Happy Holidays!

Merry Christmas, Happy Holidays, Happy Chanukah, Happy Kwanzaa, Happy Ramadan!

The most important words above are “Merry” and “Happy”. May you experience both this season! And, may you enjoy a most profitable 2010!

Andy

Let’s Put The Landlord Out of Business!

How many times have I heard commercial tenants say “I don’t care about the landlord!”?  That’s a pretty dumb thing for any tenant to say.  Why wouldn’t a tenant care about the business entity that is responsible for the very foundation, literally, the foundation…of the building, which supports the company’s ability to efficiently and profitably conduct its business on a daily basis?

On many occasions, I’ve written about the perspective of some one-sided landlords who blatantly disregard the needs of their tenants in the name of greed, arrogance, and selfishness.  Some tenants, too, can be selfish and miss the opportunity to build a mutually profitable relationship with their landlords.

Good tenant advisors constantly counsel landlords that, to be truly successful, landlords must care about their tenants’ success, and not just view tenants merely as rent payors.  Afterall, leasing commercial real estate is not like buying a used car.  When buying a, excuse me “Pre-Owned Car”, we often pray that the car will be in good working order because we plan never to see the car dealer again.  Leasing commercial real estate is a long term commitment, most often for many years, between landlord and tenant.  Tenants deal with their landlords everyday, either directly or indirectly, by virtue of the services landlords provide.

Despite the fact that some landlords refuse to admit it (Why they won’t, makes no sense to me!), landlords have a vested interest in seeing their tenants prosper.  Conversely, tenants have a similar interest in seeing their landlords succeed.  This doesn’t mean that landlords and tenants should run each other’s companies or become joint venture partners.  It does mean that both landlords and tenants should view each other as more than transactional opponents. Once leases are executed, both landlords and tenants may benefit by taking a different approach than that of going to their separate corners.

Landlords and tenants would do well to consider their relationship with tenants as one of interdependent partners, instead of transactional opponents.  The true recognition of interdependence between landlords and tenants is that without mutual benefit, the relationship simply won’t work.  A landlord with no paying tenants achieves nothing. A tenant without a building to rent would have no place to conduct its business, and would likely be forced to divert capital from investment in its own profit generating ventures to real estate ownership.

I find it amazing when over-zealous brokers get tenants worked-up by suggesting that landlords should not be entitled to profits when they complete new lease deals or renegotiate leases.  Writing as a tenant advisor, I must ask those brokers how silly it is to assume that anyone would engage in a business endeavor without a profit motive.  Everyone is entitled to profit!  The issue isn’t one of whether a landlord is entitled to generate profit, but more of how landlords generate profit, how much they generate, and are they transparent in doing so?!

Don’t get me wrong…as a tenant advisor, I don’t advocate overpaying for anything, let alone rent.  And, neither am I suggesting that tenants should consider themselves as the funding sources for commercial landlords’ profits.

Interestingly, landlords are not perceived as a group that deserves anyone’s pity.  However, given current global economic conditions, and those of credit and real estate markets, with many landlords holding on white-knuckled trying not to lose their buildings to lenders, if there ever was a time when landlords were entitled to anyone’s sympathy, now would be that time.  The government and business communities must recognize the challenges commercial landlords currently experience, along with the on-going struggles that most of them will endure over the next few years.  If not, the tenants we advisors and brokers represent may have fewer stable leasing opportunities, and therefore, they may have much bigger problems!

Given the above, tenants are in a great position to negotiate very aggressively to secure favorable terms, either in new lease transactions or when renegotiating existing leases.  How they do that, and with which landlords, makes all the difference in the world.

Aggressive negotiations don’t mean stupid negotiations!   The role of a tenant advisor is to determine the optimal achievable transaction structure on the tenant’s behalf, advise the tenant as to how it can achieve those terms, and to execute its tenant’s preferred transactions.  But, even halfway decent advisors recognize that in order to accomplish the above, they must first understand the objectives, risks, and challenges of landlords.  Understanding your opponent in any contest is the foundation of victory.

Too many unqualified or ill prepared real estate licensees (I use that term here to differentiate this subset of the industry from those who really know what they’re doing!), run their tenants headlong into real estate transactions without really knowing where to go.  These brokers are often long on salesmanship (and telemarketing skills), short on precise knowledge, and even shorter on true expertise.  Tenants who take a ‘Let’s grab every dime we can!” attitude can shoot themselves in the foot as they either drive the landlord so far that it refuses to enter into a transaction, or jockey the landlord into position such that it agrees to bad terms in the hopes of making-up the difference on the next lease, thereby putting its building in financial jeopardy.  That’s not the best way to protect a tenant’s interests!

Tenants rarely need every possible right and option under the sun, so that they tie the landlords hands and restrict its ability to lease the rest of the space in the building.  Tenants do need leases that provide favorable terms, flexibility, low and predictable costs, with no surprises.  Tenants also require financially sound landlords who can and will provide the services to which they commit.

Tenants don’t need to put landlords in the poor house.  These days, that is a lot easier to accomplish, especially if tenants and their brokers aren’t careful.

Landlords need the ability to stay in business, pay their mortgages, refinance their buildings, provide services to tenants, manage risk, sustain their own companies, and generate profits, whether those profits come now or later.

Mounting a well-planned, well-armed negotiation with commercial landlords requires knowledge, resources, and skill. I never recommend “bringing a knife to a gun fight” as they say.  Commercial landlords can be some of the most well trained, well armed, and aggressive fighters on the business battlefield, and many of them have some pretty big guns. Accordingly, tenants would be well advised to bring tanks, jet fighters, and battleships, when negotiating with certain landlords!

The special challenge in this endeavor, for both tenants and their advisors, is to determine in advance those terms that the tenant really needs to achieve its objectives and to negotiate aggressively to succeed in securing the right terms, while being mindful of keeping their landlord in business.  This is a wise approach, even when dealing with one of those landlords that doesn’t have a sense of fair play, could care less about the tenant, and is too plain greedy and self-absorbed to recognize the tenant’s good efforts and the true interdependent relationship that, when respected, gives tenants and landlords what they both need…the tools to succeed and prosper.

When Will Commercial Leasing Recover?

Again and again, we’ve been asked “When will commercial leasing recover?” Brokers, investors, developers, lenders, and reporters, are all desperately searching for the answer.  While this is a reasonable question, especially given how much of the global economy depends on the success of commercial real estate, the answer is uncertain.

A better question would be “When will the economy truly recover and achieve balance?”  Because commercial real estate is so dependent on economic drivers (purchasing, hiring, growth), the answer to the real question can be found in the speed and depth of the economic recovery.

Job growth directly correlates to demand for office space.  Specifically, experts anticipate increases in demand for commercial office leasing to occur when companies stop laying-off employees and other companies begin hiring again.

Demand for leasing of distribution and warehouse space will occur along with an increase in demand for consumer and business goods.  When businesses and consumers begin to spend on a consistent and growing basis again, the need for distribution and storing of those goods will increase. Correspondingly, demand for distribution space will also grow.

Spending will certainly have a positive impact on retail real estate leasing, as well.  Although, some believe that the retail real estate market in some parts of the country, as a whole, may have excessive over supply, such that it may not be absorbed for a long time after a recovery takes place.

Consumers will increase spending when their jobs appear to be more stable, when their futures begin to look bright again, and when the economy shows signs of consistency and stability, again.

So, it’s really all about jobs, isn’t it?  A lot must take place in order for companies to begin hiring again.  Important issues like the availability of capital and credit, the interplay of global economies, taxes, healthcare, geopolitical matters, and more, must show light at the end of their respective tunnels before confidence can returns to companies, investors, and consumers.

 ”When will commercial leasing recover?”  Simply put, commercial real estate continues to be a lagging indicator of economic conditions.  As such, we expect increased demand for commercial real estate leasing to occur three to nine months, or more, after the overall economy strengthens in earnest.

What do you think?

Some Commercial Landlords Just Don’t Get It…Still!

Why do some landlords think that because they receive rent from tenants, they’ve got great relationships with those tenants?

Why do some landlords hire property managers who cycle in and out of their jobs?  And, why should tenants receive calls from their “New Property Manager” every few months?

Why do so many landlords “Yes” their tenants and not follow-through on promises?  Do they believe that if a tenant stopped complaining, they forgot about what they needed and no longer require service?

What steps can landlords take to build mutually beneficial relationships with tenants, and not just provide lip service?

The best landlords don’t need to answer these questions, because they figured this out long ago!

Here’s an idea or two for those old school landlord types:

Start by changing how you engage in lease negotiations.  Lose the “stick it to them before they stick it to us” perspective still held by some old fashioned entrepreneurial, and even some institutional, landlords.  That doesn’t mean give away your profits!  It means that you will likely benefit by viewing tenants, both existing and prospective, as customers…Yes, CUSTOMERS!  Take a customer focused approach to negotiating.  Transform your organization to focus on words like “Service” and “Excellence”.   I know, for some of you, this is a real novel idea!  Remember…you’ll get more flies with honey!

Build two-way relationships with your tenants.  Do that on an enterprise-wide or institutional-wide basis.  Don’t leave building good tenant relationships to a seemingly friendly property manager after the damage has already been done through uncomfortable negotiations.

In order for such a major shift to take hold, those tenants who attempt to beat the hell out of landlords must also change their negotiating approach. Change must occur in both directions.

Treat your existing tenants like new customers.  They’re more important than new ones anyway, since they’ve already created value for you, and likely will continue to do so.  Prospect your existing tenants – treat them like they’re not yours, court them, build and sustain real relationships with them.  When treated well, existing tenants can be more profitable customers and easier to please than new ones.

Seek to understand how you can support your tenants’ business objectives. Don’t simply consider your tenants as meal tickets.  That kind of attitude shows, and no one likes to be treated that way, no matter how slick you think you are.  Follow the lead of some of the most successful landlords around the country…they’ve been running their businesses like this, and succeeding, for a very long time!

Create an excellent “experience” for all of your tenants.  Don’t simply permit them to occupy your building.  And, that doesn’t mean just buying them ice cream once a year.  Find ways to become a partner to your tenants.

Considering the challenges that so many companies, even landlords, are experiencing in the current economic environment, now is the time for landlords to forge solid relationships with their tenants.  And, NO!…that doesn’t mean agree to lease terms that don’t make sense.  Afterall, landlords are entitled to weather this storm, too!

In hard times like these, some people take advantage of others who need their help and some turn a deaf ear.  Others step up to recognize that by helping others succeed, they’ll likely pave the way for their own greater success when the recovery kicks in.  Remember that companies, and the people who work for them, have long memories.  Give your tenants a lot of good things to remember about their relationship with you.

The best landlords practice these ideas, and as a result, they often achieve greater success than their slower-to-learn competitors.  Now is the time for those other landlords, you know who you are, to benefit by doing the same.

Teaching Old Dogs New Tricks – Take Charge of Your Career Again!

The U.S. Department of Labor recently announced that 16 million Americans are out of work. Bloomberg Television stated that for every open corporate position in the U.S., six or more executives are in pursuit.

CEOs today can expect to be in career transition almost every twelve months. Financial executives can expect to be job searching every fourteen to twenty-two months, and senior I.T. executives are typically out of work every fourteen to eighteen months. While the sources of the above statistics are unknown to me, they have been repeated to me by so many people who are not connected to each other that they appear to have become accepted as truth.

Evidently, when no one was looking, the rules changed. Yet, too many very accomplished executives still operate as if the world was operating under the “Old Normal.” With so much talented competition seeking so few open positions, in many instances the secret to career success is not necessarily having the best credentials, pedigree, or experience. But, rather those executives who are better able to compete are the ones who are landing the few open positions and achieving their objectives.

Remember when video tape player / recorders first arrived on the scene in the 1970s and 1980s? Remember the competition between BetaMax and VHS? The commonly accepted fact is that the VHS format won, not because it was superior in any way, but merely because the proponents of VHS, an acknowledged inferior technology, put their marketing muscle behind it and outdid their competition. BetaMax went the way of the Dinosaur and VHS reigned supreme for many years.

In, what is today an extremely competitive employment field, the shortest path to executive career success is not only through reliance on track record and achievements, but on expertly packaging the value one can provide to a company, presenting it in a concise manner that will be easily grasped, and running past job-seeking competitors to the finish line. Twice this past week, I spoke at New Jersey executive career workshops, one sponsored by a local business group, and one entitled “Take Charge of Your Career Again!” At the second event, I encountered some very senior executives who, while extremely accomplished in their respective fields, were novices in their understanding and ability to communicate their own value proposition, how to package that, and then how to present and sell it. The group spent hours working through the concepts of networking, relationship building, selling, and more.

The idea here is to be very precise, to view oneself like a product or service, with features, benefits, and outcomes, to understand the buying needs and habits of the consumer (aka employer),a nd be prepared to sell the product like a professional.  

When the workshop ended, those who had entered earlier that morning looking downtrodden and fearful of not knowing where their futures would lead them, left the event uplifted with renewed energy, new ideas and tools that they would put in use immediately to Take Charge of their careers again. Knowing that I’d used my skills to help so many, I also had an uplifting experience.

Tenants: Want to Reduce Your Occupancy Costs? Buy the Building You’re Leasing!

Opportunity springs eternal!   Commercial real estate values have dropped precipitously over the last year or two.  Many experts believe that values have not yet stabilized and that it may take years before they recover and again begin their upward ascent.  So, where’s the oppoirtunity in that?

Many commercial landlords are in jeopardy and are facing a myriad of extreme challenges. Leasing demand is at its lowest point in years; many existing tenants, whose businesses are experiencing their own challenges, are seeking to reduce their current rental obligations by renegotiating their leases; other tenants are offering space for sublease at discounted rents; still others are going bankrupt and ceasing rental payments; the short-term commercial mortgages that financed so many buildings in the last decade are expiring; replacement debt may be unavailable, expensive, restrictive, and / or insufficient to equal existing debt levels; additional equity may be unavailable…the story goes on and on.

Financial executives at every well-run company, tenants and landlords alike, are seeking opportunities to uncover hidden profits and create long-term operating sustainability by reducing cost, and creating predictable costs going forward.  Purchasing real estate may provide a real opportunity for many companies. For those companies that have access to cost-effective capital, that seek greater control over their occupancy costs, that seek long term occupancy strategies, and that may wish to lock-in future returns for when commercial real estate values stabilize and grow again, real estate ownership may prove very profitable.

Companies positioned to own real estate may consider relocating to a facility that is offered for sale. Or, those companies may be better off pursuing their current landlord, irrespective of whether their building is being actively marketed for sale, to ascertain whether they could purchase that building on favorable terms.

Landlords experiencing financial challenges don’t often publicize those issues.  By contacting the landlord, or in the case of a building that is publicly challenged, the lender, your company may uncover a hidden opportunity and achieve more than mere short term cost reduction. 

Real estate ownership could work for some companies as a long term occupancy and investment strategy. For others, it could provide profitability as a short term strategy designed only to lower current costs and capture future profits from eventual rising values. Either way, the opportunity may exist, but only based on a carefully planned and expertly executed approach.

Note that this strategy may not work for some publicly-held companies, those who wish to avoid having to record depreciation expense, and those seeking to increase return on assets. Although, if and when GAAP is replaced by IFRS, that could all change.

So, bascially the opportunity may be directly in front of you.  However, you may need to adjust your sights a bit to realize it.

 

Landlords: You “NEED” Tenants…and Vice Versa!

On many occasions, I’ve written about the perspective of some one-sided landlords who blatantly disregard the needs of their tenants in the name of greed and selfishness.  Some tenants, too, can be just as selfish.  Such tenants often miss the opportunity to build profitable relationships with their landlords. Good tenant advisors constantly counsel landlords that, to be truly successful, they must care about their tenants’ success, and not just view tenants merely as rent payors. 

Tenants have a similar interest in seeing their landlords succeed. This doesn’t mean that landlords and tenants should run each other’s companies. It does mean that both landlords and tenants should view each other as more than mere transactional opponents.

Landlords and tenants would do well to consider themselves as interdependent partners.  A tenant without a building to rent would have no place to conduct its business, and would likely be forced to divert capital from investment in itself to real estate ownership.  And, a landlord without tenants would own a lot of empty buildings.

I find it amazing when over-zealous brokers get tenants worked-up by suggesting that landlords should not be entitled to profit when they complete lease deals or renegotiate leases. Writing as a tenant advisor, I must ask those brokers how silly it is to assume that anyone would engage in a business endeavor without a profit motive.  Everyone is entitled to profit! 

The issue isn’t one of whether a landlord is entitled to generate profit, but more of HOW landlords generate profit, how much they generate, and are they transparent in doing so?!  Don’t get me wrong.  As a tenant advisor, I don’t advocate over paying for anything, let alone rent.  And, neither am I suggesting that tenants should consider themselves as the funding sources for commercial landlords’ profits.

Interestingly, landlords are not perceived as a group that garners anyone’s pity. However, given current global economic condition, and those of credit and real estate markets, if there ever was a time when landlords deserved anyone’s sympathy, now would be that time.  The government and the business communities must recognize the challenges commercial landlords currently experience, along with the ongoing struggles that most of them will endure over the next few years.  If not, the tenants we advisors and brokers represent may have fewer stable leasing opportunities, and therefore, those tenants could encounter much bigger problems! 

Given the above, tenants are now in a great position to negotiate very aggressively to secure favorable terms, either on acquisitions or on lease renegotiations. How they do that, and with which landlords, will make all the difference in the world.  However, aggressive negotiations don’t mean stupid negotiations!

Should Real Estate Brokers Be Responsible to Validate Tenants’ Risk and Creditworthiness?

In today’s tumultuous economic times, landlords need to accurately determine the creditworthiness and risk profile of new and existing tenants.  Whose responsibility is it to make such a determination…the landlord or the tenant’s broker?

In previous blog posts I’ve discussed the issue of landlords seeking to pay commissions at rates and on terms deemed to be less than favorable by many brokers, especially when those landlords perceive tenants as not being creditworthy.  A reader commented that, as part of the reason for receiving commissions, commercial real estate brokers should be responsible for evaluating the creditworthiness of the tenants they represent.  At first, I was a bit surprised by that one.  Given that this particular reader was from an institutional type of commercial landlord, I understood his mindset, nonetheless. 

The reader’s desire was to secure third-party analyses of the creditworthiness of prospective tenants for his buildings. However, his idea of forcing that responsibility onto commercial real estate brokers is a dangerous one.  Real estate brokers as credit analysts?  Moreover, I saw his comment as a landlord’s desire to transfer its obligations and risk to another party.  Of course, if a broker were to take on such a responsibility, you can bet your hat that a landlord would also place the liability of accuracy on the broker, too!

So, should commercial real estate brokers be responsible to validate their tenants’ creditworthiness?  Here’s a better question: 

Are commercial real estate brokers QUALIFIED to evaluate their tenants’ creditworthiness, financial viability, risk, and ability to perform under their leases?

Credit analysis is not an easy task, especially when it comes to privately-held and private equity owned portfolio companies.  But, brokers as credit analysts?  Placing such an important component of deal making as risk analysis in the hands of commercial real estate brokers would be an extremely dangerous move for all involved, and would not likely minimize risk for landlord or tenant.

There exists an entire industry dedicated to analyzing companies and their ability to sustain and perform their financial obligations.  Perhaps landlords should rely on these qualified independent third parties to analyze the credit of prospective tenants.  Those experts are versed and capable of conducting such risk based assessments and properly reporting their results.

New insurance based third-party analysis and credit guarantee products are beginning to emerge in the marketplace as a means of evaluating tenant creditworthiness.  These combination services and products promise to provide commercial landlords with the qualified risk analysis they desire along with alternatives to security deposits and guarantees.

Demanding third party credit and risk analyses can be a slippery slope for landlords, as tenants may demand similar analyses of landlord creditworthiness.  This could pose particular challenges for landlords, given the financial struggles that many landlords are experiencing in the current economic climate. 

So, should landlords be entitled to accurate assessments of tenants’ risk before entering into transactions?  You bet! With an entire financial services industry dedicated to risk analysis, should commercial brokers provide such services?  Absolutely not!

What do you think?

The Imploding Commercial Real Estate Brokerage Industry in 2010

“Too big to fail!”  “Been around too long!”  “Too entrenched in the market!” Where have we heard these terms before?  The commercial real estate brokerage industry is in for a drastic change in 2010! 

Commercial real estate brokerage companies have been consolidating for years, at the upper size range, right on through to mid-level and small firms.  The last ten years have seen large national brokerage companies swallow-up established brands.  Some of those include  ”include CBRE’s acquisitions of Insignia/ESG,  Trammell Crow, and others, and JLL’s acquisition of The Staubach Company and others.  One recent notable acquisition saw FirstService acquire certain GVA affiliated offices.  Others are in the making.

Despite those strategic acquisitions, the current economic crisis appears to be accelerating change in the commercial real estate brokerage industry. Some small and mid-sized companies are failing.  Some of them are closing their doors and others are being acquired, with their brokers moving to larger companies one way or the other.

The rumors have again begun to swirl about some of the largest commercial real estate brokerage companies in the nation being in irreparable financial distress.  Those companies that have been around forever, that until recently have been considered too big and too entrenched in the national market to fail may, in fact, close their doors and / or be absorbed into larger more stable motherships.

One of the largest and most prominent internationally known brokerage companies, one which once was the gold standard in commercial real estate brokerage, is rumored to be imploding from within.  It has been suggested that this particular company may have only months before its current life support systems are terminated.  Another equally well-known industry behemoth came close last year to defaulting on its debt, which ranged in the hundreds of millions of dollars.  There’s more to come!  2010 promises to be an interesting year in the commercial real estate brokerage business.

The world has changed.  It always does. Sometimes faster than others. And now, the commercial real estate brokerage industry, a business that has remained relatively static for many years, is changing, too.

Will this change be good for the commercial real estate industry?  How will this inevitable evolution affect commercial tenants, buyers, landlords, and investors?   Will it prove positive?  How will individual brokers and their companies (old and new) maintain continuity of service and properly protect their clients?  Some have suggested that the big commercial brokerage companies could become too big to be effective in serving all but the very largest of companies…will that be the case?  How will these changes affect those of us who will still be standing?

What do you think?

Talk About a Broker Creating a Conflict of Interest!

In a recent commercial real estate transaction, two brokers became embroiled in claims of unprofessionalism, unethical behavior, and conflicts-of-interest. What’s your opinion?

A local broker represented a national company in offering that company’s single tenant building for a short term sublease. The sublandlord’s broker placed the space on the market, publicized the offering, and arranged appointments for prospective subtenants and brokers to visit the building.

The sublandlord’s broker hadn’t read the lease and was unaware of its details, despite the building having been on the market for over a year.  He hadn’t contacted the building owner to discuss a potential sublease. Therefore, he had no insight into the owner’s objectives and any associated obstacles the sublandlord might encounter, and was unable to answer basic questions about his offering.

Another broker, representing a tenant, contacted the sublandlord’s broker about the building. The tenant was interested in leasing a large portion of the building, but only for a longer term than the sublandlord could offer.  The sublandlord’s broker confirmed that he had no ability to offer a longer term. He claimed not to know who the owner was, stated that he did not represent the owner, and disclosed that he had never spoken with the owner.

Given the above, the tenant instructed its broker to contact the owner directly to assess the possibility of a long term direct lease between owner and tenant. Under that scenario, the owner would have to terminate a portion of the sublandlord’s lease and enter into a new lease with the tenant.

The owner confirmed that it negotiated transactions without engaging brokers to represent it and confirmed that it was not represented by a broker on the building in question. The owner advised the tenant’s broker to deal with the sublandlord’s broker if the tenant was interested in a sublease and to deal with the owner if the tenant wanted a direct lease for a longer term than what the sublandlord offered.

The sublandlord’s broker became enraged that the tenant’s broker contacted the owner directly, and made claims about the tenant’s broker’s actions being unprofessional and unethical. Then, the sublandlord’s broker demanded that the tenant’s broker deal only with the sublandlord’s broker on all transactions, including: A) a sublease; B) a combination sublease and follow-up direct lease, or; C) a direct lease with the owner.

Remember that the sublandlord’s broker did not represent the owner, but only represented the sublandlord. Yet, the sublandlord’s broker, who had a fiduciary responsibility to protect the sublandlord’s interests and accused the tenant’s broker of unethical behavior, untruthfully claimed to have authority to represent both the sublandlord and the owner.  If this were true, the sublandlord’s broker would have been involved in an obvious and blatant conflict of interest. Moreover, the suggestion by the sublandlord’s broker that the tenant’s broker should only deal through the sublandlord’s broker for all transactions at the building was merely a move designed to restrain the tenant’s ability to deal directly with the owner and achieve the best deal. Sound a bit like a restraint of trade?

My observations:

• The sublandlord’s broker created a conflict-of-interest by insisting that the tenant’s broker not deal with the owner for a direct lease, when the sublandlord’s broker only had authority to represent the sublandlord

• The sublandlord’s broker misrepresented his authority to represent both sublandlord and owner

• The sublandlord’s broker did less than a professional job of representing the sublandlord by not having read the lease; by not being aware of the terms of that lease before marketing the sublandlord’s property; by engaging in presentations and deal discussions with insufficient knowledge; and by not being aware of the owner’s objectives and any associated obstacles, or any opportunities that could be achieved on behalf of the sublandlord

• The sublandlord’s broker was only authorized to negotiate a sublease or assignment, a transaction in which the tenant was not interested. Since the tenant sought a transaction that could only be entered into by the owner, the tenant’s broker acted rightfully in the best interests of its tenant by contacting the owner directly. The claims by the sublandlord’s broker that the tenant’s broker had acted unprofessionally or unethically were false and without basis.

• The tenant’s broker could have extended a courtesy to the sublandlord’s broker by advising that the tenant had elected not to pursue a sublease and had instructed him to contact the owner directly. However, the tenant’s broker was under no obligation to do so, and by this action the tenant’s broker was not in violation of any standard of ethics or professionalism

 

I found this circumstance to be a fascinating twist on the commercial real estate broker industry. What do you think?