Retirement & Your Income Properties – Royal Atlantic Los Angeles Distribution Center Leases

From the desk of John Scatoloni, March 19, 2012, Encon Commercial Los Angeles Warehouse Rentals.

Creating sustainable wealth is undoubtedly the goal of real estate owners in Los Angeles. Yet first, we need to realize that in many cases, a landlord was once an established business owner with keen financial foresight to own the property where the business is located. We can ask ourselves, how did he get there? Well, owning a manufacturing or import/export warehouse is, and will always be, the fundamental tool to controlling fixed costs and reducing risk in business development. Such success firmly positions the owner’s of a warehouse in direct contact with tenants.

Encon Commercial serves a multitude of clients at different stages in the ownership cycle, from young entrepreneurs who are saving for the opportunity to purchase and lease back to their company, to seasoned investors with several properties under lease contract to tenants; well after the owner’s business has run its course.

In order to create a rental income stream, we need to know the strength of the tenant. In an owner/user scenario the investor already knows intimately the strength and financial capability of the tenant, as it is their own business. In turn, the lending community serves to structure a loan (usually SBA financing) at enticingly low rates to create the incentive to invest into the company and create future profits.

We all understand that renting is a necessary evil, but required until an owner can foresee and realize the optimum long-run conditions. This decision incorporates financial capability, a right-size analysis, a strategic location, the right employee mix, and a clear sense of market timing to purchase. Once this stage is recognized, called “Plateau-ing”, we advise our clients to allocate financial resources to the purchase of a warehouse, whereby creating the foundation for personal wealth through ownership and to utilize the contractual structure of a lease to one’s company in order to hold the property as it appreciates.

At Encon Commercial we interpret the warehouse acquisition as a long-term play, no less than a ten-year hold, with the goal to achieve real lease and sale value appreciation. In many cases, we find that ownership spans the entire life of the company and represents the final security net for the owners. Whether the final goal is cash out of the property at business end or to re-position the property as a viable warehouse to a third party for lease, Encon Commercial offers a proven strategy and a team of professionals to achieve these results no matter where our clients are in the ownership cycle.

On March 18, 2012, a final milestone was achieved by our real estate advisory team on behalf of Royal Atlantic. Although seemingly average in economic terms of the market, the individual impact was far-reaching in terms of retirement security for one hard working family. The Encon Commercial team concluded four leasehold transactions and one disposition, that culminated in a secured rental income stream to the retiring owners, and set the stage for the family business to make the necessary transition to the next generation. Encon Commercial is pleased to conclude a long-term lease, free of debt on the property, of more than $12,000 per month. As all of us know, this will not make the nightly news, but in every aspect has positively altered the outlook on the economic livelihood of our friends and family at Royal Atlantic.

Thanks again to Royal Atlantic for the friendship, the long-term trust, and the successes we have shared together. We look forward to watching your grandchildren grow in your footsteps.

John Scatoloni, Managing Director
Encon Commercial Real Estate Services

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