The Art of the Commercial Deal

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When a CCIM talks, people listen.
At least they do now.
Craig Hull, owner and principal broker of Hull & Company in Rogers, who has been a Certified Commercial Investment Member since 2000, has heard it firsthand.
“A lot of old customers have come by lately, and said, ‘Remember the deal you tried to scare me away from and I went down the street and bought it anyway? Can you help me fix it?’” Hull said.
Putting developers and tenants into the best possible deals and avoiding the pitfalls of a poorly researched business plan are skills that set a CCIM apart in the commercial real estate industry. They are becoming increasingly popular in the Northwest Arkansas market as it experiences the inevitable correction to a decade of booming growth.
Only 8,600 professionals across the country hold the CCIM designation, or around 6.9 percent of 125,000 agents working in commercial real estate.
In Benton and Washington counties, 17 now hold the coveted designation, but only two — George Faucette of Coldwell Banker Faucette Real Estate and David Dallas of Dallas Real Estate Services — earned theirs before 2000 while working in this market.
Jacklyn Perry, owner and broker of JP Realty, and Cindy Morse, owner and broker with Equity Commercial Realty, two industry veterans who earned their CCIM designations in 1995 and 1991 in Dallas and Nashville, respectively, are driving the movement to form a CCIM chapter in Northwest Arkansas.
They feel a local chapter will help raise awareness of just what a CCIM is and what they do while providing valuable networking opportunities for commercial real estate professionals.
“It’s been difficult,” Perry said. “People just don’t know what it is — Realtors or the general public. Someone may get a commercial listing just because they sold someone their house and they don’t know how to market it.”
Before going back into the private sector, Morse, who also consults for The Barber Group of Springdale, convinced Wal-Mart Stores Inc. of Bentonville about the benefits of CCIM training when she was hired six years ago. It now has 13 employees in its realty division who hold the designation, which is the equivalent of a graduate degree in commercial real estate.
“It puts you in a different league among your peers,” Perry said.
Clinton Bennett of Dallas Real Estate said being a CCIM brings “instant credibility.”

Relative Costs
Becoming a CCIM is no easy process, and the low number in Northwest Arkansas until recently is a sign of just how difficult it can be.
Becoming a CCIM requires taking four courses, each lasting a week, followed by a rigorous two-day review and a grueling final exam.
In a commission-based business, taking that kind of time away from work isn’t always feasible beyond the costs of travel, lodging and the $1,000 per class tuition.
A candidate in Northwest Arkansas can expect to pay around $10,000 while earning a CCIM designation. The courses cover financial analysis, market analysis, user decision analysis and investment analysis for commercial investment real estate.
Not only must a CCIM complete the four courses and the final exam, they must accumulate and turn in a portfolio of either 10 transactions totaling $30 million, one transaction worth at least $40 million or a total of 30 transactions.
Bennett took more than two years to earn his CCIM designation by taking a class every six months or so. Faucette earned his in one year, which is highly unusual, but something his position as president of the company gave him a unique opportunity to do.
Butch Gurganus of Colliers Dickson Flake Partners took all of his courses while working in the Atlanta market and didn’t have to bear the costs of travel like candidates in Northwest Arkansas face.
Faucette and Colliers each have two candidates in the CCIM program. Dixie Real Estate recently added its first CCIM with Whitley Dunn earning his in April.
No CCIM classes are taught in Arkansas, which means candidates must travel to larger metros like Dallas, Kansas City or Memphis.
The monetary costs should be considered secondary, Gurganus said.
“It will cost you more if you don’t take it,” he said.

Sophistication
CCIMs are nothing new in mature markets, but they are still somewhat of a novelty in Northwest Arkansas. They can be brokers, Realtors, developers or appraisers.
More people are entering the market from outside Arkansas — as investors, end-users and lenders — and they have demanded the service of CCIMs based on their prior experiences.
Those from inside Arkansas who picked up developing after successful careers in other fields are also now discovering the need for a CCIM’s advice.
In the past, if a developer could simply show a solid number for a projected cash flow for a property, a loan could be secured.
A CCIM will get far deeper into a project. How many other competing projects are in the pipeline, whether utility lines or streets extend to a property or if a piece of raw land will require a rezoning request are factors a CCIM will consider.
The price of land can keep an investor from being able to build a space that can offer a competitive lease rate. Simply having highway frontage or being near another development isn’t nearly enough to make a deal work.
A CCIM can use financial tools to compare vastly different projects like an apartment complex to a multi-tenant industrial building on the same level.
No matter what kind of deal or whether it is a booming or stagnant market, the basics of real estate are the same, Hull said.
“You look at it from national perspective on those courses, not the glamour factor of being right next to this or that,” he said. “The fundamentals are the same wherever you go.”
Bennett said clients can often get caught up in “ancillary items” and lose sight of the most important number.
“Which is the return,” Bennett said. “Don’t get caught up in the excitement of the market in general.”

End Results
Jim Nunnelee of Fort Smith and Bill McClard of Lindsey & Associates are the only two professionals in Northwest Arkansas to hold both the CCIM and SIOR designations. SIOR stands for Society of Industrial and Office Realtors.
As an SIOR, Nunnelee received a call from another SIOR representing Sealed Air, a New Jersey-based packaging company that produces products like shrinkwrap and bubble wrap. The company was looking for a new location for its Cryovac division to supply Tyson Foods Inc. and Nunnelee was able to broker the land deal in Rogers for a 165,000-SF plant that earned a visit from then-Gov. Mike Huckebee when the deal was announced in 2003.
Perry set up a meeting April 10 hosted in Fayetteville by Dixie Development and more than 110 commercial real estate professionals attended to network and learn about available properties.
A second meeting is scheduled for June 19 to bring pros up to date on Rogers and quarterly meetings are planned for Bentonville and Springdale as well.
“You couldn’t have done this a year ago,” Perry said. “Everybody was going and blowing. It was surreal.”
In an industry with the perception of making a sale as the top goal, CCIMs often try to talk people out of bad deals. Perry recently dissuaded a Florida investor from trying to build any more condos in Benton County and McClard spent an hour trying to convince a doctor it would be no easy task to get a piece of property he was considering rezoned.
It isn’t in a CCIM’s interest to see bad deals happen in the market and ones like Hull who saw this market pause coming years ago will be the ones who ride out the current correction.
“Some people are going to quit and go do something else,” Hull said. “Now we’ll see who wants to play.”