are new to CASH ON CASH, you might want to know that I agree with the main character's opinion on flipping. I can't stand it. How many ways can you say the word "gambling?" Anyway, let this give you a grin.

Heard Today . . .

The following two songs were performed or played at the funeral service of my friend and colleague Bob White, a U.S. Army Special Forces veteran, respected commercial Realtor, and principal broker at my office.

A courageous, short-term battle against cancer, borne with great dignity. Not surprising from an old SF soldier who played the hand he was dealt and fought the good fight . . . as best he could, to the end. His last mission, self-imposed, was to live until Christmas. He made it and then some, by a few days. A hero for his country, a hero at home, a hero in the office, Bob will be laid to rest at Arlington National Cemetery.

Today I witnessed an incredibly moving tribute, to a humble man who never asked anything of me except how he could help.

The Ballad of the Green Beret

Fighting soldiers from the sky
Fearless men who jump and die
Men who mean just what they say
The brave men of the Green Beret

Silver wings upon their chest
These are men, America's best
One hundred men will test today
But only three win the Green Beret

Trained to live off nature's land
Trained in combat, hand-to-hand
Men who fight by night and day
Courage peak from the Green Berets

Silver wings upon their chest
These are men, America's best
One hundred men will test today
But only three win the Green Beret

Back at home a young wife waits
Her Green Beret has met his fate
He has died for those oppressed
Leaving her his last request

Put silver wings on my son's chest
Make him one of America's best
He'll be a man they'll test one day
Have him win the Green Beret.

American Soldier

I'm just trying to be a father,

Raise a daughter and a son,

Be a lover to their mother,

Everything to everyone.

Up and at 'em bright and early,

I'm all business in my suit,

Yeah, I'm dressed for success from my head down to my boots,

I don't do it for money, there's still bills that I can't pay,

I don't do it for the glory, I just do it anyway,

Providing for our future's my responsibility,

Yeah I'm real good under pressure, being all that I can be,

And I can't call in sick on Mondays when the weekend's been too strong,

I just work straight through the holidays,

And sometimes all night long.

You can bet that I stand ready when the wolf growls at the door,

Hey, I'm solid, hey I'm steady, hey I'm true down to the core,

And I will always do my duty, no matter what the price,

I've counted up the cost, I know the sacrifice,

Oh, and I don't want to die for you,

But if dying's asked of me,

I'll bear that cross with an honor,

'Cause freedom don't come free.

I'm an American soldier, an American,

Beside my brothers and my sisters I will proudly take a stand,

When liberty's in jeopardy I will always do what's right,

I'm out here on the front lines, so sleep in peace tonight.

American soldier, I'm an American,

An American,

An American Soldier