Staff Spotlight: Mike Kronzer and Joe Vieira

This issue of the Insider features two of Borelli’s newest property managers, Mike Kronzer and Joe Vieira. Both men bring an extensive background in managing family real estate holdings to Borelli Investment Company. This makes them an ideal fit for Borelli’s long-time property management philosophy that it manages real estate for third-party owners as if it owned the property itself.

Background:Mike — Has been a real estate broker and commercial property manager since 1992. Prior to joining Borelli, was responsible for more than 300,000 sq. ft. of office, R&D, and manufacturing space in Los Gatos and Campbell. Born and raised in Silicon Valley, Mike is a graduate of San Jose State University.

Background:Joe — Is a life-long resident of the Santa Clara Valley, who graduated from Bellarmine College Preparatory in San Jose and St. Mary’s College in Moraga. Was part of a public accounting firm for more than a decade, and also served as director of finance and administration with a major labor union, which covers four Western states and represents more than 40,000 members.

Responsibilities:Mike and Joe will both be responsible for managing and maintaining commercial properties in Borelli’s four million square foot portfolio to maximize their asset potential, while responding promptly and efficiently to tenant needs. Joe specializes in retail properties and uses his background as a CPA to maximize the ROI for owners. Mike efficiently manages a broad cross-section of properties in office, R&D, and industrial categories.

Business Philosophy:“We are committed to helping property owners and investors provide a safe and comfortable environment for tenants, stay within budgets, and generate the highest possible returns for their investment.”

Secret to Success:“We focus on providing personalized services and assistance evaluating and selecting properties, obtaining favorable lease terms, maximizing tax advantages, minimizing expenses and turnover, managing operations, and maintaining properties at their highest and best uses,” said Mike.

Hungry For a Tasty Deli Opportunity

If you (or a client) have a taste for the deli business, here’s an exciting new recipe for success. Don’t lease your space—buy it.

Delicatessens often face high labor costs and narrow margins, making it critical to manage expenses efficiently. One of a deli owner’s largest expenses is occupancy costs.

Now, at Junction Office Center, 2051 Junction Avenue in San Jose, you can purchase space for your deli—and lock-in your occupancy costs, while enjoying the significant tax advantages and other benefits of property ownership.

• High-quality, 1,286 sq. ft. facility
• Exclusive access to 400 sq. ft. outdoor dining area
• Only deli in 52 unit, 77,400 sq. ft. office complex—for built-in clientele
• Street signage provided
• Ideal Golden Triangle location—56,000 employees within 3 miles and 220,000 employees within 5 miles
• Plumbing and electrical infrastructure in place
• Plenty of customer parking
• Turnkey plan available

BIC-015 fund in conjunction with Aster Avenue Associates raises $10 million; Sunnyvale townhome project now underway

Opportunities are often fleeting, but this one was particularly short-lived.  Borelli Investment Company raised $10 million in only one week for its latest investment fund—BIC-015—offered in conjunction with Aster Avenue Associates.  Investors snapped up the $100,000 shares, which are projected to pay an annual return of 12 percent over the expected 18- to 24-month holding period.

With the money for the project now raised, KB Home—California’s largest builder of new homes and one of the nation’s top five—has begun construction of a community of 80 townhomes in a close-in location near Lawrence Expressway and Monroe in the heart of Sunnyvale. The townhomes will put residents close to high-tech jobs and near major transportation arteries, in addition to CalTrain. KB Home plans to price the townhomes toward the affordable end of the spectrum for Silicon Valley.

“Affordable housing remains critical for Silicon Valley’s vitality,” said Ralph N. Borelli.  “KB Home recognized that, and so did the investors who bought into the fund. We continue to look for other projects that make economic sense as the target vehicles for future investment funds.”

Interested parties who would like more information about the recently closed fund, or who would like to inquire about future investment opportunities, can reach Ralph Borelli at (408) 453-4700,  or e-mail ralph@borelli.com.

This is not an offer to sell, nor a solicitation of an offer to buy shares in any current or future investment funds offered by Borelli Investment Company. Investment shares in BIC funds are offered only in conjunction with the offering prospectus. Please read carefully before you make any investment decision, and consult with an investment professional for advice and guidance regarding your personal financial situation.

When It Comes to Leasing… The Little Things Borelli Does Mean a Lot

The executive vice president of a small technology company based in San Diego hops a flight to San Jose. An hour and a half later, he’s in his rented car leaving the airport. His mission: find space for a small secondary location in Silicon Valley. Where does he turn?

His specific interests and requirements create a challenge for many brokers:

• He is looking for less than 1,500 square feet of space. In fact, he would prefer it to be no more than 500 square feet to start.
• If he can find an office in the 500 square foot range, he would like a flexible lease that will enable him to expand his space quickly and cost-efficiently if the location “takes off”.
• Because there’s no guarantee that this secondary location will be successful, he needs a short-term lease so he doesn’t get stuck with having to sublease the space.
• He wants to be able to sign the papers and get the office set up within a week, when the regional manager will be joining the company.

“Honestly, there aren’t many brokers who would work this small space requirement on such short notice,” said Buddy Parsons, senior vice president-asset management for Borelli Investment Company. “We are geared to handle any type of space requirement, regardless of the size—big or small.”

Borelli Investment Company provides real estate services that go far beyond the ordinary, and its leasing services are tailored to companies with smaller space requirements and for which little things—such as added flexibility and responsiveness—mean a lot.

Smaller Spaces, Shorter Leases

One of Borelli’s specialties is serving emerging growth companies and start-ups. Because of this first-hand experience over the years, Borelli Investment Company’s team of talented agents and brokers has gained a true understanding of what smaller companies need to succeed.

To start, Borelli has one of the largest inventories of smaller office and industrial spaces in Silicon Valley, according to Parsons.

• A high percentage of Borelli’s inventory ranges from 1,200 square feet to 6,000 square feet. Often, Borelli has an array of options within the same park, so if a client outgrows a smaller space within a year or two, he or she can move to a larger space within the park and won’t have to undergo a major relocation.
• Borelli has a surprising number of spaces under 1,000 square feet, with some as small as 300 square feet for one- or two-person businesses. This makes Borelli the ideal choice for out-of-the-area companies looking to start a secondary office in Silicon Valley, or for start-up businesses that need a modest space to lease.

In addition to smaller spaces, Borelli is also willing to work with clients on short-term leases.

“While we obviously prefer multiple-year leases, we recognize fast-growing companies have more difficulty committing for extended periods of time,” Parsons remarked. “As a result, we’ll agree to leases as short as one year. We’ll also work with a client who outgrows a multiple-year lease within the first year, and have been known to terminate a lease obligation if the client agrees to move to a larger space within the same business park.”

Creative Leasing Alternatives

Sometimes, one of the biggest challenges to completing a lease is the business’ or individual’s credit history. Many new or emerging companies—such as those that have just signed incorporation papers or home businesses that suddenly need office space due to the addition of employees—lack any credit history.

Borelli has a number of creative solutions for meeting a building owner’s credit requirements, including additional security deposits, prepaid rent, or a personal guaranty. Borelli is always willing to work creatively with a client to help that client get into a lease.

Local Knowledge and Improved Responsiveness

In today’s fast-paced business world, it is not uncommon to have a client fly into town or call Borelli with a need for business space with a few days. Very few brokers or building owners can get a company into the right space and handle all the paperwork within 48 hours. Borelli has done that many times for its clients.

“We have an outstanding group of agents and brokers ready to respond,” explained Parsons. “Lock boxes are on-site at nearly every property we represent, so in the rare case we can’t tour a client through a vacant space, that client can gain quick access himself or herself.”

One of the keys to Borelli’s responsiveness is superior knowledge of its managed properties, according to Parsons.

“For example, we may have a client who has a special leasing requirement, such as power, HVAC, or specific building improvements,” he said. “Because we have managed and leased many of our properties for years, our people can match a given leasing requirement to a particular property. Our owners also empower us as decision-makers, so we can answer questions such as ‘Can I add an extra door here or install a power outlet on that wall?’ without lengthy delays.”

In addition, Borelli is highly responsive when it comes to maintenance or other requests once a business has occupied its space. Landport, a web-based client support system, enables tenants to submit service requests online, quickly and easily. Borelli property managers and field personnel are notified immediately via cell phone, pager, or PDA. Landport even lets tenants track the status of a request online until it is completed.

Of course, Borelli offers the essential qualities every client is looking for in all of its properties:

• Competitive pricing
• Immediate occupancy
• Flexible terms
• Large and varied inventory

But when it comes to specific experience, market knowledge, and willingness to go beyond the ordinary to accommodate clients with special needs, it’s the little things Borelli does that make a BIG difference—whether a client’s space requirements are large or small.

For more information about Borelli Investment Company’s leasing services or its current inventory of space, contact Buddy Parsons at (408) 453-4700, or e-mail buddy@borelli.com.

15-Year Perspective: Resale Value of Borelli’s Commercial Condos Rises Up to 18% Annually

Commercial condominiums are one of the hottest trends in real estate today. In a commercial condominium transaction, rather than leasing space, a business buys one or more units. That business then enjoys all the benefits of property ownership, such as:

• Tax deductions, including IRC Section 179 write-offs of up to $112,000 and accelerated depreciation through the cost segregation accounting method
• Loan interest deductions
• The ability to lock-in occupancy costs
• Equity buildup plus potential long-term appreciation

The smaller size of commercial condominium transactions—for example, purchasing a single unit of perhaps 1,000 to 3,000 square feet rather than an entire building—is what has driven the hot sales trend. This puts commercial condos within the reach of almost any business or professional firm.

In addition to creating a “forced savings” plan for the owner of a small business, one of the big attractions of commercial condos is undoubtedly the prospect of owning an asset that will appreciate over time, and can be used for retirement or to pass on to family members. As a leader in the commercial condominium business—both as a developer and as a reseller—Borelli Investment Company has gained a unique 15-year perspective on how commercial condominium values have increased over the years. And in short, the answer is—very well.

Better Than Expected Return on Investment

Many commercial condo buyers are initially attracted by the equity buildup and tax benefits. Instead of “throwing away” thousands of dollars on rent, payments increase the equity in a condo property, and enable the business to write off the payments against taxes. When creating a “lease vs. buy” analysis for the prospective buyer, Borelli Investment Company has been very conservative when it comes to appreciation.

Run your own numbers using our on-line lease vs. buy calculator. Use Borelli Investment Company’s exclusive Lease vs. Buy Calculator to do a personal analysis of how much money you can save when buying an office condominium compared to leasing space. Plug in actual numbers. Get the answer in seconds.

“We have typically used a figure of two percent appreciation annually,” said Ralph Borelli. “This was based on a general historical model for Silicon Valley commercial real estate. Recently, we decided to conduct a more specific study of our own.”

Over the years, Borelli Investment Company has developed a number of commercial condominium properties—both conversions of existing properties and construction of new buildings. More than 150 units have been sold at the three complex listed below, and at Borelli’s newest project—Junction Office Center (first sale, December 2005). Many units have changed hands at least once since the original sale. Based on an in-depth analysis of current resales at our previously developed commercial condos, Borelli calculated the following rates of appreciation (see table for detail):

• De La Cruz Commercial Condominiums—first sale, January 1992: 9% annually
• Ringwood Business Center—first sale, June 2004: 18% annually
• AirTech Office Condominiums—first sale, December 2004: 15% annually

“Those are remarkable figures,” Borelli noted. “With a wealth of history on De La Cruz, an owner who bought in 1992 would have enjoyed nine percent annual appreciation, 4 1/2 times what we have been using in our analysis for buyers. And the recent hot market for commercial condos seems to have resulted in even higher value increases at our newer complexes.”

Of course, past returns do not guarantee future results, and Borelli Investment Company encourages all prospective buyers to talk with their advisors. Borelli currently has new office condominium units available at just two complexes: AirTech Office Condominiums (only two units remaining) and Junction Office Center (nearly 70 sold or occupied).

It All Adds Up

To further assist potential buyers, Borelli Investment Company has created a powerful, online Lease vs. Buy Calculator. This exclusive tool enables buyers to enter a variety of actual estimated figures for their current leased space, projected price per square foot, potential down payment, loan sizes and rates, tax rates, and more for a specific unit or units. Then, the Calculator draws upon its detailed data to provide “real” calculations in minutes—based upon the various scenarios—so buyers will know precisely where they stand.

“On virtually every projection, buying comes out ahead of leasing on an after-tax basis,” stated Borelli. “With these figures at their fingertips, buyers can make better decisions.”

For more information about Borelli’s Junction Office Condominiums, contact Larry Bengiveno larry@borelli.com or Monte Pasquinelli about Airtech Office Condos monte@borelli.com. Or call (408) 453-4700.