When Commercial Real Estate Brokers Get Greedy…and Stupid!

You’re not going to believe this one!  Frankly, I wasn’t sure I believed it myself, at first.  We recently experienced surprisingly greedy and stupid actions taken by a commercial real estate broker and his associate, both of whom were working on the same team that represented competing properties.  What these two did could land them in serious trouble.  The two brokers work for a well-known commercial real estate brokerage company, you know, one of those “alphabet companies” where, when people talk about it, they use the company’s initials instead of its full company name. 

Our client, let’s call them the Laboratory Company, is a rock solid company that has experienced steady growth, has maintained a quality reputation, and can demonstrate considerable financial credibility.  When we recently attempted to visit a particular suburban office building with our client,  the broker representing that property stone-walled us, saying  they were not interested in pursuing a transaction with our client.  You should know that the property, a multi – building complex with significant vacancies, had more than a few blocks of available space that could accommodate our client’s needs, and was situated in a geographic area where approximately 6 million square feet of office space sat empty and begging for tenants that rarely showed up.

So, when even before we provided the property broker with any details about our client’s requirements, he said they weren’t interested in, what was, a very desirable tenant, my antenna went up…way up!  When I asked the property broker to explain his very peculiar response, he gave me some back-handed nonsense that caused me to keep digging.  Then, I hit pay dirt!

What I learned greatly disappointed me.  Up to that point, I had held this particular broker  in high regard…up until that point!   What I found out was that the property broker and his associate had just been engaged to represent a competing office campus nearby.   The owner of that campus is active in the regional market with a substantial and growing portfolio, and is a player whose properties are sought after by many local real estate brokers.  I’m sure the property broker was counting on growing the number of properties he represents, including those of the competing owner.

Guess what?  Our client  was one of the major tenants in the competing owner’s office campus.  That’s the facility our client contemplated vacating in order to move to the suburban office building.  So, what I realized was that the property broker was in a real pickle.   The worst thing that could happen to the property broker would be for its first transaction at the office campus to be the loss of a major tenant.  The only thing worse than that would be for the loss to occur because the tenant moved to another building represented by the very same property broker!  In such an instance, the owner of the office campus would likely assume that the property broker pilfered its tenant, and the owner might even fire the property broker.  For the property broker, his dreams of future revenue opportunities and an expanded relationship with the owner of the office campus could quickly become dust in the wind! 

Instead of demonstrating integrity and doing the right thing by disclosing his predicament to both property owners and recusing himself from representation of one or both properties, the property broker did something that really surprised me.  Because he thought he and his associate had so much control over the local market, these two attempted to manipulate the properties, both owners, my client, and me, to protect their own position above the interests of everyone else. 

Here’s where it got silly:  The property broker attempted to block our client from visiting the suburban office building.  Then, his associate suggested that our client was expected to remain in the competing owner’s campus.  Were they kidding?  Not only did their actions constitute blatant conflicts-of-interest, but the property brokers surely breached ethics and their fiduciary responsibility to the blocked building owner, devalued the reputation of their company, made the competing office campus owner look bad, and most likely violated State license law.  Moreover, as brokers who I had previously admired for their achievements and approach to business, the property brokers lost my respect!

Can you imagine how upset our client was?  The CEO was an accomplished and easy-going, but no-nonsense executive, who did not enjoy feeling like anyone’s pawn.  Understandably, his first inclination was to tell the property brokers and both owners that he wouldn’t do business with any of them.  He also wondered if perhaps the competing owner was in on the whole thing.  Can you blame him?

Our client WILL have the opportunity to do business with whomever it chooses, irrespective of any actions taken by these greedy property brokers.  This story is still playing out.  I’ll keep you apprised.  The actions of these particular property brokers are the kind of pedestrian garbage that perpetuates the negative stereotypes of commercial real estate professionals…the kind of stuff the rest of us fight against! 

Have you experienced anything like this before?  Send me your stories.

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Copyright Real Estate Strategies Corporation 2010.  All Rights Reserved.

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14 Responses to “When Commercial Real Estate Brokers Get Greedy…and Stupid!”


  1. 1 George P. Molloy, SIOR March 4, 2010 at 2:35 pm

    Interesting process but if you have been in this game long enough, there is little doubt that you have crossed paths with “stumblebums” like this on more than one occasion….
    Brokers like that should be reported to the NJREC for a total lack of ethics and morals….
    The difficulty in this matter is always possessing enough substantative proof to effectuate change!
    You should reveal their names so that the brokerage community (majority are good) knows who they are and does not bring them any business!

    • 2 realstrat March 4, 2010 at 6:25 pm

      I think the term “stumblebums” gives these two low-life brokers entirely too much credit, and suggests that what they did was an honest error. You’re being too kind! I believe this to have been their game plan…very bad stuff. However, I am confident that our client will win the day…I’ll make certain of it!

      Thanks for writing in!

  2. 3 Mike Gormley, CCIM March 5, 2010 at 5:47 am

    Andrew, thank you for exposing these bums. Unfortunately, there’s always more than one cockroach, or in the case of your story, “a pair”. It is so disappointing to those of us who believe in doing the right thing and putting the client’s needs above greed.
    It is of no comfort to either of us that such a practice also exists in my market, here in Southern California. I’ve gotten out of the leasing side of the business because I got tired of cockroaches in suits hiding behind the respectability of their “big company and corporate clients”, while they’d steal a hot stove from their colleagues. There was a time when I was rather outspoken on these cockroaches and the games they play, but I was to discover there were more than just one cockroach. We both know that such behavior is known and condoned inside many of the big real estate companies. Otherwise, it wouldn’t survive on the street.

    Keep doing the right thing, Andrew. You’ll win, and it’ll really piss them off! Good Luck Man!

  3. 5 Evan Glanz March 5, 2010 at 1:10 pm

    Andy, you make good points and expose a not so atypical conflict of interest in the brokerage world. You asked for stories, well I can recall a similar situation wherein a broker was representing a client with a fairly large requirement and during the representation took on the assignment to market a building for one of the major landlords involved with the tenant (negotiations were ongoing). The conflict was never fully disclosed and the broker tried to play both sides. The client was savy enough to fire the broker (who also ultimately lost the other engagement as well).

    Lawyers deal with conflicts of interests every day and not only take them extremely seriously, but are obligated by law to disclose them and in certain instances decline to accept conflicting engagements. Some conflicts are less clear, but the simple rule of full disclosure and written waivers from clients clears up any issues.

    Nice to see good and honest brokers speaking out against some of the bad elements in the business.

    • 6 realstrat March 7, 2010 at 8:21 pm

      Evan:

      I can tell you story after story about transactions where our competitors represent both sides of transactions. Unfortunately, because many of those competitors also represent landlords, in many cases, it is the tenant that is not made aware of the conflict and the one, who ultimately and often unawaredly, loses out.

      Thanks for writing in!

  4. 7 Ed Meredith, Jr., SIOR March 5, 2010 at 3:42 pm

    Well Andy, in a market which has little activity and a lot of space these practices don’t make any sense to me. An Owner Rep who represents itself in the manner you have described should be brought to the attention of the Ownership of the Property and you as an ethical SIOR Broker you should keep all written correspondance of these brokers. If conflicts persist their conduct should be sent to the attention of the NJREC. It seems to be a conflict of interest from what you have described and a portrayed dis-service to the Property’s Ownership and the property’s perceived value in the greater marketplace. It is unfortunate that you witnessed such a thing in Central New Jersey.

    Best Ed Meredith, SIOR

    • 8 realstrat March 7, 2010 at 8:16 pm

      Ed:

      Thanks for writing in. I couldn’t agree more. And, I am extremely happy that these two are not SIORs. Given the ethical basis for membership in SIOR, and given how proud I am to be a part of that organization, I would certainly bring these two up on charges if they were SIORs. As for advising the NJREC of their actions, stay tuned.

  5. 9 Kevin Maggiacomo March 7, 2010 at 2:29 am

    Bravo, well said. Great to see someone putting their personal brand on the line for the good of the client. Client’s interests first – yes. Working both sides of the middle to maximize commission income – no. You lose in the long run. Ethics, morals, and a focus on doing the right thing are what separate the career commercial real estate Advisors from the rank and file “brokers.”

  6. 11 Chad Grout March 11, 2010 at 3:20 am

    Thank you for sharing that story; it definitely reflects ignorant or arrogant behavior on the part of some misguided brokers.

    If that had happened to me, I would have reacted the same way. In any situation where, for some reason, I am not getting the information or service I need about a property, and the agent is being unreasonable – I go straight to the owner.

    “Hi. I’m very sorry to have to speak to you directly, as you have made the effort to hire a listing agent – but your listing agent is telling me I cannot see your building, and I would like to know why.”

    You’ll probably end up with a new listing!

    Good luck and keep us posted.

    Chad

    • 12 realstrat March 11, 2010 at 5:26 pm

      Chad:

      Thanks for your reply. Here’s the interesting spin that I did not include in my initial post…the agents work for a brokerage company, but the property owner is fund that is managed by the brokerage company. So, the agents felt like they had even more control over the property! Still, a dishonest way of doing business.

      Regards,

      Andy


  1. 1 Prosperous links for a homeless Vulcan « Closer To Pittsburgh Trackback on March 11, 2010 at 5:57 pm

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