Archive for the 'Conflicts of interest in commercial real estate' Category



Keeping a Relationship with Someone Who Already Screwed You

And, I Thought Screws Were Just Hardware!

In a recent conversation I had with a fellow commercial real estate professional, he asked me what I thought he should do about a recent business encounter.  Someone, who had an obligation to pay him a commission, utilized a technicality to pay him a lot less, in fact a fraction of what he owed. Then, to add insult to injury, that person elected to make minimal payments over an extended time period, without interest, despite having no contractual right to do so. After understanding more details of the circumstance, it appeared that the real estate professional’s interpretation was balanced and realistic. It was plain to me that he had been screwed by this person, and that, while the real estate professional may not have perceived the payor as a bad guy, the payor obviously was not interested in doing right by the real estate professional.  In my book, someone who avoids doing the right thing when the opportunity to do right exists IS a bad guy!

I didn’t find this question, nor the answer, to be overly complicated. My response was simple and obvious: I advised the real estate professional to pursue whatever business and / or legal remedies that were available to him, collect his money, and never ever do business with that person again…PERIOD!

To me, and to most people, there would be no other answer.  When someone has demonstrated that, while they didn’t necessarily do anything bad, if they have an opportunity to do the right thing, but don’t, for whatever they claim are their justifiable reasons or extenuating circumstances, in my book they move into the Bad Guy column.

Guess how this real estate professional responded to my recommendation? He said that he was really only seeking to understand how he might collect his compensation quicker. He went on to tell me about the importance of keeping relationships, and how he thought it was important to maintain his relationship with the person about whom he asked…the person who used a written document as justification not to honor his word, his commitment, nor his obligation to pay this real estate professional fairly based on the agreement between them, irrespective of the many months of hard work this professional expended, at risk, and despite the substantial value this person derived from those efforts.

I had to place my right hand under my chin and thrust upward to close my mouth, as my jaw dropped to my chest when I heard this.

I only had one question for the real estate professional: “Why?

Why would he want to maintain a relationship with someone who obviously does not care for him, apparently sees no value in their relationship, truly put his money where his mouth was in this case, and already damaged the real estate professional?

The real estate professional’s response was: “Because I might get other business from him.”

That sound you just heard was my jaw falling off!

 

About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com. Read about timely commercial real estate issues at RealStrat’s blog at www.CorporateAdvisor.wordpress.com.   Follow RealStrat at http://www.Twitter.com/RealStrat.

LINKS:

RealStrat News
Biographies
Articles
Properties
What Our Clients Say
AndrewZezas.com

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved.

###

Dear Mr. Landlord: We Both Know You’d Rather Deal Directly with the Tenant! Part Three

Q&A on Tenant Representation with a Commercial Landlord
Part Three of a Three Part Post

Most commercial landlords understand the role of tenant representation brokers and welcome the benefits they derive when tenant representation brokers properly educate and advise their tenant clients.  However, some landlords, mostly old-school die-hards, continue to maintain very negative views of all things about the tenant representation process.   Some actually get offended by the very idea of a tenant representation broker.   Offended!?  What’s that about?

In a recent Q&A conducted via email with a prominent commercial landlord, I had the opportunity to hold a completely frank and open discussion about his views about tenant representation brokers.  And, while some of the conversation was challenging at times, both of us came away having learned from each other.

I invited the commercial landlord to provide me with his views on tenant representation, tenant representatives, and how he’d prefer to conduct the business of leasing his properties.  The conversation got so good, that it took me three posts to include it all.  Be sure to go back and read Parts One and Two!  Following is Part Three of that dialogue:

Read Part One and Part Two of this three part post.

7. Landlord: I wish tenant representative brokers would….

A) Present complete information on ALL tenant requirements at their first communication with me

RealStrat’s Response: Do you present all of your requirements at your first communication with tenant representatives?  Of course not!  While most tenant  representatives strive to provide complete information, so that landlords can make informed and intelligent decisions, sometimes complete information is unavailable.  In other instances, certain information may be confidential or may change over time as a result of landlord responses, negotiations, or changes in the objectives and needs of tenants.   So, providing ALL information at the first communication, while a preferable approach, may not always be possible.

B) Permit landlords and tenants to negotiate directly

RealStrat’s Response: Depending on many moving parts, including issues of confidentiality, tenant preferences, landlord’s style, and more, permitting direct negotiations may not be beneficial to tenants or to the transaction.

C) Not grandstand

RealStrat’s Response: Absolutely!  Frankly,  no one likes a show off!

D) Make the overall transaction process easier for the landlord

RealStrat’s Response: Unfortunately, while no one should intentionally make a transaction unnecessarily challenging, the demands made to the tenant representative by its client may have the unintentional result of creating challenges for the landlord.  And, since the tenant representative’s job is protect the interests of the tenant, making things easier for the landlord may not be on the tenant’s agenda.

E) Communicate thoroughly, more often, and in greater detail

RealStrat’s Response: A tenant representative should absolutely communicate effectively to landlords, especially when asking that landlord to be responsive and expend time and resources in an effort to complete a transaction.  However, in protecting their tenant’s interests, tenant representatives may not be able to communicate in a manner always preferred by landlords.

F) Hurry the hell up!  Tenant representatives often take too long and drag out the process.  Either make a deal with me or let me move on to a real prospect!

RealStrat’s Response: You’re certainly right about that!  Sometimes, transactions feel like they take forever.  But, in many instances, tenant representatives and their tenants must contend with changing business tides and the resulting impact on the tenant’s real estate requirements.  Additionally, based on how you and other landlords negotiate, the outcome of the transaction, and the tenant’s preferences as to where and how it will make a deal, in many cases, is not known until closer to the end of the negotiation process.

G) No longer exist (I had to! Just kidding)

RealStrat’s Response: Ha! Ha!  Landlords, tenants, and tenant representatives maintain a peculiar set of relationships.  Tenants and tenant representatives each have the kind of relationship with landlords that makes them dependent opponents.   Even with their bumps and potholes, the relationships work, and they result in profits and success for all involved.  As the world changes, so will the roles and relationships of these three parties.  Tenant representatives, the direct value they create for their tenant clients, along with the indirect value landlords derive from their presence, will likely be around for a long time.

Mr.  Landlord, thanks for being open about your beliefs and your concerns, and for being a good sport about this sensitive topic.  I hope that my replies helped you as much as your comments helped me.

Read Part One and Part Two of this three part post.


About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com. Read about timely commercial real estate issues at RealStrat’s blog at www.CorporateAdvisor.wordpress.com.   Follow RealStrat at http://www.Twitter.com/RealStrat.

LINKS:

RealStrat News
Biographies
Articles
Properties
What Our Clients Say
AndrewZezas.com

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved.

###

Dear Mr. Landlord: We Both Know You’d Rather Deal Directly with the Tenant! Part Two

Q&A on Tenant Representation with a Commercial Landlord
Part Two of a Three Part Post

Most commercial landlords understand the role of tenant representation brokers and welcome the benefits they derive when tenant representation brokers properly educate and advise their tenant clients.  However, some landlords, mostly old-school die-hards, continue to maintain very negative views of all things about the tenant representation process.   Some actually get offended by the very idea of a tenant representation broker.   Offended!?  What’s that about?

In a recent Q&A conducted via email with a prominent commercial landlord, I had the opportunity to hold a completely frank and open discussion about his views about tenant representation brokers.  And, while some of the conversation was challenging at times, both of us came away having learned from each other.

I invited the commercial landlord to provide me with his views on tenant representation, tenant representatives, and how he’d prefer to conduct the business of leasing his properties.  The conversation got so good, that it took me three posts to include it all.  Be sure to go back and read Part One, and then check-in again next week to read Part Three!  Following is Part Two of that dialogue:

Read Part One of this three part post

5. Landlord: I have to put up all the cash and take all the risk!  I don’t appreciate that tenant representatives won’t share my risk.

RealStrat’s Response: Tenant representatives are well aware of the many challenges that landlords face, especially in the current economic environment.  A large part of what landlords must contend with is how they can effectively manage their risk.  Landlords bear a lot of risk in leasing transactions, and in most everything they do.  However, with risk comes the potential for upside reward.

Tenant representatives, and brokers in general, are also in the risk / reward business, but only to the extent of investments of their time and resources prior to, and during, the execution of a transaction.   Brokers pursue tenants and bear the risk of not winning those assignments.  Then after being engaged, brokers risk that their tenants might not complete transactions that would yield compensation commensurate with the broker’s investment of time, resources, and risk.

Beyond that, specifically after landlords and tenants execute transactions, brokers are not in the business of managing the same risks as landlords.  Nor are brokers entitled to the same upside rewards as landlords, including equity and portfolio appreciation, tax advantages, debt and equity financing, and more.

So, regarding compensation and risk participation, like every industry, landlords and tenant representatives bear their own risks.  When engaged in transactions, tenant representatives are not participants in landlord’s risk (nor in landlord’s upside benefits) for very simple reasons, because participating in landlord risk would:

A) Align the interests of tenant representatives with that of landlords, which would pose a clear conflict-of-interest in relation to tenant representatives’ obligation to act solely in the best interests of their tenant clients.

B) Unfairly affect the compensation of tenant representatives by virtue of their acceptance of landlords’ risk without the benefit of the quid pro quo associated with the upside opportunity afforded landlords.  Again, if such upside were provided to tenant representatives, it could align tenant representatives and landlords posing  conflicts-of-interest between tenant representatives and tenants.

C) Unfairly force tenant representatives into a compensation model other than that of generating fees

D) Place tenant representatives in the position of acting as guarantor of their tenants’ ability to perform under their leases

None of the above fit into the tenant representation model too well.  Frankly, landlords and tenant representatives have their own risks which should be kept separate from each other and from those of tenant representatives.

6. Landlord: It is wrong that tenant representatives want to be paid up front when I don’t know if the tenant will uphold its lease obligations or pay its rent, especially after I put up all the transaction costs and have to wait until all the free rent expires.

RealStrat’s Response: This is a similar discussion to the one above about risk.  Waiting for an extended time period before getting paid creates real challenges.  As tenant representatives, we completely understand that.  Remember, that it typically takes three to nine months for landlords and tenants to complete  transactions, plus many months or even years for tenant representatives to build relationships and win a tenant’s business.   So, by the time tenants close their deals, tenant representatives have typically been working without compensation for at least a year, and in many cases, longer.

But, let’s get to the real issue of the relationship between a tenant representative’s service and its compensation.  When a landlord and tenant execute a transaction, as far as the landlord is concerned, the job of the tenant representative is done.  After that, it’s then up to the landlord and tenant to perform their obligations under the terms of the lease they executed.

Prior to executing a lease with a tenant, one would expect that a professional landlord would have assessed the tenant’s creditworthiness, and determined whether the tenant was an acceptable risk and whether or not the landlord should even conduct business with the tenant.  During the lease term, it is the tenant’s responsibility to make rent payments on a continual and timely basis and follow the rules defined in the lease.  If either the landlord made a bad assessment (or, didn’t conduct one), or the tenant fails to perform, neither of the above are controllable by, nor the responsibility of, the tenant representative.  Accordingly, tenant representatives are not in the tenant credit guarantee business.

Like the plumber who installs a sink in your home, if you select the sink because you’re satisfied with its quality and then you pay the plumber because you’re satisfied with his installation, if the sink fails because it was manufactured poorly or it cannot perform the way the manufacturer said it would, then you should pursue the manufacturer, not the installer, unless of course the installer provides you with a written guarantee for the product, too.  Few commercial real estate brokers are in a legitimate position to guarantee a tenant’s performance under a lease.

And, NO! Mr. Landlord, you should not rely on claims made by a tenant representative as to a tenant’s creditworthiness.   Neither should tenant representatives make such claims.   Do your own homework and protect yourself from unnecessary risk.  If you foolishly rely on anyone to ascertain a company’s creditworthiness, especially one who is not qualified to make such a determination, then you deserve the added risk and the consequences.

Remember that plumbers don’t accept payment each time you turn on the water, because they don’t usually guarantee the manufacturer’s product, only their own work.  Correspondingly, tenant representatives don’t guarantee the ability of tenants to perform their lease obligations, only their own work.  If you’re not satisfied with the tenant representative’s work (remember that they represent the tenant!), then address that before completing the transaction (don’t do the deal!), not after the tenant defaults.  So, when the plumber and the tenant representative have completed their duties, they both expect to be paid in-full without the risks associated with accepting payments over time, tenant default or sink failure, or otherwise.

Choose any analogy you wish.  If you buy a new car and it doesn’t work, the manufacturer must stand behind it.  You don’t get to take back the dealer’s compensation.

Read Part One now.  Stop by next week to read Part Three of this three-part post.


About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery. Visit www.RealStrat.com. Read about timely commercial real estate issues at RealStrat’s blog at www.CorporateAdvisor.wordpress.com.  Follow RealStrat at http://www.Twitter.com/RealStrat.

LINKS:

RealStrat News
Biographies
Articles
Properties
What Our Clients Say
AndrewZezas.com

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved.

###

Dear Mr. Landlord: We Both Know You’d Rather Deal Directly with the Tenant! Part One

Q&A on Tenant Representation with a Commercial Landlord
Part One of a Three Part Post

Most commercial landlords understand the role of tenant representation brokers and welcome the benefits they derive when tenant representation brokers properly educate and advise their tenant clients.  However, some landlords, mostly old-school diehards, continue to maintain very negative views of all things about the tenant representation process.   Some actually get offended by the very idea of a tenant representation broker.   Offended!?  What’s that about?

In a recent Q&A conducted via email with a prominent commercial landlord, I had the opportunity to hold a completely frank and open discussion about his views about tenant representation brokers.  And, while some of the conversation was challenging at times, both of us came away having learned from each other.

I invited the commercial landlord to provide me with his views on tenant representation, tenant representatives, and how he’d prefer to conduct the business of leasing his properties.  The conversation got so good, that it took me three posts to include it all.  Be sure to read all three posts over the next three weeks!  Following is Part One that dialogue:

1. Landlord: I would prefer to deal directly with tenants and to apply my creative deal making abilities to solve their problems, without having to work through tenant representatives.

RealStrat’s Response: In a world where transparency, disclosure, conflict-of-interest, and Sarbanes-Oxley are commonplace, for all but a few companies, it would be next to impossible for them to rely on recommendations made by transactional opponents, without having the benefit of advice and representation from third-party advisors whose job would be to protect their interests.

Additionally, professional landlords recognize the benefits of dealing with tenants who have been educated as to market conditions and properly prepared by their advisers, especially when those tenants are organized, ready, and perhaps pre-approved to make a deal.

2. Landlord: I view tenant representatives as obstacles.

RealStrat’s Response: Guess what? That’s precisely why many tenants engage tenant representatives (also known as corporate advisors).  To state the obvious, landlords benefit from higher rents, lower allowances and incentives provided to tenants, and more square feet leased for longer terms.  Tenants benefit from lower rents, higher allowances and incentives provided by landlords, the right amount of square feet and a length of term that best supports their business objectives.  Given the opposing position between landlords and tenants,  tenants see one of the many important roles of their advisors is that of a knowledgeable gatekeeper, and at times, and somewhat of an obstacle to keep the landlord from going in the wrong direction.

3. Landlord: Tenant representatives make deals more complicated.

RealStrat’s Response: Many tenants have complex business requirements that demand creative solutions. When it comes to satisfying a tenant’s operational or financial objectives, keeping it simple…the right approach in many instances…may not always be possible.

4. Landlord: I don’t like paying commissions to brokers who don’t represent me and who negotiate against me.

RealStrat’s Response: That’s interesting, because actually, tenant representatives would prefer not to be paid by their clients’ opponents.  Receiving payment from a landlord when representing a tenant makes things very complicated for tenant representative brokers.  Few industries handle compensation in a manner similar to that of commercial real estate, where the tenant’s advisor is most often paid by the landlord, the tenant’s transactional opponent.  By changing industry compensation practices, this challenge could be eliminated.  Because it remains the norm, most tenants prefer that landlords bear this responsibility.  So, until that change occurs, landlords and tenant representatives are stuck with each other as it relates to compensation.

Stop by next week to read Part Two of this three-part post.


About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.  Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com. Read about timely commercial real estate issues at RealStrat’s blog at www.CorporateAdvisor.wordpress.com.   Follow RealStrat at http://www.Twitter.com/RealStrat.

LINKS:

RealStrat News
Biographies
Articles
Properties
What Our Clients Say
AndrewZezas.com

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved.

###

Hire a Broker to Negotiate a Relocation, But Negotiate a Renewal On Your Own…You’re Kidding, Right?

Hire a broker to negotiate a relocation, but negotiate a renewal on your own?  That’s like hiring a dentist to work on only some of your teeth!  What benefit could you derive from that?

When a commercial tenant contemplates relocation or renewal, some landlords will suggest that the tenant engage a real estate advisor, but only to negotiate transactions outside of their current building.  In these instances, the landlord will typically recommend that landlord and tenant negotiate directly on a renewal or other in-place transaction.  This approach is designed to favor the landlord and removes from the tenant the benefit of expert advice and representation it would receive from an advisor on an in-place transaction.  Such an approach also changes the role of the advisor from an objective representative of the tenant, one who has no preference or incentive to sway the tenant toward any particular property or transaction (other than the one that best meets the tenant’s objectives), to that of a salesman who would only be compensated in the event the tenant elected to relocate.

Landlords will suggest that to preserve the relationship, landlord and tenant should negotiate directly.  That’s exactly why a tenant needs an advisor, so the tenant advisor can secure the terms to which the tenant is entitled and, at the same time,  preserve the tenant’s relationship…that is, if a relationship with the landlord is important. 

Other landlords will suggest that by negotiating directly, the landlord won’t have to compensate a tenant advisor, so the tenant’s occupancy costs will be reduced.    Not quite!  In fact, an advisor’s role is to drive down the tenant’s occupancy costs, despite the fact that a commission would be paid.

If the tenant agreed to deal with its existing landlord directly, such action would telegraph to the landlord that the tenant really planed on staying in the landlord’s building.  It would stack the odds in favor of the current landlord and eliminate most, if not all, of the constraints and pressure placed on the landlord through a competitive bidding process.  Moreover, the tenant would lose the objectivity it would otherwise derive by engaging an advisor to provide counsel and to protect its interests across all transactions.

In fact, the presence of a tenant advisor actually benefits the landlord while serving the tenant’s needs.  A knowledgeable advisor, objectively evaluating the implications to the tenant of all alternative transactions, including those  proposed by an existing landlord, could more appropriately guide the landlord as to how to make a deal with the tenant.

Do most tenants engage real estate advisors only to negotiate  relocation transactions, while negotiating on their own with their current landlords?  Not really.  Frankly, if a commercial tenant has the know-how, time, resources, and inclination to negotiate a transaction without an advisor, then it should do that for all transactions, whether relocation or renewal.  Otherwise, if the tenant elects to engage an advisor at all, it should give serious consideration to engaging that advisor across all transactions it may consider, to ensure continuity and objectivity, and to secure the optimal terms, wherever the tenant elects to land.

About Real Estate Strategies Corporation
Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.   Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit

Acquire new ideas about commercial real estate at RealStrat’s blog at http://www.CorporateAdvisor.wordpress.com.   Follow RealStrat and Andrew Zezas at http://www.Twitter.com/RealStrat.

Check out The Executive’s Guide to Understanding Corporate Real Estate Transactions.

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved. 

###

Passive Real Estate Brokers…Striving for Mediocrity

Considering the current challenges in the global economy and the commercial real estate marketplace, it is amazing that a few brokers continue to take a laid-back and nonchalant attitude toward their business, their clients, and their potential customers.  

While this type of attitude may exist across all segments of the commercial real estate industry, and other industries for that matter, I have most recently experienced this confusing approach with a handful of landlord representatives.  Even more disturbing is the adversarial used car salesman-like tactics I continue to see proffered by some low-rent brokers.

These brokers even use terms that support their largess on their path to mediocrity.  They “show” their landlords’ properties.  Showing anything to another person basically says: “Here it is, see for yourself.”  Showing something only permits a view of what’s on the surface. That’s exactly the problem.  Showing property won’t accomplish anyone’s objective in an over-supplied commercial real estate market!  The most successful brokers I’ve met, those who represent either landlords or tenants, understand that not merely showing a property but, presenting it in its best light, and providing insight as to both its attributes and its short-comings is the optimal approach to inspiring a potential tenant to consider it as a possible future corporate home.

Interestingly, I have found more passive brokers representing buildings, than on the buyer or tenant side.  But, these brokers do not represent the majority of the landlord representation segment of the commercial real estate brokerage industry.  Passive brokers can sometimes afford to be more sedate, as they wait for the phone to ring and  look like heroes.  Don’t get me wrong, I’m not knocking landlord and property brokers…not at all!  I’m just fed up with the lazy ones and those who simply don’t do their job!  Some of the most impressive professionals in commercial real estate today are property brokers who understand that their success is directly related to their ability to support the objectives of their clients (landlords), while serving the needs of their customers (tenants and their brokers).

Passive brokers don’t return your calls right away, they take their time opening the emails you send them, let alone responding.  And, when they do respond to your emails, it is often in only a few words, poorly written without punctuation or proper grammar, leaving you to figure out what the heck they mean.  Passive brokers can usually be identified by sloppy and incomplete proposals and offers, and by missed deadlines attached to a long list of excuses and promises never to do it again. 

As competitors, I like passive brokers for one reason; it is pretty darned easy to win against them.  And, most often, they don’t even see successful brokers coming!  So, why do I care?  Because I must deal with them when they represent transactional opponents, and they get in the way.  Moreover, these kind of devil-may-care brokers, most of whom will put in less than an 8 hour day (even in this economy!) perpetuate too many of the negative stereotypes that many of us in the commercial real estate services industry work so hard to quash!

So, in a hard scrabble business like commercial real estate, in the worst economy in decades, do you really want to be one of those laid-back, wait-for-the-phone-to-ring types?  If so, then go sell something else, and get out-of-the-way!  There are some pretty hard-working brokers in commercial real estate who prefer not to have to step over you on their way to serving their clients and customers!

Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.   Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit http://www.RealStrat.com.

Acquire new ideas about commercial real estate at RealStrat’s blog at http://www.CorporateAdvisor.wordpress.com.   Follow RealStrat and Andrew Zezas at http://www.Twitter.com/RealStrat.

Check out The Executive’s Guide to Understanding Corporate Real Estate Transactions.

Where is Andrew Zezas?

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved. 

###

Let’s Put The Landlord in the Poor House, and Other Stupid Statements

How many times have I heard commercial tenants say “I don’t care about the landlord!”?  That’s pretty dumb (and, right up there with landlords who don’t care about their tenants!).  Why wouldn’t a tenant care about the business entity that is responsible for the very foundation (literally, the foundation of the building!), that supports their ability to efficiently and profitably conduct business on a daily basis? 

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 this, 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 he / she agrees to bad terms in the hopes of making-up the difference on the next lease, only to put the 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 landlord’s 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.  They 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, doing that is a lot easier to accomplish, especially if tenants and their brokers aren’t careful.  Writing as a tenant advocate, 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 “Yes”, generate profits, whether those profits come now or later. 

Mounting a well-planned, well-armed negotiation with commercial landlords requires knowledge, resources, and skill.  Never “bring 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, or at least a missle or two when negotiating with certain landlords! 

The special challenge in a successful negotiation, 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 few remaining 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.

Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations.   Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America.  By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.

In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate.  The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery.  Visit www.RealStrat.com.

Acquire new ideas about commercial real estate at RealStrat’s blog at www.CorporateAdvisor.wordpress.com.   Follow RealStrat and Andrew Zezas at http://www.Twitter.com/RealStrat.

Check out The Executive’s Guide to Understanding Corporate Real Estate Transactions.

Where is Andrew Zezas?

 

Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved. 

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THIS WORK IS DESIGNED TO PROVIDE PRACTICAL AND USEFUL INFORMATION ON THE SUBJECT MATTER COVERED AND REPRESENTS THE OPINION OF THE AUTHOR. HOWEVER, IT IS PROVIDED WITH THE UNDERSTANDING THAT THE AUTHOR IS NOT ENGAGED IN RENDERING LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE TO THE READER. IF LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL SHOULD BE SOUGHT. THE AUTHOR SPECIFICALLY AND EXPRESSLY DISCLAIMS ANY LIABILITY THAT MAY BE INCURRED AS A RESULT OF THE USE OR APPLICATION OF THE INFORMATION THAT IS CONTAINED IN THIS WORK.

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