This is not a topic we tend to talk a lot about so I thought it was important to reveal to you here how we really think. We eat, breath and sleep commercial real estate. In order to be successful in this business I need to believe sincerely in the benefits and rewards of investing in commercial real estate. This is one area that we do not fully practice what we preach.
What am I talking about
Last month I wrote about: Five key benefits of commercial real estate investing. And yet as a company we have made a commitment to our clients that ICR registrants, partners/shareholders or employees shall not compete with ICR clients by virtue of the purchase or development of commercial real estate within the major market that we work in.
This sounds like we are talking out of both sides of our mouth however our clients are the benefactors of this commitment.
Unique in the industry
I am not aware of any other commercial or for that matter, residential real estate company that has a non compete policy of this kind. It is a policy that must be implemented in the early years of a company’s formation. It would be far too difficult to obtain “buy-in” from a large group of established agents.
Think about it for a minute. You are an established commercial real estate agent in a stable market with good financial resources. An attractive multi tenant office building in your home market becomes available. With no policy, it’s not easy to let that buying opportunity pass you by.
Why our clients appreciate the policy
Let’s carry the above buy-in opportunity story a bit farther. An agent working for a Broker who does not have a policy in place proceeds to purchase the asset. It is highly likely that agent had several investor clients who would have purchased the property had it been presented to them (somewhat of a conflict).
A year goes by and a vacancy comes up in the agent’s office building. The agent has a client’s property with a similiar vacancy listed across the street from his own building. Which property is likely to get leased first?
We still get to invest
Rather than pursue property in our home city we have the ability to invest in secondary markets. The one advantage has been cap rates that are somewhat more favorable than major market caps. As you can guess however, higher cap rates come with somewhat higher risk.
Investing in secondary markets is still not a perfect solution. Situations arise where we do represent clients who trade in these secondary markets and the conflict once again must be considered.
Is this a policy that would be important to you as an investor?