Benefit of USA Commercial Property

Benefit of USA Commercial property

A lot has been written about housing propertyinvestments but the areas of commercialproperty investments are not very common withmost of US. A huge number of investors aremore at relieve with investing in housingproperty as they are common and comfortablewith it.

What is Commercial property?

Commercial property is office spaces, tradeunits, and industrial factory sites, warehouseand developed industrial sheds. The investmentprocess and income are quite different to thetraditional residential.

September 30, 2008

Why Invest in Real Estate?

Investment Total Returns

5.3%

-22.0%

7.9%

13.3%

0.2%

5.6%

14.2%

5.2% 4.3%

11.8%

3.1%5.4%

-30%

-20%

-10%

0%

10%

20%

1 Year 3 Year 5 Year 10 Year

NCREIF - NPI S&P 500 Lehman Govt. Bond Index

Past performance is absolutely no

guarantee of future performance,

especially in the short-term and

maybe not in the long-term

Top 200 Pension Fund Allocations

* 2008 is estimated based on a 20% decline in total assets and constant real estate dollars allocated

Real Estate Allocation to Total Assets

Source: Pensions and Investments, UBS Research, Cornerstone Research

Uh-oh!

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08*

$ t

rill

ion

s

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

Total assets (L)

Real estate allocation (R)

0

25

50

75

2001 2002 2003 2004 2005 2006 2007 2008

Billio

ns

of

US

$

Apartments Industrial Office Retail

Monthly Sales Volume by Property Type

Commercial Real Estate Sales Activity

Source: Real Capital Analytics, Cornerstone Research 8-28-2008

Portfolio deals, REIT buyouts fueled peak activity in

2007, transactions fall to 5-year low in 2008

Cap Rates Disconnect

Commercial Real Estate Valuation

Source: NCREIF, Cornerstone Research 8-28-2008

Transaction vs Current Value Cap Rates

4%

5%

6%

7%

8%

9%

10%

11%

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Year

Ca

p R

ate

s

Cap Rates - All Sold Props

Current Value (Appraisal) Cap Rates

Why Commercial property is Better Than the Housing Property?

Income & Risks:

The risks low and also the

incomes are also low in the

housing property; however the

commercial property has a

higher profits with a higher risk.

In USA the commercial market

vary from location to location,

but if one takes an overall

analysis of profitable returns

compared to inhabited returns,

the difference is strikingly poles

apart.

Rents Period:

Inhabitant leases tend to be for six or twelve months, which is a

smaller period. Though, a great USA commercial property is

rents out for a higher period of time may be about six to seven

years with a boom of rentals ranging from 15 to 25% yearly.

Quality of Occupant:

The occupant is obviously a vital and critical part of your

property. In best commercial USA property, a large business

tenant occupier is considered a blue chip tenant. They are

probable to rent your property for a long period of time and are

doubtful to default on the rent.

Investment Ratio:

Retail commercial property in USA is frequently much more expensive than buying inhabited property.

Profit of a Commercial Property Investment:

One of the chief advantages of being an landlord of perfect USA

commercial property is that once you have a possible blue chip

business as a renter you have the benefit to flip your property with

a larger outskirts, where you would find ready purchaser offering

you the rich best, your pockets swell more and more, still though

you have been milking the buffalo for over so many years. This is

not the case in inhabitant investments.

Real Estate Portfolio Management

Thanks

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