Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/897832
1 2 Industry Standardization More than any other factor, the creation of a common language for commercial real estate is an important theme heard from CCIMs. It brought clarity to the field. Before CCIM training, commercial real estate did not incorporate financial and market analysis princi- ples. "In some parts of the country, cash flow meant the same thing as net income," says Ralph Varnum, CCIM, founding principal of Varnum Armstrong Deeter in Overland Park, Kan. Varnum is co-chair of the Insti- tute's 50th anniversary committee and was 1985 Insti- tute president. "Today, if the California owner tells an Illinois banker what his net operating income is, both parties understand just what is meant by the term," Varnum says. "If a Texas broker has a listing in Austin and a Minneapolis broker represents a REIT interested in purchasing, all parties are on the same page when they are discussing a 7.65 percent cap rate." The result of this common language is an "i ncreased level of professionalism," says Patricia Lynn, CCIM, CDEI, principal at LYNNK in San Francisco. "It's also provided access to commercial real estate for many residential practitioners who wanted to transition to commercial real estate, but didn't know where to obtain the common language." While universities offered real estate programs before the Institute, "It took organizations like CCIM to stan- dardize terminology, procedures, and business models," says Steve Cannariato, CCIM, MET, CDEI, manag- ing broker of Hawkins & Cannariato in Boise, Idaho. "That's one of the key contributions CCIM has made to our industry." Quality Education With the education bringing that common language, it also brought practical experience through real-world examples and the experience of those who teach it. "This gives students a much greater understand- ing of and focus on the practical applications of the concepts given," says Craig Blorstad, CCIM, CPA, CFO of WS Property Group in Bloomington, Ind. What CCIM education content has changed the industry? " I would say that the Institute has pro- moted the use of the internal rate of return as a more meaningful single-number analysis of a property," says Lou Nimkoff, CCIM, CPM, commercial real estate adviser with Brio Real Estate in Winter Park, Fla. "Until the Institute really started pushing commer- cial real estate education, few people understood it, and even fewer used it. Being able to understand what those numbers really mean helped practitioners show a potential investor what their real return would be." Another key concept is standardization of the net operating income calculation through the Annual Property Operating Data, according to Blorstad. "Cal- culating NOI is critical when reviewing debt under- writing or possible appraisal issues," he says. "Many investors may not learn the importance of this until reversion, when the next investor does buy on NOI." Key to its education mission, the Institute's rela- tionship with the National Association of Real- tors has helped it reach a much broader audience. "Through its affiliation with NAR, the Institute has been able to reach out to the (now) 1.25 million Realtors and teach them that commercial is different from residential," Nimkoff says. "I'm amazed at the number of residential practitioners who think that making a deal on a commercial property is basically the same thing." COMMERCIAL INVESTMENT REAL ESTATE / NOV.17 13 CCIM.COM "It took organizations like CCIM to standardize terminology, procedures, and business models." — Steve Cannariato, CCIM, MET, CDEI "Until the Institute really started pushing commercial real estate education, few people understood it, and even fewer used it." — Lou Nimkoff, CCIM, CPM